HC Deb 31 May 1956 vol 553 cc575-86

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Oakshott.]

10.31 p.m.

Mr. Norman Dodds (Erith and Crayford)

From the outset I have asked for a Select Committee to be set up to 'investigate thoroughly the Government surplus sales racket, and, despite the Prime Minister's statement of 16th May, I still believe that this should be done. I submit that the story behind Government surplus sales underlines the saying that truth is stranger than fiction. It is such a fantastic story that one has to be careful about disclosing some facts because most people would not believe that such things could happen in this country. The profits have been and still are, I submit, so high that it has attracted to the business masters of corruption and bribery, men who because of their greed would not rule out even worse tactics in order to get their way.

Until the Prime Minister made his statement on 16th May, there was not the slightest sign that any useful lesson had been learned from costly experience. In fact, up till then it looked as if the surplus sales racket had become part of the British way of life and that the game of skinning the taxpayer in this respect was to go merrily along.

I appreciate how difficult it is for Ministers, owing to their many duties and arduous work, to get down to the details of an intricate problem of this sort, and I also appreciate that these undesirable practices have gone on whatever the colour of the Government in power. Therefore, it is no part of my case to make any party point at all. But it is, I submit, a matter of the greatest importance to the taxpayers who expect us in this House to profit from the experiences of the past and to see that they at least get a square deal.

The eight-page Report of the Committee set up by the Prime Minister under the chairmanship of the Chancellor of the Exchequer is undoubtedly a big step forward and in the right direction. I would say that it is a remarkable Report in view of the evidence that con- siderable activity was going on and of the pulling of wool over the eyes of Ministers of several Departments. There is much evidence to this effect which is clearly revealed in many of the Answers that I and other hon. Members have received to Questions in recent months.

The five main recommendations of the Report of which the Prime Minister gave details on 16th May missed out, as I was afraid they would in view of the way that the investigations were conducted, the most important point of all. The recommendations made are in connection with getting greater efficiency and more economies in the sales of surplus goods.

I submit, too, that the need for many to do is to look into the purchasing merits of the various Government Departments which eventually result in huge stocks being declared surplus. Some of the practices being followed were very disturbing and were going ahead as though a war was in progress and it was vital to corner supplies whether or not they would ever be required. I submit that in 1956 it is time that we changed some of these practices.

I submit too, that the need for many Government Departments to carry huge stocks is out of date largely, because many manufacturers carry big stocks and many of the jobs for which these goods are required are not life and death matters anyway. So I feel that the carrying of large stocks is out of date in many respects and it is upon that aspect of this business of Government purchases and of subsequent surplus stocks that the limelight should have been directed.

Nevertheless, it is a matter of great satisfaction to me that far-reaching changes are being made. I shall watch what happens with great interest. I did not expect the Prime Minister on 16th May to say much more than he did in his statement because it should be remembered that as recently as 1st March when I asked him a Question the Prime Minister said he was quite happy about what was going on. However, following a succession of Questions, a fortnight later he seemed to be of a different opinion and announced to the House that he was asking the Chancellor of the Exchequer to look into the matter.

Several attempts have been made by both Tory and Labour Members to halt the waste, but to little account. It seems that the ganging-up of Ministers and civil servants to whitewash events has generally proved too much for the reformers. The game has gone on unhindered for far too long. One of the latest attempts to do something about it was by my hon. Friend the Member for Cardiff, West (Mr. G. Thomas). At the beginning of this year he sent a letter to a newspaper which received a good deal of publicity, and it seemed to shake the Ministry of Supply, because on 23rd January the Ministry sent out a Press statement. If the Minister of Supply had only known the facts he would not, I think, have approved of the sending out of that statement. No doubt it served a purpose for a time, but if the Minister had known the evil background of the Government surplus racket he would not have given his approval to the issuing of the statement.

I want to thank the Parliamentary Secretary for sending me a copy of the Press statement. It is a most interesting document. I have not time to deal with the whole of it. I should have liked to have had hours for this debate, not just half an hour. In replying to my hon. Friend the Member for Cardiff, West, the document makes reference to the firm of Ernest Reid and Company and goes on to say: No evidence of irregularities was disclosed. It also says: The whole case was referred to the Director of Public Prosecutions who advised that the evidence available would not support a charge against any of he people concerned. I should like a Select Committee to look into this document, because that firm was a most respectable firm until racketeer No. 1 took it over. Then, of course, it ceased to be just that. It may also be of interest that one of the chief officials of the Ministry of Supply Disposals Board happened to be a director of one of the firms connected with this racketeer No. 1. That may explain a lot of what happened about the sale of the vehicles to Ernest Reid and Company.

