HC Deb 15 January 1987 vol 108 cc409-12 3.32 pm
Mr. Robin Cook (Livingston)

(by private notice) asked the Secretary of State for Trade and Industry if he will extend the investigation into the affairs of Guinness in the light of recent events at that company and its corporate advisers.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Michael Howard)

The inspectors appointed to look into the affairs of Guinness already have wide terms of reference which enable them to investigate any matter concerning Guinness and to require any persons, including its corporate advisers, whom they consider to have relevant information to give evidence to them. As and when I receive any material suggesting misconduct in a matter not concerning Guinness, I will consider it and take any appropriate action. I shall certainly not hesitate to make a further appointment, of inspectors if the circumstances justify it.

Mr. Cook

Is the Minister aware that it is believed in the City that as many as 90 million shares in Guinness may have been bought during last year's bid on the basis of improper indemnities by Guinness? Is he aware that the trail of the slush fund with which they were financed leads through some of the most hallowed and established names in the City? Is it not now clear that we are in the middle of the biggest City scandal for a generation, so big that even the public relations talents of Sir Gordon Reece could not keep it under wraps?

Does the Minister recognise that the blame for those events cannot be shuffled off on to a few individuals who have been thrown overboard? Does he recognise that the Government have encouraged the takeover stampede by their relaxed attitude to such bids, of which today's announcement about Pilkingtons is merely the most astonishing? Does he recognise that the Government have achieved only a trickle of prosecutions for fraud in the City in stark contrast to their attitude to fraud in the social security system? Is it not clear that the Government have created a climate in the City in which anything goes?

Can the Minister assure the House that the Department of Trade and Industry inquiry was not discussed when the Prime Minister attended a private lunch last week at the London office of Bain and Co. which employed the financial director who has just been dismissed by Guinness?

Given the scale of the scandal and the £200 million of improper share dealing, why did the public authorities apparently not detect anything wrong until tipped off nine months later by the American authorities? Surely this week's events must have shaken even the Minister's complacency about leaving the regulation of the City to self-regulation by the City? Why does not the Minister admit that we desperately and urgently need an independent public watchdog to restore law and order in the City of London?

Mr. Howard

The House will not expect me to comment on the circumstances presently being inquired into by the independent inspectors who have been appointed to look into the affairs of Guinness. I would not wish to take any step that would be likely to impede their investigations. However, of one thing there can be no doubt: there is no question of keeping anything under wraps. If anything merits investigation, it will be investigated fully, properly, thoroughly and effectively.

The hon. Member for Livingston (Mr. Cook) has come out with the hoary and entirely misconceived assertion that prosecutions for insider dealing are inadequate. He knows that the record of prosecutions that have taken place since insider dealing was made a criminal offence by this Government leaves something to be desired. That is precisely why we have taken powers of an unprecedented nature in the Financial Services Act 1986. Those powers require people to answer questions put to them by investigators, even if such questions will incriminate them, on pain of punishment for contempt of court. That is a measure of the Government's determination to root out malpractice and misconduct in the City whenever evidence of it comes to our attention.

Sir Alex Fletcher (Edinburgh, Central)

I congratulate my hon. and learned Friend on the expeditious use he has made of the new powers available to Companies Acts inspectors. As the major question raised by this sordid affair is the legality of the Guinness takeover of Distillers, a matter that may well involve the Director of Public Prosecutions and the courts for many months, what steps does my hon. and learned Friend propose to take to protect the interests of the shareholders involved against any actions by Guinness that may further prejudice their interests as shareholders?

Mr. Howard

I cannot comment on the affairs of Guinness. However, my hon. Friend will appreciate that it is now under new direction and I have no doubt that those responsible will take his comments to heart.

Mr. Ian Wrigglesworth (Stockton, South)

Does the Minister agree that there is already sufficient information in the public domain to make it quite clear that the whole affair stinks and is leaving a dreadful aroma over the whole of the City? Does he also agree that we have seen enough information already to cause deep offence to many people in the City and other parts of the country and, therefore, will he tell the House what resources are being made available to carry out the investigation with the utmost expediency? Can the Minister give some indication as to when he expects the investigation to be completed and say that he will make a full statement to the House when it has been completed and reported to him?

Mr. Howard

The investigations are being conducted by independent inspectors who are not subject to any constraints on the resources available to them. They are well aware of the need to complete the investigations as soon as possible, subject only to the need to carry out a full, thorough and effective inquiry. I fully expect that, as soon as they report, the report will be made public.

