Help to the world - who gains?: Britain likes to be seen as a compassionate nation, but aid statistics show us in a harsher light, reports Chris Blackhurst

BRITAIN gives more state aid per capita to oil-rich Oman than to Ethiopia. The pounds 56m which the National Audit Office, the public-spending watchdog, reckoned was frittered away on the Pergau dam project in Malaysia is as much as Britain gave to Somalia, Ethiopia and Tanzania combined in 1992.

In those countries the gross national product per head is dollars 100-dollars 120 (pounds 70- pounds 85) compared with dollars 2,520 (pounds 1,775)in Malaysia.

It is statistics such as these, say Ben Jackson, of the World Development Movement, Andrew Lees, of Friends of the Earth, and other campaigners, that make a mockery of British claims to be a caring, helping nation. They go further: unless you are hit by a disaster such as an earthquake or cyclone, to have received British aid since 1980 you should also have bought our goods - in particular, weaponry. British aid of pounds 234m for the Pergau dam project has been linked to arms deals worth pounds 1.3bn to British companies. Margaret Thatcher was instrumental in pushing the deal, against the advice of

senior civil servants and ministers.

The biggest Third World buyers of British arms since 1980 all obtained large amounts of British aid. Countries such as Indonesia (196.4 per cent), Malaysia (99 per cent), and Pakistan (55 per cent) all showed hefty leaps in their aid allocations - yet they also found the cash to buy aircraft, weapons and aummunition.

But, as well as the arms companies and the governments of countries that were neither the poorest nor the most humanitarian, there was a third, so far overlooked, beneficiary of Britain's overseas-aid budget.

Inquiries reveal that, for years, a handful of companies took the bulk of the Overseas Development Administration's Aid and Trade Provision (ATP) - intended 'to help British companies to win sound investment projects in developing countries where there is a reasonable prospect of follow-up business on commercial terms', in the words of Overseas Development. Because of its links to future trade, ATP is administered jointly by the Overseas Development and the Department of Trade and Industry.

From 1978 to 1992, Britain handed over pounds 1.37bn in trade-lined aid grants. Of that, said Alastair Goodlad, the Foreign Office minister, in a little-noticed parliamentary answer last December, 42.5 per cent went to just five companies. The top 10 firms shared 57.5 per cent. Heading the list is Balfour Beatty. The Surrey-based construction group took 21 per cent of the funds. Balfour Beatty was in receipt of taxpayer's cash in 23 deals spread across 16 countries. In second place is GEC with 14 contracts. The next three are Davy, Biwater and Amec.

All five are large, specialist operators with proven track records in handling the very biggest projects in far-flung corners of the world. They all enjoy a close relationship with the Government. According to the Labour Research Department, which is funded largely by trade unions, BICC, Balfour Beatty's parent, has given pounds 90,000 to organisations associated with the Conservatives since 1980. None of the donations went to the Tories direct but were made to the closely linked right-wing Aims of Industry, British United Industrialists and the Economic League.

Balfour Beatty's connections do not stop there. Among BICC's directors is the Duke of Kent, who also serves as vice-chairman of the British Overseas Trade Board. Headed by Michael Heseltine, President of the Board of Trade, the trade board comprises a mixture of senior officials from the department and Foreign Office and representatives from Britain's largest companies.

Sir Colin Chandler, chief executive of Vickers (makers of the Challenger tank, which it first sold to Oman) and once head of sales at the Ministry of Defence, is a member. Others are drawn from the likes of Marks & Spencer, Rothschilds and Samuel Montagu, part of Midland Bank.

Companies bring along to the overseas trade board's regular, private, meetings their suggestions as to where Britain should be looking to do business. 'It advises the DTI and the Foreign Office on problems with overseas trade and where we can run official export promotions,' said the spokeswoman. 'Within that, it looks at overseas projects and orders.'

Beneath the board is another body, the Overseas Projects Board (OPB). Its job, says an official department circular, is to provide 'expert advice to DTI ministers and their officials on issues affecting UK industry's ability to compete effectively for major project business overseas'. The projects board's terms of reference go further: 'To provide a means of achieving closer communication between industry and government in respect of major project business; to give industry a voice in the formulation of government policy in relation to major overseas projects; to advise the projects and export policy division of the DTI on the provision of assistance under . . . the Aid and Trade Provision.'

Its chairman, also a trade board member, is Sir Alan Cockshaw, the head of Amec, fifth on the Aid and Trade Provision list. The other firms that took the lion's share of the money - GEC, Davy and Biwater - are all represented on the projects board.

They are joined at the meetings by officials from the department, Export Credit Guarantee Department, and the ODA. According to the department's circular, 'principal issues of interest to the OPB over the last two years have included . . . the ATP budget and the interdepartmental review of ATP'.

That secret review was caused by problems with administering the aid. Pergau, described as 'an abuse' by the former permanent secretary at the ODA, Sir Tim Lankester, and the subject of ferocious rows within Whitehall - Baroness Chalker, the Overseas Aid minister, and Chris Patten, her predecessor, are known to have opposed the dam project - was not the only controversial project.

In January 1985, the department proposed giving grants to the Samanalawewa dam in Sri Lanka, to be built by Balfour Beatty. The ODA and Treasury objected. The company was already building the Victoria dam in Sri Lanka with government support and, in Indonesia, it was building the Mrica dam, again with ATP cash. A National Audit Office report said 'the ODA and Treasury therefore questioned what additional advantage could be gained from further aid assistance'.

The department won the argument: pounds 14.4m of aid was approved, said the audit office, 'on the grounds that it could lead to commercial and employment opportunities'.

Other trade-related aid projects have incurred the wrath of the audit office, aid pressure groups and, within Whitehall, Overseas Development and Treasury. They fall into a familiar pattern: initiative from the department; rushed planning; disappointing performance; damaging to the environment; questionable value; not benefiting the lowest income groups; linked to British export orders.

The battle over the future direction of this aid - coupled with a growing sense of unease over scrutiny of Pergau - culminated in the interdepartmental review. Its findings have never been made public. But, in a written parliamentary answer last summer, Mark Lennox- Boyd, the Foreign Office minister, provided a glimpse of what they may have been: 'The ATP budget for 1993-94 of pounds 110m will be enhanced by pounds 7m . . . The scheme will in future focus on credit-worthy, low-income - income per head under dollars 700 - developing countries.'

In another written answer soon afterwards, he said: 'In future the ODA's appraisal, approval and monitoring procedures for ATP projects will be brought in line with those for other bilateral aid projects. In addition, the DTI is introducing more systematic appraisal of the likely commercial and industrial benefits to the UK economy, consistent with other schemes which pursue UK economic objectives.'

It was an admission that trade-linked aid had gone wrong; that its main beneficiary was not always the wider British economy. It was also a quiet policy shift. Ahead of damaging revelations about Pergau, the aid map is already being redrawn.

(Photographs omitted)

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