Fear over 'private' export licences

THE Government is considering privatising its arms export licensing system in a move that has deeply alarmed the defence industry and human rights groups.

Outsourcing of the Deparetment of Trade and Inustry's Export Control Organisation (ECO), which issues thousands of export licences for military equipment every year, is under discussion within the department, a DTI spokesman confirmed.

The DTI is facing pressure to cut a quarter of its civil service posts, as required by the recent Gershon Report on Whitehall efficiency.

'The outsourcing is going much wider than we'd have thought,' said Brinzley Salzmann, director of exports for the Defence Manufacturers' Association (DMA), which represents most of Britain's defence companies. 'We are waiting to see what the Secretary of State comes up with, but we have deep reservations about what we know of the proposals.'

The plans are understood to arise from a consultants' report that went to Trade Secretary Patricia Hewitt at the end of January. Wide outsourcing of the export licence service is one of the options.

A Trade Department spokesman said: 'We are considering as part of our overall efficiency programme how best to carry out our export licensing functions. As part of that, we are considering whether we can work with private sector partners to deliver some of the Export Control Organisation's services. No decisions have been taken yet and the aim is to continue to provide effective UK export controls.'

The actual sale value of the ECO itself would be small but the deals it controls are a substantial part of Britain's manufactured exports. UK arms exports are estimated to be worth at least £1bn a year and support 60,000 British jobs.

About 7,500 export licences were granted in 2003 and 200 were refused. The Export Control Organisation aims to process 70% of licence applications within 20 days, although it does not always manage this.

The huge political sensitivity of export licensing has been underlined by a series of controversies in recent years. Labour's decision to sell Hawk jets to Indonesia under the Suharto dictatorship provoked widespread protests. There was also controversy about arms sales to India at a time when the country seemed on the brink of war with Pakistan.

A spokesman for Amnesty International said: 'Decisions about who the UK sells arms to can be a matter of life or death, and whoever makes those decisions must be publicly accountable. Amnesty would have grave worries about potential loss of accountability if export licensing were privatised.'

Concern in the industry centres on the potentially serious issue of conflict of interest. Although it is thought unlikely that the ECO would be outsourced to an actual defence manufacturer, that option has not been ruled out. Even the more likely option of outsourcing to a specialist facilities company such as Capita would still be fraught with problems, the DMA said.

It also pointed to the legal and regulatory hurdles. Under the new arms export legislation which regulates arms broking, any outsourced export control office might have to register as a broker, Salzmann said.

'It might also have to register with the US State Department as a broker,' he added. 'That could give the US leverage over British export decisions.'