HC Deb 01 March 1973 vol 851 cc1833-42

9.55 p.m.

Mr. James Johnson (Kingston upon Hull, West)

I wish to forget statutory instruments and bureaucratic forms and turn to a much more human subject: the welfare and financial affairs of our older citizens who are confined, often in the evening of their life, to mental institutions. This debate tonight is an unusual one on a somewhat obscure subject. To discover what is happening one had to go down those long and dusty corridors and purlieus of the House of Lords and the Lord Chancellor's Department to find out what the Court of Protection is. One discovers some unusual facts in doing so.

A Law Officer is present with us. I am glad to see him because he is my Member of Parliament and I am a constituent of his in Wimbledon. I am sure that in this somewhat intimate debate between us we shall get somewhere. There are not many Members here at this time of night, but obviously the words we utter will go out to millions of people, and answers may be needed to the questions we put.

Our concern for old and sick people is a personal issue. I wish to thank you, Mr. Speaker, for allowing me to have this debate in view of my indelicacy in being somewhat late in coming to the Chamber a few days ago. My colleague the hon. Member for Rugby (Mr. William Price) was to have been here with me but unfortunately he is ill. Since, however, this is a somewhat intimate matter and Rugby is my old constituency, I can speak on my hon. Friend's behalf and on behalf of his constituents.

I shall deal with only two cases tonight, two of many that one could cite, and I shall refer to a lady who lives in a Warwickshire village. I believe this subject to be of the most intense human importance since it concerns the personal welfare and intimate financial affairs of many unfortunate senior citizens who suffer mental illness, and as with other illnesses, have to be given attention in hospital. I hope that all of us have the will and the intention to find a solution to this kind of situation even if legislation is later needed.

The people concerned represent a not insignificant element of our society and being, if one may use the words, non compos mentis they are quite unable to look after their own financial affairs. There is no party issue here. The same situation arose under my Government. It is something which should be brought out into the open. It has for too long been hidden, although occasionally Questions have been asked by hon. Members, particularly my hon. Friend the Member for Rugby, who asked a Question in July last year.

I begin factually by giving two cases. The Minister will have sympathy with me. I shall not give names, because no constituent would seek publicity in matters of this kind. One of my constituents died a few months ago having lived for the last 20 years in hospital. When this lady was admitted to hospital it was decided that her small capital—something like £450 in 1947—should be entrusted, as was legally necessary, to the Court of Protection for investment purposes.

Last year my constituent, having inquired from the court about the current value of that investment, was amazed to find that not only had the original capital been invested in 3½ per cent. War Stock but all the interest had been used to purchase the same stock. Thus, last year this lady had £1,055 of War Loan, which at today's market value is worth only approximately £380, which, as anyone looking at the figures would at once be startled to find, is less than the original value of the investment way back in 1947, ignoring the fall in the value of money.

It being Ten o'clock, the Motion for the Adjournment of the House lapsed without Question put.

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

Mr. Johnson

Obviously one's first assumption is that there has been some mismanagement. I know that the Solicitor-General is looking into this matter and I hope he will tell me the the present position. I was purposely given the evidence of what I term "mismanagement" and was asked, as was my hon. Friend the Member for Rugby and, no doubt, many other hon. Members, what action if any was contemplated in Parliament to remedy the unfortunate situation concerning this 3½ per cent. War Loan.

