Labour donor's firm 'invited on trade mission by minister'

Engineering company also has contracts with Ministry of Defence worth £500,

(UPPA/PHOTOSHOT)

Ministers were last night accused of drumming up trade for a multi-million-pound company owned by one of Labour's biggest donors. Caparo, the engineering firm founded by Lord Paul, the Labour peer who has non-domicile tax status, was invited on a UK delegation to Saudi Arabia headed by the trade minister Lord Davies of Abersoch earlier this month.

Lord Paul's son, Angad, the chief executive of Caparo, represented the company on the visit to Jeddah, and to an entirely new metropolis on the Red Sea called King Abdullah Economic City. At the same time, it emerged that Caparo has contracts with the Ministry of Defence for nearly half a million pounds.

While there is no suggestion of wrongdoing, the disclosures fuelled concerns that the company and the Paul family are benefiting from a close relationship with Labour. Lord Paul, who has donated £400,000 to the Labour Party and who is worth an estimated £500m, is a close friend of Gordon and Sarah Brown.

Lord Paul gave £45,000 to Mr Brown's 2007 leadership campaign and is expected to donate a significant amount towards Labour's general election fund.

The disclosures follow scrutiny of Lord Paul's non-domicile tax status, which would bar him from sitting in the House of Lords under proposed new laws. And there was embarrassment for Labour last week when it emerged that the peer had been made a privy councillor, despite his non-dom status.

Lord Davies led the delegation of British firms to Saudi Arabia in early December to launch the UK's "Soft Landing" programme for companies to "explore the opportunities" of the Arab world's largest economy.

The programme will help UK businesses – including Caparo – source accommodation and business services, and each firm will have a dedicated expert assigned to it from UK Trade & Investment (UKTI), an agency of Lord Mandelson's Department for Business.

Some 40 firms were represented on the trip, but Caparo was one of four promoted on the UKTI website to highlight the programme.

Angad Paul was quoted on the site as saying: "The plans here represent huge opportunities for business and will, I hope, serve to change the somewhat narrow-minded perception of what Saudi Arabia is."

The Liberal Democrat Treasury spokesman, Lord Oakeshott, said: "Lord Paul's company, Caparo, is on a fast-track to a Saudi contract with high-level help. Lord Paul's a non-dom ... Our Government should promote companies and business leaders who pay full tax here, not lurk in tax havens."

In a further development, written answers to parliamentary questions submitted by the Conservative MP Graham Stuart reveal that Caparo, which makes steel parts for vehicles, has six contracts with the MoD worth a total of £488,784.

Bob Ainsworth, the Secretary of State for Defence, told Mr Stuart: "I am withholding the breakdown of this information, as its disclosure would prejudice commercial interests."

AP Braking Ltd, a subsidiary of Caparo Group, has a contract for vehicle brakes with the Department for Transport.

A series of cabinet ministers have refused to respond to parliamentary questions asking whether they have held meetings with Lord Paul, his son or other executives from Caparo. Lord Paul handed over the running of the group to his son in 2003, but remains its chairman.

Caparo is registered as a company in Britain but has sister subsidiaries around the world, including Caparo GCC, based in the Gulf. Caparo GCC's chief executive, Richard Botting, was also part of the delegation – raising questions over whether it was an entirely British exercise.

A spokeswoman for UKTI said that that there were 40 firms in the delegation, all of which had applied to go on the visit. She added that there was no "grand design" as to why Caparo was highlighted by UKTI. Lord Davies has carried out more than 20 trade visits with British firms in the past year, she added.

Lord Paul did not comment on the allegations last night. Angad Paul said: "The last thing I need is any government help to do business in Saudi Arabia. If anything, I was there to help the Government in terms of getting a message across for this country.

"My whole purpose for this was to support UK plc, but, unfortunately, perhaps not enough people are doing that. I am not a Labour donor, and when I go [on business trips] it is because I actually care about this country, rather than trying to destroy it."