HC Deb 11 December 1958 vol 597 cc636-48

Motion made, and Question proposed, That this House do now adjourn.— [Colonel J. H. Harrison.]

9.59 p.m.

Mr. James Callaghan (Cardiff, South- East)

I am very grateful to Mr. Speaker for selecting this subject for the Adjournment, because it has aroused considerable public interest and because I should like briefly to get the facts, as I understand them, on record. Last spring, the Indonesian Government were anxious to standardise in this country on the lines of the Royal Navy, and were ready to build in this country, if permission were given. a number of ships, the construction of which was to be spread over a period, probably as long as ten years. This would have involved the sum of about £60 million—which would have come to this country, of course.

It being Ten o'clock, the Motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, That this House do now adjourn.— [Mr. Chichester-Clark.]

Mr. Callaghan

I approached the Foreign Office on this matter, but for weeks I could not get any reply, although I made telephone calls and saw the Minister of State. Eventually, I got some sort of uncommunicative reply which told me that in present circumstances it was not deemed wise to allow these orders to go through. I told my correspondents what the view of the Foreign Office was, and readily acknowledged in my letter to the Foreign Office at the time that … the present situation must be troubling you but, on the other hand, this order will be spread over a long period and the position in Indonesia will be settled one way or another before it can come to fruition. Nevertheless, the inquiries were rejected.

The next thing that I heard was that the Indonesians, having been refused permission here, had taken the first part of their order to West Germany and had placed orders for six motor-torpedo boats with Messrs. Lurssen of Hamburg, Germany. The value of those orders was roughly £3 million. I am running rapidly through the facts to get them on record because this is such an incredible story of muddle and incompetence on the part of the Foreign Office.

What happened next was that although 'the Indonesians were still anxious to place orders in this country, and although they wanted us to build one destroyer and one frigate, of the Blackwood class. I think—it was certainly a destroyer and a frigate —the firm in question could get no authorisation from the Admiralty or the Foreign Office to build those craft.

The position when it was brought to me was that the Indonesian naval mission, which is in Europe at the moment, had taken the orders to an Italian shipbuilding firm in Genoa—I have the name— and had asked it to build two destroyers. If the Italian shipbuilding firm gets the orders for those two destroyers, it is highly likely that it will get orders for another twelve destroyers, because the Indonesian Government are anxious to standardise. That was the whole point of their original approach to British firms —they wanted to standardise on one country's weapons.

There now arises a most astonishing fact, and I ask the Under-Secretary to correct me if I am wrong in any of these statements. I understand that although we refused to give permission for the building of the six motor-torpedo boats, Messrs. Vickers-Armstrong have been given permission to supply the main armaments, the torpedo tubes, to Messrs. Lurssen of Hamburg. Will the Under-Secretary say whether that is right or wrong?

I further understand that in the event of the Italian shipbuilding firm getting the orders for the two destroyers, Messrs. Vickers-Armstrong are getting permission, or will get permission, or have got permission—I do not want to be tied to any of those; but it is fairly clearly understood—to supply the latest four-inch quick firing guns, the main armament of the destroyers.

Where is the sense of this? While still thinking it wrong, I could understand denying the Indonesians the ships they need, but what possible confidence can there be in a Government who tell shipbuilding workers that they can be thrown out of unemployment, but that Messrs. Vickers-Armstrong will be given the opportunity of supplying armament for those ships?

Will the Under-Secretary tell me whether I am right or wrong? The House and the country are entitled to an answer. If I am wrong, I will willingly acknowledge my share of the responsibility. I am acting on information conveyed to me by what I believe to be responsible authorities. I exploded when I read that the Civil Lord of the Admiralty, standing at the Dispatch Box, told the House that small shipyards in this country were in a serious position and that there is likely soon to be redundancy.

Is it reasonable that Indonesia should have this equipment? It has been suggested in my local newspaper that it is not, and that we are trafficking in arms. I should like to make one or two comments about that. First, it has always been the policy of British Governments to supply other nations with warships. If we look at the current Jane's Fighting Ships we find a list of between 20 and 30 countries, ranging from Argentina to Yugoslavia, to whom we have supplied ships in the past.

