ROM-Data Corporation

HC Deb 24 January 1996 vol 270 cc309-16 12.30 pm

Mr. David Jamieson (Plymouth, Devonport)

I am pleased to have been granted this short debate, as there are important questions to be answered about the ROM-Data Corporation and the way in which the Department of Trade and Industry grant aid has been given to companies in the south-west. I am happy to allow the hon. Member for Falmouth and Camborne (Mr. Coe) to have some time to speak in the Adjournment debate that I have initiated.

The south-west is in great need of economic regeneration; there has been a rundown in defence industries and many of the primary industries that used to exist in Cornwall and parts of Devon. As you will know, Madam Deputy Speaker, unemployment is high, not only in Plymouth, but in Falmouth and Camborne. That is why inward investment is essential to create new jobs and improve the long-term economic conditions of the south-west.

I welcome the regional office that has been set up in our area, which has helped to make improvements in some of those sectors. I fully appreciate that there are limited and finite resources available for that assistance, which is why those resources must be used well and effectively. I also appreciate that, when those grants are given to companies, spotting winners is difficult, that only some companies can benefit from those funds, and that no Department can ever guarantee success. It is sometimes easier to spot losers and guaranteed failure.

The Department of Trade and Industry has an absolute responsibility to undertake the most careful checks before large sums of taxpayers' money are given to any company. At least two factors must be considered: the first is that a proper, skilled assessment of business plans must be conducted by an independent authority. Secondly, careful checks into the financial background of directors should be carried out to discover any former bankruptcies, liquidations or even fraud.

In the case of the ROM-Data Corporation, various questions are raised. The first involves the competence of the advice given to the DTI. The second relates to the DTI's policy when giving grants to people with dubious financial backgrounds. Were checks made of the ROM-Data Corporation? Was there a full and proper scrutiny of the company's business plans before the grant was made?

I shall give a brief history of the ROM-Data Corporation. It was set up in Falmouth in 1991 to do the job of data processing. In that year, it received regional selective assistance of £825,000 of taxpayers' money—a substantial sum. It is the sort of sum that many companies in the south-west would like to enjoy, and they would welcome receiving a fraction of it. A promise was made that many jobs would be created.

Early in 1994, wages and value added tax were unpaid, and, I believe, the company approached the hon. Member for Falmouth and Camborne, who assisted it to obtain more time to pay the VAT. That is what any Member of Parliament would have done in those circumstances.

Later that year, the company received £250,000 of loan guarantee—another substantial sum of taxpayers' money—despite the fact that it had not been paying wages, and was clearly experiencing financial difficulties. At the end of 1994, not only were wages and bills unpaid, but the company went into liquidation. It left many creditors; the wages of many workers in the Falmouth area, Cornwall and Devon were not paid. Many small businesses suffered as their bills were not settled.

The question must be asked: what checks were made in 1991 by the DTI into the directors of the ROM-Data Corporation, particularly Mr. John Dawson? Mr. Dawson was a former Bath Conservative councillor whose firm, John Dawson (Motor Holdings) Ltd, in 1981, suffered a spectacular bankruptcy—one of the largest bankruptcies in the south-west at that time. Mr. Dawson left more than £2 million of debts. Wages were unpaid; there were many creditors—many of which were small businesses—who were hurt when the company went into liquidation. I believe that Mr. Dawson fled to the West Indies on his yacht, and a warrant was issued for his arrest.

What checks were made into Mr. Dawson's background, and, more importantly, what did they reveal? The DTI Minister, Baroness Denton, wrote a letter to the hon. Member for Ryedale (Mr. Greenway), who had quite properly inquired why one of his constituents had not received his money from ROM-Data. On 12 January 1992, the Minister wrote to the hon. Gentleman saying: all applications for Regional Selective Assistance are rigorously appraised by officials within this Department. The hon. Gentleman must have pressed the matter further on behalf of his constituent, as the same Minister admitted on 2 April 1993 in a further letter to the hon. Gentleman: Mr. Dawson may have made a commercial mistake in his past. She was presumably referring to the liquidation that amounted to more than £2 million and the fact that the police were looking for Mr. Dawson in 1981.

