HC Deb 21 December 1966 vol 738 cc1461-74

2.12 p.m.

Mr. William Hamilton (Fife, West)

Exactly three weeks ago today Board of Trade inspectors published the Report on what I choose to call the Cadco affair. The Press had access to that Report 48 hours before I had, and I protested about this treatment of back-bench Members and got the brush-off from the Government for my pains. I make this comment at the outset, that in cases in which a Member of Parliament can be easily identified as being intimately involved, as I was in this instance, it should surely be within the discretion of a Government Department to treat that Member at least not worse than the Press, and I hope that some action will be taken to ensure that that is done in the future.

May I next address my remarks to the Report itself? Those who have read it will agree that it is at one and the same time a most squalid and fascinating piece of reading, certainly that I have read for a very long time. From the first page to the last it is a concoction of dishonesty, deceit, crime, gullibility and incompetence the like of which has probably never been known in Scotland before.

The present Government have taken certain action to ensure that such a thing will not occur again. The steps taken were outlined by the Secretary of State in answer to a Written Question of mine on 30th November, the day the Report was published. I will not go into the details of that Answer, which is there for everybody to read, but I am not sure whether it fully implements the recommendations found in paragraph 435 of the Report, namely, that the financial standing of those behind a project like this, as well as the viability of the project itself, should be investigated before any contractual commitments are made involving substantial sums of public money, and that one inquiry should be carried out on behalf of all the interested parties on these particular matters.

Be that as it may, and however effective the proposed steps are in preventing any more Cadcos, there are still a host of questions which remain unanswered and which are causing a good deal of public disquiet not only in Fife and in Scotland, but in the whole of Britain, as my postbag indicates.

The first question with which I wish to concern myself relates to administrative and technical incompetence and/or negligence and/or lack of judgment. The Report does not cast any doubt on the integrity of the officials of the Development Corporation at Glenrothes. No evidence was found of any dishonesty or impropriety in that quarters. But there is a great deal of difference between integrity and incompetence, and between integrity and naïvety or lack of judgment or gullibility.

Like others, I may be accused of being wise after the event. Nevertheless, one cannot help being amazed at the credulity at those who, for instance, attended the Edinburgh Press conference on 28th May, 1963. I ask hon. Members to note the date. It was May, 1963—not the present Government then in power. A Conservative Administration were in power. I say that because we have been subjected to some criticism on the ground that the present Government were responsible. The previous Conservative Administration were responsible for this—and I want to emphasise that point because I shall return to it later.

The Press hand-out at the conference was prepared by a Mr. David Donald, then information officer of the Scottish Council, and it is clear that no attempt was made to ascertain the accuracy of the handout. The most cursory investigation would have revealed it for what it was—a tissue of lies designed to deceive everybody concerned. I will not go into the details. They are all in the Report. But if the Development Corporation at Glenrothes had made any kind of inquiries into the financial standing of the sponsors or the viability of the project by the spring of 1963, they would have discovered that this company, called Royal Victoria Sausages Ltd., had already lost irretrievably over £250,000. In fact, I have seen a figure of £600,000 mentioned in other information that I have seen.

It was subsequent to this that the Development Corporation used an American company in Glenrothes, Beckman Instruments Ltd., to seek to obtain a bankers' reference on the Cadco Co.—the multiplicity of companies called Cadco. Two replies were eventually received to the inquiries of Beckman Instruments Ltd., dated 10th July and 18th July, 1963. But meanwhile, before the Development Corporation had received those references, they had allowed building to begin, and when they were received they were anything but convincing, as the Report says in paragraph 183: Surprisingly, neither the executive staff nor any member of the Board of the Development Corporation saw in the replies which the Beckman Instruments inquiry ultimately produced, anything to put them on enquiry. Far from questioning the financial standing of the companies, building went on at full speed by the Cadco building company—£1 million worth of building in the first stage of the project, and this by a company which had never engaged in any building operations whatever. Paragraph 167 of the Report makes that quite clear. All the technical staff of this building company—indeed, the entire labour force—was recruited locally, I believe some of it from the Development Corporation itself. Despite this, as the Report states, in paragraph 168: … it does not appear to have occurred to any of the officials"— officials of the Development Corporation— to question the competence of Roe, Loraine, Sanders, or Black"— who were responsible for this venture— to control and supervise building operations of such substantial size The story of the building of the piggeries can only be described as a hair-raising fiasco of monumental incompetence. The story is told in detail in paragraphs 161–166 of the Report and it is clear that no technical advice was taken on the design of the piggeries at Glenrothes, although the Pig Industry Development Authority had offered advice. The Authority's advice was rejected. I wonder by whom and when? Did the Development Corporation know that that advice had been rejected? If so, did it know by whom and when it had been rejected?

