Britain need not corrupt itself with dodgy arms deals New figures show that bribery-induced sales have little effect on UK jobs
David Leigh Monday June 16, 2003 The Guardian If Alan Garwood, the former BAE Systems missiles salesman who heads Britain's controversial arms sales machine, were to collect the traditional knighthood, trouser the balance of his hefty six-figure Whitehall contract and simply shove off, would the nation totter? Even before the latest hair-raising revelations from the public records office in Kew, people were beginning to think it was time that he and his whole secretive gang of arms pushers were thrown out of Whitehall. Garwood, like his predecessors in the job, is undoubtedly a man of impeccable personal probity, who would not dream of paying bribes inside Britain to gain an advantage. I expect even if he was given too much change he would instantly return it. Yet somehow, when it comes to foreigners, politicians develop a double vision about what even a high court judge, Sir Oliver Popplewell, referred to rather complacently in his recent memoirs as "palm-greasing". The previously secret documents dug up by the Guardian's bribery series show that the government's arms sales organisation was launched in the 1960s by that old Labour warrior, Denis Healey, in the middle of a sterling crisis, with the odious battle-cry: "It is often necessary to offer bribes to make sales." Yet although times have changed, this still appears to be the motto of the 600-strong defence export services organisation (Deso) inside the Ministry of Defence, which is controlled by the arms firms, part-funded by the arms firms and run for the benefit of the arms firms. The current Deso manual, it transpires, even spells out the rules for handling what it coyly calls "special commissions". These are, more bluntly put, bribes paid by companies to foreign rulers, their friends and relations, often in deplorable regimes, to persuade them to buy weapons they don't want. In Whitehall, Deso's grubby philosophy of sales at all costs still calls the shots. Deso staff are able to lobby inside the circle of official secrecy for export licences to be issued; subsidised credit guarantees provided; and dubious aid deals to be contrived. Government ministers trudge round the world to demean themselves by pressing the Czechs, the Indians or the South Africans to sign up to arms deals that are liable to further impoverish these countries, whose biggest problem is not that they have too few guns. The moral and economic arguments for ceasing to behave this way have already been piling up, and the latest bribery disclosures substantially add to them. First, the legal climate has changed. Since the beginning of last year it has become a criminal offence to bribe foreigners (unless, of course, you belong to MI6). No one has yet brought any prosecutions under this law, nor made any serious effort to enforce it; but there is an embarrassing anomaly between what apparently goes on in Deso and the words of ministers. Jack Straw says: "Corruption is like a deadly virus. It has no boundaries. We need to fight it wherever it is found." Lord Falconer, the new lord chancellor, repeats ringingly: "Corruption worldwide weakens democracy, harms economies, impedes sustainable development and can undermine respect for human rights by supporting corrupt governments with widespread destabilising consequences." This is all very true, and it does not sit easily with a political environment in which - as occurred in 1998 - a £7m "special commission" on a government-to-government arms deal can be paid by BAE Systems into a secret offshore trust for the benefit of a relative of the ruler of Qatar. Eventually, ministers will have to rewrite the Deso rulebook if they are not to stand accused of utter hypocrisy. Second, a succession of academics and lobby groups are now attacking the claims that arms sales are vital to the British economy. Defence economists at York University published a study suggesting that if arms sales fell, the effect on British jobs would be minor and transient. Events are tending to bear them out: arms shipments in recent years have been running at far below their previous peak in the 90s - less than £2bn a year, rather than £6bn. Yet no economic crisis has followed. Although BAE Systems, Britain's biggest arms firm, has a factory in east Yorkshire making Hawk fighters and employing some of John Prescott's constituents, that is not much of a reason for skewing the entire country's economy. Mr Prescott too, one imagines, condemns corruption as a "deadly virus". BAE, far from seeing itself as a national champion, often points out these days that its shares are majority foreign-owned, as it seeks to negotiate a merger with a US company to break into the American market. The influential thinktank, the Institute for Public Policy Research, together with the lobby group Saferworld, published a study at the end of last year calling for government financing of Deso to be phased out. They argue that the common obsession with "traded goods" is an economic fallacy, and that Britain does not need to cajole foreigners into buying overpriced UK hardware in order to make a living in the world. Another lobby group, The Corner House, is this week publishing a devastating report on how the export credits guarantee department has been used to subsidise arms firms and other overseas contractors, while permitting corruption to flourish in the way those contracts were obtained. Although Deso's supporters claim its approximate £12m-a-year net cost to the taxpayer is dwarfed by the cash it brings in, these figures look uncertain when more closely examined. There is no way of convincingly calculating the alleged cost-saving to Britain from UK arms firms "spreading the overheads" on the tanks, missiles and planes they sell both to the MoD and to foreigners. In fact, another little official secret buried in the files is that Deso often cheats the taxpayer. To clinch arms deals that boost the profits of the private weapons firms, Deso - according to the MoD's internal contracts manual - frequently waives the "commercial exploitation levy" due to the government because the taxpayer paid all the enormous research and development costs of a weapons system in the first place. One retired senior procurement director at the MoD estimates several hundred million pounds a year are thrown away like this. The arms sales annual registers now published by the foreign office let in some valuable fresh air on the claims of the industry that palm-greasing is inseparable from Britain's survival as a trading nation. Most arms shipments these days are not with countries high on the corruption league tables published by campaigners such as Transparency International. They are instead to respectable western allies - the US, Canada, Germany. A ban on arms sales to the kleptocracies and the human-rights abusers would probably make only a modest dent in current overall sales figures. It seems an acceptable price to pay for a return to the principles of honest business. David Leigh is the Guardian's investigations editor [EMAIL PROTECTED]