Sir Edward Gardner (Fylde)

Does my hon. and learned Friend agree that it is offensive in principle and injurious in practice that a famous company such as Pilkingtons that can promise to revive the prosperity of the north of England should be put in peril by the predatory activities of another company such as BTR?

Mr. Speaker

We should have questions about Guinness, not Pilkingtons.

Mr. Robert Sheldon (Ashton-under-Lyne)

Is the Minister aware that we are talking not about a few individuals who have done something wrong but about some of the most prominent names in the City of London, such as merchant banks and solicitors, as well as those who have responsibilities for the stockbroking aspects of this matter? Dealing with such prominent names is rather different from dealing with a few individuals who might be castigated at some stage in the future.

Is the Minister aware that many of us suspect that none of this might have come out had it not been for information gathered from the United States that set off the whole investigation? Will the hon. and learned Gentleman accept that we are not talking about small matters? We need proper regulation of such problems if the City of London is to hold anything like the place that many of us expected for it when deregulation started.

Mr. Howard

I cannot comment on the source of the information which led to the appointment of inspectors in this case, but I can say that as soon as that information came to the attention of the Department we acted speedily and promptly to appoint independent inspectors to investigate matters.

As for the more general regulation of the City, the regime provided for under the Financial Services Act 1986 will prove to be effective. However, we shall scrutinise with care the report of the Guinness inspectors, and we shall be anxious to learn any lessons from it that we can.

Several Hon. Members


Mr. Speaker

Order. I remind the House that a private notice question is an extension of Question Time. We have a further private notice question on Pilkington. I shall allow two questions from either side.

Mr. Bill Walker (Tayside, North)

I congratulate my hon. and learned Friend and his inspectors on the way in which they have conducted their duties thus far. Does my hon. and learned Friend agree that I was the first Member in the House to raise the matter of how Guinness and Morgan Grenfell were behaving? Does he also agree with the comments that I made on 25 July 1985 regarding that, and the way that the takeover panel had fallen far from the standards required for self-regulation? I support self-regulation, but when one finds that the individuals who are carrying out the duties are falling short, it is right that it should he commented on.

I also draw my hon. and learned Friend's attention to the fact that one of the few hon. Members——

Mr. Speaker

Order. The hon. Member should ask questions, not make statements.

Mr. Walker

Does the Minister agree that the hon. Member for Livingston (Mr. Cook) is one of the few Opposition Members who have been consistent in this matter and is to be congratulated, unlike others, such as the Leader of the Opposition, who supported Guinness, and who are now being noisy about it?

Mr. Howard

The Opposition have been far from consistent in their approach to these matters, but I can confirm that my hon. Friend has been vigorous in drawing material to the attention of the Department.

Mr. Tom Clarke (Monklands, West)

In view of the potential for further job losses if Guinness continues with its present programme, especially in Scotland, will the Minister—or better still the Secretary of State—use his influence to invite Guinness to withdraw its notorious rationalisation programme, especially since it flies in the face of all the pledges that were given by Mr. Saunders during the takeover campaign?

Mr. Howard

These are matters for the company. I am sure that it will take all the circumstances into account in making its decision.

Sir Anthony Grant (Cambridgeshire, South-West)

As during many years of Labour Government absolutely nothing was done to legislate against such scandals, will my hon. and learned Friend reject as humbug what the Opposition say? Nevertheless, does he agree that in recent years some people have entered the City who are long on cunning but short on morals? Is it not a great pity that some of the energy and talent used in shuffling paper in takeover deals is not used to increase existing productive business?

Mr. Howard

For the most part, standards in the City remain high. It is important that we should acknowledge the great contribution which the City makes to our economy, earning £7.5 billion for Britain in net foreign exchange in the latest year for which full figures are available. That makes a significant contribution to our productive economy.

Mr. Dick Douglas (Dunfermline, West)

Will the Minister accept that the House is not really persuaded by his argument that this is a little local difficulty involving only insider trading? Will he give us, particularly in Scotland, some assurances on the possibility of going down the line and looking at the activities of the Saunders syndrome in relation to the takeover of Bell's? Many Labour Members, including myself, who were anxious about those activities and received some assurances on headquarters, employment opportunity and so on—I have a substantial Bell's plant in my constituency—would like to know the Government's intention in that regard.

Mr. Howard

I have already described to the House the inspectors' terms of reference, and they are very wide.