§ The Minister for Overseas Development (Mr. Timothy Raison)
Mr. Speaker, with permission I should like to make a statement on the future of the Crown Agents.
Last summer the Government of Brunei terminated their contract with the Crown Agents for Overseas Governments and Administrations for the management of their investments. This resulted in significant loss of income to the Crown Agents, amounting to up to £4 million in a full year, so that action became necessary to enable them to meet their financial duties under the Crown Agents Act 1979.
The board of Crown Agents accordingly submitted to the Government proposals for the reorganisation and improvement of the efficiency of the business, designed to enable them to achieve financial viability not later than 1986. Those proposals included the reduction of staff from about 1,200 to under 900, changes in terms of service to enable them to provide services competitively, and the sale of their principal offices at 4, Millbank, which would make possible the reduction of the commencing capital debt from its current level of £19.8 million to £9 million.
The Government have taken the opportunity to undertake a thorough review of the future of the Crown Agents and the need for their continued existence in their present form. In undertaking this, we have had regard to the Government's policy of reducing the size of the public sector, to the services which the Crown Agents provide for developing countries, and to their value to Britain's own interests.
On the basis of this review I expect Crown Agents to be fully profitable by not later than 1986.
After very careful consideration of this and other factors and of the representations made to me, the Government have decided broadly to endorse the proposals of the board of Crown Agents for their reorganisation with a view to their privatisation in due course. The timing and method of privatisation will be settled later. Pending the necessary legislation, the board will set in train appropriate measures of internal reorganisation in order to facilitate privatisation.
To facilitate the financing of this reorganisation, it is the Government's intention to waive in full under section 17(4) of the Crown Agents Act 1979 the interest due on the commencing capital debt in 1984, and to seek parliamentary approval under section 17(10) for any waiver necessary in 1985 and 1986.
I believe that this decision will enable the Crown Agents, under their vigorous chairman, Mr. Peter Graham, to continue to serve successfully both Britain and the developing world.
§ Mr. George Robertson (Hamilton)
Ministers of the present Government have in the past rightly complimented the Crown Agents on their invaluable role. It would therefore be disgraceful if the ideological paws of the Treasury were to be allowed to wipe out our huge gains from their work with Third-world countries. They have made valiant efforts to reach their present level of efficiency and growth, and it would be indefensible if those achievements were in any way compromised or destroyed. This announcement, therefore, is welcome 992 inasmuch as, and only inasmuch as, it accepts the Crown Agents' reorganisation plan and the rescheduling—to coin a phrase—of the immediate debt problems of the Crown Agents. The threat of unnecessary and damaging privatisation is, however, still to hang over the heads of the Crown Agents. Privatisation would make no sense at all, and it would enormously damage the viability and independence of the Crown Agents if they still faced the threat of privatisation in the indefinite future. As long as the uncertainty and indecision continue, so long will we continue to rob the Crown Agents of the talent which they have been losing during the period of uncertainty which they have suffered since last September.
I have four questions to ask the Minister. First, what consultations have the Government had with the client countries of the Crown Agents? It is the views and the confidence of those countries which determine the continuing value of the Crown Agents to our country and economy.
Secondly, what consultations have there been with the staff of the Crown Agents? For a substantial period there has been uncertainty about the Minister's intentions in relation to the Crown Agents. Members of staff have almost daily seen newspaper reports predicting dreadful prospects for the organisation in which they work. The burden of work has been considerable since the staff cuts were made, and the staff now face further cuts. Are the staff likely to be happy with the future arrangements for the organisation? Thirdly, what is the position of the pensions office in East Kilbride? The Minister made no mention of this in his statement, but in today's Financial Times there is an authoritative article which managed with considerable skill to predict the bulk of the Minister's statement. It states that the pensions department in East Kilbride will besubsumed within a Whitehall department.Will the Minister say whether that is true? The pensions department accounts for almost £1 million of the Crown Agents' profits. What are the implications of this reduction in profit capacity for the 1986 target date set by the right hon. Gentleman for the Crown Agents to become profitable?
