§ Mr. Benn (by Private Notice) asked the Secretary of State for Trade and Industry if he will make a statement about London and County Securities.
§ The Minister for Trade and Consumer Affairs (Sir Geoffrey Howe)
London and County Securities Limited and London 910 and County Investments Limited both render accounts at six-monthly intervals under the terms of the Protection of Depositors Act 1963. The last accounts submitted to my Department related to the period ended 31st March 1973 and revealed no grounds for action under the Act. The accounts for the period ended 30th September 1973 are not due until the end of this month. As at 31st March 1973 deposits totalling approximately £60 million were held by London and County Securities while deposits totalling approximately £7.5 million were held by London and County Investments Limited.
Following a dispute at the last annual general meeting about certain entries in the accounts concerning the treatment of the cost of acquiring control over a subsidiary company and loans to directors, my officials interviewed the secretary and obtained answers which appeared to be acceptable. Further information has very recently been brought to the attention of my Department and, as I have told the House on previous occasions, inquiries are still proceeding.
The present situation does not appear to have arisen from any matters in relation to which the Department's statutory powers could have been exercised. I understand that the position of the company is at present being urgently considered by substantial shareholders and I do not wish at this stage to say anything that might prejudice the outcome of these discussions.
§ Mr. Benn
Is it not clear that there should be a Department of Trade and Industry inquiry into this company, particularly because it looks as if a number of small depositors may suffer, once again becoming victims of City operations that are causing great anxiety elsewhere? Secondly, is it not also clear that some control system rather similar to that which a previous Conservative Government introduced in respect of insurance companies might have to be introduced to deal with problems of this kind? Finally, do the Government in any way yet connect in their minds this type of abuse of power in the City with the Government's appeal for wage restraint elsewhere and which makes the whole policy seem totally hypocritical?
§ Sir G. Howe
I repudiate absolutely the implications which the right hon. 911 Gentleman attempted to draw in the last part of his question. It is much too early to generalise from any of the matters happening in this case on the wider basis which the right hon. Gentleman attempted. Plainly any decisions about any changes in any system of control which might need to be considered are being considered all the time by hon. Members on both sides. Equally, it is much too soon to conclude that there is any case for an inquiry on the basis that the right hon. Gentleman suggested.
§ Mr. Thorpe
I am not certain whether it is necessary to declare an interest, but I certainly do so.
Does the right hon. and learned Gentleman agree that in this matter the interests of the small depositors are paramount, as the right hon. Member for Bristol, South-East (Mr. Benn) indicated? Is it within the right hon. and learned Gentleman's knowledge that in that regard normal business for members of the public has been taking place at all branches today?
Is the right hon. and learned Gentleman aware that a joint stock bank and a merchant bank which have independently assessed the affairs of the bank have both independently taken the view that its assets exceed its liabilities? Is the right hon. and learned Gentleman aware, further, that talks have been taking place during the weekend and are continuing at the moment to ensure the viability of the bank and the security of its deposits? Although it is perfectly understandable that the House of Commons should show concern, does not the right hon. and learned Gentleman agree that it is in the best interests that those discussions should continue, in the interests of the depositors, with the minimum of publicity, for the very simple reason that it is surely in the interests of the whole House that the outcome of those talks should be available—and that we shall not have to wait many hours before that outcome is known?
§ Sir G. Howe
Certainly the House must be concerned about the position of the small depositors. That is one of the reasons the Protection of Depositors Act 1963, was passed. I have told the House about the extent to which substantial shareholders are already taking part in urgent discussions about the future of 912 the company. I have made my own view clear that I would not wish at this stage to say anything likely to prejudice the outcome of those discussions.
§ Mr. Tugendhat
Is my right hon. and learned Friend aware that, although London and County is clearly rather a small concern, this is a matter which is potentially extremely important, since it inevitably raises a question mark over the secondary banking sector and will cause questions to be asked about a variety of operations within the City of a number of different kinds?
Will my right hon. and learned Friend therefore accept that when the discussions to which the Leader of the Liberal Party referred have been concluded, it is of the utmost importance that the House should be kept fully informed of precisely what the obligations of London and County were and precisely who are the depositors? There is a fear that there might otherwise be a domino effect. That fear will be banished only if the House is kept fully informed about exactly who is involved and what liabilities the company has, and what its full circumstances are.
§ Sir G. Howe
I fully appreciate the entirely proper interest of the House, not only in the position of the depositors, particularly the small depositors, in this company, but also in the interests of the secondary banking sector. I also fully appreciate the extent to which the House will wish to be kept fully informed on these matters—at the right stage and at the right time. My concern at the moment is with the future of this company, in the light of the factors raised by the right hon. Member for Devon, North (Mr. Thorpe).
§ Dr. Gilbert
Is it not very alarming that the Minister should say that his Department has no statutory responsibility in this respect? First, quite apart from the question of allegations of insider trading, there are allegations about the rôle of the auditors and also serious concern that trading continued in this stock while the chairman of the board was making statements which, with the benefit of hindsight, would appear to be misleading, to say the least. I remind the Minister, finally, that this is the fourth major scandal involving lending institutions of different types in recent 913 months. There was Wm. Brandt's, San Diego National and the Scottish Co-op. Is it not high time that the Minister's Department exercised a realistic control over the lending policy of these various types of financial institution?
