HC Deb 25 February 1994 vol 238 cc574-83

11 am

The Minister of State, Foreign and Commonwealth Office (Mr. Alastair Goodlad)

Britain and Malaysia have worked hard together over the past 10 years to set our relations on an excellent footing. Trade last year reached the highest total ever—£965 million, up 52 per cent. on 1992. We want to preserve our excellent relationship.

The Government very much regret the decision taken by the Malaysian Government to ban new contracts with British companies bidding for Government business in Malaysia. The problem arises from what Malaysia perceives as unfair reporting by the British press of affairs relating to Malaysia. There is no good reason for the Malaysians to make a connection between British press reporting and the conduct of trade between Britain and Malaysia. Trade is justified on its own merits to the benefit of both countries.

In Britain, the press is free; the Government cannot control what the press reports, and do not seek to do so. The Malaysian Government understand that.

We are in close touch with the Malaysian authorities, and with British businesses, and hope to restore Malaysian relations to a flourishing footing as soon as possible.

Dr. John Cunningham (Copeland)

I thank the Minister of State for making his statement.

These are very important—indeed, in some respects unprecedented—events, affecting British trade and perhaps thousands of British jobs. It is exactly the handling of the events surrounding the financing of the Pergau dam project that have brought the matter to a head.

Because the Foreign Secretary overruled the decision of his own accounting officer in respect of a quarter of a billion pounds of taxpayers' money, which the accounting officer described as an abuse of our aid budget; because the Foreign Secretary denied that there was any link with an arms deal with Malaysia—a statement that we now know to be untrue; because, at every stage as this event has unfolded, the Government have sought not only to deny the House information, but at times to give misleading information in answer to questions—is it not clear that it is because of that conduct by the Government that we now face these serious circumstances?

Is the Minister aware that Opposition Members believe that links between our overseas aid budget and a formula for the cost of defence deals constitute a clear breach of law, contrary to the Overseas Aid Act 1966 and the Overseas Development and Co-operation Act 1980? Is it not clear that, if councillors were behaving in this cavalier fashion, Conservative Members would be the first to call for them to be disqualified from office and personally surcharged?

Is it true that, at the same time as British companies were involved in discussions about aspects of the Pergau dam project contracts, some of those same companies were involved in discussions about aspects of the arms deal? Does the Minister really expect the House and the country to believe that these things were being done separately, without knowledge of the one being linked to knowledge of the other, in companies such as Trafalgar House and GEC? Are we really expected to believe that?

Is the country expected to believe that expenditure of a quarter of a billion pounds of taxpayers' money was being promised to a Government at the same time as an arms deal was being negotiated with that Government, and that there was no link between the two? Those are incredible statements.

It is precisely because this whole squalid business has started to unravel following legitimate investigations by the National Audit Office, the Public Accounts Committee, the Foreign Affairs Select Committee, Members of Parliament and the British media—who are perfectly entitled to ask questions about these matters—that British trade and British jobs are now at risk; and the responsibility lies with those on the Government Front Bench.

Mr. Goodlad

The Malaysian Government have made it clear that the problem has arisen not, as the right hon. Member for Copeland (Dr. Cunningham) alleged, from our handling of the Pergau dam project—which Malaysia welcomed as a contribution to its development—but from what Malaysia perceives as unfair reporting by the British press of affairs relating to Malaysia.

The right hon. Gentleman raised the matter of my right hon. Friend's overruling the Overseas Development Administration's accounting officer. My right hon. Friend looked at the project in the light of our commitment to continue to assist Malaysia's development, and in the wider context of our overall bilateral relationship with Malaysia. If we had backed out, that relationship would undoubtedly have been damaged.

The Malaysians placed great importance on the Pergau project as a contribution to their national development and diversification of their energy sources. It is the Government's task to promote the national interest, including exports and jobs. I recognise that it is not the right hon. Gentleman's job, as he sees it.

The right hon. Gentleman raised the possibility of a link between the aid offer and defence sales. The Malaysians raised this with us in 1988, in the context of negotiations over the 1988 memorandum of understanding on defence sales. The then Secretary of State for Defence wrote to the Malaysian Finance Minister in June 1988 to say that aid could not be linked to defence sales. We made it clear on several occasions in 1988 that we were willing to consider aid for civil projects. The September 1988 memorandum of understanding with Malaysia on defence matters makes no mention of overseas aid.

