Pergau Dam (Hansard, 13 December 1994)

§ The Secretary of State for Foreign and Commonwealth Affairs (Mr. Douglas Hurd)
With your permission, Madam Speaker, I would like to make a statement on the Pergau dam in Malaysia.
I have now considered the written judgment of the divisional court. As I told the House on 17 November, I needed to establish whether, in the light of this judgment, the Overseas Development Administration can continue to run an aid programme of benefit to this country as well as to the recipients of aid.
I have considered whether there are particular forms of aid which in the light of this judgment should not be financed under the authority of the Overseas Development and Co-operation Act 1980. 1 have concluded that the activities financed by the Overseas Development Administration are not in general vulnerable to the kind of legal challenge brought in the case of Pergau. In the light of this, and having now considered the written judgment and taken legal advice, I have decided not to appeal. I have asked the ODA to ensure that all new spending decisions are weighed carefully, in order to respect fully the implications of the court's judgment.
In co-operation with the National Audit Office, my officials have carefully reviewed all projects receiving finance under the aid and trade provision, to see whether any of these projects approved under our previous understanding of the Overseas Development and Co-operation Act 1980 might fall outside the interpretation of that legislation now given by the divisional court. It appears that in the light of this review three projects might be held to raise legal difficulties following that judgment. These are £22 million of ATP support for a British sub-contract for the metro in Ankara, which was approved in 1990 and is in progress; a £9.3 million contribution to the costs of a television studio in Indonesia, approved in 1985 and completed several years ago, for which soft loan payments are continuing; the Botswana flight information region project, costing £2.9 million of ATP, approved in 1988 and physically complete.
In each of those projects, issues were raised about the strength of the economic or wider development case, though in none of them did the ODA accounting officer ask for a ministerial direction.
My hon. Friend the Parliamentary Under-Secretary for Foreign and Commonwealth Affairs announced to the House on 17 June 1993 new procedures for ATP projects as a result of our review of the programme. All ATP projects approved since these new procedures were introduced fully meet the criteria laid down in the Act as now interpreted by the divisional court.
In the light of the judgment, arrangements will be made for the outstanding commitments to Pergau to be met from funds voted by Parliament outside the scope of the Overseas Development and Co-operation Act. In order to avoid any possible doubt, similar arrangements will be made for the other three ATP projects I have mentioned. In the case of Pergau and the Indonesian project, which are financed by soft loans, the Export Credits Guarantee Department will continue to make the necessary payments under the relevant statutory 774 provisions of that Department. A supplementary estimate will be sought to replace the relevant appropriations in aid from the ODA. In the case of the other two projects, which are financed by mixed credit, funds will be sought under the authority of the Appropriation Act. The necessary supplementary estimates will be laid before Parliament in due course.
A number of hon. Members have called for the money which ODA has spent in the past, and would have spent in the future on Pergau, to be available for other aid purposes. But the aid and trade provision of the aid programme for previous and future years was set on the assumption that the cost of Pergau and the other three projects would be met from within it. For the future, a financial obligation has been lifted from the aid programme and will have to be met outside the scope of the Overseas Development and Co-operation Act. It is not self-evident to me or to the Government that the Government should in consequence ask the taxpayer for additional money to allow the ODA to expand its aid activities.
The Government have concluded that, in respect of expenditure on the four projects in previous years, no adjustments will be made to ODA's future budget. Under our system of annual budgets, the books for those years are effectively closed, and we believe that they should remain so.
For the future, the planned aid programme again contains provision for all four projects. Expenditure on the four projects is expected to be £34.5 million this financial year and £31 million next financial year. It might be thought harsh if the aid programme were reduced by those amounts. The Government have therefore decided that funding from the Reserve will be provided to meet the costs of the four projects, thus releasing an extra £34.5 million this year and £31 million next year for overseas development.
For later years, my right hon. and learned Friend the Chancellor of the Exchequer announced to the House on 29 November increases of £56 million and £115 million in the aid programme in 1996–97 and 1997–98 respectively. Final figures for the aid programme in those and later years will as usual be determined during the annual public expenditure survey in the light of all relevant factors.

