HC Deb 25 January 1995 vol 253 cc274-94

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

10.5 am

Mr. Jim Marshall (Leicester, South)


Hon. Members

Hear, hear.

Mr. Marshall

The House is far more crowded than one would usually expect during an Adjournment debate, and it is most unusual for my standing up to arouse a cheer as well, but perhaps we are making history in more than one sense today.

There is a certain irony in my luck in coming top of the draw, as I was one of those hon. Members and right hon. Members who voted against the change. Perhaps, Madam Speaker, either you or the gods are getting their own back by ensuring that I have to be here at 10 o'clock on the first Wednesday.

The second comment that I wish to make before I reach the substance of the debate is that, as you know better than I, Madam Speaker, and I am sure that the Leader of the House also knows, the House has sat on Wednesdays in recent times, although not regularly since 1967. The last time that the House sat on a Wednesday morning was on an overspill on the Consolidated Fund Bill debate—something that can no longer happen—on 28 March 1990.

The House decided to meet on Wednesday morning of 1 August 1984 because the House was going into recess. That is an interesting date also because now we do not reach August before we go into the summer recess. It is a sign that the times have changed with the Government. They want us out of the way now, rather than keeping us here in the House.

The House also met on Wednesday 7 November 1990, for the Queen's Speech. However, the last time that the House met regularly on Wednesday was on 25 October 1967, well before my time in the House, and I am sure a few years before your entrance, Madam Speaker.

I asked the Journal Office to obtain for me the front page of that day's Hansard, and it is obvious that some things never change, even though we may change our proceedings from time to time. After Prayers, the House started with a ten-minute Bill, the Travel Concessions for Seamen Bill, moved by Mr. Hector Hughes, who was then the Member of Parliament for Aberdeen North. It will not surprise the House to know that it was critical of British Rail. Hon. Members criticised British Rail for removing the travel concession for seamen going home after arriving in port; so that, as is habitual, British Rail was being criticised 27 years ago, as it is today.

The main item of business under the Orders of the Day—is shows how important those issues were then—was the Sea Fisheries (Shellfish) Bill. Some names to conjure with: Mr. Graham Page sought to move amendments, as did the then Mr. Ronald Bell; so there are some links between now and that time, 27 years ago.

I am delighted to be able to open the first Adjournment debate. I think that it does credit to you, Madam Speaker, or to the ballot, that we should be able to have a debate that is of real significance to this country's national interest and to the position of the poorest countries throughout the world.

The Pergau dam affair shows all that is wrong with the way that Britain gives its aid to some of the less poor countries of the world. To me, and I am sure to many other hon. Members, the affair still leaves a nasty taste in the mouth. Despite protestations to the contrary, it will always, to me and to others, be associated with aid for arms.

The Foreign Secretary has admitted, in his own singular phrase, to a "brief entanglement" between arms and aid in 1988. I have taken an interest in the issues of Bosnia and Europe generally over the past few years. One of the things about the Foreign Secretary is that he can always come up with a neat phrase. The tighter the corner he is in, the smarter and neater the phrase he comes out with.

To me, the phrase "brief entanglement" implies something a bit more than just a short time span. The then Secretary of State for Defence—the scion of the Scottish industiral family—made an error when he went to Kuala Lumpur in 1988 to negotiate arms and offered aid on the side. But in the Foreign Secretary's phrase, the affair was a "brief entanglement". There are those—mainly Opposition Members—who believe that the project would not have been proceeded with without the arms connection. To me it is a long affair, not a brief entanglement.

The case is also a bad deal for the United Kingdom taxpayer, and arguably a bad deal for the Malaysian electricity consumer. Funding the project by soft loans has increased the charge on the United Kingdom public purse by approximately £56 million more than if the project had been funded by a method of mixed credits. It has been estimated—I presume that the estimate is correct as I am not aware that its validity has been questioned--that Malaysian electricity consumers will pay £100 million more than if the electricity was generated by gas turbines. In economic terms alone, the project should not have been proceeded with.

Great credit is due to the World Development Movement for its courage in taking the Foreign Secretary to the High Court to seek a judicial review on his 1991 decision. We all know the outcome—the High Court agreed that the Foreign Secretary had acted unlawfully. We now know—because of the Foreign Secretary's statement and his response to questions on 13 December 1994—that the Government had no intention of appealing against that decision.

Mr. Dennis Canavan (Falkirk, West)

Will my hon. Friend give way?

Mr. Marshall

I shall give way when I have finished making my point, but other hon. Members want to speak, and we have only one and a half hours for debate.

The Foreign Secretary must go further than his statement to Parliament on 13 December, and make two matters absolutely clear. First, he must state clearly that the Treasury will not be allowed to cut future spending allocations to the budget of the Overseas Development Administration in order to claw back future payments for the Pergau dam. The Foreign Secretary has already given that commitment for this year and for 1995–96, but his commitment must go further still to cover the lifetime of the project—for the next 10 to 11 years.

Secondly, the Foreign Secretary must give a commitment to repay fully the aid budget for all past spending, both on the Pergau dam and on the other three projects that might be deemed to be unlawful, and thus reverse the decision that he gave in the House of Commons on 13 December.

Mr. Canavan

I am grateful to my hon. Friend. On the illegality of the Secretary of State's action, does my hon. Friend agree that, if a local councillor had been found guilty in a court of law of misappropriating more than £20 million of public money for an unviable project against the advice of a senior official, that local councillor would almost certainly be surcharged, probably be banned from office for many years, if not for life, and almost certainly be bankrupt? Yet the Secretary of State for Foreign and Commonwealth Affairs carries on almost regardless. Should he not, in all honesty, resign?

Mr. Marshall

I agree with my hon. Friend's conclusion. Clearly, the Foreign Secretary should resign, together with all his Cabinet colleagues. To be fair to the Foreign Secretary—I am not usually fair to him—the High Court ruled that he acted unlawfully in using that piece of legislation. It did not rule that he was unable to provide funds to allow the project to go ahead. We are discussing the legality of the action under the 1980 legislation, not whether the Government had the right to provide money, which they clearly did. They simply chose the wrong vehicle to do so.

I was in the Chamber when my hon. Friend put the same question to the Foreign Secretary in person, and the response that I have just given was far more convincing than the one that the Foreign Secretary gave to my hon. Friend.

