Hurd to accept court ruling

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Douglas Hurd, the Foreign Secretary, is expected to announce tomorrow that he will not appeal against the High Court ruling that he acted unlawfully in authorising £234m in aid for the Pergau dam project.

In a Commons statement, Mr Hurd is expected to explain how the £55m already spent will be returned to the Overseas Development Administration's budget. Further payments from it will cease.

Whitehall sources indicated that Mr Hurd had been "concious of the drawbacks of appealing for some time."

The High Court's judgment followed criticism from the Foreign Affairs Select Committee that the grant had become linked to an arms deal signed with Malaysia in 1988.

After the ruling, Mr Hurd admitted he had considered resigning. If the it remained unchallenged, he said, ministers would have to decide whether the ODA "can live within the new judgment and yet continue to run an aid programme of benefit to this countryas well as to the recipients of aid".

He emphasised last month that the judgment could not alter British involvement in the Pergau project, which was now 75 per cent complete after participation by 200 British firms. But the money would have to be found from elsewhere.

The Prime Minister inherited the Pergau affair from Baroness Thatcher, who promised to provide financial help in 1989 while negotiating an arms deal with Malaysia worth £1.3 bn.

In 1991, Mr Hurd authorised the first payment despite advice from Sir Timothy Lankester, the former permanent secretary at the ODA, that the dam was not a sound development.

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