Strategic Export Controls

HC Deb 27 March 2003 vol 402 cc159-88WH

[Relevant documents: First Joint Report from the Defence, Foreign Affairs, International Development and Trade and Industry Committees, Session 2001–02, HC 718, and the Government's response thereto, Cm 5629; and the Minutes of Evidence from the Defence, Foreign Affairs, International Development and Trade and Industry Committees, 27th February 2003, HC 474-i.]

Motion made and Question proposed, That the sitting be now adjourned.—[Charlotte Atkins.]

4.14 pm

Mr. Roger Berry (Kingswood)

It is a pleasure to introduce the report on strategic export controls. It was produced by the Select Committees on Defence, Foreign Affairs, International Development and Trade and Industry, which together are commonly known as the Quadripartite Committee. I thank my colleagues for their efforts in producing yet another unanimous report. Indeed, given that the Quadripartite Committee consists of four Committees, we did rather better than that and simultaneously produced four unanimous reports, and I am grateful to my colleagues for their contributions to that process. I should also like to place on record my thanks to our Clerks, whose skilful drafting of the reports has been instrumental in ensuring our success.

The need to control arms exports has never been greater. When a country is engaged in war, it is not out of idle curiosity that people ask, "Who armed our enemies and why?" When a country is faced with terrorism and the threat of terrorism, it is especially important that we know where our arms exports are going and why, to ensure that they do not fall into the hands of terrorists. The issues analysed in the report and the Government's response thereto are extremely important at the present time.

I shall start by echoing one of the report's opening comments and congratulate the Government on the real progress that has been made in recent years. That progress includes the development of the consolidated criteria, the Landmines Act 1998, the ban on the export of torture equipment, annual reports and greater transparency and, the Export Control Act 2002. The Government have taken many steps to bring our arms export control regime up to date, to make it transparent and to make Government accountable. As the Quadripartite Committee acknowledged, and as I am sure that my hon. Friend the Minister would accept, I have spent a considerable amount of time recognising that throughout the country.

The Committee and I pay tribute to the Government for the progress that has been made but, as is inevitable in debating the report, I suspect that all right hon. and hon. Members will want to focus on those areas of Government policy on which they want greater clarity or on which they are in substantive agreement. The report identifies several concerns that I want briefly to mention. They include how the war on terror has affected the licensing regime; end-use monitoring and the policy on the monitoring of arms exports after they have been delivered; policy on the export of military components and the incorporation issue; the Export Control Act 2002 and the issues arising therefrom, particularly arms brokering and trafficking; how regional tensions have affected exports to India and Pakistan; the account taken of sustainable development when licensing exports, particularly in the context of the export not long ago of the military air traffic control system to Tanzania; and the proposals for prior parliamentary scrutiny of export licences—an issue that exercised our Committee for some time.

Before I come to those issues, I want to comment on three others that deserve brief mention. The first relates to the information made available in the annual report not only to the Quadripartite Committee but to the public. There is a continuing dialogue between the Committee and the Government about the importance of ensuring that we can access the information that we require to fulfil our job of scrutiny. We do not wish to impose undue burdens on Government Departments but the fact is that, however valuable the information in the annual reports may be, it raises more questions than answers, and it is inevitable that the Quadripartite Committee will need to seek further clarification if it is to do its job properly.

Secondly, there is a fair amount of potentially sensitive information relating to arms export policy that it would be desirable to make available to the public in an appropriate form. I am sure that the Government share the Committee's view that we should provide the fullest possible information, so that people know what decisions have been made and why.

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Mike O'Brien)

I am sure that my hon. Friend would agree with me that what is important is to have effective export controls. It is key, therefore, that the officials working on that should be able to concentrate on that job. It is important to respond to parliamentary scrutiny. It is also important that those who are scrutinising recognise that the same officials will reply to the extremely large number of questions asked. It is right that we should answer them, but it is also right that the officials should ensure that the control mechanism is effective.

Mr. Berry

Of course it is important that the officials with responsibility for running the export control regime have the resources to do so. It is also essential that the Quadripartite Committee has no difficulty in securing answers to questions when it seeks once a year to clarify issues in the Government's annual report. The Clerk of the Committee and I spent a considerable time examining answers to supplementary questions. Without the necessary expertise, it was often difficult for me to know what a particular piece of equipment was designed to do or who Mr. Bloggs in Iran was. It is inevitable that the Committee will require full and speedy answers. I am sure that I could suggest to my hon. Friend on another occasion how resources in the civil service might be deployed in relation to the arms export business, but the Committee must have prompt replies to questions.

I welcome the Government's commitment to give our Committee time to consider the draft secondary legislation to the Export Control Act next Thursday, when we will take evidence from the Secretary of State for Trade and Industry, the Defence Manufacturers Association and the UK working group on arms, which, as many hon. Members will know, includes organisations such as Saferworld, Amnesty International and Oxfam. The Committee is grateful to all those organisations for their serious interest in our work and the significant contributions that they have made to our deliberations.

Mr. David Drew (Stroud)

I presume that next week the Committee will consider the subordinate legislation to the Export Control Act with specific regard to small arms. If not, will my hon. Friend say when it might consider it? He mentioned Saferworld, which always highlights the issue of small arms. I am especially interested in issues relating to the re-export of small arms, which may have come through Britain as an intermediary country on the way to somewhere else.

Mr. Berry

I am grateful for my hon. Friend's intervention. We will certainly consider the draft subordinate legislation, which includes references to brokering to which I believe he is alluding. I shall comment on that later.

I was about to make a point about the administration of the licensing process. The Committee has consistently pressed the Government to improve the processing of licensing applications. We need a speedy system. It can be irritating not to receive a speedy reply, and it imposes a burden on business. The Government have undertaken a review, and I would appreciate any comments that the Minister may like to make about it.

There are substantive issues, including the war on terror. The Government told the Committee that the consolidated criteria do not need to change to deal effectively with terrorism. However, the report highlights two specific issues that are difficult to handle but that need to be addressed. The first issue is the balance that we strike between security concerns and human rights concerns when we consider the export of arms to countries that use them to engage in conflict with their own domestic sources of terrorism. The gift of assault rifles and helicopters to Nepal is a recent example. The Committee commented that it is legitimate for another Government to use force within its borders to achieve security and to defeat terrorism. We must, however, remain alert to the threat of violations of human rights. Great vigilance is required to ensure that appropriate balance. The Nepalese armed forces have a legitimate need for weapons because they are engaged in a struggle against terrorism, but they do not have a spotless record on respect for human rights, and that issue must be addressed. There is also the question of whether money from the conflict prevention pools should be used for helicopter equipment, as was the case in Nepal.

There are real concerns, outside and inside the House, that the Government may be relaxing export controls to some countries that are perceived to be "on side" in the war against terror, even when those countries have poor human rights records. We can probably all think of examples. The Committee may wish to examine that matter further when we consider our report on the 2001 annual report, but I would appreciate the Minister's comments on those concerns.

The second issue in relation to the war on terror is obvious. We must do everything possible to deny arms to terrorists and proliferators. That concerns not only weapons, but dual-use goods that could be used by terrorists, and must be a key priority for our arms export control regime. In evidence to the Committee four weeks ago today, the Government said that the controls are pretty robust as they stand. To give you a figure, of all the export licence refusals that we issued last year, 50 per cent. were because of WMD"— weapons of mass destruction— concerns. I welcome that, and would like to place on record that we applaud the efforts of those responsible for operating our export control regime. It is a difficult and time-consuming task, as we have been reminded. However, I repeat the obvious point that, at a time when we are faced with the threat of terrorism, we need rigorous and comprehensive arms export controls.

Granting a licence is one thing, but the end use may be another. After a licence has been granted, how do we ensure that the actual end use is that for which approval was given? What is our policy on end-use monitoring? In our report, we expressed the view that the Government should consider producing clear guidelines for the circumstances under which end-use monitoring should be undertaken. On a number of occasions, the Government's response has been that the surest way of preventing diversion or misuse of defence exports is to examine the risks carefully when assessing the export licence application, and to refuse such an application when those risks are unacceptable.

That is the best way to do it if there is full and perfect information. If the information received when the decision on the licence application is to be made is accurate, it is self-evident that the decision can be made at that point, and the end-use monitoring issue disappears. However, if that information is incomplete or inaccurate, how do we ensure that the purpose for which an arms export was licensed is the purpose to which it is put? I suggest that the Government's policy on end-use monitoring in those circumstances is unclear. That may be illustrated by the case of military equipment exported to Israel; the example is well known and I will be brief in making the point.

