Cook and Byers under fire over Indonesia

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ROBIN COOK and Stephen Byers were last night under attack from Labour MPs and facing a rough reception at the Labour Party conference over the taxpayers' subsidy in the sale of Hawk jets and other financial help for Indonesia and the failure to fulfil lofty promises for an ethical foreign policy.

The Foreign Secretary and the Secretary of State for Trade and Industry were facing renewed criticism from their own backbenchers for failing to suspend the export orders for the Hawks by British Aerospace until the weekend.

Friends of Mr Cook blamed Tony Blair's office, defence ministers led by the former defence secretary Lord Robertson, and the former trade and industry secretary, Peter Mandelson, for opposing his attempts to block the sale of arms to undesirable regimes because of fears that British companies would lose orders.

Labour backbench anger was fuelled by confirmation that the export credit guarantee department (ECGD) had authorised guarantees totalling pounds 130m for the Hawk jets to be bought from British Aerospace over the past year. The Tories weighed in, accusing Mr Cook and Mr Blair of "hypocrisy" over the ethical foreign policy.

One Labour MP said: "Robin has got egg all over his face. He should have threatened to resign months ago to stop these sales."

Insiders said Mr Cook was assured before the July reshuffle by Mr Blair that he would remain as Foreign Secretary until the general election, although he is almost certain to be moved or dropped if Labour wins a second term.

The row threatens to erupt at the forthcoming Labour Party conference with campaigners warning that they will protest at the Government's failure to deliver an ethical foreign policy when Mr Cook makes a keynote conference speech.

Mr Byers last night insisted that he had "acted properly" over Indonesia and had simply been honouring credit agreements set up by the previous Conservative administration. That policy had now been changed and all credit applications from Jakarta this year had been refused. "We have acted properly in all these matters," Mr Byers said.

Asked whether the Government's ethical foreign policy was still intact, he said: "It is an ethical foreign policy which means that we changed the criteria by which we judge these matters. That has enabled me to reject applications for credit for arms."

Mr Byers strongly defended his action in ordering the ECGD to underwrite a pounds 683,000 guarantee for a British-built electricity project to be completed in Indonesia. He insisted that without the extra guarantees, the project to help supply electricity to eight million of the poorest people in Indonesia would have collapsed.

"I felt this case fitted our Government's overseas development objectives and the size of the contract was relatively small," he said. He added that not a penny of taxpayers' money was being paid to the Indonesian government.

The Labour-led Select Committee on Trade and Industry will investigate the Government's agreement last year to reschedule pounds 1.7bn in debts to help Indonesia escape the Asian economic crisis.

ECGD sources said that Indonesia was repaying the interest on the debts and was not defaulting, although there was "always a risk". There has been speculation that Indonesia may seek a second rescheduling of the debts and government sources were not ruling out the possibility that Hawk sales could be resumed if Indonesia moved further towards free and fair elections with peace in East Timor.

There was fresh anger among Labour MPs last night at the small print in the United Nations resolution which will give Indonesian troops accused of collaborating in atrocities by militias responsibility for maintaining security in East Timor and the return of the refugees.

Ann Clywd, the leading Labour campaigner over East Timor, said: "These are the very people that brutalised them, that murdered them, that raped them. Now they are supposed to say, `Lovely - you are coming to save us'. It is ridiculous."

Iain Duncan Smith, the Tory spokesman on defence, said: "One of the things they won the election on was to attack the last government for having carried through the sales to Indonesia. But over the last two years they had carried on selling arms to Indonesia as well as subsidising those sales with taxpayers' money."

Menzies Campbell, the Liberal Democrat foreign affairs spokesman, said "joined-up government", involving co- operation between the Ministry of Defence, the Foreign Office and the Ministry of Defence, was needed over arms sales policy.