§ Sir G. Howe
The particular suggestions of insider trading and of the continuation of transactions in circumstances that might be improper in this case are matters for consideration elsewhere. They can no doubt be considered in the formulation of the legislation which will be debated in the House later in this Session. I appreciate the extent that there must be concern about any failure of any trading, lending or borrowing concern, but there must be a limit to what can be achieved by any system of supervision, either under existing provisions or under any future legislation. The guiding principle of the Protection of Depositors Act was to require very full information, beyond the ordinary requirements, to be made available for people to take into account in deciding whether to invest with these organisations. The extent to which people are to be guided by the information which is made available is one of the important features which should never be overlooked.
§ Sir D. Walker-Smith
Does my right hon. and learned Friend agree that there are two requisites here—first that, while not agreeing with the Leader of the Liberal Party in his observations about the minimum of publicity, nevertheless there should be a full opportunity for an effective result to accrue from the opposite operations being undertaken by the clearing bank and the merchant bank in the interests of depositors and that those operations should not be prejudiced by observations based on insufficient knowledge ; secondly, that when the information is known and wholly available it should be given full and urgent consideration by the Government to see that any necessary legislative or other steps are taken to ensure that in this, as in all other respects, we achieve a wholly acceptable face of capitalism?
§ Sir G. Howe
I agree with my right hon. and learned Friend that this matter must be looked at in two halves. I am concerned today, first, to see that a full opportunity is made available, as far as 914 I can achieve it and as far as the House can achieve it, for the conclusion of the discussions which are now taking place. I entirely agree with my right hon. and learned Friend that this is a matter in relation to which the House will need further information which will require full consideration with a view to seeing not only whether any practical steps ought to be taken, but whether any legislative lessons can be drawn. Those are two perfectly legitimate and acceptable questions.
§ Mr. Paget
Is it not a fact that the business of banking consists primarily in lending on short term and borrowing on long term, and that if one has a panic situation there is probably no bank that can meet all its obligations, if all its depositors demand their money at once? Therefore, in circumstances such as these, are not such expressions as "major scandal" perhaps to be regretted, and is not the assurance which appears now to be given, that no deposits with this bank are in any peril at all and that the money is available for the depositors, one that should be emphasised?
§ Sir G. Howe
Clearly, any banking operation depends, as the hon. and learned Gentleman pointed out, upon the confidence of people who are dealing with the bank on both sides. That is why one should not jump to any general or more far-ranging conclusions in the present situation. The second point raised by the hon. and learned Gentleman is one that is uppermost in the minds of those considering the future of the company.
§ Mr. Lamont
Does the right hon. and learned Gentleman agree that the fall in the company's share price from 200p to 40p in 10 days is a clear suggestion of some inside knowledge of the company's finances, despite the denial of the management? Secondly, is he aware that many people are of the opinion that the Stock Exchange should have suspended dealings in the shares earlier, and will he make representations to the Stock Exchange not only to make an investigation into the possibility of insider dealing but also, unlike previous inquiries, to make public the finding of that inquiry?
§ Sir G. Howe
I shall see that the hon. Gentleman's suggestions are brought to the notice of the Stock Exchange.
§ Mr. Skinner
Is the Minister aware that he could take appropriate action under the Companies Act 1948, if he wanted to accept the advice that I gave him on 22nd October, which could in some circumstances have resulted in a different situation from that which we are debating today? Is the Minister further aware that the Leader of the Liberal Party should be the last person to talk about worrying over small investors' money and safeguarding that money, when the Leader of the Liberal Party was opening banks in supermarkets as recently as October this year? Also, is the right hon. and learned Gentleman aware that it is a criminal act to go touting for investors' money at a time when a company is sinking and is possibly—
§ Mr. Speaker
Order. I think that those two statements are so near to one another that the hon. Member is transgressing the rules of order. He is not allowed to make any suggestion against the character or conduct of an hon. or right hon. Gentleman, except on a substantive motion.
§ Mr. Skinner
I am asking the Minister, who is well known in legal circles, whether he can tell me whether a company director touting for investors' money could be regarded in some circumstances as committing a criminal act. That is all I am asking. Is the Minister further aware that there is £1 million of the Post Office pension fund invested in London and County Securities—or it was a few weeks ago? What will happen to that money? Is not the answer to this question that we are now beginning to witness what community politics are all about, when the chairman of the 1922 Tory Committee is bailing out the Leader of the Liberal Party?
§ Sir G. Howe
The hon. Gentleman has ranged widely, as is his custom. In discharging my statutory responsibilities under the 1948 Act, I shall give the hon. Gentleman's views such weight as I think appropriate.
§ Mr. Nicholas Edwards
On a point of order. Reference was made earlier to a highly respectable merchant bank, Wm. Brandt's, which is a wholly-owned subsidiary of National and Grindleys Bank, and of which I am a director. A remark was made which suggested that that bank had been in financial difficulties. There is no truth whatsoever in that statement, and I believe that the hon. Member who made it should withdraw it.
§ Dr. Gilbert
I am casting no aspersions whatever on the present financial stability of Wm. Brandt. I give the hon. Member that assurance. He is aware of the events to which I referred, which took place rather earlier than was my recollection. He will be aware of them.