In February 2002, during the passage of the Export Control Bill in the other place, the Government, in relation to the end use of equipment exported to Israel, said: We have no evidence that equipment or components manufactured in the UK and licensed for export were used … in the occupied territories during the recent violence."—[Official Report, House of Lords, 7 February 2002; Vol. 631, c. 834.] That statement was made because the Government, quite rightly, had secured a written assurance from the Israeli Government that no UK originated equipment nor any UK originated systems/ sub-systems/components are used as part of the ߪ Defence Force's activities in the Territories". The Government had sought the assurance that arms exports to Israel, which are not banned, took place on condition that they were not used in the occupied territories. Therefore, as of February 2002, the Government were saying that there was no evidence of any violation of that agreement.

In March 2002, in a written answer in the other place Baroness Amos stated: British Embassy staff in Tel Aviv do not undertake physical checks on the end-use of UK licensed equipment, components and spare parts supplied by the UK to Israel. They do not have the resources to do so. In addition, many UK defence exports in recent years have been components or pieces of technology embedded in other systems and therefore not very visible."—[Official Report, House of Lords, 7 March 2002; Vol. 632, c. WA31.] I will come to incorporation in a moment. A week later the then Foreign Office Minister, the Parliamentary Secretary, Privy Council Office stated: New information has, however, come to light that UK supplied equipment licensed for export under a previous Administration and a different export control regime is being used by the Israelis in the Occupied Territories.—"[Official Report, 11 March 2002; Vol. 381, c. 689W.] Those were the British Centurion tanks that had been exported a long time ago and were observed being used in the occupied territories.

Since then there have been different versions about how that information came to light and how it was that modified British Centurion tanks were being used in the occupied territories. Initially we were led to believe that it came to light by chance. Four weeks ago our Committee was told that: the Israel case was a particular one where we had received certain assurances from the Israeli government that British equipment would not be used in the Occupied Territories. We obviously then made an effort to ensure those assurances were being met and our attachés in Israel, at considerable personal risk in some cases, did make tours in the Occupied Territories with this in mind. I then asked: This discovery by the Military Attaché was not just ߪ accidental ߪ was it? The reply was: No, it was part of his task. That appears to contradict Baroness Amos's statement last year that British embassy staff do not undertake physical checks. I am now rather confused about the Government's policy on end-use monitoring.

Mr. O'Brien

I do not think that there is any great confusion about what happened. The defence attachés and other embassy and consulate staff make tours of the west bank. One of their objectives is to ensure, in so far as they can, that no equipment is used in breach of any undertakings. As my hon. Friend will know, these chassis, which ended up as troop carriers, were adaptations from 1940s and 1950s exports from the then British Government to Israel. They were subsequently changed on a number of occasions into troop carriers. That was spotted by an alert defence attache. One of his jobs is to keep an eye on those issues. I am sorry, Mr. Deputy Speaker, that I am taking a little too long here. I will be brief. It is not his job to do that exclusively, but it is among a number of tasks that those who do these tours undertake.

Mr. Deputy Speaker (Mr. John McWilliam)

I thank the Minister for his courtesy in apologising. However, interventions should be short.

Mr. Berry

The fact is that on one occasion last year we were told that this activity does not take place because there are not the resources to do it. It is not a question of whether someone does it full time or not. More recently we were told that this is a more explicit responsibility. I simply make the point that some of us at least believe that that case demonstrates that there is some confusion in the Government's policy on end-use monitoring, or that it is rather ad hoc.

Why have the Government not considered the American system, the blue lantern approach, where careful attention is paid to the end use of arms exports? We need a more robust system of end-use monitoring, particularly when there are growing concerns about diversion. If blue lantern is good enough for the United States, will the Minister tell us why it is not good enough for us?

The problem of end use is complicated by that of incorporation. Many of the exports listed in the annual reports are not complete weapons or weapon systems. In fact, most of them are components, which is one reason why it can be difficult to understand exactly what is going to whom and why. Most of the licences detailed in the annual reports are issued for components, which are covered by the consolidated criteria-there is no question about that. On 8 July last year, the Foreign Secretary announced in a written answer that new guidelines would be taken into account alongside the existing consolidated criteria for licence applications for goods where it is understood that the goods are to be incorporated into products for onward export"—[Official Report, 8 July 2002; Vol. 388, c. 653W.] The effect of that is to hand control of re-export to the incorporating state when the Government are satisfied with its export control regime.

It seems clear that the guidelines were precipitated by an export licence application for the export of head-up display units to the United States for incorporation in F-16 aircraft for subsequent export to Israel. Our Committee regretted that the guidelines were announced in a written answer, because if the Foreign Secretary had made an oral statement on the Floor of the House, he could have been questioned and challenged. More substantively, when giving evidence to our Committee four weeks ago, he said that he had taken into account the export control systems of the incorporating country, which in this case is the United States, whose system is a very effective one". The Government have often prayed in aid a statement by the Committee in support of the sentiment that the United States has an effective export control regime, and, indeed, a previous Committee report said precisely that. However, I must make the obvious point that although the USA's export control regime may be effective, it is the USA's export policy that matters, particularly with regard to arms sales to Israel, for the simple reason that it has a different policy from the United Kingdom. In our report, we say that the comments of our predecessors on the effectiveness of the US system of export controls should not have been called in aid to justify the decision of Ministers in relation to policy on the export of aircraft components to Israel via the USA. I have made that point on several occasions, but I am afraid that the Government have misunderstood our Committee's view. I hope that that now puts the matter to rest.

The substantive point is that I have no doubt that if an application had been made for a licence to export head-up displays directly to Israel, it would not have been granted without an assurance that they were not to be used in military equipment to be deployed in the occupied territories. In fact, I do not think that it would have been granted at all, because the Government do not regard a previous Israeli Government undertaking as valid after the experience with the Centurion tanks. It is perverse that the Government would have turned down licences for export to Israel, but because the United States has a less stringent policy, there is nothing to prevent that component being used in Israel for any purpose. That point was not made explicit in the guidelines, and it is not clear to me that it is justified in terms of arms export control policy because, politically, it will put the Government in a curious position. Exporting the head-up display units to the United States of America gives a greater chance that they could be used in aircraft in the occupied territories. Perversely, under these guidelines, the Government appear to be licensing the export of military components even though the final destination is Israel where they are more likely to be used in the occupied territories. I do not believe that they would have granted the licence if the export had been direct.

Ironically, under US law, recipients of controlled goods—weapons or components—must seek the permission of the United States before re-export. Why should we not apply the same control? Does not the Government's arms export control policy seek to control the end use of components as well as of complete weapons systems?

It is clear, not least from the evidence that we took four weeks ago, that different EU countries have different policies on incorporation. Will the Minister comment on the steps that the Government are taking to try to secure common agreement on the application of EU criteria in these cases?

Any policies that are adopted in relation to end-use monitoring and incorporation are of limited value if they can be easily avoided and, at present, arms brokers are able to do just that. That is why many of the arms that are used by terrorist and criminal groups in the world's conflict zones are provided by arms brokers.

The report that is before us refers to the Export Control Bill, which became an Act in 2002, and I am delighted that section 4 of that Act gives the Government the power to impose controls on trafficking and brokering by UK citizens located anywhere in the world. That is long overdue. However, the Government have said that it is their intention to introduce those extraterritorial controls only for trade in long-range missiles and torture equipment—which, thankfully, is banned in any case—and to destinations subject to embargo. The Government do not intend at present to control trafficking and brokering in small arms by UK nationals located outside the UK—that is my understanding of the situation, but I would be grateful for clarification on it if I am wrong. I regret that, and I said so at the time of the debate on the Export Control Bill.

I remind the Government of their 2001 election manifesto commitment to control British arms dealers wherever they are located. This is a serious loophole in the Government's plans to regulate arms exports. Their view seems to be that to close it would be unfair because the arms dealer cannot be expected to know that he or she has to get a licence or, perhaps, because it is unenforceable. I am not a lawyer, but I did not think that ignorance of the law was a defence. There must be a number of laws on the statute book that are difficult to enforce, but that is no excuse for not trying.

