Examination of Witnesses (Questions 20
- 39)
THURSDAY 17 JANUARY 2008
RT HON
DES BROWNE
MP, MR DESMOND
BOWEN AND
MR TONY
PAWSON
Q20 Chairman: We appreciate exactly
what you are saying but I am sure you will appreciate that we
have some difficulty in the sense that the Ministry of Defence
does speak of a period long before you became Secretary of State
for Defence. In their memorandum to this Committee they are asserting
that allegations of this kind are completely unfounded on the
basis of the evidence they have and I simply make the observation
that the public will find this difficult to comprehend given the
statement of a previous Secretary of State for Defence and of
others.
Des Browne: I have many examples
in my head of people who apparently had one view when they were
in office and another view when they were out. I do not make any
comment on that. What I say to you is that if you want my view
then I am prepared to look at the evidence and the facts that
are there and draw that view from that, not draw it from somebody
else's conclusions based on their own experience of whatever it
was because I cannot evaluate that unless I have their experience
or they share the underlying facts with me and neither of them
have.
Q21 Chairman: I think that is entirely
reasonable; I accept that. You invited me to ask you about 1976
so can we do so? You will be aware that papers that were in the
National Archives in relation to certain events in 1976 have now
come into the public domain, including a document that is before
the Committee, the draft minute from Lester Suffield who was Head
of Defence Sales at the time to Sir Frank Cooper, the then Permanent
Secretary of the MoD. This draft says, for example, that agency
fees, "although described as `technical consultancy', amount
in practice to the exertion of influence to sway decisions in
favour of the client".[19]
Then, in a further paragraph, he goes on to explain that senior
Saudis "would certainly not officially approve the payment
of fees, although they undoubtedly expect appropriately discreet
arrangements to be made. Statements to this effect are made by
senior Saudis to visiting major businessmen in somewhat elliptical
language whenever a suitable opportunity occurs" and then
there is an example which I will not quote.[20]
There were two contracts under discussion in 1976 essentially
and the papers deposited in the National Archives have now been
published. Do you think this provides any prima facie evidence
that possibly the rules were being breached?
Des Browne: I said at the outset
that I have given this some consideration and I have. Clearly
I am limited by the fact that this document that had been deposited
in the Archives and the Public Record Office and has come to light
is 30 or more years old. There is no way in which I can determine
the circumstances of this draft document. It is not clear from
it—I have examined it—who the author of it is but
it has a set of letters at the top which suggests who the final
document was supposed to come from. I do not know what his status
is or his authority; it is addressed to the then permanent under-secretary
who is unfortunately now no longer with us and it is just not
possible for me to construct a reliable picture of the situation
30 years ago. However, it is possible to take about a dozen words
out of it, but it is also possible to read the whole document.
The advantage I have had is the ability to be able to read the
whole document. What does the document tell me? The actual document
tells me that somebody was conscious of the principles of the
use of public funds because it starts off with the sentence which
says, "In the context of your" (meaning the permanent
under secretary) "recent directive on the subject of agency
fees", so it is written in the context of the 1976 Directive
I assume which was in turn a set of guidelines for officials to
ensure that they stayed within the law and did not act corruptly.[21]
The author of this document is consciously writing to the permanent
under secretary to say, "Within the context of those guidelines
and that objective" and then goes on, in my view, to set
out an intention to alert the risk of allowing agency fees to
rise above a particular percentage level, the inference that can
be drawn if that happens or the danger that it will in fact be
a corrupt thing to allow to happen. Then it goes on, "and
advises the Government that the Government should seek to restrain
payment so that that is not triggered". So the author says
that there is a risk and that we should not trigger that risk.
The way in which we should not trigger that risk is in the context
of your analysis in the 1976 Directive and we should restrain
these agency fees to a ceiling, which is broadly in the 1976 Directive
considered to be a ceiling that is indicative of where the risk
will not kick in, although the 1976 Directive also says you have
to look at the individual circumstances of each one. Contrary
to the conclusion that officials were in a recipe for corruption,
they were actually conscious that they had to create a set of
circumstances. The whole document does not seem to me to hold
any other construction. It may well be that there are parts of
it in which the drafter sets out certain types of behaviour—I
have no idea on what basis that was being set out—but that
is not the tenor of the document. The document says that in the
context of your directive, permanent under secretary, of 1976
this is what we need to be alert to and this is what we need to
do to make sure that we do not trigger that risk. It is capable
of supporting, very easily, the entire contrary construction to
that which people have put from 12 or 15 words out of it.