Finally, the Minister mentioned the possibility of selling 4, Millbank as part of the process of reducing the debt of the Crown Agents. What studies have been made of the London property market which suggest that, in the interests of the public, this would be the best time to sell a valuable property?
§ Mr. Raison
I thank the hon. Gentleman for his somewhat limited welcome of our decision not to close down the Crown Agents. On the question of privatisation, our first aim is to carry through the reorganisation effectively. When that has been done we shall consider ways of privatising parts, and probably the whole, of the Crown Agents. We believe that that will be useful and will increase the competitive capacity of the Crown Agents. I understand that the chairman is very happy with the future that we have suggested.
The hon. Gentleman's first question was about consultations with the client countries. We have not had formal consultations with client countries, but we have had many discussions with people in different parts of the world about the role of the Crown Agents. I acknowledge the respect in which they are held.
993 I have seen representatives of the Crown Agents trade unions, both in London and in East Kilbride. I should be happy to meet them again to discuss the implications of our decision for their future. At present we have no plans to subsume the pensions office in East Kilbride within the Government machine. On the other hand, when privatisation comes about, we shall have to consider what is the best way of handling the pensions operation.
The Crown Agents have considered the sale of 4, Millbank. They believe that they could make a substantial sum from that sale. They believe that it is right to sell the property, and I endorse that belief.
§ Sir Bernard Braine (Castle Point)
Whatever the final decision on this matter, does not the interim statement that we have heard leave the Crown Agents and their clients —over 100 countries and 4,000 exporting companies are involved—in a state of doubt and uncertainty? Can that be in the national interest? Will my right hon. Friend confirm that there are 4,000 British companies—many quite small — which depend in large measure on the Crown Agents for their exports? Has any study been made of the benefits which would accrue to the Crown Agents from privatisation, compared with the undoubted risk that business will go to our competitors overseas?
§ Mr. Raison
I accept the value of the Crown Agents to British industry. That is one of the reasons why we have decided to accept the proposals for reorganisation rather than go for closure. However, as we move on towards privatisation it will be possible to look at the whole picture in such a way as to ensure that the important interests which my hon. Friend mentions can be maintained.
§ Mr. Guy Barnett (Greenwich)
How can the Minister describe his statement as a thorough review when he has not troubled to have formal consultations with 100 or more Government principals who use the Crown Agents and regard them as a disinterested service who work on their behalf? Is it not wrong for him to come to the House and make a statement of this type without having consulted those who rely on the Crown Agents for their services?
With regard to what the hon. Member for Castle Point (Sir B. Braine) said, does the Minister realise that threats of privatisation will put an end to the disinterested service which the Crown Agents now provide, and might well destroy them? Does he recognise the vital importance of the Crown Agents being regarded as the servants of the 100 Governments and the several hundred organisations overseas which use their services? They will not continue to use those services unless they remain a public agency, and will not use them if they are subject to the possibility of privatisation.
§ Mr. Raison
In the past few days we have given very careful consideration to the points that the hon. Gentleman raises. No one can say that we have treated the matter lightly. We have thought about those factors, but it is for the Government to make a decision, and that is what we have done. The way in which we have made the decision will enable us to move forward the prospects of getting the reorganisation implemented — that is important — and then to consider the best way in which to progress to privatisation without throwing away the advantages which I recognise are presented by the existence of the Crown Agents.
§ Sir Peter Blaker (Blackpool, South)
Is my right hon. Friend aware that he carries the House with him in his 994 congratulations to the chairman of the Crown Agents, Mr. Peter Graham? Is he further aware that he carries the majority of the House with him in his decision not to close the Crown Agents down, as they have rendered excellent service to Britain and countries overseas? With regard to privatisation, surely the question is whether the Crown Agents, when privatised, can continue to render those services. I can see no logical reason why that should not be so.
§ Mr. Raison
I am grateful to my right hon. Friend for his comments. He is right about privatisation. It is possible to achieve privatisation, while securing the benefits which the Crown Agents undoubtedly give Britain.
