Bribery and death: made in the UK

November 3, 2000

Britain is the world's second largest arms exporter. Tim Garden explores the murky underside of an industry that employs 400,000 people.

Many British manufacturing industries have declined or disappeared over the past half-century. Yet one, the manufacture of weapons, maintains an extraordinary pre-eminence. Since the end of the cold war, the worldwide arms market has reduced as the international competition has increased; and yet Britain is second only to the United States as an arms exporter. The defence industries employ about 400,000 people, of whom more than a third are directly dependent on export contracts. The total value of arms exports is about Pounds 5 billion a year. These are the statistics that politicians and industrialists will quote whenever the morality of arms sales policy is questioned.

The thoughtful citizen should be concerned about many aspects of this unique industry. We make drug dealing illegal because of the destruction that addictive substances cause to the individual and society. We regulate closely the tobacco industry because its products reduce the life span of smokers. Yet we exult in being a world leader in the production and export of weapons that are designed to kill.

Of course, the rationale is that weapons are produced for defensive purposes: the right of self-defence is enshrined in the UN Charter. For many military forces this will be true. We train and equip the British military to use lethal force so they can defend themselves, their country and those nations with which we are allied. The use of our troops is rightly subject to the closest regulation, national law, European law and international law. One might expect the export of arms to other countries to be subject to similar considerations, particularly by a government that espouses an ethical dimension to its foreign policy.

Mark Phythian, a politics lecturer at Wolverhampton University, has produced a deep and thoughtful analysis of the politics behind the success that Britain has enjoyed in arms sales. In doing so, he raises many questions about the ethics, economics, legality, opportunity costs and institutional arrangements that surround the defence industries. He shows how successive UK governments, both Labour and Conservative, have sought to stretch policies to accommodate arms exports.

The Blair government is not the first to have problems maintaining an ethical arms sales policy. Harold Wilson had publicly declared in 1963 that a future Labour government would ban all arms sales to South Africa and, immediately on assuming office the following year, instructed that all shipments of arms should cease forthwith. He was then briefed by officials on the potential loss of export earnings, the effect on British strategic interests and the liability for export credit guarantees. By the following month, aircraft deliveries to South Africa were resumed. Robin Cook had a similar change of heart over aircraft deliveries to Indonesia.

At least British weapons in South Africa were not used against British forces. Argentina had been a regular customer for British weapon systems since the 1950s. The military coup in 1968 was not allowed to affect delivery of ships, missiles and helicopters. Indeed, spare parts were delivered from Britain just ten days before Argentina invaded the Falkland Islands. British troops would find themselves facing British (and French) weapons. Nor was this lesson learned subsequently, as the Scott inquiry so clearly demonstrated. Government guidelines were pushed to the limits to provide military capabilities to Iraq, either directly or through third-party countries in the 1980s. Again, British forces found themselves at the wrong end of British-made weaponry.

The book examines many other cases of dubious exporting practice to places such as Chile, Brazil, Peru, Iran, Saudi Arabia, Indonesia and Malaysia. Sometimes the need for the weapons was questionable, and for some, the final purpose was as likely to be internal repression as defence. Rarely would the UK government see beyond possible hopes of export income and jobs.

Yet the evidence for real economic benefits from arms exports is obscure. Phythian might have devoted a little more of his book to this important subject, although he concludes that it is difficult to find any rational explanation for Britain's high-profile involvement. The reader will piece together a confusing picture of claimed income and hidden costs. Phythian records that the use of government-backed guarantees meant that we paid £652 million for Iraq to procure weapons to use against us. In Malaysia, £234 million of concessional loans for the Pergau Dam project were arranged in parallel to (but technically separate from) aircraft, frigate and missile sales. Add to these costs the expense of running the Defence Export Services Organisation (DESO), fielding military attaches as arms salesmen around the world, and withdrawing frontline equipment from our forces when it is needed to clinch a deal, and the price may be surprisingly high. We provide no comparable support for any other industry.

The costs of promoting arms sales are not just financial. Phythian also highlights the foreign policy implications. If a lucrative arms deal is in the balance, the British government has a history of tempering its foreign policy accordingly. Both Malaysia and Saudi Arabia have made it clear on several occasions that continuing business depends on uncritical relations. An adverse British media comment may be enough to make them threaten to cancel contracts. The presence in London of a Saudi dissident, Mohammed al-Mas'ari, sparked such threats that the British government ordered the expulsion of this political refugee.

