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.