HL Deb 28 February 1978 vol 389 cc396-405

4.16 p.m.

The Lord CHANCELLOR (Lord Elwyn-Jones) rose to move to resolve, That it is expedient that a Tribunal be established for inquiring into a definite matter of urgent public importance, that is to say, to what extent there were lapses from accepted standards of commercial or professional conduct or of public administration in relation to the operations of the Crown Agents as financiers on own-account in the years 1967–74 described in the report of the Committee of Inquiry on the Crown Agents (HC 48 of 1977). The noble and learned Lord said: My Lords, following the debate in another place on the report of the Fay Committee on 5th December last year, my right honourable friend the Prime Minister announced on 8th December the Government's decision to establish a tribunal of inquiry under the Tribunals of Inquiry (Evidence) Act 1921.

The Fay Report brought out with admirable clarity the circumstances that led to the need to make special financial assistance available to the Crown Agents. The Government concluded that a further inquiry should be held to consider where the blame lies; and it was proposed in another place that this should be a public inquiry. In these circumstances, the Government are proposing to set up a tribunal under the 1921 Act which will have the ample powers given by that Act to carry out the thorough investigation of all matters that are relevant in this unhappy matter. As my right honourable friend the Prime Minister said on 8th December, the purpose of the tribunal will be to deal with lapses in accepted standards of public administration. The Government believe that the concept of "accepted standards" will make clear that the Tribunal is not required to adopt criteria that are either so restricted as to exculpate everyone who was not in breach of some legal duty, or so wide as to set unreasonably high standards.

The inquisitorial powers of tribunals set up under the 1921 Act are quite different from those of the ordinary courts and they require special safeguards for people whose conduct is in question. One safeguard lies in the composition of the tribunal. The White Paper of 1973, giving the then Government's response to the report of the Royal Commission under the noble and learned Lord, Lord Salmon, accepted the principle that the chairman should be a person holding high judicial office. It also expressed the view that when a tribunal is inquiring into the conduct of members of a particular service, profession or calling, or where it is required to deal with issues of a specialised, technical nature, it should include members other than lawyers with experience or qualifications relevant to the subject of the inquiry. The Government have followed these principles in considering the membership of the tribunal, which will comprise a judge of the High Court and two distinguished non-legal members.

Other safeguards are to be found in the six cardinal principles set out in the Royal Commission's report. These are: first, before any person becomes involved in an inquiry, the tribunal must be satisfied that there are circumstances which affect him and which the tribunal proposes to investigate. Secondly, before any person who is involved in an inquiry is called as a witness, he should be informed in advance of allegations made against him and of the substance of the evidence in support of them. Thirdly, in the first place he should have adequate opportunity of preparing his case and of being assisted by legal advisers; and, in the second place, his legal expenses should normally be met out of public funds. Fourthly, he should have the opportunity of being examined by his own solicitor or counsel and of stating his case in public at the inquiry. Fifthly, any material witness he wishes called at the inquiry should, if reasonably practicable, be heard. Sixthly, he should have the opportunity of testing, by cross-examination conducted by his own solicitor or counsel, any evidence which may affect him.

The Government endorse these principles, as did the previous Government in their White Paper of 1973. The Home Secretary will be drawing them to the attention of the tribunal and I am confident that the tribunal will have full regard to them.

With regard to the third principle, concerning legal representation for those involved in the inquiry, I should make it clear that, since the 1921 Act has not yet been amended in the way that the Salmon Commission proposed, the decision whether to authorise legal representation for any person rests with the tribunal itself under Section 2(b) of the 1921 Act. The Government will invite the tribunal to be guided in this matter by the Salmon Commission's recommendations as accepted in the 1973 White Paper, and to adopt the practice envisaged in that Paper of ascertaining and prescribing the particular issues in which an applicant for representation is to be regarded as an interested person. It is also intended to authorise the tribunal to announce at the preliminary hearing that the Government will be prepared to pay on an ex gratia basis the reasonable costs to individuals of legal representation allowed by the tribunal in relation to the issues prescribed by it, and subject to any recommendations the tribunal may make.

Your Lordships know the background to the inquiry, which was so clearly set out in the Fay Report. Much time has already elapsed since the events occurred which are to be investigated, and your Lordships may think that the tribunal should begin its work as soon as possible. My Lords, I beg to move.

Moved to resolve, That it is expedient that a Tribunal be established for inquiring into a definite matter of urgent public importance, that is to say, to what extent there were lapses from accepted standards of commercial or professional conduct or of public administration in relation to the operations of the Crown Agents as financiers on own-account in the years 1967–74 described in the report of the Committee of Inquiry on the Crown Agents (HC 48 of 1977).—(The Lord Chancellor.)

4.24 p.m.


