§ 4.5 p.m.
§ Baroness LLEWELYN-DAVIES of HASTOE
My Lords, with the leave of the House I will now repeat a Statement being made in another place by my right honourable friend the Minister of Overseas Development. It is, I am afraid, a rather lengthy Statement, but as it is an important and technical matter I hope the House will bear with me. The Statement is as follows:
§ "With permission, I wish to make a further Statement about the financial position of the Crown Agents and other matters relating to that organisation.
§ "My predecessor announced in December 1974 that the Government had agreed to provide a recoverable grant 1019 of £85 million to the Crown Agents to cover the writing down of asset values in their 1974 accounts as then foreseen and to provide financial backing appropriate to their operations, and that standby facilities had also been arranged with the Bank of England. I have now received the audited Accounts for 1973 and 1974 and have placed copies in the Libraries of both Houses. The balance sheet as at 31st December 1974 shows that the Government grant of £85 million was not enough in the event to avoid a technical state of insolvency, with liabilities exceeding assets at that date by some £15 million. This was because a greater degree of writing down of asset values and provision for losses were found necessary for the period covered by the Accounts.
§ "I should emphasise that the Crown Agents have no immediate liquidity problems. They have still not needed to draw on the £85 million grant nor on the standby facility. I am also reassured by the thorough and energetic action which has already been taken by the new Board of the Crown Agents, under its Chairman Mr. Cuckney, to clear up the problems of the past and lay the groundwork of a more soundly based future for the organisation. I should like to pay my own tribute to their efforts.
§ "Nevertheless, without Government backing the Crown Agents would at present be in a difficult position, which could affect the confidence of depositors and others. I have therefore thought it desirable formally to reaffirm the assurance given by my predecessor in December 1974, that Her Majesty's Government stand behind the Crown Agents. Honourable Members will find the terms of my assurance to the Chairman in his covering report on the 1974 Accounts, and I emphasise now to the House that the Government wish to see the Crown Agents continue in being for the sake of the valuable services which they are able to render both to their many overseas Principals in the developing world and to Her Majesty's Government in their relations with overseas countries.
§ "Like my predecessor I am however concerned that the future activities of 1020 the Crown Agents, and their relations with Ministers, should be on a more closely defined basis. The Government have been giving much thought to the future status, structure and functions of the Crown Agents. We have decided that the right solution will be to introduce legislation which would confer independent legal personality on the Crown Agents by incorporating them, define their functions for the future and provide that specified powers of direction should rest with Ministers. This would create a well understood relationship of a kind which exists between a number of bodies in the public sector and the Ministers responsible for them. It would clarify the responsibilities of the Government in exercising the broad oversight over the activities of the Crown Agents that has been shown to be desirable by all that has happened; while leaving it to the Board to run their own day-to-day affairs. It would not disturb the traditional relationship between them and their Principals.
§ "My predecessor told the House in April that she hoped to publish a White Paper during the present Session giving the Government's thinking on these matters. I shall not quite be able to meet that target, but I hope to publish a White Paper shortly to set out our present view of the provisions which will or may be required in the legislation to incorporate the Crown Agents.
§ "Meanwhile, I should inform the House of a further complication arising from the past activities of the Crown Agents which will have to be dealt with separately and in advance of this legislation. I was informed in August by the Chairman that certain loans made by the Crown Agents, either directly or through a nominee company, might be challenged as unenforceable, on the grounds that the Crown Agents were neither licensed moneylenders under the terms of the Moneylenders Acts nor a bank for the purposes of those Acts. The Crown Agents are advised that if this matter was brought before the courts, they would have a good defence, particularly on the basis that they and their staff are exempt from the operation of these Acts as Crown servants. However, if there were a challenge in the courts the matter might take a long 1021 time to resolve. Meanwhile the Crown Agents' financial position might be seriously worsened by the withholding of loan repayments and the interest due, and in other ways.
§ "This would increase the potential call on the Exchequer for financial support for the Crown Agents to a degree which we should find quite unacceptable in the circumstances. It would mean that a heavy additional liability would fall on the public purse and that other creditors of those property and other companies to which the Crown Agents had made loans would be in a position to benefit by taking advantage of an uncertainty in the application of legislation. I think it is essential to put this anomalous situation right. The Government will therefore introduce a Bill, for consideration as early as possible in the next Session, to put the matter beyond doubt."
