In a savage attack on the Department of Trade and Industry, the International Development Committee said that its approval of exports to Eritrea and Indonesia was "deplorable".
The Labour-dominated committee revealed that Clare Short, the International Development Secretary, objected to the licence agreements, but was overruled by the DTI.
MPs also called for new laws to control the activities of private military companies such as Sandline International, the British company at the heart of the arms-to-Sierra Leone affair.
A register of arms brokers should be created, with legislation to prevent them arranging weapons deals to countries to which the Government would refuse export licences, the committee concluded.
In a wide-ranging report published last night, it suggested that new laws should be introduced to make it a criminal offence for British businessmen to bribe or corrupt Third World officials to win lucrative foreign contracts.
The arms approvals for Eritrea and Indonesia were among 17 licences criticised by Ms Short, but her concerns were dismissed by civil servants. The MPs commended her approach and concluded that she should be given a veto over future decisions by the DTI.
"Determined and principled control of arms exports is a litmus test of this Government's concern to prevent conflict and inject an ethical dimension into foreign policy," the report said.
"We criticise the DTI for issuing Export Licence Agreements to Eritrea and Indonesia... It is clear that the DTI has yet to take on board effectively the human rights and conflict concerns which are at the heart of development policy."Reuse content