Secondly, Indonesia is a country of 80 million people, living on a vast archipelago of about 3,000 islands, stretching —if my geography is correct—as far as from Newfoundland to Ireland. That country needs and demands, and can properly ask for, craft of this kind to protect itself against piracy, to protect its coasts, and for general police duties. The case is made out on those grounds alone.

I made some reference to this at a conference of unemployed shipbuilding workers and what surprised me was the volume of correspondence I got as a result. The Joint Under-Secretary does not know what a hornet's nest has been stirred up, and how angry British industrialists are about the present attitude of the Foreign Office. I have seen details of orders which the Indonesian Government have placed for merchant ships during this summer. They have placed orders for 10 ships in Japan, to a total value of £2½ million, for which they have paid or will pay cash—there is no question of credit—24 ships in Poland, to a value of £14 million; two cattle carriers in West Germany, to a value of £500,000; 12 ships from the Soviet Union, and one ship from Finland. I should like to read a letter that I have received from one businessman, who starts by disclaiming any desire to help the Labour Party. He says

I have done some business with the Indonesian Navy. Most of its senior officers either served in or were trained by our Navy. There is a tremendous feeling of good will towards us, and the Admiralty believes that our interests are best served by strengthening this to the utmost. As it is, Indonesian officers I have met are losing their faith in British good will, and turning to the Germans or to Yugoslavia and Poland…The Foreign Office subservience to American, Australian and Dutch interests has lost Britain all this, and unless opinion can be roused to force a change, we shall lose much more, not merely work, but that even greater asset, confidence and good will. This 'head-in-sand' attitude will not stop the Indonesians from getting what they want. It will drive them elsewhere…Indonesia wishes to buy communications equipment in large quantities for civil use. She needs it for aviation and for marine traffic. The Germans, Japanese and Americans are all trying to take the orders, because they know that once their systems are established they will have a long-term monopoly for spares and extensions. The writer goes on to say that unless his firm can get permission from the Foreign Office and the Board of Trade to accept these orders—which it cannot get at present, because of the policy of the Export Credits Guarantee Department —there will inevitably be serious redundancy in his firm. The Foreign Office has an account to answer.

I want to come to a point about the other Governments referred to in the letter. According to a Foreign Office statement made only a few days ago, it was decided in September, after consultation with all our friends and allies, that we did not intend at present to supply major items of military equipment to Indonesia. Who are these friends and allies? Rumour has it that one is the United States of America. If that is true, they are playing a double game, because they are getting orders. I have details of the orders that they have obtained, and of what they are trying to do. The Under-Secretary should ask his right hon. and learned Friend to raise this matter with Mr. Dulles forthwith.

Is Australia one of these friends and allies'? Nobody here wants to do anything to endanger Australian security. Certainly I do not wish to do so, and I should not be a party to raising this matter if I thought that it would do so. I have made the point that this is a vast island country, stretching over a great area of sea, which is asking for the minimum number of ships necessary to protect its coast.

Nobody will convince me—and I claim to have some slight knowledge of what is possible in the way of attack and defence in this matter—that these orders represent any threat at all to Australia.

Thirdly, is it Holland? I am told that assurances have recently been given to the Dutch Ambassador that we will not supply arms. I am bound to say that I do not think that we need to take lessons from the Dutch.

The views in Australia about this were summed up in the Sydney Morning Herald last Thursday and I have been sent a cutting, which states: It would appear that the British have, in the interests of good relations with Australia and Holland, rejected valuable orders without adding a whit to peace and stability in the Indonesia-New Guinea context. Djakarta seeks naval vessels; if it does not get them in Britain it goes to Germany or Italy, and if not there it will find them perhaps in some less desirable neighbourhood. If it had not received the kind of arms it recently got from the United States, it would have found them in Communist armouries. That is the view of the Sydney Morning Herald.

There are two views in Australia about the representations supposed to have been made in this country by the Australian Government. I ask the Under-Secretary to tell us what are those representations. We want to put this to him. Is any attempt being made to discuss the facts? The Foreign Office and the Board of Trade stand convicted of neglecting British interests in this part of the world. Of course they should listen to representations made by Australia, by the United States and by Holland, but they do not have to lie down in front of these countries.

