§ 6.44 p.m.
§ Baroness LLEWELYN-DAVIES of HASTOE
My Lords, I know that many noble Lords have referred to the noble Earl, Lord Cowley, but I should not want this particular opportunity to pass without saying something about him on behalf of the whole House and particularly because this Bill was one of his special subjects. It is difficult to believe that someone so young, so active and so sincerely and enthusiastically alive to all the things he believed in could have gone from us so suddenly. I have debated many times with him on aid and on foreign affairs and there has always been that unfailing good humour and courtesy which we grew to expect from him. More important than that, perhaps, was the fact that he had a very deep knowledge of his subjects. He was becoming a skilled debater and there can be no doubt that he could have gone very far in the service of this House. The fact that his untimely and, indeed, tragic death has happened in this way will be a very real loss to his Party, to the whole House and, I think, to the country. Perhaps, most important of all, we are all thinking of his young wife and her little daughter. We 1290 know her, many of us: we are all thinking of her and we send her our love and our deepest sympathy.
My Lords, I beg to move that this Bill be now read a second time. The purpose of this Bill is to establish that the Moneylenders Acts do not apply, and have never applied, to the loans made by the Crown Agents for Overseas Governments and Administrations either directly or through their wholly owned companies. The Bill involves no addition to public service manpower, nor to public expenditure. Your Lordships may remember a leader in the Daily Telegraph of November 25th which said:It is not often that Parliament is given the chance to consider a Bill of just two clauses which could save the taxpayer hundreds of millions of pounds, without cutting defence spending or the social services and on which Members can be wholeheartedly in agreement without breaching or even stretching Party lines.Indeed a unique occasion—well, rare anyway. As my right honourable friend the Minister of Overseas Development said in his Statement on October 16th, which I repeated and which foreshadowed this Bill, he was informed in August by the chairman of the Crown Agents that the loans in question could be contested as irrecoverable and any securities related to them as unenforceable on the grounds that the Crown Agents are neither licensed moneylenders under the terms of the Moneylenders Acts nor a bank for the purpose of those Acts. As I think the House knows, before 16th October the Crown Agents had received some indications that their money lending status might be challenged. They had, in particular, received a letter from the liquidators of the Vehicle and General Assurance Company Limited requesting information on this point. The point has proceeded no further; but this was the necessity for this Bill.
It has always been understood that the Moneylenders Acts did not apply to the Crown Agents as servants of the Crown; they have also been advised that if this matter were brought before the courts they would have a very good case. However, if there were a challenge in the courts it would obviously certainly take a long time to resolve, and even if a judgment favourable to the Crown Agents were given on one loan it might not cover all the other loans.
1291 Noble Lords will understand that the delay and uncertainty could significantly worsen the Crown Agents' financial position. I think that noble Lords know that the Crown Agents' function at present is to provide financial, technical and commercial services to over 100 Government and 200 other public bodies overseas. These services include large-scale procurement activities for their overseas principals, about £113 million of which is business in the United Kingdom. Noble Lords will appreciate the consequent benefit to our balance of payments. I should like also to stress—I am afraid I have said this before—that they manage over £800 million in sterling securities and cash for their overseas principals. It is most important work which noble Lords on all sides of the House recognise. Of course, the Government want to see these valuable services continued for the sake of the Crown Agents overseas principals in the developing world and for the sake of this country in its relations with overseas countries. That is why the Government have emphasised many times that they stand behind the Crown Agents; if we do stand behind them we lay the taxpayer open to the liability of the potential cost to the Crown Agents of the circumstances I have explained. I cannot precisely estimate the total liability, but it is generally agreed that at maximum it would just about exceed £400 million, and that is without taking into account future interest payments on the loans.
My Lords, I think the House will realise that the main beneficiaries would he those property companies, secondary banking companies and other companies to which the Crown Agents have made loans or, in the case of insolvent companies, their other creditors. Can I come quickly to the element of retroactivity which some noble Lords will find distasteful? We always find retrospective legislation distasteful. I want to emphasise that this Bill does not involve overruling either a decision of a court or a clear legal proposition. I have mentioned an inquiry from one liquidator. Other questions about Crown Agents' money-lending status have been raised in correspondence; but no legal proceedings concerning the loans have been started before the Statement on 16th 1292 October. Neither have the Crown Agents instituted such proceedings. We are not therefore altering anything which has been decided. The House will agree that it is not therefore retrospective provision in the sense that the House might normally find objectionable.
