§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Chapman.]
2.32 pm§ Mr. Phillip Oppenheim (Amber Valley)I wish to raise the issue of the county council pension fund operated by Derbyshire county council on behalf of people who work for the county council and for other local authorities in Derbyshire. The operation of the county council pension fund has been the source of some concern to my constituents, some of whom are Labour voters, over the past couple of years. The concern certainly goes well beyond supporters of the Conservative party and is widespread in Derbyshire among supporters of all parties and extends even to Opposition Members of Parliament representing Derbyshire constituencies. First, I should make it clear that Derbyshire county council is one of the very few county councils in which, in effect, councillors run their own pension fund. Most county council pension funds, although technically run by the councils, are operated and executed by independent investment bodies and advisers. In Derbyshire, however, the leader of the county council and certain councillors take a very close operating interest in the running of the pension fund.
Concern about the running of the pension fund began in the summer of 1986 when the county council initially announced its intention through its pension fund, to invest £260,000 in a newspaper called News on Sunday, which advertised itself as Left-wing and non-sexist. in deference to my hon. Friend the Minister, I shall not say what the slogan was, but some hon. Members will be aware of it. At the time of the investment, many people warned the county council that it was wrong to invest in such an overtly political publication and that the newspaper was not viable, but the county council failed to heed those warnings or to take any proper independent advice as to whether it was a sound investment.
The warning voices proved to be correct and in June 1987 the newspaper ran into severe financial difficulties and had to be bailed out by a self-styled Left-wing entrepreneur by the name of Owen Oyston, who made a great deal of money operating an estate agency in Manchester and the north-east. Mr. Oyston refinanced the newspaper and took a large chunk of the equity, diluting the equity holdings of the original investors, including Derbyshire county council. In the process, it is reported that he paid himself £4,000 a week in consultancy fees. I understand that Mr Oyston has never denied that figure, but it puts an interesting light on the supposed altruism of his gesture in rescuing the newspaper.
Despite the apparently well-paid efforts of Mr. Oyston, the newspaper finally packed up in November 1987. At that time, Derbyshire county council came under severe criticism and confusion seemed to reign at its headquarters in Matlock. Councillor Bookbinder, the leader of the county council, claimed publicly that the pension fund investment in News on Sunday was safe. Subsequently, in an article in the Derby Evening Telegraph on 20 November 1987, the leader of the council was quoted as saying that the investment was in Growfar Limited and not the News on Sunday and that Growfar would continue in business. In a subsequent letter to me, the leader of the council told 705 me that the county council pension fund did not have any holding in Growfar. He has subsequently refused to elaborate on the subject.
On 16 December 1987 the Derby Evening Telegraph reported that the county council pension fund's share in Growfar had been sold to Mr. Oyston for £400,000. Councillor Bookbinder waved a cheque claiming that, far from making a loss on the News on Sunday deal, he had made a substantial profit of £95,000. He also announced that Derbyshire county council was planning to set up a new joint company with Mr. Oyston called Telemags. However, that is not the whole story. Confidential investment panel minutes later showed that as part of the negotiation whereby Mr. Oyston paid £400,000 for the council's share in Growfar the council agreed to invest the same sum in Telemags. It was grossly misleading for Councillor Bookbinder to claim that he had made a profit on the deal. In fact, he had secured a face-saving deal whereby Mr. Oyston initially bought out his share for £400,000 and then subsequently the county council pensioners were forced to invest the same amount in another of Mr. Oyston's ventures. Furthermore, apart from the £400,000 investment in Telemags, it was contemplated that a further £2 million over a two-year period would be invested in yet another of Mr. Oyston's companies.
In January 1988 Councillor Bookbinder announced in the Derby Evening Telegraph that the £400,000 was to be invested in Telemags. However, when I wrote to the leader of the county council asking whether there was any link between the buy-out of the shares and the agreement to invest in Telemags, he replied on 11 January refusing to answer any of my questions. In an article on 8 January in the Ilkeston Advertiser Councillor Bookbinder denied that there were any strings attached to the sale of the News on Sunday shares. That was shown to be completely untrue by the confidential investment panel minutes which came into my possession.
Apart from the somewhat dubious deals involving News On Sunday, which were motivated more by political than by commercial objectives, there is the vexed subject of the county council's dealings in a Russian leisure centre, which were first mentioned with a blaze of publicity in March 1988. Despite the media spotlight which Councillor Bookbinder ensured was put on his dealings in Russia, little concrete information was released about what the deal involved. Initially, Councillor Bookbinder said that no ratepayers' or pension fund money would be involved, but subsequently it became apparent that not only were his trips to Russia financed by ratepayers but that ratepayers were to pay £20,000 for a feasibility study on the deal.