The Government are also inconsistent on the issue of extraterritoriality. There are many examples of that, but I shall offer only one: under section 109 of the Anti-terrorism, Crime and Security Act 2001, bribery is a criminal offence in UK law when it is committed anywhere in the world by a UK citizen or company. Why is bribery a more self-evidently criminal act than arms dealing without a licence? Unlike bribery, trafficking and brokering cause deaths, so why are the Government committed—I believe rightly—to criminalising bribery carried out overseas, but not trafficking and brokering?

Mr. Barry Gardiner (Brent, North)

Is my hon. Friend aware of chapter 2.14, under the section on penalties and enforcement, of the consultation document on draft orders under the Export Control Act 2002? It states that the Government believes that ignorance of the law should not exempt an offender from the possibility of receiving a custodial sentence for engaging in behaviour which any unreasonable person could be expected to know would constitute an offence".

Mr. Berry

My hon. Friend makes an important point, which strengthens the arguments of those of us—and he is one—who want the loophole to be closed.

Will the Minister confirm that other European countries are introducing full extraterritorial powers; that Finland and Poland have already done so; and that such powers are under consideration in Belgium and—dare I say it—France? We should be looking to our colleagues elsewhere.

Dr. Vincent Cable (Twickenham)

Is the hon. Gentleman aware that the Government have already accepted the principle of full extraterritoriality in other areas, such as that of female genital mutilation, which is very much to the Government's credit? It raises the question, however, of why that principle is not being applied elsewhere.

Mr. Berry

The fact is that an arms broker who is a UK citizen can hop on the Eurostar to Lille and do the deal, and that would not be covered by the Government's plans. That is silly, as hopping on the Eurostar is not difficult. I have described my personal views on arms brokering, but the Select Committee will consider the issue when it examines the draft secondary legislation.

I shall move on because I am conscious of the time and the fact that several hon. Members want to speak. On India and Pakistan, criterion 4 of the consolidated criteria allows an export licence to be refused if there is a clear risk that the intended recipient would use the proposed export aggressively against another country or to assert by force a territorial claim". The Committee has been concerned by the Government's arms export policy response to the varying tensions between India and Pakistan, including the recent and serious tensions over Kashmir, not least because both nations are nuclear powers. We have examined information on the licensing decisions in relation to India and Pakistan in 2000, 2001 and early 2002. More recently, we have considered the proposed sale of Hawk aircraft to India, and have been keeping an eye on measures by the Government to prevent the export of equipment that might be used in either country's nuclear arms programmes. Those are the two key issues.

The Committee felt that if the situation in India and Pakistan in the spring of last year did not fully engage criterion 4—hon. Members will recall that that was a time of high tension between the two countries—it would be difficult to conceive of circumstances that would, short of all-out war. These two nuclear powers primarily have a dispute over Kashmir. If that, combined with a time of high tension, does not require careful consideration of the risk of arms exports being used aggressively to assert by force a territorial claim, I do not know when such a concern would be prompted.

I should like to make one more remark about arms exports to India and Pakistan in relation to Hawk aircraft. When the Foreign Secretary gave evidence to the Select Committee last month, he responded to the suggestion that senior members of the Government had been lobbying the Indian Government to buy Hawks by saying: Would either the Prime Minister or I have been urging on the Government of India the merits of Hawk, if we believed that the sale of Hawk would be contrary to the criteria? No, of course we would not. That raises the question whether the Government should be promoting the sale of military equipment with a potential for aggressive use to either India or Pakistan while tensions over Kashmir continue, and whether a Minister who has been involved in promoting an arms sale can avoid pre-empting the objective judgment that must be reached when assessing an export licence application. Was the Foreign Secretary speaking for all four Secretaries of State? Has the decision already been made?

Criterion 8 deals with sustainable development criteria and suggests that the Government would refuse a licence if the equipment for which it is sought has the potential seriously to undermine sustainable development in the recipient country or seriously to undermine its economy. No licence has ever been refused on criterion 8 grounds, although that does not prove anything in itself. However, the controversy over criterion 8 blew up in autumn 2001 in relation to the application for a licence for the export of a military air traffic control system to Tanzania.

There was a substantial body of opinion at the time—there still is—in the World Bank and the International Civil Aviation Organisation, that the air traffic control system did not best meet Tanzania's needs. Nevertheless, the licences were granted. Criterion 8 has never been used in this country as a reason for refusing an export licence, so it is impossible to assess the threshold for invoking it. If it does not bite in the case of Tanzania, when would it bite? In a written answer published in September last year, the Government gave some clarification of how they apply the sustainable development criterion. However, when we questioned the Government in Committee it emerged that no number or combination of indicators, or their degree, will pre determine the judgement in a particular case". If that means that we do not pre-determine anything, I agree with that. We need clarification from the Minister of what "number" and "combination of indicators" mean. Precisely how does the new guidance help those who are applying for export licences and those, like ourselves, who seek to scrutinise Government policy?

Mr. Drew

Does my hon. Friend accept that part of the problem is that it is difficult to consider a licence for a country, whatever its merits, in isolation from the countries surrounding it. In the case of Tanzania, Sudan, Somalia and Ethiopia will each have a view.

Mr. Berry

The more important consideration is how you deal with such issues when they have a cumulative effect. With the sustainable development criterion, having one licence application in which you consider the implications for sustainable development is one thing, but there are problems when you get a second, third, fourth or fifth. The cumulative impact on an individual country is the more serious problem, rather than what neighbouring countries might think.

Mr. Deputy Speaker

Order. The hon. Gentleman used the phrase "cumulative effect", which leads me to draw to his attention the fact that, when he uses the word "you", he refers to me, and I have done none of the things that he accuses me of doing.

Mr. Berry

You certainly have not, Mr. Deputy Speaker, and I apologise unreservedly for not choosing my words carefully.

I am sure that other hon. Members will wish to comment on prior scrutiny. As the Minister will know, the Quadripartite Committee has consistently recommended that it should have a role in the scrutiny of a small number of contentious export licences before decisions are made by the Government. The reason for that is straightforward. Arms licensing decisions and weapons being exported to other parts of the world are sensitive issues, but except in a few extreme circumstances, decisions are usually irreversible.

The hon. Member for Cynon Valley (Ann Clwyd) is not in this Chamber this afternoon. Members of the Select Committee on International Development are away and I am sorry that the timing of today's debate is such that they have not been able to participate. She tabled an early-day motion, which was signed by 311 hon. Members from all sides of the House, calling for the prior scrutiny by a committee comprising honourable Members of Parliament.

Mr. Alan Duncan (Rutland and Melton)

Both sides of the House.

Mr. Berry

I know that some Liberal Democrat, Plaid Cymru and Scottish National party Members signed it. I assumed that certain Conservatives had signed it, but I suspect that a contribution later this afternoon will demonstrate that they did not. It is remarkable that 311 hon. Members signed that early-day motion.

The issue was discussed during the passage of the Export Control Bill. A proposal by Lord Campbell-Savours, which was not supported by the Quadripartite Committee, was considered during the debate in the other place, at which time the Government made it clear that they would look at it.

I emphasise that the Committee is not asking for a role in decision making: that is a job for the Executive. We are asking for an opportunity to comment on a few sensitive issues before decisions are made. We are not asking for the licensing process to be held up; we have put forward detailed proposals, of which the Minister will be aware, to avoid that happening. Confidentiality is, perhaps, the nub of the Government's concerns about what we are saying. However, our Committee has handled, and handles on a regular basis, confidential information without any problems arising. It is a shame that the Committee and the Government have been unable to reach agreement on prior parliamentary scrutiny. I hope that we may yet get agreement.

I apologise for speaking for too long. I conclude by saying that there are few more important areas of foreign policy than decisions about whether or not to export arms to a country. The Government have made a significant and brave start to getting arms export controls under some kind of control with a clear, transparent set of policy objectives. However, many concerns remain, and I have only been able to comment on some of them this afternoon. I hope that this and other debates will persuade the Government that significant progress can still be made to ensure, above all, that, at a time when we are rightly concerned about war and terrorism, our arms export control regime works, that it is effective and that it is comprehensive.

4.58 pm

Mr. Andrew Lansley (South Cambridgeshire)

I am conscious that other hon. Members want to speak, so I shall avoid reiterating what the hon. Member for Kingswood (Mr. Berry) said on behalf of almost all Committee members, although I depart from him on various points.

