Committee publishes response to financial crime and development report

27 March 2012

The defence manufacturer BAE systems has now signed a Memorandum of Understanding with the Department for International Development to pay £29.5 million plus accrued interest to improve the Tanzanian education system - following an International Development Committee inquiry into Financial Crime.

The Government's response to the select committee's report - which is being published today - accepts the key recommendations made by the MPs that:

  • Future settlement agreements made by the SFO, on the basis of plea bargaining in relation to financial crimes, should be drawn much more tightly than the agreement concluded with BAE Systems.
  • DFID should be involved from an early stage in providing advice for any future reparation payments of this kind.
  • An external audit will be carried  out  to assess progress on the delivery of textbooks, teachers’ guides, syllabi and desks

The Government has also confirmed in a subsequent parliamentary response to committee member, Hugh Bayley MP, that it would seek to change the law later in this parliament to empower judges to enforce penalty payments, so as to prevent the sort of delays seen in the case between BAE and the SFO.  (See the commons exchange included at the end of this release).

The Chairman of the Committee, Malcolm Bruce MP, commented:

"Following our inquiry into Financial Crime, BAE will now finally hand over to the Tanzanians the £30 million the company agreed with the Serious Fraud Office.

We are delighted that the Government has agreed to change the law, so that in future big companies will not be able to delay making compensation payments when implicated in serious financial misconduct.

We hope this sends a signal to other multinational companies that they must respect the law and be completely transparent about international contracts."

Background Information

In Parliament on Tuesday 20 March, the Government confirmed that a memorandum of understanding has been signed (on Thursday 15 March) between the UK Department for International Development, the Government of Tanzania, the Serious Fraud Office and BAE Systems, for BAE to pay £29.5 million plus accrued interest to improve the Tanzanian education system, in order to implement the undertaking given by the company when it was convicted thirteen months ago (on 21 December 2010) of a serious accounting offence connected to the sale of an air traffic control system to Tanzania.

The money will be used to buy textbooks for all 16,000 primary schools in the country, benefiting 8.3 million children, with an emphasis placed on the key subjects of Kiswahli, English, Maths and Science.  Funds will also be used to provide all 175,000 primary school teachers with teachers' guides, syllabi and syllabi guides to help improve their teaching skills.  Up to £5 million will be spent on the purchase of desks to benefit primary school children living in nine districts where the need for investment in education is considered greatest.  The procurement process will be rigorously and independently monitored to ensure the money is used solely for the benefit of the Tanzanian people.

The Solicitor General also confirmed that the Government is considering introducing deferred prosecution agreements. Such agreements would deal with penalty payments and ensure that compensation could be paid as a result of court orders. This means it would no longer be necessary to rely on a voluntary agreement, as was the case with BAE Systems following their conviction for an accounting offence in relation to the sale of an air traffic control system to Tanzania. This would reduce the delays in making payments. Read the exchange between the Solicitor General and committee member Hugh Bayley MP (on 20th March 2012) in Commons Hansard.

Further Information

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