May I emphasise that the House wish to remember that we are acting in the interests of the taxpayer and in relation to a very large sum. We must make the legislation bite on the loans which Crown Agents have made in the past, and those are the loans which are now in question. Nor do I think that it can be said we are seeking double standards between the public and the private sector. Noble Lords who follow these matters will remember that the Ship Mortgage Finance Company Act 1962, enacted when a Conservative Government was in power—I am making no political point about this—was a private Act related to a company in the Private sector, and was similarly retrospective. Therefore, in enacting this Bill, Parliament would not be adopting double standards.
In another place, the question was raised at the Committee stage of the Bill as to whether litigation had been started in which the Moneylenders Acts had been pleaded. My honourable friend the Parliamentary Under-Secretary of State said that he understood that no such litigation had been started, but if this proved to be inaccurate he would see that this matter was put right in your Lordships' House. Since this assurance was given I have been informed that a writ was served on Four Millbank Investments Limited after notice of this legislation was announced in Parliament on 16th October, claiming that a certain transaction was invalid. However, no details of the grounds on which the claim rests have yet been received, and it is not possible to say on what basis the action is being brought. I can say, however, that no defence under the Moneylenders Acts has been pleaded. I thought I ought to tell your Lordships of this writ so that there should be no further misunderstanding.
Some of your Lordships may question, as was done in another place, whether Parliament is being asked to legislate in the dark before we have more information about the Crown Agents in 1293 general; in other words, before my right honourable friend's White Paper is published and, of course, before the results of the Fay Committee are known. May I stress again that tonight we are dealing with current day-to-day activity of the Crown Agents, which is urgent. May I stress the word "urgent". The long-term future will be dealt with in the White Paper and in the ensuing legislation. All noble Lords know that this is not an easy problem and that we have to keep in the forefront of our minds the need to maintain the confidence of the overseas principals. I think everyone will agree that this time we have to get the framework absolutely right, and we need a little time to do this.
The conclusions of the Fay Committee, in whose conclusions noble Lords are deeply interested, will provide the reasons why and how the Crown Agents got into their financial difficulties, which nobody denies. But, of course, these things take time and the conclusions will not be available until some time in the coming year. In the meantime, we have an urgent need to clarify the Crown Agents' moneylending status now so as to avoid further financial problems. Until we have clarification, the Crown Agents may suffer serious loss of income and may be unable to recover capital owing to them. It is a risk we must eliminate urgently.
It is a very foggy night, but perhaps I may make one or two technical points in explaining the Bill. I will be as brief as I can. It has only two clauses. Clause 1 provides that the Moneylenders Acts shall not apply and shall be deemed never to have applied to loans made by the Crown Agents, either directly or through wholly-owned companies. It also declares in subsection (3) that this exemption shall not prejudice any status, privilege or immunity of the Crown Agents, or such a company as servants or agents of the Crown. Clause 1(1) is framed to cover any period when there was only one Crown Agent, when, in order to comply with the requirement that a company needs more than one shareholder, the other shares in the companies wholly owned by the Crown Agents were held in trust for them by a member of their staff acting in his official capacity.
Clause 1(2) is simply a definition of the Crown Agents which is needed because there is no legislation establish- 1294 ing them; they derive from the prerogative. It is more involved than might otherwise have been necessary because the titles of the appointments made to the Crown Agents by successive Ministers have not been identical. Clause 2(2) is included because legislation to repeal the Moneylenders Acts has already been enacted, as the House will understand, under the provisions of the Consumer Credit Act 1974.
I will not go into the Bill in more detail now; if noble Lords have questions on it, I will reply later. I want to stress that the position of the Crown Agents is unique. Their status for the past 150 years has never been dealt with in legislation or tested in the courts. I am sure the House will agree that we must clarify a situation which could soon increase the potential burden on the taxpayer for financial support to the Crown Agents to a degree which would be unacceptable. We have therefore prepared this Bill to place beyond doubt in this limited respect the position of the Crown Agents and their wholly-owned companies. I beg to move.
