Patten 'fury' at Malaysia dam deal: Minister 'thought Pergau not proper use of aid'

CHRIS Patten, Governor of Hong Kong and one of John Major's closest political allies, strongly objected to the pounds 234m aid for the controversial Pergau dam in Malaysia and was 'furious' about the project, Hong Kong sources close to Mr Patten told The Independent on Sunday yesterday.

Pergau, regarded by senior officials as uneconomic but believed to have been pushed through at the insistence of Margaret Thatcher because it was linked to a pounds 1.3bn British arms deal, was first raised when Mr Patten was Overseas Development Minister, responsible for the aid budget, in 1988.

'He thought it wasn't a good aid project; he said it wasn't a proper use of aid,' says a senior official.

News of Mr Patten's misgivings, and the force of his feeling, is deeply damaging to the Government which is desperately trying to prevent Pergau from becoming another arms-for-Iraq type of affair. If he were to give evidence about it in public - as may yet happen - the damage to the Government, and to the credibility of Mr Major, would be devastating.

Mr Patten's opposition is in a Foreign Office minute which would have been available to Mr Major when he ratified the earlier decision of his predecessor, Mrs Thatcher. That minute is thought to be among six files at the Foreign Office in London, denied to the National Audit Office, the public spending watchdog, that revealed how Mr Major had over-ruled his own officials on Pergau.

The NAO report - it condemns the project as unnecessary, unenvironmental and a waste of taxpayers' money - makes no mention of the Prime Minister ignoring the advice of ministers.

Marked 'Not for the NAO', the files are also believed to contain the objections of Sir Geoffrey Howe, former Foreign Secretary and Mr Patten's boss in 1988, and Baroness Chalker, the current Overseas Development Minister.

Mr Patten, stressed a Hong Kong source, was not alone. Apart from Sir Geoffrey and Lady Chalker, he was also reflecting the views of all his advisers and officials. In fact, 'the whole of the ODA objected to the dam'. Within Whitehall, said the source, Pergau became a cause celebre with only the MoD, the Security Services and Downing Street, in the shape of Mrs Thatcher, then Mr Major, supporting it.

Already two influential cross-party Commons select committees are examining Pergau. The Public Accounts Committee heard the deal described by Sir Tim Lankester, the former Permanent Secretary at the Overseas Development Administration and one of Whitehall's most senior mandarins, as 'an abuse' of the aid system.

After a welter of evidence linking Pergau to the sale of arms to Malaysia - including the building of a secret special forces base, and the involvement of Stephan Kock, a shadowy intelligence adviser and banker who played a key role in the Supergun affair - the Foreign Affairs Committee launched its own inquiry. Unlike the Public Accounts Committee, it can call ministers. Douglas Hurd, the Foreign Secretary, and Baroness Chalker, have already been told they will be required to attend.

If Mr Patten were added to the list, the chances of severe embarrassment for Mr Major would be great. Were Mr Patten to confirm in public that his objection stemmed from linkage to arms - something that may be illegal under the 1980 Overseas and Development Co-operation Act - and that he was appalled to discover that the amount of aid to be given was based on a percentage of weapon sales, as has been alleged, the damage to Mr Major's credibility could be devastating.

Already, there are unnerving parallels with the Scott arms-for-Iraq inquiry: officials and ministers registering their concerns; figures from the intelligence community giving their approval; and public immunity certificates being used to withhold documents from scrutiny.

Part of the reason for government sensitivity about those documents, which were denied to the defence in a fraud case involving the Malaysian banker Lorrain Osman, is that they show British knowledge of appalling levels of corruption by Malaysian ministers. Many of them are signed by Sir Geoffrey Howe and Sir David Gillmore, the current most senior civil servant at the Foreign Office.

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