The Government's justification for the non-reimbursement of funding for previous years is that the aid and trade provision of the aid programme for previous and future years was set on the assumption that the cost of the Pergau dam and the three other projects would be met from it. In the Foreign Secretary's words, the books for those years are effectively closed".—[Official Report, 13 December 1994; Vol. 251, c. 774.] That is another neat phrase. Books are either closed or not. What does he mean by "effectively"? Does he mean that, if pressure is exerted, the books could be reopened? Is he already anticipating his response when my hon. Friend the Member for Eccles (Miss Lestor) says to him, "You have been under pressure from the High Court or other quarters and have had to reopen the books; how does that tie in with your commitment of 13 December 1994?"?

I can already see the Foreign Secretary, in his usual languid manner, rising at the Dispatch Box and saying to my hon. Friend the Member for Eccles, "I said that the books were effectively closed." Perhaps that phrase means one of two things—the books are closed and cannot be reopened, or the Foreign Secretary is making an escape route for himself for the time when sufficient pressure is placed on him that the books have to be reopened and the payment repaid.

I think that we all accept that the reason that the Foreign Secretary has given and the arguments advanced by the Government amount to pathetic excuses. The Government's unlawful decision prevented lawful aid and trade provisions from going ahead—only one third of the ATPs put forward for 1990–91 were proceeded with. If the Pergau dam project had not been approved, the way would have been left open for lawful ATPs. If the House did not wish to do that, the resources could have been put into the mainstream aid budget.

As a basic principle, the money which was spent illegally must be returned to the aid budget. If that is not done, the Government will have spent resources set aside for aid on non-aid purposes, in blatant disregard of the wishes and the authority of Parliament. The £24 million that was spent on Pergau could make a significant difference to the quality of life in a poor country.

The Pergau dam affair has cast a shadow over the credibility of our aid programme which must be removed. I believe that we should take this opportunity to review overseas development administration policy as it has not been reviewed comprehensively since the 1975 White Paper. My view—I believe that it is also increasingly the view of my party—is that our aid, both bilateral and multilateral, should be targeted at the poorest people in the poorest countries.

We should never forget that 1.2 billion people continue to live in poverty throughout the world. If we are to help to eliminate that poverty, we must give increased priority to the provision of basic education, primary health and safe drinking water—just three objectives among many. I contend that £234 million would provide a great boost to that policy development.

10.21 am
Mr. Michael Jopling (Westmorland and Lonsdale)

I rise on this important and historic occasion with a great deal of pleasure. Madam Speaker, you will recall that this Wednesday morning sitting—which I hope will be the first of a permanent series of such sittings—results from the unanimous recommendation of the Select Committee on Sittings of the House, which I had the honour to chair.

The four different types of private Members' business—the Consolidated Fund Bill debate, with its absurd all-night sittings which are hopefully now behind us; private Member's motions; Adjournment motions; and the last day Adjournment debates—can now be dealt with in the four-and-a-half hour sitting of the House every Wednesday morning. That is a very neat way of putting private Members' business on a regular footing, instead of dealing with it hurriedly just before a recess. It is a far more satisfactory forum for hearing hon. Members' concerns, and it is much more sensible for us to debate an important issue like Pergau at this time of the morning rather than at 4 am, as we probably would have done previously.

The hon. Member for Leicester, South (Mr. Marshall) referred to the parliamentary sittings in 1967. I may have been in the Chamber during the debate to which he referred—I recall taking part in the morning debates during the Crossman experiment. That experiment failed because the House was not prepared to accept those arrangements, and because the business which Mr. Crossman put on the Order Paper was much too controversial.

There is always a temptation for people to monkey about with controversial business, which is what happened in the 1960s. We are now accepting relatively non-controversial business on motions for the Adjournment, and I believe that that will prove very satisfactory for the House.

I am a member of the Foreign Affairs Select Committee, which held a number of hearings and produced a report about the Pergau dam affair late last year. I want to refer to the events leading up to the court's decision about the legality of the payments for the construction of the Pergau dam under the Overseas Development and Co-operation Act 1980.

The whole sorry saga of the Pergau dam began when my noble Friend Lord Younger, as he is now, signed the protocol in March 1988 in Kuala Lumpur. He maintains to this day that he did not do anything wrong, and he gave advice to that effect to the Select Committee. He said that he thought that the wording of the protocol was appropriate, and did not link aid with arms expenditure. However, the Foreign Office and the Government disagreed with that view, as did the Select Committee in its report. We felt that it was wrong for Mr. Younger to sign the protocol at that time.

The signing of the protocol has had a domino effect. I reflect the criticism in the Select Committee report when I say that I cannot understand why the Foreign Office or the Ministry of Defence allowed the protocol to be signed. The Foreign Office was totally ignorant of what was going on. The actions of the British high commission in Kuala Lumpur were totally disgraceful. It appeared to know very little about the reason for George Younger's visit to Kuala Lumpur, and it then failed to inform the Foreign Office what he had signed until some weeks after his return to this country. That is a lamentable state of affairs.

The whole project was appraised in a bizarre mission between 12 and 14 March 1989. Sir Tim Lankester, the permanent secretary, said—it appears in the Select Committee report—that the mission was "wholly unsatisfactory", and described it as a "lamentable slip-up." I agree with him. It is all very well for Sir Tim Lankester to complain about the viability of the scheme after the event; I think it is a pity that people within the Department did not pay more attention to the conduct of the scheme's appraisal and to the legal basis of the expenditure, which has since been overturned by the court as contrary to the provisions of the 1980 Act.

The events surrounding the Pergau dam affair have not been helped by the machinations of the consortium of contractors. The Select Committee was critical of those contractors, and I think that their behaviour does them little credit. Having said that, I entirely understand why it was impossible to stop the Pergau dam project dead in its tracks once the first mistake of signing the protocol had been made. That could have had massive ramifications for our relations with Malaysia—which are delicate at the best of times—and badly affected our important trade with that country. Undertakings had been given by the then Prime Minister, Mrs. Thatcher, and I believe that the Government were right to uphold the undertakings which were given at that time.