It is clear from current events in Iraq that the Government and the international community attach importance to the avoidance of proliferation of weapons of mass destruction. Weapons in the wrong hands are a matter of considerable concern to the Government. From my own observation, important efforts are made to support that view through the export control and licensing process, and in the House through the scrutiny process. Much has been done in recent years to make that process more effective. I put on record my appreciation of the work that has been and is continuing to be done in that respect.

Leaving aside issues of international importance relating to weapons of mass destruction, the present conflict offers opportunities to assess the extent to which Iraq has been the recipient of weapons of many descriptions, about which there has been speculation. It will perhaps enable the international community to assess how effective end-use monitoring has been in other countries. I flag that up as an important matter to which we should return. I am sure that the Government intend to assess how many weapons have reached Iraq and where they have come from.

The hon. Gentleman raised the matter of incorporation, which the Committee considered in the light of head-up displays in relation to F-16 jets. I had more concerns about the issue after the Foreign Secretary gave oral evidence a few weeks ago than I had before. I had understood, perhaps erroneously, that the purpose of the guidance issued on 8 July was to set out the factors that applied to incorporation, which was a sub-category of exports. It may be my ignorance, but when I looked at it in detail, it immediately became obvious that incorporation is a common feature of exports; such a large proportion of components are being exported that incorporation is widespread.

There may be a sub-category of components; for example, the Committee was told that in at least one European country, if the value of the components for incorporation is less than 20 per cent. of the value of the final product, the box is ticked and they do not get the subsequent export control scrutiny that they should. That is not the way in which the British Government do such things. However, if all components that are to be incorporated into a final product are to be treated as a category, I suspect that that applies to a large number of exports.

The question, therefore, is what did the guidance issued last year achieve? I suspect that it was set out because the Government were not confident that the consolidated criteria had been applied in respect of a particular export and they needed some additional criteria in order to justify it. The terminology of the consolidated criteria and the guidance applied to incorporation made it clear to me. Criterion 5 of the consolidated criteria was a reference to the defence and security interests—of the United Kingdom, in our Case—and that was converted in the incorporation into the defence and security relationship with the incorporating country. In subsequent questions, the Foreign Secretary made it clear that the relationship between BAE Systems and the United States defence industry is a significant part of that matter.

A balance must always be struck between the defence and security interests of the United Kingdom and our strategic industrial interests in respect of arms and defence manufacture. I understood that they were intended to be reflected in the consolidated criteria anyway, but to be circumscribed. I am concerned that different terminology on incorporation seems to have been applied specifically to justify exports to America for incorporation.

If that is not the case, I do not understand why the terminology has changed. If it is the case, we must understand that a very particular relationship with the United States defence industry is being protected by the way in which we are expressing the criteria. Perhaps that is a distinct relationship, different from others. However, if so, we should put additional effort into trying to understand all the circumstances in which we are exporting for incorporation into American defence equipment. We must understand the basis on which, as the hon. Gentleman made clear, the policy is to be applied, and make that a substantive part of the negotiations that we have with the United States on the international traffic in armaments regulations. The policy should apply as much to exports from the Americans to us as to those from us to them. There would then be, in effect, a bilateral understanding of the policy and we would know where the United Kingdom could draw lines—there are clearly lines that we wish to draw, beyond which we would not want our defence manufacturers to export. The Americans should respect that, just as we, under the international traffic in armaments regulations, are expected to adhere to the American end-use controls.

I have a point on small arms brokers. A dozen of my constituents have raised that matter with me during the past few days, and we can return to it when we examine the statutory instruments to be made under the Export Control Act 2002. However, I take issue slightly with other hon. Members who have raised the matter. There is a difference, in policy and practice, between seeking the extraterritorial application of UK laws to other countries to support understood, internationally agreed standards—whether United Nations sanctions, UN arms embargoes or internationally understood restrictions on the export of long-range missiles—and seeking the extraterritorial application of UK laws in ways that would not be in line with the law and practice of the countries concerned.

Mr. Gardiner

I have listened to hon. Gentleman carefully. Does he think that the same should apply in countries where the age of consent for sexual conjunction is lower or where the practice of the country allows what we call female genital mutilation? Under the logic of his argument, extraterritoriality would not apply there either.

Mr. Lansley

The logic of my argument is that we need to understand different cases very carefully. I must confess that I was not present in the House when the private Member's Bill on female genital mutilation was discussed last Friday. If we are dealing with matters over which there are internationally agreed standards, the logic of my argument applies to them too, but I do not want to get drawn at length into an argument on a subject with which I am less familiar. My point is that if we start applying extraterritorial jurisdiction in this matter, we should remember that there is a substantial difference between doing that in ways that differ from the laws of the host country and doing it in ways that differ from internationally agreed standards or internationally applied legislation.

Mr. Gardiner

I am grateful to the hon. Gentleman for kindly giving way a second time. Does he agree that the extraterritoriality that we have introduced in this country to cover British citizens going abroad to engage in paedophilia in countries where there may not be laws prohibiting such action is absolutely right? Is not the key factor that that applies to British citizens going abroad to do something that would be proscribed in this country under UK law?

Mr. Lansley

We have to be very careful here, and I shall not go on at great length. The logic of the hon. Gentleman's argument is that UK citizens should, in any country in the world, be able to do only what they can do legally in the UK. I can remember many instances when I fought against the United States' desire for extraterritorial application of its laws, for example in relation to corporations, or—[Interruption.] My hon. Friend the Member for Rutland and Melton (Mr. Duncan) says tax, and actually that is my recollection. If we go too far down that path, we will be in the absurd situation of seeking to apply our laws in countries across the world, even when they are directly contrary to the laws of that country and cannot be enforced effectively. That would be unsatisfactory.

The Government may be wrong to draw the line where they have done, but they are trying to arrive at a practical point on the issue of enforcement between my argument and that of the hon. Member for Brent, North (Mr. Gardiner).

Mr. O'Brien

Perhaps I can help the hon. Gentleman with his argument. I do not think that the example of paedophilia and female genital mutilation is the right one. I do not know of any country that encourages female genital mutilation or paedophilia. However, a country might encourage the sale of arms and other things to another country, and a British person in that country might find that they fell foul of a law relating to something that was encouraged in that country. The comparison with female genital mutilation and paedophilia is entirely bogus, because clearly those are things that almost every country—or certainly any civilised country—would seek to discourage. However, that is not always true of the trade in arms.

Mr. Lansley

I am grateful to the Minister for setting the seal on that argument.

I had hoped to talk about the administration of the licensing process, but it seems pointless to do so before the Government have concluded and published the outcome of their review of that process. I hope that, as soon as the Government have completed and published their review, the Minister will encourage us on the direction that our inquiries should take, and the evidence the Committee should hear. Companies in my constituency and businesses across the country still have difficulties with the time it takes to secure licences, particularly where appeals are concerned.

I come to prior parliamentary scrutiny. I shall sit down soon for fear that I take too many interventions on this subject, too. The Committee was not of one mind on the subject—at any rate, two of the Committees that make up the Quadripartite Committee divided on the question of prior parliamentary scrutiny. The matter is not really about whether the Quadripartite Committee can come up with a process that guarantees confidentiality; I am sure that we can. Nor do I think that it is an issue of whether, legally, the Government would expose themselves to the risk of judicial review through inappropriate sub-delegation and the like, because that could reasonably be guarded against. The issue is what is the purpose of a Select Committee?

The purposes of Parliament, as distinct from the Executive, are very well established, and we are seeking to trespass on them. The purpose of Parliament is to set out legislation, and next week we will begin formally to consider some of the statutory instruments; that is where we set out the legislative framework for Government. Every time that Ministers change Government policy, they should tell us and expose themselves to scrutiny on that policy. If there are decisions that give rise to policy issues on which Ministers feel they need to take the advice of the Quadripartite Committee, there is absolutely nothing to constrain Ministers from doing so. If, as a result of that, the policy is changed, they should be under an obligation to tell us. None of that should change the fact that such decisions are executive decisions, made by the Government. We have a separate scrutiny role in relation to those decisions, and it is our responsibility to assess whether Ministers have taken those decisions properly.

There is a danger that the Committee might become heavily engaged in trying to interpose our views on policy decisions, but in practice trying to do so in a way that was influencing individual decisions. Tanzania was an example. We came very close to the point of asking questions of Ministers at the time of and in relation to a specific decision, supposing that we were dealing with policy when in fact our purpose was to determine the outcome of a decision.

