Taxpayers Pick Up Multi-Billion Pound Bill For Risky Arms Deals

12.00.00am BST (GMT +0100) Mon 6th Oct 2003

The British taxpayer is owed over £6billion by foreign countries due to the UK Government guaranteeing risky private contracts, including arms sales, according to new figures released today by the Liberal Democrats.

The controversial Export Credit Guarantee Department (ECGD), has amassed a huge £14bn liability on behalf of British taxpayers, £3bn of which guarantees arms sales by UK defence companies.

As defence manufacturers gather in Docklands at Europe's largest arms fair to parade their goods to potential buyers, it is increasingly clear that it is the British taxpayer who ends up subsidising their most risky business deals with countries that are unlikely to pay up.

The Government is unable to say how much the taxpayer has had to pay out due to risky arms deals that went wrong, as they cannot work out how much of the money owed by foreign governments before 1992 (£5.2billion) was for arms deals or for non-defence contracts.

Vincent Cable MP, Liberal Democrat Shadow DTI Secretary, said: "If the Government continues using taxpayers' money to underwrite risky business with foreign countries, the British taxpayer will probably end up footing the bill for some of the deals done at the arms fair this week."

"Britain's taxpayers should not be picking up the tab for providing warplanes to foreign countries. It is staggering that the Government can't work out exactly how much has already been paid out due to risky arms deals that went wrong."

"This is a scandalous misuse of public funding with Ministers hiding behind commercial confidentiality in order to obscure the true picture. The whole ECGD system is murky. Subsidies for arms sales should stop now."

ENDS

Notes to Editors:

The Export Credits Guarantee Department is the UK's official export credit agency. The Department reports to the Secretary of State for Trade and Industry, and helps UK exporters by providing guarantees against non-payment by overseas governments to UK exporters. Its web site can be accessed at http://www.ecgd.gov.uk>

A full breakdown of which counties owe money under ECGD backed deals and which deals represent future liability can be supplied in excel format on request.

Export Credit Guarantee Department: Exposure and Debt

Source: Parliamentary Answer to Vince Cable MP, 25 July 2003

Total Amount at risk 14,111,600,428

Amount currently Due;

Due 6,123,617,663

Interest 4,066,044,260

10,189,661,923

Total ECGD Exposure+claims 24,301,262,351

• Total Outstanding debt and potential future liability is

£24.3 billion.

• Amounts currently due from foreign governments £6.1 billion.

• Interest due from Foreign governments £4.0 billion.

• Total amount still at risk £14.1 billion.

Of the amount currently due, we know that £0.5 billion is in respect of payments made under guarantees given for arms exports (£500 million Indonesia and £1 million Zimbabwe), and £0.3 billion is due for non-defence guarantees that have been called in.

According to DTI minister Mike O'Brien, of the £6.1 billion currently due, the Government is unable to split £5.3 billion of pre- 1992 business between defence and non-defence. This means the Government is unable to say whether guarantees paid out on for exports to Iraq (£622 million), Nigeria (£1.7 billion), Serbia (£165 million), Russia (£584 million) and others, were for arms or for other equipment.

The amounts still at risk of £14.2 billion represent guarantees underwritten by the ECGD not yet called upon. £3.3 billion is in respect of guarantees given for defence equipment. The Government still issues guarantees in respect of exports to countries that represent poor security. For example, Brazil, which owes £219 million and a further £86 million in interest arrears, still has guarantees issued regularly. ECGD accounts show that in the accounting periods 2000 to 2003 at least 17 guarantees were issued for exports to Brazil, with a value of £181 million. "At Least 17..": because the accounts state that certain guarantees are not listed due to "commercial confidentiality".