I now turn to the issue at the core of what the hon. Gentleman is raising in his one-and-a-half hour Adjournment debate—the judgment of the courts, which nobody really anticipated. The hon. Member for Falkirk, West (Mr. Canavan), who interrupted the hon. Member for Leicester, South, is also a member of the Select Committee for Foreign Affairs.

If he were still in his place, I am sure that he would agree with me, as would my hon. Friend the Member for Broxtowe (Mr. Lester), who is also a member of the Select Committee, that, although the World Development Movement told us that it considered the payment to be illegal, nobody else, on or off the Committee, also reached that conclusion. Although we heard what the World Development Movement had to say, none of us set very much store by it. The World Development Movement was right, however, and the rest of us were wrong.

Returning to the intervention by the hon. Member for Falkirk, West, he sought to link the court case, which was about the legality of the payment under the 1980 Act, with the advice and the objection by Sir Tim Lankester, which was based purely on the viability of the scheme and had nothing to do with the legality of the payment. Those two issues are quite separate, and I wish that the hon. Gentleman were still in his place so that he could hear me say that.

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

If the right hon. Gentleman checks back on parliamentary questions that have been tabled over a number of years, he will find that a number of my right hon. and hon. Friends questioned the legality of the project.

Mr. Jopling

I accept that there have been questions which suggested that. I would guess that those questions might have been inspired by conversations with the World Development Movement. I do not think that there was any advice in or out of the Select Committee to the effect that the payments were illegal, except from the World Development Movement. Therefore, the judgment was a surprise.

I applaud the statement of the Government, complying with the judgment of the court, that money will be found from the reserves—£34.5 million this year and £31 million next year—to put right what the court has said was wrong, and that seems adequate.

Referring to previous years, I am not clear how and whether it would be appropriate or sensible to reopen previous years concerning the £24 million. It seems to me that that is water over the dam, and I could not support pressure to make the Government find that £24 million as well. Of course, the World Development Movement is doing everything it can—it may go back to court, for all I know—to insist that that £24 million is found, but those books are closed. They refer to years gone by and I should be very surprised if it were possible to find that money.

The third part of the money is in future years, and that has also been referred to in the debate. There is no way in which the Government can commit themselves—before we have entered into the specific public expenditure survey rounds—to be absolutely clear about what will happen in 1996–97, but when the Foreign Secretary made his statement on 13 December, he pointed out that the overseas aid budget is to increase by £56 million in 1996–97 and by £115 million in the following year. That will be the baseline for discussions at that time.

Finally, I want to say a word about the aid and trade provision. We should remember that it was introduced by the Labour Government in 1977. We ought also to recall that only 6 per cent. of our aid budget—rather less, I think—goes on ATP and, what is most important, since the Pergau affair the rules have been changed and it would be impossible for Pergau to be financed now to ATP, as it was then.

I am glad that the Select Committee report endorsed the use of ATP, and was not in favour of its abolition. ATP is a very good scheme. I welcome the use of the aid budget to encourage British trade and the preservation of British jobs.

Although the Select Committee was not in favour of an extension of it above 6 per cent., I would not object at all if the ATP budget were increased. It would be to the advantage of British industry, as ATP has had very good effects and repercussions on jobs and industry in this country. It is a pity that the statistics are not sufficiently clear for us to be precise about just what advantages have been gained over the years from the ATP provision.

With those remarks, I look forward to hearing what my hon. Friend the Minister has to say. In particular, I think it would be interesting if he could give us some an idea of how the extra £34.5 million this year is likely to be spent. The Foreign Secretary referred to Bosnia, but there may be other provisions, and I am sure that the House would like to know where the money is going.

10.37 am
Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

I first congratulate my hon. Friend the Member for Leicester, South (Mr. Marshall) on obtaining his debate on this historic first Wednesday morning sitting, at least for a number of years. I am pleased to follow the right hon. Member for Westmoreland and Lonsdale (Mr. Jopling), who is responsible for us sitting on Wednesday morning. I am glad to see him here today, and look forward to seeing him regularly on Wednesday mornings.

I also emphasise that my hon. Friend the Member for Leicester, South, who so ably put his case today, has the total support of those on the Opposition Front Bench in the arguments he put forward.

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Tony Baldry)

In the Labour party, support from the Front Bench counts as a novelty.

Mr. Foulkes

The Minister will have the opportunity to speak later. He is noted for his sarcasm rather than his humour. My hon. Friend has the total support of the Opposition in seeking the debate, and in everything he said.

Today's much-needed debate on repayment of the money that was so scandalously wasted on the Pergau dam is an issue that, contrary to what Ministers and Conservative Members say, is in no way resolved. It may seem to the Foreign Secretary, a small discrepancy in his bookkeeping, but, to millions of people throughout the developing world who are dependant on British humanitarian aid, it can mean the difference between life and death.

The Pergau dam affair, from the original infamous entanglement of arms sales and aid, arising from the improper deal signed by Lord Younger on 23 March 1988, all the way through to the High Court ruling and the Foreign Secretary's stubborn refusal to accept it, has been one of the sorriest sagas of this discredited Government.

On 9 and 10 November last year—nearly three months ago—the High Court heard the World Development Movement case for a judicial review of the Foreign Secretary's decision. The WDM deserves the thanks and congratulations of the whole House for that action. The challenge to the Foreign Secretary's decision was based on the Overseas and Development Co-operation Act 1980.

The judgment held that the Foreign Secretary's decision was unlawful, and that future payments from the aid budget were to be halted. We do not congratulate the Foreign Secretary on doing that, because he was so instructed by the High Court. Equally important, the High Court instructed the Government to reveal to the World Development Movement how they intended to put right the aid payments made so far.

By comparison, the Government quickly stated their intention to meet their contractual obligations to Malaysia, no doubt under legal threat from its Prime Minister, Mohatmir Mohammed. However, the High Court ruling explicitly stated that the WDM must be informed how the Foreign Secretary planned to make good the overseas aid budget. When will it receive a similarly quick response? It still awaits one. Once again, the interests of British companies and of trade relations with Malaysia have taken precedence over the needs of the developing world.

In the House, the Foreign Secretary first ignored many legitimate requests for his resignation, and even mild requests for an apology for the unlawful action that had been taken. Now, the right hon. Gentleman is blatantly attempting to avoid the implications of the judgment. The High Court specifically instructed the Foreign Secretary to take appropriate steps to make good the deficiency in the overseas aid budget. It could not have been clearer.

