Guinness plc (Hansard, 15 January 1987)

"The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)
My Lords, for the convenience of your Lordships, and with your Lordships' permission, I should like to repeat a Statement that has been made in another place by my honourable friend the Minister for Corporate Affairs in response to a Private Notice 645 Question on the subject of Guinness. The Statement reads as follows:
"The inspectors appointed to look into the affairs of Guinness already have wide terms of reference which enable them to investigate any matter concerning Guinness and to require any persons, including its corporate advisers, whom they consider to have relevant information to give evidence to them. As and when I receive any material suggesting misconduct in a matter not concerning Guinness. I will consider it and take any appropriate action. I shall certainly not hesitate to make a further appointment of inspectors if the circumstances justify it."

§ Lord Williams of Elvel
My Lords, we are most grateful to the noble Lord for repeating as a Statement the Answer given by his honourable friend in another place to a Private Notice Question.
I am sure that the noble Lord will realise that the whole matter of Guinness is now developing into a major financial scandal, and that is something that we have not seen in the City of London for at least a decade and more.
Two quite different issues are raised by the noble Lord's Statement. The first issue is whether or not there should be some form of interim report from the inspectors. The state of the market at the moment is that rumour is feeding on rumour. Almost every day some new and rather extraordinary turn of events takes place which is reported in the press, and there is nothing that the market likes worse than uncertainty.
I understand, and I hope that the noble Lord will be able to confirm, that the auditors of Guinness—Price Waterhouse—were commissioned by the board of Guinness to study the whole matter which is under review; that they reported to the board; and it was on the basis of that report that the board yesterday took the action that it did. In the light of that, is it not proper that the findings of Price Waterhouse should be made more generally available to make absolutely certain that all that is contained in this particular part of the Guinness activity should be seen to have been dealt with, and that there are no further shocks that the market may have to sustain?
There is a second question on the interim report. I understand the reticence of the noble Lord's honourable friend in agreeing to make any kind of commitment about this, but there is the question of whether there might be, as a result of the inspectors' report or investigations, any question of prosecution against any member of the company, or any of its advisers. I understand that it is not appropriate to make an interim report on that basis. Nevertheless, I come back to the first point and I feel that the question of whether this is an end which makes a full-stop to the rumours that are circulating round the City of London is a question to which the noble Lord may wish to address himself. If an interim report can be made I think that would serve the purpose.
The second major point to which the Statement gives rise concerns a wider issue. Of all people, the noble Lord will be aware that on 29th July last year I raised the whole question of the takeover of Distillers 646 by Guinness and the statements that had been made by Guinness in the course of that. In replying to my remarks the noble Lord said that in his understanding, the Takeover Panel had the matter under review. It is clear that at that time this curious support operation for the Guinness share price was under way. It is therefore clear that the Takeover Panel, whether or not they had the whole matter under review, failed to pick up that this was happening. The Takeover Panel, as I argued at the time—and as a number of other noble Lords argued—can only work if everybody agrees to abide by the spirit and the rules of the code. Enough is now known about the matter to see that a number of people, some of them very highly respected names in the City of London, failed to do so. I should like to ask the noble Lord whether he would not even now consider taking some measures which would ensure that the Takeover Panel code and rulings should have some measure of statutory backing.
The second problem as regards the wider issues is whether this marks the end of self-regulation. At the time of the Financial Services Bill we made our position absolutely clear. We wished to see a system of practitioner-based regulation with a strong statutory superstructure. In my view the statutory superstructure is now more necessary than ever. I quite simply ask the noble Lord whether he and his department will not now bring forward the Financial Services Act (Amendment) (No. 1) Bill which will bear out some of the points that the Opposition were making during the passage of the Bill last summer.

