Crown Suppliers (Hansard, 23 July 1991)

§ Mr. Yeo

As stated in my reply to the hon. Member for Workington (Mr. Campbell-Savours) on 24 January 1991,Official Report column 271, Government support of £36,000 for advisers' fees has been paid to the management buy-out team who were seeking to acquire the Crown Suppliers' transport business. Towards the end of the sale competition they applied for additional support. Provisional agreement was reached with the teams' advisers that, subject to certain conditions, the Government would be prepared to pay 60 per cent. of the advisers' fees incurred, based on a maximum estimate of 185,000–£111,000. However, the sale of the business was aborted towards the close of March 1991 before the conditions had been fully met. Thus, although most, if not all, of the proposed additional expenditure had been incurred by the management buy-out team, no further payment was made by the Department.

With the agreement of the Treasury, Property Holdings wrote on 26 March to the management buy-out team members, and to the firms that advised them, to say that the Department did not accept any liability for the costs incurred. Nevertheless, the letter indicated that the Department would not rule out all payments if any of the parties wished to pursue the matter and was prepared to give the Government detailed information on the expenditure incurred.

It was not recognised at the time that the possibility of payment held out by this letter meant that it constituted a form of "letter of comfort" and that therefore a contingent liability of up to £111,000 had been incurred. I regret not bringing this matter to the attention of the House before the letter of comfort was sent. In accordance with Government accounting rules, I have now arranged for a copy of the letter to be laid before the House and for copies to be placed in the Library.