HL Deb 23 February 1984 vol 448 cc866-72

4.27 p.m.

Baroness Young

My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Minister for Overseas Development. The Statement is as follows:

"Last summer the Government of' Brunei terminated its contract with the Crown Agents for Oversea Governments and Administrations for the management of its investments. This resulted in significant loss of income to the Crown Agents, amounting to up to £4 million in a full year, so that action became necessary to enable them to meet their financial duties under the Crown Agents Act 1979.

"The board of Crown Agents accordingly submitted to Government proposals for reorganisation and improvement of the efficiency of the business, designed to enable them to achieve financial viability not later than 1986. Those proposals included the reduction of staff from about 1,200 to under 900, changes in terms of service to enable them to provide services competitively, and the sale of their principal offices at 4 Millbank, which would make possible the reduction of the commencing capital debt from its current level of £19.8 million to £9 million.

"The Government have taken the opportunity to undertake a thorough review of the future of the Crown Agents and the need for their continued existence in their present form. In undertaking this, we have had regard to the Government's policy to reduce the size of the public sector, to the services which the Crown Agents provide for developing countries and to their value to Britain's own interests.

"On the basis of this review I expect Crown Agents to be fully profitable by not later than 1986.

"After very careful consideration of this and other factors and of the representations made to me, the Government have decided broadly to endorse the proposals of the board of Crown Agents for their reorganisation with a view to their privatisation in due course. The timing and method of privatisation will be settled later. Pending the necessary legislation, the board will set in train appropriate measures of internal reorganisation in order to facilitate privatisation.

"To facilitate the financing of this reorganisation, it is the Government's intention to waive in full under Section 17(4) of the Crown Agents Act 1979 the interest due on the commencing capital debt in 1984 and to seek parliamentary approval under Section 17(10) for any waiver necessary in 1985 and 1986.

"I believe that this decision will enable the Crown Agents, under their vigorous chairman, Mr Peter Graham, to continue to serve successfully both Britain and the developing world".

My Lords, that completes the Statement.

Lord Oram

My Lords, may I first thank the noble Baroness for repeating the Statement, even though (as she will not be surprised to learn) major parts of it, and particularly the threat of privatisation, are most unwelcome to those of us on these Benches. Does the noble Baroness recall stating just a year ago that the Crown Agents were performing successfully their role of providing services for overseas governments, and particularly those of developing countries? Will she confirm that the Crown Agents in their present form continue to enjoy the confidence of those client countries? Will she say what consultations there have been with those client countries about the proposed reorganisation? Will she also tell me whether the staff were consulted before this Statement was made?

In particular, will the client countries and the staff be consulted before privatisation is entered upon? While we of course welcome the prospect that as a result of reorganisation we can expect full profitability by 1986, will not the confidence of the staff be undermined by the overhanging threat of privatisation in that period? Despite the early paragraphs of the Statement, is not the real nub of the Statement privatisation; is not that the essence of the Statement which the noble Baroness has read out? Why disturb something that is working successfully? Is this not once again a case of pursuing the dogma of privatisation to still further lengths of irresponsibility?

Reverting to what the noble Baroness said a year ago, is it not the case that many countries—100 of them, including many small countries—have very real reason to be grateful and to appreciate the value of the services which the Crown Agents have provided over the years? Will she bear in mind a point which the noble Lord, Lord Gridley, brought to the attention of the House: the fact that ex-colonial servants who are now pensioners have good reason to thank the Crown Agents for the efficiency of their services in that respect? Is there not a danger that all those beneficiaries of the work of the Crown Agents hitherto may suffer as a result of the proposals which the noble Baroness has today announced?

Lord Diamond

My Lords, on behalf of noble Lords on these Benches I. too, should like to thank the noble Baroness most sincerely for repeating the Statement, but I ant bound to say that it is impossible to give it a sincere welcome. It is a very important Statement. and one will want to consider it very carefully.

It is of course the case that when an organisation of this kind suffers a significant loss of income steps have to be taken to remedy that situation. But can the noble Baroness the Minister tell us why the steps taken have been limited almost entirely to running down the organisation instead of seeking alternative outlets for its many activities? There is a running down of staff, a running down of offices, and a running down of activities. This is not the normal way that active businesses and active boards deal with difficulties of that kind. Is it not the case that they normally search for alternative sources of income?