I would submit, too, that that Select Committee would have been interested in whether the police were anxious to get prosecutions in this case. Because, as I say, truth is stranger than fiction, I felt it was essential to make use of a document known as Document No. 36, the information in which, I am sure, will indicate some of the reasons for my talking about the evil background to the Government surplus racket. This document states: I would point out at this juncture that an enquiry is being conducted by this Department into the fraudulent and criminal activities of Mr. A. in connection with the purchase of ex-Government motor vehicles, and with him are involved the following shady individuals. …Mr. A. is known to have amassed a huge fortune during the past few years, is the registered owner of four aircraft. and employs his own pilots. The Press statement mentions at the end that there have been some abusive attacks on individuals in the Ministry of Supply, and it goes on to say that he is a more or less discredited individual. I have a document here to indicate that the individual who served three years in prison was "framed," and I have also a copy of a written confession to that effect.

I make that point—I cannot develop it—because it has been the policy of one of the largest racketeers to make it very difficult for some of his colleagues to continue in business. In fact, he got rid of them, and the man who is discredited in this document happens to have been discredited in that way. I bring forward in support of my case another extract: The enquiries made …in respect to the sending of the drugs to Mr. L. proved negative "— This was another attempt at framing—

But we have been informed on good authority that Mr. A. was behind the villainy, and was instrumental in getting the drugs to Mr. L. The purpose was then to put him away and get him into trouble.

Professor B informed us that although he was unable to be definite, he was of the opinion that the drugs had come from abroad. Our informants tell us that these drugs were dropped by parachute from one of Mr. A's aircraft in a lonely spot on Romney Marshes, where they were collected, brought to London, and sent by post from Leicester Square Post Office to Mr. L. Although it is most difficult to prove such a story, the source from whence it came is most reliable, and I have no reason to doubt its veracity. The person responsible for this document was a highly placed officer at Scotland Yard. The other person who supported it is another highly placed officer at Scotland Yard. Both of those officers left. Of course reasons have been given, but a Select Committee might find the real reasons. One thing it would find would be that, having written a document of this kind, the police officer who wrote it then became security officer for racketeer No. 1, and has served since then the useful purpose of seeing that racketeer No. 1 has not been put into prison long ago. The copy from which I am quoting was mentioned on the floor of the House, and the Home Secretary agreed that it is a copy of an authentic document.

Not having as much time as I should like, I want to come to a more up-to-date picture. By the end of June this year there will have been held under the auspices of the Ministry of Supply twenty-two Government surplus auction sales in various parts of the country. It seems to me that many of them flourish because of the belief that there is no need for Government buyers to worry about purchasing too much since, by this method, stocks can be got rid of at any time by such public auctions. There is plenty of evidence of articles being sold for no other reason than to make way for new stocks of the same articles. There is plenty of evidence also of the ordering of stocks from manufacturers of similar goods by other Government Departments as these sales take place.

Of course the Prime Minister showed by his answers to questions put to him that he, too, did not know much about the surplus goods racket, because the right hon. Gentleman said in his statement that he felt that the system was working properly. Even the Chancellor of the Exchequer in his report says the same. I would recommend to the Parliamentary Secretary and to the other Ministers the query raised by the hon. Gentleman the Member for Farnham (Mr. Nicholson) when, on 16th May, he said to the Prime Minister:

Is my right hon. Friend aware that public anxiety arises from what are alleged to be the large profits made by people who bought surplus stocks at auction, and would he consider changing the system so as not always to dispose of stocks by auction, but by employing agents or some Government Department to find markets."—[OFFICIAL REPORT, 16th May, 1956; Vol. 552. c. 2008.] The Prime Minister stated that the Chancellor's report said that it was felt that to change the system drastically would cost too much money. If the Chancellor really knew how much money had been lost on these sales he might alter his opinion.

I have many examples, but I take next one which the Prime Minister selected in reply to a Question on 1st March, when he was asked if he would have an investigation into the business of the substantial stocks being sold at give-away prices. In a supplementary reply he said: A great many Questions have been asked about paint. I found, on inquiry, that stores of paint ordered in 1953 were largely for our troops fighting in Korea: it was bituminous paint to protect tents against weather conditions during the fighting in Korea. Happily that fighting is now over. There are no other uses for that kind of paint anywhere else, except where there are hostilities. That being so, it is inevitable that some of the paint should be sold."—[OFFICIAL REPORT, 1st March, 1956; Vol. 549, c. 1372.] That was in reply to a Question about the huge quantities of paint being sold at Woolwich and Melton Mowbray, to a total of nearly 250,000 gallons. That was the information given to the Prime Minister to pull the wool over his eyes. The facts were that the only paint he mentioned totalled less than 5,000 gallons out of 250,000 gallons, and the Prime Minister gave the House to understand that that was the sort of paint being sold, whereas it was mostly paint which is the "bread and butter" paint being used in many other Government Departments.

