Court Line Limited

– in the House of Commons at 12:00 am on 6th August 1975.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. John Ellis.]

4.18 p.m.

Photo of Mr Peter Shore Mr Peter Shore , Tower Hamlets Stepney and Poplar

Let me start by putting to the House certain simple but highly relevant facts.

First, the subject of these reports is the last chapter in the story of the collapse of Court Line Group, Britain's largest air travel operator. That firm collapsed on 15th August 1974, not because of the actions of Government but in spite of our serious efforts to avert it. The whole story of events that led to its collapse must await the final reports of the company inspectors.

However, it is clear to everyone now that the strength of Court Line has been irreparably sapped by the failure of its own management decisions combined with the drastic change of circumstance affecting the air travel industry last year. The last serious error made by the company is covered by the inspectors' report: the decision to acquire the collapsing and debt-laden travel firm Horizon in February 1974—a decision taken, as I understand it before the present Government were formed.

Secondly, the collapse revealed the inadequacy of the arrangements previously made under the 1971 Civil Aviation Act to safeguard holidaymakers. The fall-back bonding scheme was revealed to be quite insufficient in scale to compensate holidaymakers for the losses incurred in the failure of the firm. I should remind the House that it was not only Court Line but several other air travel operators who crashed last summer.

Thirdly, the House will be aware that the Government became involved outside the regulatory function of the Civil Aviation Authority only when Court Line approached the Department of Industry to negotiate the sale of its shipbuilding assets. The Government's decision to buy these assets could not have had any effect in the short term other than a beneficial one for the rest of the Court Line operation.

Further, in relation to their own conduct the Government have not brushed aside or dismissed the reports of the Parliamentary Commissioner or the inspectors. We recognise that these reports have been prepared with scrupulous care and we take very seriously the conclusions that they reach. It would have been easy for us to accept their conclusions without further ado and to offer an apology—as the right hon. Member for Penrith and The Border (Mr. Whitelaw) suggested last week.

The House is always rightly indulgent in these circumstances, and if we had been seeking an easy way out that would have been the obvious course to take. But we have not done so, and when I say "we", I mean, of course, the Government as a whole—not because we are stiff-necked, either collectively or individually, but because we have considered their findings with a care matching that of the authors of these reports, and because we have concluded, with reluctance and respect, that we simply cannot agree.

That is clearly a grave conclusion which I must now explain. Let me remind the House of the chain of conclusion and argument that the two reports contain. According to the inspectors, the Government were right to buy the shipbuilding subsidiary of Court Line on 23rd June. Further, the price agreed, £16 million, was the right price to pay. Next, the Government's statement of 26th June was, as they put it, not in any way untrue or reckless". On the contrary, the Government made an honest and careful assessment of the information available to it. Further, and most important, according to the inspectors, We do not complain that the Government expressed confidence in the company. They had material for doing so". On all these points there is little or no difference between the inspectors and the Parliamentary Commissioner. In his report the Parliamentary Commissioner affirms that what was done and said publicly was done and said in good faith". He also acknowledges that the confidence that both officials and Ministries felt at this stage, honestly and in good faith, about the continued viability of the Court Line holiday activities for the rest of 1974 season was based essentially on the financial information supplied by Court Line immediately before and during the weekend discussions, and critically examined by officials so far as was possible during that short period, and on the opinions expressed by directors and their advisers". Again, he says: Very properly, the Government accepted an obligation to incorporate in public statements about the negotiations references also to the future, as the Government saw it, of that business. Where, then, does the criticism lie? In the words of the inspectors, Our complaint is that the Government was in no position to express unqualified confidence, and in the words of the Parliamentary Commissioner undue confidence should not be created or maintained". This raises two questions: whether in fact the statements made were expressions of "unqualified confidence" and, second, what would have been the effects of a more qualified statement had one been made.

On the first point, and after serious reflection, the Government hold the view that the use of such words as this should stabilise the situation in respect of Court Line's interests and again that holidaymakers should have some reasonable security fall short of expressions of unqualified confidence, let alone constitute a guarantee. That must also have been the view of the Association of British Travel Agents, which sought further assurances from the Court Line Group, immediately after the Government's statements were made.

Since we are dealing with matters of emphasis and nuances of expression, it is worth while reminding the House of the difference between the language used in the Government's statement and the statements subsequently used by the directors of Court Line itself when they were approached by representatives of ABTA. I quote from Mr. Blonfield, the director of Court Line, in a letter issued on 3rd July: This sale means that Court Line is now in a position to maintain and develop its aviation and leisure interests with the necessary financing and backing to support an ongoing operation. All compartments in the leisure division, as well as in the aviation division are therefore secure", He added: We have the products, we have the management, we have the necessary finance. That was followed by a meeting between representatives of ABTA and Mr. Young, the Managing Director of Court Line, who, amongst other things, said on 5th July: The Court Line leisure and aviation divisions are operating normally and agents need have no doubts or fears when accepting bookings for our programme". I do not believe that anyone can dispute that these statements on behalf of Court Line were in fact "expressions of unqualified confidence". Equally, I do not see how anyone can fail to conclude that the statements made by the Government were of a different character and fell far short of that degree of confidence that the Court Line directors expressed.

It will not have escaped the attention of the House that both the inspectors and the Parliamentary Commissioner themselves emphasise how fine the point of judgment is. In the words of the inspectors, it is a matter of finely balanced judgment as to the precise degree of confidence to be expressed", and according to the Parliamentary Commissioner it must always be a difficult exercise in judgment to decide how much or how little it is right and fair to say publicly in the sort of situation which faced the Government in this case. But, equally important, we have to ask ourselves the question: what indeed would have been the effect if a slightly more cautious statement by the Government had been made? Both reports draw attention to a draft supplementary answer included in the Secretary of State for Industry's brief. The question that might have triggered that supplementary reply was never asked. But if, in fact, he had used the most important of the suggested words, Obviously I cannot give a guarantee about an independent commercial operation but, certainly people's prospect of getting their holidays have been greatly improved by the Government's actions", can we really believe that this would have had any deterrent effect on prospective holidaymakers? The Parliamentary Commissioner himself discusses this matter and doubts whether a qualification of this kind would have significantly altered the volume of bookings in Court Line. If this is correct, it is clear that Court Line would still have collapsed on 15th August, with all the consequences that followed.

But if the Government had given a strong warning to holidaymakers, if they had implied that they were seriously worried about the state of the company—against the information they had before them—there could be no doubt that Court Line would have been brought to a point of collapse within hours of the statement. Imagine the situation then. If that had happened, if the Government had made a statement in June 1974 that brought Court Line to a collapse, we can well imagine what charges would then have been made. It would have been said that owing to an incautious statement at a time when confidence was of crucial importance, the Government had unnecessarily brought disaster to a major enterprise and to the hundreds of thousands of people whom it served.

Judging by the kind of statements which the hon. Member for Henley (Mr. Heseltine) has been making in the past 12 months, we would almost certainly have been accused of destroying a great free enterprise firm—and deliberately doing so—and no doubt there would have been a demand for an investigation by the Parliamentary Commissioner into our alleged mismanagement of the whole course of the affair.

Photo of Mr Kenneth Lewis Mr Kenneth Lewis , Rutland and Stamford

I have not an interest in the package tour business but I have an interest in the travel business. I do not think anyone has suggested that the Secretary of State would have been right to have made a statement suggesting that Court Line was likely to collapse. That would clearly have created a disastrous situation in the opposite direction. What we campaign about is that the then Secretary of State for Industry went too far in the other direction. That is precisely what the Parliamentary Commissioner complains about and what the right hon. Gentleman will not accept.

Photo of Mr Peter Shore Mr Peter Shore , Tower Hamlets Stepney and Poplar

The whole of this debate is, in a sense, about how far is too far. It is, as I have said, a matter of the finest possible point of judgment. There is here a real dilemma which is not solely about Court Line, although that is the immedate subject of the debate. There will always be cases, under any Government, where a company, known or suspected to be in financial difficulty, perhaps only temporarily, is discussing with the Government some form of financial assistance, or the sale of some assets, and it is obviously right that the House and the public generally should so far as possible be kept informed. There is a very real problem in deciding what to say.

The Government must come to a view—however provisional, and however much based on incomplete information—about the longer-term effects of their decision on the company. Obviously that view must be as honestly and carefully justified as the circumstances, which may well involve acting very quickly, allow. The Government must expect to be questioned in this House about what that view is and give it. In these circumstances, great care is of course needed—as the Parliamentary Commissioner himself says, but it must always be a difficult exercise in judgment. I invite the House, however, to consider as a general problem whether in cases of this kind any statement can be made which does not run the risk that someone, somewhere, may possibly be misled in the light of subsequent and unforeseeable events.

The Government cannot condemn themselves or the many great enterprises with which they deal to the consequences of total silence. That truth is known by the responsible members of the Opposition Front Bench as it is by those of us here on the Treasury Bench.

I turn now to the important and practical issue of the holidaymakers. The question of compensation for those who lost their holidays is not directly raised in either report although the Parliamenttary Commissioner quotes the statements that I and my Under-Secretary made during the course of the Air Travel Reserve Fund Bill to the effect that nothing in that Bill would disbar us from taking further measures if we thought it right. I use the word "further" deliberately because, as the House will know, Her Majesty's Government, recog- nising the failure of the earlier bonding arrangements to give that security which the public could reasonably have expected, have already greatly strengthened the protective system.

May I say in passing that I was helped in coming to this view by letters from constituents which the hon. Member for Henley and the hon. Member for Bury St. Edmunds (Mr. Griffiths) were good enough to send me last summer from aggrieved constituents who made precisely this point that they had felt secure under the existing bonding system and that it had collapsed under them.

Under the Air Travel Reserve Fund Act we have already made a contribution which covers not only Court Line but also those other air tour operators who failed last season by offering to the fund, which will ensure repayment to Court Line and other holidaymakers, an interest-free loan of up to £15 million. The value of the interest forgone on this loan will depend on how much of this needs to be called up and for how long, and those factors cannot now be adequately judged. But the amount will clearly be substantial. It follows that it is not right to say that all the fund is doing is to pay Court Line holidaymakers out of the pockets of future holidaymakers. In view of these arrangements and the arguments that I have already advanced, we are convinced that it would not be right for the Government to make any further contribution to the fund.

I know that many right hon. and hon. Members wish to speak, so may I say in conclusion something about the conduct of some Opposition spokesmen throughout this sad affair. I do not complain about criticism: a disaster of such magnitude made that inevitable. Nor do I in any way object to Opposition calls for a searching inquiry into the whole of the events and the conduct of the Government. Hon. Members opposite were simply doing their duty in demanding that. But there have been certain aspects of the attack which the House should note.

First, when I set up my inquiry under the Companies Act, an inquiry which, as the inspectors' report reveals, was as thorough and as independent as such reports are, my action was greeted by the hon. Member for Henley with these words: It is incredible that the Government should have set up an inquiry to investigate Court Line but should make no attempt to subject their own behaviour to the same independent examination. As that report makes abundantly clear—I believe for the first time in history, certainly in recent history—two Cabinet Ministers willingly subjected themselves to the cross-examination of the inspectors, and every possible piece of information at their disposal was made available.

Photo of Mr Peter Shore Mr Peter Shore , Tower Hamlets Stepney and Poplar

The hon. Gentleman says "Right", but it was not right for the hon. Gentleman to make that accusation when he did. The same event was greeted by his hon. Friend the Member for Bury St. Edmunds, when we were setting up an inspectors' inquiry, with these words: I am not going to call this a whitewash because the whitewash has not yet been applied. But they have prepared the pot and are dipping the brush in it". Secondly, extract—highly controversial extracts—from the Peat Marwick reports found their way into the hands of the magazine Accountancy Age and were used as they were intended to cast doubt upon the good faith and competence of Ministers in their handling of the Court Line affair. The hon. Member for Henley was chairman of the company that produced this publication for some years although what his connections are with it now I do not know. I am sure that the House will wish to be assured that the hon. Member played no part in what was, to put it mildly, a serious breach of confidence.