§ Moved, That the Bill be now read 2a. —(Baroness Llewelyn-Davies of Hastoe.)
§ 6.59 p.m.
The Earl of GOWRIE
My Lords, like my noble friend Lord Campbell of Croy during our previous business, I am here as a substitute for the late Lord Cowley. I should like to thank the noble Baroness the Government Chief Whip most sincerely for her references to him. We are all very shocked by his death at less than 30 years of age and amid all the happiness of his strong family life and commitment and, likewise, of his strong commitment to a public career. It is conventional that we as a House pay our respects usually to Members of Privy Council rank or beyond upon their death; but I believe as a colleague and friend of Lord Cowley that I may join those on this side of the House in expressing to his young and charming wife our warm feelings for him and our great sadness at his loss. This House, Parliament and the country, as the noble Baroness suggested, are not so full of young men committed to careers in politics that we can afford to lose them lightly. My late noble friend was only at the start of his career; but I am glad to be able to recall that he was in 1973, albeit briefly, the youngest member of 1295 any British Government for very many years, and that surely was a promising start.
§ Lord BROUGHAM and VAUX
My Lords, may I interrupt my noble friend, on behalf of Maria Cowley, whom I am seeing later this evening. I will pass on the messages from my noble friend, the noble Baroness and the House.
The Earl of GOWRIE
My Lords, I am grateful to my noble friend for that intelligence.
I turn now to the Moneylenders (Crown Agents) Bill, which was, as we would expect, very disarmingly moved by the noble Baroness the Government Chief Whip, who itemised carefully and accurately all the areas of conceivable opposition that I might be able, at short notice, to raise. I understand that the Crown Agents manage overseas property, whether real or financial, belonging to Governments. Most Government institutions and banks in this country are covered by the Moneylenders Acts so that liability is not limited unless this Bill becomes an Act in the case of the Crown Agents. The noble Baroness mentioned that to all of us, as Parliamentarians, there is an element of distastefulness in retrospective legislation. Certainly here very large sums of money could be involved. She mentioned a total sum of some £400 million being at risk with overseas banks and institutions, as a result of doubtful debts in the 1974 accounts, of loans to Bristol banks and institutions, of overdrafts, commitments to overseas principals and interest received and liable to be repaid if judgment went against the Crown Agents. Since many people could theoretically be denied lawful benefits which they could expect to receive, I think there is an element of distastefulness here.
The noble Baroness said that the Bill does not involve overruling the decision of any court or any existing legal proceedings. I would say, with respect to her. in view of that sentence, "So we would all hope". I acknowledge, with her, that retrospective legislation may be unavoidable in this case. I believe it would have been better if we had received more information and if the White Paper outlining the intentions of the Government about the future of the Crown Agencies were published at least during the consideration of the later stages of 1296 this Bill. I was going to ask the noble Baroness whether that would be likely, but she has pre-empted me and indicated that it would not, and that the later stages of the Bill would be proposed without that information. However, I must agree with her that confidence in the Crown Agents must be maintained, and particularly where foreign Governments are concerned and at a time of great indebtedness towards them.
§ Lord HAILSHAM of SAINT MARYLEBONE
My Lords, perhaps I may be allowed to add a couple of words. I am quite sure in my own mind that nobody believed that the Moneylenders Acts did apply to the Crown Agents at the time when the transactions which may be in question were arrived at, that the Crown Agents were never intended to be caught by the Moneylenders Act sand that nobody could put up a defence under the Moneylenders Acts for any reputable reason whatever.
§ 7.3 p.m.
§ Lord PEDDIE
My Lords, I should like to join in the expressions of deep regret and sympathy upon the passing of one of our colleagues. I did not know him well, but certainly had a great respect for his quiet charm and tremendous friendliness. I shall always remember him for those qualities.
