Human rights and Arms campaigners have welcomed a hard hitting report from an All-Party Parliamentary Inquiry published today which recommends widespread changes to UK Export Finance, the government department which provides financial support to British exporters.

The report’s recommendations to the government include conducting an audit into the debts owed to UK Export Finance, making human rights and environmental standards apply to all projects and transactions, the imposition of penalties on companies that violate standards and a consultation on a prohibitions list for arms.

The inquiry was co-chaired by Lisa Nandy MP (Labour), Harriet Baldwin MP (Conservative), and Martin Horwood MP (Liberal Democrat).

Unlike some of its competitors UK Export Finance does not conduct any human rights or environmental screening of loans of less than £10 million, or those payable over two years or less. In 2011/12, this included loans for: a methanol plant in Azerbaijan, a Chinese nuclear power plant, a natural gas delivery system in Nigeria and two coal mines in Russia.

The inquiry reveals that UK Export Finance, in its eagerness to help secure new contracts for British companies overseas, has failed to vet all applications for their human rights impacts, has not established a grievance procedure and has not published impact assessments relating to projects that it supports.

Peter Frankental, Economic Relations Programme Director of Amnesty International said:

“We welcome the report’s findings. The Government should take heed and ensure UK Export Finance operates in a way that is consistent with the international human rights standards that UK is committed to. For too long this publicly-funded body has been allowed to operate beneath the radar of government scrutiny for its human rights impacts. This reports holds out the prospect that it will be held properly accountable.”

Around £2.3 billion of “Third World Debt” is owed to UK Export Finance. Figures released at the start of November show, for example, that three-quarters of Indonesia’s debt comes from loans to the former authoritarian government of President Suharto to buy weapons, some of which were used for repressive purposes. A quarter of Egypt’s debt comes from loans for military equipment to the past authoritarian regimes of General Mubarak and President Sadat.

The inquiry recommends holding an audit into all the debts owed, something the Norwegian government has recently begun doing.

Nick Dearden, Director of Jubilee Debt Campaign, said:

“We are delighted that parliamentarians have called loudly for fundamental reform of the UK’s export credit department. The first step in that reform is to audit and wipe out the odious debts accumulated through years of selling weapons to dictatorial regimes. Step two is a new set of human rights standards to prevent such appalling decisions being taken again. We hope the Minister will bring forward legislation to enact these recommendations at the earliest opportunity.”

UK Export Finance subsidises the Arms by lending money for the purchase of weapons. For instance, in the 2000s UK Export Finance backed £750 million of loans to Saudi Arabia as part of the Al Yamamah deal, which later had a Serious Fraud Office investigation controversially cancelled by Tony Blair. The parliamentary inquiry recommends consulting on a prohibitions list for arms.

Ann Feltham, from Campaign Against the Arms, said:

“Historically, the arms companies have benefited more than any others from export credit guarantees, with arms giant BAE Systems topping the list of companies assisted. It is wrong that we are selling arms to repressive regimes like Saudi Arabia and the UAE and it is wrong that UK taxpayers are underwriting the costs. There should be no export credit for any military deals.”