My Lords, I think the whole House will be especially grateful to the noble and learned Lord who is sitting on the Woolsack for the very detailed and precise statement which he has made on behalf of the Government. It is especially pleasing to have details of this particular tribunal spelled out to us, since the House will be aware of the very widespread concern felt throughout the country, in Parliament and elsewhere, such as in the City, and I daresay in many countries all over the world, as a result of this particular case. But our main query from these Benches is whether or not the scope of the proposed tribunal will include such matters as breach of duty or negligence in those bodies which were mentioned by the Minister in her Statement in another place on 1st December 1977. For your Lordships' information, these organisations would include Crown Agents themselves, the Ministry of Overseas Development, the Treasury, the Bank of England and, of course, the Exchequer and the Audit Department.

This is a formidable list, and I think it right that such bodies should indeed come under the detailed scrutiny of a tribunal of inquiry for four main reasons. First, the scale of the losses was spectacular enough, and justified concern was felt over whether adequate provision had been made to cover these losses. Secondly, the faults in the various systems which ought to operate within such bodies as I have mentioned were indeed disturbing. One example of such a gap in the system of safeguarding funds and investment was given by the Minister when she pointed out that the accounts for the Crown Agents' operations for the year 1972 (as she put it, "such as they were") were made available only in January 1975. The House will surely be aware of my especial interest in the accountancy profession, but there can be no doubt that any method of control, especially over financial matters—matters which can be detailed, complex and very byzantine—requires that any system which is thus overworked should be revised.

The third reason why we are very pleased about this tribunal is, as should be pointed out, that the tribunal need not necessarily be seen in this House, or indeed in the Press, as any form of a witchhunt. Indeed, the Fay Report stressed continually that the causes of this catastrophe concerning the Crown Agents were due to the actions, and indeed the inaction, of individuals coupled with a defective system. Again I quote: The story was one of incompetence rather than misconduct. Thus, no one who is likely to be called before the tribunal to give any evidence has anything to lose at all. Lastly, we believe that a tribunal will do much to reassure the House, and indeed the Ministry of Overseas, Development and those nations and organisations to whom Fay refers as principals, that such defective systems as I have briefly mentioned will be improved and altered, so that matters cannot run out of hand again on such a scale in this field of investment and banking.

Throughout the debate in another place which the noble and learned Lord on the Woolsack has mentioned, on the 5th December, the Minister defended the ability of the proposed Aarvold Commission to examine how and where management systems had broken down, and how these defects would be solved; but in the end it was decided that a tribunal under the 1921 Act would be the correct method whereby the flaws which are displayed in the Fay Report could be removed. The Minister herself pleaded that such a tribunal could take as long as two years to issue its final report. Indeed, my honourable and learned friend in another place, Sir Michael Havers, likened the tribunal to a blunderbuss. I do not think the noble and learned Lord would necessarily agree with that, in spite of the fact that it came from a member of his learned and distinguished profession. But certainly Sir Michael mentioned the Salmon Report and its dissatisfaction with the Profumo ad hoc tribunal, and also its recommendation that an inquiry under the 1921 Act would be the only correct, satisfactory and reasonable vehicle whereby such grave faults as had occurred then, and as had been shown in the debate in another place, I believe, could be set right.

My honourable friend the Member for Shoreham in another place said during the course of his speech in that particular debate: … there is great distrust about Whitehall and about Parliament …" —[Official Report, Commons, 5/12/77; col. 1087.] I presume he meant in connection with the level of control exercised by Parliament in this special case. I can assure your Lordships that my honourable friend is entirely correct, and not just in this special case, because each weekend I am informed by members of the public, as I am sure many of your Lordships are, that they do not believe us in Parliament to be capable of supervising even the day-to-day running of their lives, let alone such byzantine affairs as are outlined in the Fay Report. I believe there is much reason in these arguments, presented certainly to me and, I am sure, to many of your Lordships, by members of the public. For this and many other reasons, it seems to us that the blunderbuss mechanism of the tribunal of inquiry is, on balance, more desirable than the more informal and briefer proceedings of a Commission, such as the proposed Aarvold Commission, and especially in this case. That is why we thank the noble and learned Lord and are very pleased to support his Motion.

4.30 p.m.


My Lords, from these Benches, too, we should like to give a welcome to the very wide terms of reference of the tribunal which have been read out by the noble and learned Lord. We are also pleased to hear the safeguards that he has given to those individuals who are concerned or who will be giving evidence. I think that this tribunal will be seen, whether we like it or not, as a post-mortem because of the time that has elapsed since the events came about which were described in the Fay Committee Report. All postmortems are ugly; this tribunal will be no exception. I endorse what was said by the noble Lord, Lord Lyell: that the public are not crying for blood here, but for information and to make sure that these mistakes will not or cannot occur again perhaps on the same scale. I think that this tribunal can go a long way towards putting right a lot of misunderstandings—certainly in the minds of the public. We should look on this as an opportunity and I think it will take a long time.