Again, there was the answer given by the War Office, that since 1955 they have taken into stock 1,100,000 gallons of paint. A letter from the War Office says: Except for special requirements the paint is ordered twice a year in bulk by types and the estimated requirement is based on average isues to users over the previous three years... That seems to be a hit-and-miss business and, as a consequence, the War Office is now ordering far too much paint. That is one of the reasons why some is sold to make way for other stocks being brought in. A Select Committee looking into that matter would find a remarkable state of affairs. Since 1st January, 1955, no less than 1,100,000 gallons of paint have been ordered.

I could quote from the newspapers. The News Chronicle, on 17th February, said:

One manufacturer said: 'We find over a period that Service specifications for paint alter. It seems some-one high up must be changing his mind quite a bit.' I suggest that instead of placing huge orders with one paint manufacturer, much of the paint requirements could be taken from stock. That would prevent any cornering of the market, and lower stocks could he kept, with consequent smaller losses. Since 1st January, 1954, the War Office disposed of well over 300,000 gallons of surplus paint, and during this period eight other Government Departments purchased 1,699,000 gallons.

Only one Government Department has bought any paint, and that was the Ministry of Works, who bought it after the row in the House started. The Post Office said that none of the paint was any good to them because it was a lower-grade ammunition paint. Is not that a case of pulling the wool over the Minister's eyes? We know that that paint was less than 40,000 gallons out of a total of 220.000 gallons. The Minister of Works bought 1,500 gallons of paint, which, he said, was the wrong colour. If he had looked at the catalogue he would not have had the wool pulled over his eyes.

Over 50,000 tyres, 23,000 inner tubes and 350 tons of tyre and tube scrap have been sold by the Ministry of Supply since 1st January, 1955.

The Minister of Supply says that most of them were too old to he used by the Services but that he was right to sell them to dealers. When told that it was unfair to put them on the roads, he answered that they were not, of course, going on the roads—they could be sold to farmers for use on tractors. What a stupid answer. It means that in selling surplus stores, Government Departments are either selling stuff which should have been sold earlier or stuff which is of no use to Government Departments and therefore should not be allowed to be used on the roads.

A Select Committee might also get an answer to the question of when hammers, pick shafts and the like become obsolete or why the Minister believes that horseshoe nails are obsolete. The only man with experience of selling horseshoe nails for many years says that there have been no obsolete types for the last 50 years.

The Minister has mentioned with pride that the Parliamentary Secretary went to a sale at Woolwich and saw nothing wrong. I say with respect that the hon. Gentleman was an innocent at large. There is substantial evidence of these things. My hon. Friend the Member for Faversham (Mr. P. Wells) has first-class evidence of rackets and how, after a sale, people go into a cafÉ where there is a split-up and money is shared out. Surplus sales have been a thorough racket which has gone on for time almost unlimited. I wish that I had more time, but I have the evidence to support my case and there is much more that I could say. I am still hoping that a Select Committee will look into the matter and if not I do hope it will be possible to alter this state of affairs in consequence of the Prime Minister's statement.

10.52 p.m.

The Parliamentary Secretary to the Ministry of Supply (Mr. F. J. Erroll)

The House is familiar with the perseverance of the hon. Member for Erith and Crayford (Mr. Dodds) in asking questions about the disposal of surplus stores. I know that it is very difficult for him, with so much information at his disposal, to confine his remarks to the short time available on the Adjournment, but in view of the sweeping and, in many cases, quite untrue allegations the hon. Member has made, he might have allowed me a little more than eight minutes in which to reply to some of his tendentious accusations.

The hon. Member has referred to the procedure for disposal of surplus stores, carefully built up over the last eleven years by the right hon. Member for Vauxhall (Mr. G. R. Strauss) and his successors, as a "surplus racket." I assure him that it is certainly not a racket, except in his own jaundiced eyes.

Mrs. E. M. Braddock (Liverpool, Exchange)

It is.

Mr. Erroll

It is time that the hon. Member for Erith and Crayford learned that other people are capable of investigating matters as well as him. We who have taken a great deal of trouble in the various Government Departments

concerned to look into all these matters have arrived, quite correctly, at conclusions very different from his.

As to the vague charges of corruption by the curious Mr. A. and some transactions dealing with drugs parachuted into the country, those have nothing whatsoever to do with surplus stores.

Mrs. Braddock

They have.

Mr. Erroll

If they have, it is the duty of hon. Members opposite to make the information known, either to the Department concerned in the first place or to the police, instead of always telling the Press and then blaming us afterwards for putting out a Press statement to contradict their wild accusations.