With regard to the reorganisation which the board has recommended with a view to privatization, can the Minister say whether that examination was undertaken on terms of reference which specifically provided that it was to be in the light or the expectation of privatisation? It seems from the Statement which has just been repeated that the board's proposals with a view to reorganisation have been made with a view to privatisation. One wants to know, therefore, whether these were the objective views of the board on how best to forward their activities, or whether they were the views of the board on how best to adjust their activities so as to be capable of easy privatisation.

One of the most important questions I want to ask is: what do the Government think will be the effect of this announcement and of their policy on the services provided to developing countries, which is one of the main activities of the Crown Agents and does not necessarily lie all that easily with the concept of privatisation and of making a profit no matter what? I shall be grateful if the noble Baroness the Minister can provide more information on that point.

Will the noble Baroness also fill in my recollection as to whether we have debated the Croom-Johnson report? My recollection is that there was a report by Mr. Justice Croom-Johnson on the activities of the Crown Agents and that your Lordships' House has never been given an opportunity to debate that report, which would be very material to our consideration of what is now intended. In short, I find myself compelled to say that it is much easier to come to the conclusion that the Government have been concerned more to pursue their policies or privatisation no matter what, rather than have regard to the best interests of the clients of the Crown Agents.

Baroness Young

My Lords, I thank the noble Lords, Lord Oram and Lord Diamond, for their recognition that this is an important Statement. The noble Lord. Lord Oram, began by asking me about privatisation. As the Statement makes clear, the first proposals are a general reorganisation of the Crown Agents, and questions as the method and timing of privatisation will be considered at a later date. What has particularly precipitated this, as is set out at the start of the Statement, is the fact that the Government of Brunei have terminated their contract with the Crown Agents, so that since the summer of 1983 the Crown Agents have been running at a loss. The Government therefore felt it was right that the Crown Agents should be reorganised, and the general proposals are set out in the Statement.

On the particular questions I have been asked about reorganisation, I should like to confirm to the noble Lord, Lord Oram, that my right honourable friend the Minister for Overseas Development has seen representatives of the trade unions at the Crown Agents, both in London and East Kilbride. They are aware of the reorganisation, and I expect that my right honourable friend will meet them again to discuss the implications to the staff of the Government's decisions.

On the general question about privatisation, the Government believe that the work which the Crown Agents do could be done by the private sector. Our aim in privatisation will be of course to retain the confidence of the clients; we would expect this to be the case. Morgan-Grenfell, who have examined the prospects of privatisation, have said that there is a good prospect of achieving privatisation and that the Crown Agents' financial forecasts are a reasonable basis on which to make a decision.

The noble Lord, Lord Diamond, asked a series of questions. In reply to his question about a debate on the Croom-Johnson Report, that must be a matter for the usual channels. In fact, in the Answer I gave at almost exactly this time a year ago on the action which the Government have taken on the findings of the tribunal of inquiry into the Crown Agents, I outlined the action which the Government had taken on that report and explained that the 1979 Act gave the Crown Agents a clear legal status and provided for appropriate accountability to, and control by, the Secretary of State. I hope that this Statement will be seen by the client countries as indicating a determination to make the now reorganised Crown Agents not only more efficient but certain to maintain the high standards of work that the client countries have come to expect.

The Earl of Selkirk

My Lords, I do think we should recognise that, over the 150 years since the Crown Agents started, they have played a tremendous part overseas in those countries in different continents with which we have been associated, and that those who have done their job deserve the fullest praise for what they have carried out. It is, of course, true that about 14 or 15 years ago they ran into some difficulties; indeed this point was raised in this House for the first time. I have every reason to believe, however, that they have put their house fully in order.

But the world is different today. The Crown Agents were essentially a concomitant of the British Empire, and now we are dealing with a great many sovereign independent countries. The Crown Agents leave a sort of legacy that they are agents of the British Government. That is not true, I know, but it gave the impression of that, and I have very little doubt that the lack of confidence in Brunei was in some measure due to the fact that they thought that the Crown Agents were in fact the British Government expressing itself in a certain way. They were wrong in that, but never mind; I think this was an element that played its part. Now that they can take an independent line—call it what you will; I hate the word "privatisation"—and will clearly be not part of the British Government, I believe they can have and should have a very considerable future.

Baroness Young

My Lords, I am most gratetul for the words of my noble friend Lord Selkirk. I think he has put very well what the present position is. Although it is very difficult to be sure what led the Government of Brunei to cancel their contract, it may well be that they felt that, with the approach of independence, it would not be appropriate for the Crown Agents to manage their investments, and that they wished to do this themselves. It is for those kinds of reasons that we believe the present arrangements will be a better basis for the future.