§ Mr. Harry Cohen (Leyton)
On a point of order, Madam Speaker.

§ Madam Speaker
Points of order are taken after the statement.

§ Mr. Cohen
Will you check whether the loudspeakers are working, Madam Speaker? I did not hear the Foreign Secretary say that he was sorry.

§ Madam Speaker
Increase the loudspeakers, please.

§ Miss Joan Lestor (Eccles)
First, may I thank the Foreign Secretary for sending me a copy of the statement a short time ago?
I welcome the fact that the aid programme will no longer have to bear the cost of the four projects, estimated at £34.5 million to date. Will the money that has already been spent on those projects—that spent on Pergau alone comes to £35 million—be repaid, since those funds have clearly been misappropriated? In the case of Pergau, the funds were unlawfully 775 misappropriated. Will the right hon. Gentleman confirm how much has already been lost on the four unlawful projects? That lost money could otherwise have been used to alleviate poverty and to feed the hungry of the third world, where most people imagine that much of the aid budget is used.
Does the right hon. Gentleman recall that, when I first raised this matter in the House, in 1989, I was advised by the Minister that I was imagining a link between defence sales and aid. The Secretary of State has since admitted to what he coyly described as a brief entanglement—which occurred in 1988—between our aid programme in Malaysia and our support for defence exports. That admission is not a full confession, but it is certainly a start.
Does the right hon. Gentleman believe that promises given by a former Prime Minister are always defensible? Is it common practice for aid projects to get a provisional go-ahead, but to undergo rigorous reassessment? It should not be the guiding force of Ministers to prop up the tarnished reputation of former Prime Ministers. Furthermore, if we are to accept the Secretary of State's claim that at no time did he seek legal advice on the project, we can only conclude that he was either incompetent or so dismissive of the monitoring process that he felt that there was no need for him to cover his tracks.
Can the right hon. Gentleman also tell the House which of the three new projects that he mentioned—the metro in Ankara, the television studios in Indonesia and the flight information centre in Botswana—the former Prime Minister had a hand in? Were any of them queried by the former permanent secretary, as in the case of Pergau? Either way, the Secretary of State's case does not really stand up. As a recent editorial in The Times put it: If the loan was illegal, his position will be untenable. It was and it is.

§ Mr. Hurd
I sent the hon. Lady a copy of my statement in advance, I hope in sufficient time. She does not seem to have read it with any great care because I have already answered several of the questions that she asked. The amount already spent on Pergau is £24 million over the past two years. The hon. Lady's first question, which I think goes to the heart of the matter, shows a misunderstanding as to how the aid budget is arrived at. It is not plucked out of the air. We do not say, "Let us spend £2 billion on aid," and then decide how to spend it. It is built up out of our estimate of needs and commitments. Part of those commitments for the past two years was certainly the aid and trade provision, and part of that was Pergau. Everybody knew that, questions had been asked about it, and it was known in Parliament and through Government.
It is not a question of money having been filched from the aid programme. When that programme was approved by the Government and voted by Parliament it was known to everybody who took an interest in it. It included the ATP and a commitment to the Pergau project, which had been discussed.
776 The arrangement that I have announced says that we will not open the books on the £24 million that has already been spent. However, for this year, when £34.5 million will be spent on the four projects, and for next year, when £31 million will be spent, the aid figures announced by the Chancellor will remain and will not be reduced because of Pergau. They will thus be available for such extras as extra relief for Bosnia, which will certainly be needed.
Much of the ground covered by the hon. Lady has already been covered in debate, for example on 17 November. The 1988 entanglement was examined in depth by the Select Committee, and its report is available to the hon. Lady. I repeat what I said on 17 November: that at no time while I have held this position have I approved or been aware of any link between the provision of overseas aid and defence sales. I ask the hon. Lady, as I asked the hon. Member for Cynon Valley (Mrs. Clwyd), to accept that.
I have already dealt with the question about the ODA accounting officer. As I said in my statement, in terms of the three additional projects of which I have told the House, there was no question of the accounting officer asking for a direction. I will need to check this and let the hon. Lady know if I am wrong, but I do not believe that there was any involvement by the former Prime Minister, my noble Friend Baroness Thatcher, in any of these projects.
The arrangement that I have announced, the decisions not to appeal and on how to honour our commitment to Pergau, which with the other projects brings substantial benefit to British industry and to our trade, coupled with our arrangements for financing and the decision not to reopen the books on the £24 million that has already been spent on Pergau and, equally, not to cut the aid budget for the present year and the coming year, are equitable ways to settle the matter.

