Margaret Thatcher is said to have been so concerned that Britain would lose the al-Yamamah arms deal to the French that she had MI5 bug the Saudi prince with whom she was negotiating.

The al-Yamamah (dove of peace) deal is the most valuable export order ever won by Britain and Mrs Thatcher was the driving force behind landing it.

Since it was agreed in 1985, Britain has supplied 120 Tornado fighter jets to the Saudis and the British economy has benefited to the tune of £43 billion.

The deal has boosted diplomatic ties between the countries and supported thousands of manufacturing jobs in the UK, but allegations of bribery and corruption have refused to go away.

BAE Systems, which built the Tornados, is alleged to have operated a £60 million slush fund that paid for the entertainment of Saudi princes.

There are extravagant stories of prostitutes, wild parties in London and gifts, which all helped to grease the wheels of this enormous arms deal.

Britain had sold the Saudis military equipment in the 1960s but the Americans took over as the chief supplier in the 1970s. When the Israeli lobby in the US succeeded in blocking further sales of the F15 fighter to the Saudis in the 1980s, King Fahd went shopping.

Mrs Thatcher lobbied him personally to make sure the Tornado was chosen instead of the French Mirage.

Al-Yamamah was initially an oil-for-arms trade. BAE supplied Tornados to the Saudis and they transferred oil to Shell and BP. These companies would pay for the oil by moving money into an account held by the Bank of England. The Ministry of Defence then paid BAE from there.

After the oil price crashed in the early 1990s, the Saudis paid cash directly into the Bank of England account.

It is understood by The Times that when this account went into surplus in the late 1990s, the Saudis asked for some of the money back. However, because of the contract’s complicated set-up, the money had to be paid first to BAE and then on to whomever the Saudis identified.

This is the root of accusations of bribery against Prince Bandar bin Sultan, who is said to have received payments from BAE while he was Saudi Ambassador to the US.

All these transactions are covered by the Official Secrets Act and neither the Government or BAE will discuss them. BAE and Prince Bandar insist that bribes were never paid.

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