That is not our role—we must be clear about the distinction. It is the role of Government to make decisions and to be held accountable for them. We can do our jobs effectively as long as we are clear about the distinct responsibilities. If we were to reach a point when the Quadripartite Committee became an adjunct of the export licensing process, not only would we inevitably introduce delay and hazard the efficient working of Departments, we would undermine the subsequent scrutiny process and the distinction between the Committee and the Executive.

5.15 pm

Mr. Barry Gardiner (Brent, North)

I congratulate the Quadripartite Committee on its work and my hon. Friend the Member for Kingswood (Mr. Berry) on the way in which he introduced the debate.

Last Sunday, the British troops who engaged with Iraqi forces outside Basra discovered Iraqi bunkers that contained an arsenal abandoned by Saddam Hussein's southern army. Many of the cargo crates in that lethal arms depot bore a stamp that said: Wallop Defence Systems, a subsidiary of Cobham plc", which is based in Hampshire, England. Nothing makes our debate more important than that. We are allowing weapons made by British companies and supplied by British arms dealers to kill British troops. Of course, that is not the Government's intention. It is not what the system of export controls is designed to do, but it is the very real effect of the present system, and it must stop.

I commend this Labour Government for the important changes that they have made to the UK's arms export policy. They ratified the Ottawa treaty on land mines and introduced a ban on the export of equipment that is designed for torture. They secured the European code of conduct on arms exports and committed themselves to publishing an annual report on strategic export controls, which is a model of transparency for others to follow.

This Labour Government also included the following words in their election manifesto for the 2001 general election: Labour will lead efforts to control the trade in small arms ߪ We will legislate to modernise the regulation of arms exports, with a licensing system to control the activities of arms brokers and traffickers wherever they are located. The Government's response to this debate and to the present consultation by the Department of Trade and Industry on the draft orders to be made under the Export Control Act 2002 will determine whether they keep their manifesto commitment. If they do, we can confidently predict that in future conflicts the chances of British soldiers being killed by British-supplied weapons will be enormously reduced. However, if they capitulate to the business interests of the powerful industrial lobby, we can be certain that more British soldiers will be killed by weapons made and sold illegally and recklessly by their fellow citizens to regimes such as that of Saddam Hussein.

The defence industry is important to this country. It provides many jobs and much-needed income to UK plc. Defence is a legitimate business, and the primary obligation of any state is the protection of its citizens. Therefore, I approach the issue not wishing to close down our defence industry but to ensure that it is properly and comprehensively regulated. As the events of the past week in Iraq have shown, that would not be against the interests of this country. On the contrary, it would act against the interests of our enemies.

I wish to concentrate my remarks on two principal issues: end-use monitoring controls and extraterritorial controls. The diversion of military equipment from authorised countries such as Jordan, Ukraine and Yemen to end users who are clearly not authorised, such as Iraq, is well known and documented. Despite that, the Government profess that existing pre-licence checks are satisfactory and act as a surety against diversion and unauthorised re-export. By contrast, the United States operates a system of post-export checks on end-user countries if it believes that there are grounds for suspicion. In 2000, in the 218 end-user checks that the US conducted, it found that unauthorised diversion or re-export had occurred in 25 per cent. of them.

It is essential that our Government institute a system of end-use controls on exported arms and dual-use equipment. They should explicitly prohibit unauthorised re-export or an unauthorised change in the end use or end user of UK-licensed military equipment. The controls should include a formal end-use monitoring system that gives the Government an absolute right to verify, in the country of the end user, that the relevant undertakings are being implemented and respected.

It may be argued that such a system is cumbersome and disproportionate to the enormous number of export licenses granted by the UK each year. To those who might be tempted by such an argument, I would point out that common sense dictates that end-user checks are carefully targeted at those countries that give rise to the greatest concern. Indeed, the US statistics are significant. Only 218 checks were made out of all its thousands of export licenses. However, 25 per cent. of those checks showed material non-compliance with the conditions. The US operates a flag system to identify contracts in which investigation and follow-up is required, and that is what we should do in the UK.

The Government spend more than £20 million a year promoting the arms industry. I do not begrudge that investment in British industry, but I will not accept a Minister pleading that end-user controls cannot be implemented on the ground of cost. Such controls would cost a fraction of that budget to implement and, in the opinion of many British people and soldiers, that would be money much better spent.

Mr. Drew

My hon. Friend makes a point with which I have a great deal of sympathy. I would link it to the comments of the hon. Member for South Cambridgeshire (Mr. Lansley) about the role of parliamentary scrutiny being seen as intervening on the role of the Executive. There is a precedent for that. The Executive share information with the Intelligence and Security Committee in total confidence. As I understand it, that has always worked and I cannot see why we could not have a similar arrangement in this regard. Would my hon. Friend agree?

Mr. Gardiner

I have not entirely grasped my hon. Friend's point, but I believe that there is sufficient information in the intelligence community for us to be able to focus our end-user controls and checks in such a way that they would not be overly costly or cumbersome and so that they would produce significant results. If that is his point, I entirely agree with him.

The second issue I would like to address is that of extraterritoriality. I welcome the Government's intention to introduce full extraterritorial controls on the sale of weapons of mass destruction. torture equipment and long-range missiles to embargoed destinations. I am deeply concerned that the Government will not introduce controls on British arms brokers operating outside the UK in relation to other armaments from handguns to tanks.

The Government's proposals establish that a broker must have a licence before entering into a "commitment" leading to acquisition, disposal or movement of controlled goods. The definition of "commitment" is left unclear. A licence for brokering is required only if any part of the deal takes place in the UK and will be triggered only by the commitment. What the phrase any part of the deal expressly does not include is marketing and promotion. That is clear in the clauses. It is therefore possible to market and promote controlled goods in the UK and to conclude a deal offshore, with no requirement on the broker to obtain a UK licence. Under that regime, unscrupulous brokers can become promoters for the purposes of UK law, maintaining their base in the UK but concluding their brokering deals outside the UK with impunity. If a licence were required by all UK persons engaged in brokering arms, regardless of where that activity occurred, such a loophole would be closed.

The system proposed by the Government is much more bureaucratic and difficult to monitor and enforce. Did the broker require a licence? Where was the commitment made? Was his activity in the UK promotion or brokerage? Decisions would have to be taken on those questions in monitoring any deals with which the Government were concerned. Such determinations are the stuff of the civil service long grass. They are the weasel words that enable effective regulation to collapse.

If the Government truly want effective controls, they will recognise the need for simplicity. If all arms transfers are regulated by licence, the control of the negotiations becomes redundant. The Government machinery is freed from looking at deals to check whether they should have been licensed, and can focus on those deals where unauthorised transfers may occur. A law requiring a licence for all deals would shift the burden of proof of a deal's legality on to the broker, and help to prevent arms sales to embargoed countries or known diversion points.

I stress that brokered deals have a particularly harmful effect. It is assumed that they comprise only a small percentage of all arms deals—we cannot know for sure because no comprehensive broker licensing exists—but weapons transferred by brokered deals are often sent directly into conflict zones. The brokers' register should not be a de facto one. All brokers should be required to register upfront. In that way, we could have a system of fit and proper persons, such as that properly introduced by the Government under the Financial Services and Markets Act 2000. Brokers would be assessed upfront on that basis, and the activities on which we need to focus and with which we are concerned about the transfers could be properly controlled.

Finally, I shall refer to the controls that are not extended to shippers and transporters. The Government excluded shippers and transporters from the remit of the Export Control Act 2002, even though such groups are key players in shipping arms to conflict zones throughout the world. Let me give an example. Christopher Barratt-Jolley, a well known gunrunner, recently went to jail for flying £22 million worth of cocaine into Britain. He also flew weapons into countries such as Angola and South Yemen. Because the new law proposed by the Government does not cover shippers and transporters, it would allow the activities of people such as Christopher Barratt-Jolley to remain unregulated. That, too, is an important matter for which the Government should increase the strength of their controls.

5.28 pm

Dr.Vincent Cable (Twickenham)

I welcome the debate and the undoubted progress that has been made towards more effective scrutiny and transparency in the arms control process. That said, there is something a little odd about the debate. We are dealing, in many ways, with a fast-moving situation.

Mr.Alan Duncan

On a point of order, Mr. Deputy Speaker. I think that there is about to be a Division in the House.

