HL Deb 22 July 1991 vol 531 cc475-82

3.44 p.m.

Lord Waddington

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

"My right honourable friend the Chancellor of the Exchequer made a Statement to the House on Friday and indicated that the Government will commission an independent inquiry into precisely these matters. I am now able to tell the House that the inquiry will be undertaken by Lord Justice Bingham and that the terms of reference will be as follows: to inquire into the supervision of BCCI under the Banking Acts; to consider whether the action taken by all the UK authorities was appropriate and timely; and to make recommendations.

"All the matters that the right honourable gentleman has raised today will be covered in Lord Justice Bingham's inquiry. Lord Justice Bingham will have access to all relevant papers and officials and Ministers. I can assure the House that any relevant matter of any sort will be made available to Lord Justice Bingham. The conclusions of the inquiry will be made public".

My Lords, that concludes the Statement.

3.45 p.m.

Lord Williams of Elvel

My Lords, the House will be grateful to the noble Lord the Leader of the House for repeating the Statement made in response to a Private Notice Question from my right honourable friend Mr. Kinnock in another place. It will come as no surprise to your Lordships that I also had put down a Private Notice Question on this matter. I did so because I and my right honourable friend believed that, given the press allegations made over the weekend, the whole matter had gone beyond banking regulations and that it had now become, because of the security implications, a matter for Ministers. There is no question now of casting the Governor of the Bank of England as a fall guy. Ministers must have known what was happening otherwise there was a serious dereliction of duty.

I welcome the inquiry which the Government have set up and I also welcome the appointment of Lord Justice Bingham. I very much hope that, when he comes to take up office in this inquiry, Lord Justice Bingham will not dismiss lightly but investigate thoroughly the allegations made in the weekend press. He will no doubt be asking, as we ask, whether it is the case that more than a year ago security and intelligence services gave the Government—not the Bank of England—evidence, some provided by senior BCCI officials, of a serious criminal conspiracy, including the funding of terrorist groups, and that that led to the investigation known as Project Q. Lord Justice Bingham will no doubt be asking himself whether that allegation is true or false.

He will also no doubt be considering whether the evidence that was submitted at the time was considered by the Joint Intelligence Committee of the Cabinet; whether papers were prepared for Ministers and whether they read those papers. Lord Justice Bingham will no doubt be asking himself whether that is true or false. Furthermore, he will be asking himself whether an interim BCCI-Price Waterhouse report of January 1991 showed that more than 40 BCCI accounts had almost certainly been used by Islamic jihad, part of the Hizbollah group, which is responsible for kidnapping British and other hostages in the Lebanon. I have no doubt that he will also be asking himself whether those allegations are true or false.

Since the noble Lord the Lord Privy Seal has promised ministerial co-operation in this matter, Lord Justice Bingham will no doubt also be asking himself whether it is true or false that it was an Under-Secretary at the Ministry of Defence who revealed the names of account holders to the Bank of England at an early stage. No doubt Lord Justice Bingham will be investigating whether the whole matter was considered by the Board of Banking Supervision which was set up, as your Lordships will be aware, under Section 2 of the Banking Act 1987, and whose independent members have the right to have their advice to the Bank of England placed before the Chancellor of the Exchequer. Did the Board of Banking supervision consider the matter? What was its advice; was that advice placed before the Chancellor? If it is the case, as I understand it, that the board's advice to the Bank of England was rather different from what we have heard, was it reported to the Chancellor?

We are assured by the noble Lord the Lord Privy Seal, and by other Ministers, that there will be no ministerial cover up. I hope that that is the case. We have to accept it from the noble Lord the Lord Privy Seal that there will be no ministerial cover up. However, it is difficult to believe that the Prime Minister and Chancellor of the day knew nothing whatever about this matter.

I am glad to hear from the noble Lord the Lord Privy Seal that the relevant papers can be sought by Lord Justice Bingham. Will the Minister confirm that Lord Justice Bingham can seek evidence on oath and that this will be a proper judicial inquiry, which will include the Ministers to whom the noble Lord the Lord Privy Seal referred? This is a sorry and shabby affair. We hope very much that Lord Justice Bingham will be able to clear the matter up once and for all. We on these Benches will not rest until the truth is out, because there is a serious scandal which goes right to the heart of government.

Lord Harris of Greenwich

My Lords, I should like to join the noble Lord, Lord Williams of Elvel, in thanking the Leader of the House for having repeated the Statement. I should like to ask one or two questions, and 1 apologise if I am going over ground already covered by the Leader of the House—my note taking is not as efficient as it should be. I welcome the fact, as we all do, that there is to be co-operation from Ministers; indeed it would be astonishing were there not to be such co-operation.

