HC Deb 14 December 1988 vol 143 cc562-3W
Dr. Goodson-Wickes

To ask the Secretary of State for Foreign and Commonwealth Affairs what plans he has for the future of the Crown Agents; and if he will make a statement.

Mr. Chris Patten

In 1984 my right hon. Friend the Member for Aylesbury (Mr. Raison) announced measures to improve the efficiency and competitiveness of the Crown Agents with a view to their privatisation in due course. Those measures, which included staff reductions, a change from public sector terms of service to private sector terms and the sale of the organisation's principal property at Millbank, have been implemented.

Her Majesty's Government have no immediate plans to privatise the Crown Agents. They have agreed with the Crown Agents certain further measures to put them on a sounder footing in the public sector. These measures involve further changes in the business and capital structure of the organisation designed to improve profitability. The Crown Agents will retain their core activities of procurement, financial and technical services. They have given up, or will give up, speculative trading and certain other activities which are not closely related to their main business. These other activities include two postage stamp production and sale companies, which the Crown Agents have sold, and some pensions services which are being taken over by the Overseas Development Administration.

The measures introduced from 1984 onwards reduced permanent staff numbers from some 1,100 to about 800. The further changes will involve a reduction in staff numbers of about 55. Most of these jobs will be transferred with the activities that are taken over by other organisations. The balance of the reduction in staff will be achieved through agreed redundancies or natural wastage.

The Crown Agents have customarily provided, and continue to provide, valuable services to the Overseas Development Administration, their major client, in respect of procurement and loan and grant administration. These services have demonstrated their worth in terms of securing better value for money and ensuring propriety and expedition in the international delivery of goods and services provided under the overseas aid programme. In recent years the Crown Agents have diversified their sources of business to reduce their dependence on the Overseas Development Administration and, in international competition, have won substantial business financed by other governments and by multilateral agencies.

The proposed changes in the capital structure will provide a more commercial basis for the Crown Agents, in particular a debt equity ratio more appropriate to the size and nature of the business. Subject to parliamentary approval of the new estimate in the supplementary round, I propose to use existing powers to make a grant of about £15.8 million effectively to convert to equity all but about £2.8 million of the Crown Agents' commencing capital debt to the national loans fund, which they assumed under the Crown Agents Act 1979. The normal rules for premature repayment will apply. These sums will be additional to the Overseas Development Administration's existing public expenditure survey provisions and will involve a net charge to the Reserve of around £3 million; they will not therefore add to the planned total of public expenditure.

The Crown Agents have undergone a continuous process of change since incorporation in 1980. It reflects credit on the board, senior management and staff of the organisation that this process has been carried through successfully in a difficult period. I am confident that the additional measures announced today will strengthen the Crown Agents' position and leave them better placed to meet the challenges of the 1990s.

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