Mr.Deputy Speaker

The hon. Gentleman is right: we appear to have a Division. However, the Division Bells are not ringing and the screen shows that the Minister of State, Northern Ireland Office, is still speaking in the House. We shall therefore carry on until we hear that a Division is taking place.

Dr.Cable

Thank you, Mr. Deputy Speaker—

Mr. Deputy Speaker

Order. We now have a Division. In the middle ages, the hon. Member for Rutland and Melton (Mr. Duncan) might have been burnt at the stake for that degree of prescience.

5.29 pm

Sitting suspended for a Division in the House.

5.56 pm

On resuming—

Dr. Cable

This debate increasingly resembles a test match at Headingley, but I shall continue for as long as I can. I had got as far as welcoming the debate and the procedures that have been set in place. The legislative framework is evolving rapidly, and post-11 September the world situation has also changed rapidly.

We have been asked to consider the Quadripartite Committee's report on the Government's annual report for 2000, much of which relates to licences issued several years ago. In a sense, this is archaeology rather than scrutiny. That is one reason why I am in favour of contemporary scrutiny of the kind that seems to be emerging in some Select Committees. For example, the hon. Member for South Cambridgeshire (Mr. Lansley) described the type of scrutiny that takes place in the Select Committee of which he is a member.

Before leaving that point, it is worth reading the Quadripartite Committee's conclusion on whether we should progress to a prior scrutiny approach. It suggests a sensible compromise to which the Minister may be able to respond positively. The report says that when we examine the arguments put forward by the Government to support their rejection of our predecessors' proposals for prior parliamentary scrutiny of certain licence applications we find many of them to be either ill-founded or exaggerated. We recommend that the Government come forward with their proposals for an experimental scheme for prior scrutiny so that their concerns can be tested against experience. The debate rests on the possibility of having such an experimental scheme.

My other introductory remark will explain where I am coming from. I am in the unusual position of having progressed from gamekeeper to poacher on the issue of export control for armaments. I spent a period in the 1970s in the diplomatic service signing off hundreds of millions of pounds of arms exports to Latin American dictators of varying degrees of venality and brutality. That experience left me with a strong impression of the lack of control and scrutiny. There was a forceful Great Britain Ltd. approach in the Foreign and Commonwealth Office, the Department of Trade and Industry and the Ministry of Defence, and very little restraint from any other side. In fact, the only real restraint was from the Treasury, which was under Lord Healey, who would argue from time to time that the policy was expensive for the British taxpayer because of the hidden subsidies in the Export Credits Guarantee Department. None the less, there were tremendous pressures to sell.

Things have clearly moved on. We have a more sophisticated system of control and scrutiny but, whatever the formal arrangements within it, it shows a basic lack of common sense. A minor item caught my eye when I read the report—the details about British export licences for sales of armaments to the Channel Islands. I wondered what was going through officials' minds about such matters. To take a tick-box approach, there is no torture, no civil war between Guernsey and Jersey and no threat of military action. The area clearly passes all or most of the criteria. Why, however, are the islands importing large numbers of sub-machine-guns, major components for combat aircraft and armoured cars? What are they doing with them? Sub-machine-guns are not needed for the Jersey flower festival, as the chances of being invaded by France are zero. Why is such action being taken?

The obvious common-sense explanation is that a process of evasion is taking place, either of the export control regime or of the financial arrangements governing money. At the very least, a certain amount of critical intelligence should be applied and questions should be asked about why such action is taking place. I accept that that is a minor example, but it is one of the problems in the system.

I come now to some of the major issues that came to the surface in the Quadripartite Committee's report. Some of the big issues have already been dealt with, such as incorporation. I shall not repeat the consolidated criteria, but just dwell on the development criteria and its particular application in Tanzania. It is an interesting case study and one that has many loose ends. In many ways, the transaction was small, given that it was a £28 million contract. However, in relation to Tanzania, that is a big sum; it is about half the total amount of annual debt relief granted to heavily indebted poor countries.

Furthermore, there are unsatisfactory aspects to that project, in terms of process and substance. Construction was started well before the licence was granted under an unusual F680 procedure. The matter deserves further consideration. The Secretary of State for International Development publicly signalled her opposition to the project, even to the extent of cutting off aid to Tanzania while other Departments were actively promoting it. Two major multilateral financial institutions, the International Monetary Fund and the World Bank, clearly said that it was not developmentally sound and that equally valuable equipment could be obtained for about an eighth of the price.

In some ways, that is water under the bridge, but we must bear in mind the loose ends. The Quadripartite Committee said that the Government had promised a cost-benefit study on the project, but that has not yet been published. Where is it? What about the International Civil Aviation Organisation study that was undertaken to evaluate whether the project was developmentally useful? The Department for International Development has copies of it, but the study has never been released. Why has it not been released? When will it be released?

There is an interesting postscript to the story. After the British BAE Systems apparatus was installed, the Tanzanians soon discovered that it was inappropriate and they have subsequently ordered a separate air traffic control system from the European Union through European aid finance at a fraction of the cost. It is now being installed on top of the British system. In many ways, this case was a development disaster and there is still a good deal of explaining to do.

I am aware of the fact that there may be another Division in the House and I want to allow time for the hon. Member for Rutland and Melton (Mr. Duncan) to speak and for the Minister to reply. However, I want to raise the issue that was effectively pursued by the hon. Member for Brent, North (Mr. Gardiner). It concerned the new environment in which we operate. There is a heightened awareness of terrorism, particularly the problems of rogue states, and how our export control system should adapt to deal with that situation. Instinctively, I should have thought that we should be heading for an environment that is more selective, restrictive and suspicious in the way that the hon. Gentleman implied. However, I have the sense—if I am wrong I am sure that the Minister will correct me—that, in practice, our system has become liberalised in some key respects. There are 18 countries—32 categories—that are now able to access arms from the UK in a less restrictive environment than used to be the case. I am talking about quite sophisticated kit: short-range missiles, air combat aircraft and tanks.

Some of the countries involved would raise eyebrows in any circumstances. First, there are the former Soviet Union central Asian republics, such as Turkmenistan and Uzbekistan. Many of those countries—well, I think that there are only five in total—are still ruled by people who were installed by Brezhnev and who still operate their countries using the same principles that were used to run the former Soviet Union. Such regimes are wholly repressive and, in the long run, potentially rather unstable. Supplying arms to such countries, particularly in the present environment, seems questionable.

Secondly, there is Pakistan. I appreciate the sensitivity of the issue and the importance of giving Pakistan's Government some support through aid, trade and other means. However, it seems dangerous to supply Pakistan's military forces, which have been heavily penetrated by extremists, with sophisticated military equipment. The same logic applies to Saudi Arabia.

Is it the case that, since we became much more aware of the problems of terrorism, what seems to be liberalisation has indeed occurred? I reinforce the point made by the hon. Member for Brent, North about end use. The countries that have received British arms in the past few years include Yemen and Ukraine. Ukraine is notoriously and utterly corrupt and chaotic, in terms of its central Government, and has long been part of the Iraqi arms supply chain. Yet it has been receiving British military equipment. It is hardly surprising if such equipment ends up in Iraq and comparable countries.

To give other Members an opportunity to reply, I will terminate my remarks shortly. I return to what seems to be the central issue. Although this debate is valuable and it is useful to go back through the records of what happened in years past, we need a more contemporaneous system of scrutiny. I hope that the Minister will respond positively to the suggestion of adopting at least an experimental system of prior scrutiny in the case of some of the major licence applications.

Mr. Peter Pike (in the Chair)

Before I call the next speaker, I want to point out that, unless there is another Division in the House, we will conclude the debate at 6.37. If there is another Division, the position will change. I also remind Members that I am not to be referred to as Mr. Deputy Speaker; I am Mr. Pike.

6.7 pm

Mr. Alan Duncan (Rutland and Melton)

Thank you, Mr. Pike.

This is an important and timely debate, because, with the current conflict in Iraq, along with a host of other conflicts in the world, the responsible export of arms and controls to keep them out of the hands of unscrupulous regimes and groups are topics that assume an ever greater significance. There have been some well-informed contributions from my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) and the hon. Members for Kingswood (Mr. Berry) and for Brent, North (Mr. Gardiner).