Third, with the hon. Member for Henley and the hon. Member for Bury St. Edmunds rivalling each other in an ever-mounting crescendo of abuse, the hon. Member for Bury St. Edmunds won the inglorious prize when he said on 23rd August last year: This is getting to be like Watergate with all its associations of conspiracy and of criminal conduct. Finally to keep the pot on the boil, they were at it again this week-end, alleging—not in the House, where such calumnies can be dealt with, but in the media, where it is difficult to catch them out—that the Parliamentary Commissioner and the inspectors had wilfully and arbitrarily been denied, relevant information in their inquiries, a matter dealt with earlier today. Indeed, the hon. Member for Bury St. Edmunds went so far as to say in his published letter to the Parliamentary Commissioner that the withholding of certain Cabinet Committee documents, which is provided for in the Parliamentary Commissioner Act itself, was "bound to throw doubt" on the validity of his report. The hon. Gentleman will now have received a letter from Sir Alan Marre himself dealing, I think sternly, with that particular point. I believe that fair-minded Members on all sides of the House will recognise smear tactics when they see them. To attack our judgment is one thing; to attack our good faith is another. To cast doubt upon the integrity of independent investigatory bodies like inspectors and the Parliamentary Commissioner can only do harm to confidence in how we handle our affairs in this country and ultimately to the reputation of Parliament itself. I ask the House, and not only my hon. Friends, to support the Government this evening and if in the event the Opposition press the point to a Division, to defeat them decisively.

4.49 p.m.

Photo of Mr Michael Heseltine Mr Michael Heseltine Shadow Secretary of State, Shadow Secretary of State for Industry

I must say I was saddened to hear what the right hon. Gentleman said in the last few minutes of his speech. If I may deal with the personal allegations that he made under the rather choice phraseology of "recognising smear tactics when they see them" perhaps I could clarify one or two personal points. The use of a Companies Act inquiry to investigate the behaviour of Government, I believe, is unprecedented. Never before has it been used to consider the policy and behaviour of Ministers, and I believe that it put upon the inspectors a novel and questionable strain. That was why I thought there were other methods of conducting the inquiry last summer which I would have preferred to see used. I still happen to hold that view, while paying great public tribute to the work of the three inspectors. I still believe that that framework was the wrong way to go about it. As for my association with Accountancy Age, it is true that I am a major shareholder in the company, as the register of Members' interests will show, and I was its chairman before the 1970 General Election. I have never spoken to the editor, publisher or any member of the staff of that publication, or of the company, about the Court Line affair. The right hon. Gentleman could have discovered that by asking any one of them. The right hon. Gentleman's charge has caused great offence to the editor and staff of the magazine, who, in pursuit of their journalistic profession, unearthed the information themselves. I did not know of its existence until it appeared in Accountancy Age.

I in no way pass judgment upon the journalistic techniques involved; that is a matter for other people. But I greatly resent the making of the charge, first, I think, in another place last week and then here this afternoon by the Secretary of State for Trade. At the end of a very reasonable speech on a difficult matter he sought to embarrass me in a way that gives more credit than I suspect he intended to give to the sort of comments that some of us have seen fit to make about some of his activities. For the record, it would at least be a gesture if the right hon. Gentleman would withdraw the allegations that he made.

The debate calls for comments in three areas—first, the rôle of the management of Court Line; secondly, the rôle of the Government; and, thirdly, the position of the Ombudsman and the consequences of his investigation.

Pages 87 and 137 of the inspectors' report deal by way of summary with the position of the management. The report says that nobody could discover what the financial position or cash flow was. It was difficult to the point of impossibility". On page 137, in answer to the question whether Court Line should have approached the Government earlier, it says 'No', in the light of the state of knowledge of Court Line's financial position as existing in the Spring and early Summer of 1974. That state of knowledge was in fact seriously deficient and the responsibility for that must rest with Court Line's Directors". I support that judgment 100 per cent. I said so at the time of the collapse last year.

I move to the second question—the rôle of the Government. The very thorough documentaion of the two reports makes it clear that the Government Department throughout was well briefed and apprised of the declining position of Court Line. They did not have a responsibility to act in the matter, but the civil servants, by taking simply an intelligent interest in the work that they did, as one would expect, continually unearthed pieces of information or found Press comments which alerted them to the deteriorating situation of Court Line. Therefore, there is no doubt that in the run-up to the events that led to the crucial five days the civil servants fully knew of the company's declining position. There is nothing but praise for their documentation of that declining situation, revealed by the report.

The critical point, as I see it, was on 19th June, when, some 14 days after the National Westminister Bank advised the company to go to the Department of Industry, its representatives turned up at the Department. If I have one criticism which does not emerge from the reports quite as clearly as perhaps it should have done, it is that over that very hectic weekend there does not appear to have been recourse to independent or outside advice to the Government, who, as far as I can see, relied totally on the advice of the directors of Court Line, Court Line's professional advisers or bankers on the one hand and, on the other, their own internal expertise.

It would have been better if the Industrial Development Advisory Board, set up under the Industry Act very much for such a purpose, had been given at least an opportunity to be involved. I do not accept the view that there was not time to involve it. I believe that there was time, albeit not for thorough involvement. But that was not the way in which that weekend was able to be conducted. The board would perhaps have introduced a more abrasive questioning into some of the conversations that took place that weekend.

When he replies to the debate, will the Secretary of State for Energy, who was Secretary of State for Industry at the time, clarify the situation that arose towards the end of the questions that flowed to him at the time of his first statement? It was to do with the purchase of Court Shipbuilders, which I think he will remember saying was profitable and would prove to be a public asset. About three months later came the end of Court Shipbuilders' financial year. A copy of the accounts of the three companies concerned, which was recently placed in the Library, shows a net loss of £5 million. I should be interested to know whether that relates to the company that the then Secretary of State for Industry thought he was buying as a profitable and viable enterprise, and for which £16 million was considered a reasonable price. I imagine that, if the companies were a great deal less successful than the evidence that weekend indicated, that judgment is one more casualty of the problems that faced the right hon. Gentleman in coming to so rapid a decision.

The inspectors undoubtedly came to the conclusion that when the deal was agreed the rescue was reasonable. But, in the critical period which the Government then faced, the first draft parliamentary statement—produced, I imagine, by civil servants, but presumably carrying with it to the first Cabinet sub-committee supporting documents from the then Secretary of State for Industry—made it clear that the responsibility for the judgments about the holidays was firmly that of the company.

I believe, on the basis of my own ministerial experience, that it is also fair to say that there was prepared by the same civil servants at the same time, or near to that time, a draft supplementary reply which had exactly the same effect as that first draft statement. It added nothing to it. My attitude to the defence which I have heard advanced that the right hon. Gentleman would have used that reply, if he had been asked the supplementary question—as though it were a means of protecting the situation—is that that is a misunderstanding of the way in which the supplementary reply came to be on the files in the first place. My guess is that it was on the files because civil servants had put it there earlier, and that it remained there because it reflected their judgment—the judgment that had led to the preparation of the first statement, the one that was not made. I do not believe that it is possible to argue that the simple fact of its existence showed that there was an intention to reveal the full situation in the event of a supplementary question giving the opportunity.

We move to the Government's decision—after a discussion, details of which are not made available to us, for reasons with which the House is familiar—on the preparation of a second statement, which, however one tries to describe it, put the Government's opinion behind the judgment about the viability of the holidays.

This is the critical point. I refer to the critical decision which was made by the Cabinet sub-committee and the consequent draft of the Secretary of State for Industry. I assume that the decision to do so was deliberate and conscious. The Secretary of State for Trade said that it was necessary to give to the credibility of Court Line a greater degree of support than was demonstrated in the original draft version. It was a conscious decision. In those circumstances the findings of the two reports must be accepted. After an independent inquiry, they made that point.

The Government decision must have been anguished, with all the holiday-makers spread across the world and the immense difficulties of the time scale within which they had to operate. Not to understand the problems facing the Government would be to deny the realities of ministerial life. We arrive at the point when the Government created confidence which the events did not entitle them to do. It is not right to say that the Government should have introduced the second statement as opposed to the first. What the Government thought the statement meant is not of critical importance. What the holiday-makers thought the statement meant is of critical importance.

On that point the reports are clear. However fine the judgment, however much anguish Ministers must have ex-experienced about the situation, in the end they produced that statement. The only interpretation in the minds of the two groups of inspectors was that the statement gave a credibility to the holidaymakers' judgment which it otherwise would probably not have possessed. I believe that the Government must accept responsibility for that, as they should have anticipated that point.

The Secretary of State for Trade waxed indignant—as I think he was to some extent entitled to do—about the Court Line management's use of the letter or statement. He must ask himself what he expected the Court Line management to do if it had the authority of the Government behind the judgment about the viability of the holidays. The management was fighting for the survival of the company. I do not wish to defend the situation. However, the Government should have anticipated that their words would be used to reassure people.

When we consider the background against which the Government took this decision, we see that it is clear why the inspectors came to the conclusion that the Government were optimistic. First, according to the figures for the year ended 1973, the Court Line companies had net tangible assets of £13·1 million and borrowings of £41 million. Those figures were available in March 1974. After that, there were the problems of the oil crisis, the three-day working week, and the slumps in the shipping and tourist markets.

The CAA was unable to obtain adequate cash flows. That is referred to in the report. On 31st March 1974 the Observer said that the profits produced by Court Line should have been realistically put at about £60,000 on a turnover of £80 million. The companies' advisers persistently expressed the gravest doubts. The Stock Exchange valuation of Court Line slumped dramatically when it was in the hands of the solicitors and the civil servants. Presumably, there were available to Ministers details from the companies' solicitors and civil servants, according to the inspectors' report, which should have raised questions about the viability, even to the end of 1974, of Court Line.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

Is the hon. Gentleman saying that the Government should have issued no statement, or that a statement should have been issued? If the statement had been any gloomier the Government would have been crucified for bringing the company to the point of liquidation.

Photo of Mr Michael Heseltine Mr Michael Heseltine Shadow Secretary of State, Shadow Secretary of State for Industry

The hon. Gentleman has mentioned the centre of the dilemma facing the Government. Both inspectors' reports deal with this issue. They came to the conclusion that although there must have been a temptation for the Government to issue more optimistic statements than the events justified simply to maintain a degree of confidence, it was not the duty of the Government to issue optimistic statements however politically easier that made the situation for the Government.

We are not dealing with the extremes mentioned by the Secretary of State for Trade. This is a question of drafting. It is no more than that. It is a question of making clear that the judgment about the safety of the holidays was the judgment of the company. The Secretary of State for Industry should have said "I have provided £16 million for this company, on the evidence provided by the company. It is its view that this is sufficient to guarantee the holidays for the remainder of the year. I have had only this weekend to deal with this situation." If the Secretary of State had said that, I do not believe there would have been the panic to which the right hon. Gentleman referred.

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

Does the hon. Gentleman recall the occasion when he was criticised by the Select Committee on Science and Technology? In his defence, he said that he based his view on the evidence and the best information available to him at the time from the officials in his Department. Does he say that the Government are in an entirely different situation from that? Apparently that is a good defence for a past situation but is not applicable to this Government, who now base their position on information from officials—as clearly outlined in both reports, of which there is no criticism—and from the company at that time.

Photo of Mr Michael Heseltine Mr Michael Heseltine Shadow Secretary of State, Shadow Secretary of State for Industry

I remember that incident. I made the statement which caused the question to be raised. I explained the matter and revealed the full facts to the Select Committee. It was suggested that the words I used were misleading. I did not like the idea that I had misled the House of Commons. Having discussed the matter with my Front Bench colleagues, I was persuaded that there was only one honourable course in the circumstances, which was to apologise. I did so at the earliest possible parliamentary opportunity. I believed that that was the only course to take.

In these circumstances, in view of the interpretations placed by those inspectors on the speech which the Secretary of State for Industry made in the House, the apology course should be adopted.