§ My Lords, that concludes the Statement.
§ Earl COWLEY
My Lords, I am certain that the whole House is grateful to the noble Baroness for repeating this important Statement, especially in view of the difficult financial position which has been facing the Crown Agents. We are grateful and pleased that the Government have decided to reaffirm their support and backing for the Crown Agents in order that the position of their depositors might be safeguarded and international confidence, which is so vital, might be maintained. Furthermore, the Crown Agents play an important part in providing much needed foreign exchange to our balance of payments. Consequently, we should also like to add our own appreciation to Mr. Cuckney and his colleagues for the work they have been doing over the last few months.
We cannot, of course, comment in detail on the Government's proposals to turn the Crown Agents into a public corporation until we have seen the proposed legislation itself. However, we are glad that the Crown Agents' reputation for confidentiality is to be maintained and that they are not to be turned into a Government Department, which would raise practical problems like managing World Bank loans. However, we shall have to await the legislation itself before deciding whether the Government 1022 have got right the balance between accountability and confidentiality. We agree that it is important that the position of the Agents' losses which were incurred mainly in fringe banking and property markets and the legal position under the Moneylenders Acts should be settled as soon as possible. However, I hope that the Government will ensure that the overseas principals are not put in a position of being liable for or paying these losses.
I have one detailed question for the noble Baroness. She mentioned the proposed White Paper but not the report of Judge Fay. Could the noble Baroness tell the House when this report will be produced and whether it will be published.
§ Baroness LLEWELYN-DAVIES of HASTOE
My Lords, may I thank the noble Earl for his very generous response to an extremely important Statement about a very tangled situation. I should like to repeat the assurances that Her Majesty's Government give to the principals—that there will be the same complete confidentiality and that everything that will be outlined in the White Paper, to which we look forward, will guarantee their position. I should like to make it absolutely clear that confidentiality will be maintained. Of course, the White Paper is still "baking in the oven" but I am quite sure that the noble Earl will be satisfied with that aspect of it when it emerges. I think that everyone in your Lordships' House and, indeed, in the City, will welcome the clarification of the legal identity of this rather anomalous organisation. Indeed, it has been thought about since practically the beginning of the century and many Administrations have been concerned in trying to grasp the nettle. We have now grasped it and I very much look forward to the White Paper.
If I might refer to the Fay Committee—this is the Committee of Inquiry under Judge Fay with Sir Edmund Compton and Mr. Peter Godfrey—I cannot give the noble Earl an exact date, but it should report some time in 1976, the report will be made to the Minister and the Minister will make a report to the Houses of Parliament.
§ Lord BROCKWAY
My Lords, as one who has been critical of the Crown Agents and their administration right up 1023 to the year 1972, may I say how much I welcome this Statement. I believe it will clear up the absolutely incongruous status which in the past the Crown Agents had in relation to the Government and the developing countries. May I say how glad I am to hear from this Statement that the Minister will be following the policies which his predecessor laid down. I believe that now we have to have confidence in the personnel who have been appointed to control the Crown Agents and that the Government, the Crown Agents and the developing countries whom they serve will derive everything that is good from the changes which have been made.
§ Baroness LLEWELYN-DAVIES of HASTOE
My Lords, I am most grateful to my noble friend. As he is listened to not only in this country but all over the world his words are particularly welcome.
§ Lord ALPORT
My Lords, when the legislation for the new form of Crown Agents has been drawn up may I ask the noble Baroness whether the Government will consider that the circumstances which brought the Crown Agents into being and the relations which that organisation had with its clients and depositors overseas cannot be continued in anything like the same form in the present conditions and will not try too closely to reproduce the kind of background of activity and responsibilities which the Crown Agents have had in the past because it may be that it is no longer realistic to do so. Like the noble Lord, Lord Brockway, and others, I am glad that this very difficult situation is being tackled in this way and realise the tragedy that has taken place as a result of the history of the last three or four years.
§ Baroness LLEWELYN-DAVIES of HASTOE
My Lords, I have noted very carefully what the noble Lord has said and will pass on his remarks to my right honourable friend.