Q22 Chairman: Except that it is confirmation
that the Saudis undoubtedly expect appropriate discreet payment.
Des Browne: What it does not do—and
this is what the nub of the issue is—is that it does not
say that we are going to countenance that or allow it; it says
in fact that we need to behave in such a way that not only are
we not going to do that but that it cannot be inferred that we
are.
Q23 Chairman: It is interesting that
the 1976 Directive—the so-called Cooper Guidelines—does
not actually make any reference whatever to the 1948 Act which
has been used in aid of the MoD's position at the time, nor does
it refer to any risk of criminal prosecution. Is that not a little
strange?
Des Browne: It may well be but
I have no way of knowing whether it is or not. Does it not largely
depend on the trained state of knowledge of those whom this directive
was written for? If everybody in the 1970s who was operating at
that level in the Civil Service knew very well that to act corruptly
as a public official was a criminal offence then they probably
did not need to be told. I actually suspect that most people who
rise to that level in the Civil Service probably have an inkling
that behaving corruptly as a public official in those days was
a criminal offence whether they know the particular provision
of the act or not. In any event, they have the advantage of the
directive and the directive was obviously written to ensure that
the MoD staff acted lawfully and properly. I have taken the trouble
of drawing out of the directive the bits that I think support
that. Rather than read the whole directive I can send it to you,
but it says, "there is a need for some special guidance"
because of the "importance of maintaining strict standards
in the defence sales field ... Public money is not to be used
illegally or for improper purposes. Officials must not engage
in, or encourage, illegal or improper actions; this requirement
covers relations with representatives of United Kingdom firms
as well as nationals of other countries. Defence sales are to
avoid so far as possible the use of agents. If agents are employed"—and
this is the important thing about the subsequent document—"The
agent should be reputable in the area in which he is operating"
and a fee of 10% or more or any fee less than 10% which "would
appear excessive in relation to the level and proper work the
agent undertakes" is to be referred to the permanent under
secretary.[22]
So it did not specifically refer to Section 31 of the Criminal
Justice Act 1948 but it did pretty comprehensively set out the
sort of behaviour which, if transgressed, would be a contravention
of Section 31 of the 1948 Act. So it did the job although it did
not refer to the actual piece of legislation.[23]
Q24 Chairman: What it also said was,
"What is `illegal' or `improper' will depend in the last
resort on the law and practice of the country or countries concerned,
and it is for the foreign government to determine what are acceptable
standards within its jurisdiction".[24]
It then goes on to say—so that I cannot be accused of being
too selective—"But where these standards are less restrictive
than those applied within the UK, any relaxation of the UK standards
should be applied by us with great caution". Somebody thought
it was quite important to stress that what is `illegal' or `improper'
depends on the country concerned and not upon the 1948 Act. Somebody
thought it was important to say that and not that where the standards
are less restrictive than in the UK we should apply UK standards
but specifically the words chosen were: "any relaxation of
the UK standards should be applied by us with great caution".
I dare say, Secretary of State, you can apply different interpretations
of the phrase "with great caution" but somebody here
was sending a message that is not quite as firm, I would suggest,
as the rule is according to the 1948 Act.
Des Browne: Just to highlight
the disadvantage that both of us have, we have a piece of paper
in front of us, we do not know the author of that piece of paper,
we have no way of looking into that person's mind. What we do
know is that both of these objectives are served by this paper,
the question is which of them was most likely to impress the reader?
I have no way of knowing but I just say to you that as far as
Section 31 of the 1948 Act, the makings of it were there even
if the reference to the Act was not.
Q25 Chairman: I want to ask a final
question about the Panorama broadcast of 11 June last year.
I have already referred to it in the context of what the late
Lord Gilmour said but is it the case, as alleged in that programme,
that MoD officials have processed quarterly invoices from Prince
Bandar bin Sultan of Saudi Arabia?
Des Browne: What is the case—and
this is in the public domain—is the written answer that
my predecessor Geoff Hoon, when he was the Secretary of State
for Defence, gave to Mr Hancock on 20 June 2004 and that is (I
read this short but people can read it for themselves) that claims
are processed by MoD officials but those are claims that are endorsed
by the UK Government for payment only when they comply with the
terms and the prices contained in the associated contract supported
by documentation confirming contractual performance and that what
we do is that we process presentation for payments of claims submitted
by BAE systems. That is what our officials have been doing. Can
I just say, for the avoidance of any doubt, that in the context
of the SFO[25]
investigation, the officials from the MoD cooperated fully with
the SFO in relation to their engagement in this process and shared
all the information that was asked of them with the SFO investigation.
