HC Deb 23 April 1975 vol 890 cc1477-84
The Minister of Overseas Development (Mrs. Judith Hart)

With permission, I wish to make a further statement about the Crown Agents.

The House will recall that just before it rose for the Christmas Recess I explained the immediate problems of the Crown Agents' reserves and liquidity which had been reported to me by the new chairman and board, and announced the Government's agreement to provide immediate support of £85 million and the agreement of the Bank of England to provide standby facilities.

So far the Crown Agents have found no need to draw upon either the £85 million or the standby facility at the Bank of England to meet liquidity problems. We shall all hope that this will continue to be the case. But the support of the Government stands firm and ready. The grant is there to cover prudent writing down of assets as necessary, and to provide a capital base.

I would also like the House to know of the confidence I have in Mr. John Cuckney, the new Chairman of the Crown Agents, and in his board. In the most difficult circumstances, they are overcoming the problems they faced on appointment with considerable success. Since December, overseas principals have increased the scope and scale of their business with the Crown Agents. Confidence has increased, and it is right that this should be so, for the steady and gradual withdrawal from property investments and secondary banking, according to my directive, is restoring a fundamental financial soundness in their operations.

I have now made further appointments to the board. I have appointed Mr. Harry Hoff, Mr. James Jack and, with effect from 1st July, Mrs. Hester Boothroyd to join Mr. Leslie Kirkley and Mr. John Gordon as members of the board. I have also appointed Mr. John Goble, at present a member of the board, as deputy chairman.

I promised to keep the House informed. I can now make an interim report—not yet a final one, for reasons I shall make clear. In doing so, I know the House will understand and appreciate that it concerns not the present but the past.

The chairman has provided me with his board's views on the circumstances which led to the need for financial support, which have been assisted by the investigations carried out by Coopers and Lybrand, the consulting accountants. These are not yet complete. They have had to work on a very large number of transactions made over a long period of time.

The principal factors which the board considers to have contributed to the problems are: first, the operation of a substantial banking business without an adequate capital base; second, over-dependence on the property and secondary banking sectors, and commitment of an unduly large proportion of the total banking resources to a small number of borrowers; third, inadequate controls and procedures for approving and monitoring loans to subsidiary and associated companies, for security for advances, and for the delegation of authority; fourth, lack of outside commercial banking experience among senior staff. These defects of the past are rapidly being remedied.

The Government have reached two major conclusions in the matter. We believe it important and necessary, and the board of the Crown Agents recommends it, to arrange for an independent inquiry into past events and the circumstances giving rise to the need for Government support. Accordingly, I have decided to set up a committee of inquiry with the following terms of reference: To inquire into the circumstances which led to the Crown Agents requesting financial assistance from the Government. The inquiry will be conducted by Judge Fay, sitting with Sir Edmund Compton and an accountant. There will, of course, be complete protection of the confidential interests of the overseas principals.

We also propose to give further consideration to the relationship between the Crown Agents and the Government. I shall present a White Paper to the House at a later stage—I hope during this Session—with my detailed proposals, along with the necessary background information about past custom and practice.

Now that I have presented those two major conclusions, I know that hon. Members will wish to join with me in expressing their confidence and support in the present chairman and his board, and in congratulating them on their very great success in the last few months.

Mr. Wood

Does the right hon. Lady recall chiding me, in that gentle way she has, with delay in these matters? Does she recognise that she started these investigations in the 1960s and they now look like going into the late 1970s if, indeed, she is still responsible for conducting them?

In the statement in which the right hon. Lady has announced the setting up of the inquiry has she not to a large extent prejudged the findings of the inquiry? Finally, what powers is the committee of inquiry to have? Amongst other things, will Sir Claude Hayes and others closely concerned have full freedom to state their views in accordance with the recommendations of the Salmon Committee?

Mrs. Hart

I confess that I am a little surprised at the right hon. Gentleman's tone. He will recollect, because he has great knowledge of this matter, that I had asked for a study to be made of the constitutional relationship between the Crown Agents and the Government in the last few months of 1970 when I was in my present post, in which the right hon. Gentleman succeeded me. He is right to say that I chided him from time to time in the House, as did one or two of my hon. Friends. We then had the Stevenson Report, which the right hon. Gentleman refused to publish. I think it is fair to say that this Government have done their best to come to grips with a situation in which that was greatly needed.

As for the right hon. Gentleman's second point, the inquiry will be conducted by Judge Fay, Sir Edmund Compton and an accountant yet to he named. I am sorry that I cannot give the name of the accountant today. We have no reason to suppose that any information requested will not be forthcoming. I am certain, though this is a matter for the inquiry itself, that it will wish to have discussions with all those who have been involved in Crown Agents' matters over the past few years.

Mr. George Cunningham

Will my right hon. Friend accept congratulations on the speedy clean-up job she has done over the past 10 months or so? Will she answer these questions? First, while the inquiry is being conducted, and indeed from now on, can we be sure that the annual reports produced by the Crown Agents will give very full information about the holdings they have, whether directly or indirectly, and the companies with which they have commercial association?