The arrangements for controlling arms exports are bizarre. DESO, which supports the defence industries, is a part of the Ministry of Defence. Yet the MoD should be more concerned about restricting arms sales abroad to potential adversaries than promoting such deals. The Department of Trade and Industry has overall control, and is primarily concerned about supporting British manufacturers and exports. The Foreign Office and the Department for International Development comment on proposals but appear to have no veto when a sale is not in line with foreign or aid policy. Phythian advocates greater Foreign Office control and more parliamentary transparency. I would argue that if the DESO should exist as a government organ at all, it should move to the DTI where the exporting lobby could be unified. MoD could then protect defence interests and the FCO could rule on the overall foreign policy interest.

Perhaps the most troubling thread that runs through the whole book is the question of corruption. The arms industry is peculiarly susceptible to corrupt practices. The sums of money are enormous, and buying decisions are handled in secret by relatively few people. The weapons manufacturers keep their pricing structures confidential, and are supported in this by the British government. Payment is often in a complex mix of cash, barter and offset arrangements. The most lucrative UK arms deal is with Saudi Arabia and it has a long tradition of commission payments. The salesmen claim contracts can only be won by using intermediaries, who are entitled to be appropriately rewarded. The custom of paying commissions blurs distinctions between consultancy and bribery.

Nor is it easy for parliament to examine what has happened in any particular case. In 1980, when the payment of some £491,476.09 (a curiously precise sum) into a Swiss bank account by the sales agency of the MoD was questioned by the Public Accounts Committee, the MoD gave assurances that it was for consultancy services and certainly not as a bribe. However, the permanent secretary agreed that he could not know whether the money was used subsequently for bribes. The book documents case after case of such commission payments over the years.

The new Labour government has followed the lead of the previous Conservative government in refusing to publish the 1992 National Audit Office report into the Al Yamamah contract for arms to Saudi Arabia. It is ironic that weapons overtly sold to defend countries may, in the end, undermine their governments through the spread of corrupt practices.

A culture of bribes can spread quickly from the leadership through the public service. Unnecessary weapons may be bought because the decision makers and policy advisers stand to gain personally. Even when new weapons systems are needed, they will give poor value for money if the price has to include the cost of commissions. A leadership which grows rich on the back of arms purchases, while impoverishing its people, is unlikely to be stable in the long term.

The negative aspects of the arms industry must be a matter for government. Overseas sales can only happen with Whitehall agreement, and there is a scrutiny process, albeit an imperfect one. The British government also has enormous power through its position as the main customer of the UK defence industries. It should use this power to take a lead in setting new international standards for arms sales. Industry would resist such moves strongly, fearing that it would lose out to less constrained international competitors. Yet our main competitor, the United States, is much more regulated by Congress. It is hardly a proud boast for Britain that it makes more arms sales because it is less ethical than America.

Robin Cook announced at the Labour Party conference that he intended to extend the code of conduct on arms sales. He should insist on greater parliamentary transparency and accountability for arms contracts, and that his department should take the lead. Each defence manufacturer should be required to produce an acceptable statement of corporate ethical policy, which would include a total ban on the receipt or giving of bribes. Without such a published and audited company policy, the manufacturer should not be able to bid for British military contracts. Coupled with Cook's proposed harmonisation of rules across Europe and the US, there could be a new, cleaner approach to what has been a murky business. It might also be time to examine the total costs and benefits of the industry. Restricting sales to military allies would be a more rational approach, and would be more in line with the government's other policies on reducing arms throughout the world.

This review can only touch on the rich vein of material that Phythian has quarried for his reader. It is a book that deserves a wide audience beyond the political scientist. It is, for once, a deeply academic book which is also a very good read. Perhaps Robin Cook should curl up with it over Christmas. He might feel moved again to put a little more ethics into Britain's approach to arms sales.

Air Marshal Sir Timothy Garden served in the Ministry of Defence from 1987 to 1994. He is currently visiting professor at the Centre for Defence Studies, King's College, London, working on European defence issues.

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