INCREASE OF FINANCIAL LIMIT (Hansard, 28 November 1991)

§ Mr. Rhodri Morgan (Cardiff, West)

I am grateful for the opportunity briefly to mention some reasons why we should carefully consider clause 1, which increases the borrowing limit for public finance for the WDA from £700 million to £950 million. I approve of that increase. The WDA has earned it, but it should not have a carte blanche. I have been concerned by one or two aspects of the way in which the WDA has been spending money recently.

The WDA should receive this extra money, but that does not mean that it should be immune from criticism or parliamentary scrutiny of how it is spending this money. That is why I reject the criticism of me by the hon. Member for Clwyd, North-West (Sir A. Meyer) for certain things that I have said recently. He said that my criticisms of the agency were damaging to Wales. That would be true only if one believed that any criticism of the WDA was damaging to Wales and that we as Members of Parliament did not have the right to scrutinise the way in which the WDA is spending its money.

If we come across examples of the WDA misspending public money, it is the oldest public duty of all to draw attention to it, particularly when we are being asked to approve a massive increase of £250 million in the public funding available to the WDA. We should specify the acceptable and unacceptable ways of spending that public money.

I want to give two examples of what I consider to be unacceptable methods of spending public money. I am talking of only a small aspect of the agency's operation, which I believe is open to perfectly fair criticism. That is not a criticism of the agency's being at all. If it were, it would be like saying that Beethoven's Emperor concerto is a rotten piece of music because he was drunk when he wrote it. That makes a difference to what we think of his music, and the same applies to my criticism of the agency.

In 1990–91, the agency pointlessly lost around £1 million on its north American operations as a result of naivety and bad management. I am informed that it lost $250,000 on just one weekend—the same weekend, I believe, that the Secretary of State was there—in June this year.

In July 1989, the agency entered into a bizarre three-way arrangement to set up Welsh Development International Inc. as a profit-making company incorporated in the state of Maryland. It was wholly owned not by the WDA itself, or WDI, but by Mr. and Mrs. Raymond Carignan of Baltimore, Maryland. Mr. Carignan was the chief operating officer of the agency's north American operations. He owned 99 shares of the company and his wife owned one share, in the usual way. That is a bizarre way for the agency to do business. The dangers to which it exposed the agency became evident at the end of June and the beginning of July this year.

1160 I wrote to the Secretary of State about that matter on 13 September, and on 30 September I received a reply that was nothing more than a cover-up. I think that the right hon. Gentleman had been flannelled by the agency.

The $250,000 was lost when Mr. Carignan stripped the office bare of all its expensive equipment—an entire desktop publishing system, audio visual equipment, the database, desks, telephones, security system, and so on. Everything was stripped from the office after it had been in operation for 23 months. I am told that that equipment was valued at $250,000, but the WDA's contract with Mr. and Mrs. Carignan's private company had been so badly and naively drawn up that the agency had no claim to the items that the British taxpayer had paid for to equip the WDA's North American operation. Under the contract between the WDA at Pearl house in Cardiff, WDI and Mr. and Mrs. Carignan, they had the rights to all that equipment.

§ Mr. Morgan

There is no need for the Minister to come the old soldier with me. I wrote to the Secretary of State on 13 September, within a couple of weeks of being supplied with documents covering the contract. The right hon. Gentleman is, after all, the person who appoints the chairman of the Welsh Development Agency—who is responsible to the Secretary of State for Wales. To pretend that the right hon. Gentleman has no responsibility for ensuring that the WDA's money is spent properly is an extraordinary alleged abdication of the Welsh Office's financial responsibilities.

The Minister will be aware that the Secretary of State's primary responsibility is to the House, which is why we are debating the clause. The second responsibility is that of the permanent secretary—as the chief civil servant of the Welsh Office—to the Select Committee on Welsh Affairs, or to the Public Accounts Committee. The third responsibility is obviously that of the National Audit Office, which serves as a safety net in case the Secretary of State has, for one reason or another, not found out.

On 13 September, I wrote to the Secretary of State telling him that something very peculiar had gone on in relation to the three-way contract. The WDA's right to retrieve the equipment was so weak that it even told an employee of Welsh Development International whose personal belongings had been taken by Mr. Carignan— presumably by mistake, when he swept the office bare—that it would be better to let sleeping dogs lie, and not to ask for them back. The attitude seemed to be, "We don't want to get involved. We have lost all that money. We had better just sweep it under the carpet and forget about it." I do not regard that as acceptable. The same applies to the flannel that I received from the Secretary of State for Wales on 30 September.

I have received a parliamentary reply that casts a little light on a round-the-world trip, lasting nearly three weeks, that finished a fortnight ago, on 16 November. Those on the trip went from Wales to Japan, from Japan to Australia, from Australia to the United States and thence 1161 back to Wales. The reply to my written question, which I received a few hours ago, suggests that the concern that I expressed was entirely proper, despite what the hon. Member for Clwyd, North-West said.

The round-the-world trip was taken by three people, two of them employees of the agency, and one, Mr. Shimon Cohen, the personal public relations executive of the agency's chairman, an employee of Lowe Bell. The trip cost £28,000. This was no economy class venture to seek out inward investment; it was a de luxe trip, costing £9,500 a head.

I question the wisdom of such a venture. The leg between Wales and Japan could be seen as a mission to secure inward investment: it was during that leg that the new investment referred to by my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) was announced, although it had probably been fixed up earlier. After that, however, the three proceeded to the Great Barrier reef, stayed for a couple of nights in the Holiday inn in Cairns, Queensland, the local holiday resort, and went on to Melbourne and Sydney.

I do not think that Australia is a great place to go for the purpose of seeking out foreign investment for Wales. Perhaps it will be in 10 years' time, when the economy has matured, but it is too early to expect Australia to be able to provide Wales with many factories and jobs this side of the year 2000.

The rest of the trip strikes me as entirely unjustifiable. The three had intended to stay for two nights in Tahiti —from 15 to 17 November—at the Beachcomber hotel, where they were booked in; the plan was then to go on to Los Angeles. That leg of the trip was, however, cancelled. They had planned to visit only one company, and a management change caused the visit to be crossed off the list.

The £28,000 really covered only a serious investment mission to Japan. The three could have returned direct from Japan, but instead they went to the Great Barrier reef, Melbourne, Sydney, Tahiti and then back home. That comes close to spending public money as though it were private money, and as though there were a lot of it to spend—as my hon. Friend the Member for Cardiff, South and Penarth (Mr. Michael) said.

I have referred in early-day motions to the recycling of WDA grant money to consultancy companies that have been closely linked with, or owned by, senior officials of the agency. I disapprove strongly of that. However, I approve of the £250 million increase, although I think that it is time that the Secretary of State called in the WDA's chairman for a chat to put him back on the right road.