Regarding this Bill, I do not think there is any doubt that here we have a piece of retrospective legislation, and no Parliamentarian can welcome retrospective legislation. But I believe that there are occasions when it is necessary to right a wrong or correct a mistake, or, as the noble Baroness said, to clarify a situation. I am sure that this Bill is justified on at least two of those counts, and therefore I welcome it as a piece of completely justifiable legislation.
Before making any further comments, I should declare an interest in that I am chairman of a company which has a financial connection with the Crown Agents; but beyond that my main reason for intervening in this debate is my continuing critical interest in the affairs of the Crown Agents—one which extends over almost five years. The noble Earl, Lord Selkirk, and I have frequently drawn attention in the past to most disturbing elements in the operations of the Crown Agents. Indeed, I can claim personal responsibility for exciting the interest of 1297 a number of Members in another place, which I think had some influence upon the activities which resulted in the Stevenson Report of May 1972—a Report which, incidentally, we never had the privilege of reading.
The noble Earl, Lord Gowrie, while welcoming the Bill, said that it was the responsibility of Government to give more information. I agree that the Crown Agents, and indeed the public, in times past have suffered a great deal because of the reluctance of Governments to give all the facts. I hold equally responsible the Party opposite, because I remember vividly that on 21st November, 1973—and I shall paraphrase Hansard—in response to questions posed at that time the statement was made by a Member of the Party opposite that the Crown Agents had adapted their organisation and structure to deal with a wide range of technical and financial services. The spokesman went on to say that in the light of the Stevenson Report they agreed that fully owned subsidiaries staffed by Crown Agents personnel should be developed to deal with specialised financial services of the Crown Agents. Beyond that, the statement was made that the investment policy pursued by these companies should be in accordance with the trustee analogy and consistent with their name and standing. I welcomed that statement at the time, and particularly the comment that the investment policy was to be in accord with the trustee analogy, but I must say that no full description of what was meant by that phrase was given. Presumably we were not aware of the full situation at that time.
Furthermore, I regret that the White Paper which has been promised by this Government has not yet been produced. It was as far back as 17th December 1974 that this Government made a cash injection of £85 million, and I would pay them this compliment: that occasion marked the first time ever of the giving of a full and frank expression of complete Government support for the Crown Agents. That was a most important decision—so important, as the Crown Agents themselves will testify, that it added to the confidence which was felt by overseas investors and resulted in a very substantial increase in deposits. My figures are in excess of those quoted by my noble friend. They indicate as 1298 much as £1,200 million of overseas funds now being handled by the Crown Agents.
I agree that this Bill involves no public expenditure. If it is not accepted, it could involve expensive litigation, the benefit of which could only be to property companies, fringe banks and others who have obligations to the Crown Agents. I believe that the Crown Agents have enormous potential, and in spite of a long, long period of criticism, I personally would say that I have absolute confidence in them, and particularly in the knowledge of Mr. Cuckney, who is the chairman and a man of outstanding reputation. I welcome this opportunity of making such a statement.
I would end by making this comment. I look forward to the publication of the White Paper, which is long overdue, and I hope that it will advocate a public corporation of a character which provides backing by the State but gives a considerable measure of independence to the Crown Agents themselves. I believe that the Crown Agents have been in the past, and can continue to be, a very useful asset to this nation. They have done tremendous work and I am quite sure that this House will give full support to, and will indeed welcome, this Bill as being a very necessary step to put matters right and make sure that we have continued progress on the part of the Crown Agents. I have great pleasure in supporting the Bill.
§ 7.10 p.m.
Lord BRUCE of DONINGTON
My Lords, the noble and learned Lord, Lord Hailsham of Saint Marylebone, will correct me if I am wrong but, to the best of my recollection, under the Moneylenders Act 1927, there are only two ways in which a borrower can avoid his obligation of repaying a loan to a moneylender. The first is when a moneylender is not a registered moneylender as such, even though he holds himself, or a firm holds itself, out to lend money. The second is under Section 6 of that Act, which automatically voids a contract and any security given in respect of a loan if the contract for the loan does not state all the terms. The only reassurance upon this Bill that I require is that no borrower shall suffer as a result of its passing, by reason of any reference to Section 6 of the Moneylenders Act 1927. So long as I 1299 have that assurance, I think that the Bill should be thoroughly supported.