First, may I ask specifically whether it is to be made quite clear to Lord Justice Bingham that he can invite any Minister of the Crown to give evidence and that any Minister of the Crown will agree so to do? Secondly, the noble Lord has said that the report of Lord Justice Bingham will be made publicly available. Is it being made clear to Lord Justice Bingham that he cant take evidence in public? That is an extremely important point. I should be very grateful if the Leader of the House would assist us by answering that question. Thirdly, what many of us find inexplicable about this whole sorry chapter of events is the fact that no one appeared to take any action, notwithstanding the fact that there was abundant evidence of wrongdoing by BCCI. I remind the noble Lord of the point which I made in our short debate on Friday afternoon; that is the evidence of the District Attorney for Manhattan, Mr. Robert Morgenthau. Mr. Morgenthau told the Consumer and Regulatory Affairs Sub-Committee of the United States Senate which was looking specifically into this issue that: In the summer of 1989, over the 4th July weekend, several members of my staff attended an international conference on money laundering in Cambridge, England. They learnt that BCCI had an international reputation for capital flight, tax fraud and money laundering that far exceeded the conduct charged in the Florida indictment".—[Official Report, 19/7/91; col.444. ] I am sure this will be one of the many issues that Lord Justice Bingham will want to review. Many of us remain deeply puzzled that despite this evidence and a great deal of other evidence, no one bothered to take any action at all until the events of a few days ago.

Lord Waddington

My Lords, I do not think that the noble Lord, Lord Williams of Elvel, would expect me to reply to him in too gentle a manner, although he will expect me to reply to him frankly.

I ought to remind the House of a little bit of history. The Leader of the Opposition wrote to my right honourable friend the Prime Minister on Thursday urging the advantages of setting up an inquiry without delay. Such an inquiry was announced on Friday. After such an inquiry had been announced, the right honourable gentleman the Leader of the Opposition promptly denounced it as a cover up. He then called for a Statement in this House, which could have only one of two purposes: either to secure discussion of whether the security service was involved in these matters and, if so, the extent of the involvement, or to prejudice the findings of the independent inquiry. The right honourable gentleman must have known that security operations are never discussed on the Floor of the H ruse. One therefore wonders why he thought it proper to table a Private Notice Question in the other place today which of course has led to the making of a Statement in the other place and a Statement by me.

I do not have a vivid imagination, neither am I given to conspiracy theories, but some of us may—

Lord Williams of Elvel

My Lords, I—

Lord Waddington

No, my Lords; I am entitled to reply. As the noble Lord asked me no questions at all, it is very appropriate for me to put it in this way. One is entitled to wonder why it was that a Private Notice Question was tabled in the other place. I am not given to conspiracy theories, but there is a little whisper about a thing called the Citizen's Charter, with a press conference to follow.

However, coming now to the remarks made by the noble Lord, Lord Williams of Elvel, the burden of his remarks were not questions to me, they were a recital of the kind of matters which he believed Lord Justice Bingham would be asking. 1 have no complaints about the noble Lord rehearsing in this House what he believes the questions will be; but it hardly seems to me to be possible to read such speculation as a list of questions to me. If they were questions to me, the noble Lord must surely know that I am quite unable to reply to them. If I were to reply to matters which are within the remit of the inquiry, I would be told that I was prejudging the inquiry. If I were to reply to matters concerning intelligence, then I would be breaching the convention which has been observed in this House and in another place for years that matters of security are never discussed here or in another place. For obvious reasons we do not even discuss whether there may be a security implication.

I turn now to the matters raised by the noble Lord, Lord Harris of Greenwich, who thanked me for making the Statement. He is right: Lord Justice Bingham will be able to call Ministers. The inquiry will be full and independent. It will be a non-statutory inquiry, as was Lord Justice Woolf's inquiry into Strangeways, and Lord Justice Taylor's inquiry into the Hillsborough disaster. There is no need to invoke all the time-consuming apparatus of the Tribunals of Inquiry (Evidence) Act 1921, which was last used as long ago as 1978.