Photo of Mr Michael Heseltine Mr Michael Heseltine Shadow Secretary of State, Shadow Secretary of State for Industry

I did not have to admit anything. I found myself in a position in which an independent verdict gave one view. As that was the view of a Select Committee, I accepted it. In this case, two independent verdicts have given a similar unqualified judgment. In those circumstances, it would be in the interests of the Secretary of State for Industry and of the other parties concerned to accept those judgments. When he replies the Minister should say something along the lines of my remarks, which were made in similar circumstances.

In reply to the point made by the Secretary of State for Trade, I ask: what do we do now? There is a remedy available to the Government through the Air Travel Reserve Fund Act, which sets up a fund to ensure that holidaymakers get back their money in the event of the failure of a tour operator. I accept that the whole of the £15 million is not designed for that purpose, but a substantial part of it is.

In the light of what the Secretary of State for Trade seemed to be saying in Committee and what the Ombudsman said in his final paragraph, there can be no objection to making that loan a charge to public funds generally and not a charge to be repaid by future holidaymakers. That would be the elementary recourse demanded by these two independent inquiries.

The overwhelming judgment of the two inquiries has been accepted by the commentators who have examined the reports. Every editorial I have read has supported the judgment of those two inquiries, and has called upon the Secretary of State for Energy to apologise to the House. I ask him to consider doing just that because for him to fail to do so would put the Ombudsman in a prejudiced position.

When Richard Crossman moved the Second Reading of the Parliamentary Commissioner Bill, he told the House that the lowest clerk and the highest in the land would be subject to inquiry by the Ombudsman. It would be a great disservice to that institution if it should be found that in future the lowest in the land were compelled to accept the findings of the Ombudsman but when, for the first time, the highest in the land were subjected to his inquiry and the findings went against them, they rejected his findings out of hand.

Several Hon. Members:

Several Hon. Members rose

Photo of Mr George Thomas Mr George Thomas , Cardiff West

I remind the House that we have one hour eight minutes left for back benchers.

5.12 p.m.

Photo of Mr Ivor Clemitson Mr Ivor Clemitson , Luton East

When my right hon. Friend the Secretary of State for Trade made his statement about Court Line last week, I waited in vain for any sign from the Opposition either of criticism of the erstwhile directors of Court Line, or of sympathy with the plight of the 1,200 people who used to work for Court Line but who have lost their jobs in the collapse.

Photo of Mr Anthony Fell Mr Anthony Fell , Yarmouth

On a point of order, Mr. Deputy Speaker. You have just said that only one hour eight minutes are left for back benchers. Will you make an appeal through your channels to Front Bench speakers to take less time so that the back bench speakers may have more time? I am not myself asking to speak.

Photo of Mr William Whitelaw Mr William Whitelaw , Penrith and The Border

Further to that point of order, Mr. Deputy Speaker. The right hon. Gentleman the Secretary of State for Energy has asked me for about 30 minutes. As he is defending himself, I think it proper that the House should support that request, with which I agree. I intend, if possible, to wind up in 10 minutes, which, is a much shorter time than is normal. If I overrun by a minute or two, I am sure that the right hon. Gentleman will understand. I want to give the right hon. Gentleman that amount of time and I think it right that a Minister who is defending himself should be allowed that amount of time.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

I am much obliged to the right hon. Gentleman. My appeal is to hon. Members who are called to be as brief as possible.

Photo of Mr Ivor Clemitson Mr Ivor Clemitson , Luton East

I was in danger of doing the hon. Member for Henley (Mr. Heseltine) an injustice. He devoted two sentences to the responsibility of the Court Line directors. The rule appears to be that if the directors of a privately-owned company get into trouble, we must look for someone else to blame, preferably the Government, I remind the hon. Gentleman of his immediate reaction to the first of the two statements last year, which was to blame the Chancellor of the Exchequer in particular for his Budget and the Government in general for their plans to nationalise the shipbuilding industry.

The central figure in the hon. Gentleman's demonology reigning over the lowest level of the nether regions is my right hon. Friend the former Secretary of State for Industry. Fuel is now added to those flames by the Ombudsman's report. After many "ifs" and "buts" and qualifications, the Ombudsman came to the conclusion that: insufficient regard was paid in the statement to the principle that undue confidence should not be created or maintained. I do not wish to comment on whether that conclusion is justified, because my right hon. Friends are perfectly capable of justifying themselves and it would be improper for me to attempt to justify them. [HON. MEMBERS: "Why?"] Because, as I shall attempt to show, the matter is one of supreme insignificance.

The terms of reference of the Ombudsman were extremely narrow. I make no complaint against the Parliamentary Commissioner on that score. His powers are circumscribed by statute and the subject he was asked to investigate was extremely narrow. I venture to suggest that if he had been in a position to ask the real question, which is who was responsible for the collapse of Court Line and, as a result, the loss of holidays and the loss of jobs, he must have concluded that any fault on the part of the Government and of my right hon. Friend, if fault there be, pales into the minutest insignificance compared with the responsibility resting on the shoulders of the directors of the company.

The introduction to the interim report of the inspectors appointed by the Department of Trade states that the investiga- tion was much broader than that of the Parliamentary Commissioner. But we must remember that the report of the inspectors is concerned only with the last five months of Court Line's existence and is addressed to whether there was fraudulent trading on the part of Court Line and not whether there was managerial incompetence or irresponsibility. Yet who can read that report without concluding that it was the sheer incompetence, maladministration and irresponsibility of those Court Line directors that caused the collapse of the company?

The report reads like the story of a compulsive gambler. The deeper he gets into debt, the higher the stakes he puts on the table. The company acquired Clark-sons in 1973, with its "chaotic records". Within a few months before the collapse it acquired Horizon, an acquisition— that was not right and was not beneficial. The inspectors based their opinion upon— the plain, undoubted and seriously disrupting fact that Horizon's financial records were—and were known to be—in a chaotic state. If I may misquote Oscar Wilde, to acquire one company with chaotic books may be considered a misfortune, but to acquire two looks like downright carelessness.

Then there followed the "Dick Van Dyke Show" with the acquisition of a 10 per cent. stake in an oil and gas consortium. There was always money available to acquire these companies. There was always the National Westminster, Williams and Glyn's and Barclays, who contributed not inconsiderable sums of money to Court Line in the early months of 1974. Incidentally, if the Government are to be criticised for acting on inadequate financial information, what about these paragons of financial virtue, the banks, the people who are such experts in the ways of business?

The holiday side of the business was a house of cards, based on virtually no assets and vulnerable to the merest puff of wind that came along. What must we think, for example, of a company in which two-thirds of the supposed capital and reserves was goodwill? On that basis it borrowed over £40 million, breaking its own articles by grossly exceeding its maximum borrowing requirement. At the company's annual general meeting, instead of admitting that the rules had been broken, the chairman said: The board has for some time been conscious that the level of group borrowings is high, particularly in the light of changes in the general economic climate that have taken place in this country and overseas in the last six months. There was not a word about the breaking of the rules.

Talking of statements conveying an over-optimistic picture, there is the rest of the chairman's statement. I forbear from quoting any more from it. As the inspector's report rightly says, It is not only hindsight that reminds one that the group of which the chairman was speaking in mid-March 1974 was on 15th August 1974 forced to go out of business, with no new factual circumstances of any significance or consequence intervening. The directors clearly knew that the business was in a mess before the AGM. We are told: consideration was actually given to the question of rewriting the accounts and as to whether the recommended dividend should in fact not be paid. The report continues: it was decided for many reasons—including the question of public confidence—not to take either of those steps. Here was a company in terrible financial straits, yet so strong was its sense of duty, and so little did it want to shatter the confidence of the public, that it paid out another £586,000 to add to the £501,000 of the interim dividend to make a grand total dividend for the year of £1,087,000. This was a company owing over £40 million on the strength of £6 million of capital and resources. Of course, £30,000 of the dividends was added to the £260,000 emoluments of the directors, which on my calculations brings the average take for the year for 15 directors to very nearly £20,000, and the take of the managing director to not far short of £50,000.

Photo of Mr Ivor Clemitson Mr Ivor Clemitson , Luton East

No, I shall not give way. I know that many Members wish to take part in the debate.

No wonder in 1973 the group could afford to contribute only a meagre £275 to the Conservative Party. I forbear to mention the non-monetary advantages. I shall not bore the House further with this sad tale of incompetence, except to note that in the last few months of its life—I now go back to what the hon. Member for Henley said about the shipbuilding division—£8 million was milked from the shipbuilding division for the leisure division. Of that sum £4 million found its way to the sunnier climes of the Caribbean and formed part of the £15 million owed by the Caribbean interests to the rest of the group.

On its last knees, the company went to the Government, as privately-owned companies are wont to do when in trouble. From the findings of the inspectors it is clear that, save for the small point of the statements made in the House, the Government's actions have been fully justified.

It might be thought that I am being a little harsh on the directors of Court Line. If that is so, let me say that 1,200 people lost their jobs. They were people who had a greater loyalty to their company than any other group of people I have ever met. Many of those people happen to be my constituents. Luton Airport happens to be in my constituency. They lost their jobs and their money. The report reads: Many employees of Court Line were left upon its collapse in an unfortunate situation in that they were owed wages considerably in excess of the present preferential claim limit of £200 contained in the Companies Act 1948. Further, many such employees had properly incurred expenses which were due to be repaid to them and which are not covered by the Act at all. The sufferings and the misfortunes of many people, including holiday makers and ex-employees of Court Line, have been cruelly and contemptuously exploited by Conservative Members. They have strained at the gnat of the Government's statements and yet have swallowed the camel of the incompetence and irresponsibility of the Court Line directors without so much as a hiccup.

5.17 p.m.

Photo of Mr Charles Fletcher-Cooke Mr Charles Fletcher-Cooke , Darwen

It is very rare that a Government reject the findings of the Parliamentary Commissioner. Of the many thousands of reports that he makes—and many of them are quite unknown to the general public—I can think of only half a dozen over the whole period of his institution that the Government have completely rejected. It is even rarer that the Government reject such a report before the Select Committee set up by the House to examine the reports has had a chance to do so. I can only recollect one other such case—namely, the inquiry into the Sachsenhausen Camp case. However, let me remind the Government that in the end, and after the Select Committee had finally had its go, the Government paid up.

Why should the Select Committee's work be made so difficult by Government acting in this precipitous way? This matter was examined by Sir William Armstrong, as he then was, the head of the Civil Service, after the Sachsenhausen case. I shall quote a few sentences from the definitive work on the Parliamentary Ombudsman by Mr. Roy Gregory who wrote: Sachsenhausen, Sir William reiterated, was a special case, in that after the Minister had spoken in the House, it would have been very difficult for civil servants to say any more about it before the Select Committee…. What complicated the issue, he emphasised, was the intervention of the Minister…Suppose a Minister totally rejected a report from the Commissioner, he was asked, would not the Committee be expected to advise the House in some way? How could they do that without conducting the kind of investigation which they had been discussing? A situation of that kind, Sir William agreed, would indeed put the Committee in very great difficulty. He could only hope that the Commissioner's reports would not be made the subject of Ministerial action until they had been taken by the Committee. Those are the words of somebody who grew up with the whole institution of the Ombudsman and who saw the dangers of the Government precipitately rejecting a report which they disliked, which could thereby nullify all the work that had been done by the Committee.

There is not only the difficulty that the civil servants will close up, as they are obliged to do, once the Minister has spoken. There are also appalling difficulties in that Ministers put their own supporters on the Committee when we come to do our work. Their loyalties will be completely divided if their leaders have said one thing before we have been able to exercise what is a judicial judgment. Therefore, I protest not just in an empty constitutional way, but because there is a real issue involved, and one in which Ministers, curiously enough, have done themselves an injustice. This is not merely an academic matter. There is a suggestion in the inspectors' report that the full horror of the crime of slackness of accounting was not sufficiently brought to the attention of Ministers at the time.

We have had an interesting account of the full horror of the Court Line management from the hon. Member for Luton, East (Mr. Clemitson). It seems to me that the Government in that weekend should have been warned rather more closely about the matter than they were. If we as a Select Committee had been allowed to examine the officials, as we do on occasions, it might be that the Ministers would have found that their blame would not have been as great as now appears. I am only guessing on that point and I am not attempting to prejudge the matter.