I take this opportunity to acknowledge the hard work of the Committee in producing the report, which tackles a complex subject about which there are rarely black-and-white or cut-and-dried judgments to be made. It is a matter of making an imperfect system work as well as possible. Obviously, the annual report that the Committee discussed preceded the Export Control Act, which itself replaced a raft of older laws and orders. It is important to consider the annual report in the light of what has occurred since, as the Committee did. In some ways the trouble with that Act is that it authorises most things through secondary legislation. We must watch that secondary legislation with care, because it will determine whether the Act is effective. We welcome the Government's reaffirmation of their promise, in response to Committee recommendation (c), that they will give the Committee the opportunity to consider the secondary legislation in draft form.

We recognise the importance of responsible defence exports to legitimate Governments for their defence requirements, and the importance of the defence industry to our domestic economy. A strong indigenous defence industrial base is important for national security and, of course, for jobs. Indeed, the UK possesses one of the largest defence industry sectors in Europe. By and large, our defence companies operate responsibly, but transparency and accountability are naturally vital for public approval to be earned and sustained. It is important that the export of arms should be as palatable as possible, which is why Conservative Members support a register of licensed UK arms dealers.

I must be briefer in my comments than the subject deserves, but there are a few areas that I want to cover quickly. The report and the Government's response cover many issues, some rather broader than others. They examine the format of the annual report, the structure of the licensing system, the central issues of accountability, prior approval, the criteria used and the need for the regional stability of areas to which goods are exported. There are also more mundane but equally important matters such as delays in the processing of licence applications and the administrative efficiency of the export control organisation.

The annual report is extremely detailed. We welcome the Government's commitment to the openness signified by the reports, as in recommendations (1) and (n), and their willingness to discuss the report's content with organisations such as Saferworld. External feedback and participation, as in recommendation (d), are extremely important. Although there are calls for its details to be increased, having waded through the document, I have some sympathy with those who are concerned that it is already beginning to look like a telephone directory.

In some cases, however, as touched on in recommendation (I), tables of dual use items could be useful, and I would welcome the Minister's suggestions on how that information might be made available without compromising the cost and the accessibility of the annual report. Perhaps there are ways in which the information might be made available simply to the Committee in its deliberations. A balance must be struck between providing the Committee with too much and too little information. In that respect, has the Foreign Secretary decided whether to provide the Committee, in confidence, with the detailed calculations behind the licensing decision for the air traffic control system exported to Tanzania, as in paragraph (t) of the report's conclusions.

A balance must also be struck between proper scrutiny of the licensing system and the damage caused to industry by unnecessary licensing delays. Contracts and jobs can be lost through unnecessary administrative delays in processing licensing applications. Paragraphs (n) and (o) of the report suggest, and the Government appear to concur, that the efficiency of the export control organisation leaves much to be desired. While care must always be taken with statistics, especially given the backlog of applications, can the Minister give us the average figures for the number of new applications for all licences, not simply standard individual export licences processed within the target period mentioned?

The consolidated export licensing criteria, helpfully reproduced in appendix (f) of the annual report, are largely well drawn. The bottom line is that defence exports are legitimate when they are not to be used for internal repression or international aggression. Considerations such as regional stability and developmental progress are also important, but a list of criteria can only be a guideline. I am therefore pleased that the Committee and the Government reaffirm that each case must be judged on its own merits. However, I have some concerns about references to precedents being set by the Foreign Secretary's decisions, and officials then being able to use them to judge other cases. It is impractical for a ministerial decision to be made in every case, but in highly sensitive potential conflict areas, ministerial involvement is a requirement in every case. Particular care is required with exports to countries such as India, Pakistan and Israel, as in recommendations (e) to (h). Those countries all have legitimate defence needs, but there is also a risk of their breaching criteria 3 or 4.

I agree with the report's questioning whether the Kashmir situation did not fully engage criterion 4. The report also mentions end-use monitoring in the case of Sri Lanka and Zambia. What end-use monitoring systems are in place in Israel, India and Pakistan to monitor not only the end use of any weapons exported, but also that of dual-use components? There is also much debate about the concept of prior approval. Sweden and the United States are the only two countries that operate prior parliamentary scrutiny. Does the Minister agree that the introduction of such a procedure could risk drawing the Committee into what is more properly an Executive function? It could also risk creating even more delays in the licensing process, which would cost UK companies exports and competitiveness. That would have declaration of interest implications for our Parliament. We make a distinction between hon. Members of this House who have Executive responsibility and those who do not. If there is a blurred area in which massive arms exports could be influenced by the decision of a Back-Bench Committee, that would have a bearing. I raise the matter as a question, not as a conclusion.

Mr. Berry

May I briefly state again that the Committee and its members have never suggested that they should share in the Executive responsibility? A similar example of involvement would be that of the Foreign Affairs Committee, which gave prior scrutiny to the ministerial position taken at the Nice conference some years ago. There is no question of our taking any part of that Executive responsibility.

Mr. Duncan

I accept what the hon. Gentleman says. In that case it would appear to be properly defined and described as prior scrutiny and not prior approval by his Committee. I appreciate the distinction that he has drawn; it is important that that should be understood. I do not suggest for a moment that retrospective approval and scrutiny is ideal. However, the system of prior approval—better described as prior scrutiny—would have drawbacks. What proposals do the Government intend to advance in that area, given their "ethical commitment" to doing so?

Another matter for debate is the Government's manifesto commitment to finding ways to apply the Act to UK passport holders dealing in arms outside the UK—the extra-territorial exercise of authority through secondary legislation. We have yet to see the Government's detailed proposals. What assessment has the Minister made of the enforceability of such a policy? Does he believe that it would be possible to detect breaches, and then gather sufficient evidence to proceed in such circumstances? What sovereign authority does he think we have over such matters? What progress has been made in ensuring a level playing field across the EU in terms of individual countries' export criteria being the same, notwithstanding the EU consolidated criteria referred to earlier? As usual, if we play by the rules, does he think that the French will too?

The publication of the annual reports and the excellent work done by the Quadripartite Committee in examining them, and the wider export controls system, is vital to creating the openness increasingly, and rightly, demanded in these areas by the public. I could say much more, and I would like to mention other issues covered in the report, but time dictates otherwise.

With increased threats to international security, increased instability and the growing problem of failed states degenerating into violent conflict, it is more important than ever to keep tight controls over the weapons that can fan the flames of conflict while allowing the legitimate trade supplying the defence needs of responsible and respectable Governments to proceed; balancing the two will always prove a delicate judgment. I hope that the Minister will strive to address all the points that have been raised.

6.18 pm

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs(Mr. Mike O'Brien)

This has been a good debate on an enormously important issue, in which Parliament takes a great interest, and which the Government take extremely seriously. Given the present circumstances, I hardly need to point out the importance that the Government attach to tackling the threat posed by the proliferation of weapons of mass destruction—or of any weapons.

We have to be aware that tyrannical regimes might take control of particular types of weapons and turn them on us, or threaten us or our interests with them. What is perhaps less well understood is the central importance that effective export controls play in this work. I shall deal with some of the individual points that have been raised during the course of the debate. I should also like to set out the broad principles under which we will determine these important and difficult decisions.

I shall deal first with a couple of specific issues before getting on to the broader issues such as price scrutiny and incorporation. One apt case was raised by my hon. Friend the Member for Brent, North (Mr. Gardiner) who spoke about media reports about the discovery of rocket-propelled grenades in a bunker near Basra in a box with a UK company's name on it. I cannot comment in detail on that finding until we know all the facts. The company has told us that it makes only such items as flares and smoke grenades and has never sold anything to Iraq. Its best guess—its guess, rather than ours at this stage—is that the boxes once contained smoke grenades, which were sold to Kuwait in 1985, and that they were taken back to Iraq following the invasion in 1990 and 1991. If my hon. Friend has any new facts in relation to the matter, we will look at them with great care.

Mr. Gardiner

I understand that Wallop has denied any involvement. I hesitate to quote Mandy Rice-Davies, but as she would have put it, "It would say that, wouldn't it?" Wallop is well practised in the art of denial. Does my hon. Friend remember that in 1991 the company denied links with Iraq when documents found in the Iraqi embassy in London allegedly implicated it in the supply of munitions to Iraq during the Iran-Iraq war?

Mr. O'Brien

Those are serious matters that we will examine with a great deal of care. As I indicated to my hon. Friend in the break we took for the Divisions, we must be sure of the facts before Ministers can comment any further.