The result was that the piggeries, costing £277,000, were designed by people who did not know what they were doing. An example is given in the Report. The effluent from 20,000 pigs, which was the planned project, was equivalent to the effluent emanating from a town of 50,000 people. It was proposed by these people who did not know what they were doing that this quantity of effluent should be catered for by the installation of one 9-inch pipe, with an inadequate fall, leading to a sewage tank which was capable of taking only 24 hours' flow of effluent. Imagine anyone thinking that a 9-inch pipe could deal with the quantity of effluent emanating from a town three times the size of Glenrothes itself. There was incompetence at technical and administrative level and there can be no doubt that that applied to the Development Corporation and beyond.

Has any disciplinary action been taken? If not, is any contemplated? It is not sufficient to say that this will not happen again. That will not do. I urge the Minister to be more forthcoming, particularly about the publication of the details of the investigation which he conducted at Glenrothes. As the representative of the people concerned, I have a right to know just where the fault lay in this matter.

I turn to the question of the Scottish Development Department and the Board of Trade. At that time, the responsible Ministers were the right hon. Member for Argyll (Mr. Noble), who was the then Secretary of State for Scotland, and the present Leader of the Opposition, who was the then President of the Board of Trade. I sent a note to the right hon. Member for Argyll saying that I would be referring to him and he has apologised for being unable to be here this afternoon. Never at any stage did those Ministers raise any objection or express any doubts about what the Development Corporation was doing or about the way it was doing it.

It seems that both of those Departments allowed the Development Corporation to get into deeper and deeper water, without at any time questioning either the viability of the project or the financial soundness of its sponsors. The actions of Conservative Ministers at that time were in complete breach of the obligations laid on them by Section 12(7) of the New Towns Act, 1946, which states: It shall be a condition of the making of advances to a development corporation under this section that the proposals for development submitted to the Minister under section 3 of this Act shall be approved by the Minister with the concurrence of the Treasury as being likely to secure for the corporation a return which is reasonable, having regard to all the circumstances, when compared with the cost of carrying out those proposals". I assume that those Ministers thought that this investigation would be done by B.O.T.A.C., but there was no reason for that assumption. No application had been made for a loan and even when a belated application for grant was made, and was rejected, the Scottish Development Department ignored the red light that was clearly flashed by that rejection.

Was the Scottish Development Department a quiescent, approving spectator of what was happening, or was it an unwilling agent of the Development Corporation, which was desperately anxious to get 2,000 new jobs in the pipeline before the pending General Election? Did it knowingly take unwarranted risks with public money, or was it completely ignorant of what was going on? Should the charge be that of ignorance, indifference, incompetence, or folly? We have a right to know the truth. The political heads at the Scottish Office, the Board of Trade and the Treasury were Conservative Ministers at that time and they must bear a heavy responsibility for what happened.

I come to what I believe is a much more disturbing aspect of this matter. It concerns the crimes perpetrated in this evil affair. The Report is replete with examples of criminal activities, of which I will give some instances. Bosley & Co., the solicitors in Sussex, were responsible for putting into local newspapers what are described in the Report as fraudulent advertisements, in infringement of certain legislation, designed to attract capital to Royal Victoria Sausages.