I call attention to the statement on page 148 of the inspectors' report which says that Mr. Sayer's opinion on that occasion was not reported back to the Ministers. The Government, by their precipitate action in cutting us off from our usual work, may have prevented a possible defence. It may be that in breaking the Armstrong rules the Government have become hoist with their own petard and have done themselves an injustice.

On the general issue—and I promise that I shall be brief—it must be admitted that a sharp knock has been delivered to the whole office and position of the Parliamentary Commissioner. He and his predecessor have built up a quiet but important body of law, and indeed of case law, in this matter. Their reputation for fearless inquiry and exposure of maladministration, delay and all the other evils for which the Government may be responsible has been growing in recognition, even though it has not had the publicity given to showier elements. It is inevitable that when the light of publicity is focused on him, as it is today—and it is an occasion when Ministers have criticised and rejected his report—it must mean that confidence in the Commissioner's position is undermined.

To my mind this is an occasion not so much for anger as for sorrow. My sorrow is that this is all in aid of so very little. If the Ombudsman had found gross negligence, some collateral motives, or some real wickedness in ministerial behaviour, one could have understood why it should perhaps have been rejected in this summary way.

But now for what? It is rejected for a difference of opinion about emphasis, on the nuance or meaning of words. I put the rhetorical question: is it for reasons of amour propre; is it for the money; or for what? Why should it be rejected when it is a matter of opinion as to what some people might have taken words to mean and other people do not? I feel that the prize, if it can be so termed, that the Government will gain from this rejection is so tiny compared with the damage they are doing to the institution, that it is a matter for tears rather than for anger.

5.35 p.m.

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

The combative speech with which the Secretary of State for Trade opened the debate seems to me to reflect an error which from the beginning has dogged the Government in their dealings with this uphappy episode. They have paid too much attention to the likely political reactions of what they have done and said, but far too little attention to the likely attitude of the ordinary citizen who was counting on Court Line for various holiday services. There was too much concern in the Secretary of State's speech about the highly predictable reactions of the hon. Member for Bury St. Edmunds (Mr. Griffiths), at the expense of studying the probable attitude of members of the public.

I base myself on the verdict on the matter arrived at by the three distinguished inspectors who faced this problem by entitling one section of their report "The So-called Dilemma". In the course of that short chapter in paragraph 171 they say: It was sought to be impressed on us by some witnesses that if a company though expressing confidence sounded a note of caution or reservation as well the latter would swamp the former and completely undermine the message of confidence. This we cannot accept. In our view the public respond sensibly and fairly to what is said to them in announcements to them. A fair sense can be conveyed by fair language. On that basis it seems to me that Ministers should have realised from the beginning that in dealing with an undertaking whose accounting was wholly faulty at all levels, and not just in one section of book-keeping, they should have adopted an agnostic attitude to the possible outcome of the leisure division's activities. It has also been made clear that at the level of balance sheet accounting the company was under severe criticism in the 1973 accounts.

On the very important matter of inter-company indebtedness in the group, the company was completely haywire. Court Line told the inspectors that it thought its inter-company indebtedness was about £6·34 million, the inspectors could trace an inter-company indebtedness of £7·2 million, and the bank said that it was £8 million. In the event, a total of £9 million was swallowed up out of the Government's £16 million in clearing off indebtedness to the shipbuilding division. On that extremely quaky basis, the Ministers should never have consented to get mixed up with the forecasts about the outcome of the leisure division's activities and should have remained agnostic about it. I believe this could have been done without seriously undermining public confidence in the holiday services.

In the basic matters of ordinary day-to-day records in the leisure division, the inspectors say that they were abundantly satisfied that these records were …in an appalling stat—a state which defied any speedy remedy and which made everybody's task of finding out the financial position and the cash flow difficult to the point of impossibility. In that situation statements should not be made suggesting that the information is there and that there were only slight difficulties in the way of Ministers knowing what was going on. Judging by the narrative of the inspectors' report, I cannot help feeling that these very important considerations were submerged in an atmosphere of unjustified optimism.

The hon. and learned Member for Darwen (Mr. Fletcher-Cooke) rightly drew attention to the action by Mr. Sayers at the meeting of 23rd June, namely, that it should be clearly understood that Court Line was not in a position to guarantee the position so as to enable the leisure division to continue throughout the summer season. The inspectors say that this timely warning appeared to have been submerged in a general atmosphere of optimism during that afternoon.

I feel that the summary rejection of the Ombudsman's conclusions, supported word for word in the report of the three distinguished inspectors, should not have been dismissed by the Government in that way—partly, and perhaps most importantly, for the reasons given very clearly by the Chairman of our Select Committee, but also because of the damage done to a growing public confidence in the Ombudsman among ordinary citizens who were beginning to understand that at last they had an ally against bureaucracy and possible ministerial misjudgments—misjudgments to which all human beings are prone. They now find that this great authority has had its findings rejected in a single sentence and without any argument as to statements made in the House. That is a disservice to an office which on its creation received a great welcome from all parts of the House. In these circumstances, my right hon. and hon. Friends and I believe—

Photo of Mr Peter Shore Mr Peter Shore , Tower Hamlets Stepney and Poplar

I must put it to the hon. Gentleman that no disservice or damage is done to the office of the Parliamentary Commissioner when a Government disagree with the verdict. Damage would be done to the Ombudsman if attacks were made upon his own judgment, fairness and reliability in going into all the evidence. There have been occasions in the past—not a large number—when Governments have disagreed with Ombudsmen.

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

The burden of my case is that the findings of the Ombudsman, supported by the unanimous verdict of three distinguished professional inspectors who covered the same ground, were dismissed in one sentence in the Secretary of State's statement to us the other day. This is the sort of thing that will damage public confidence, and the intervention we have just had makes it necessary for me to speak for a minute or two longer.

The public will conclude that other Ombudsmen—dealing, as they have to do, with complaints arising from the National Health Service, complaints against town halls, and so on—are likely to have their findings similarly dismissed in such a cursory fashion. The public will form the view that it is a lot of eyewash. I do not believe that it is eyewash, but that will be the impression given by the summary way in which the Government chose to treat the Ombudsman's findings. I hope, therefore, that there will be some recantation this afternoon.

I believe that Sir Alan Marre's findings should have been accepted on the basis that they were the comments of a disinterested person, supported by three other disinterested people, and quarrelled with by people who cannot deny that they are extremely interested.

In those circumstances, every convention of life in this country dictates that those who are interested parties should bow gracefully, decently and honourably to the conclusions formed by the disinterested investigators. It would follow from that that the Government should contribute handsomely to the compensation fund.

5.43 p.m.

Photo of Mr Michael Maitland Stewart Mr Michael Maitland Stewart , Hammersmith Fulham

I was glad that my hon. Friend the Member for Luton, East (Mr. Clemitson) reminded us that the most important aspect of the Court Line affair is the object lesson it gives us in the appalling mismanagement of which private enterprise is capable, and the injury consequently done to many holidaymakers and many employees. But the matter we are now discussing—that of the Government statement and its relation to the report of the Ombudsman and the commissioners—although of lesser importance, is by no means an unimportant matter, and it is that to which I want to address my remarks.

May I dispose of a matter that I hope nobody will have the face to raise after the Prime Minister's statement earlier today—that of the Cabinet document. It is quite clear, to anyone who knows the Parliamentary Commissioner Act, that in not giving the Ombudsman a sight of that document the Government were doing not only what the law allows but what the law requires. The only relevance of the document was that it could establish that the decision was not that of a single Minister but of the Government as a whole, but the Government have never denied that at all and never attempted to conceal it. This whole business, therefore, was a red herring, born in some cases of ignorance and in some cases of malice.

But, setting that aside, and turning now to the question of rejecting an Ombudsman's report, this is not unheard of. Indeed, there have not only been rejections of particular reports but cases in which successive Governments have repeatedly refused to make alterations in procedures which the Ombudsman and the Select Committee considered just. We are encouraged by the fact that progressively over the years Governments have tended to move a little nearer to the position that we are urging on them.

I do not see how any Government could be expected to say in advance, "We will accept the Ombudsman's judgment." That was never in the mind of the House when the Act was passed. In some cases an Ombudsman may make a judgment which would require a Government to pay out money. Quite frequently Governments make ex-gratia payments and so on as a result of decisions of Ombudsmen, but no Government could say in advance, "We give to the Ombudsman the power to decide whether we should pay out or not." We do not give a power like that to Select Committees appointed by the House. We never say that we will accept in advance whatever its report may be.

It is important that this should be clear. A refusal to accept an Ombudsman's report is not in itself, as has been suggested in some quarters, a kind of high crime and misdemeanor against the constitution. But it is also quite right to point out that not to accept an Ombudsman's report in a major matter is an extremely serious thing to do. It is not something to be done lightly.

Here I take up the point made by the hon. and learned Member for Darwen (Mr. Fletcher-Cooke). What is the Government's attitude as to how reports of this seriousness from the Ombudsman ought to be treated? In this case not only did the Government pronounce their judgment before the Select Committee had had an opportunity to consider the report. They pronounced their judgment on the report, which is a report to Parliament, before Parliament had even seen the report. There may have been reasons in this particular case why that was unavoidable, but I trust that we shall have an answer before the end of the debate as to how the Government see this problem for the future.

It seems to me that Governments ought not to express their judgment on the Ombudsman's report before Parliament has even seen that report. I think it would generally be a good thing—I am not quite so certain of this—if the Select Committee had a go at the matter before the Government committed themselves, but we may hear the Government's view on this matter.

What is the verdict of the Ombudsman? We all saw the hon. Member for Henley (Mr. Heseltine) in a decidedly chastened mood today. He usually models himself on Sergeant Buzfuz, and the attempt to model himself on Uriah Heep, although salutary, was not as attractive as his usual robustness. But, of course, he had to do it, because the suggestion, wildly made all round, that the Government had been tearing up the constitution, deceiving the House and deceiving the country, will not stand up for one moment in the face of either the investigators' report or the Ombudsman's report.

The Ombudsman makes it quite clear that the Government acted in good faith, with speed and with a sense of responsibility. The charge that is made—and it is to this that we must address ourselves—is that the degree of confidence that the Government expressed about Court Line clients' holidays was not sufficiently qualified. On that matter I ask my right hon. Friend in his reply to address his mind particularly to paragraph 86 of the Ombudsman's report. That quotes, I think not unfairly, certain phrases used by my right hon. Friend. It says: The statement of 26 June referred to the Government's view that the proposals should 'stabilise' the holiday situation Later in the paragraph it says that in answer to questions he said that it 'was thought right that holidaymakers…this summer should have some reasonable security, and the Government were anxious to help them', that the proposed purchase of the shipbuilding and related interests made 'possible…safeguarding the holidaymakers', and that the statement was a holding statement 'designed mainly to reassure…holidaymakers'. The Ombudsman's comments on those phrases is: It seems to me that all these references would naturally and reasonably have been understood as meaning that holidaymakers could, in the Government's view, safely go ahead with their holiday plans for 1974. I find it difficult to contest that argument, and the Government in their reply must address themselves to that.

I know—this is brought out very clearly in the Ombudsman's report—that there was a very weighty reason why the Government should not tilt too far in the other direction and express less confidence than the facts might have warranted. The fact is that in that case Court Line probably would have folded up and that a great many more holidaymakers would have suffered. The Ombudsman does not dispute this. He points out, correctly from his point of view, that he is not called upon to deal with the grievances of people who suffer as a result of the incompetence of private enterprise, but that he is called upon to deal with the grievances of people who suffer through errors of Ministers or civil servants.

What is the argument, then? I think that the Government are saying that there was a very weighty reason of State—a reason of policy—for expressing rather more confidence in the chances of the holidaymakers than a strict, austere judgment of the facts would have warranted. I ask right hon. and hon. Members to notice that the Government were not attempting to get any party advantage for themselves or to conceal any facts discreditable to themselves. The people whose interests they were concerned for were the holidaymakers.

