Leading Article: The whole dam scandal

CONFUSED by the Government's denials and later retractions, many of our readers know something disreputable has been going on with arms sales and aid to Malaysia, but are not sure what. It is worth stepping back to assess the story so far and the issues it raises.

The Government now admits that Lord Younger, then the Defence Secretary, gave the Malaysians a written promise of pounds 234m of aid as just one incentive in a pounds 1.3bn arms contract. The aid is being used to build an unnecessary dam.

Knowing what would happen if the story came out, British civil servants tried to hide the details of the affair from the National Audit Office by marking certain sensitive papers 'Not for the NAO'. Ministers then used a public-interest immunity to avoid producing for a judge papers on the affair demanded by a prominent Malaysian banker who was trying to defend himself against extradition to Hong Kong, and gave blatantly misleading parliamentary answers on the matter.

So much for the facts. One lesson from them is that the Government should stop hiding behind the Armstrong doctrine - enunciated in the Spycatcher case by a now retired Cabinet Secretary - that it can be permissible to be 'economical with the truth'. In a court of law, witnesses must tell not just the truth but the whole truth; ministers answering to Parliament must either do the same, or make explicit what they are unwilling to reveal. The argument that a misleading statement can be true 'as far as it goes' is pure casuistry.

The story shows how easily bilateral aid programmes of this kind can be misused. If it is to benefit the countries for whom it is intended and to be beyond the temptation of the corrupt, overseas aid is best administered by third parties - and should be linked to programmes of good economic management, not specific dams, roads or bridges. Aid should also be confined to poorer countries. Those such as Malaysia (whose national income per head is nearly dollars 3,000) need open markets, not handouts.

The Government's defenders may justify its actions by saying that the international arms trade cannot exist without bribes. Some say that paying them is essential if British defence companies are to compete. There is an urgent need for public debate on the matter, given the hypocrisy of demanding high moral standards but then complaining at the job losses that result.

Yet a distinction must be drawn between the private and public sectors. If directors of armaments companies want to pay bribes, they must answer to their shareholders. There can be no case for ministers to do so with taxpayers' money. If they were subject to the same rules on surcharging as local councillors, the practice might be easier to stamp out.