The Foreign Secretary had the gall to tell the House that he believed that not paying back the £24 million that unlawfully went to Malaysia in that "brief entanglement" as he described it, was "an equitable way" of dealing with the difficult situation that had been created. That is unbelievable. The right hon. Gentleman's view of what is equitable is of no great relevance to the House, and his view of the matter has been shown by the High Court to be fundamentally flawed, and an insult to right hon. and hon. Members and to the British judiciary. Above all, his view is an insult to the people who desperately need the £24 million that the Foreign Secretary is so anxious to keep.

The Labour party is not opposed to the aid and trade provision. We were reminded today as on previous occasions by the Under-Secretary of State, with his usual sarcasm—

Mr. Baldry

The hon. Gentleman mistakes humour for sarcasm.

Mr. Foulkes

It may seem like a sense of humour to some people, but it seems like sarcasm to this side of the House. We do not need to be reminded that a Labour Government introduced the aid scheme. We are proud that Judith Hart introduced it in 1978, but that is not the scheme currently pursued by the Government. The original scheme was intended to allow a small proportion of bilateral aid of about 5 per cent. to be available, to give higher priority to the commercial importance of a limited number—these are the key words—of "developmentally sound projects."

We find objectionable the systematic abuse and corruption of the scheme under a Conservative Government to satisfy Tory central office, the awarding of tenders to companies donating large sums of money to Tory party funds—no doubt to pay some of the heavy legal fees that it must reimburse The Guardian and other newspapers, manipulation of the aid budget to further the sale of British arms and the financial interests of the Government's family and friends, and the Government's refusal to admit dishonesty and at least attempt to make amends.

The legal basis for aid payments was agreed by the House in 1966 and 1980. It gives the Foreign Secretary to authorise aid payments, but only for the purpose of promoting the development or maintaining the economy of a country or territories outside the UK, or the welfare of its people". That was not the purpose of the Pergau dam. As the Foreign Secretary told the Foreign Affairs Committee, there were "wider considerations", such as a clear understanding at the highest level and the interests of British industry. Ironically, the Committee and the Overseas Development Administration's own study of the programme showed that it will not create jobs or orders for British industry, so it cannot be argued that Pergau would help in that way. It boils down to a clear understanding at the highest level I cannot believe that George Younger, who was Mrs. Thatcher's leadership campaign manager, did not have his leader's words ringing in his ears when he signed that fateful arms-for-aid deal in 1988. It was not for nothing that Mrs. Thatcher was nicknamed by a former Leader of the House she who must be obeyed. The following year, on 15 March 1988, Mrs. Thatcher met the Malaysian Prime Minister and sealed the deal on the basis of incomplete information about the cost to the British taxpayer. Over the next two years, it became clear that the Pergau project was not developmentally sound but uneconomic and, in the words of the ODA's own appraisal, "a very bad buy" for Britain and a burden on Malaysian electricity consumers. In 1991, the ODA's Permanent Secretary, Tim Lankester, and the Minister for Overseas Development, Lady Chalker, reached the conclusion that the project was not sound, yet on 26 February 1991, after consulting the Prime Minister, the Foreign Secretary gave his final approval.

Why did the Foreign Secretary do that, against all professional and, I believe, legal advice? Why did he approve a project that would help neither British jobs nor Malaysian consumers? We should not be surprised that he did, when we realise that nearly all the companies that benefit from ATP donate to Tory party funds. We should not be surprised, because of the particular interest taken in Pergau and in the Ankara metro project by the then Prime Minister. Despite all her other tasks, she took a particular interest in those two projects.

When I asked the Minister what other projects the Prime Minister had asked to be put on her desk, he said that it would cost too much to tell the House. It is time the House knew of all the ATP and other projects that found their way on to Mrs. Thatcher's desk before they were approved.

Because of her special relationship with the Malaysian Prime Minister, she was also keen to see British arms sales to Malaysia proceed. One hon. Friend pointed out to me that a report in The Times today says that our Export Credits Guarantee Department programme is distorted by high expenditure on the arms trade. Although the Prime Minister formally de-linked the "separate but parallel letters", there was still a strong relationship between them. The Prime Minister might also have had a close family interest in the project.

Downing street's involvement in reviewing ATP projects is particularly disturbing. The overruling of countless officials, discontent of Cabinet Ministers, protests of non-governmental organisations and press editorials were all ignored by the Government. It took action by the World Development Movement in the High Court to force the Foreign Secretary to admit that he had acted illegally in spending aid money on Pergau. A further refusal to abide by the judgment and to repay the money has caused unmitigated outrage, and rightly so.

The case for repayment is straightforward. The Foreign Secretary has used the lame excuse that the books for previous years are effectively closed. However, it was made clear in response to a question put to the Foreign Secretary's counsel in a preliminary hearing that provision existed for retrospective rearrangement of funds. In other words, the Foreign Secretary's representative said that the books could be reopened, and they should be. It seems that the interpretation of the laws of the United Kingdom depend on which side of the law the Government are operating on.

The Foreign Secretary also stands accused of contempt of the authority of Parliament. He seems to be of the opinion that the aid budget was set on the assumption that the Pergau project would be financed from within it, so provision would have been less if the project had not been included. However, the House did not vote on individual aid and trade projects when it voted for the aid budget in 1991. The ATP allocation appears as a total figure, not as a list of individual projects. Parliament voted the ATP money on the assumption that it would be used for genuine developmental projects. That has not been the case. The House has been ignored.

The money refused by the Foreign Secretary also provides a compelling argument for its return to the aid budget, which has fallen to 0.3 per cent. of gross national product. The bilateral aid budget has declined, and it desperately needs the money that could come, as it were, from the Pergau project. Africa and all poorer countries of the world desperately need the money.

In conclusion—that will please Noddy, the Government Whip. Even more important, Madam Speaker, it will please you.

Madam Speaker

I have an interest in Back-Bench Members.

Mr. Foulkes

So do I, Madam Speaker.

The Pergau dividend, which was successfully won by the World Development Movement, could be used to fund many grass-roots projects which have disappeared from the forefront of British aid.