On 2 March last year, I asked a question of the former President of the Board of Trade, now the Deputy Prime Minister, about what checks were made. The answer that I received stated: A range of inquiries were undertaken by the Department and others into the background of ROM-Data, including checks on the directors of the company through the Companies House and the insolvency service".—[Official Report, 2 March 1995; Vol. 255, c. 716.] On 19 July 1995, I asked a further written question of the President of the Board of Trade. I asked him whether the Department was aware of the previous bankruptcy of the director, John Dawson. The reply that I received stated: The Department made certain inquiries into the background of the directors prior to the offer of grant in 1991. However, the bankruptcy record referred to did not come to light at the time."—[Official Report, 19 July 1995; Vol. 263, c. 1562.] The bankruptcy did not come to light, despite the checks that had been made with the Insolvency Service, but, in 1993, Baroness Denton had had the information at her disposal—she said that Mr. Dawson had made a commercial mistake in his past. She must have known then the information held by the DTI, so why was that not made clear in the answer before the House in July 1995?

When pressed on the matter of the checks, the new President of the Board of Trade came clean in a written answer to me on 19 December last year. He said: although some checks may have been made…the subsequent investigation has revealed no documentary evidence that these checks were made."—[Official Report, 19 December 1995; Vol. 268, c. 1091–92.] In a further letter to the hon. Member for Ryedale, the President of the Board of Trade said of the answers given to me earlier in the year: Answers which had been given earlier this year…were misleading. In his letter, he underlined the word "were".

The answers given to me in the House were indeed misleading: they were untruthful and incorrect. The President of the Board of Trade said that checks were made, but in December he said that there was no evidence that those checks were made. The President of the Board of Trade has therefore admitted that the previous President of the Board of Trade misled the House on that important issue.

I shall now discuss the way in which those grants are assessed. A panel has been set up by the DTI, composed of people employed by the DTI, to inquire into those matters. I have not received answers from the President of the Board of Trade, which were due on 15 January 1996, to questions about the role of a Mr. Kenneth Holmes. I believe that he was an accountant. He was appointed to the DTI, I believe in the late 1980s, to help assess grant applications to decide whether they were the right type of applications to be eligible for substantial grants.

I ask the Minister today, because he has failed to answer that question so far in written questions that I have tabled: was Mr. Holmes involved in the vetting of the ROM-Data application for grant in 1991? The answer needs to be given to that, and I shall return to that later.

Was it known that Mr. Holmes, as it is alleged, has been involved with other companies that have had financial difficulties? I quote the company H. Bear and Sons, which he bought in 1987, which I believe went into liquidation in 1989.

If Mr. Holmes vetted the ROM-Data application, was he given permission by the DTI to become, on 21 November 1993, not only a director but the chairman of the ROM-Data Corporation? Only 12 months before ROM-Data went into liquidation, the man who had approved the grants had become a director and a chairman of a company that subsequently went into liquidation. The company has left unpaid the wages of constituents of the hon. Member for Falmouth and Camborne, and has many creditors for more than £2 million. I am pleased to note that the Serious Fraud Office is now inquiring into those matters.

Does the Minister approve of employees of the Department of Trade and Industry, who are carrying out the extremely sensitive work of vetting grants of substantial sums of taxpayers' money, becoming directors of companies that have benefited financially from their own decisions? How does he feel about a DTI official approving a grant and later becoming a director of that company, which then owes the DTI that money? Is it a coincidence that Mr. Holmes, like Mr. Dawson, is a member of the Conservative party? I believe that his wife is vice-chairman of the Totnes Conservative party. In spite of his liquidations, Mr. Holmes carries on in a very comfortable life style.