We have a real interest. Our people are being put out of work by the present policy of the Foreign Office which has not in any way succeeded in stopping anything from getting to Indonesia. All they have done is to lengthen the queues at the employment exchanges in this country.

I say to the Under-Secretary that he should take the initiative, or his right hon. and learned Friend should do so, and approach the Australian Government, the Dutch Government and the American Government and point out to them the consequences to our people of the policy at present being followed. It should be pointed out to those Governments that in fact they are not succeeding, by the representations they are making, in keeping things from Indonesia that they do not wish the Indonesians to have. For goodness sake let the Foreign Office stand up for Britain instead of lying down before these people.

My second proposal is that we should ask our Ambassador in Indonesia to see the Minister of Foreign Trade, who was recently the Indonesian Ambassador to this country. There is here a tremendous market. There are 80 million people involved. This is the sixth largest State in the world. Under the present policy of the Foreign Office we are even denying the Export Credits Guarantee Department the opportunity of giving cover for loans to back orders for trade with Indonesia. I say that this is folly, and it is high time the facts were dragged out and exposed.

The third suggestion I make is that the hon. Gentleman should invite—I hope he is listening because this is very important and I warn him that there will be a lot more heard about it—our Naval Attaché in Rome to call on the head of the Indonesian naval purchasing mission there and invite him and his mission to come to London. Let us have a discussion about what they need and what can be done to supply them. I warn the Under-Secretary that he is not just losing the opportunity of securing orders for a small number of vessels now: he is losing the opportunity of getting orders for a large number of vessels over a long period.

My fourth suggestion is that the Government should reverse the present policy set out in the Financial Times a few days ago that, because of the economic and political uncertainties in Indonesia, there is no satisfactory basis for resuming credit insurance cover with Indonesia. This may be so, but it is not the view of any of the other major trading countries in Europe or in the United States. It seems to me, in the absence of any information from the hon. Gentleman, that what is prompting this attitude on the part of the Export Credits Guarantee Department is not the merits of the case but the politics. What is preventing the Department from doing its duty is political pressure. We are lying down in front of those who do not wish us to sell goods to Indonesia.

Mr. Harold Davies (Leek)

I should like to confirm what my hon. Friend is saying, only recently having returned from the United States. The interests of Britain are being put behind the interests of the whole State Department in the cold war in South-East Asia. As one who knows the Indonesian Archipelago, I say this is a tragedy for British craftsmanship and workmanship and I hope we shall follow this matter to the bitter end with those who are controlling British interests.

Mr. Callaghan

My hon. Friend has made his speech, but I want to conclude and to give the Under-Secretary plenty of time in which to reply. As I understand it, the job of the Foreign Office is to support British trade by freeing it, but at the moment it seems to be the policy to sell Britain short.

10.16 p.m.

The Joint Under-Secretary of State for Foreign Affairs (Mr. John Profumo)

I want to say at once that I am glad the hon. Member for Cardiff, South-East (Mr. Callaghan) has brought this important and complicated matter before the House tonight, for he has conducted the major part of his campaign on this subject so far—with the exception of a Question he asked the other day— through the Press. At least, I have seen a great deal in the Press. Some of the things that he has said have been wholly out of proportion with the true facts, and this occasion gives me a chance to try to put the facts in the right perspective.

I know from my days at the Ministry of Transport and at the Colonial Office what a skilful debater the hon. Member is. It is really rather strange that one of the first essays I make at this Box into the realms of foreign affairs should turn out to be one on which the hon. Member is attacking me again. I know that when the hon. Member beats the drum he kicks it about in such a way that, in the end, it is very difficult to recognise the thing at all. The gravamen of the situation is that the hon. Member has made some very irresponsible and partisan statements. I want to analyse the accusations which have been made tonight and in the newspapers.

The first is that we have been following a misguided policy over the export of strategic goods to Indonesia and that this policy has been administered with muddle and confusion. Secondly, he says that the policy has led to foreign countries getting huge orders, especially for ships, which would have been ours, and that this produces serious results particularly in the shipbuilding industry.