The right hon. Gentleman referred to the documents for the Foreign Affairs Committee. My right hon. Friend the Foreign Secretary has made it clear that he will co-operate fully with the Foreign Affairs Committee inquiry. He has sent the Committee a full and detailed memorandum, and both he and the Minister for Overseas Development will be giving oral evidence to the Committee.

I repeat that it is our wish to restore relations with Malaysia to a harmonious footing, in the interests of both countries and the people who work for firms doing business there. I recognise that the right hon. Gentleman may not wish to join us in that task.

Mr. John Ward (Poole)

It may interest the House to know that I spent some 15 years of my working life trying to export the construction industry and its products to various parts of the world. I suggest that the only people who should take comfort from the present exchange are our competitors overseas. They are well aware that, in any export industry, the same rules do not normally apply in other countries as apply here; and there is a lesser understanding of our standards in this country.

Would it not be better, however, if, in their desperate attempts to smear the Government, the Opposition waited until after the inquiry? While Opposition Members may glory in the present embarrassment between the two countries, the net result is lost jobs, which are clearly of no concern to the right hon. Member for Copeland (Dr. Cunningham).

Mr. Goodlad

I agree with my hon. Friend, who speaks with great knowledge of those matters.

Sir David Steel (Tweeddale, Ettrick and Lauderdale)

I entirely agree with the opening statement by the Minister. Is it the case, however, that the objections that the Malaysian Government have raised are to British press stories about funds paid, allegedly, by British contractors into Swiss bank accounts on behalf of Malaysian politicians? If so, none of us is in a position to know whether those stories are true or untrue, but it is surely up to the Malaysian Government to respond to them. The blast of blather from Malaysia this morning suggests that they may have something to hide.

Does the Minister accept that, a few years ago, an editor of a major newspaper in Kuala Lumpur was jailed for two years without trial for writing stories that were inconvenient to the Government, and will he make it clear that, much though we may be tempted, that is not how we do things here?

Does the Minister also accept that, although there may be Members of Parliament who imagine that kickbacks or misuse of aid funds or arms deals are legitimate if one is pursuing business and jobs, the policy of Her Majesty's Government remains that of good governance—transparency, accountability and freedom of the press—and that we shall wish to return to those matters in the debate on Tuesday?

Mr. Goodlad

I am grateful to the right hon. Gentleman for his support of what I said in my statement. He is right to say that I have no responsibility for what appears in the British national press, and that remedies are available to the Malaysian Government if they seek to use them.

Mr. Michael Shersby (Uxbridge)

I am a member of the Committee on Public Accounts. Does my right hon. Friend agree that what has upset the Malaysian Government, understandably, is the suggestion in some parts of the British press—fanned by some Opposition Members, unfortunately—that there has been corruption; or, alternatively, that the deal between Britain and Malaysia was illegal? Is he further aware that there was nothing illegal about the deal that was done with Malaysia? There is nothing in the Overseas Development and Co-operation Act 1980 that would demonstrate that any such deal was illegal.

Is my right hon. Friend further aware that the reason why Sir Tim Lankester, the former permanent secretary, quite properly sought a direction from my right hon. Friend the Foreign Secretary was that he was questioning the economy and efficiency of that specific provision of overseas aid to Malaysia?

Is he further aware that my right hon. Friend the Foreign Secretary gave Sir Tim Lankester a direction, which he was properly entitled to give as Foreign Secretary, and that he gave that direction because he did not wish to renege on undertakings entered into between the then British Prime Minister and Dr. Mahathir bin Mohamed, the Malaysian Prime Minister, at their joint meeting?

Mr. Goodlad

My hon. Friend is correct on the subject of legality and, as I said earlier, he is also correct to say that my right hon. Friend considered the project in the light of our commitment to continue to assist Malaysia's development, and in the wider context of our overall bilateral relationship with Malaysia.

Mr. Peter Shore (Bethnal Green and Stepney)

This is bad news from Malaysia, and no one can do anything but regret it, but will the Minister, first, make it plain to the Malaysian Government that trade is a two-way thing, and that we have been running a persistent deficit in our trade with Malaysia?

Secondly, will he continue to make it plain to the Malaysian Government that the Government here control neither the British press nor the debates or questions that are raised in the House of Commons?

Finally, will he assure the House and the country that Foreign Office Ministers and the Foreign and Commonwealth Office will continue to co-operate with the Select Committee on Foreign Affairs in its inquiries into the Pergau dam and all that is associated with it?

Mr. Goodlad

I can give the right hon. Gentleman the assurance he seeks about co-operation with the Foreign Affairs Committee. He is right to say that there is no good reason for the Malaysians to make a connection between British press reporting and the conduct of trade between Britain and Malaysia. He is also right about the nature of the trade deficit and, as I have said, we are not responsible for what the British press reports or for what is said in this place.