The Report goes on to say that this was attributable to … the ignorance and inexperience of Miss Christy … who, I understand, was a junior clerk in that solicitor's office. On that account, and because it happened five years ago—in addition to which certain individuals have got their money back—the Report recommends no action. But ignorance on the part of an employee seems to be a flimsy reason for not taking action against the firm, which must surely assume full responsibility for whatever is done in its name.

No criminal charges are preferred and apparently no disciplinary action has been taken by the relevant professional organi- sation—the Law Society or whatever other body may be concerned; and the Report recommends no action—against Mr. Braidwood, who was then an assistant accountant with Cadco Developments—on the grounds that he was young and inexperienced—or against any of the other subordinate staff who were involved in currency irregularities. I am inclined to agree that action should not be taken against the subordinate staff, some of whom, no doubt honest people, were not aware that they were being led and were leading people up the garden path.

The real villains of the piece, most of whom were at the root of this business, are those against whom action should be taken, although it is said that they are out of reach. Loraine was a treacherous, lecherous character of the worst possible type. Some of these people are within reach and I will come to one of them who is not out of the country. Indeed, he is still in Scotland.

I must preface my further remarks by referring to Parliamentary privilege, something which, by its very nature, must be used sparingly and with a full sense of responsibility by the hon. Member using it. No hon. Member would dare use it either frivolously or vindictively. It is in that spirit that I refer to the part played by Mr. McKee, the group accountant of the Cadco companies. Several specific charges are made against this man in the Report, and I will enumerate them.

First, McKee made a number of false statements to the Royal Bank of Scotland, knowing them to be false, to get an overdraft, which eventually amounted to £460,000. Paragraph 412 recommends that prosecution of McKee, Loraine and Roe should be contemplated. Secondly, McKee was responsible for putting before B.O.T.A.C. documents and accounts, an action which the Report refers to as being … perhaps a most serious aspect of this whole matter. Paragraph 422 recommends that his prosecution should be contemplated.

Thirdly, McKee was involved in the misappropriation of large sums, and the diversion of £398,325 from the Cadco Building Company to other sources, and, again, paragraph 426 of the Report recommends consideration of his prosecution. Fourthly, McKee was knowingly engaged in the infringement of currency regulations, and paragraph 432 gives some details of how thousands of pounds were smuggled out of the country in £10 or £5 notes, secreted between the leaves of a film script.

Altogether, this amounts to a massive indictment of one who is not a subordinate, but who knew full well just what he was doing. In view of that, I find it completely inexplicable that the Lord Advocate has decided that criminal proceedings in Scotland are not warranted, and that the Director of Public Prosecutions has also decided that there is no action he can take at present.

On 6th December I wrote to the Lord Advocate: I feel I must write to you to express my deep disquiet concerning your decision not to take criminal proceedings following the findings of the Board of Trade inquiry into the Cadco affair at Glenrothes. In view of the comments in paragraphs 408, 411, 421, 422, 425, 427–9 and 432, I am quite unable to understand the reasons for your inaction. I may say my views on this matter arc shared by large sections of opinion in Fife and, I believe, in Scotland as a whole. I must give notice that I intend to pursue this problem much further. If it is not satisfactorily resolved, I am afraid the confidence of many people in the administration of justice may be seriously undermined. On 8th December, I received a reply from the Lord Advocate, and I have his permission to quote it. He says: I have carefully considered what you say, and I have looked again, in particular, at the paragraphs in the report to which you have referred me. It is the invariable practice not to make known the grounds upon which a decision is taken to prosecute or not to prosecute any individual, and you will appreciate that there are good reasons for this. I may say, however, that in a case of fraud I have to consider the whole evidence available, and to decide inter alia whether there is satisfactory evidence of false representations having been made in Scotland to any party with the effect of inducing that party to take action to his loss. The Cadco case, as you can well imagine, has occasioned me much anxiety, and it was only after a long and exhaustive investigation, and after considering the whole evidence obtained as a result, together with all the circumstances, that I reached my conclusion. But for my decision not to proceed against any of the persons involved, I could not, of course, have agreed to the publication of the Report in view of the fact that it contained statements prejudicial to these persons. I need hardly add that I should make no complaint at all against your pursuing a matter of this gravity, and if I can be of any assistance to you, please do not hesitate to let me know. As a result, Mr. McKee, Mr. Sanders, Mr. Roe and Mr. Loraine and others have got away with it. For one reason or another they all escape punishment for what they have done. The Scottish Development Department, the Glenrothes Development Corporation and the Board of Trade have come out of this shambles unscathed. The only people punished are the ruined contractors, and the workers who lost wages and jobs and who are still awaiting wages they will probably never get. Surely this is the massacre of the innocents.