The DTI should have conducted a searching internal investigation, and a careful analysis of what went wrong. I have been told by the President of the Board of Trade that those investigations are now complete. They are so detailed that, I believe, the two most important players, Mr. Dawson and Mr. Holmes, have not even been interviewed. I want to know from the Minister why those two people have not been interviewed in connection with that important matter.

I am sure that the hon. Member for Falmouth and Camborne, in whose constituency the events occurred, has acted honourably in this matter throughout. He played a part in helping the ROM-Data Corporation to defer payments of VAT, as any hon. Member would have done for a time.

I believe that the hon. Member for Falmouth and Camborne also helped the company obtain the loan guarantee. I question whether that was entirely wise. I notice that, in July 1995, the hon. Gentleman was quoted in the Daily Mail. He said that he had not investigated Mr. Dawson's background because I am only an MP and cannot be expected to rush off to Companies House to check out track records every time a business wants help". [Interruption.] A quick check with the House of Commons Library would have given him the information he wanted.

Even if that was not good enough, the hon. Gentleman may also have read the Western Morning News, which, as early as 3 June 1992, published an article entitled "£2m debts that haunt high flier". If the hon. Gentleman had read that, he would have known that that man was extremely dubious. Was not the hon. Gentleman slightly suspicious that Mr. Dawson was not paying his constituents' wages? He nevertheless helped him to obtain further assistance.

I called the debate with some reluctance. [HON. MEMBERS: "Nonsense."] I had to call it, because we are not receiving satisfactory answers from the President of the Board of Trade to questions. [Interruption.] I believe that the previous President of the Board of Trade has seriously misled the House in that matter. [Interruption.]

Madam Deputy Speaker (Dame Janet Fookes)

Order. The debate is becoming a little cantankerous. I ask hon. Members, however provoked they feel, to observe the highest standards of courtesy.

Mr. Jamieson

Thank you, Madam Deputy Speaker. I hope that the Conservative Members who appear to be disturbed by the truth coming out about this matter will make their own contribution to the debate, and tell us what their part was in the matter.

We need a thorough investigation into the way in which those grants were made in the south-west. I am sure that any hon. Member representing the south-west would agree that we need to help genuine companies, those that can create real jobs and buy from other companies to create other jobs. That will not be achieved until the DTI makes known its plans to improve.

The case of ROM-Data shows what happens if one mixes together a solution of taxpayers' money, incompetence by officials, obfuscation by Ministers, a large handful of people in the same political party and a generous supply of greed. A rich soup is created, in which taxpayers' money may be misappropriated and corruption may thrive.

12.45 pm

Mr. Sebastian Coe (Falmouth and Camborne)

I resent being limited to barely a few seconds in a discussion that centres on my constituency.

It is a matter of record that I drew attention to most of the issues that have been mentioned in the debate well in advance of the hon. Member for Plymouth, Devonport (Mr. Jamieson). More than a year ago, I expressed my anxieties about the way in which the company had operated, and its subsequent liquidation, to one of my hon. Friend's predecessors at the Department of Trade and Industry, the Member for Bexhill and Battle (Mr. Wardle).

It is a matter of record that ROM-Data was given a grant to set up in my constituency in 1991—a year before the general election, a year before I was honoured with the stewardship of that constituency. The hon. Member for Devonport mentions the way in which the vetting procedure may or may not have taken place, and I know that that is the subject of a full and thorough inquiry within the DTI, which I instigated and asked for more than a year ago.

Several issues have been raised, but I do not wish to enter into those, as they will be the basis of that inquiry and the President of the Board of Trade has promised to report back to the House.

I want to tease out two or three issues. It would be odd for a Member of Parliament representing a constituency with higher levels of unemployment than in most parts of the country, to sit on his hands when confronted, in the space of three or four days, with the potential loss of 170 jobs in his constituency. I very much doubt that the hon. Member for Devonport would have acted differently in those circumstances.

