Arms, human rights and a question of values

The export credit guarantee department has become the centre of a Whitehall row over ethics, arms sales and environmental considerations, because of its pivotal role in underwriting billions of pounds of credit to British exporters.

The institution, dating back to 1919, offers huge credit insurance funds to British companies which export. In the past five years alone, it under wrote £17bn of exports, offering credit insurance at flat rates over a two to 10-year period.

The taxpayer picks up the bill only if the project collapses or the country where the project is based defaults. Taxpayers over the past eight years have had to fork out between £148m and £750m a year because of defaults.

The ECGD funded the Pergau dam in Malaysia in the 1980s, which was criticised because of environmental damage. A comparable row broke out under Labour over the funding of the Ilisu dam in Turkey.

The table reveals for the first time the scale of British exports involved. It shows that in the past 4 years some 6,659 firms asked for aid to back £298bn worth of business. The ECGD issued 821 export guarantees covering £14.6bn worth of business.

The country-by-country breakdown reveals that some of the biggest number of applications were for Turkey, the Russian Federation, China, Saudi Arabia and Oman - all likely to be deals involving arms sales or dealing with regimes where human rights are a significant issue.

Other tables show that demand for export credits to Arab states are so high that the department has run out of money to service them.

It is estimated that a third of the export guarantees issued by ECGD are for arms sales.

The row in Whitehall has been intensified because of pressures by environmental campaigners and third world debt groups demanding that Britain moves towards support for sustainable development to help the poorest nations.

This was a key part of the review ordered by Stephen Byers, the trade secretary, into the future role of ECGD. The aim was to bring Britain's policy in line with the World Bank, which takes a strong line on the environment, and other countries, like Sweden, which apply tough criteria to export aid. The new policy will be announced in March.