Mr. Callaghan

It will.

Mr. Profumo

I have read very carefully the newspaper cuttings and perhaps the hon. Member has been misquoted. [An HON. MEMBER: "We have all read them."] If hon. Members opposite have all read them they will agree with me—

Mr. Callaghan rose—

Mr. Profumo

Perhaps I can make my speech in my own way.

The hon. Member will agree that the recent history of Indonesia has been anything but a calm one. The attitude of Her Majesty's Government towards strategic exports, and, incidentally, that of our chief Allies and of our N.A.T.O. Allies, has, naturally, been affected by all this uncertainty which eventually ended in civil war. In speeches by the hon. Member and in Press interviews he has scarcely mentioned the civil war. He appears altogether to have ignored the fact that there was a considerable Communist threat, that Communist mobs had led attacks on Dutch property and that there were signs of Communist influence near the seat of power.

The hon. Member appears to have overlooked the fears—not ill-founded fears—that extremist elements in Indonesia might use modern weapons to turn on Netherlands New Guinea and that throughout the early part of the year the Indonesian authorities were completing the take-over—so far without any compensation—of the extremely extensive Dutch assets in Indonesia.

Mr. Harold Davies

Foster Dulles must have written that.

Mr. Profumo

Her Majesty's Government could not know what the outcome of all this would be, nor, indeed, to what use—perhaps even in external ventures— the eventual Government of Indonesia might put our supplies. I do not think that hon. Members, if they really reflect, would question our decision not to export arms and warlike equipment at that period.

I have no doubt whatever that the hon. Gentleman himself and his colleagues, who have never put the export of arms in the forefront of their own policy, would have taken precisely the same decision as we did. Indeed, there has not been a word of censure from the House of Commons at all about that particular period, and this at once seems to me to narrow down the period of disagreement, and, of course, I recognise that there is disagreement, to the last few months since the end of the rebellion.

Now the hon. Gentleman has spun his yarn as though Her Majesty's Government have been following a long and mischievous policy with disastrous consequences. During these last months, because of the continued unsettled conditions in Indonesia, there has been, and I readily admit, as a result of a definite act of policy, restriction in strategic exports to that country. But throughout that period we have been keeping the policy under constant review, not only among ourselves, but also with our Allies. Of course, we cannot possibly do this sort of thing without risking the loss of orders, maybe large ones, and, indeed, without running a risk of causing hardship to firms and to individuals.

Decisions about arms supplies are always most difficult. It would be much simpler for the Government if there had been a complete ban. If arms are supplied, the Government are accused of increasing tension; if they are not supplied, it appears that we are accused of losing valuable orders. None the less, the Government of the day have got to form the best judgment they can in each particular case.

Only the other day in the House my right hon. and learned Friend was implored by an hon. Member from the benches opposite to stop the export of arms to a certain country. Did we accuse the Opposition of trying to cause unemployment in industry in this country? I ask the hon. Gentleman: how dare he stoop so low as to throw out the sort of challenge, which he has certainly been reported in the Press as having made, when he said: How many more British shipyard workers do the Government want to throw out of work?

Hon. Members

Hear, hear.

Mr. Profumno

How dare he do that when he knows perfectly well that there is a long history of the export of strategic goods, and the right hon. Gentleman who is sitting beside him knows very well that these things take a long time and this is a question of striking a balance, because if we do not export something it may be brought into the cockpit of party politics.

Let the hon. Gentleman turn some of his fury towards his right hon. Friend the Member for Ebbw Vale (Mr.Bevan). [HON. MEMBERS: "Why?"].Well, we have been accused of muddle and confusion. It seems to me that there is a good deal of muddle in the minds of hon. Members opposite. This may appear to be a good cry for the moment, but I implore the House to realise the real seriousness of this problem. It cannot be judged purely on the question whether we are losing orders or not. It is a far more important problem than that.

I was saying that the right hon. Member for Ebbw Vale was saying only last year that he supported most strongly the idea of an arms embargo for the whole of the Middle East. Why was he supporting that embargo? Because he wanted to have people thrown out of work? No, we have not accused him of that. He had a proper proportion in this matter.