Secondly, am I right in assuming that if the Crown Agents draw upon any part of the £85 million standby cover they will be answerable to the Public Accounts Committee but that they will not be answerable to the Public Accounts Committee otherwise?

Mrs. Hart

I confirm that what my hon. Friend said in the last part of his question is indeed so. I hope and believe that it will not prove necessary to draw on the £85 million. Indeed, it is very gratifying to be able to say that this has not needed to be drawn on up to now. I hope that that situation will continue. However, should there be drawings, this would be a matter in which the accounting officer of my Department would hold responsibility and it would be a matter for the Public Accounts Committee.

On my hon. Friend's first point, he will know that as from now—I think I have given this information before, and certainly the Crown Agents have —the annual report of the Crown Agents is now, as distinct from past practice, to be submitted to me so that I may make it available to Parliament, and the accounts will similarly be made available to Parliament. The audited accounts for the last possible year —1972—are already in the Library. I think my hon. Friend will find that they give the kind of information that is needed, but I am certain that if this proves not to be the case the Crown Agents or myself would be very responsive to any discussion about what further information they might include.

Mr. Hordern

May I echo the confidence in Mr. Cuckney and the efforts that he has so far made? With respect to the inquiry which is about to take place, may we take it that the findings in the Coopers and Lybrand report are temporary findings and are liable to the fullest possible justification by the full judicial inquiry which is to take place later?

On that point, will the right hon. Lady not only allow that inquiry to make the fullest inquiries into all the matters which have occurred in the past but allow Sir Claude Hayes, in giving his evidence, to see the findings which that judicial inquiry may make, unlike the practice in the past in Department of Trade investigations, and allow him to comment on any findings that the inquiry makes before those findings are published?

Mrs. Hart

Obviously, the detailed conduct of the inquiry must be a matter for Judge Fay, who will be leading it, and for the other members of the inquiry. It never has been the practice in the past for a Government, having set up an inquiry, to regulate the precise way in which the inquiry is to be conducted, but I am certain that the inquiry will wish to give every opportunity to all concerned fully to be acquainted with the whole situation and to say whatever they want to say. I think that is much the fairest way of conducting it.

Mr. Skinner

Will my right hon. Friend agree that one of the important reasons why it has been her duty to tell the House, not only on this occasion but on others, too, of the scandalous investments and so on within the area of the Crown Agents is that the Crown Agents wanted the highest rate of return, and that usually in this system of ours the highest rate of return can involve investments within the murky and seamy side of life; and the net result was that, like a good many other people who got their fingers burned, they poured their money into property speculation and, indeed, into slum speculation?

Will my right hon. Friend in future insist that investments are of a kind which will not leave her as a Minister to have to come to the House, as the previous Minister did, in order to try to explain away how these investments have been made?

Will my right hon. Friend also see to it that the committee of inquiry will establish quite clearly how much money has been lost as a result of all these investments in these areas of secondary banking, with a particular reference to the amount of money that was lost as a result of the investment in the ill-fated Storehouse venture? All these matters should be investigated by the committee of inquiry.

Mrs. Winifred Ewing

On a point of order, Mr. Speaker. Is it not the case that today at Question Time, when Scottish Questions were answered, questions which were much shorter in duration than the one which we have just heard were interrupted by your good self as being too long? Can you explain why it is that the hon. Member who has just asked a supplementary question seems to be allowed to ask as long a question as he likes?

Mr. Speaker

I will try to make the position clear. At Question Time the object is to get as many Questions answered as possible. Long supplementary questions cut out other Members' supplementary questions and Questions. After statements, the considerations are not quite the same. It is a matter for my discretion, although I admit I do not often have to complain of excessive brevity on the part of the hon. Member for Bolsover (Mr. Skinner).

Perhaps the right hon. Lady will now answer the hon. Gentleman's question.

Mrs. Hart

My hon. Friend is right in pointing to the fact, which I outlined in my earlier statement in December, that it was the over-investment in property companies and secondary banking, in which there had been a considerable decline in the value of assets, which led to the immediate crisis of liquidity in the Crown Agents. I have given a positive directive that this is now to diminish, and the Crown Agents are now very sensibly withdrawing in a phased way—because it is correct to phase it—from both secondary banking and properties. Since October over £59 million has been withdrawn from property and secondary banking by the Crown Agents.

On the second point about London Capital, I think I made it clear a month or two ago that this is a matter for the commercial judgment of the Crown Agents and that they are acting entirely in accordance with their best and most prudent judgment in this matter. It is not strictly a matter in which I would regard it as proper for me to intervene.

Mr. Stanbrook

Does not the experience of the Crown Agents confirm the folly of any Government or quasi-Government institution using its assets to operate in fields in which it has neither qualifications nor suitability?

Mrs. Hart

What emerges clearly—and I hope we have now corrected the situation—is that if we have a valuable Government institution, which the Crown Agents is—it has the most tremendous ramifications and involvement and an excellent reputation for its procurement policies and all its other activities on behalf of many overseas investments and overseas public corporations—it is of the greatest importance that we have people who are best able to make the right kind of judgments in the operations in which they are involved. I think my own appointments since July have created a board with the expertise and judgment to enable these matters to be correctly administered from now on.