The dealings in the Russian leisure centre are extremely dubious, especially in view of some of the comments made by the county council's leader. It has been said that the deal is a millionaire's playground without the millionaires and that it would involve a recoupment of the investment by a factor of four. It may be all well and good for a commercial company to risk capital investment in a leisure centre, millionaires' playground, marina or hotel in the Soviet Union, but it is quite another thing for a leader of a county council to use ratepayers' money, pension fund money or whoever's money it is for such a deal. I sincerely hope that the deal will be profitable, however, as it will otherwise be a serious matter for pension fund holders and ratepayers in Derbyshire. We must ask whether it is right and proper for a county council leader to involve himself, 706 ratepayers and possibly pension fund holders in such a deal, which is more rightly the preserve of commercial companies.
A further matter which is much concerning the people of Derbyshire about the pension fund dealings relates to a company called Jebwill. On 16 May 1988, confidential minutes of the delegation's sub-committee of the policy committee reported Jebwill's decision to acquire up to £2 million worth of shares in Red Rose radio—a radio station effectively controlled by none other than Mr. Oyston, while Jebwill is effectively controlled by the county council pension fund. The county council pension fund also announced that it would subscribe to 2 million Jebwill seed shares. Later, Red Rose merged with the Miss World group in which Mr. Oyston had a 30 per cent. stake and Jebwill now has a 7.9 per cent. stake in Mr. Oyston's expansion into the Miss World group.
It is deeply suspicious that the county council is involving yet more pension fund money in Mr. Oyston's ventures. The ventures may be profitable, but I question whether the investment decisions are being made primarily on commercial and economic grounds, rather than being motivated by a desire to achieve publicity or to posture publicly on the part of the leader of the county council, Councillor Bookbinder. Those deals are highly suspicious. Furthermore, the cloak of confidentiality that the council leader has put around the deals further arouses my suspicion and that of many other people.
It is ironic that a council and a council leader, who continually miss no opportunity to profess their belief in the freedom of information, have fought an expensive legal battle——
§ Mr. Harry Barnes (Derbyshire, North-East)Will the hon. Gentleman give way?
§ Mr. OppenheimI will give way in a minute.
It is suspicious that a council which took expensive legal action to ensure that its libraries could stock the "Spycatcher" book, and which has been bitterly critical not only of the Official Secrets Bill but of the Official Secrets Act 1920 and the Government's involvement in the Spycatcher case, could none the less release so little information about the commercial dealings of its own pension fund.
I have asked a series of questions directly to Councillor Bookbinder relating to the pension fund dealings, but I have consistently been stonewalled and have never received proper replies. On 21 November 1988, for example, I sent a detailed list of 20 questions to Councillor Bookbinder. All that I received was a letter saying that Councillor Bookbinder felt that those issues were matters of commercial confidentiality and that although he would be happy to debate the issue he was not prepared to release the answers to my questions before the debate.
I am the first to accept that there are occasions when it is right to declare commercial confidentiality. When a council is putting out tender documents for a contract, for example, it is right that there should be commercial confidentiality while the tendering process goes forward.
§ Mr. Harry BarnesWill the hon. Gentleman give way?
§ Mr. OppenheimI said that I would give way in due course. The hon. Gentleman should hold himself in check. I will give way in a minute.
707 It is legitimate during the negotiating stage of certain deals for a county council pension fund to involve itself in deals which it initially cloaks in commercial confidentiality. What is wholly wrong is that, when engaging in the controversial and politically motivated deals in which Derbyshire county council has involved itself, it should use the excuse of commercial confidentiality when clearly there is no legitimacy for it. It is not fair to say that every aspect of every deal in which a county council pension fund is involved should be commercially confidential. The ratepayers of Derbyshire and the pension fund holders have an absolute right to the full details of the dealings involving Mr. Oyston, Councillor Bookbinder, Jebwill, the proposed millionnaires' playground without the millionnaires at Yalta in the Crimea in the Soviet Union, and all the other companies, such as Growfar, News on Sunday and Telemags, in which the county council has invested large sums of pension fund money but about which little is known.
It is customary, when hon. Members wish to intervene in or to contribute to an Adjournment debate, that they write to ask consent for that. I have received no such missive from the hon. Member for Derbyshire, North-East (Mr. Barnes), but as an act of wholly gratuitous goodwill to a fellow Derbyshire Member of Parliament who shares my deep concern about the operations of the county council pension fund—if he does not, he certainly should—I will give way and allow the hon. Gentleman to intervene.