Mr. Michael Jopling (Westmorland and Lonsdale)

Does the Minister agree that the House perhaps would be wise, before jumping to conclusions, to await the report of the Select Committee, which is inquiring into this matter, and which will cross-examine two Ministers next week?

Will he also convey two messages? Will he convey a message to the Government of Malaysia that many people in British industry will be perplexed, under the freedoms that we enjoy in this country, to find their jobs put at risk because of the activities of a free press, which we believe to be essential to our liberties?

Will the Minister also convey a message to the press, reminding them of the need for responsible reporting in view of the way in which some countries in practice, and perhaps in an irritating way, respond to irresponsible reporting? Will he suggest to those newspapers which have made allegations that, if they have evidence, they ought to produce it, and that, if they have not, they ought to withdraw the allegations?

Mr. Goodlad

My right hon. Friend is right to say that the House should not jump to any conclusions in advance of the report of the Select Committee, and I do not imagine that the House would wish to jump to any conclusions. He is also right to say that people will be bewildered that their jobs should be put at risk by press reporting, and he is obviously right to reflect that accurate and responsible reporting is very important to this country's reputation. I believe that responsible people in the media would share that view.

Mr. D. N. Campbell-Savours (Workington)

May I, as the Member of Parliament who was responsible for debriefing the original Pergau informants in 1989, and who asked the National Audit Office to carry out the inquiry that subsequently took place, tell the Minister that key questions remain unanswered?

One question is, why was the contract driven through in favour of those companies against the advice of the World bank, of people in the environmental movement and of people in the Overseas Development Administration itself? Even in the Foreign Office there was division; there was division in the Department of Trade and Industry; there were people in the Treasury challenging the decision that was being taken. Why was it driven through when everyone else was advising that the project should have been based on a gas-fired power station, which is indeed business that Britain would have won? Why cannot we have those questions answered at this stage?

Is it not important for the Malaysian Government to realise that the reason why British Members of Parliament are asking questions on the issue, and why the British media are running with the story, is that everyone knows that the project was an abuse—an abuse of Britain's aid budget, of money that should have been sent to third-world countries to help people who were in real need?

Mr. Goodlad

The responsibility for the decision was not in the hands of the World bank, of environmental groups or anyone else. The responsibility was that of the British Government. My right hon. Friend considered the project in the light of our commitment to continue to assist Malaysia. The Malaysians placed very great importance on the Pergau project, as a contribution to their national development and diversification of their energy sources. We have diversified energy sources ourselves in this country.

There was nothing illegitimate about using aid and trade provision. It was introduced by the Labour Government in 1977 precisely for that type of project. Is the hon. Gentleman suggesting that the Labour party is now abandoning the use of ATP? Perhaps we should be told.

Mr. Colin Shepherd (Hereford)

Does my right hon. Friend agree that, in Commonwealth terms, this fracas is most distressing? Would not both countries have an immense amount to lose from a trade war? Will he convey a third message to the Malaysian Government—that, under United Kingdom law, it is perfectly open for the Ministers against whom allegations have been made to sue the British press?

Mr. Goodlad

My hon. Friend is right on his latter point. On his former point, of course this is regrettable in the Commonwealth context, and I hope that our relations will return to harmonious and fruitful paths as soon as possible.

Mr. Terry Davis (Birmingham, Hodge Hill)

Is it not a fact that it is the Foreign Secretary, not a journalist, who is personally responsible for the threat to British exports and jobs, because it was the Foreign Secretary who had Sir Tim Lankester read a statement to the Public Accounts Committee, linking British exports with the Pergau dam affair?

Mr. Goodlad

I fear that the hon. Gentleman has not been listening to the exchanges that have taken place in the Chamber in the past 20 minutes. The problem arises not from the British Government's handling of the Pergau dam project, which Malaysia welcomed as a contribution to its development, but from what Malaysia perceives as unfair reporting by the British press of affairs relating to Malaysia. Any attempt by the hon. Gentleman to distort the truth of the matter is, I am afraid, bound to fail.

Mr. Cyril D. Townsend (Bexleyheath)

Does my right hon. Friend agree that the top priority for the Foreign Office is to restore relations with the fastest growing economy in that part of the world, that it is best done by time and patient, quiet diplomacy, and that our excellent high commissioner should be encouraged to get on with it? Does he agree that companies such as British Aerospace are exporting at the front of technology, and that it is greatly in the interests of such a Commonwealth country that it should benefit from their products? Will he remind the Malaysian Government that British Aerospace is creating vital jobs in Malaysia?