I say that it was an important reason of State. Let us consider this. There is no doubt that this will not be the last time when a Government have to go to the help of decrepit private enterprise and when, in consequence, Ministers have to make statements about the possible commercial futures of companies. What worries me is that when in future the public read such statements made by Ministers, will they say to themselves, "Yes, but we must allow for the fact that the Minister, for quite admirable reasons and with the best of intentions, is bound to be expressing a more optimistic view than the facts warrant"? Does not this present a permanent long-term problem to Governments?

It is to that that I hope my right hon. Friend the Secretary of State for Energy will address himself when he replies to the debate.

5.53 p.m.

Photo of Mr Eldon Griffiths Mr Eldon Griffiths , Bury St Edmunds

Out of a desire to be brief, I shall confine myself to three simple questions.

The first is whether the statement made by the then Secretary of State for Industry led holidaymakers to believe that they could safely maintain their reservations with Court Line or, indeed, make new reservations, on the basis of what he said. The answer to that question cannot be disputed.

I have some 1,200 letters from our fellow citizens in every part of the country which make it clear beyond doubt that when their writers heard through the media the reports of the statement of the Secretary of State they paid over money which they would not have paid over otherwise.

I shall not weary the House with the massive documentation that I have. I simply quote two examples taken entirely at random.

The first letter is from a Mr. N. W. Brodie, of Wilmslow in Cheshire. He writes: It was only after hearing Mr. Benn's assurances on television that our holidays would be secure as a result of his action in taking over the ship buildings activities that I paid my balance of £340. Actually, it was paid the day after his television broadcast Certainly I would not have paid this money over had it not been for Mr. Benn's assurances. The second entirely typical and random example is from a Mrs. Eewrel, of Stage-lands in Crawley. She writes: My husband booked a holiday in Greece for four people…costing £460. We held the money up until Mr. Benn gave out his statement that all holidays would be safe. We then paid our money over. My first question, therefore, is whether the right hon. Gentleman's statement led people to pay over money which otherwise they would not have paid. I think that the incontestable answer to that question is, "Yes." Let me quote the Daily Mirror. The main news item on the front page on the day after the right hon. Gentleman spoke was: A black cloud hanging over the sunshine holiday plans of 400,000 Britons was swept away yesterday by Industry Secretary Anthony Wedgwood Benn. The item went on to quote a spokesman for the company as saying: Any holidaymakers who have doubts about their future holiday can rest assured that all will be well. —the implication being because of the Government's action.

My second question concerns where the responsibility lies. It being the fact that hundreds of thousands of people lost their money as a result of this statement, to what extent can we hold the right hon. Gentleman accountable? Should he have included in his statement sufficient reservation or qualification to alert the travelling public to what we now know and he then had reason to suspect was the true position of the company?

The Ombudsman at least is quite clear about this. In paragraph 84 he says: …it seems to me to be an important principle…that undue confidence should not be created or maintained. He says in paragraph 87: …the statements suggested confidence without any qualification…they went somewhat further than the circumstances warranted…the statements were liable to leave a misleading impression with the public. Those are not my judgments. Those are the judgments of Sir Alan Marre, the high official appointed by this House to try these matters. I hope that it will not go out from this House that we have no confidence in the judgments that Sir Alan Marre has reached on this matter. They are powerful indictments, and they lead to a specific conclusion. Sir Alan says in paragraphs 91 and 92, about a suitable qualification: …the case for its inclusion…was the need to give persons who were deciding whether to spend their own money on holiday arrangements a balanced enough assessment of the situation on which to base their decisions. Because that was not done, because that qualification was not provided, tens of thousands of people lost their holidays, scores of thousands of people lost money and, because of this, the Ombudsman reached the verdict: …the Government cannot be absolved of all responsibility… That brings me to my final question. Who within the Government must bear the responsibility? Is it the civil servants? I believe that a careful study of the two reports will indicate that they recommended qualification. Is it the Secretary of State for Industry, as he then was? I believe that he bears a very great degree of responsibility. But I do not think that he bears it alone. The Secretary of State for Trade shares his responsibility. I say that for this reason. Any reading of the report of his own inspectors and of the report of the Ombudsman indicates a pattern of events over a period of some nine to 12 months where officials of his Department and indeed of the Department of Industry were giving advance warnings of the company's difficulties.

Again, I shall not weary the House by documenting this. I hope that it will be accepted—[Interruption.] If hon. Members wish me to do so, I can, of course, do so. There is ample evidence to show that the storm signals had been given to the Secretary of State for Trade over a long period of time. They continued after the statement of the Secretary of State for Industry.

Thus on 31st July, after the statement by the Secretary of State for Industry, the Under-Secretary advised the Prime Minister that Court Line was continuing to experience serious problems in its holiday activities. On 1st August, Messrs. Peat, Marwick, Mitchell & Co. concluded that the continuation of Court Line's leisure activities was not a viable proposition. On 5th August, Ministers were informed that a very serious situation was developing. On 9th August the Under-Secretary sent a further minute to the Prime Minister showing that Court Line would inevitably go into liquidation the following week.

During this period of 10 or 12 days after the second statement by the Secretary of State for Industry, the Secretary of State for Trade and his colleague had evidence that the situation was deteriorating rapidly. Why did they not inform travel agents and this House, which was still sitting? Why did they not admit that the original statement had over-egged the pudding and that the Secretary of State for Industry had given assurances which the new information available to the Department of Trade could not sustain?

Photo of Mr Clinton Davis Mr Clinton Davis , Hackney Central

The hon. Gentleman should do the House the courtesy of looking at the reports and what they have to say in this respect. Is he suggesting that the Government should have taken earlier action to make sure that the collapse occurred before 15th August?

Photo of Mr Eldon Griffiths Mr Eldon Griffiths , Bury St Edmunds

I am saying that there is incontestible evidence that many travel agents continued to take new bookings and more money from the public during the period when it was known to the Secretary of State for Trade that the company could not sustain those bookings. The Department of Trade failed to alert the public to the fact, of which the Secretary of State had knowledge, that they were putting their money into a company that was doomed to bankruptcy. The Department allowed the public to go on booking holidays.

My complaint is of double standards. If the directors of any private company had given assurances similar to those given by the Secretary of State for Industry which shortly afterwards turned out to be ill-founded, they might well have been under a legal obligation to disclose their error of judgment in order to save the public from making a bad investment on that account. That is company law as far as private businesses are concerned.

Photo of Mr Eldon Griffiths Mr Eldon Griffiths , Bury St Edmunds

I very much hope that it will apply, but apparently it will not apply to members of the Government. Equally, if the director of a private firm came into possession of information which showed that a company with which he was associated was incapable of carrying out its contracts, he would be bound to try to avoid allowing the public to put more money into that firm. The Secretary of State did not do that. He is in a different position from a company director, but there is one thing he should do: he should accept the independent verdict of the Ombudsman.

Photo of Mr Peter Shore Mr Peter Shore , Tower Hamlets Stepney and Poplar

I suggest that there is one thing the hon. Gentleman should do. He should read again the inspectors' report which deals with precisely the points he has made and every one of them. Mr. Griffiths: I undertook that I would be brief and it would be a misuse of time to argue across the Floor of the House with the Secretary of State, as I could do, on this point. I say only this: it is one of the good conventions of this House and this country that, when an independent body is asked to investigate a matter and reaches a conclusion on the facts, we accept the judgment and abide by it. It is a sad day for Parliament and the country that two Ministers who have been found guilty by such an impartial body do not have the guts to admit it.

6.6 p.m.

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

I shall be very brief indeed. I must point out to the hon. Member for Bury St. Edmunds (Mr. Griffiths) that on 25th July 1972, his hon. Friend the Member for St. Ives (Mr. Nott), who was a member of the Government, said: I do not think there can be any doubt, however, that it was never intended, when the Parliamentary Commissioner for Administration Bill was debated, that in the last analysis the judgment of the Parliamentary Commissioner should be substituted for that of the Ministers responsible. This implies there may be occasional—I emphasise occasional—cases where they do not feel able to accept the remedy he proposes."—[Official Report, 25th July 1972; Vol. 841, c. 1788.] Governments in the past have not always accepted reports of the Parliamentary Commissioner if they have felt unable to do so.

I was in the Government at the time of the Court Line collapse and I know that the hon. Member for Bury St. Edmunds has been a Minister. He must know what the Government faced in the dreadful situation where thousands of workers could have been thrown out of work and confidence in the future of the travel side was involved. This was an appalling situation for the Government to find itself in. If the Government had taken no action, hon. Members opposite would have kicked up the biggest row possible and said that the Government were failing in their obligations to workers in the industry and to holidaymakers. It is a "Have you stopped beating your wife?" situation. If you answer "Yes", that means that you have beaten your wife in the past and if you reply "No", that means that you are still beating her. In fact you may never have beaten your wife at all. That was the situation into which the hon. Member for Henley (Mr. Heseltine) was trying to put the Government It was interesting to hear his speech today. He was very moderate. He has had to retreat from the position of recent public statements. He is much fiercer outside the House because he knows that inside the House he could not sustain the sort of rubbish he puts forward. I remember him saying that we wanted Court Line to collapse so that we could nationalise it. That is the sort of nonsense we get from him.

We have been asked to accept the judgment of Sir Alan Marre. I make no bones about it: I think that he has gone beyond his remit. The terms of his remit, as issued by his own office, are: The function of the PCA is to investigate complaints referred to him by Members of Parliament from members of the public who claim to have sustained injustice in consequence of maladministration". No one has claimed that there has been any maladministration. This is a political judgment, and I did not think that the Ombudsman entered into high politics or made political judgments. That is the issue at stake in our discussions. I say that he has gone beyond his remit and that the Government are entitled, as the previous Conservative Government were entitled, to say that there are occasions when they are not prepared to accept a certain position.

Photo of Mr Michael Heseltine Mr Michael Heseltine Shadow Secretary of State, Shadow Secretary of State for Industry

The hon. Member may be entitled to make that point about the Ombudsman in respect of an inquiry instigated by back-benchers. Does he take the same view about the inquiry which was set up by his right hon. Friends, which was given a very wide remit and which came to precisely the same conclusion?

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

I do not understand the situation of the two inquiries in the sense that it is said that in their inquiry the three inspectors kept in close contact with the Ombudsman. The comments in the two reports about my right hon. Friend's statement are in almost identical wording. I am not suggesting that there was any collusion by the inspectors and the Ombudsman. Hon. Members can draw their own conclusions about that. I am saying only that this was a matter of poli- tical judgment. It had nothing whatever to do with the fact that the Government took the right decisions. If the Government had not acted in the way they did, Court Line would have collapsed that much sooner and thousands more people would have found themselves stranded on holiday and in an impossible position.

6.12 p.m.

Photo of Mr Michael Hamilton Mr Michael Hamilton , Salisbury

The House will be grateful to you, Mr. Deputy Speaker, that in this brief debate you have called both the Chairman and the former Chairman of the Select Committee on the Parliamentary Commissioner. Both of them made very valuable contributions. What puzzles me about this whole business is that in these extraordinary difficult days one would think that the Government would welcome all the friends they can muster. I concede that all Governments need their share of good luck.

I appreciate that this is the season when Ministers are under strain, yet repeatedly we have seen in this Chamber the taking of imperfect decisions and the exercising of imperfect judgment. Within the last 48 hours we have seen this long-suffering House unable to bring itself to support some Government measure or other. That was because of sheer lack of foresight and management. Here again this evening we are concerned with what is quite clearly a blunder.

We can all think of things which might be said about the Prime Minister, and I was grateful that he should have been present in the early stages of the debate. Everyone will accept that it can be said of the right hon. Gentleman that he is very deft in his footwork. I believe, and I am delighted to pay him this compliment, that if he had not been out of the country at the critical moment we should not now be holding this debate.