The Government must be aware that any attempt to cut the aid budget in other areas will be vigorously opposed by the Opposition. Attempts at retribution by the Foreign Secretary will not be accepted. The Labour party wants—indeed, demands—that the money misappropriated from the aid budget be immediately restored. The restoration of credibility to the United Kingdom's aid programme is badly needed to remedy what has become one of the most sickening examples of the susceptibility of this discredited Government.

The only thing that will satisfy the House, non-governmental organisations and the law is that the future payments earmarked for the Pergau project be targeted on the poorest people in the poorest countries—in other words, not only the £24 million that has previously been wasted on the project.

The Minister must say how the Government intend fully to implement the decision of the High Court. If not, it will be open to the World Development Movement, as the right hon. Member for Westmorland and Lonsdale rightly said, to return to the High Court to seek legal redress. The Opposition would encourage the WDM to take that action, to ensure that the Foreign Secretary is made to obey the law of the land.

10.54 am
Mr. Jim Lester (Broxtowe)

The hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) spoke from the Opposition Front Bench in his usual colourful, florid and inaccurate way to try to build up a case that was out of all proportion. I have spent 20 years in the House using my energy to improve the transfer of resources from this country and other developed countries to developing countries, for the relief of poverty and for the integration of the world economy, and I speak from that background.

The Select Committee on Foreign Affairs took an enormous amount of evidence on this controversial issue, made recommendations and identified areas of concern. There is no point in a Select Committee taking that course if Opposition Front-Bench spokesmen repeat assertions that have been disproved, including links between arms and aid, and continually repeat charges that have been clearly demonstrated by others, including Opposition Members who sat on the Select Committee, to be untrue. The Select Committee examined the matter with considerable concern, including aid and trade provision.

It is interesting that Malaysia, which was a very poor country and qualified for ATP when the Pergau dam was authorised, no longer qualifies for such provision. That is a tribute to the success of aid programme development. Countries such as Malaysia have succeeded in getting themselves into the world economy, much to the benefit of the majority of their peoples.

We recognise that ATP has, always been an extremely difficult horse to ride. It is difficult to qualify what is developmental aid and what is assistance to business men who make quotations for major projects. To my recollection, the Select Committee has considered the issue on at least three occasions and has made various recommendations. It must be recognised that, in an imperfect world, it is an extremely difficult issue.

The United Kingdom is one of the few countries that has a limit on ATP. We have limited it to a maximum of 9 per cent. of our aid budget of £2 billion. Other countries use most of their aid budget to assist their own commercial development. The United Kingdom is more restricted because we have much tighter rules than other countries.

It is a misconception that the money spent on the Pergau dam should be available for the bilateral aid programme. The hon. Member for Leicester, South (Mr. Marshall) did not make that mistake. Instead, he said that the money should be used within ATP. The changed rules limit ATP to countries with low per capita incomes and countries with much smaller projects.

My principal concern is that the concept of the dam has been much undermined by what has happened in this country. I feel that strongly. The evidence shows that there is a narrow technical argument in the Overseas Development Administration not about whether the dam should be built but about when it should have been built in terms of the Malaysian electricity cycle. It was a question whether it should be built immediately or in 10 years' time. In the end, the argument turned on who had the most interest in and knowledge of what should happen in Malaysia—in other words, whether the Malaysians should go ahead or whether ODA officials, who took an interested but narrow view, should decide when or whether it should proceed.

The hon. Member for Leicester, South talked about targeting poverty. I have seen various projects throughout the world and it is my experience that the provision of electricity in areas where hitherto there was none, such as the townships of South Africa, can do far more to target poverty—in the sense that it brings an area to life, enables factories to be built and provides a basis for jobs to be created—than projects which bring clean water, education and social services, although I do not seek to undermine those.

It is a great mistake to imagine that the provision of essential infrastructure does not relieve poverty in a positive way. It is understandable that the Malaysians wanted to develop an area of their country that had no electricity. It is understandable also that they wanted to develop a regional project. It has been a successful project. Nobody has ever suggested that the price that was eventually arrived at when the design work was done was unfair. Nobody has suggested that the dam is a white elephant. It has not been suggested that the dam will be anything but a successful project within the Malaysian electricity cycle.

Mr. Foulkes

That is not true.

Mr. Lester

It is true. The project is nearly finished, and it will be successful.

Harping on, moralising and repeating assertions undermine precisely what I, my hon. Friends and Opposition Members who form the all-party group seek to do. Disinformation about sleaze, linkage with arms and corruption, which is not borne out by the facts, only reinforces those who seek to oppose the transfer of resources from the United Kingdom to developing countries. and to close down the aid programme as an easy way to save public expenditure. It damages all that one seeks to do.

In the real world, one must negotiate resources with the Treasury. Our current Foreign Secretary—one of the most capable and committed Foreign Secretaries that we have had for a long time—succeeded, despite all the difficulties, in getting an increase in the aid budget. We all know about the 0.3 per cent. and the 0.7 per cent., but to get an increase in the aid budget out of a difficult public expenditure round is a matter for congratulation, not castigation. I understand that the £24 million already spent was a matter of considerable negotiation with the Treasury and the Foreign Office came out with a reasonable deal. We can all argue for perfection, but we should also argue from reality and from accurate information. I hope that I have at least tried to put the balance right in terms of the argument.

11 am

Mr. Mike Watson (Glasgow, Central)

I welcome the opportunity to participate in this first ever Wednesday morning debate under the new arrangements, and I join my colleagues in congratulating the right hon. Member for Westmorland and Lonsdale (Mr. Jopling) on the part that he played in getting us to where we are.

In a way, I am glad that my hon. Friend the Member for Jarrow (Mr. Dixon) is not with us, as I know that he was not an enthusiastic advocate of the new arrangements and is even less enthusiastic about my urging that we should go yet further. I would like the House to sit on Tuesday, Wednesday and Thursday mornings and for Mondays and Fridays to be entirely constituency days. If anybody tried to suggest that I or any other hon. Member would be working only a three-day week as a result, I should have no problem in refuting that. None the less, we have taken the first steps towards more sensible hours and I am glad that we have the opportunity—

Madam Deputy Speaker (Dame Janet Fookes)

Order. I allowed the hon. Gentleman a little latitude, but he must now return to the subject.

Mr. Watson

I am happy to do so, Madam Deputy Speaker.