§ Mr. Tom King (Bridgwater)
Will my right hon. Friend confirm that by far the greatest part of our aid budget goes to the poorest countries, that ATP represents only about 5 per cent. of our aid budget and that it has been of considerable benefit to British industries in overseas markets? Does he agree that, after all, those industries help to fund the aid budget in any case?

§ Mr. Hurd
I am grateful to my right hon. Friend. He is perfectly right. Eighty per cent. of the aid budget goes to the poorest countries, and 92 per cent. goes to the lowest and middle income countries. I think that ATP is between 5 and 6 per cent. of the total and, of course, the Pergau commitment is a small part of that. I believe that the ATP which was put into action was invented by the Labour party. It has proved itself in a modest way to be a help to British industry.

§ Sir David Steel (Tweeddale, Ettrick and Lauderdale)
Like the hon. Lady, I would like to thank the Foreign Secretary for sending me the statement in advance. I have read it carefully and I genuinely admire the gall with which he wrote the sentence: I have asked the Overseas Development Administration to continue to ensure that all new spending decisions are weighed carefully". The whole House knows that that spending decision was weighed carefully by the ODA. It recommended against it, it was steamrollered by the Foreign Secretary 777 and the previous Prime Minister, and it was subsequently found to have acted illegally by the courts. It is not a minor technical matter to be treated like a page of the telephone directory.
As for what is self-evident to the taxpayer, which the Foreign Secretary included in his statement, it is clear that the money was misused and the taxpayer believes that the limited budget for overseas aid should be used for its proper purpose and that the Foreign Secretary should reinstate those funds.

§ Mr. Hurd
I do not wish to repeat myself on reinstatement of funds. I believe that the decision I have announced is equitable; it will enable the aid programme this year and next year to undertake activities for which there will be a crying and continuing need in Bosnia and which otherwise they would not have been able to do.
On the right hon. Gentleman's main point, an undertaking was made in circumstances on which the Select Committee has reported in detail. It was twice made by the Prime Minister of Britain to Malaysia that we would help the projects, which they and we believed was developmental. When the time came in 1991 for me to decide whether the promise should be kept, it was clearly more expensive than it was supposed to have been three years earlier, but the right hon. Gentleman will acknowledge that the fact that keeping a promise is more expensive than was supposed when it was made is not always a reason for breaking it.

§ Mr. Michael Colvin (Romsey and Waterside)
Will my right hon. Friend confirm that our defence sales and aid proceed quite separately and that the September 1988 memorandum of understanding on defence matters with Malaysia does not mention overseas aid?

§ Mr. Hurd
My hon. Friend is quite right. The Select Committee examined the matter exhaustively under the chairmanship of the right hon. Member for Bethnal Green and Stepney (Mr. Shore) and I have nothing to add to its report, which seems to me a balanced account. I simply repeat what I said before: that since I have held this position I have never approved or been aware of any linkage between aid and defence sales and I am confident that no such linkage exists.

§ Mr. Peter Shore (Bethnal Green and Stepney)
This is a long and appalling story which, as the Foreign Secretary well knows, began with an aid for arms protocol signed by the former Secretary of State for Defence and has now ended with himself being judged to have been a law breaker in terms of the Overseas Development and Co-operation Act 1980, which it is his duty to administer. Surely some sign of regret or remorse, let alone an apology to the House of Commons, would be much more fitting than the rather strident tone in which he has addressed the House. Although he has made restitution for the next two years, he must be aware that unless further restitution is made, £181 million, which has still to be paid by the British Government to complete the Pergau project, will be deducted from what would otherwise be the legitimate overseas aid budget?