Baroness Llewelyn-Davies of Hastoe

My Lords, is the noble Baroness aware—I think she must be—that in all parts of the House there are many Members with experience of the work of the Crown Agents who will have heard the Statement with much apprehension? The noble Earl pointed out that this has been a public service since the middle of the 19th century. May I ask the noble Baroness whether, since the Crown Agents have not acted for commercial concerns in the private sector and since they do act for the United Nations on projects financed by the World Bank, and for international organisations of a similar kind, the Government can really be certain that such bodies will have the same confidence in a privately owned organisation, and, moreover, a privately owned organisation the timing and method of the privatisation of which, if we can call it that, have still to be settled later?

Baroness Young

My Lords, I have no reason for thinking that because it is a private organisation international bodies or developing countries should have less confidence in it. I think it is a very dangerous statement to suggest that simply because something is a private organisation it will be less competent or less reliable. I think we must look to the future with confidence that under its present organisation and present direction it will be able to fulfil its future role effectively.

Lord Gridley

My Lords, may I ask my noble friend the Minister this? As I have been more or less intimately involved over the years I have been in this House, having been a former overseas civil servant, in the protracted and very difficult negotiations which have arisen from time to time regarding a satisfactory culmination of the takeover of overseas pensions, I am aware of the great expertise and value which has been exhibited by members of the Crown Agents in all the deliberations we have had. I must state to your Lordships how much we missed in some of the deliberations the assistance we had had from the late Lord Boyd of Merton. May I seek an assurance from my noble friend the Minister that under the reorganisation and the privatisation which is envisaged for the Crown Agents the Government will be in a position to maintain the expertise of the staff, which has been of so much help to us over these years?

Baroness Young

My Lords, I should like to acknowledge to my noble friend Lord Gridley the importance that we attach to the expertise of the staff, and indeed I recognise the appreciation which has been shown in all parts of the House of the expertise that has been built up over the years by the Crown Agents. I should like to confirm to my noble friend that. in looking to the privatisation of the Crown Agents, some of the work which is at present carried out in East Kilbride, which of course includes the pensions administration work to which my noble friend has referred, and some of what is now done for the Overseas Development Agency, may well continue to be carried out in the public sector. But decisions on that particular part of the organisation have yet to be taken.

Lord Ross of Marnock

My Lords, can the noble Baroness tell us exactly what will be the effect in East Kilbride on the staff there?

Baroness Young

My Lords. I gave the effect of the reorganisation proposals, which indicate a reduction of staff from about 1,200 to about 900. It is rather difficult to tell exactly how it would work out, because there would of course be some natural wastage, but the Crown Agents estimate that there would probably be a staff loss of about 250. We believe that any alternative decision to the closure and the break-up of the Crown Agents would have meant that a substantially greater number would have been made redundant. At the same time, the Management and Personnel Office will take all practicable steps to facilitate the transfer to the Civil Service of any such staff who can be transferred to other departments.

Lord Ross of Marnock

My Lords, I asked particularly about East Kilbride.

Baroness Young

My Lords, I think it is rather difficult to give a more detailed answer than I have given. If there is a more specific number that I can give to the noble Lord, I will write to him about it. It is rather difficult to make a judgment on something which has yet to take place.

Lord Oram

My Lords, I wonder if I may ask the noble Baroness to clear up one rather general, but I think important, point. She said that the immediate considerations were the reorganisation of the Crown Agents, and then went on to say that it would be the timing and method of privatisation which would be settled in due course. Do we take it from this that there has been a firm decision to privatise? We understand from what we have read that there has been considerable heart-searching within the Government on this question. Do we take it that a firm decision has now been reached and that the Crown Agents are to be privatised? And what is meant by "in due course"?

Baroness Young

My Lords, the noble Lord, Lord Oram, will, I am sure, have read the Statement very carefully; he will see that it says that the reorganisation is with a view to privatisation. But, clearly, we wish to see the reorganisation take place, and the privatisation should take place at a time which is in the best interests of the organisation for its future success.

Lord Allen of Abbeydale

My Lords, this is not a question but a reflection that I spent rather too many years looking at the problems of the Crown Agents and that it is odd to think that they got into their problems because they went into own account business in the belief that, if things did go wrong, they would be left on their own and would have to fend for themselves. How wrong they were and what a sad story it all proved to be.