HC Deb 19 April 1989 vol 151 cc321-3
3. Mr. Andrew MacKay

To ask the Chancellor of the Duchy of Lancaster what proposals he has for improving his Department's procedures in investigating those suspected of company frauds; and if he will make a statement.

The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Francis Maude)

In April last year the serious fraud office was established for the investigation and prosecution of serious and complex fraud. An increase in resources last year allocated to investigations by the Department of Trade and Industry has already resulted in such inquiries now being concluded in a much shorter time scale. In addition, following a review last year, the Companies Bill at present being considered in another place contains provisions which significantly improve procedures and extend powers for the investigation of companies.

Mr. MacKay

Even so, does my hon. Friend agree that there is still a regrettably long delay before people are prosecuted for company fraud, which is damaging for all concerned, including those being tried? Does he also agree, as a one-time practising barrister, that one of the principal reasons why it takes so long is that the Director of Public Prosecutions and the Department find it difficult to obtain a conviction when there are jury trials? Does he agree that the House fluffed the opportunity to change to a judge and two laymen, as the Roskill committee recommended, and that that should be implemented as a matter of urgency in the next Session of Parliament?

Mr. Maude

On the time scale, my hon. Friend will be delighted to know that in the past few years the average time for a Companies Act investigation has fallen from three years and five months to 18 months despite a general increase in the complexity of the investigations. I am sure that the House will welcome that marked improvement.

My hon. Friend is right that for a few trials of exceptional complexity the Roskill Committee recommended trial by judge and assessors rather than by jury. That was the only significant recommendation that the Government did not accept and, as my hon. Friend said, it was highly contentious. We accepted a number of other principally procedural recommendations, which should make it easier for juries to deal with exceptionally difficult cases.

Mr. Rees

Will the Minister look into the allegation of procedural confusion between the serious fraud office, his Department, fraud departments in the police force, the Crown prosecution service and the Attorney-General? With the best will on earth, people are getting the procedures wrong because they are too complicated.

Mr. Maude

A degree of complexity is inevitable. I know of no country with as sophisticated a corporate structure as ours where it is possible for administrative matters of this kind to be dealt with in a neat and tidy way. Different functions have to be carried out, and prosecuting authorities must remain independent. I do not foresee much scope for streamlining administrative structures, but I foresee scope—we have worked extremely hard to achieve this—for ensuring that the processes are much swifter. We are having considerable success along those lines.

Mr. Nelson

Does my hon. Friend agree that part of the answer may lie not in increasing the powers of the serious fraud office or of his Department, but in companies and their boards considering more adequately activities which may not necessarily amount to fraud but are certainly not intended uses of shareholders' money? Whether it concerns loans or activities wholly unassociated with the activities of a company—[HON. MEMBERS: "The Tory party."]—and whoever the non-executive staff or directors of a company may be, I suggest that the House should reconsider the proposals of the late Sir Brandon Rhys Williams on audit committees, which would allow such activity because it would be separately reported.

Mr. Maude

I hear what my hon. Friend says. As my hon. Friend no doubt did, I had a number of fascinating discussions with our late friend Sir Brandon on the subject. I do not accept the argument that the simple existence of an audit committee solves all the problems. Directors currently have a duty to account to shareholders for the way in which shareholders' funds are used. Proper means are available for shareholders to hold directors to account for the way in which funds are used.

Mr. John Garrett

Why has not the inspector's report into the House of Fraser takeover been published, when no criminal proceedings are pending? If the Secretary of State is still awaiting the serious fraud office report, how is he able categorically to state that there have been wrongdoings?

Mr. Maude

It was perfectly clear from the outset, and it was stated in open court in the Court of Appeal. The hon. Gentleman should know enough about the world to understand that a case is not referred to the serious fraud office unless there is some sign of wrongdoing.