§ 7.12 p.m.
§ Baroness LLEWELYN-DAVIES of HASTOE
My Lords, it is not often that I am able to thank the noble and learned Lord, Lord Hailsham, for help on these matters, but I thank him very warmly for his very clear and helpful intervention about the relationship between the Crown Agents and the Moneylenders Act. I hope he will forgive me for saying that he was absolutely right in his interpretation of the situation, and I am most grateful to him. Indeed, I am also grateful to my noble friend Lord Peddie, because we all know that he has been a very deeply knowledgeable critic of the Crown Agents in the past, and when he gets up I never quite know what he will say. So I am grateful to him for at least approving of two points in the Bill.
Of course he was right to be critical. As my right honourable friend said in another place when he was dealing with the current financial situation, no one has ever tried to pretend that the financial situation is good. Of course the Crown Agents are technically insolvent—I think that term has probably applied to me all my life and, unfortunately, bank managers take these matters rather seriously—but, even so, as the House knows, since my right honourable friend made his Statement about the £85 million, and the Bank of England's offer, neither of those guarantees has had to be taken up, and the Crown Agents have not had to fall back on them. Furthermore, as my noble friend Lord Peddie said, deposits made by oversea Governments and bodies have gone up, so that confidence in the Crown Agents has been maintained and increases. I should not like to argue figures with my noble friend Lord Peddie, but there is no doubt that they have gone up. This is what matters and it is of tremendous importance.
I share with the House the regret that we could not have had both the White Paper and the Report of the Fay Committee before we had to take this little but very important Bill, but I can promise your Lordships that the White Paper will be out very shortly. I know that that is a phrase which Government often use, but I really believe that it will be with 1300 us very soon. I have already said that we shall not have the Report of the Fay Committee very soon and, in the meantime, it is essential to get on with this Bill. I think my noble friend Lord Peddie will be satisfied with the White Paper when we get it. It will not only set out the history of the Crown Agents, but will describe what is proposed for its future functions, and the specific powers—I think this is important—which should rest with the Minister.
The word "incorporation" is always used in these matters. It describes a relationship of a kind which noble Lords perfectly understand between bodies in the public sector and Ministers responsible for them. I think that the White Paper will clarify the responsibility and broad oversight which the Government need to exercise, as has been proved by past events, over the activities of the Crown Agents, but will leave the Board to run their day-to-day activities. Most important, it will not disturb the traditional relationship between the Crown Agents and their principals. It must be admitted that this is an extremely difficult nut to crack. All sorts of Administrations have had a go at it. My noble friend referred to the Stevenson Committee. Everyone has tried to get this straight. At last, Her Majesty's Government have now grasped the nettle and I think that in a very few weeks we shall see the White Paper. But, again, may I emphasise that we need this Bill now, immediately, in order to save for the taxpayers millions of pounds possibly being forfeit.
The noble Earl, Lord Gowrie, asked me a question. I think the answer is that it will be the Crown Agents who are denied the right to recover loans which all concerned would have considered to be recoverable. As the noble and learned Lord, Lord Hailsham, pointed out, their debtors will be denied only the right to advance a contrary interpretation of the Act which the Government do not consider to be a correct one. The noble Earl also referred to the difficulties which another place have found in the law being left to the courts to determine. Of course, the courts interpret legislation handed down by Parliament, but if Parliament becomes aware that there is a lack of clarity in the application of legislation, 1301 then it is right and proper that Parliament should clear it up and I believe that this Bill represents such a case.
So without going into further details on this foggy night, may I again say that the Bill does not prejudge the repeal of the Moneylenders Act. It will cease to have effect at the same time as the Moneylenders Act ceases to have effect through the orders I have mentioned under the Consumer Credit Act, and its remedial effect in relation to past loans will continue. At this time of utmost restraint on public expenditure, it would be quite unacceptable to take on what could be an avoidable burden. We can dispel such doubts about the Crown Agents' past moneylending status only by legislation such as this Bill which I am recommending.
§ On Question, Bill read 2aand committed to a Committee of the Whole House.