Arms firm pays Blair to rent flats

TONY BLAIR is earning about £60,000 a year renting his controversial 'Cheriegate' flats to a defence firm involved in Government contracts worth more than £5bn.

The extraordinary potential conflict of interest involves French-owned defence giant Thales, which has twice given substantial donations to the Labour Party and has one of Mr Blair's former Cabinet Ministers on its British board. The company has been renting the two luxury flats in Bristol, controversially purchased by the Prime Minister and his wife Cherie on the advice of convicted conman Peter Foster.

The Blairs bought the two-bedroom apartments as an investment in January last year, saying one was to be used as student digs by their son Euan.

Downing Street refused to disclose the earnings from the properties, but the development, known as The Panoramic, commands some of the highest rents in the city. A similar flat in the block is being offered for £2,600 a month.

The revelation that Thales defence experts working on a Government-funded contract are Mr Blair's tenants will raise questions about Downing Street's relationship with the company.

The employees are all senior Thales executives who stay in Bristol during the week while working on a £2bn project for the Ministry of Defence, developing high-tech equipment for British infantry.

They include deputy project manager Stephan Pattoni, programme manager David Tibbs and technical director John Foley. All were relocated to work alongside Defence Procurement Agency officials based in Bristol.

The firm is being paid an initial £20m for its work on the project, which aims to produce Robocop-style battle equipment for ground troops to use in war zones such as Iraq and Afghanistan.

It is believed that Thales pays the rent and expenses for the flats for the executives, who have family homes elsewhere in the UK. Since the contract is funded by the MoD, Mr Blair is effectively getting taxpayers' cash from his tenants.

It is unclear how the Blairs came to let the properties to the company. The flats - which cost £262,500 each - are managed by the Prime Minister's blind trust, The Manchester Trust, which is supposed to separate Mr Blair from decisions about how his personal wealth and assets are invested and managed.

However, Mrs Blair took a central role in the decision to buy the Bristol-properties and caused a major political scandal after it was revealed she had used fraudster Peter Foster, the then boyfriend of her close friend Carole Caplin, as an agent in the deal.

In what became known as the 'Cheriegate' affair, Downing Street initially tried to cover up the role played by Foster in securing a £69,000 discount. But Mrs Blair was later forced to apologise on television for having misled the public.

It is not the first time Labour's links with Thales have caused Mr Blair embarrassment. The new disclosures come in the wake of an earlier decision by the Government to give Thales a 50% stake in a £2.8bn order to build two aircraft carriers for the Royal Navy. British defence company BAE Systems was forced to share the contract with the firm, which is partowned by the French government, provoking accusations by the Tories of betraying UK interests. This year Thales also signed a deal worth £800m to supply the MoD with so-called 'spy in the sky' unmanned aircraft.

Former Minister David Clark, now Lord Clark, sits on the firm's British board, having taken the job in 1999 after quitting the Government.

After Labour's 1997 Election victory, it was revealed that the French-based defence firm - then known as Thomson-CSF but later renamed after a bribery scandal - had secretly donated thousands of pounds to the Party. Labour was accused of breaching strict rules forbidding it from accepting money from foreign companies.

The firm, which had previously been accused of trying to sell hightech equipment to Iraqi leader Saddam Hussein in breach of United Nations sanctions, channelled funds into Party coffers through a UK public relations consultant. In return, it was given the opportunity to meet Mr Blair and senior Party figures including Dr Clark, then Labour's defence spokesman.

At the time the company said it had 'unwittingly' given money to the Party. 'No one will ever believe that we didn't know that money was going to a political party,' it reportedly said.

But in 2000 it gave a more open donation. Labour revealed it had received 'more than £5,000' in 'sponsorship' from the company. Last week Mr Pattoni, the most senior Thales executive living in the Blairs' flats, said he was 'unaware' that the Prime Minister owned the properties. He said they had been rented through a local lettings company.

Joanne Wright, who works for the lettings firm, said: 'The landlords are told who their properties are being rented to but we do not inform our tenants who the owners are.'

Asked whether the Blairs were personally informed their flats were being rented to Thales, she added: 'That is confidential. I cannot discuss it.'

Last night Guy Douglas, head of UK media relations for Thales, said that, in spite of security concerns surrounding the firm's work, it did not do detailed checks on properties it rented for its executives.

In a statement, he added: 'We rent properties to house our employees working away from their home base. As we deal with lettings agents we know nothing of the ownership.'

Last night a Downing Street spokesman said: 'The Blairs have played no part in choosing tenants for the flats. It is all handled by The Manchester Trust which manages the Prime Minister's private affairs.'

He refused to say whether the Blairs had been informed who their tenants were or why their son had not moved in to one of the properties as originally planned.