A CONTROVERSIAL deal personally approved by Tony Blair to send a multimillion-pound air traffic control system to Africa is being investigated for corruption, The Times can reveal.

The Serious Fraud Office and Ministry of Defence police are looking into allegations that BAE Systems paid backhanders to the Tanzanian Government for a £28 million military air traffic control system.

The Prime Minister overruled Gordon Brown and other Cabinet ministers to approve the deal, despite warnings from the World Bank that it could have bought a non-military system for a tenth of the price.

Investigators, who have been studying the deal for more than six months, made a fact-finding visit to the House of Commons last Wednesday. They were handed a dossier of evidence compiled by Norman Lamb, the Liberal Democrat MP who has played a key role questioning the deal.

The news that a Serious Fraud Office (SFO) investigation is under way risks reopening one of the most divisive rows of the last Parliament, which pitted the Chancellor and Clare Short, the former International Development Secretary, against Jack Straw, Patricia Hewitt and Geoff Hoon, who were in favour of the deal.

It also risks undermining the Prime Minister’s commitment to poverty reduction in Africa. Today David Miliband, the Environment Secretary, is in Nairobi for talks with representatives of 100 governments on finding a successor to the Kyoto Agreement. They are expected to focus on how Third World countries can afford to cut carbon emissions.

The SFO is already investigating BAE Systems in connection with claims of a £60 million “slush fund” used by BAE to pay off Saudi Arabian dignitaries.

Investigators are understood to have obtained documents that suggest that there might have been criminal activity connected with the Tanzania deal. The SFO is believed to have questioned a number of employees at BAE, but none of those interviewed has been charged.

On the basis of the evidence obtained so far, investigators want to expand the inquiry and are applying to the Treasury for additional funding to separate this investigation from the existing Saudi Arabia one. It is understood that these submissions are routine and ministers are not allowed to form a judgment of the validity of the case.

The decision by the Prime Minister to grant an export licence for the BAE system to Tanzania caused a huge row when it was made public in 2001 and the World Bank questioned why Tanzania, which has only eight military aircraft, needed a military system. The deal was financed by a £40 million loan from Barclays Bank, which caused further anger because the debt was paid from aid given to Tanzania by Britain to assist sustainable development, including primary education.

A spokesman for the World Bank said that it was “a mistake and a disappointment” and experts at the International Civil Aviation Organisation said that it was primarily a military design, which was not adequate for civilian air traffic control use.

The Department of Trade claimed that the new system could be “cost neutral” because Tanzania could make millions of pounds from charging airlines for overflying and it could improve safety and encourage tourism. Ministers also argued that the 280 British jobs at stake on the Isle of Wight would be lost if the deal did not go through.

Mr Lamb said that there was no justification for Mr Blair approving the sale of the system. “It is extraordinary that this should get the Prime Minister’s support given his stated commitment to Africa and it is a relief that we may now get to the truth of how this export ever took place.” He added that the Treasury must now give the investigation the support that the Serious Fraud Office was demanding. Ms Short confirmed that the police had visited her about six months ago and told her that they had received documents suggesting corruption concerning this contract.

“Although I never knew any details of corruption, it was always clear that that contract could not have been honestly obtained and I am delighted that the truth is coming to light,” she said.

An SFO spokesman said: “There have been reports about various aspects of BAE Systems’ contracts overseas and I think that in the generic sense we are looking at suspected corrupt acts. Our investigations into BAE and suspected corruption are sensitive and, for operational reasons, we cannot assist in providing confidential information.”

A spokeswoman for BAE Systems said: “The SFO inquiry is an ongoing process with which BAE Systems continues to co-operate fully. As this matter is an ongoing investigation we can make no further comment at this stage. However, we fully believe that BAE Systems has done nothing wrong.”

HOW THE DEAL WAS STRUCK

1990 Failure of air traffic control radars covering Dar es Salaam, and Kilimanjaro

1992 Tanzanian Government seeks tenders on a new joint military/civilian air traffic control system

NOVEMBER 1993 Bid from Siemens Plessey (now BAE Systems) accepted

JULY 1997 BAE submits a request to the MoD for preliminary advice on gaining an export licence

AUGUST 1997 Clearance given

SEPTEMBER 1997 Tanzanian officials first meet Barclays

1999 Barclays supplies a “soft” loan to Tanzania

OCTOBER 2000 Barclays granted a banking licence to open branches in Tanzania

MID 2001 The World Bank, left, asks the International Civil Aviation Organisation (ICAO) to investigate the project

SEPTEMBER 2001 The World Bank persuades Tanzania to suspend payments from Barclays to BAE pending the outcome of the investigation

OCTOBER 2001 An ICAO interim report finds that the BAE system is “not adequate and is too expensive” for civil purposes

NOVEMBER 2001 Tanzania is judged so poor that it qualifies for World Bank debt relief

DECEMBER 2001 Tony Blair and Patricia Hewitt overrule Gordon Brown and Clare Short to grant BAE a government export licence

JANUARY 2002 Tanzania defends the deal

SPRING 2002 The system is shipped to Tanzania

JUNE 2002 The final ICAO report, understood to confirm that the BAE system is too expensive for civilian purposes, is handed to the Tanzanian Government

DECEMBER 2005 President Mkapa is succeeded by his Foreign Minister, Jakaya Mrisho Kikwete, after elections

EARLY 2006 Investigators start their inquiry

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