§ Mr. Hurd
As regards the future, when the Treasury and spending Ministers discuss spending in the public expenditure survey, they take everything into account 778 and these events will be taken into account. I cannot say what decision will be reached on that in the public expenditure survey next year. The right hon. Gentleman is not contesting what I have said about the equity of the arrangements that I have announced for this year and next year; they are equitable and will give the Overseas Development Administration funds that it did not expect in order to carry out its duties.
As regards regret, the right hon. Gentleman knows the arguments. He does not agree with me, but I believe that the penalties which the national interest would have incurred had we broken in 1991 the undertaking given in 1989, would have been formidable. The court has not said the Pergau dam should not be financed or that Lady Thatcher's promise should have been broken; the court did not deal with any of those matters or with the question of arms. It simply dealt with the specific point of whether or not funding of the Pergau dam should be taken under the 1980 Act.

§ Mr. Jim Lester (Broxtowe)
Will my right hon. Friend confirm that much of the pseudo-indignation from Opposition Members is manufactured, in the sense that this money, which is allocated to the aid and trade budget, could have been used for other aid projects? We have already heard from my right hon. Friend that more than 91 per cent. of our aid budget goes to specific purposes. Will he also confirm that the Pergau dam has never been subject to corruption, that it is a triumph of British engineering, that it will generate electricity, which will be of value to Malaysian development, and particularly for development in the northern region of Malaysia, which is a very under-privileged area?

§ Mr. Hurd
I agree with all my hon. Friend's points. He speaks with close and sympathetic knowledge of the matter and I repeat my estimate of where the national interest lay. Of course, since then, the ATP policy and the aid policy have changed. An application from Malaysia—because its standard of living, its development, has been so successful in the past few years—for ATP on this kind of project would not now be granted. The House knows of the change of policy. We are not talking, therefore, about what would be approved in future. As I said in my statement, it is quite clear that the guidelines have been tightened and projects for a Pergau dam in Malaysia would not be approved today. That was not the question in 1991. The question then was whether the word given by the Prime Minister of this country should be kept.

§ Mr. Tony Banks (Newham, North-West)
Will not the Secretary of State accept that the link between arms and aid was judged by the courts to be unlawful? How, then, can a promise that is unlawful be expected to be kept? Is not it a fact that if a council had been found guilty in the courts of misappropriating such a level of funds it would have been surcharged and, perhaps, independently taken to gaol? Why should there be different standards between central and local government?

§ Mr. Hurd
The hon. Gentleman cannot have read the judgment. He can have read only the initial advertisements of the World Development Movement. The court was not asked to deal with any question of a link with arms sales, and therefore did not do so.

§ Sir Anthony Grant (Cambridgeshire, South-West)
Can my right hon. Friend confirm that the ATP was originally an initiative of the previous Labour Government? As the Opposition are always talking about help for British industry, is there not a very substantial element of humbug in their attitude to this matter?

§ Mr. Hurd
I agree with my hon. Friend. ATP, I believe, has justified itself. It has not taken over the aid budget; it is between 5 and 6 per cent. of the aid budget. It has justified itself in helping the development of countries that we want to help, and at the same time giving help to British companies. I see no harm in that, provided it is done within international rules, which it has been.

§ Mr. Dennis Canavan (Falkirk, West)
Why should the taxpayer have to foot the bill for illegal misconduct by the Secretary of State, bearing in mind the fact that, if the Secretary of State were a local government councillor who flouted the advice of his officials, thereby incurring illegal expenditure, he would be surcharged, probably bankrupted and certainly barred from holding public office? Will he now do the decent thing and resign?

§ Mr. Hurd
The hon. Gentleman is being synthetic, I think. The criticism that reached me from the ODA on the Pergau project did not relate in any way to its legality. The question was whether it was economically sound, and Sir Tim Lankester said that, in his view, it was not. There was no question, no query raised, at that time as to whether it was a development project in accordance with the 1980 Act. I had to decide whether it was in the national interest that Sir Tim Lankester's doubts on the matter should prevail over the promise that had been given. Keeping the promise turned out to be more expensive than had been supposed when it was given. I did not think that it was in the national interest that it should be broken.