There has been no attempt to try to do anything other than show
that these allegations—which I still say are unfounded—against
officials in the MoD are unfounded by transparency in terms of
that investigation.
Q26 Malcolm Bruce: Secretary of State,
perhaps I can make it easy for you by asking what you are going
to do now rather than what has happened in the last 30 years.
The Government signed an Understanding Document with Saudi Arabia
in 2005 and under that Document the Saudi Arabian Government announced
on 17 September that agreement had been reached to purchase 72
Typhoon aircraft for the Saudi Armed Forces at a cost of £4.4
billion. This is a new contract starting. Transparency International—which
I think you will acknowledge is a well-recognised body—has
suggested that in order to make clear at the start of this arrangement
that the accusations that have been discussed in the previous
questions will not arise again, that it would be useful to set
up a body comprising respected institutions from both countries
that would monitor the finance, equipment and associated support
areas during the whole life of the contract. The suggestion is
that this has been set up by the two governments; my understanding
is that they have in fact put this proposition directly to you
and that it would be consistent with recognised standards of corporate
integrity and that putting such an operation in place would both
improve the image of the UK and of Saudi Arabia as to their intentions
of how they are going to conduct contracts that go from this day
forward to avoid the problems and the embarrassment we have suffered
over the last 30 years.
Des Browne: This contract which
I think is very good for British industry and good for our broader
security arrangements—the security of the United Kingdom
and of the world—is an arrangement where the funding comes
from the Saudi Arabian defence budget. Pedantically this process
has not actually been put to us, it has been put to government,
it was put to the FCO. The view of government is that these contractual
arrangements are subject to the scrutiny of the NAO.[26]
That is, in my view, a good enough and reputable enough organisation
to be scrutinising them. Why create a new body to be arbiter of
whether that body meets these criteria when we have a perfectly
good body in the UK in audit terms which has a worldwide reputation
and could scrutinise the conduct of this and will no doubt turn
their attention to it at some time. The fundamental problem is
that this is a government-to-government contract. The Saudi Government's
view—and we respect this—is that the financial arrangements
in relation to such contracting is confidential, so I do not understand
how creating some other body is going to actually address the
issue that people will look to in any event to criticise by inference
or allegation what is going on. I am confident enough that the
NAO can do this job personally as a minister; I am confident that
they do not avoid tough scrutiny of the Government—that
is not my experience of them—and I do not see any advantage
in setting up some body where in any event there is no international
standard to set it against.
Q27 Malcolm Bruce: Just to make clear,
Transparency International say they have written to the prime
minister, the former Secretary of State for Trade and Industry,
the Secretary of State for Defence and the Head of the FCO Middle
East desk commending their proposals. Their proposals say that
it is the governments that should set them up so it is a government-to-government
arrangement. If you are saying—as I think you are—that
you are not really interested in pursuing that proposal or any
variation on it, other than what you have said how can you say
with certainty that you can be confident that this new Al Salam
contract will not be tainted with accusations of bribery as has
been the case with previous contracts?
Des Browne: I cannot be certain
that people will not make allegations and accuse anybody; I am
saying that this is a perfectly proper contract in which there
is no impropriety associated with this negotiation at all. It
is a government-to-government contract. I apologise both to you
and to Transparency International that I was misinformed about
whether they had written to us or not; they may well have written
to my office. However, that is neither here nor there, they wrote
to government in any event. I have to say that in this area I
suspect that were we to accede to this and that the two governments
were to set this up, the next claim would be that it is not independent
because the governments set it up even if it was in response to
a suggestion from Transparency International. There is a perfectly
good, independent body in the NAO that reports to Parliament that
does this job, why do we need another one?
Q28 Malcolm Bruce: There was a perfectly
good Serious Fraud Office that did not quite deliver the job on
the previous accusations.
Des Browne: I have to say that
I fundamentally disagree that officials behaved corruptly.
Q29 Linda Gilroy: Secretary of State,
you announced the outcome of the review of defence attachés
last September. To what extent did you take account of the need
to have suitably qualified staff such as defence attachés
to advise on defence exports and to monitor the use to which British
arms imports are put? Did you take account of this role when you
were making the decisions to either remove or reduce the numbers
in the different embassies?
Des Browne: We looked across a
whole host of defence attachés across the world and we
re-evaluated their roles in the context of the 21st century. We
looked at the job they were doing and saw how we could best maximise
our resource and where we could make efficiencies. That is what
you will expect of government. The principal role of the defence
attaché in the 21st century is to help strengthen international
peace and stability by working to prevent conflicts, to help boost
peace support operations and to reduce the risks of terrorism.