An even worse case is that of my former constituent. My hon. Friend the Member for Rugby, who is ill and unfortunately cannot be present, has asked me to put this case forward. It is quite startling. A man committed to a mental hospital in 1948 had his capital of £800 invested for him by this Government Department. In mid-1972 he died and his 60-year-old widow expected to inherit certainly some thousands of pounds I am not specifically talking about 5 per cent. or 7 per cent. compound interest, but if this money had been invested in the market she could have expected at least between £4,000 and £5,000. The widow learned that only £230 remained. Indeed, my hon. Friend the Member for Rugby at that time stated that this was "scandalous inefficiency." In addition, the Daily Mail of 30th June 1972 quotes him as stating that She would have been better off if the money had been left in a biscuit tin. This seems to have been the course of events. The husband entered the mental hospital and his affairs were taken over by the court, which invested his £800 in War Loan. It remained there for 24 or 25 years, despite its steady but catastrophic decline. I shall not go into what happened in the 1950s. I suggest that if a good merchant banker in the City had been advising the court, he would have said "Please get out of War Loan and into something else." Even a local businessman would have done this. However, that was how the situation remained for almost a quarter of a century.

It might be said that this is a case for the Parliamentary Commissioner. We are placing this matter before the Lord Chancellor's office. Knowing the Solicitor-General, I imagine that he will have an adequate answer. If not. I am sure that he will take steps to see that the position is altered for the future.

Without being too provocative, I should like to quote again what my hon. Friend said: I should have thought you would have to be some sort of perverted financial genius to invest £800 back in 1948 and end up with a loss. Even the safest, most conservative investment should now be worth nearly £10,000. I do not know, but I should have thought that at interest of 5 per cent. or more it must be worth about £5,000 or £6,000.

I have talked to a number of my hon. Friends about this matter to see whether they know of similar cases of a son, a daughter or a widow badly in need of money and expecting thousands of pounds but who is disappointed in this way. It is fantastic how often this kind of thing occurs. By coincidence, the day after I spoke to my hon. Friend the Member for Barrow-in-Furness (Mr. Booth) on this subject, he had a letter from a constituent who was in the same parlous position. The Court of Protection—what a misnomer! As a Member of this House, when I meet this kind of constituency problem I think that we need another court to defend people against this so-called Court of Protection.

I am seeking legal advice in this debate. I sought legal advice from a colleague on the Opposition benches who is a Queen's Counsel. He turned to a textbook whose author, I believe, is Halsbury, a famous legal luminary, and this was the advice I received: "I have had a look at the law on this, and on the surface there seems to be adequate protection for the proper investment of funds." I was a little foxed by that. If, as my colleague says, there seems to be adequate protection but it is not afforded, where does the fault lie? Who is advising the court? Any decent merchant banker would have put these funds to much better use.

I wonder how much money there is in this fund. There must be millions of pounds. When one thinks of the tens of thousands of fellow citizens who because of mental illness have to go into a home or a hospital and whose funds are made over, one realises that there must be a lot of money placed in the care of the court. If there are many cases of this kind there must he millions of pounds invested, not of course to the best advantage. Who manages, or apparently mismanages, the investment of these old people's assets?

I had a letter yesterday, not from a constituent living in Hull, but from one who lives just outside Hull, in Cottingham. He told me that he was employed in the work of advising on investment for people who were committed to similar homes. He said "We do a wonderful job. What is all this about?" I ask the Solicitor-General to tell me who are the advisers to the court. Who is the chairman of the board and who are the members of the court? What happens down those dusty purlieus leading to the Lord Chancellor's Department in the House of Lords? Letters to my constituent are signed by a divisional officer, so-called, but any reply must be addressed to a chief clerk. I wonder who these people are and what is the position of the court.

What are the powers of the court? I wonder whether new and wider powers are needed to enable it to invest wisely and, in my view, much better than it seems to have done in the past. It is investing on behalf of elderly people who obviously cannot manage their own affairs. Without being too sarcastic, I should say that the court could place this money in the Co-operative Building Society, now known as Nationwide. Even I with my few assets have my money in the Co-op which can guarantee me 5½ per cent. free of tax.

There is a moral or an ethical side to what I deem to be the sordid history of two cases which could be multiplied many times. It is quite scandalous that at the end of 25 years the value of the assets should be less than the original sum. That is absolutely indefensible. In the New Testament, in the Parable of the Talents, the man who hid his talent in the ground got back 100 per cent. when he dug it up again. There is an obligation on the court at least to hand over to a son or daughter 100 per cent. of the value of the original asset. There is a moral obligation upon the Government of the day to make good any deficit. Indeed, there is a moral obligation to make it up to a figure beyond that—perhaps a guaranteed 5 per cent., or something of that nature.

