His admission of an 'entanglement', possibly in breach of legislation covering aid, will open the Foreign Secretary to fierce questioning next week by the cross- party Commons Select Committee on Foreign Affairs.
'The two things became entangled for a few months during 1988 . . . They were both pursued separately after that,' Mr Hurd said on BBC Radio from Lisbon. He has previously denied that the pounds 234m in aid for Pergau was formally tied to a pounds 1bn arms deal signed by Lady Thatcher and Mahathir Mohamad, the Prime Minister of Malaysia, in September 1988.
To honour that deal, the Foreign Secretary overruled the objections to the aid package by Sir Tim Lankester, the Permanent Secretary to the Overseas Development Administration, whose evidence in investigations by the Public Accounts Committee and the National Audit Office fuelled the controversy.
Mr Hurd said: 'What I was doing and the Prime Minister (John Major) was doing in 1991 was honouring an undertaking that had been given before. This last episode, what we are living through now, simply shows how careful one had to be.'
In 1980 the Malaysian prime minister enforced a 'buy British last' policy in retaliation for a British decision to end subsidies for overseas students' fees in Britain, which affected his son. Lady Thatcher only managed to end the feud in 1985.Reuse content