Labour has accepted more than £12m in sponsorship for Government projects and political events from arms and defence companies since 1997, The Independent on Sunday can reveal.
Labour MPs, including the Secretary of State for Northern Ireland, Dr John Reid, have also accepted hospitality from such firms.
And links are strengthened by the appointment to Government quangos of senior executives from some of the companies involved.
The multi-million pound link has prompted concerns that a cosiness exists between Labour and the arms industry that threatens an ethical foreign policy, even where there is no impropriety.
Richard Bingley, of the Campaign Against the Arms Trade, said: "No wonder the Government finds it so difficult to put an arms embargo on India and Pakistan when they receive donations and hold shares in arms companies. There seems to be an institutionalised connection between the Labour Government and senior figures in the arms production business.
"It means that other groups that might be putting across a different message to the Government are not getting a fair hearing."
Concerns over arms trading have been heightened in recent weeks because of the threat of conflict between India and Pakistan in their dispute over Kashmir. Plans by the Secretary of State for Trade and Industry Patricia Hewitt for a UK arms embargo to the two countries were quashed last week after Tony Blair used his personal authority to save a £1bn deal to sell Hawk fighter-bombers to the Indian Government.
The company involved in the deal is British Aerospace Systems (BAe), which is listed among companies who gave more than £5,000 in sponsorship to the Labour party in both 1998 and 2000, sponsored a ministerial question and answer session at the 1999 Labour party conference and paid £12m to sponsor the Mind Zone in the Millennium Dome.
The Labour party pension fund has 27,490 shares worth around £95,000 in BAe.
Sir Richard Evans, the chairman of BAe Systems, sits on the Government's Competitiveness Council. The former vice-chairman of BAe, Richard Lapthorne, was appointed by the Government in April 2000 to set up its Working Age Agency and Lord Hollick, a Labour peer and party donor, was a director of BAe from 1992-1997. BAe's chief operating officer Peter Gershon is paid £180,000 a year as the head of the Office of Government Commerce, set up in 2000.
In April, the Prime Minister, intervened personally in a BAe deal to promote the sale of 24 JAS-39 Gripen fighters to the Czech Republic, later defending his role as straightforward backing of British industry.
Other arms and defence companies linked to Labour include Raytheon Systems, who, according to Friends of the Earth, gave £30,000 to the Labour party in 1997, £15,000 for a pre-dinner drinks party at the Labour conference in 1998 and £12,500 for drinks at the London Hilton in 1997.
The US arms manufacturer was awarded a £800m contract by the Ministry of Defence for their Astor battlefield radar spyplane system in 1999.
David JB Brown, the managing director of Multidrive, a manufacturer of commercial and military vehicles based in Thirsk, North Yorkshire, donated more than £5,000 to the Labour party in 1999-2000.
Thomson-CSF Racal, an integrated defence company, gave more than £5,000 in sponsorship in 2000, as did the UK Defence Forum.
A number of Labour MPs have also listed perks from defence companies in the Register of Members' Interests. In January 2001 Cabinet Minister Dr John Reid took a courtesy helicopter, paid for by BAe Systems, from Stirling to their shipyard in Scotstoun, Glasgow. He then accepted a lift back from Glasgow to RAF Northolt in the chairman's private jet.
BAe Systems also paid for Labour backbencher David Borrow's return flights from Chester to Toulouse to visit Airbus Industrie, and his trip in June 1999 to the Paris Air Show. Fellow backbencher Roger Casale, a former policy advisor to John Prescott and Tony Blair, accepted travel and expenses for trips to Italy from defence company GKN, who also part-sponsored a trip to Rome for Labour backbencher Rachel Squire.
In June 1997, Raytheon Systems Ltd flew Labour MP Frank Cook to the Paris Air Show where Labour peer Lord (Barry) Jones was a guest of BAe Systems. MP Gordon Marsden's attendance at a conference on EU enlargement in 1998 was paid for by BAe.Labour peer Lord Gregson is the president of the Defence Manufacturers Association and Lord Mackenzie of Framwellgate, a special advisor to Jack Straw on policing, is its honorary vice-president.
A Labour party spokesman said: "A lot of these companies are diverse companies who are employing a lot of people in this country. It is totally proper that they should be able to make donations to politcal organisations."
But the links have further angered campaigners against the arms trade, who maintain that UK arms exports are still being used by oppressive regimes such as those in Indonesia, Sierra Leone, Angola and Zimbabwe.