The members of the court are in the position of stewards. They have an obligation towards these people who, because of their condition, are unable to manage their own affairs. These people are the casualties of our society. There is an obligation upon us all to look after their assets and ensure that in future they are not given this kind of shabby treatment.

10.11 p.m.

The Solicitor-General (Sir Michael Havers)

I am sure that the House is grateful to the hon. Member for Kingston upon Hull, West (Mr. James Johnson), who is also my constituent, for having raised this important matter, and I am grateful to him for doing me the service of mentioning in advance some of the detail that he intended putting before the House.

This problem arises because of the steady drop in the nominal value of 3½ per cent. War Loan that has occurred since shortly after the last war due, no doubt in part anyway, to the fact that it is undated stock. In 1950 it stood at 92 13/16. Five years later it was down to 87¼. In 1960 it was 65 5/16. In the next five years it dropped to just under 50. In 1970 it was down to 40, and in 1973 it was down to 36, although it went up slightly to 36⅜ about a week ago.

The responsibility of a Law Officer for replying to this debate arises from his duty to speak in this House on behalf of my noble and learned Friend the Lord Chancellor as this is a matter which falls within his province since the Court of Protection is part of the Supreme Court.

The Court of Protection is not a court in the ordinary sense. It is an office of the Supreme Court, the function of which, under the Mental Health Act 1959, is to protect and manage the property of persons who, by reason of mental disorder, are incapable of managing their property for themselves.

There is a reference to a nominated judge, as the hon. Gentleman described it, being a judge of the High Court, but the day-to-day functions of the court are performed by the Master and Deputy Master who have the responsibility, among other things, of supervising the patient's property and finances and doing the sort of jobs which ordinarily people of sound mind can do for themselves, and they have the advantage of expert professional advice in these matters.

I have been asked about general policy. One of the first matters that has to be decided is the future of the patient. If one takes an elderly patient, one tries to deal with the investment on a ratio of two to one between fixed interest stock and equities. If one has a younger patient, where it is expected that he has at least a 15-year expectation of life, the reverse ratio applies—that is, one of fixed-interest stock to two parts of equities.

In many cases the patient coming within the care of the Court of Protection may have considerable assets, may have legal advisers, may have his own solicitors, and may even have his own stockbroker. The funds of the Court of Protection amount to about £100 million. The number of patients that it looks after is 20,000. That gives an average of about £5,000 for each patient. But one knows that in many cases the sum involved is less than £1,000, while in many others the sums protected are very much greater. Often, in those cases, solicitors and stockbrokers will be on the scene when the Court of Protection takes over the responsibility. It is not the policy of the court to make any substantial changes in the portfolio of investments, unless there are very good reasons so to do. Often, when the patient comes within the control of the court, the portfolio has already been created as a result of advice and not a great deal of difference is made.

Mr. James Johnson

Perhaps the hon. and learned Gentleman would tell me why, in the 'fifties, with the catastrophic decline which has been mentioned, the investments were kept in the same portfolio. Why did not someone with some common sense switch out of those areas as anyone would normally do?

The Solicitor-General

If the hon. Gentleman will bear with me for a moment, I am coming to that point. I am trying to deal with the cases which are so often reported to hon. Members involving capital sums of three figures. These are under £1,000, usually between £500 and £1,000. In those cases, one has to consider the interest of the patient himself, and find whether it is possible to provide the highest possible interest in order to give him the extra comforts which will make his lot easier.

Again, in many cases, one finds that when he is taken into hospital such a man has left a wife at home who is often herself elderly and also in desperate need of money. Sometimes, a receiver is appointed, although that is in a sense a formality, and the court's policy then is to try to get the highest possible interest. Capital is of relatively little importance.

