HC Deb 15 October 1990 vol 177 cc617-21W
Mr. Blunkett

To ask the Secretary of State for the Environment whether his proposed guidelines to the chairmen of development corporations will include arrangements relating to compulsory purchase powers in respect of land acquisition; and if he will make a statement.

Mr. Portillo

The guidance will contain advice on handling any conflicts of interest which may appear to arise from the use of compulsory purchase powers by an urban development corporation.

Mr. Blunkett

To ask the Secretary of State for the Environment (1) what steps his Department has taken to ensure that the procedures adopted for the letting of contracts or the offering of consultancies by the Sheffield development corporation have conformed with the procedures outlined in his answer of 20 December 1989,Official Report, column 329; and if he will make a statement;

(2) what steps his Department takes to ensure that all development corporations are following the procedures laid down in regulations arising out of the Local Government Act 1988 or similar previous enactments relating to competitive tendering, together with appropriate EC directives; and if he will make a statement.

Mr. Portillo

Guidance on the competitive tendering requirements of the Local Government Act 1988 and EC directives was issued to all UDCs, including Sheffield, in December 1988. The Department monitors compliance through arrangements for project approval, post implementation sampling of projects, and the work of external auditors appointed by the Secretary of State.

Mr. Blunkett

To ask the Secretary of State for the Environment (1) if he will now publish the report of the investigation into the running of Sheffield development corporation; and if he will make a statement;

(2) if he intends to take any action arising from the recommendations of the inquiry into the operation of the Sheffield development corporation in respect of separating out potential conflict of interest arising out of appointments held in companies or organisations who may have a commercial or other similar relationship with the development corporation, to review the membership of the Sheffield development corporation board; and if he will make a statement.

Mr. Portillo

Those who gave evidence to Sir John Garlick's inquiry did so in confidence. I do not therefore believe that it would be fair or appropriate to publish the report.

On 29 August, I issued the following statement: Earlier this year my Department received from Mr. Keith Beaumont, the Chief Executive of Sheffield Development Corporation, a letter criticising the Chairman's role in the conduct of the Corporation's business. The letter was sent by Mr. Beaumont quite properly in his role as the Corporation's Accounting Officer. I thought it right to ask Sir John Garlick, a former Permanent Secretary of this Department, who as a Member of the Board of London Docklands Corporation is familiar with UDC procedures, to look into the matters raised and report to me as quickly as possible. He has now done so. I am satisfied that Mr. Sykes has performed his role as Chairman with complete honesty and integrity. Sir John found no grounds whatever for thinking Mr. Sykes had attempted to secure improper financial gain through his role as SDC Chairman—nor had Mr. Beaumont made any such suggestion. Mr. Sykes has tremendous enthusiasm for and commitment to the regeneration of the Lower Don Valley and has my full support in continuing as Chairman of the Development Corporation. Sir John did however find a number of shortcomings in the way Corporation business had been conducted. Some of these were the responsibility of the Chairman, others of SDC officers. Sir John also concluded that some criticism could be made of the Department for not ensuring that the most effective guidance was available to the Chairman. The shortcomings in the conduct of SDC business were in four areas:

(1) The holding of Chairmanship of Hallamshire Investments plc concurrently with SDC Chairmanship. Mr. Sykes was instrumental in establishing Hallamshire Investments plc which is a joint public/private sector investment company set up with the specific objective of investing in the regeneration of Sheffield. Mr. Sykes is non-executive Chairman of Hallamshire, but has no financial interest in the company and is not involved in its investment decisions. On this basis my Department agreed, after discussion with Mr. Sykes, that he could properly retain the Chairmanship. This was an exception to the normal rule that Development Corporation Chairmen give up Chairmanships of companies which operate in their area.

"Sir John found no evidence of harm or wrongdoing but concluded that, given the nature of the company's activities, for one person to hold the chairmanship of both Hallamshire Investments and the SDC was inconsistent with the need to avoid situations where public duties and private interests conflict or where there could be a suspicion of conflict. Sir John also found that my Department's views on his retention of the Chairmanship of Hallamshire Investments and of certain other business interests may have left the Chairman confused as to exactly what constraints applied to his activities, particularly in relation to Hallamshire Investments.

(2) "The Chairman's business interests. Mr. Sykes has a wide range of business interests both inside and outside Sheffield. He has been entirely open about these to the Department since his appointment and has in general followed the guidance given to Development Corporation Chairmen which is designed to ensure that there can be no conflict or suspicion of conflict between public and private interests.

"Sir John was satisfied that the Chairman had no wish deliberately to disobey the rules and indeed noted that on several occasions he was at pains to ensure that he was acting entirely properly. But Sir John found a few occasions when a clear distance was not kept between his public and private activities and when as a result a suspicion of conflict might have arisen. He found no evidence whatever of any financial impropriety or wrongdoing.

(3) "Appointment of consultants to the SDC. The rules governing the appointment of consultants to public bodies are strict. Competitive tender is required in all but exceptional circumstances and the Corporation's systems need to be able to ensure and demonstrate that value for money is being achieved.