The noble Lord asked whether the proceedings would be held in public. We have to be very careful not to prejudice the criminal inquiries. I understand that it is the intention of Lord Justice Bingham not to hold the proceedings in public in the interests of expedition of ensuring maximum disclosure of material which is confidential and commercially sensitive. However, that does not mean that the results of the inquiry will not be published. As far as possible and without prejudicing possible criminal proceedings arising out of the inquiry of the Serious Fraud Office, and under the confidentiality provisions of the Banking Act, Lord Justice Bingham's recommendations will be made public. We all sincerely hope that he will be able to get down to work very quickly, and that he will be able to reach his conclusions as soon as possible.

I give way to the noble Lord.

Lord Williams of Elvel

My Lords, I am most grateful to the noble Lord. Perhaps I may remind him of the report of the Procedure Committee. It states: A Lord who is speaking may be interrupted with a brief question for clarification. Giving way accords with the traditions and customary courtesy of the House". My question for clarification was: is it in order for the noble Lord the Leader of the House to criticise personally a Member of another place?

Lord Shepherd

My Lords, is it not a fact—perhaps the Leader of the House can help us—that in another place a Private Notice Question can be asked only with the consent of the Speaker of the House? In that case the criticisms that the Leader of the House has made in terms of my right honourable friend can be a reflection upon a decision taken by Mr. Speaker in another place. I should have thought that that is something that we should always seek to avoid.

Lord Waddington

My Lords, I did not wish to cast any such reflection. There is a convention that when a Private Notice Question is asked for by the Leader of the Opposition the Speaker grants the request. Of course it is customary for someone to give way, but I am not sure that it is customary to give way half way through an argument. That is why I gave way at the end.

Lord Cockfield

My Lords, I wish to raise a question strictly related to the terms of reference of the inquiry. In the original Statement there was a reference to considering whether the existing law of the United Kingdom on prudential regulation was satisfactory or whether there should be any amendment or strengthening of that law. As I understand it, that does not appear in the terms of reference given to Lord Justice Bingham.

The point is important because, as I indicated when we were dealing with this matter a few days ago, I do not believe myself that the present United Kingdom law gives effect to the Community directive known as the second Banking Co-ordination Directive. That is not a criticism of the Government because, as I made clear at the time, that directive does not come into force until 31st December of next year. Nevertheless, it is clearly a matter of great public importance whether our law is good enough or whether it needs strengthening.

The point is of added importance because of the involvement of Luxembourg in these matters, a country which is also covered by the terms of the banking directive. We have to face the very difficult question of there being two supervisory bodies with different functions. I raise the point simply to clarify whether this will be considered by the tribunal or whether it will be considered elsewhere outside the tribunal's inquiry.

Lord Waddington

My Lords, I am sure that the matters raised by my noble friend will come within the remit of the inquiry. One can hardly inquire into the supervision of BCCI under the Banking Acts without considering whether there were ample opportunities for supervision and whether the right mechanism was available to allow that supervision to take place. The terms of reference allow the inquiry to make recommendations. I read that to mean any recommendations which the inquiry thinks are relevant in the light of the history which will be revealed to it.

Lord Bruce of Donington

My Lords, is the noble Lord aware that the Treasury received an invitation to attend the Conference on International Crime, to which reference was made by the noble Lord, Lord Harris, which was held last year, but declined to attend? Will that matter come within the scope of the inquiry? Will the noble Lord please bear in mind that there does not seem to be any convincing reason, aside from possible security implications affecting MI5 and the various other secret services, why this inquiry should not be held in public? There is a widespread demand in the country which has already been voiced on all sides of the House that it should be held in public. Is there any convincing reason why it should not be?

Lord Waddington

My Lords, with respect to the noble Lord, there are the strongest reasons why the inquiry should not be held in public. Obviously there would be a risk of serious prejudice to criminal investigations. On the other matter, I am convinced myself that it is up to Lord Justice Bingham to ask himself what is relevant. The matters to which the noble Lord has referred are clearly matters which he will be entitled to consider.

Lord Havers

My Lords, when the noble and learned Lord, Lord Salmon, wrote his report about the Tribunals of Inquiry (Evidence) Act he made the point that to hold such inquiries in public might make it impossible to prosecute people. Indeed, when I was Attorney-General there were a number of occasions on which I was asked to grant immunity in order that a witness should be able to give evidence to such an inquiry. That is the answer to the question.

Lord Waddington

My Lords, I am obliged to my noble and learned friend. He is entirely right.

Lord Campbell of Alloway

My Lords, perhaps I may ask for clarification. Is that not the reason why the evidence will not be given on oath, or will the evidence be given on oath? Is there not a relationship between the last question and the question I am putting? I have a second point on which I seek clarification. As I understand it—I seek assistance—the inquiry will be wide enough to cover all aspects of ministerial responsibility but will, one hopes, exclude any public consideration of security and intelligence matters.

