Thatcher to take centre-stage: Former Prime Minister to appear at Scott inquiry. David Connett reports

IN AN unprecedented piece of political theatre, Baroness Thatcher will tomorrow answer accusations that she and her ministers encouraged British businessmen to sell arms and defence-related equipment to Iraq in breach of official guidelines.

The woman who dominated the nation for more than a decade will face questions at the Scott inquiry about her knowledge of British efforts to arm Saddam Hussein's forces.

It will be the first time a former prime minister has given evidence publicly to a formal inquiry.

Although important aspects of the inquiry - the prosecution of three Matrix Churchill company directors and ministerial efforts to withhold vital defence evidence - occurred after she was driven from office, she still faces questions about British policy towards Iraq in several key areas.

The inquiry team's chief objective will be to establish precisely what Lady Thatcher knew.

She has completed a 76- page questionnaire sent to her, but indicated to Lord Justice Scott she would like to deal with other 'more detailed matters orally'. Questioning is likely to focus on the creation and operation of government guidelines in 1984 limiting defence sales to Iran and Iraq and attempts to amend them. Documents reveal Lady Thatcher asked to be kept informed. In September 1988, her private secretary wrote: 'The Prime Minister will wish to be kept very closely in touch at every stage and consulted on all relevant decisions.' Despite this, some ministers were reluctant to bother her. William Waldegrave, minister for open government, claimed he did not tell her of an important relaxation of the guidelines because 'it was so insignificant it would have been a waste of her time'.

Other questions will probe her knowledge of Jordan's role in diverting arms and equipment to Baghdad, the use of government cash to support exports, and the sale of the Hawk aircraft to Iraq. She will also be asked about repeated warnings from MI5, MI6 and GCHQ that exports were for Iraqi munitions, which were missed, disregarded or ignored. Mark Gutteridge, a former Matrix Churchill executive who worked for MI5, claims his handler told him intelligence he provided was seen by her. Frank Machon, a Glasgow haulage contractor who worked for the MoD, also claims he warned Downing Street in December 1988 that British military supplies to Saudi Arabia were really destined for Baghdad.

Other witnesses told how she received quarterly reports on UK arms sales and welcomed regular bulletins from a secret Whitehall committee monitoring Iraq's attempts to develop a nuclear weapons programme.

One intriguing aspect on which she will face questions is her involvement in Matrix Churchill machine-tool exports. Evidence from Alan Barrett, an official in the Defence Export Services Secretariat, suggested it was considerable.

Mr Barrett, who monitored exports to Iraq, told Lord Trefgarne, the former minister for defence procurement, that Lady Thatcher approved exports by Matrix Churchill, the Coventry-based company, in 'order to protect intelligence sources'.

It was the collapse of the trial of three executives from the firm last year that prompted the inquiry.

'This case needs to go back to the Prime Minister before we could recommend approving the current applications,' he wrote. When questioned about the origin of the information, Mr Barrett initially thought he had made a mistake. When pressed, he said he would not have implicated her 'without good reason'. While unable to remember who told him, he said: 'I certainly would not have made it up.'

Neither Lord Trefgarne nor other officials to whom the document was copied, queried Lady Thatcher's involvement.