§ Mr. Harry BarnesI thank the hon. Gentleman for giving way, despite his preamble. I am rather disappointed with his contribution because I stayed especially for this debate. I intervened because it seemed appropriate. One cannot plan an intervention before one comes to the House. Had I done so, it would have been to say that the hon. Gentleman should come outside to make his remarks because legal action might need to be taken against him, but I do not need to say that because he has said nothing of significance.
The hon. Gentleman has told us that the county council uses venture capital which is about 3 per cent. of total expenditure—the specific money to which he referred is about 0.5 per cent.—and I would have thought that he would have supported the fact that the council is in the market to make money, like any good capitalist. The hon. Gentleman also complained about councillors travelling the world, although he and the Prime Minister do so. The councillors travelled to raise capital and it is said to be a worthwhile reason.
The hon. Gentleman said that Derbyshire Members of Parliament, meaning all of us, were worried about what was happening. Neither my hon. Friend the Member for Bolsover (Mr. Skinner) and myself, nor the other two Labour Members for Derbyshire constituencies, are worried. I notice that no other Conservative Members are here to back up the hon. Gentleman.
§ Mr. OppenheimI thank the hon. Member for Derbyshire, North-East (Mr. Barnes) for his comments. The hon. Member for Bolsover (Mr. Skinner) has done a good job of winding the hon. Gentleman up and setting him off in the right direction—I could almost see him pulling the strings. Having said that, I think that the hon. 708 Member for Derbyshire, North-East did a pretty good job trying to defend the county council, although I should point out that Ministers go abroad to try to promote British industry because they have a responsibility to boost our exports. County councillors, on the other hand, should accept that their main role is to promote and boost efficiency and value for money in the provision of local services. They are not international statesmen and they do not have a role posing and posturing on the world stage as Councillor Bookbinder seems to think. It is a great shame because Councillor Bookbinder is clearly a man of great energy and some intelligence and it would be to the benefit of everyone in Derbyshire if he concentrated his efforts on trying to achieve value for money for ratepayers and users of services.
The hon. Member for Derbyshire, North-East said that I should say outside the House what I have said here. I do not think that I have said anything today that I have not already put into print on numerous occasions or that I have not already said in Derbyshire, so the hon. Gentleman need have no worry that I am trying to hide behind the cloak of privilege as I most certainly am not. The hon. Gentleman also said that other Derbyshire Members were not here to support me. My hon. Friends discussed the matter with me and they fully agree with what I have said but, needless to say, they are confident in my ability to handle the debate alone and saw no reason to be present. They preferred to be in their constituencies, where many hon. Members spend their Fridays.
The hon. Member for Derbyshire, North-East said that he was not in the least worried about the county council's pension fund dealings and claimed that the same was true of his hon. Friend the Member for Bolsover. If they are not concerned, they certainly should be. One of their colleagues on the Opposition Benches who does not come from Derbyshire has apparently made a special trip to Matlock to express his deep disquiet to the leader of the county council, Mr. Bookbinder. The hon. Member for Derbyshire, North-East should open his eyes because while he may not be concerned, his constituents most certainly are.
§ The Parliamentary Under-Secretary of State for the Environment (Mrs. Virginia Bottomley)I am pleased to respond to my hon. Friend the Member for Amber Valley (Mr. Oppenheim), whose constituents are fortunate to have as their representative someone who is so vigorous and diligent in pursuing their interests.
I should, perhaps, begin by explaining the factual position. The local government superannuation scheme is contained in detailed regulations made by my right hon. Friend the Secretary of State. The regulations require 88 authorities—mainly county councils in England and Wales and London boroughs—to maintain superannuation funds for the purpose of paying benefits under the scheme as they fall due. The current total value of the fund is estimated to be about £25 billion.
The regulations require the funds to be invested, and lay down certain rules that are to apply to such investment. No more than 5 per cent. of a fund may be invested with any one company, and no more than 10 per cent. may be invested in unlisted securities. Authorities are also required to have regard to the need to diversify their 709 investments, to the suitability of any proposed investment, and to expert financial advice, which they must obtain at reasonable intervals.
The regulations stipulate that each fund is to be valued by an actuary at five-yearly intervals. In the light of his valuation the actuary is required to fix the contributions which local authorities and other employers in the area must pay into the fund over the next five years. These contributions come direct from the rates, and it follows that the investment performance of a pension fund can have a substantial effect on the amounts which authorities need to find from the rates. That is one of the reasons why my hon. Friend is so concerned in this case.
In recent years, this effect has often been disguised by the fact that, because returns on investments have been high, most of the funds are in considerable surplus. But that does not alter the fact that, if a particular investment fails, the call on the rates will be greater than would otherwise have been the case.
§ Mr. Dennis Skinner (Bolsover)Will the Minister give way?