Mr. Goodlad

Yes, indeed: my hon. Friend is absolutely right. Trade stands or falls on its own merits and is, by its nature, to the benefit of both parties involved. British Aerospace is certainly a good case in point.

Mr. Harry Barnes (Derbyshire, North-East)

May we have some clarification? The hon. Member for Uxbridge (Mr. Shersby) claimed that the deal was not illegitimate but, in his initial statement, the Minister told us that there was no deal and that the matter was merely coincidental. Was it coincidental, or was there a deal?

Mr. Goodlad

What my hon. Friend the Member for Uxbridge (Mr. Shersby) said, which I said was correct, was that there was nothing illegal about the grant of aid and trade provision for the Pergau dam project.

Mr. Gerald Malone (Winchester)

Does my right hon. Friend agree that it is a pretty shameful day for British jobs when Opposition Members admit knowing that the effect of their actions will be to destroy jobs? Is he aware that in Hampshire, close to my constituency, many jobs depend on foreign orders? Will he take it from me that the people employed in the companies involved appreciate his efforts and those of the Government to continue to sell British industry abroad? Will he guarantee that those efforts will continue undiminished?

Mr. Goodlad

I am grateful to my hon. Friend for his comments. We shall continue to work as hard as we can to promote British exports, which are doing extremely well in Asia, and to sell Britain abroad. He is right to point out that Opposition Members are interested only in selling Britain short.

Mr. Jeremy Corbyn (Islington, North)

Will the Minister stop confusing the message with the messenger? Does he accept that the questions being asked in the British press are wholly legitimate and proper questions about the conduct of public affairs and the use of public money? Will he decide once and for all and tell us that the Government are not prepared to condone sleaze, corruption or backhanders in any shape or form anywhere in the world, especially if British companies and the Government' s own policy decisions are involved?

Mr. Goodlad

Of course we do not condone sleaze or corruption; nor have the British Government been involved in any such thing. I have already said that we are not responsible for what appears in the British press, but that accurate and responsible reporting is very important to this country's reputation.

Mr. Roger Knapman (Stroud)

If the allegations made in the British press, especially in the Sunday press, have any substance, should not such evidence be made available straight away? If there is no such evidence, should not the press apologise to the Malaysian Government?

Mr. Goodlad

My hon. Friend makes an important point.

Mrs. Ann Clwyd (Cynon Valley)

Does not the Minister realise that the whole overseas aid budget has been cut by half since 1979, and that what we are objecting to in particular is the misuse of aid and trade provision? This case, in addition to many others which I believe the National Audit Office is at present examining, is a reason for an inquiry to be held into the use of aid and trade provision. Should it not be kept separate by the Department of Trade and Industry from the activities of the ODA? Was it not a lack of development soundness as much as anything else which the permanent secretary of the ODA and Lady Chalker were questioning at the time?

Mr. Goodlad

The hon. Lady's initial statistics are, to say the least, a little misleading. In fact, our overall aid has gone up by 10 per cent. in real terms since 1987. She mentioned aid and trade provision, which was introduced by the Labour Government in 1977, and which currently accounts for approximately 5 per cent. of our overseas aid programme. We give a higher proportion of our aid budget to the poorest countries than other major donors, although one might not think so from listening to the hon. Lady.

Our major competitors use tied aid to win contracts overseas and we cannot allow British industry to be at a disadvantage. To date, some £3.9 billion of British exports has been won through aid and trade provision since the scheme started—272 projects in 50 countries worldwide since 1977. [Interruption.] The hon. Lady may not like it, but she has to listen. If it is the purpose of the hon. Lady and the Labour Party to cease this form of aid, we should like to hear about it; otherwise, they should stop carping about it.

Several hon. Members

rose—

Madam Speaker

Order. Hon. Members are rising on both sides of the House who were not here for the statement. I have said before that hon. Members must be here to hear the statement before I can call them.

Mr. Hugh Dykes (Harrow, East)

Will my right hon. Friend contrast the interesting difference between the very measured and responsible utterance of the right hon. Member for Bethnal Green and Stepney (Mr. Shore) and the frenzied and exaggerated hysteria of the shadow Front Bench spokesman, the right hon. Member for Copeland (Dr. Cunningham), and others, especially the hon. Member for Workington (Mr. Campbell-Savours), when crucial British jobs and exports are at stake?