§ Sir Giles Shaw (Pudsey)
If there is any regret to be expressed, it would, on my part, be that this issue may have damaged the huge importance of ATP. Will my right hon. Friend confirm that, as a proportion of total aid, the ATP should be increased from its current level of 5 or 6 per cent., that it provides, and has provided since it started, some £4 billion of income to British industry, many of them small companies, and that its administration is crucial if we really mean to gain export access to difficult markets, which only the Government can help us to achieve?

§ Mr. Hurd
I do not want to prejudge the decisions that we shall make about how the ODA will use the amounts announced in the Budget speech and the extra amounts that I have announced today; but I note what my hon. Friend has said about the importance of ATP, and I am both certain and keen that it should be preserved.

§ Mr. Dennis Skinner (Bolsover)
There is a gang of serial crooks in the Government. We should consider all the ones who have been in court. When will one of them, instead of acting arrogantly, have the decency to 780 admit that he or she was wrong and resign? That is one of the problems with this Government. May I tell the Foreign Secretary that I might have expected him to be the fellow to do it. There is a vacancy in a flower stall outside Waterloo station; the Foreign Secretary should go and fill it.

§ Mr. Hurd
The court decided that it was illegal to finance the Pergau dam under the 1980 Act. It interpreted the Act in a way in which it had not previously been interpreted, causing me to say that we must look through all the ODA projects to make absolutely sure that the law was being complied with. That we have done, with the results that I have mentioned.
That was the nature of the court's judgment. I have no desire to cross swords with the court, and have not done so in any way. As I have decided not to appeal, we must obey the court's verdict strictly. I believe that we can do that while still preserving an aid programme that is able, within the limits of the ATP, to help British industry.

§ Mr. Richard Page (Hertfordshire, South-West)
In accepting my right hon. Friend's statement, the whole House will know that he was not Foreign Secretary at the time and that no personal responsibility attaches to him.
The Pergau dam project has attracted a great deal of criticism, but is it just coincidence that, since the signing of the contract, our trade with that country and that part of the world has increased considerably, providing many jobs for people in the United Kingdom?

§ Mr. Hurd
I feel strongly about the merits of the matter. I must obey the court's decision, as I have decided not to appeal against it, but I do not feel penitent about taking a robust view on where this country's interests lie.
Since the decisions of 1988–91—as my hon. Friend pointed out, I was responsible only for the final decision, but I entirely understand the reasoning behind the others—our trade with Malaysia and its neighbours has increased enormously. Those are the most expanding markets of the world, markets in which Britain has been strikingly successful. Does the House really believe that we would have enjoyed that success if in 1991—strikingly and stridently—we had decided to tear up an undertaking that we had given?

§ Mr. Ted Rowlands (Merthyr Tydfil and Rhymney)
Did not Lord Justice Rose clearly state that the Foreign Secretary should agree to take appropriate steps to make good the deficiency in the overseas aid budget"? As £24 million of that budget was spent unlawfully on the Pergau dam, could not the Foreign Secretary at least modestly restore that £24 million?

§ Mr. Hurd
I have been into that. The court said that what it described as the "unravelling" was not a matter for it, and that is obviously true. I believe that what I have done—I have not reopened the past books relating to the £24 million, but have dealt with the rather larger 781 sums involved in this year's and next year's budgets—is an equitable way of dealing with the difficult situation that was created.

§ Mrs. Jacqui Lait (Hastings and Rye)
What progress has been made in the restoration of British business links with Malaysia?

§ Mr. Hurd
They were never wholly interrupted. There was a pause and a breakdown in public sector contracts as a result of the Malaysian Prime Minister's indignation over what he read in the British press, but that has passed and we are on track for a further steady expansion of our trade with Malaysia.

§ Mr. Llew Smith (Blaenau Gwent)
The Foreign Secretary informed me that there was no link between defence sales and aid. Thanks to the stirring work of the World Development Movement, it has been shown that he misled the House. Many of my hon. Friends have requested either his resignation or perhaps words of regret. Is he willing to give either?

