TOPICS : Squalid arms deal cost the UK its reputation

Britain has a tradition of turning a blind eye to paying whatever it takes to win an arms deal. At a meeting in the late 1970s, the then PM Jim Callaghan told the other ministers present that Britain would not be able to meet the requirements demanded by a new US law banning the bribery of foreign governments. Exports were too important to Britain. The UK could not live by the same standards, he said.

The telling minute is reproduced on the London Guardian website in its investigation into BAE and its arms dealing, notably the now-confirmed GBP 1bn payments to Saudi Arabia’s Prince Bandar to help oil the wheels in the GBP 43bn al-Yamamah arms deal. Details of the deal reported this month have created a gathering crisis. The affair, along with Blair’s decision to halt the inquiry into the al-Yamamah arms treaty last year, could hardly be more compromising.

In today’s climate, the secrecy and scale of the ‘commission’ payments cannot be justified. Twenty-five years ago, it was just about possible to argue that in less developed countries without transparent public procurement procedures, commission payments to individuals who make ‘introductions’ were nothing more than brokerage payments to help sellers find a buyer. They might have looked like bribes in the developed economies, but in the context of a less developed country, they helped create markets which otherwise would not exist.

Today, the argument does not work. ‘Introduction’ fees may sound justifiable in the absence of transparent procedures for public procurement; in fact, ‘introducers’ always have a vested interest in doing the deal, whatever the economic logic, to get the fattest payment.

In the UK it was the Labour governments of the 1960s and 70s which accepted that jobs, exports and preserving Britain’s defence industrial complex were too important to halt commission payments - bribes - to those who won the deals. The Conservatives under Thatcher did no more than continue the tradition when she pulled off what was Britain’s largest-ever deal, the al-Yamamah agreement with Saudi Arabia. This was a government-to-government deal that had advantages for both sides. The Saudis got Tornados and Hawks and Britain got the orders without which it could not sustain its defence capacity. Blair’s decision last year to call off the inquiry only followed the logic of successive governments’ policies.

But over the 1990s, OECD governments accepted two principles. The first is that economic or real politik arguments to justify secret commissions are specious and wasteful. Second, the only way to deal with such practices in less-developed countries is for OECD countries to form an united front, hence the 1999 OECD anti-bribery convention to which the UK is a signatory.

Britain cannot unilaterally suspend the investigation into this case, while continuing similar investigations, for example, in South Africa and Tanzania. Britain needs an industrial defence capacity. And to have that, it needs a strong BAE with its reputation intact. — The Guardian