Does my right hon. Friend agree that none of this is the fault of the present Government? [Interruption.] Yes, that is so. Will my right hon. Friend convey to the excellent Government of Malaysia the fact that we too have suffered at the hands of a wholly free and irresponsible press, which is not under the control of the British Government, and that the British Government and British companies are most anxious to continue to promote the modernisation and development of Malaysia and that it is one of our most sincere objectives?

Mr. Goodlad

I do not wish to drive wedges between the two right hon. Gentlemen, but my hon. Friend is right to say that we should now try to restore our relationship with Malaysia to its former fruitful state, to the benefit of both countries.

Mr. Peter Bottomley (Eltham)

Will my right hon. Friend confirm that it is not desirable anywhere, and not possible in this country, to control the press? Will he also confirm that, if British contracts are not signed, even though they might provide the best value for Malaysia, it is probably an offence against GATT and not in the interests of the Malaysian people? Does he agree that those who want to have clean hands while digging in the graveyard of British jobs will not be very convincing?

Mr. Goodlad

As always, my hon. Friend's points reflect his great knowledge of these matters. He is right to highlight the cavalier attitude towards British jobs shown by Labour Members.

Mr. Keith Mans (Wyre)

Does my right hon. Friend agree that many Conservative Members want more linkage between British jobs and foreign aid? Does he also agree that the present problem is with the press in this country, especially the foreign-owned press, which seems to have little regard for British jobs? Does he further agree that it might well have something to do with the comments made by the Malaysian Prime Minister and the Australian Prime Minister at a recent meeting, rather than with the British Government and recent contracts?

Mr. Goodlad

Accurate and responsible reporting is important, whatever the ownership of the press involved.

Dr. John Cunningham

Everyone will recall that, on the last occasion that relations between Malaysia and Britain were at a low ebb, it was because of the policies of the present Government, so we take no blame for their mismanagement of our relations with Malaysia. We of course deplore the threat to trade and jobs in this country, as I said at the outset, but we shall take no lessons about threats to jobs from a Government under whom there are still 2.8 million people in receipt of benefits and many more unemployed. For every year that they have been in office, they have had many more people unemployed than the last Labour Government ever had. That is the reality.

May I say to the right hon. Gentleman—[Interruption.]—and his raucous supporters—that it will never be possible to build a successful economy and stable and secure jobs on squalid, if not illegal, deals like this. Of course we all need a responsible press in any democracy; but even more in Britain, we need the responsible conduct of government in the interests of the people.

Mr. Goodlad

This morning, the right hon. Gentleman seems to be rather a late convert to the interests of British workers and British jobs. It has suddenly occurred to him that he should say something about the matter. I am sure that he will not be pleased that unemployment in this country is falling as it is, and that we are doing so much better than our European competitors. It is feeble to complain about what the right hon. Gentleman called "raucous supporters" on this side of the House: I fear that he may be rather embarrassed that he has so little support on his side.

As I said, Britain and Malaysia have worked hard together over the past few years to develop an excellent relationship, with very high levels of trade in each direction. We are determined to preserve that excellent relationship, and we do not expect any assistance from the Opposition Benches.

Several hon. Members

rose—

Madam Speaker

Order. We must now move on.

Mr. Harry Greenway (Ealing, North)

On a point of order, Madam Speaker. This statement was most important to me, because jobs in my constituency could certainly be at stake, as it is extremely important in other constituencies, for that reason and for many more. However, the statement was not notified to 3 Dean's yard where my office is and, therefore, not to me. Although I asked the attendant on duty if she knew about the statement, she said that she did not, and nothing came through. Could you look into the matter and ensure that that never happens again, bearing in mind the great importance of a matter like this, and any other statement?

Madam Speaker

I am sure that the statement has been on all annunciators since 10 o'clock this morning. However, if the hon. Gentleman will let me know the annunciator that he looked at, I will have it examined. I call Mr. Wallace.

Mr. Greenway

It was not on the annunciator that I looked at.

Madam Speaker

Order. I just made the point that it was on all the annunciators that I saw. If the hon. Gentleman says that it was not on his annunciator, I will have it examined.

Mr. David Nicholson (Taunton)

On a point of order, Madam Speaker. I hope the fact that you did not call me on the statement does not mean that you thought that I was not present for it, because in fact I was present at the start.

Madam Speaker

Hon. Members need not raise these points of order. The two hon. Gentlemen I referred to—I will not mention their names so as not to embarrass them—knew exactly whom I meant, and did not rise after I said what I did. We are a little subtle in the Chamber—not very often, but sometimes.