I am far from satisfied with the situation as it now stands. It seems to me that the logical consequences of the revelations in the Report have not followed. I do not believe that the whole truth has yet been told, nor do large numbers of people in Scotland and elsewhere. When the Parliamentary Commissioner Bill is on the Statute Book, I intend to refer this case to the Parliamentary Commissioner in the hope that he may unearth information within the Scottish Office, the Board of Trade, the Treasury, and the offices of the D.P.P. and the Lord Advocate, which is denied to me.

Meanwhile, I would recommend to my hon. Friend that a film be made of the whole sordid story. Never has it been truer than in the case of Cadco that truth is stranger than fiction. If the copyright of such a film were retained by Her Majesty's Government, a handsome profit might yet be made out of this gruesome nightmare.

2.35 p.m.

Sir John Gilmour (Fife, East)

The hon. Member for Fife, West (Mr. W. Hamilton) said that some of the blame for this sorry affair rested on two of my right hon. Friends. If that were the fact, it would be in the Report. It is not in the Report.

My chief interest is in the fate of the sub-contractors to the Cadco Building Company, many of whom live in my constituency, but I would like to ask the Under-Secretary a question about the piggeries, because it seems quite extraordinary that the plans should have been passed and the piggeries built with a drainage system that was completely ineffective and unworkable. I am told, though I do not know whether it is right, that the pig men's houses that were built, and which are still there, could not be occupied because they had no drainage system. That seems extraordinary, because when I went on the N.F.U. summer outing in 1962—a year before the company folded up—it was known that there was a real drainage problem.

I feel very strongly that the Glenrothes Development Corporation was in breach of paragraph 30 of the Scottish Building Regulations, which particularly lays down that the principal contractor shall not be entitled to obtain another certificate from the architect for a further instalment unless and until he has satisfied the architect, by the production of vouchers or other evidence, that he has settled with the sub-contractors. That does not seem to have been done by the Corporation or, if it was done, it was only partly done.

I feel this all the more because, since the time of this affair, we have moved in Scotland to conditions known as the R.I.B.A. conditions, under which it is possible for the architect to certify that the bill should be paid direct to the subcontractor if he is not satisfied that the main contractor is passing on the money. I therefore feel that in this case that the Corporation has let down those contractors.

Another aspect is the lack of liaison between the Board of Trade and the Development Corporation—and possibly the Scottish Development Department as well. The letter to the Board of Trade of 5th June, which is quoted in the Report said that the company would repay £250,000 by 30th June, and £200,000 by 30th September, from the progress payments that were to be received from the Corporation. In reply to a Written Question yesterday, the Secretary of State outlined the dates of payment which showed that the total payments for the project at Glenrothes were about £766,000. In June, when that letter was written, about £700,000 had already been paid over, so there was no possibility whatsoever of this £450,000 being provided. If there had been liaison between the Board of Trade, the Glen- rothes Corporation and the Scottish Development Department the matter would have come to a head not at the end of September, but back in June, and some money would have been saved.

It is also difficult to work out from the Report exactly on what date it was known to the Glenrothes Development Corporation that this project was going entirely wrong, but the Report states that a Mr. Clayton went to the Corporation towards the end of August and admitted that the company was in very great difficulties.