No local Member of Parliament has the ability to rubber-stamp or hand out a Government grant. There is a lengthy application process, in which many agencies in the constituency—and in this case the county—are involved. That is what happened in the case of ROM-Data. All types of agencies were involved, including economic development organisations. Jobs are important. No Member of Parliament will sit and do nothing when there is the potential for job losses on that scale in his or her constituency.

Broader issues should be discussed. The hon. Member for Devonport spoke of the need to vet grants. Of course that is paramount in any process. However, he has failed to say that, in my constituency, like his, and in much of the south-west, our lifeline is regional selective assistance and grants. That assistance should be provided.

I recently met an all-party group of councillors and local business men in my constituency. They said that they were aware of the way in which the ROM-Data case has been dealt with, and the way in which the hon. Member for Devonport has made mischief and slowed the process dramatically. I am delighted to be joined in the Chamber today by my fellow Conservative Members of Parliament from Cornwall and the south-west, who know that those delays have not been helped by the actions of the hon. Gentleman.

It is a difficult issue, and we must tease out and examine various points. However, the manner in which the hon. Gentleman raised the matter this morning leaves something to be desired.

12.49 pm

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Phillip Oppenheim)

I have listened carefully to the points made by hon. Members this morning, and I shall attempt to deal with them in the short time available.

I refer at the outset to the allegation by the hon. Member for Plymouth, Devonport (Mr. Jamieson) that Mr. Holmes was a Department of Trade and Industry official. I state categorically that that was not the case.

I shall continue with some general remarks about the way in which the Department has approached the case. First, I make it absolutely clear that Ministers accepted from the beginning that it was important that the facts of what occurred should be investigated fully and properly, and that the results should be made known. My hon. Friend the Member for Falmouth and Camborne (Mr. Coe) and others have been active in raising concerns about the case, and Ministers have been equally anxious to discover what has happened.

That is why the Department set up a formal investigation into the handling of the case as soon as problems became apparent, and why the Department drew the case to the attention of the Serious Fraud Office. Above all, it is vital that we know what happened and why, so that we can take effective action to ensure that there is no repetition.

Secondly, we have made it absolutely clear that we shall be open about what went wrong, both to ensure that we get to the bottom of what has been a lengthy and complex sequence of events, and, more importantly, to ensure that nothing is done to impede or prejudice in any way the investigation of the events by the Serious Fraud Office. That investigation is continuing, so I am limited in what I can say today about the company's actions, or about particular individuals who might be the subject of further proceedings. I also must not prejudge the further inquiries that are being made under the Department's internal disciplinary procedures.

However, I assure hon. Members that we intend to be open about the matter. That is why, as soon as it became clear that answers to earlier questions from the hon. Member for Devonport might have been based partly on inaccurate information supplied by officials, my right hon. Friend the President of the Board of Trade warned the House of that possibility. When, following further investigation, it became clear that that had occurred, he informed the House immediately. It is in that spirit of openness that my right hon. Friend has undertaken to report the findings of the Department's investigation to the House as soon as he is able to do so. That will not be long delayed.

The Department's internal report on its handling of the ROM-Data case has now been completed. Ministers have received the report only in the last few days. It deals with a series of complex events which must be considered carefully. However, Ministers remain committed to making the Department's findings public as soon as possible. The Department will also consider taking further action under its disciplinary procedures. That latter aspect, together with the continuing investigations by the SFO, makes it difficult to say much about the role of individuals at this stage.

The DTI has rigorous procedures for handling public money, which are communicated to staff in extensive written guidance. The Department's financial procedures and systems are regularly checked by its internal auditors and the National Audit Office. My initial impression of the common theme running through the report's findings is that the main problems resulted from failings in the way in which the specific ROM-Data case was handled, rather than major deficiencies in the Department's overall systems and procedures—although clearly improvements can, and will, be made in a number of areas.