In too many cases, when the patient came within the care of the court, he had invested a great deal of his money already in War Loan, and this was some years after the peak, when the downward trend was going on, and it was standing at £65 or £70. It being a fixed interest stock paying 3½ per cent. on £100, the moment that it was brought in standing at £65, the interest was a great deal more than 3½ per cent.

So the court has always been faced with the problem of having to say. "If we move out of this stock, when there is not a great deal of money involved, into some other stock which is less likely to depreciate, we shall get nothing like that interest rate." After all, if the stock stood at £65, the interest would be nearly 6 per cent. It would be very difficult to find something else giving 6 per cent. One always had to have the highest possible interest.

There were other advantages, which were not minor. War Loan stock provided payment of the interest without deduction of tax, it meant that there were no administrative costs or difficulties in recovering that tax, the capital itself was easily accessible without incurring brokerage and legal expenses. In many of these cases, because of the desperate condition of the wife and also because the court wanted to go on providing the little extra comforts, capital would also be disposed of. If, say, there was a possible seven-year future, it was right to spend some of the capital also to bring comfort. Bearing in mind the high interest, and the fact that one could sell some of the stock without brokerage and legal expenses, when one was dealing with figures under £1,000 and with patients who had only a limited life ahead of them, this action was taken.

The court was advised, throughout this period from 1965 onwards, by a very high-powered investment advisory committee appointed by the Lord Chancellor. The hon. Member has asked me to speak of that. The present members—I emphasise the word "present" because it would be wrong to commit them for what has happened in the past—include Viscount Sandon, Deputy Chairman of the Westminster Bank, Mr. Touche, who is in a high position in the insurance world, Mr. Ginsberg and Mr. Hunter Johnston. The last two are concerned with merchant banking. Until very recently they have not been advising disposal of stocks of under £1,000 in War Loan because they were prepared to accept that there would be some drop. But to move out of War Loan after the major drop that occurred in the early part of the 'fifties would have meant too marked a drop in the interest rates.

I can tell the hon. Member that it is a matter of anxiety to everybody that the arrangements for managing patients' estates should be efficient. As for the present proposal, there must obviously be some improvement of the staff of the Court of Protection because, with £100 million and 20,000 different patients involved, each patient has a different portfolio.

I would have liked to be able to deal with the case from Rugby raised by the hon. Member's colleague but there is not time. In that case, throughout the period that the investment was looked after by the court, not only was it necessary to find money to provide the extra comforts for the patient, but his wife was in desperate financial straits and from time to time stock had to be sold in order to provide her with money. In fact, the individual in question, obviously through an oversight, had not disclosed that he had got that capital and had been on National Assistance for two years and there was, as a result, a substantial sum to repay.

Thus the details the hon. Member has given as to the figure at which it started and the figure at which it ended must also take into account that there were, in addition, considerable capital payments during that time.

That is another example why each one of these portfolios, which may be small or large, requires attention at least every six months so that it may be reviewed. Not only must there be reviews as to whether the investments are the right ones, but the financial circumstances of the patient and those of his wife, his family or his dependants must be looked at as matters progress. If wives who are in work then fall out of work the whole situation has to be changed. It is an enormous task to look after 20,000 different portfolios.

This has now become clear and an increase of strength of the investment branch has recently been approved. This is expected to ensure that the business is dealt with efficiently. I can give the undertaking that my noble and learned Friend the Lord Chancellor will keep the matter under review.

Having made that explanation, I hope the hon. Member will feel that "mismanaged funds" rather than "managed" over the years is language a little stronger than was right. This has been a great difficulty. It is work which is done with practically no charge. In many cases it is a labour of duty and not one of love by departments that have been understaffed and faced with all kinds of competing interests. But the main interest has been that they must administer these funds in the ordinary cases to provide the maximum income for comforts for the patient and the maximum protection for his dependants. That difficulty has faced them constantly over the years.