Inside Parliament: Dam impedes flow of industry debate: Heseltine attacks Opposition 'innuendo' for damage to exports - Cook mocks Tory citing of Rover sale to BMW as a triumph of strategy

Michael Heseltine appeared to align himself with the 'when-in-Rome' school of winning overseas business yesterday as a Labour-initiated debate on the state of manufacturing industry became 'entangled' in the Pergau dam saga.

In a final flourish at the close of his speech, the President of the Board of Trade said Labour and Liberal Democrat MPs were becoming experts at undermining by 'innuendo and smear' the activities of British exporters.

'Britain does not rule the world. We don't dispense justice to the world. We don't police the world. We don't establish the customs and practices of other countries. But what we do have to do is sell to the world.

'We have to sell to a world where everything said here is used to harm our interests and is exploited by our competitors.' Mr Heseltine said that on the shop floor and in boardrooms 'every sanctimonious posture' was seen for what it was - 'Opposition members trying to get themselves cheap publicity regardless of the damage it does to British jobs and British investment.'

Along the corridor, meanwhile, Lord Prior, chairman of GEC, voiced the bitterness of companies that stand to lose by Malaysia's ban on new contracts with Britain. GEC is involved in the dam project and has orders with Malaysia worth more than pounds 500m.

'I always thought in the Eighties some sections of the press were sycophantic to the Conservative government . . . In the Nineties the worm has turned with a vegenance and now no innuendo, no rumour, no suggestion is too far-fetched for the press to turn against the Government,' the former Tory Cabinet minister said as the Lords debated overseas aid.

It was 'quite understandable' that at the same as discussing the pounds 1.5bn defence order, Malaysia should ask 'if we place this order with you, will you aid us in a major project we badly need?' And 'not surprisingly' the British Government said 'yes'.

Citing a Malaysian estimate that Britain had lost pounds 3.5-pounds 4bn of business, Lord Prior said problems could be avoided if responsibility for Aid and Trade Provision was switched from the Overseas Development Administration to the Department of Trade and Industry.

The principal player on the Pergau stage yesterday was Douglas Hurd, who overruled ODA objections to pounds 234m of taxpayers' aid for the project. After a two-hour grilling by a select committee examining the affair, the Foreign Secretary summed up his case at Question Time.

'What emerges is that since June 1988 we have followed two policies . . . building up defence sales to Malaysia and getting our share of civil contracts with the help of Aid and Trade Provision under the rules.' The grave accusation was that they had 'done too much to help British business and protect British jobs'.

Mr Hurd was replying to Simon Burns, Conservative MP for Chelmsford, who railed against a 'sanctimonious and dishonest campaign' by certain newspapers and opposition MPs over Malaysia. It would cost jobs and exports and make Britain a 'laughing stock' among competitors. New contracts with British firms have been banned by prime minister Mahathir Mohamad.

The patrician manner of the Foreign Secretary carried more conviction on the day than the flamboyance of his fellow Cabinet heavyweight, Mr Heseltine. Despite pantomime-style support from loyal backbenchers, roaring at jibes good, bad or mainly indifferent, the President was not in full command. He made much mock of an assertion in Labour's motion that the steel, car and airframe industries could not be allowed to fail if Britain was to remain an advanced economy. In all his many years in politics he had never heard anyone asking for a policy for the airframe industry, Mr Heseltine scoffed.

But the laughter switched sides and talk of a 'Heseltine-for-leader' comeback looked less realistic as Robin Cook gently pointed out that the words in the motion were lifted from page 111 of Mr Heseltine's 1987 book Where There's A Will. Mr Heseltine still wields the rhetoric of political knockabout with a swaggering ease but Mr Cook wields a needle, tipped with formic acid.

Focusing on the sale of the Rover Group to BMW of Germany, Mr Cook wondered what had happened since Mr Heseltine wrote that the future of the sole remaining British-owned and controlled car manufacturer would continue to be important for the Government?

If, as the industry minister had said, the sale was a triumph of the Government's industrial strategy, it was not one emulated by Italy or France which both had two volume car makers, or by Germany, three, or Japan which had five. 'Britain is alone in having only Rolls Royce and the Reliant Robin under British ownership.'