The aid community and, for that matter, the developing world, owes a twofold debt of gratitude as a result of the recent developments in the Pergau dam affair: first, to the World Development Movement for having the foresight to challenge the Government on spending on the Pergau dam and on the wider question of the methods by which the Government operate their aid policy, and for having the determination to see the case through to its successful conclusion; secondly, to Lord Justice Rose for his judgment of 10 November last.

Historic though that judgment was in reining in the Government's increasing tendency to act with impunity, it confirmed the trend of the courts in being prepared to dive in and swim around in those murky waters which not much more than a decade ago were regarded as the exclusive domain of the Executive. The willingness of the judiciary to allow an organisation such as the World Development Movement to pursue a judicial review must be welcomed.

If the wider result of the judgment is that it succeeds in curbing Executive power, that will meet with widespread acclaim from every direction but Whitehall as it fits into the unpleasant pattern of Cabinet Ministers having to be told by the courts that they were acting illegally—a previous Home Secretary on a deportation case and the current Home Secretary in relation to compensation for victims of crime.

My pleasure at Lord Justice Rose's judgment was tempered by the Foreign Secretary's grudging acceptance on 13 December 1994 when he addressed the House on the Government's response to the judgment. There was no contrition whatever. There was no admission of guilt and no apology. No regret was shown, except at the fact that they had been found out, which these days seems to be the only crime to which they are ever prepared to admit.

Despite failing to hold his hands up and say, as it were, "It's a fair cop, guv," in true Dixon of Dock Green style, the Foreign Secretary asked for three other offences to be taken into account, which was interesting to say the least. They were the Ankara metro project in Turkey, a television studio project in Indonesia—we could ask all sorts of questions about whether we should have relationships with countries with such human rights records—and the flight information project in Botswana. The latter two have been completed and the first will be completed in 1997.

In total, they amount to some £35 million worth of aid—relatively small beer in terms of the £234 million earmarked for the Pergau dam project, but again they form a pattern: a culture of deception, of disguised intentions with regard to aid funding, of hidden agendas and the end being held to justify the means. That is not a philosophy to which I and my hon. Friends would subscribe, particularly in regard to such an important area as overseas development aid.

In his statement on 13 December, the Foreign Secretary refused to reinstate the £24 million already taken—illegally, it emerges—from the already depleted ODA funds. In effect, as my hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) said, money was effectively stolen from the poor in the developing word. Attempting to justify that, the Foreign Secretary said: 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 …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."—[Official Report, 13 December 1994; Vol. 251, c. 774.] In other words, those who never had it will never miss it. Let the Government tell that to the starving millions of sub-Saharan Africa, where on the ODA's own calculations the percentage of total British aid will fall from 14.4 per cent. in 1994–95 to 12.1 per cent. in 1997. If there is not a need to make up that deficit now, I do not know when there ever will be. We shall not convince the Government of the need if they can claim that the books are closed while at the same time aid to that deserving part of the world is decreased in terms of our overall aid budget.

A modest increase in aid was announced by the Chancellor of the Exchequer to take place, I believe, in 1996–97 and 1997–98. Unlike most other European Union member states, however, the Government refused to promise extra funding for the overall aid budget to take account of the need to increase European aid by 60 per cent. by the end of the century. That decision was taken at the Edinburgh summit in December 1992 and it leaves us in a disadvantageous position compared with our fellow members of the European Union.

The Organisation for Economic Co-operation and Development, which sets aid guidelines for 25 of the richest nations, recently reported that Britain was the only member among the top 12 donors whose aid budget had declined over the past 10 years. It warned that bilateral aid to poor countries—the main purpose of the total aid programme—of some £2.3 billion will be severely cut if Britain is to meet the 60 per cent. increase in EU aid without coming up with any other funding.

That target would absorb up to one third of British aid, compared with the current figure of one fifth. It is in that context that Opposition Members demand that the funding earmarked for Pergau and the other projects to which I referred, which must be reinstated, should be set. Even if the full outstanding part of the £234 million over the next decade is not reinstated, at the very least the £24 million already illegally diverted must be restored.

As my hon. Friend the Member for Leicester, South (Mr. Marshall) so eloquently put it in opening the debate, why should the books be closed for those years when it is admitted not just that a mistake was made but that the Government acted illegally? If I broke into the office of a colleague, stole something and was found guilty, I do not believe that it would be right for me to be told, "You don't have to give it back—all you have to do is to ensure that you don't do it again in the future." There is something bizarre in the Government's saying, "Well, yes, we were caught out, but we'll close the book on it," effectively pretending that it did not happen.

I was not convinced by the argument made by the right hon. Member for Westmorland and Lonsdale, who said that one cannot expect the Government to look into the future, and I agree—particularly for a Government who do not have a future. None the less, they have announced figures for increases in aid for 1996–97 and 1997–98, so they are at least willing to look that far ahead. I am not sure where they find the confidence, but they are prepared to do that although they have not been prepared to give a commitment in respect of the Pergau dam aid funding.

That has been only for this year and next year. If the Minister will not accept the Opposition's pleas, he should remember that the High Court judgment instructed the Foreign Secretary to replenish the ODA funds which had been diverted for that ill-starred project. I hope that the World Development Movement will consider returning to the courts if the Minister confirms, as I expect that he will, the Government's refusal to reopen the books and to make good the deficit that has been identified.

The retrospective rearrangement of funds, which was mentioned in court, is well merited in its own right. The arguments have been eloquently put. Under Lord Justice Rose's judgment it is obligatory, but most of all it is needed by the poor of the world, who have consistently been sold short by the Government in their aid programme despite the rises for the next two years to which I have referred.

Money was stolen from the poor of the world despite the Government's stated intention that their aid budget was to deal first and foremost with poverty. The Government must not be allowed to get away with their ill-gotten gains. Those funds should be reinstated and I urge the Minister to announce the intention to do so today.

11.10 am
The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Tony Baldry)

First, I congratulate the hon. Member for Leicester, South (Mr. Marshall) on introducing the debate and providing the Government with a further opportunity to state their position on the aid and trade programme and on the particular event in question. We welcome that.