Mr. Bruce Milian (Glasgow, Govan)
Although I fully support the criticism about the unnecessary dogmatism concerning privatisation, may I return to the specific point about the pensions branch at East Kilbride, as what the Minister has said threatens it? May I remind the Minister that the transfer to East Kilbride was to make up the numbers of what had been a much reduced Civil Service dispersal to Scotland? Will he assure me either that the branch will stay there or, if there is a reduction in numbers, there will be additional Civil Service dispersal to make up the numbers which were originally promised?
§ Mr. Raison
We have no plans at present to change the work which is carried out at East Kilbride on the pensions side. It is possible that, as and when we progress towards privatisation, there will be a change in the status of the work done there. However, it is extremely likely that a substantial part of the work that is done for the Overseas Development Administration will remain in the public sector. There should therefore not be unnecessary alarm in East Kilbride.
§ Mr. Bowen Wells (Hertford and Stortford)
I also congratulate my right hon. Friend on what I believe to be a balanced decision. We are to retain the services of the Crown Agents, their expertise, contacts and the confidence of overseas Governments in taking procurements through them. This will also preserve the interests of the companies which have benefited from procurement through them. In their independence, they will provide a more efficient service to their clients in Britain and overseas. Will the privatised Crown Agents continue to enjoy the preferred status which they enjoy on procurement through the Overseas Development Administration?
§ Mr. Raison
I am grateful to my hon. Friend for what he said about our plans. I am sure that experience will prove him right. It would be a mistake to think that the Crown Agents have preferred status in all respects. Only about 20 per cent. of the goods procured under British bilateral aid comes through them; the rest comes through the private sector. They work closely with the aid programme. That is as it should be, but there is plenty of scope for private contractors to compete.
§ Mr. David Alton (Liverpool, Mossley Hill)
Does the Minister agree that many people outside the House perceive his statement as a poisoned chalice which contains praise for the Crown Agents and the seeds of their destruction? Does he agree that if, as he says, the Crown Agents are to be profitable by 1986, they might just as well stay as they are, as the Government's decision is purely dogmatic and has been made for doctrinaire reasons?
§ Mr. Raison
I do not believe that my statement will be seen as a poisoned chalice. I believe that it will be seen widely as a sensible development plan for the future which is capable of making the best use of the skills and resources embodied in the Crown Agents.
§ Mr. Peter Bottomley (Eltham)
Does my right hon. Friend agree that the Crown Agents and their customers have changed since my grandfather was one of them? Does he agree also that what is important for the Crown Agents' customers is that the independence of the customers should be matched by the independence of the Crown Agents and their service should be justified by competitiveness?
§ Mr. Raison
I agree. We bear those factors in mind, and will continue to bear them in mind as we approach privatisation.
§ Mr. Tom Clarke (Monldands, West)
Is the Minister aware that he has not made one progressive statement from the Dispatch Box since taking over the Ministry for Overseas Development? Is he further aware that, however today's statement is dressed up, it will cause great anxiety to the civil servants involved and to the developing countries, many of which have been served by the Crown Agents for 150 years? They have been served extremely well and will find the statement inexplicable. Does he accept that there is no way in which privatisation will lead to the type of objectivity and neutrality for which the Crown Agents have been greatly praised?
§ Mr. Raison
The hon. Gentleman's and my ideas of progressive statements are probably very different. I believe that my statement is progressive. It outlines a sensible and potentially viable future for the Crown Agents. It is a way in which to strengthen what they already have in the immediate future. It will enable the Crown Agents to operate competitively and effectively.
§ Mr. Anthony Nelson (Chichester)
With regard to the announcement of a timetable leading to privatisation, does my right hon. Friend agree that there is now abundant evidence that, having incurred record losses on own dealings account, having had £3.5 billion out of their £4.5 billion worth of investment funds which they manage transferred to American competitors, and now having been refused the right to tender to one of their major clients, privatisation is long overdue and that the Crown Agents have for some time let the Crown down? No private company could spend two years incurring such losses. Why should the taxpayer have to do so?
§ Mr. Raison
There have been difficulties in Brunei. The difficulty reported in today's newspapers is due to a misunderstanding. I hope that it can be resolved. I have no doubt that our decision to reorganise with a view to privatisation is right, and I hope that it can be brought about before too long. We are anxious to ensure that the real assets, skills and abilities of the Crown Agents are not wasted. We believe that our plan is the best way in which to make good use of them.