§ Lord Wigoder
My Lords, the affairs of Guinness are very natuarally and properly a matter of considerable public discussion at the moment. They are a matter of very lengthy investigation in the press and it is not entirely surprising that there are members of political parties who think that there may be, in some way, some electoral advantage to be gained out of discussing them in considerable detail.
However, is it not the simple fact, as the noble Lord, Lord Lucas, has said, that there are inspectors appointed who have complete powers to pursue a thorough investigation? Is it not also the fact that those inspectors, under the Companies Acts 1948 and 1981, have the power, if they think it right, wise and sensible, to issue an interim report, and that at this stage the matter ought to be left there? Is this not a situation in which it would be quite wrong to keep calling for interim statements and interim reports before the investigations are completed, and when those interim statements and reports can only be prejudicial and unfair to some of the people involved? I suggest that it is very much in the public interest that we do not pursue this matter, that we do not make demands of that kind, and that we all control our impatience.

§ Lord Lucas of Chilworth
My Lords, I am greatly obliged to the noble Lord, Lord Wigoder, for his extremely wise words and the advice that he gives not only to your Lordships' House but, I hope, to a very much wider audience. I can add nothing further in response to his comments.
As regards the noble Lord, Lord Williams, I feel obliged, notwithstanding what I have said in answer to the noble Lord, Lord Wigoder, to respond to the 647 specific points he makes. In so far as an interim report is concerned, officials in my department are of course in touch with the inspectors, who at this juncture agree that an interim report would be an unnecessary diversion of effort from the investigation. As regards the Takeover Panel, I believe, as I said last year, that taken together with the statutory powers the self-regulatory system is the best system to deal with the matters that are the subject of the Statement this afternoon. Obviously we shall take into account any matters which are relevant when we receive the inspectors' report.
With regard to underlining the position as we see it today, I think that noble Lords will agree that as soon as evidence came to our attention warranting the appointment of inspectors, the Government took immediate action to exercise the very strong and very wide-ranging powers that are available to them under the Companies Act 1985.

§ Lord Diamond
My Lords, while fully supporting every word that my noble friend Lord Wigoder has said, may I ask the noble Lord the Minister whether he takes the view that it would be unwise to base an alteration in the law on one incident, and terribly unwise to base it on that incident when one does not even know where the incident is?

§ Lord Renton
My Lords, could not that matter be regarded as both hypothetical and premature?

§ Lord Lucas of Chilworth
My Lords, in response to the noble Lord, Lord Diamond, and underlining what my noble friend Lord Renton has said, I think that, in fact, I answered when I said in response to the noble Lord, Lord Williams, that we would certainly be taking account of any matters that are relevant when the inspectors' report is to hand. That will be the time for us to give proper consideration to any matters of that kind.

§ Lord Williams of Elvel
My Lords, will the noble Lord not recognise that in the meantime there will be a lot of press speculation and a lot of rumour, and that there may be further developments about which we do not know that will create continuing uncertainty and prejudice the future of what is, after all, a great British company, one that we want to encourage? What measures can the Government think of that would reduce that uncertainty and allow the company to get on with its business?

§ Lord Lucas of Chilworth
My Lords, again, I have really answered, although I cannot stop speculation whether in the press or anywhere else. The Government took immediate, very strong powers as soon as evidence was brought before them and will not hesitate to take any action that is necessary in matters of this kind.

§ Lord Orr-Ewing
My Lords, will my noble friend not consider that the restructured board of Guinness will surely take every opportunity of giving information to its shareholders and the public as it becomes available? Would it not be unwise—as suggested from 648 the Liberal Benches, endorsed by my noble friend Lord Renton—to rush into legislation which, as we have learnt time and again, is much less flexible and much slower to react than a self-regulatory authority such as that now being tried? Is it not far too early in this trial to pass judgment on a case which, as was said from the Liberal Benches, has not yet even been decided? I do hope that the Minister will abide by what he has said so far and will not be too swayed and rushed into any consideration of legislation yet awhile.

§ Lord Lucas of Chilworth
My Lords, my noble friend Lord Orr-Ewing raises two points. First, I think that he would recognise, as would other noble Lords, that it is not for me to suggest to the board of the company what it should or should not do. As to the second matter, I give my noble friend the assurance that the Government will not be rushed into any premature decision or premature consideration of the matters currently before them.