I also welcome the fact that my right hon. Friend the Member for Westmorland and Lonsdale (Mr. Jopling) was able to take part in the debate. It is due to the initiatives of the Committee that he chaired that we are able to have Wednesday morning sittings, which will be much welcomed by hon. Members. As a senior member of the Foreign Affairs Select Committee, his contribution was valid and valuable. It should be noted that he and my hon. Friend the Member for Broxtowe (Mr. Lester), also a member of the Foreign Affairs Select Committee, endorsed and supported the Government's approach to the matter.

I am delighted to see the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) on the Opposition Front Bench. I believe that this is the first time he has spoken at the Dispatch Box since taking on his new brief. I was not entirely sure who would be the Opposition's Foreign Affairs spokesman this morning as I noted that the shadow Foreign Secretary was making a speech today on clause IV. Everyone in the Labour party now has to make speeches on clause IV, even those who supposedly have responsibility for foreign affairs. The shadow Foreign Secretary may be able to explain to the Labour party that it is now the only democratic party left in Europe which—

Madam Deputy Speaker

Order. The Minister is trying my patience. He must return to his brief.

Mr. Baldry

I was simply welcoming the hon. Gentleman to the Dispatch Box and pointing out why it was that only he appeared to be free this morning to take part in the debate. However, I appreciate the sensitivities in the Labour party about the debate on clause IV.

The United Kingdom has a substantial aid programme of some £2.28 billion this year, praised for its quality and focused on helping the poorest in the world. Nine of the 10 biggest aid recipients last year were poor countries in Africa and Asia. Former Yugoslavia—Bosnia in particular—was the other main recipient.

Our purpose is to help people in countries poorer than our own to improve their lives. In doing this of course we are keen to link with British companies and British consultants wherever it makes sense to do so, as we do with British non-governmental organisations such as Oxfam and Save the Children.We link with them because they can provide the advice, know-how, products, experience and expertise which can be of benefit to the development of the countries that we help. We should be proud that British money, British talent and British expertise is being devoted to help many of the poorest in the world.

The aid and trade provision was established in 1977 by a Labour Government, as has already been commented on and acknowledged. It has enabled the UK to promote development in areas where British companies have much to offer.

ATP is a successful scheme. It is successful in helping poorer countries in that the approximately £1.4 billion which has been committed to support development projects overseas has led to nearly £4 billion of British exports. My right hon. Friend the Member for Westmorland and Lonsdale asked whether we had the figure and that is it. It has led to substantial exports for the UK. That is good news for Britain, good news for UK jobs and good news for exports. It is particularly good news for those countries which have benefited from these projects. Not surprisingly, the Foreign Affairs Select Committee concluded that ATP should continue.

As the House will know, my predecessor, the hon. Member for Morecambe and Lunesdale (Sir M. Lennox-Boyd), announced in June 1993 new procedures for ATP projects. All ATP projects approved since the new procedures were introduced fully meet the criteria laid down in the Overseas Development and Co-operation Act 1980, as now interpreted by the divisional court. Following the judgment of the divisional court in co-operation with the National Audit Office, there was a review of all projects receiving finance under the aid and trade provision to see whether any of the projects approved under our previous understanding of the Act might fall outside the interpretation of the legislation given by the divisional court. Three projects raised concerns, so following the judgment it was made clear to the House that arrangements would be made for the outstanding commitments to Pergau and the other three projects to be met from funds voted by Parliament outside the scope of the Act.

As to the past, the aid and trade provision of the aid programme was set on the assumption that the cost of Pergau and the other three projects would be met from within it. The books for those years are now closed. Therefore, as the House will know, we concluded that in respect of spending on those projects in previous years no adjustment would be made to ODA's future budget. The planned aid programme for the present and future years again contains provision for all four projects. Spending on the four projects is expected to be £32 million this financial year and £32.7 million next year.

Mr. Hugh Bayley (York)


Mr. Baldry

We have therefore decided that funding from the reserve will be provided to meet the costs of the four projects, thus making available an extra £32 million for the aid budget this year and £32.7 million next year for overseas development. I am sure that the vast majority of people will find that a fair, reasonable and equitable outcome. I am sure that the vast majority of right hon. and hon. Members consider that to be a fair, reasonable and equitable outcome.

Mr. Bayley


Mr. Baldry

That is evidenced by the fact that today's debate has been attended by only a handful of Opposition Members. This does not seem to be a House in which there is considerable doubt about whether the outcome is fair, reasonable or equitable.

Sir Peter Emery (Honiton)

One of the things that I note has not arisen in the debate, most of which I have heard, is that however much many of us might wish to see aid to the rest of the world which is in need increased, many of my constituents feel strongly that some charity belongs at home, and they see great difficulties with such increases when the Government are refusing to give money for the elderly and for many other projects. That must be taken into account. It is no good dismissing it. That is what is felt by many of my constituents.

Mr. Baldry

My right hon. Friend illustrates the fact, which was commented on by my hon. Friend the Member for Broxtowe, that every year the Government have to make difficult decisions in the public expenditure survey. My right hon. Friend the Foreign Secretary is to be congratulated on the fact that this year, next year and the year after that, the overseas development budget will be increasing year on year so that we shall be able to devote more resources to helping the poorer nations.

Mr. Bayley


Mr. Baldry

I shall give way to the hon. Gentleman, who has been something of a yo-yo in the debate. I think that he has only been present for a short part of it, but I gladly give way to him.

Mr. Bayley

I am grateful to the Minister. I am sure that he will agree that it is important to ensure that any future ATP projects are funded within the ODA's rules. Following the Pergau debacle, the ODA changed its rules: in future, ATP would be given only to countries with a per capita gross national product of less than $700. On 18 November, in answer to a parliamentary question, the Minister gave me a list of ATP projects that had been approved for funding since June 1993, when the policy changed; it included four projects worth a total of £16 million—

Madam Deputy Speaker

Order. The hon. Gentleman is now beginning to make a speech. Interventions, by their nature, must be brief.

Mr. Baldry

Perhaps I may anticipate the hon. Gentleman's point. Before Christmas he issued a press release asserting that Ministers had approved projects in defiance of the policy announced in June 1993 that new ATP projects would be approved only for countries with an income per head not exceeding $700 in 1989. That policy has not been breached: the four projects to which the hon. Gentleman's December press statement referred were approved well before June 1993, as my right hon. and noble Friend the Minister for Overseas Development made clear to him subsequently in correspondence.