§ Mr. Tam Dalyell (Linlithgow)
Is not the history of the Crown Agents a great deal of unsung good and the occasional, albeit much publicised, fiasco? In reply to my hon. Friend the Member for Greenwich (Mr. Barnett), the Minister used the phrase, "very careful consideration". Is that not an abuse of the English language? How can one talk about careful consideration when none of the 100 principals, either Third world developing Governments or 996 universities in the Third world, and none of the 300 organisations with which the Crown Agents deal, have been consulted? How can there have been careful consideration when those consultations have not, as I understand it, taken place formally?
§ Mr. Raison
It is no secret—the matter has been in the open since last September—that the future of the Crown Agents is under discussion. Those who have wished to make representations to the Government have done so in no uncertain manner, and there has been nothing secret about the operation. Anyone with a point to make has made it and we have listened carefully. We have taken much trouble over the decision, made up our minds and come up with the right answer.
§ Mr. Nigel Forman (Carshalton and Wallington)
I am relieved to hear that the Crown Agents are to continue, albeit in a slightly different form, and I endorse the points made from both sides of the House about the importance of safeguarding the position of overseas pensioners. Will my right hon. Friend clarify two matters which are not clear to me? First, he spoke about achieving profitability by 1986. Does that presuppose that that will happen before privatisation? Secondly, he referred to writing off debts and interest. Will that be found from the contingency reserve or from other parts of the departmental budget, which I consider is already too low?
§ Mr. Raison
With regard to my hon. Friend's question about profitability by 1986, we hope to achieve profitability before privatisation takes place. Writing off debt will not affect the departmental budget.
§ Mr. Nigel Spearing (Newham, South)
Does the Minister agree that the fact that the Crown Agents are known not to be profit-oriented, and therefore impartial, is one of their most valuable assets? Is not the Minister risking dissipating that asset by his proposals? He says that we should wait and hear what people say, but it is surely irresponsible not to consult when the people concerned are busy with many other matters. To make a proper assessment, the hon. Gentleman has an obligation to ask questions. Finally if the Minister goes ahead with the decision in principle, will he first offer the Crown Agents for sale to its principals overseas?
§ Mr. Raison
I do not believe, nor does the Crown Agents board, that it is satisfactory for such an organisation to operate unprofitably. It is also contrary to the conditions of the governing Act of Parliament. I believe that the board will endorse and welcome the decision, but it is for the board to speak for itself.
§ Mr. Dennis Skinner (Bolsover)
Does the Minister agree that it ill becomes the hon. Member for Chichester (Mr. Nelson) to talk about privatisation of the Crown Agents, when he was engaged with Slater Walker in global activities similar to those that might be undertaken by the privatised Crown Agents? As a result, Slater Walker had to be rescued by the taxpayer after a few years of activity. The taxpayer bailed out that company when the Labour Government were in office.
Why is a price not available now if the business is capable of being privatised? In a pure entrepreneurial world, why is it not possible to privatise the Crown Agents without writing off their debts for 1984 to 1986? There is always a price for a commodity. Will the Minister ensure that those who privatise Hamilton teacher training college 997 will not be allowed near the Crown Agents, in view of what has happened there? Finally, will the Minister bear in mind that the Crown Agents privatised themselves in the early 1970s, or at least played at privatisation? When they played at speculating they privatised from within, not by Government edict, and finished up being bailed out by the taxpayer at a cost of more than £100 million. Why do we need to privatise them again?
§ Mr. Raison
The remarks of the hon. Member for Bolsover (Mr. Skinner) about my hon. Friend the Member for Chichester (Mr. Nelson) were wholly and typically irrelevant.
The Crown Agents are not being privatised immediately, because they received a considerable blow last year from the withdrawal of the handling of the Brunei investments. The Government and the Crown Agents rightly felt that it was right to take time to reorganise the agents' operations, to allow them to recover their equilibrium and to plan for the future. That process is under way.
The hon. Gentleman's remarks about the history of the Crown Agents have little or no bearing on what we are discussing now.