I am not worried so much about Court Line, although victims of the crash are among my constituents. I am not so worried about the lost holidays or about the misleading of our constituents. What troubles me about all this is the injury done to Parliament. The Parliamentary Commissioner's criticism is very slight, and many of us would think that it was too slight. Yet even this gentle criticism is rejected by the Government. What is the point of back benchers on both sides of the House assembling evidence, setting out complex issues and laying it before the Parliamentary Commissioner in Great Smith Street if they feel that at the end of the day whatever the Parliamentary Commissioner is likely to say will be disregarded by the Government?

What is the point of this House setting up a Select Committee, a committee of very senior and experienced Members, to which the Parliamentary Commissioner reports if that is the sort of treatment given by the Government to the Commissioner's findings? We should ask what the House had in mind when it set up the Parliamentary Commissioner. Was it our intention that Governments should ride roughshod over his findings? I have been a Member of this House just long enough to appreciate that whatever may be said in debate there is certain common ground between back benchers across the Floor of the House. I believe that many would agree with me that when the Government ride roughshod across the Parliamentary Commissioner it is the back bencher's position which is weakened. The ally of the back bencher is worsened, and in this Court Line case the Government have shot the back benchers' fox.

My criticism of the Parliamentary Commissioner is that on a delicate issue of balance he tends to give the benefit of the doubt to the Government of the day. A consequence of that is that when he criticises the Government that criticism is roundly deserved, and that is the case in the Court Line business. I agree with my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) that this is a rather sad day for Parliament. It is a sad day for the back bencher and, therefore, for those whom he represents. I regret the Government's conduct.

It is not difficult for any of us to imagine what Sir Alan Marre's thoughts towards the Government must be at this moment of time, but I do not believe that he will be despondent for very long. In his office in Great Smith Street he has on the wall a great gallery picture from which I am sure he will draw comfort. It is a picture of Belshazzar, his rulers, his princes, his full administration and his secretaries of state. There is the writing on the plaster of the palace wall. It says: Thou art weighed in the balances, and art found wanting. It forecasts certain downfall of the administration. Whatever else, I think we can agree that Sir Alan Marre has good taste in pictures.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Before I call the hon. Member for Luton, West (Mr. Sedgemore), I must remind him that the winding-up speeches are due to start in just a few minutes.

6.18 p.m.

Photo of Mr Brian Sedgemore Mr Brian Sedgemore , Luton West

These two reports raise at least two important issues, the first of which has not been discussed tonight. It is this: what are the legal and moral responsibilities of private enterprise firms when they enter into negotiations with Governments when their firms are in difficulty? From the first to the last day that the Court Line managers and directors were in consultation with the Government until 15th August when the firm went into liquidation, this was a private enterprise firm. If anyone was going to make public statements which would bring the firm to its knees and ensure its collapse, it should surely, both legally and morally, have been the directors of the firm.

The report of the inspectors of the Department of Trade has made clear that in their view there was no fraudulent trading during that period, but they also made clear that they do not preclude any other criminal offences which might have been committed or other actions for civil remedies by the people who suffered from the crash.

The second issue which these reports raise concerns the rôle of the Government when a private enterprise firm comes to them for help and they decide that they will not guarantee the future of that firm. They will help it and will want further information, but they are not prepared to guarantee it against any future contingency, including the possible contingency, which arose in this case, of the total incompetence of the management and directors of the firm.

When the Ombudsman and the inspectors inquired into this aspect of the report, they found that the then Secretary of State for Industry had acted speedily and decisively, had come to a crucial decision within five days, including a weekend, when a firm was in dire distress, was running a competent Department and throughout had acted with great integrity, I dare say that that is what sits in the gullet of the hon. Member for Henley (Mr. Heseltine). No one is ever likely to produce a report accusing him of running a competent Department or of acting with great integrity at a time of critical stress.

The only criticisms that the two reports made of the then Secretary of State for Industry was that he should have qualified his support for the future of Court Line more than he did. The only result of that would have been that 400,000 holidaymakers would have lost their holidays instead of the 100,000 holidaymakers who actually lost their holidays.

I end my speech with the reflection that someone in the House must define where the dividing line comes between administration and policy. If the Chancellor of the Exchequer makes a statement in the House based upon economic facts known to him and makes a judgment which subsequently leads speculators or members of the public to lose money, is that statement to be the subject of an inquiry by the Ombudsman? It seems to me that when a Minister makes a judgment in the House, be it political, moral or economic, based upon the facts available to him, that is a matter of policy. It is not a matter of administration. In that sense my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) may well be right.

6.22 p.m.

Photo of Mr William Whitelaw Mr William Whitelaw , Penrith and The Border

The shortage of time makes it inevitable that I must not allow myself to be provoked by the remarks of the hon. Member for Luton, West (Mr. Sedgemore). I merely say to him that I believe he has done his case no good by his totally unjustified attack on the integrity of my hon. Friend the Member for Henley (Mr. Heseltine).

I wish to refer to one straightforward and simple issue and in doing so I wish to follow the important speeches made by my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke), the right hon. Member for Fulham (Mr. Stewart), who has been the Chairman of the Select Committee dealing with the Ombudsman, and the hon. Member for Colne Valley (Mr. Wainwright). I wish to refer specifically to the repercussions in the long term of the Government's decision to reject the Ombudsman's report, especially when that report is supported on the main points by the departmental report.

My hon. and learned Friend the Member for Darwen made an important point about the Government summarily rejecting the report before there was a chance for the House to debate it. That point was also made by the right hon. Member for Fulham and by the Select Committee which considered the matter. I hope that on reflection the Government will consider those points carefully, because I believe that in the context of Parliament they are extremely important.

I was originally one of those who had doubts about the effectiveness of an Ombudsman when the proposal was first put forward. Some of those doubts were borne out by what we are discussing tonight. However, as time has passed I have realised that in the main those doubts were not well-founded. It became clear to me that we all have constituents who consider that they have been unjustly treated by a Government Department and who believe that their last hope of redress rests with a reference to the Ombudsman. No doubt like other right hon. and hon. Gentlemen, I sometimes have to explain to my constituents that they are the victims of the laws as they stand and that there is really no question of maladministration at all. They may not like that explanation, but I believe that as Members of Parliament we have a duty to refer cases to the Ombudsman only when we believe that there is a possibility of injustice through maladministration.

Therefore, it is surely all the more important to preserve confidence in the impartiality and the standing of the Ombudsman. If the public begin to feel that the Government of the day will reject any of his reports which they do not like or in some way they find inconvenient, I believe, as does the hon. Member for Colne Valley, that a valuable safeguard in our parliamentary institutions will be seriously undermined. That will do harm to the relationship between the Government, Parliament and the public. Incidentally, I point out to the Secretary of State for Energy that if he were to continue his campaign for greater public participation his ideas would tend to have an increasingly hollow ring.

I am not suggesting for one moment that the Government must accept automatically every Ombudsman's report. I entirely agree with the right hon. Member for Fulham on this aspect. However, I maintain that the Government should reject a finding only exceptionally and, indeed, for good reasons. At this point I take issue with the hon. Member for Liverpool, Walton (Mr. Heffer). My view is broadly supported by the remarks of Lord George-Brown and the late Richard Crossman during the debate on the Sachsenhausen case, to which my hon. and learned Friend the Member for Darwen referred. During that debate the then Mr. George Brown said: Having established the office of Parliamentary Commissioner, whether I think his judgment is right or wrong, I am certain that it would be wrong to reject his views. The late Richard Crossman, graphically and perhaps typically and in his best traditions, in winding up the debate said: My right hon. Friend the Foreign Secretary says, ' Thank you, Ombudsman, for making a difficult decision. I grudge it you a bit, but I give it to you just the same. ' That seems to be a healthy position."—[Official Report, 5th February 1968; Vol. 758, c. 116, 170.] That is the case which the Government in this instance have to answer. That was the case put forward by two distinguished Ministers in the Labour Party.

In considering whether the Government and the right hon. Gentleman on their behalf made an error of judgment in steering an extremely difficult and narrow course, I make it clear, as both the Ombudsman and the departmental report have done, that I am absolutely satisfied that the Government and the right hon. Gentleman acted in good faith. As the departmental report says, there is no question of the statement being in any way untrue or reckless. That should be accepted.

Both reports conclude that there were errors of judgment. Other hon. Gentlemen have referred to paragraph 85 of the Ombudsman's report. It is clear that the statement was changed because it states: The final version of the statement omitted any reference to the board's belief and ascribed to the Government themselves the view that the arrangements would stabilise the situation in respect of Court Line's interests". In the light of that, I believe that the right hon. Gentleman must admit to himself, with the benefit of hindsight, that he was wrong to disregard the reservation in the proposed answer to supplementary questions with which he was briefed. I accept that he did not have directly the opportunity to use that supplementary answer, but he did something further. From the way that he made his statement, he did not follow that reservation. He went perceptibly in the opposite direction, as the right hon. Member for Fulham pointed out.

I have tried to examine what I should have done in the right hon. Gentleman's position. I must be honest and say that I am far from clear. I should like to think that with the reservation in that supplementary answer at the back of my mind, although I might not have used it I would have been guided by it. I know that this is a judgment with the benefit of hindsight. However, when the right hon. Gentleman considers it with the benefit of hindsight I believe that he will take the view that on the whole it was a mistake—a mistake in a difficult situation, and an error of judgment.

Therefore, both the Ombudsman's report and the departmental report agree that errors of judgment were made. On reading the evidence it is impossible to come to any other conclusion. I accept at once that it was an extremely difficult task for Ministers in any Government to deal with. On the one hand, I accept that they had to preserve confidence in Court Line. On the other hand they had to be careful not to give assurances to the general public which, on the evidence available, they were not in a position to give. They had to steer a balance between the two. In my judgment and in the judgment of both the reports and of a large number of people who considered the matter, they erred on the wrong side. They did not give sufficient reservations.

Frankly, I believe that this was an error of judgment. I do not accept, as the Secretary of State for Trade said, that to have made that reservation would have destroyed confidence in Court Line. I cannot prove it, but I do not feel that way about it. I am entitled to my views.

I believe that an error of judgment has been made. There can be no great blame on a Minister who makes an error of judgment in a crisis situation. Indeed, if I were to say anything different I should certainly be throwing very heavy stones in a glasshouse, because I know the mistakes that I have made in crisis situations.

Photo of Mr William Whitelaw Mr William Whitelaw , Penrith and The Border

Certainly. I have always been ready to admit them in this House, as the hon. Gentleman knows. It is usually wise to admit one's mistakes. I believe that it is particularly important that the Secretary of State, on behalf of the Government, should do so. If he does, he will uphold the strong position of the Ombudsman and thereby strengthen our parliamentary democracy.

Therefore, in the best interests of future government and of this House, I ask the right hon. Gentleman to get up and to say that, on mature reflection, the Government will now unequivocally accept the Ombudsman's report, backed as it is by the departmental investigation. If not, I hope that my right hon. and hon. Friends will register in the Division Lobby their dissent from what I believe would be an unwise and damaging Government decision which they will live to regret.

6.32 p.m.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

All who have taken part in the debate recognise its importance, and I certainly welcome the opportunity to take part in it.

I want to make clear to the House that I accept full personal responsibility for all the decisions taken by the Government last year, for the statements that I made in the House and for my relations with my civil servants, which have been brought to the attention of the House in detail, because I insisted that all the departmental documents should be made available to the Ombudsman and to the inspectors.

I hope to persuade the House that on reflection, the Government's decisions and statements last year were fair and reasonable and that the criticisms made in the two reports raise major policy considerations of which the House should be aware before reaching its own view on the matter.

It is sometimes said that the Government are dismissing these two reports. That is not so. The Government are expressing their own view. It has been said that the Government should not have expressed their view before the House expressed its view. But the Government were asked to express their view at the very beginning of the inquiry. As the Ombudsman makes clear, the Government were given an opportunity to express their view before the report was finalised. Therefore, the Government must give their view on a matter of this kind.

I am grateful to the Commissioner and to the inspectors for their courtesy. I had the opportunity of giving evidence and of being closely cross-examined on these matters.