Lord Waddington

My Lords, my noble friend is right on the second point. I am rather diffident about expressing an opinion on those other legal matters, surrounded as I am by such legal eminence. My understanding is that it will be up to Lord Justice Bingham to decide whether he wishes evidence to be taken on oath. I do not believe that there is anything to prevent him, but I shall make inquiries about that. If I am wrong, I shall certainly write to my noble friend.

Lord Campbell of Alloway

My Lords, with respect to my noble friend, I do not believe that there is power for Lord Justice Bingham to administer the oath unless the power is conferred upon him.

Lord Waddington

My Lords, my noble friend may well be right. That is why I was cautious and diffident in giving my reply. I was worried about it myself. What I am undoubtedly right about is that very wide-ranging and thorough inquiries can be set up, as we know from the Woolf Inquiry and other inquiries that have taken place recently, without using the Tribunals of Inquiry (Evidence) Act.

Lord Morris

My Lords, is my noble friend aware that many would welcome most strongly the insistence by Lord Justice Bingham that this inquiry should be held in private and not in public? That is absolutely essential. It would be impossible for the person leading the inquiry to ask certain questions in public which he might otherwise be able to ask in private. It would certainly prejudice the witnesses. It is absolutely essential that it is in private. I know that many people will agree with his view.

Lord Waddington

My Lords, my noble friend has a very important point. By hearing evidence in private, one will undoubtedly ensure maximum disclosure of confidential and commercially sensitive material.

Baroness Blackstone

My Lords, can the Leader of the House answer the question of my noble friend Lord Williams of Elvel about the procedure of this House with respect to personal criticism made in this House about a Member of another place? Turning to the independent inquiry, can he say whether there will be an interim report? As it is likely to be a long inqury, it might be helpful if there were an interim report, particularly with respect to Ministers' roles, given what we are now reading in the newspapers.

Lord Waddington

My Lords, on the first point, I cannot add anything to what I said earlier. On the second point, it will be up to Lord Justice Bingham to decide whether it might be worth while to have an interim report. I have no reason to believe that he will think it appropriate, but neither do I see anything in the terms of reference or the background to the matter which would prevent him from doing so.

Lord Williams of Elvel

My Lords, with the greatest respect, the noble Lord the Leader of the House did not gay anything on my first point.

Lord Waddington

My Lords, what was the noble Lord's first point?

Lord Williams of Elvel

My Lords, I asked whether it is proper for a Member of this House to criticise personally a Member of another place. I should be most grateful if the noble Lord could add a little bit to what he did not say in the first place.

Lord Waddington

My Lords, if I have erred, I apologise. Being somewhat a novice in such matters, I shall have to swot up on the subject to make sure. However, if I did transgress, obviously I am sorry.

Lord Simon of Glaisdale

My Lords, arising from the question asked by the noble Baroness, and by the noble Lord, Lord Williams, is not the position that it is out of order—or, in the words of the Companion to the Standing Orders, "to be discouraged"—for any Member of the House to refer to a private Member of another place in any critical way; but that it is always open to criticise, while preserving courtesy, not only the Government Front Bench but also the Opposition Front Bench when Members are speaking officially?

Lord Waddington

My Lords, I am grateful to the noble and learned Lord for what I think may be a lifeline. However, I am not quite sure.

Lord Wyatt of Weeford

My Lords, is the Leader of the House aware that I have frequently been attacked in the other place, and somewhat opprobriously from time to time? I have never complained. I presumed that Members of the other place were allowed to do so.

Lord Waddington

My Lords, I hope that we have all got broad backs and that we do not become over-sensitive about such matters.

Lord Ezra

My Lords, returning to the subject of the inquiry, does the Leader of the House agree that two issues are involved? We are concerned not only with the question of BCCI, but also with the question of the whole regulatory system for banking in this country. Is it not a fact that, as a result of what has happened, local authorities (which, on the basis of information received from the Bank of England, have invested in the banks listed by the Bank of England) are now very concerned about investing in smaller banking institutions? There is a serious doubt as to which banks can be trusted. That is not putting the matter too seriously. Will this inquiry restore our old faith in the banking system of Britain?

Lord Waddington

My Lords, we shall have to wait for the result of the inquiry. However, we could not have set up a more high-powered inquiry under a wiser person than Lord Justice Bingham.