That is why we deploy them. Can I also say that the assessment
that we made was that of the total defence attaché time;
about 5% of it was associated with any aspect of defence exports.
The principal responsibility in relation to licensing issues does
not lie with the defence attaché, it lies with the Foreign
Office. Because of the expertise of our people periodically we
are asked to help in this regard as part of the team. They will
still be able to do that. We have no doubt that they will be able
to meet the high standards that we have been able to meet as a
team in these missions abroad when work is necessary to be done.
The defence attaché was a part of that but not the majority
part of that process that people believed they were. In some countries
they did more of it than in others, but it was about 5% of the
total time of defence attachés.
Q30 Linda Gilroy: Part of the statement
said that as well as reductions in military staff more of their
tasks will be undertaken by civilian personnel. Can you assure
us that these changes will not degrade the ability of the embassy
posts to advise on applications? How does that figure in with
your 5% of time?
Des Browne: I cannot divide it
between military and civilian. Tony may be able to help us in
that regard; he is more associated with the day-to-day working
of the Defence Export Service. In all its manifestations, both
military and civilian, you do not have to be a military person
to be able to do this. Of course we will, as we reduce military
force and replace it with civilians, take into account the need
for certain skills and for trained people. I can reassure the
Committee that there will be no reduction in the level of scrutiny
that is necessary from posts abroad in relation to the licensing
process by the process that we have gone through with defence
attachés. It was not the majority of the work that we did
that some people believed that it was. In actual fact the defence
attachés, people will be pleased to hear, are more focussed
on trying to prevent conflict, keeping the peace and counter terrorism
work.
Q31 Sir John Stanley: Secretary of
State, the joint funding arrangement between the FCO and the MoD
goes back a long way and, to the best of my recollection, it was
in place when I was minister for the Armed Forces. Is it not the
case that in reality the defence attachés still perform
responsibilities which come within the MoD but equally—and
your answer confirms this—they discharge functions which
come within the responsibilities of the FCO? Given that that remains
the case, was it not wholly unreasonable—I cannot put it
any other way—for the Foreign Office to unilaterally renege
on their joint funding arrangement and basically say, "You,
MoD, are left with picking up their slice of the bill"?
Des Browne: I spent a lot of my
time across government encouraging people to do things across
government and to work together across departments. That requires,
I think, the ability to be able to respect the priorities and
the changing priorities of government departments in a pretty
flexible way. We ask people across government who work with us
to respond to changes that we make. I do not think it is unreasonable.
I fully understand why that £10 million to £11 million
became a hostage to other priorities in this complex and changing
world and I was pleased to be able to work with them to re-shape
our defence attaché team in a way that I think will ensure
that we still do all the priority work that we need to do as well
as we have ever done before and we have been able release resources
towards other priorities. That, as you know from your own experience,
is what government is all about.
Q32 Mr Borrow: I want to touch on
the UK/US Defence Trade Cooperation Treaty. The Committee has
received evidence from Saferworld expressing some concerns about
the impact on arms exports and particularly suggesting that the
Treaty puts the UK/US relationship into some imbalance in the
sense that it allows the US to determine which goods are included
in the Treaty and allows the US to override the UK arms exports
controls and impose their own in terms of end use of particular
goods. Would you like to comment on that?
Des Browne: It's easier to answer
the last part of the question first. The integrity of our own
arms export control system is entirely intact and the United States
has no role to play in that; it is still our responsibility. It
no way weakens it and no way affects it. It is a misunderstanding
of the Treaty if people think that it does. The other part of
the question is designed to identify that there are some sensitive
technologies (which is a phrase that is used in the Treaty) which
will be excluded from the Treaty. The fact that the Americans
will identify certain technologies that they will exclude from
the Treaty and they will do that in consultation with us in the
implementation arrangements does not in my view in any way undermine
or imbalance the Treaty. In fact the whole purpose of the Treaty
is to bring the processes into alignment so that we can speed
up and simplify the delivery of equipment to the UK but also to
US troops who operate together around the world which is a longstanding
policy of both countries. Since we have deployed together and
operated together and are valued allies of each other that seems
to me to be an appropriate and reasonable objective and it is
in our interests as well as in theirs. In relation to the sensitive
technologies, there will be about three or four of them. I am
not able to specify what they will be but they will be a comparatively
small number. I think given the advantages there will be in the
treaty which will be manifest—and I am sure you know what
they are—then this comparatively small area of restriction
which is perfectly understandable because of the sensitivities
of the technologies does not in any way undermine it.