Mr. Dodds


Mr. Erroll

I should like to have a few minutes to reply to the hon. Member's sweeping accusations. He had twenty-two minutes to make his accusations and he must surely be prepared to take a little in return. If the hon. Member has evidence of the kind he has attempted to describe to the House, it is his duty as an hon. Member to make it available to the Government Departments concerned. In answer to a number of Questions, which I have carefully studied in anticipation of this debate, there has been a request by different Ministers for this sort of information to be made available to them, but instead it is made available to Reynolds News and other recipients who fill the hon. Member for Erith and Crayford with a sense of grandiosity which I am afraid has spoiled some of the good points he has raised from time to time on this subject.

In the five minutes which remain I should like to answer some of the other points which the hon. Member made and which have been raised by other hon. Members in the last few weeks. I wish, first, to make plain the responsibility of the Ministry of Supply in this matter of stores disposal. The statement which the Prime Minister has already circulated touches upon many aspects of the matter and sets out general conclusions which have emerged from the inquiry he called for in which the Service Departments, the Ministry of Supply and the Treasury participated. I suggest that any fair minded hon. Member who reads the statement which was published will agree that there is no need whatever for the Select Committee which the hon. Member has been calling for this evening.

The Ministry of Supply's responsibility on the disposals side is limited to the disposal of surplus stores for the War Office and to the disposal of certain other stores, such as tyres, machine tools and vehicles for a number of Departments. We do sell a few Air Ministry and Admiralty stores, but these two Departments dispose of the bulk of their surpluses under their own arrangements. The Ministry of Supply has a purely executive responsibility to sell those stores which the disposing Department has certified as surplus to requirements. The Ministry of Supply also buys stores for the Service Departments, but only in accordance with stated requirements for which the Service Departments have the normal financial authority. I can assure the hon. Member that the Service Departments take care that they do not order stores in excess of reasonable forecastable requirements or which are currently being declared as surplus.

Nevertheless, Departments must always guard against the risks of over-procurement and so, as the Prime Minister stated, the Ministry of Defence is co-ordinating a general examination by the Service Departments, the Ministry of Supply and the Treasury of their procurement policy and procedure. The hon. Member said it was out of date to carry large stocks. I agree, and that is why in many cases we are disposing of them. They are wartime surpluses which have been held as what we might call "in case stores". Many of the examples which the hon. Member quoted at the end of his remarks are stores which were wartime stocks for which there is no foreseeable purpose, and surely it is the right policy to dispose of those stocks. The hon. Member made serious allegations against our methods of disposal, and particularly our auction sales. He referred to the possibility of alternative methods. Perhaps he does not realise that currently two-thirds of the surplus stores are sold by tender and not by auction—

Mr. Dodds


Mr. Erroll

—and we adopt the tender method where that is considered to be better. We decide that in the light of experience. Heavy specialised machinery,

large quantities of textiles and similar lots are sold by tender. Sales by auction on the other hand are much more appropriate where we desire to interest as wide a range of potential buyers as possible and when the stores are of a miscellaneous type, and in any condition from shop soiled to beyond economic repair. One further advantage of selling by auction is that freelance buyers can find new uses for old stores, which results in higher bidding than would be the case if the same goods were offered only by tender. Auction sales have the further advantage of speedy disposal and quick collection of the money realised. This is especially important at a period like the present when surpluses are coming forward regularly and must be disposed of promptly if Army depots are to be cleared.

I wish particularly to refer to the so called buyers' rings, because we do take steps, which I do not propose to publicise, to counter the danger to buyers from dealers' rings. It is also open to anyone to submit a bid in writing to the auctioneer and thus counter any form of "ganging up" and splitting the "swag" in cafes, as the hon. Member alleged. I might add that under the Auctions (Bidding Agreements) Act, 1927, it is an offence to form rings at auction sales; and since the hon. Member seems to know so much about these allegedly shady transactions, I would remind him once again that if he has any evidence, it is his duty to disclose it to the proper authorities. I very much hope that he will do so.

On the other point regarding the disposals of paint, his case is considerably exaggerated and the Prime Minister's statements were not incorrect as he alleged. The bituminous paint for Korea, which he quoted, the Prime Minister mentioned by way of illustration, and the hon. Member has sought to puff up a supplementary answer intended to be helpful to him into some extraordinary further allegation of inefficiency on the part of the Government.

Mr. Dodds

It was 5,000 gallons out of a quarter-of-a-million.

Mr. Erroll

He also referred to 40,000 gallons of ammunition paint. The point he fails to realise is that colour also enters into the different types of paint where they can be usefully purchased by other Departments.

The Question having been proposed after Ten o'clock, and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order. Adjourned at one minute past Eleven o'clock.