We shall consider how to implement the report's various recommendations for improvements in existing procedures once we have had the opportunity to consider them properly. They are essentially concerned with detailed additions to the existing systems and procedures. In light of the findings, the DTI will also pursue the necessary further inquiries under its internal procedures in order to establish whether and what disciplinary action should be taken against any staff members.

I had intended to run through the chronology of events at ROM-Data. However, as time is limited, and as most hon. Members are aware of that chronology, I shall not do so. I turn instead to the role played by my hon. Friend the Member for Falmouth and Camborne.

My hon. Friend was obviously concerned about the failure of an important local employer and a company which had received substantial sums of public money. As the constituency Member of Parliament, he had quite properly and assiduously supported the company's application to secure a loan guarantee scheme loan which offered an opportunity to protect jobs in his constituency. In so doing, he acted in the same manner as any hon. Member seeking to fulfil his proper role in this place. I find it difficult to believe that the hon. Member for Devonport would not have done the same thing in similar circumstances.

Mr. Jamieson

I would have checked.

Mr. Oppenheim

If the hon. Gentleman is saying that directors' backgrounds should be checked every time that Labour Members lobby for regional selective assistance or a loan guarantee scheme grant, I suggest that he conduct a poll of his right hon. and hon. Friends. I will be amazed if he can find one Labour Member who has done such a check.

Mr. Jamieson

Will the Minister give way?

Mr. Oppenheim

No, I will not give way. The hon. Gentleman had quite enough time to put his case.

I pay particular tribute to my hon. Friend the Member for Falmouth and Camborne, because he contacted Ministers as soon as he became aware of possible irregularities in the case. I make it absolutely clear that he was the first person to contact Ministers following the company's liquidation. He immediately passed all his information to Ministers, and he has kept in close touch with Ministers since then. He has acted properly and constructively throughout.

Ministers want to get to the bottom of the matter, put right any failings by the Department and be as open as possible about the circumstances. As soon as Ministers heard about the ROM-Data case, they asked the Department for an urgent report. The contents of that initial investigation, which was conducted in February 1995—shortly after the meeting with my hon. Friend—led to the decision to establish a full internal inquiry into the Department's handling of the case.

The inquiry's terms of reference were extended subsequently in light of emerging concerns—for example, concerns about earlier ministerial answers that were given on the basis of inaccurately supplied information, to which I have referred already. Parallel work by the Department on the circumstances of the ROM-Data Corporation led to the establishment of a separate SFO inquiry after the Department had referred the case to the SFO in August 1995.

The Department aims to find out what happened, where, and how any mistakes were made in its handling of the case, and to suggest ways of preventing such failings occurring again in future. I attach particular importance to that last point, as will be apparent from what I have said about the important action that the Department will take. It is clear that there have been procedural failings, and, if we find that DTI officials have breached the Department's rules of conduct, they will be held to account through the Department's disciplinary procedures.

Mr. Jamieson

Will the Minister give way?

Mr. Oppenheim

With respect to the hon. Gentleman, he has taken up half the time available for debate. He raised a series of complex issues, and I am doing my best to address them. I must add that most of those issues had already been raised separately by my hon. Friend in whose constituency the problem occurred. I do not believe that the hon. Member for Devonport has any constituency interest.

The SFO must determine whether others have acted improperly, and its inquiries are continuing.

Mr. Anthony Steen (South Hams)

Will my hon. Friend give way?

Mr. Oppenheim

I hope that my hon. Friend will excuse me, but I have only a few minutes in which to conclude my speech.

Finally, I shall put the unfortunate events into context. As my hon. Friend the Member for Falmouth and Camborne pointed out, regional selective assistance is a highly successful and popular scheme. Last year, the DTI offered grants of £159 million, which are expected to result in £1.3 billion in new investment and the creation or safeguarding of 36,000 jobs. In the same year, we wrote off less than £2.5 million. That is too much, as no one likes to see public money lost. However, some failures are inevitable and the RSA failure rate is extremely low. We must learn the lessons from this case, in order to prevent any repetition in the future.