Labour members of the committee last night confirmed they would be calling for Lady Thatcher to be summoned to give evidence, but Tory members said they were unlikely to support the move. 'If they don't there will be a hell of a row,' said one Labour member of the committee.
Tory MPs believe the controversy was partly defused yesterday by Lord Younger, the former Secretary of State for Defence, who took the blame for signing the protocol with the Malaysian government in March 1988 which 'entangled' aid and arms, in breach of international rules and Government policy.
Lord Younger said he feared that if he did not sign the protocol, expressing the Malaysians' 'desire' that they would receive aid, he would have lost pounds 1bn in defence contracts, underpinning 20,000 jobs in Britain. 'It was a very attractive prospect to get this deal and I certainly regarded it as very much put on my plate,' he said.
'It was a very difficult judgement to make at the time, but, having reflected on it, I do not think it was wrong and I certainly do not think it represented any commitment.' Lord Younger was accused by Labour MPs of contradicting the evidence given last week by Douglas Hurd, the Foreign Secretary, by insisting that it did not represent a commitment.
The former Secretary of State for Defence said it had to be changed because the Foreign Office feared the 'infelicitous' words in the protocol could be built on by the Malaysians. He said he had been briefed before going to Malaysia against linking arms and aid.
Lord Younger disclosed that he met the Malaysian defence minister at an arms fair in Aldershot on 28 June 1988, the day when two letters were delivered simultaneously to the Malaysian government withdrawing the protocol linking arms and aid; one from Lord Younger confirmed the defence contract and the other confirmed the offer of aid.
But Sir Nicholas Spreckley, the former High Commissioner for Malaysia, cast doubt on the Government's defence that aid and arms had been disentangled. Sir Nicholas confirmed the formula - aid at 20 per cent of the arms contract - had been used in August to award the Malaysians pounds 200m in aid for the pounds 1bn arms deal.
John Major was first aware of the link between aid and arms for Malaysia as long ago as May 1988, it was revealed last night, writes Chris Blackhurst.
In a parliamentary answer, Mr Major also disclosed that the Treasury played a key role in the Whitehall talks, following the visit to Malaysia by Lord Younger in March 1988. It was on that trip that Lord Younger signed a protocol formally linking the amount of aid to arms sales.
When he returned to London, his colleagues insisted the offer should be withdrawn. Mr Major was one of five ministers involved in those talks. The others - Lord Younger, Chris Patten (as overseas development minister), Lord Howe (then Foreign Secretary), and Lady Thatcher - have left the Government. Lord Howe and Mr Patten are known to have opposed the use of aid for the Pergau dam - a payment sanctioned by Mr Major when he became Prime Minister.
Alan Williams, MP for Swansea West, who obtained the answer, said Mr Major was the only living link in the Government with the original joining of aid with arms. It also showed he was 'central to the funding discussions going on'.