Both reports have criticised the Government. In view of some of the comments which have been made, not least by hon. Gentlemen opposite and others during the year, before turning to the criticisms I should like to reiterate some of the other comments which were made about the Government and their conduct during this matter.

The Ombudsman said both officials and Ministers acted with the speed and the sense of responsibility which the situation required; and secondly that what was done and was said publicly was done and said in good faith. There is no suggestion that we inflated optimism beyond what we then thought to be right. The Ombudsman said: But the Government's view…was based on an honest and careful assessment of that information, taking the weaknesses into account. The inspectors said that everybody concerned in the events of the last few weeks…acted with the highest degree of public mindedness". They went on to endorse the Government's objectives of seeking to save the shipyards and at the same time of seeking to help the holidaymakers. I make no apology for that. The inspectors thought that we would have been wrong to allow a receiver to go in, though had my words taken the form indicated by some Court Line would have collapsed on the afternoon of that debate.

The inspectors said that the Government had sufficient information to enter into an agreement to buy the shipyards, that the 100 per cent. acquisition was right, that the motives were right, that the price was fair, that the statements made were neither untrue nor reckless, that bona fides were beyond question and that an honest and careful assessment had been made.

I have referred only briefly to these passages in the reports, because for over a year the Opposition have been engaged in fanning the wild and reckless charges made against Ministers which have been wholly and completely repudiated by what is in the two reports.

I should like to put the record straight once and for all, because there were serious criticisms in the reports, to which I shall come. However, they were not directed against the Government's integrity, good faith, public-mindedness, honesty or the care with which they approached the matter.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

I have little enough time to say much on an important matter.

I now turn to the criticisms made in the two reports. The Parliamentary Commissioner—this has been quoted already but I must quote it again—said: although I understand the strength of the argument that confidence must not be unnecessarily impaired, it seems to me to be an important principle also that undue confidence should not be created or maintained. That is the nature of the criticism. Indeed, as my right hon. Friend the Member for Fulham (Mr. Stewart) pointed out, the Ombudsman later said: But since (in my view) the statements suggested confidence without any qualification, it seems to me that they went somewhat further than the circumstances warranted…the statements were liable to leave a misleading impression with the public. The inspectors reiterated that by saying that the statements are to be criticised for going too far by way of assurance to holidaymakers, without sounding any note of caution or reserve. Therefore, both reports make criticisms and allot some share of responsibility to the Government for the loss to the holidaymakers. But I say, because it needs to be said, that there is no hint or suggestion in the reports—obviously the House knows this, but many people outside do not—that the Government were in any way responsible for the collapse of Court Line. Many of my right hon. and hon. Friends, not least myself, during the year, as a result of the help given by the Opposition, have been given the impression that in some way we precipitated the collapse of Court Line. Both reports recognised that Court Line would have collapsed at the time that it came to the Government if the Government had not stepped in. In those circumstances, more holidaymakers would have lost their holidays, the shipyard workers might have had their jobs at risk, and the orders for ships would have been vulnerable to renegotiation if the company had gone through receivership.

Therefore it is necessary to make clear in this debate, before coming to the matters of judgment upon which the House wishes to reach a view, that Court Line failed because of circumstances which had nothing whatever to do with the Government. The directors of Court Line, as became clear during the time devoted to the unravelling of their affairs, had totally mishandled their own finances and were unable to give the Government, let alone their own shareholders, any real indication of the company's position.

I turn to the two questions at the heart of the debate to which the inspectors and the Ombudsman invited us to address our minds. First, was it right for the Government to maintain confidence at the time they decided to do so? I believe that, it was, for one simple reason. We honestly believed, in the light of all the information, that that confidence was justified. I should find it hard to accept from anyone else, however independent or skilled, that as a Minister I had an obligation to say something that I did not believe just because later it might be more convenient if I could have been shown to have said something which I did not then fully believe.

I shall go further. It is argued that in five days no Government could know the truth. However, even as late as 1st August and five weeks after my statement in the House, Peat Marwick indicated in its third report that Court Line had, on a going concern basis, a surplus of assets over liabilities, and overdraft facilities in excess of requirements at least to 30th September 1974. What should the Government say when they are faced with a situation and their information points to a clear statement? The Ombudsman lays it down in paragraph 74: very properly, the Government accepted an obligation to incorporate in public statements about the negotiations references also to the future, as the Government saw it, of that business. We did that, no more and no less.

I do not have to emphasise in detail the problem of confidence, but there are many firms whose problems are known to the Government at particular moments. I do not forget the statement made by the right hon. Member for Knutsford (Mr. Davies)—I have given him notice of this although he may not be present, and I quote him with approval, not with criticism—in which he explained why he had not done more about Vehicle and General although his Department had known for several months that it was in trouble. He said: It is always fairly easy, with the benefit of hindsight, to say that this should have been the case. The question to which the right hon. Gentleman "— I was asking him the question— should address himself is the wisdom of disturbing confidence in a concern which carries a large amount of insurance of this kind if such lack of confidence were not fully justified. It is that particular concern which one has to maintain in mind—and correctly so."—[Official Report, 2nd March 1971;Vol. 812, c. 1400–1.] I believe that the travel company with little sums of money from many people is comparable to the insurance situation and that the right hon. Member for Knutsford's advice should have been tailor-made for us as we looked at this difficult judgment.

Secondly, did the statements go too far and give a guarantee to the holiday-makers? In none of my statements or supplementaries was the word "guarantee" used. When one of my hon. Friend's said "What about the shipyards?" I said that even the ownership of the shipyards would remain with Court Line until the negotiations were completed. What is true is that the holiday-makers welcomed the fact that the certain loss of their holidays had been averted, and so it was. That was the black cloud that was lifted. However, no serious newspaper—neither The Times, the Daily Telegraph, the Financial Times nor The Guardian—had any doubt that what I had said was that the Government would seek to buy the shipyards but that the holiday business would remain in private ownership. There was no suggestion that we had given a guarantee.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

The hon. and learned Gentleman will have to allow me to continue because I have very little time. I do not want to be discourteous to him, but I hope he will recognise that I have waited a year to make this speech and I must be allowed to do so. I am not attacking any Conservative Member.

Why did the holidaymakers not cancel their holidays? One argument was that they did not do so because of my statement. However, The Guardian gave the real reason, and on 28th June 1974 that newspaper quoted one of the central London travel agents. He said: One of the problems however was that people exercising an option to cancel could not get their money back. Therefore, it does not follow that the holidaymakers, who obviously had hopes raised that the problems that confronted them might be averted, would receive a guarantee from the Government.

I turn to what the Ombudsman said about this. He said: it does not follow that the inclusion of a specific qualification would necessarily have produced a different reaction among holiday-makers. I believe that he is right. Unless I had gone out of my way to separate in that statement the purchase of the shipyards from our total lack of confidence in relation to the holidaymakers, which we did not feel—in which case Court Line would have collapsed despite our decision to acquire—I do not believe that a modest qualification of the kind around which this whole debate has rotated would have made any difference.

I turn to the most significant passage in the report that we are considering. Upon this, above all else, I hinge our case. The inspector said: The word 'guarantee' has a particular meaning in law and applies only when the relevant parties are in legal relationship with each other, usually direct contractual relationship. The word has been used somewhat freely in regard to the matter of Court Line and when we use it or mention it hereafter we do not do so in a legal sense, because in our view that does not apply at all, but in the colloquial sense.In Mr. Wedgwood Benn's statements the word 'guarantee' was not used at all. I invite the House to consider the meaning of that passage. The inspectors are saying that whereas in law there is a guarantee which everybody knows about, in the relations between Government and industry there is a colloquial guarantee, which is a quite different thing. No Minister in any Government could possibly accept the invention of an entirely new concept, the concept of a colloquial guarantee. This is the issue to which the Government had to turn their mind in considering how to respond to the criticisms. If the criticisms—

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

Perhaps the hon. Gentleman will allow me to develop the point. If the criticisms were accepted and if the easy method of the personal apology—which the House would always, in the case of any hon. Member, be ready to accept—were adopted, the House would be accepting and embracing the idea that in the relationship between Government and industry we do not have to have a legal guarantee because anything a Minister says may be turned into a colloquial guarantee.

Photo of Mr Michael Latham Mr Michael Latham , Melton

Mr. Latham rose

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

I am not attacking the Conservative Party. I am seeking to develop the idea that it would be wrong for these criticisms to be accepted. On occasions the House receives news of Government guarantees. For example, there was the case of Alfred Herbert and a formal guarantee was sought for British Leyland. However, to offer help to a company is not a formal guarantee.

I turn to the exact parallel. It is the parallel of Rolls-Royce in 1970–71. On 11th November 1970, when Sir Frederick Corfield was Minister of Aviation and Supply he announced that the Government were ready to extend a further sum of £42 million to Rolls-Royce, which was then in private ownership. In explaining the reasons for this decision Sir Frederick Corfield said: I stress that the principal purpose of this arrangement is to ensure the success of the RB211–22 engine, to ensure that Rolls-Royce is in a position to fulfil its contract with Lockheed."—[Official Report, 16th November 1970; Vol. 806, c. 403.] How does that differ from the statement I made—to ensure, to support, to stabilise?

When Sir Frederick Corfield announced the collapse of Rolls-Royce, he said—I am not saying that he was wrong— The Government have no liability in respect of the contract between Rolls-Royce and Lockheed."—[Official Report, 4th February 1971; Vol, 810, c. 1922.] In my submission, that was an exactly parallel case. The Conservative Government tried to help and failed, and no one suggested that the Parliamentary Commissioner should look at what Sir Frederick or the right hon. Member for Knutsford had done. The inspectors were called in and they wrote a very big report on Rolls-Royce. But they did not even interview the Minister who had said that the Government's launching aid was to ensure that the contract with Lockheed could be fulfilled.

I say that these are policy matters. It was on their policy decision that the Conservative Government were criticised over the Rolls-Royce case, and it is as a policy matter that we should have been criticised, if criticism there has to be, over the handling of Court Line.

It is not right to take a policy decision given with absolute integrity and relate it in some way to matters of maladministration—although that word is not mentioned in the Parliamentary Commissioner's findings. Nor is it right for inspectors, doing the best job they can as distinguished lawyers and accountants, to invent the concept of a colloquial guarantee as a precursor for criticism of a Minister who is accountable to the House of Commons.

This is a very important question. All Governments are concerned with the success of industry. All major firms in trouble are likely to turn to the Government for advice or assistance. Members of this House necessarily come to Ministers if important firms in their constituencies run into difficulty, and every Minister concerned with industry, if my experience is anything to go by, has a flood of letters, deputations, delegations and discussions when such crises appear.

The Government can do three things. First, they can let events take their course so that receivership may follow, Secondly, they can wheel into play the formal, precise Government guarantee, embodied in a parliamentary statement or order under which everyone knows exactly what the position is. But the most common case falls into neither of these categories but into the third, in which the Government try to help without commitment and without guarantee. Some attempts will fail, as Rolls-Royce and Court Line failed. But many more succeed—many more than see the light of day, because no firm wishes to advertise itself as coming to the Government for help, because that of itself might undermine its confidence.

I have details here—it is an old list—relating to firms which the Government for the first time helped to secure against some difficulty or other, and they include 64,237 jobs in 18 firms. Some have now recovered; others have run into difficulties. Alfred Herbert was one of the latter, and it has now been taken over and absorbed.

But I warn the House that there is a deeper danger. If in accepting the reports, or asking for an apology which would imply accepting them, we blur the difference between the cases where the Government try to help without commitment and those cases where the Government give a full-scale guarantee—if the crucial and clear difference between what is a guarantee and what is not a guarantee is blurred by the Court Line affair—the whole nature of the relations between the Government and industry will necessarily change. I believe that the House would not wish to make such a change, with all its far-reaching consequences, without the most careful consideration of what would be involved, and certainly would not wish to make it by what the lawyers call a side-wind.