I should like to deal with another serious issue raised by my hon. Friend the Member for Kingswood (Mr. Berry). The Government fully support the BAE Systems bid to sell Hawk aircraft to India. That has been made clear by the Prime Minister and is in line with the Government's commitment to support legitimate defence exports. We understand that the proposed Hawks would be used by the Indian air force for training purposes only. However, all export licences will continue to be considered rigorously on a case-by-case basis against the consolidated criteria.

My hon. Friend asked whether any decisions had been made. In September 2001, a licence was issued for a range of components and production equipment to enable the local assembly and later production under licence of the Hawk in India. The licence does not permit the export of fully assembled and operational aircraft. I am confident that it is fully consistent with the consolidated EU and national arms exports licensing criteria.

In terms of the operational role of the Hawk, under the proposed deal the first aircraft would not be delivered for some years. These aircraft are intended solely for training purposes, although they would have limited combat capability as they are fitted with the necessary systems and interfaces to allow them to carry a range of weapons for combat training. The Indian air force already has a range of other modern aircraft that are much more suitable for combat purposes, including the Mirage 2000 and the SU30.

Reference was made to the specific case of Channel Islands exports, on which I have some advice. There were several applications in respect of the Channel Islands, but I gather that some of the more interesting ones were for the private collection of antiques, many of which will be covered by the licensing procedure. There were also some issues relating to aircraft, and some law enforcement sales were apparently approved.

The hon. Member for Twickenham (Dr. Cable) referred to central Asian states and Gulf states that have poor human rights records. We do not intend that there should be any liberalisation of our policy because of the war against terrorism, but I assure hon. Members that criterion 2 of the code of conduct, which relates to internal repression, is fully applied when open export licences to central Asian states are considered. We will want to be sure that there is no clear risk that exports would be used for internal repression. It is also important to remember that the exports authorised under open licences are not necessarily destined for that country's armed or security forces.

My hon. Friend the Member for Kingswood talked about incorporation, an issue that the hon. Member for South Cambridgeshire (Mr. Lansley) also raised. The statement made to the House on 8 July 2002 clarified export licensing policy, but it did not change the export licensing criteria—nor did the statement present a means of bypassing the criteria. On the contrary, the incorporation statement refers to other factors, which must be taken into account when it is known that goods are to be exported to a state that will incorporate them into another product for onward export.

As the hon. Member for South Cambridgeshire said, the incorporation statement allows Ministers properly to take into account the implications of a contract for the United Kingdom's commercial relationships, as well as for our strategic, security and defence interests and defence industrial base when making a decision. However, any licence application is considered against all the other usual criteria. On the particular example that the hon. Gentleman raised about the US, it is not for the benefit of the US that the Government clarified their position on incorporation; that is very much in our own national interest.

The UK's relationship with the US is fundamental to our national security, as well as to our ability to play a strong and effective role in the world. Defence collaboration with the US is also key to maintaining a strong defence industrial capability. In itself, that is a strategic asset, which enables us to provide high-quality equipment to our armed forces at a lower cost to the taxpayer. So we took the view that, because the criteria of the US was similar to our own—I shall return to the particular issue raised by my hon. Friend the Member for Kingswood in a moment—and because of the close relationship between our two countries, it was possible to take all that into account in making a decision, although I repeat that that does not change the nature of the criteria.

My hon. Friend the Member for Kingswood and others raised the issue of prior parliamentary scrutiny. I agree with the broad view set out by the hon. Member for South Cambridgeshire that it is the role of Ministers to make decisions, for which they are accountable to Parliament, and it is right that they should be challenged on those decisions and made to justify them. That is the role that a Minister undertakes when he accepts the post, but I am pleased to say that the Government have a reasonably good relationship—I hope a very good one—with the Quadripartite Committee. Indeed, I am not aware of any Government who spend more time accounting to Parliament for their export licensing operations, and that is as it should be. That demonstrates our commitment to accountability and transparency in the export licensing process. That does not mean that it is right for the Quadripartite Committee to play a role in scrutinising individual export licence applications before the Government have taken their decision on them.

The Government have made it clear that the form of prior parliamentary scrutiny proposed by the previous Quadripartite Committee would not be right in principle. It could not be made to work in practice without having a materially adverse impact on the efficiency and effectiveness of the export licensing process. If I remember rightly, my hon. Friend the Member for Kingswood and the hon. Member for Rutland and Melton (Mr. Duncan) both raised concerns about the delays and time taken for some decisions. If we prolong the period even further, we must consider the impact that that would have on the efficiency and effectiveness of the process.

The Government have the responsibility of ensuring that the licensing system delivers quick and accurate decisions to our industry. However, we are still considering how best we can increase still further the accountability and transparency of the current system in the context of Parliament. As a sign of our commitment, I am happy to offer confidential policy briefings to the Quadripartite Committee.

My hon. Friend the Member for Kingswood also asked about our policy on end-use monitoring. We refuse applications in which there is a clear risk of the end use being in breach of the criteria. He referred to the example of Israel and the chassis. We do not employ a defence attaché solely to check on the equipment that we have sold to the Israelis. He has a series of roles, of which that is only one, and he has a wide range of duties. He must establish effective liaison with the Israeli defence forces on issues such as their actions on the west bank—my hon. Friend will remember the case of Ian Hook and others in which we needed effective information about what happened.

The roles of the limited numbers of staff that we have in Israel and the occupied territories are diverse. One role is to report any breaches that they see by Israel, and a report was made about the somewhat ancient chassis. None the less, we still need to resolve the issue with the Israelis, and I hope that we will reach a situation in which they comply with the guarantees that they have given.

Mr. Berry

Although I am full of admiration for the individual who spotted the vehicles, we have been told specifically—I gave the quotations in my speech—that British staff in Tel Aviv do not undertake physical checks on end use. I only pointed that out because it is contrary to what we have just heard from the Minister, and to other statements that they sometimes carry out checks. I seek no more than clarification of the end-use monitoring policy.

Mr. O'Brien

I do not want to suggest that we employ someone specifically to carry out end-use monitoring and nothing else. We give a range of tasks to those who are employed in our embassies and consulates and see what they can do in the available time. End-use monitoring is one task, on a long list, that staff are sometimes able to undertake. However, if I said to my hon. Friend that their job was to carry out end-use monitoring in a broad and consistent way so that we catch all breaches, I would be misleading him. I do not want to do that.

I am saying only that there is a limited amount of time in which the staff are able to do certain things, and in this case they were able to identify a particular example. If there are other examples in other countries, they will undoubtedly be reported, and we carry out some inquiries, as was indicated in confidence to the Quadripartite Committee on Monday. We often impose certain re-export conditions, and much informal checking is carried out by posts. It would not be useful to have a formal requirement for end-use monitoring, because if we did that on a formal basis everywhere, it would consume a vast amount of resources. We must have a sense of realism about this. It is possible to do things on a limited basis in certain specific circumstances, but it is not possible to give my hon. Friend the blanket reassurance that he sought—that we shall carry out end-use monitoring everywhere.

Mr. Gardiner

Will the Minister give way?

Mr. O'Brien

I will give way briefly, although I have only two minutes remaining.

Mr. Gardiner

Will the Minister accept that that is not what my hon. Friend the Member for Kingswood (Mr. Berry) and I asked him to do? We requested him to put in place a system of end-use monitoring, such as that in the United States, in which the focus of attention—it is not a blanket check—is on those deals in which there is most likely to be a problem. The USA has shown that a quarter of the deals that they then check are subject to complaint.

Mr. O'Brien

I am grateful for that clarification of the position adopted. It would be useful if the Quadripartite Committee could give further clarification as to exactly what it wants, because it seems to me that the confusion lies not in the Government's policy, which is clear, but in the request. However, those matters can be discussed at length in due course.

I am aware that hon. Members have raised a number of other issues, and, given the limited time available, I shall have to respond to some of them in writing.

We seek to speed up the whole process of considering licensing applications. We aim to reduce the decision-making process to a reasonable period of time, and good results have recently been achieved in that area by the Foreign and Commonwealth Office and the Department of Trade and Industry. I should like to congratulate staff in the Foreign and Commonwealth Office on the speed at which decisions are being made, without any loss of quality. The Government's aim will continue to be to get export licensing decisions right every time—consistent with our stated policy—and to do that quickly and fairly. We take that aim seriously, and I can assure the House that we will continue to do so.

Question put and agreed to.

Adjourned accordingly at twenty-four minutes to Seven o'clock.