§ Mr. Hurd
I am not sure what the hon. Gentleman is referring to. The events of 1988, for which 1 have no responsibility, have been fully examined. If he is saying that, since 1989, a connection has been made between defence sales and overseas aid provision, he should say so. If that is what he is implying, he should say so. I believe it to be wholly untrue. I do not think that that sort of insinuation does good.

§ Mr. John Townend (Bridlington)
Does my right hon. Friend agree that the majority of this country's population see nothing wrong in using aid to create British jobs? If it has been found to be against the law, is it not time that the law was changed? May 1 take issue with him on the £65 million from the reserve? That money is still coming from the taxpayer. It is still increasing overseas aid and it will not be welcomed in my constituency, particularly on a day when hon. Members have been asked to increase the burden of taxation by £800 million. More and more people in this country are beginning to say, "When does charity begin at home?"

§ Mr. Hurd
My hon. Friend's views on this matter are well known. Charity does begin at home, but it does not necessarily end at home. I hope that today's announcement illustrates that.

§ Mr. Robert N. Wareing (Liverpool, West Derby)
The Foreign Secretary cited the evidence of the Select Committee on Foreign Affairs almost in his own, or in the Government's, defence. Is he aware that one person refused to give evidence to that Committee—that dreadful woman, Baroness Thatcher? Until we know why there was a link in a letter of 8 August 1989 to the Malaysian Prime Minister, how can any of us be really convinced that there was no link in her mind between arms sales and the Pergau dam project?

§ Mr. Hurd
That is not a matter for me. The hon. Gentleman and his colleagues went into the matter carefully. I am not saying that their report justified everything that happened because it did not. It showed a good deal of understanding of my position in 1991 and it came to the conclusion that I did not have much 782 choice at that time. Despite the fact that my noble Friend did not give evidence, the hon. Gentleman would agree that the Committee did a thorough job.

§ Mr. Peter Luff (Worcester)
Does my right hon. Friend agree that the World Development Movement's decision to pursue the court case and the manner in which it was exploited by the Opposition parties and by some sections of the British media were damaging to British interests, British jobs and our relations with Malaysia? One good thing, however, has come out of this. Will my right hon. Friend give the House an indication of how the additional sums in the overseas aid budget will be used this year and next?

§ Mr. Hurd
The World Development Movement was entirely entitled to act as it did and it showed considerable perseverance and skill in doing so. I am not so sure whether, against the background of the opinions expressed by my hon. Friend the Member for Bridlington (Mr. Townend), it did good to the cause of support for British aid and the people that it has helped. That is a matter for the World Development Movement to judge. The opposite opinion to the sort of views that it has expressed may have become quite strong.
On the last question of my hon. Friend the Member for Worcester (Mr. Luff), I do not know yet, because the decisions that I have announced today have only just been taken and we have only just had the Budget figures of my right hon. and learned Friend the Chancellor of the Exchequer. We need to put those two together and to decide how the Overseas Development Administration is to distribute the money. The human emergencies in the world, whether caused by civil war or famine and whether they occur in Africa or Bosnia, are not likely to diminish. The Chancellor's Budget announcement and the arrangements that I have announced today will enable the ODA to continue a tradition, which it has successfully established, of giving quick, prompt, adequate aid to deal with those emergencies. I imagine that some of the money will go for that purpose.
Mr. D. N. Campbell-Savours (Workington): Are the appraisal reports into ATP projects, which are conducted by independent consultants, still being revised at the request of departmental officials if it is considered that they might be embarrassing for the Government?

§ Mr. Hurd
Perhaps the hon. Gentleman would examine the announcement made in 1993 by my hon. Friend the Under-Secretary of State about the change in procedures following our review. Were he to do so, I think that he would be satisfied about the procedures. If not, perhaps he will let me know and I shall try to satisfy him.