Q33 Mr Borrow: In terms of the implementing
arrangements, where are we up to with that? Where is the UK in
terms of exchanging notes with the US Government and also in terms
of Senate ratification of the Treaty itself?
Des Browne: The current position
in relation to the Treaty, as the Committee will know, is that
the Treaty has gone through the parliamentary process here. The
congressional process is an integrated process in the sense that
both the Treaty and the implementing arrangements will be presented
to Congress. The negotiation of the implementing arrangements
is going on at the moment. I have in my mind a kind of timeline
in relation to that but I do not think it would necessarily be
helpful to the negotiations for me to publicly say that we expect
them to be concluded on a particular day. However, they are advanced,
they are going well; we have no reason to believe that they will
not be concluded successfully in a reasonable timeline and then
we will be in a position to present the Treaty to Congress. We
hope to be able to do that at an early date and we are working
with the American authorities to be able to do that. In case you
ask me when I think we will get it through congress, I do not
necessarily think it would be helpful to that process for me to
say from here and feed into that process; I think we need to leave
it to them.
Q34 Mr Borrow: A significant chunk
of the UK defence industry is international in the sense that
it is owned by several European countries' major companies that
have invested to a large extent in the UK defence industry in
the last five or 10 years. How do they fit into this particular
Treaty?
Des Browne: You know the value
of the Approved Community to this Treaty; the so-called List X
is the Approved Community. We already have to take into account
the fact that companies are owned by foreign owners when assessing
applications to join that community of companies. Nothing substantially
will change; we will still go through that same process and take
that into account in relation to the Approved Community for the
Treaty and it will not make that much of a difference.
Q35 Peter Luff: Secretary of State,
the Defence Export Services Organisation is still with you until
the first of April when defence sales moves to the UKTI. What
was this all about? Was it doing its job too well as the NGOs[27]
seemed to think? Or perhaps not well enough? Or is just change
for change's sake?
Des Browne: People make changes
in the machinery of government regularly and they are a matter
for the Government. I have no knowledge of machinery of government
changes being extensively debated, discussed and consulted about
before they were announced in the past and this was no different.
We promised that we would work through before Christmas with industry
and with other stakeholders the nature and shape of this change
and I am pleased that on 11 December when my colleague, the secretary
of state for DBERR, announced the nature and shape of the future
arrangements they were welcomed by industry and so they should
be because we now have, I think, an ability which we were seeking
to create of using the broader UKTI framework to support and help
the defence exports area and this will improve the one organisation
which was doing well and the other and they will come together
and do better.
Q36 Peter Luff: So your hope is that
it will increase defence sales.
Des Browne: Defence sales are
a very complex area, as you know. Our ambition to maintain a level
of them for a number of reasons is very important. They make a
big contribution to building capability where we need to build
it for the purposes of peace keeping and other purposes that we
share in terms of our foreign policy. The measure of improvement
in this area is not just about the numbers. We happen to have
had last year a very good year. We had a very good year a few
years ago. We believe that we will continue in that way. Against
all the objectives that we set for the defence industry I think
that this change will be good.
Q37 Peter Luff: The NGOs have welcomed
the change because they think it will put defence sales and defence
exports on a level playing field with the rest of industry which
presumably means will disadvantage defence sales. Is that the
case?
Des Browne: I think that everybody
at the end of the day will see that this change was to the advantage.
Q38 Peter Luff: Advantage of?
Des Browne: The advantage of the
objectives that they set.
Q39 Peter Luff: This is getting rather
circular.
Des Browne: No, it is not. This
is not a zero sum game. It is not the case that in defence, in
defence sales and in defence equipment you always have to fly
in the face of the NGOs and their ambitions by what you do in
the defence industry. The trick is actually to do the two. What
I am saying is that it is not a zero sum game and there is no
reason to believe that people will not see that the issues that
they are interested in about transparency, about ethical behaviour
and all the rest of it being improved. I am not suggesting that
our defence industry does not conform to these. It will be improved
by this but at the same time we will have the advantage that the
very successful organisations such as UKTI will be able to deploy
its extensive resources in support of the defence industry. The
defence industry and the sales of certain equipment abroad is
a humanitarian thing to do in many circumstances.
19 National Archives, file DEFE 68/319 Back
20
National Archives, file DEFE 68/319 Back
21
1976 Guidelines Back
22
1976 Guidelines Back
23
Ev 45 Back
24
1976 Guidelines Back
25
Serious Fraud Office Back
26
National Audit Office Back
27
Non-Governmental Organisations Back
| 