§ Mrs. BottomleyI will not give way, because I have little time in which to speak. The hon. Gentleman has recently had two Adjournment debates in which he could have raised matters relating to Derbyshire.
In 1986–87, it was reported that some Labour-controlled local authorities, including Derbyshire county council, had invested money belonging to their superannuation funds in the Left-wing newspaper the News on Sunday, as my hon. Friend has explained. When the company went into liquidation after a few weeks, most of the authorities lost their entire investments, although, as my hon. Friend explained, Derbyshire managed to recoup its initial outlay. Since that time, there have been further reports about alleged investments by the Derbyshire fund, some of which my hon. Friend has explained this afternoon.
I understand that the Derbyshire superannuation fund is valued in excess of £300 million. It seems unlikely, therefore, that any of the investments has offended against the limits laid down in the regulations to which I have referred, requiring no more than 5 per cent. of the fund to be invested with any one company, or 10 per cent. in unlisted securities, which is what the News on Sunday shares were. Any other question about the legality of the investments, such as whether the council had had sufficient regard to the suitability of any proposed investment or the overall requirement to diversify those investments and act in the light of expert financial advice, would be a matter for the district auditor, rather than my right hon. Friend the Secretary of State.
It may well be that some of the investments were imprudent, in the sense that councillors must have been aware of the risks involved. It is open to any ratepayer in the county to take appropriate action if he or she considers that such imprudence might have put up the rate bill.
What I know for certain is that it will not be the employees of Derbyshire county council, or its constituent districts, or the pensioners who suffer as a result of any losses sustained by the fund. The future benefits of the 20,700 employees who are current members of the fund are absolutely protected by statute. So are the pensions and pensions increases of the 9,000 pensioners currently drawing pensions from the fund, and the 3,000 or so other 710 former employees who have deferred pension rights from the fund. The rights of those 30,000 or so people are very adequately protected by statute.
However, once again, the 420,000 ratepayers of Derbyshire, about whom hon. Members often hear, will stand to lose, by rash or poorly thought through investment decisions by those controlling the pension fund. They might wish that they had a similar absolute assurance that the finances of their county council would always be handled with the kind of prudence that they might expect.
This year, Derbyshire has succeeded in achieving a reduction of about 2 per cent. in the level of its precept. That measure of relief must be welcomed by the hard-pressed ratepayers who, for years, have had the highest rate poundage of any county council. This year, they are beaten only by similarly Labour-controlled Cleveland. Although I understand that, if the council had made prudent and cautious decisions, such as those made by the council in the district represented by my hon. Friend, it could have done much better. The rate could have been cut by 8 per cent. The fact remains that Derbyshire still has the second highest rate precept of all the shire counties and the highest rate of spending, in relation to estimated need, of all those councils. I imagine that the ratepayers would be much happier if their councillors concentrated rather more of their efforts on bringing rates down to a more acceptable level and spent less money on investing in enterprises such as short-lived newspapers, in which the attraction seems to lie in their political purity rather than the soundness of their finances.
More generally, Ministers must clearly be concerned by reports such as those brought to us by my hon. Friend the Member for Amber Valley, that investments are being made on other than commercial considerations, and we are considering whether the regulations need to be strengthened to deter such activities. That is difficult, because the rules apply to all 88 fund authorities and we have no wish to shackle those who are blameless in order to catch those who may be tempted to act improperly. However, I can assure my hon. Friend that we are considering the position to see what can be done, and I am grateful to him for drawing this to the attention of the House.
My right hon. Friend the Minister for Local Government is today in Derbyshire meeting council leaders and visiting some of the districts.
It is understandable that my hon. Friend the Member for Amber Valley should be particularly outraged as a result of the behaviour of Derbyshire county council when, by contrast, Amber Valley district council has only recently, saved £2.5 million by moving swiftly to put all its services out to tender.
Our model is that local government should fairly, effectively and efficiently represent the interests of the ratepayers, provide services in an efficient, cost effective, manner and give value for money.
I was interested that my hon. Friend the Member for Amber Valley and the hon. Member for Derbyshire, North-East (Mr. Barnes)—with whom I debated earlier this week—referred to libraries because they are a sore point in Derbyshire. As my hon. Friend the Member for Derbyshire, West (Mr. McLoughlin) well knows, the council spends more distributing fewer books than neighbouring Staffordshire. Once again, that is an example of a county council which is more concerned with political 711 gestures than with considering its hard-pressed ratepayers. We are confident that, as we move towards the community charge system, such behaviour will be exposed to local charge payers for what it is.
§ The Motion having been made after half past Two o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at two minutes past Three o'clock.