§ Mr. Spencer Batiste (Elmet)
Does my right hon. Friend agree that in the eyes of most people in this country there is absolutely nothing wrong with linking an appropriate portion of aid with trade? This case has revealed that the present rules are too inflexibly drawn. Will he introduce proposals to widen the bands under which such decisions can be made, so that in future 783 the Government can make sensible judgments without the danger of their being second-guessed by every lobby group on any subject?

§ Mr. Hurd
I am glad that my hon. Friends are strongly endorsing ATP and that the Opposition are not condemning it as such. That is useful. Of course, ATP has to take place under international rules which have been tightened since the period that we are discussing. It is not a good idea to have a race to subsidise exports, but it is right that, within international rules and the law, we should persevere with ATP, concentrated on those markets that make most sense, such as the poorer countries in which there are good trade prospects for this country. I am encouraged by today's exchanges to be robust in persevering with ATP.

§ Mr. Tony Worthington (Clydebank and Milngavie)
The Secretary of State said that he believes that what he has announced today fulfils his obligation to the court after its judgment against him. What legal advice has he received, and is it unambiguous that his response is right? If the advice proves to be incorrect, will he resign?

§ Mr. Hurd
I have, of course, taken legal advice on the question of past payments. I am advised that it is not for the court to direct what should happen in that respect. I stand by what I said about the present and the future, and that is not open to legal question.

§ Mr. Gary Streeter (Plymouth, Sutton)
May I urge my right hon. Friend not to be blown off course by the Opposition's synthetic anger? When shaping future aid policy, will he be sure to take into account the employment prospects for British workers, just as the French, Germans and Americans do? Is not that what aid for trade is all about?

Hon. Members
Bribery.

§ Mr. Hurd
I am sorry that this has become a party matter because there is an underlying problem which is not being dealt with by the Opposition in their desire to make trouble. If they examined recent events they would see what that underlying problem is. I am grateful to my hon. Friend.

§ Mr. Harry Cohen (Leyton)
Does the Secretary of State recall the pictures that the nation saw of emaciated and dying children in Ethiopia and Somalia a few years ago? What does he think of a Government who preferred to use the aid budget to sell arms to what he has admitted are rich countries? Does not that fill him with shame?

§ Mr. Hurd
The record of this country and of the ODA in particular, often operating through non-governmental agencies, in taking prompt and effective help to the type of disasters to which the hon. Gentleman refers is second to none. Instead of making such remarks in order to cause the Government trouble, the hon. Gentleman should take a little pride in what we are doing overseas, whether in Rwanda most recently, or before that in Somalia, which he mentioned, or every day in Bosnia where we are supplying 20 per 784 cent. of the international aid. Our record in dealing with exactly the type of problems that he mentions is unmatched.

§ Mr. Nigel Waterson (Eastbourne)
Can my right hon. Friend give us an idea of how many Labour Members persistently press for companies in their constituencies to be involved in projects linked to ATP? Does not that reveal the gross hypocrisy of much of what we have heard from them this afternoon?

§ Mr. Hurd
There is strong pressure—I cannot give the figures—from constituency members, of course, that ATP? help should go to projects in which they are interested. There is also very strong pressure from individual Labour Members that their constituents should benefit from the sale of arms to the third world.

§ Mr. Mike Hall (Warrington, South)
Earlier in his statement, the Foreign Secretary referred to evidence given to him by Sir Tim Lankester, the former permanent secretary at the Overseas Development Administration, and he described Sir Tim's reservations as being on economic grounds. When Sir Tim Lankester came before the Public Accounts Committee, he described the Pergau dam as an abuse of the aid project. The courts decided that it was illegal. I think that it is wrong for the Foreign Secretary to say that it is a party political issue. The only two things missing from his statement this afternoon were an apology and a resignation.

§ Mr. Hurd
I do not wish unnecessarily to repeat myself. I have described what the court decided. The court did not say that it was wrong to finance the Pergau dam. The court did not say that it was wrong to take into account political and commercial considerations. The court did not enter at all into the question of arms sales, which bulks so large in the controversy. The court simply said that it was not right. It produced a new interpretation of the 1980 Act and said that the financing of the Pergau dam did not fall within that interpretation of the Act. I am complying fully with that judgment.