Mr. Callaghan

Will the hon. Gentleman explain why it is that, in a matter of weeks, we have, first, a decision that we cannot build warships, but secondly, we can supply quick-firing guns and torpedo tubes?

Mr. Profumo

The hon. Gentleman cannot get out of his responsibility. I am coming to that point in a moment. The hon. Gentleman chucked around accusations and wild allegations about huge orders for ships being turned away.

I agree that the Indonesian Navy has a programme of future construction, and that this will take many years and will be worth considerable sums of money, perhaps many millions of pounds, but there has been nothing like a firm order of the magnitude suggested by the hon. Member. He talks about £60 million. I do not know where he gets it from. I have searched and searched, and unless we are to rely on vague calculations, transactions and inquiries, there is no truth at all in the allegation that we have turned away orders worth £60 million. I must say that there is no evidence that satisfactory financial arrangements could have been reached even if negotiations for these orders had gone ahead. Indonesia's financial position is causing her a great deal of concern. I am certain that large amounts of credit would have been involved, probably greater than could have been accepted.

I have been asked whether the orders have gone elsewhere. I have no evidence. The hon. Member talked about orders to a German firm for M.T.B.s. I understand that a German firm is building motor launches for Indonesia. An order for unarmed craft might well have gone to this country had we been asked to supply them, but we were invited to quote for M.T.B.s. I was asked whether it is true that we have given permission for weapons to be supplied to the German firm which it can put on the ships. The answer is that we have given no such permission.

The inquiries for larger warships came earlier this year at the time when the rebellion was taking place, and I have dealt with that. I have no evidence that these orders have gone to Italy. All I do know is that the supply of two frigates and two corvettes from Italy did go to Indonesia, but these are already there and were ordered before the civil war began. At that time, there was no official embargo in this country.

In any event, the hon. Member cannot have it both ways. He is grumbling that we are not exporting strategic goods to Indonesia and, at the same time, he suggests that we should not be exporting these goods to our own allies. We have always proceeded on the basis that the responsibility for where these strategic materials eventually end up rests fairly and squarely with the Government of the country to which we export and that we should certainly allow our home industries to benefit from these exports. If, however, the hon. Member is right in saying that other N.A.T.O. countries are accepting orders for strategic goods for Indonesia, that certainly would be a reason for reconsidering our own policy.

I know how difficult it is for hon. Members on the benches opposite to look at controls as anything but permanent instruments of policy, but we on this side do not like controls at all. Long before the hon. Member started this great hue and cry, my right hon. and learned Friend the Foreign Secretary had been discussing these matters with the Indonesian Foreign Minister when he was last in London.

The hon. Member spoke about the export of non-strategic goods to Indonesia. A Question was answered in the House this afternoon by my right hon. Friend the President of the Board of Trade to the hon. Member for Stockton-on-Tees (Mr. Chetwynd). I wanted to dilate on that, but time is short. Certainly, we are anxious to export non-strategic goods to Indonesia. The difficulty is the question of credit, which is a serious problem and but for which there is no embargo.

Certainly, the Foreign Office is causing no difficulty whatever. We are only too anxious to help. This is not an embargo by the Foreign Office. There is the serious trouble of restriction of credit. [Interruption.] We are prepared to continue the export of goods of a non-strategic quality to Indonesia, but the trouble is an economic one and not a matter of policy. It is a matter of the working of the Exports Credits Guarantee Department, which has this matter under consideration and which will continue to review it in order to be able to restore cover at the earliest possible time.

The gravamen of the hon. Member's accusations today has concerned the export of strategic materials. This is a problem which is constantly under review and on which we intend to continue to take action from the responsible viewpoint of a Government in power. We will not be deflected from our duty by this sort of party pressure which the hon. Member is seeking to put upon us. Let him have his party arguments in other fields. This is so serious a matter that we shall continue to take our decisions as the situation requires.

I am not prepared to go further than that tonight. I am sure that in the basic interests of the country we have been right in what we have done. We shall continue to take our decisions according to what we feel to be the right policy to take.

The Question having been proposed at Ten o'clock and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at half-past Ten o'clock.