This is not a theoretical matter. It is a practical matter. Unemployment is now over I million and is rising. In the difficult economic circumstances which face Britain, the number of rescue cases is bound to rise, threatening jobs and manufacturing capacity. The firms in trouble and those who work in them will be scattered around the country in the constituencies of many hon. Members. Members of all parties will be approaching Ministers for advice and help. Constituents whose jobs are at risk, be they workers or managers, will look to Par- liament and the Government to protect them from the harshest impact of market forces which do not count the human cost.

Photo of Mr William Whitelaw Mr William Whitelaw , Penrith and The Border

I generously conceded the difficulties of the situation in which the right hon. Gentleman was placed. What I am saying is that, having expressed all these reservations, he would serve the House best if he followed the advice of the late Richard Crossman in the Sachsenhausen case, expressed the reservations and accepted the Parliamentary Commissioner's report.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

If I were to adopt that course—which I could not do because I believe it would be wrong to do so—I would be inviting the House to frighten future Ministers from trying to help in cases which will come to their attention. They would be left with only two courses open to them—either to allow bankruptcy or go for a full-scale Government guarantee.

I know that there are many hon. Members who think that a massive disengagement of Government and Parliament from industry would be a good thing. I do not take that view. This is absolutely relevant to the Court Line affair. If hon. Members and Ministers turn their backs on those who come to them for help for fear of rebuke or being claimed to be giving guarantees, Parliament will not be performing the function on behalf of its constituents that the Government sought to do in the case of Court Line.

Court Line came to us. We did not go to Court Line. As a result of Government policy, 9,000 jobs and many orders were saved from the terrors of bankruptcy which would have affected these men and their prospects. Holiday-makers who would most certainly have lost their holidays at once if the Government had let Court Line collapse at least had their holidays protected until 15th August. Later holidaymakers would have lost everything had it not been for the legislation which gave them a refund as a result of the interest-free loan given to the Air Travel Fund. A substantial salvage was achieved.

That is one reason why I seek the House's support. The other and more important reason is this. If judgments are to be made on Ministers upon the industrial policies they pursue, they must be passed by the House of Commons and the people as a whole and not dealt with indirectly when these are not matters, as is quite clear in this case, of company law or of maladministration. Having given this account to the House, I hope that it will be able to support the Government

not only for what they did about Court Line but for the response they have given to the reports now before us.

Question put, That this House do now adjourn:—

The House divided: Ayes 156, Noes 180.

Division No. 328.]AYES[6.59 p.m.
Adley, RobertHastings, StephenPardoe, John
Aitken, JonathanHawkins, PaulParkinson, Cecil
Atkins, Rt Hon H. (Spelthorne)Hayhoe, BarneyPattie, Geoffrey
Awdry, DanielHenderson, DouglasPercival, Ian
Bain, Mrs MargaretHeseltine, MichaelPeyton, Rt Hon John
Banks, RobertHolland, PhilipPrice, David (Eastleigh)
Benyon, W.Hordern, PeterPrior, Rt Hon James
Biffen. JohnHowe, Rt Hon Sir GeoffreyPym, Rt Hon Francis
Biggs-Davison, JohnHunt, JohnRaison, Timothy
Blaker, PeterHurd, DouglasRees, Peter (Dover & Deal)
Boscawen, Hon RobertHutchison, Michael ClarkReid, George
Bottomley, PeterIrvine, Bryant Godman (Rye)Renton, Tim (Mid-Sussex)
Boyson, Dr Rhodes (Brent)Jessel, TobyRhys Williams, Sir Brandon
Braine, Sir BernardJohnson Smith, G. (E Grinstead)Ridley, Hon Nicholas
Brittan, LeonKershaw, AnthonyRifkind, Malcolm
Brotherton, MichaelKilfedder, JamesRoberts, Michael (Cardiff NW)
Brown, Sir Edward (Bath)King, Tom (Bridgwater)Rodgers, Sir John (Sevenoaks)
Buck, AntonyKirk, PeterRossi, Hugh (Hornsey)
Bulmer, EsmondKnox, DavidRost, Peter (SE Derbyshire)
Butler, Adam (Bosworth)Lane, DavidSainsbury, Tim
Carlisle, MarkLatham, Michael (Melton)Shaw, Giles (Pudsey)
Carr, Rt Hon RobertLawrence, IvanShelton, William (Streatham)
Chalker, Mrs LyndaLawson, NigelShepherd, Colin
Clark, Alan (Plymouth, Sutton)Le Marchant, SpencerSims, Roger
Cooke, Robert (Bristol W)Lester, Jim (Beeston)Skeet, T. H. H.
Cope, JohnLewis, Kenneth (Rutland)Smith, Cyril (Rochdale)
Cormack, PatrickLuce, RichardSmith, Dudley (Warwick)
Costain, A. P.McAdden, Sir StephenSpeed, Keith
Dean, Paul (N Somerset)McCrlndle, RobertStainton, Keith
Drayson, BurnabyMacfarlane, NeilStanbrook, Ivor
Dykes, HughMacGregor, JohnSteel, David (Roxburgh)
Edwards, Nicholas (Pembroke)Macmillan, Rt Hon M. (Farnham)Stewart, Donald (Western Isles)
Emery, PeterMcNair-Wilson, M. (Newbury)Stokes, John
Fell, AnthonyMarshall, Michael (Arundel)Stradling Thomas, J.
Finsberg, GeoffreyMarten, NeilTaylor, R. (Croydon NW)
Fisher, Sir NigelMates, MichaelTebbit, Norman
Fletcher, Alex (Edinburgh N)Mather, CarolThatcher, Rt Hon Margaret
Fletcher-Cooke, CharlesMaudling, Rt Hon ReginaldTugendhat, Christopher
Fookes, Miss JanetMawby, RayVaughan, Dr Gerard
Fry, PeterMaxwell-Hyslop, RobinViggers, Peter
Gardiner, George (Reigate)Mayhew, PatrickWainwright, Richard (Colne V)
Glyn, Dr AlanMiller, Hal (Bromsgrove)Wakeham, John
Godber, Rt Hon JosephMoate, RogerWarren, Kenneth
Goodhart, PhilipMonro, HectorWeatherill, Bernard
Goodhew, VictorMontgomery, FergusWelsh, Andrew
Goodlad, AlastairMoore, John (Croydon C)Whitelaw, Rt Hon William
Gow, Ian (Eastbourne)More, Jasper (Ludlow)Winterton, Nicholas
Grant, Anthony (Harrow C)Morris, Michael (Northampton S)Young, Sir G. (Ealing, Acton)
Griffiths, EldonMorrison, Charles (Devizes)
Grimond, Rt Hon J.Morrison, Hon Peter (Chester)TELLERS FOR THE AYES:
Grist, IanNeave, AireyMr. Anthony Berry and
Hamilton, Michael (Salisbury)Nelson, AnthonyMr. Russell Fairgrieve.
Hampson, Dr KeithNewton, Tony
Harrison, Col Sir Harwood (Eye)Normanton, Tom
NOES
Allaun, FrankBottomley, Rt Hon ArthurCook, Robin F. (Edin C)
Archer, PeterBradford, Rev RobertCorbett, Robin
Armstrong, ErnestBuchanan, RichardCox, Thomas (Tooting)
Ashton, JoeCallaghan, Jim (Middleton & P)Cunningham, Dr J. (Whiteh)
Atkinson, NormanCampbell, IanDalyell, Tarm
Barnett, Guy (Greenwich)Carter-Jones, LewisDavidson, Arthur
Bates, AlfCastle, Rt Hon BarbaraDavies, Bryan (Enfield N)
Bean, R. E.Clemitson, IvorDavies, Denzil (Llanelli)
Benn, Rt Hon Anthony WedgwoodCocks, Michael (Bristol S)Davis, Clinton (Hackney C)
Bidwell, SydneyCohen, StanleyDeakins, Eric
Bishop, E. S.Coleman, Donaldde Freitas, Rt Hon Sir Geoffrey
Booth, AlbertConlan, BernardDelargy, Hugh
Dell, Rt Hon EdmundJeger, Mrs LenaPowell, Rt Hon J. Enoch
Dormand, J. D.Jenkins, Rt Hon Roy (Stechford)Prescott, John
Douglas-Mann, BruceJones, Barry (East Flint)Price, C. (Lewisham W)
Duffy, A. E. P.Jones, Dan (Burnley)Rees, Rt Hon Merlyn (Leeds S)
Dunn, James A.Judd, FrankRichardson, Miss Jo
Dunnett, JackKerr, RussellRoberts, Gwilym (Cannock)
Eadie, AlexKilroy-Silk, RobertRobertson, John (Paisley)
Edge, GeoffLamborn, HarryRodgers, George (Chorley)
Edwards, Robert (Wolv SE)Lamond, JamesRooker, J. W.
Ellis, John (Brigg & Scun)Latham, Arthur (Paddington)Roper, John
Ennals, DavidLewis, Ron (Carlisle)Ryman, John
Evans, Fred (Caerphilly)Lipton, MarcusSandelson, Neville
Evans, Ioan (Aberdare)Litterick, TomSedgemore, Brian
Ewing, Harry (Stirling)Loyden, EddieShore, Rt Hon Peter
Faulds, AndrewLuard, EvanShort, Rt Hon E. (Newcastle C)
Fitch, Alan (Wigan)Lyon, Alexander (York)Silkin, Rt Hon John (Deptford)
Fitt, Gerard (Belfast W)Lyons, Edward (Bradford W)Sillars, James
Flannery, MartinMcCartney, HughSilverman, Julius
Fletcher, Raymond (Ilkeston)McCusker, H.Skinner, Dennis
Fletcher, Ted (Darlingon)MacFarqunar, RoderickSmall, William
Foot, Rt Hon MichaelMackenzie, GregorSmith, John (N Lanarkshire)
Forrester, JohnMcMillan, Tom (Glasgow C)Snape, Peter
Fowler, Gerald (The Wrekin)Madden, MaxSpearing, Nigel
Fraser, John (Lambeth, N'w'd)Mahon, SimonStallard, A. W.
Freeson, ReginaldMarks, KennethStewart, Rt Hon M. (Fulham)
Garrett, John (Norwich S)Marquand, DavidTaylor, Mrs Ann (Bolton W)
Garrett, W. E. (Wallsend)Marshall, Dr Edmund (Goole)Thomas, Ron (Bristol NW)
George, BruceMarshall, Jim (Leicester S)Tinn, James
Gilbert, Dr JohnMason, Rt Hon RoyUrwin, T. W.
Ginsburg, DavidMaynard, Miss JoanWainwright, Edwin (Dearne V)
Gould, BryanMeacher, MichaelWalker, Terry (Kingswood)
Graham, TedMellish, Rt Hon RobertWard, Michael
Hamilton, James (Bothwell)Mendelson, JohnWellbeloved, James
Hamilton, W. W. (Central Fife)Mikardo,IanWhite, Frank R. (Bury)
Hardy, PeterMillan, BruceWhitehead, Phillip
Harper, JosephMiller, Mrs Millie (Ilford N)Whitlock, William
Harrison, Walter (Wakefield)Molloy, WilliamWilliams, Alan (Swansea W)
Hatton, FrankMolyneaux, JamesWilliams, Rt Hon Shirley (Hertford)
Hayman, Mrs HeleneMorris, Charles R. (Openshaw)Wilson, Rt Hon H. (Huyton)
Healey, Rt Hon DenisMulley, Rt Hon FrederickWilson, William (Coventry SE)
Heffer, Eric S.Newens, StanleyWise, Mrs Audrey
Horam, JohnNoble, Mike
Hoyle, Doug (Nelson)O'Malley, Rt Hon BrianWoodall, Alec
Huckfield, LesOrbach, MauriceWoof, Robert
Hughes, Robert (Aberdeen N)Ovenden, JohnWrigglesworth, Ian
Irvine, Rt Hon Sir A. (Edge Hill)Palmer, ArthurYoung, David (Bolton E)
Jackson, Colin (Brighouse)Park, George
Jackson, Miss Margaret (Lincoln)Parry, RobertTELLERS FOR THE NOES:
Jay, Rt Hon DouglasPavitt, LaurieMr. Tom Pendry and
Perry, ErnestMr. David Stoddart.

Question accordingly negatived.