The Question answered yesterday shows that £17,500 was paid out on 28th August by the Corporation to the Cadco Building Company. Was this payment made before or after the Development Corporation knew that the Cadco Building Company was insolvent? Here again, we have this £17,500, a big proportion of which could have been paid to the sub-contractors but which was taken up by the Cadco Building Company.

Mr. Speaker

Order. I hesitate to interrupt the hon. Member but this debate has to finish at about 2.50 p.m., and the Minister has yet to reply.

Sir J. Gilmour

I have almost finished, Mr. Speaker.

Was it after this date in August when the Development Corporation knew that the Cadco Building Company was insolvent? If so, this money should not have been paid to the Cadco Company; it should have been retained, to pay the sub-contractors.

2.41 p.m.

The Under-Secretary of State for Scotland (Dr. J. Dickson Mabon)

Many issues have been raised in this debate and I shall try to deal as swiftly as I can with the major ones. In fairness to the whole position of Cadco, and its whole story, we have to go back to 1963 and the atmosphere of that time. We all know now that it was a great swindle, but it would have been a wise man who said at the time that these people were suspicious and that we had to be very careful about the project.

The year 1963 was one of distress to Scotland. There were well over 100,000 unemployed and, as my hon. Friend for Fife, West (Mr. William Hamilton) knows, Fife was going through a very hard time. Industrial prospects were bleak, and Glenrothes was struggling to establish a broader industrial base, and in the aftermath of the decision not to proceed with the Rothes pit it would have been difficult to rebuff any new attraction to the new town.

The Cadco project came in 1963 and it was very welcome. The exercise by the public relations people, to which my hon. Friend has referred, was enormously successful. I have here a great collection of Press clippings, ranging from the Scottish Grocer to the Financial Times and embracing all the Scottish daily newspapers. Some important commentators then, perhaps unwisely, welcomed the project as being a great boon and blessing. This is the general atmosphere that we have to recognise, which surrounded not only the Press conference and the Corporation publicly but the officers and members of the Development Corporation principally responsible for making this arrangement with the Cadco people.

I have been concerned in this matter on behalf of my right hon. Friend the Secretary of State since the Labour Government came to office, and I can tell my hon. Friend the Member for Fife, West that he is quite fair in seeking to question Ministerial responsibility. Nevertheless, he must realise that Ministers cannot answer for Ministers in a previous Government. This is a matter entirely for ex-Ministers themselves to decide, as to how they should answer.

I have been looking up the debate on the Crichel Down affair, which took place on 20th July, 1954, and I want particularly to refer to the remarks of Sir David Maxwell-Fyfe, as he then was, when talking about the fourth category of considerations, concerning the question of Ministerial responsibility in relation to civil servants. He said: where action has been taken by a civil servant of which the Minister disapproves and has no prior knowledge, and the conduct of the official is reprehensible, then there is no obligation on the part of the Minister to endorse what he believes to be wrong, or to defend what are clearly shown to be errors of his officers. The Minister is not bound to defend action of which he did not know, or of which he disapproves. But, of course, he remains constitutionally responsible to Parliament for the fact that something has gone wrong, and he alone can tell Parliament what has occurred and render an account of his stewardship."—[OFFICIAL REPORT, 20th July, 1954; Vol. 530, cc.1286–7.] That applies to present and past Ministers. I do not presume to answer for previous Ministers; it is entirely their prerogative, and it is up to them to volunteer information if they think that it is important.

But that is in relation only to officers of our own Department—the Scottish Office—and not in relation to Development Corporation officials, who are answerable to the Development Corporation. One must be fair and read what is said in the Report about the Development Corporation general manager and other officers, and also the statement made by the Development Corporation quite recently.