§ Mr. Jacques Arnold (Gravesham)
Will my right hon. Friend stress time and again the lavish use made of ATP procedures by our export competitors? Is it not a fact that the Government have given skilled support to British exporters, which has been good for jobs, not least jobs in the constituencies of Labour Members?

§ Mr. Hurd
That is certainly true. As a result of all that has happened, the importance of ATP is, if anything, more clearly established. I repeat the point that I made before. I am against having an international race to subsidise exports. I believe that there should be international rules on that—indeed, there are—and that they should be strictly enforced. Within those rules, I see no case whatever for sitting back and giving an advantage to our competitors.

§ Mr. Hugh Bayley (York)
On a number of occasions this afternoon, the Foreign Secretary has stressed the importance of abiding by the verdict of the court in this matter. However, is it not equally important for him to abide by the policies of his own Department as set out in the annual report, which say that aid should be targeted on poor people in poor countries? Why, 785 since he has been told by the court that he may not use that sum of money for aiding the Pergau dam, is he standing in the way of using it for purposes for which Parliament has voted?

§ Mr. Hurd
We are complying with our own policy. Of the aid budget, 80 per cent. goes to the poorest countries. The quality of British aid is often praised, as it was, for example, in the latest OECD report. From the aid budget, 92 per cent. of the aid goes to low and middle-income countries. We have nothing to be ashamed of in that respect. As regards the past, I have answered the question about reopening the books. As regards the present and the immediate future, the arrangements that I have announced today will enable us, for example, to give more effective and more immediate help to the kind of cases to which the hon. Member for Leyton (Mr. Cohen) referred a few minutes ago.

§ Mr. George Foulkes (Carrick, Cumnock and Doon Valley)
There are one or two questions which the Foreign Secretary has not yet answered. I remain puzzled as to how the Foreign Secretary had no knowledge of what he described as an entanglement between arms sales and aid, which was known to the Prime Minister and to Lord Younger. Was he merely naive, or was he kept in the dark?

§ Mr. Hurd
I was Home Secretary.

§ Mr. Foulkes
He was a member of the Cabinet. There must be some collective responsibility for decisions taken by the Cabinet.
The right hon. Gentleman accuses us of making this a political issue. May I assure him that we support ATP, but we do not support ATP stealing money from humanitarian aid and help to the poorest of the poor? We do not support money going into unsound economic projects, which the Pergau dam was clearly seen to be. He made some amazing revelations in his statement today. How do a television studio in Indonesia and a 786 metro in Ankara fit in with our aid policy of helping the poorest of the poor? How can they possibly be the kind of projects that we should be supporting?
As many of my hon. Friends have rightly said, in the good old days, any Secretary of State caught red-handed, in the way in which this Secretary of State has been, would have done the honourable thing and would have gone back to writing novels, which the Foreign Secretary does so well. However, if the Foreign Secretary is not willing to do that, I assure him, on behalf of all Opposition Members, that his standing would rise immeasurably in the House if he would simply apologise for his mistake.

§ Mr. Hurd
On the hon. Gentleman's specific points, he has his chronology a bit wrong, but I do not complain about that. The reference to ATP stealing money simply does not wear, because the figures for the aid programme included ATP and the commitment to the Pergau dam. There was no secret about any of that. There was no question of filching money.
The total of the aid programme took into account the commitments that had been made. That is how the aid programme is constructed. This talk of filching or stealing money surreptitiously from the aid programme is completely wrong. As it is completely wrong, what the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) followed up with is also completely wrong. [HoN. MEMBERS: "What about Indonesia?"] I will go into that. That is a programme of £9.3 million of support from the ATP. It was approved in 1986 by the then Minister of State.
In Bandung, it is designed to bring together a widely scattered community of poor people and make it possible for that community to function more effectively. If the hon. Member for Carrick, Cumnock and Doon Valley thinks that that is a wrong use of money, I would not agree with him. I believe that it is a good use for the money and my right hon. Friend was right to approve it. We believe that it may fall outside the Overseas Development and Co-operation Act 1980. In order to be absolutely sure, it is being financed as I have said.