My Lords, perhaps I, too, may ask a question for clarification on two of the points that the noble and learned Lord has given us this afternoon. The first comes under the heading of lapses from the accepted standards of public administration. I do not believe that we should go into investigating all the Departments concerned and which were covered by the Fay Committee. But I think that the Auditor-General's Department should be looked at very carefully and consideration given as to whether it is the most efficient way of looking after the books of the nation.

Secondly, I should like to think that this would be an opportunity to consider the constitution of the Public Accounts Committee. When one considers there are hardly (I think) a dozen qualified accountants in another place, and that the civil servants who come up before the Public Accounts Committee have taken three or four months in preparing their case, it is difficult to put blame on Members of another place for not discovering sooner or, indeed, at all, some of the things that were specified by the Fay Committee. I hope that we can look at this constructively and look forward to the future; that there will not be any similar tribunals of this nature.

I mention this because it worries me that the Fay Committee had to call upon outside agencies, agencies outside Government, in order to get the figures right to present them before Parliament. I think that this is an indication of some of the weakness or, possibly, the lack of accountancy skills in the Government's fiscal department. I think that this is an area in which, if this tribunal does its work well, the public can be reassured and satisfied, as taxpayers, at the way in which their funds are being kept and the books looked after. But if the tribunal fails to do this, I think that the misunderstandings, doubts and concerns expressed by the general public will not be decreased but greatly increased to an extent which could lead to a very serious situation.

4.34 p.m.


My Lords, as the Fay Report says, this matter was raised in the first place in your Lordships' House. If I may, I should like to remind the House of the situation as it was seen in August 1971. I think that the noble Lord, Lord Peddie, if he were here, would endorse what I am going to say. For some time it had been known that rather odd things had been happening in the Crown Agents' business. The purpose of bringing it up was, first, to alert the Government to the anxiety felt and, secondly, to try to find out whether there was a public liability. There were also some very full and forthright articles by Mr. Charles Raw, chiefly in the Guardian newspaper; so there was no lack of information at that time.

When we come to look at the Fay Report we find this. These things were fully known two years before in the Department concerned. They were known in the Treasury; they were known at the Bank of England. In the early part of 1970, the Law Officer of the Foreign Office said quite clearly that the ultimate liability would lie with the public purse. I believe that this really is a matter which is not concerned with any individual; and the noble Lord, Lord Lyell, said this. It is probably more a question of incompetence than it is one of misconduct; but I think that it is a matter of very general concern. It is the administration as a whole which has not faced up to the responsibilities of carrying and looking after very large sums indeed of money which they now hold from the taxpayers of this country. There are many taxpayers who have difficulty in meeting their liabilities as they stand. There are a great many organisations today which are vaguely and loosely connected with the Government, for which, nonetheless, the Government have a degree of responsibility.

I do not think it is purely a question of accountancy. It is one of initiative and of appreciation of responsibility which, in this case, has been badly lacking. Here we are, eight years after the event and probably it will be ten years before we hear that has happened. I am particularly glad that this Motion which the noble and learned Lord has put forward deals with the administration. I believe that it is basically a question of administration which has gone fairly wrong. I am not unaware of the complicated nature of the Crown Agents' position; but that does not alter the fact that once it was known in the Government that ultimate responsibility would lie with the general public somebody or some body should have taken more drastic and definite action. That, I hope, is what will be looked at. I believe that the noble and learned Lord will confirm that that is well within the compass of the terms which he has moved.

4.37 p.m.


My Lords, noble Lords have pointed out the importance and gravity of the matters that fall for consideration by the tribunal and it is for the reason of reassuring and informing the public that the terms of reference have been drafted as widely as they have been; because they call for inquiry into the extent to which there were lapses from the accepted standards of commercial or professional conduct on the part of those involved and lapses from accepted standards of public administration. I venture to think that all the matters to which noble Lords have referred as requiring study and investigation will be covered by the terms of reference which I have moved.

It is the case that in the past the proceeding of some of the earlier tribunals of inquiry have caused grave concern. One could not have been unaware of the fact that in some previous proceedings many innocent persons had their reputations damaged and the closing years of their lives ruined by accusations which are not proven and not justified. It is for this reason that, first of all, the Royal Commission was set up under the chairmanship of Lord Salmon and why I have emphasised the importance of complying with the six cardinal principles which were identified in that report and to which the tribunal's attention will be drawn.

My Lords, I take comfort further in the fact that, as I have said—and the names of the members of the tribunal will be announced shortly—the chairman will be a High Court judge with experience in these matters, assisted by distinguished colleagues who will not themselves be lawyers but who will have had considerable administrative experience in relevant fields. Accordingly, I hope that this tribunal will be able to do what noble Lords have indicated: to inform the public as fully as possible as to what went wrong and as to where the responsibility lay. It will not of course fall to the tribunal to impose any penalties or punishments, disciplinary or otherwise. If any such matters fall for action, they will have to be considered in the light of the findings of the recommendations of the tribunal in due course. Accordingly, therefore, I am glad what is now proposed has the approval of your Lordships.

On Question, Motion agreed to.