I shall not go over the whole history. My hon. Friend has gone over this before, in two previous Adjournment debates, the first answered by myself and the second by my right hon. Friend the Minister of State, Board of Trade. When we came to office matters had reached a head. In December, 1964, the Board of Trade appointed inspectors under the Companies Act to investigate the affairs of Cadco Developments Limited and two other companies in the Cadco group. The Cadco Building Company had by that time gone into the hands of the Official Receiver.

The Report, which is a very good one—I am glad that my hon. Friend was sensible enough to fortify his speech with a number of quotations from it—is by no means a whitewashing exercise. It has been carried out by two very good inspectors, who have gone into the matter quite thoroughly.

On the question of Ministerial responsibility, I would add that the inquiry or review which we carried out took place later and that at the material dates the matter was the responsibility of the past Administration. Constitutionally, the then Secretary of State was responsible to Parliament for what happened when he was in office. I do not suggest that he would have been bound to support the action taken by the officials if it had been taken without his knowledge. I leave that part of the case and turn to the part concerning ourselves.

On 1st December, 1964, my hon. Friend raised this matter in an Adjournment debate and I then told him that I was proposing to invite the Development Corporation to discuss the whole history of the project with me. The first meeting with members and officials of the Corporation took place on 19th December, in the course of which we analysed the details of the course of events as known. These followed a series of meetings in Edinburgh and Glenrothes at intervals up to June, 1965, but as early as February and March, 1965, we had decided to review the arrangements governing the clearance procedure for industrial and commercial projects in Scottish new towns.

We did not apply this just to Glenrothes; we decided to apply it to the three other new towns—and it now applies to the fifth new town.

It is now endorsed in New Towns Memorandum No. 7 as the correct procedure, and it is very thorough—a better tightened-up procedure than existed in the previous circumstances was issued in May, 1965, and subsequently referred to by the Comptroller and Auditor-General in his Report and Accounts for 1964–65. We issued this Memorandum in respect of new towns, giving this guidance on clearance procedure. I cannot say that a Cadco can never occur again; no one can. But the chances of a Cadco project ever taking place again in any Scottish new town are very small. The new procedures that we have established are the best that we can devise in human experience so far. We have taken a wide consensus of opinion to arrive at this. The Scottish public is entitled to that assurance.

I think, also, that the whole Cadco affair is a lesson to many officers and other people engaged in new town work and in the attraction of industry not only to Scotland but to other parts of the United Kingdom.

My hon. Friend referred to the Lord Advocate. The position in Scotland is a little different from that which obtains in England. The Lord Advocate's decision in this matter is final, and I cannot give the House the reasons which he felt were conclusive in deciding not to prosecute those mentioned in the Report, including Mr. McKee, to whom my hon. Friend has referred. The position of the Director of Public Prosecutions is entirely different. His decision for the moment, is tentative and not by any means final, and it remains to be seen what further developments there may be in this matter.

I have very few minutes left. I am sorry that I cannot comment on the question of the sub-contractors under contract to the Development Corporation and the building company. This is a matter between the two parties which does not involve the Scottish Office. If there is a feeling that the Development Corporation is in breach of contract there is redress in the courts, which the sub-contractors can take. I have had a lot of correspondence with my hon. Friend on this matter and I do not propose to say any more than that.

The new town of Glenrothes had a sharp setback with the decision not to proceed with the Rothes Pit, and the failure of the Cadco project was a considerable blow to it. These were two heavy blows, just at the beginning of its development. Since then we have made every effort to restore the morale of everyone concerned and to try to ensure that the energy with which the attraction of new industry was pursued is continued. In fact, 12 new industrial projects have come to the new town since the Cadco project collapsed. These new firms employ 1,600 people already, and they have a potential employment of 2,250.

In housing and in other ways development is going well, and my right hon. Friend takes an active part in ensuring that this is so. I am sure we all wish the new town success, now that it has got over the intense disappointment of the failure to proceed with the Rothes Pit and this unfortunate affair of Cadco.

Mr. Speaker

I am grateful to hon. Members for keeping to the time table. May I remind right hon. and hon. Members that this next debate will finish at about 3.42 p.m.