"Sir John told me that, in his wish to ensure that the SDC had access to high quality advice, the Chairman had, he judged pressed too hard for the appointment of a particular consultant. Sir John noted however that it was a matter of judgment as to how far it was reasonable for a Chairman to press for the appointment of a particular individual or firm, and that his own judgment in this case was inevitably subjective. He also noted that SDC officers had been slow in making progress on the appointment of any candidate in the particular case.

"Sir John also criticised the SDC's systems for selecting, appointing and subsequently monitoring consultancy appointments. These were the responsibility of the Chief Executive. Again Sir John found no evidence of financial impropriety or wrongdoing, but noted the need for proper observance of procedures and adequate systems to ensure that the SDC always obtained best value for money.

(4) "Use of SDC facilities. Mr. Sykes' personal staff of two full time secretaries and one part time assistant work on both SDC and non-SDC business. The SDC pays for one full time member of staff, Mr. Sykes for the other two.

"Sir John found no evidence that the SDC paid for more secretarial time than it should under this arrangement. Indeed the SDC may well, on balance have gained. But he regarded the arrangement which the SDC had entered into as untidy and open to abuse.

"Sir John emphasised that he found no evidence of actual harm arising from any of these matters. But noted that a continuation of what had happened in the past could lead to justifiable criticisms in future.

"I have discussed these findings with Mr. Sykes and with my officials. Mr. Sykes entirely recognises the procedures and standards involved in public business and the need for the SDC to improve its official systems and procedures. He and his board have given me an assurance that the Corporation will maintain the highest possible standards in future. The Corporation is also taking steps to review its systems and procedures.

"As far as Sir John's criticism of the Department is concerned, I am making arrangements to strengthen the guidance given to all Chairmen and board members.

Detailed guidance will be given to cover the difficult issues that can arise for a Chairman who has a range of local business interests. Local knowledge and connections can in themselves be of considerable value to an urban development corporation. But a clear distance needs to be kept between the activities of the public body and private business interests to avoid any suspicion of a conflict of interest.

"As far as the Chairmanship of Hallamshire Investments is concerned, I am satisfied that Mr. Sykes behaved entirely properly in continuing to hold both Chairmanships after the first discussions with the Department. But we both accept Sir John's conclusion that, given the nature of the company's activities, there are difficulties in one man holding the Chairmanships of both the SDC and Hallamshire. Mr. Sykes has therefore told me that he will be talking to the Board of Hallamshire Investments with a view to resigning his Chairmanship.

"I am most grateful to Sir John for the speed and thoroughness with which he has completed his work. I am happy that the Corporation will now be able to get on with its vital work of regenerating the Lower Don Valley. The Corporation has made excellent progress so far in securing environmental and economic improvements. I confidently expect that positive change to continue and accelerate over the next few years".

Mr. Blunkett

To ask the Secretary of State for the Environment if he has anything to add to his answer of 20 December 1990,Official Report, column 329, in respect of the practice adopted by the development corporations in the letting of contracts or the funding of consultancies, following the statement issued by the Minister of State on 29 August in respect of the investigation which had been undertaken into the running of the Sheffield Development Corporation; and if he will make a statement on the new guidance to be given to the chairmen of development corporations in respect of the separation of public and private interest.

Mr. Portillo

I have nothing to add to the answer given by my right hon. Friend on 20 December 1989. When the Department's revised guidance to UDC chairmen and board members on handling conflicts of interest is issued a copy will be placed in the Library.

Mr. Blunkett

To ask the Secretary of State for the Environment whether, in the guidelines to be issued to development corporation chairmen, advice will be given on(a) the appointment of staff without public advertisement or interview for the post concerned, (b) the separation of payment from public and private funds for those employed by, or paid on behalf of, the development corporation and (c) the calling of ad hoc and unminuted meetings of selected members of the board of development corporations for discussion of business to be considered by the whole of the board membership; and if he will make a statement.

Mr. Portillo

All urban development corporations have been advised that staff should be recruited on merit on the basis of fair and open competition and in accordance with the standards expected of public sector employers. My Department will shortly issue guidance on the separation of payment from public and private funds for those employed by or paid by UDCs. Arrangements relating to meetings of a UDC board are a matter for the corporation to determine.

Mr. Blunkett

To ask the Secretary of State for the Environment when officials of his Department were notified of suggestions of impropriety or concerns relating to the procedural or other conduct of the workings of the Sheffield development corporation about which he subsequently initiated inquiries; what action was taken at that time as a consequence of the reference made; and if he will make a statement.

Mr. Portillo

In July 1989 a member of the public expressed concern about the conduct of SDC's affairs. In September that year the chief executive raised similar concerns informally with the Department. In neither case did the Department consider that there was any evidence of impropriety.

At the end of May this year, the chief executive wrote to the Department criticising the chairman's role in the conduct of the corporation's business, and my right hon. Friend the Secretary of State asked Sir John Garlick to carry out a formal investigation. That investigation found no grounds whatever for thinking that the chairman had attempted to secure improper financial gain through his role as SDC chairman.

Mr. Blunkett

To ask the Secretary of State for the Environment whether development corporations are now to be made subject to the provisions of the compulsory competitive tendering legislation contained in regulations arising out of the Local Government Act 1988; and if he will make a statement.

Mr. Portillo

Urban development corporations have always been subject to the provisions of parts I and II of the Local Government Act 1988.