Mr. Bayley

That is not what the parliamentary answer said.

Mr. Baldry

Perhaps I could make some progress.

As far as I can see, the only organisation—apart from the official Opposition—that does not consider the Government's approach fair, reasonable and equitable is the World Development Movement. It does not consider the extra £65 million for the aid budget to be reasonable. So be it; the WDM may seek to return to court if it wishes, but I am confident that we shall be found to have acted properly and reasonably.

Mr. Foulkes

Will the Minister give way?

Mr. Baldry

No. The hon. Gentleman made a long speech—so long that it tried your patience, Madam Deputy Speaker, and you told us as much.

We are putting the extra money to good use, as we put all the aid budget money to good use. In the current financial year it will enable us to provide, for example, additional emergency aid for Bosnia and Rwanda, and to deal with the crisis in Chechnya. We are financing general relief supplies through the International Committee of the Red Cross, the United Nations High Commissioner for Refugees and other non-governmental organisations that are working for the 400,000 people who have been displaced by the tragedy in Chechnya. Britain will give up to £1 million for international humanitarian efforts to help those injured or made homeless in the fighting; the money will be used to provide food as well as blankets, plastic sheeting and clothing to protect people from the extreme weather conditions in the region.

We shall also be able to respond to specific appeals from the UN and the Red Cross, and to work on joint projects with the World Health Organisation and other multilateral organisations which are intended to deal with primary health care needs in developing countries. Allocations for the next financial year are still to be decided, but aid for the poorest in Africa and Asia is our priority. I assure my right hon. Friend the Member for Westmorland and Lonsdale, and others who asked me about the money, that it is being put to very good use supporting our humanitarian work throughout the world.

Mr. Foulkes

I welcome what the Minister has said, but he has not yet told us—and he has only a few minutes left—how the Foreign Secretary will implement the court's third decision. When will he meet the World Development Movement to explain how he intends to put right the aid payments that have been made so far? That is what the court decided should be done; how will the Government fulfil its decision?

Mr. Baldry

The hon. Gentleman clearly did not listen to what my right hon. Friend the Foreign Secretary said before Christmas, or to what I have said this morning. Furthermore, he obviously was not particularly well briefed by the World Development Movement. The Treasury Solicitor wrote to the WDM on 23 January, setting out the Government's position.

Mr. Foulkes


Mr. Baldry

Sadly, the need for emergency aid has never been greater than in recent times—

Mr. Foulkes

On a point of order, Madam Deputy Speaker. I am aware of the existence of the letter to which the Minister referred, but has it been placed in the Library of the House? It has not been circulated, but it ought to be the property of the House as well as the World Development Movement. Surely it is improper for the Minister to refer to a letter that has not previously been circulated to hon. Members, although they are aware of it and it is central and material to the important point with which we are dealing.

Mr. Baldry

I am more than happy to make the letter available, and to place it in the Library. It repeats very clearly what my right hon. Friend the Foreign Secretary said before Christmas, and what I have said today. The hon. Gentleman cannot have been listening to my speech.

As I was saying, the need for emergency aid has never been greater than in recent times. In 1993–94, we spent about £180 million on providing speedy and effective help for the victims of natural and man-made disasters. We provided help for the victims of 135 emergencies. We work together with the UN, other relief organisations, our partners in Europe and non-governmental organisations such as the British Red Cross and Oxfam. Whether it be the horn of Africa, refugees in Afghanistan or displaced people from Azerbaijan, the ODA is there providing a continuous flow of emergency aid to help the victims of many emergencies.

Nor does ODA help stop at emergency aid, vital though that is. It is, for example, running a programme to restore basic electricity supplies to central Bosnia; ODA engineers are repairing power stations and mending supply lines to provide local communities with electricity. Road engineers maintaining life—saving convoy routes, radio operators, fitters, telecommunications experts and logisticians, all paid for by British aid, are working with the UN throughout Bosnia and Croatia. That is work of which we can all be proud.

During the past four months, operations in Rwanda and Bosnia have been undertaken by the UN and a wide range of British NGOs using bilateral ODA funds now totalling respectively £33 million and £94 million. Last week we announced a further £2 million to promote the recovery of Rwanda. Including our share of EC aid, we have spent more than £62 million on the Rwandan crisis since last April. Long—term programmes also continue in northern Iraq, Angola, Mozambique and the horn of Africa.

Sadly, the Opposition have used today's debate to recycle the canard that our aid is in some way linked to arms sales. That is nonsense: there is no link between our aid programme and defence sales, and there never has been. It is absurd to suggest that our aid flows are in any way determined by prospects of such sales. All the 10 highest aid recipients are low—income countries, nine of them in Africa and Asia. A recent OECD report recognises that our aid focuses on poorer countries, and acknowledges its quality. The United Kingdom", says the OECD, has a highly concessional business—like bilateral programme largely directed towards the poorest developing countries. Its role as a major donor has been particularly important in several geographical areas, notably Sub—Saharan Africa and Asia, and in key sectors such as education, agricultural research, health and population and private enterprise. The United Kingdom has many prominent institutions in the development field and an enormous amount of expertise". That is the reality of the UK aid programme—aid that works to reduce poverty world wide, promoting sustainable and lasting development. It has helped, and continues to help, to change the world for the better.

Fifteen years ago there was bitter war in Zimbabwe; equally unresolved was the struggle for Namibia's independence, while civil wars scarred Mozambique and Angola and, of course, South Africa lived under the shadow of apartheid. Now only Angola's future remains in doubt, and there too an end to the conflict seems in sight. In all those countries, and in some 150 developing countries around the world, UK aid has been and continues to be a catalyst for change for the better. There is nothing inevitable about countries' having to be poor, and every reason to believe that it is possible for us—and others—to make a positive contribution to change. The Economist recently forecast that by the year 2020 what are now called developing countries will account for two thirds of world output and that as many as nine of the 15 biggest economies at that time will be from today's third world.

Whether it is helping to improve the distribution of bread in Moscow, supporting sustainable agriculture in Bangladesh, helping to fight malaria in Africa or the countless other programmes and projects supported and funded by the ODA, we are determined to maintain a substantial and effective aid programme to help to reduce poverty worldwide. It is work of which we can all be proud.

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