Crown Agents

– in the House of Commons at 12:00 am on 5th December 1977.

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4.3 p.m.

Photo of Mr John Mendelson Mr John Mendelson , Penistone

I beg to move, That this House do now adjourn.

Leave having been given on Thursday 1st December under Standing Order No. 9 to discuss:The loss of more than £200 million through the operations of the Crown Agents. In submitting my application to you, Mr. Speaker, I was quite confident that there would be a general request in the country that the subject matter of the statement made by the Minister of State for Overseas Development, and the recommendations contained in that statement emanating from the Government, should be debated without delay. I believe it can be generally agreed that the response in the country over the weekend has proved that expectation to be correct. I think that it is for the good of the country and the House that the debate should take place today, and I believe that it is also of advantage to the Executive in our system of government that the Minister should have a further opportunity to explain her policy to the House.

The purposes that I have in mind for this debate have nothing whatever to do with easy denunciations. They are of a threefold nature. The first is to establish what kind of response the House wishes to give immediately to the facts revealed so far. The second is to give the judgment of the House on the proposals made by the Government as to the kind of further inquiry that is to take place. The third is to get the Government to accept the view of the House at the end of the debate.

As regards the first purpose, the report makes shocking reading. Everybody who has read the report since its publication on Thursday afternoon will, I believe, agree that this is no overstatement of the position. It is a shocking indictment, first and foremost of the background and the atmosphere in which the operations described took place. The City of London and the solicitors and other lawyers mentioned in the report will have to take great care in part through their own institutions and, if necessary, through action by Parliament that what is regarded as common occurrence does not become accepted as the reputation of the City of London and of an important part of its legal profession. That is the background.

But equally important and equally serious is the conduct of so many of those who are either quasi-civil servants, as they have been called, or, at any rate, public servants in serious and responsible positions—namely, the employees of the Crown Agents themselves, including their most senior officers. The third element to be examined is the attitude of successive Governments from whichever political party, and the attitude of the institutions of the House of Commons itself, as regards its supervisory functions.

I begin deliberately, as I believe one must, with the conduct of the officers of the Crown Agents. I was dissatisfied—and I put on record my dissatisfaction last Thursday afternoon—that in our reaction to the Minister's first statement after the publication of the report there should have been, first, so much concern that nobody should be hurt. In fact, it is common ground in the House that the greatest care should be taken in any inquiry decided upon at the end of the day that innocent people should not be traduced and that all those who appear before a committee or tribunal should have proper opportunity to safeguard themselves, and their interests.

But that can never be the only, main or first reaction when a shocking state of affairs is revealed, as in this case of the Crown Agents. The first reaction in the country certainly has been a feeling of disgust and shock that this should have been going on for almost 10 years. That ought to be the reaction of the House as well. It is certainly the first thing to put on record.

But at the same time it ought to be recognised that one of the most serious aspects of the report is that it mentions from time to time so many practices where the common excuse of the officers of the Crown Agents, when investigated and questioned by members of the Committee of Inquiry, was, "This happens in the City all the time". [Interruption.] My hon. Friends may be familar with that, but many of us are still capable of being shocked that it should be held by the officers of the Crown Agents that this is going on in the City all the time. Certainly many people in the nation outside the House are still capable of being shocked that this should be the state of affairs as described by the report.

In fact, whether we talk about letters of comfort or window-dressing—the pleasant practice of deliberately giving false information to make it appear to shareholders that their company is in a much better position than it is really in—all those, when brought up, are replied to by senior officers of the Crown Agents saying, "It may not be a good practice, but it is going on in the City all the time." That is no excuse for public servants to act in that way. But it is certainly an indictment of the kind of atmosphere in which these operations have taken place.

Equally serious is that in so many cases so many people who know a great deal about what goes on in the City fail to take action—primarily the Bank of England. Indeed, the Bank of England comes out of this inquiry very badly. Those who have always defended the composition of the Bank—that 50 per cent. of its governing board is drawn from the City of London, from the clearing banks and from the merchant banks—have always justified it by saying that the great advantage of having such a composition for the governing body is that the Bank is not made up of civil servants, academicians, university lecturers or people remote from the business world, but those who matter are all there.

But if they are all there, why did they turn a blind eye to all these shocking developments that have taken place over such a long period? Why did they not immediately say to the Governor and the Deputy Governor, mentioned so often in this report, "It is more than high time for action"? Where were they? Did they not know what was going on? Of course, they did. They kept a prudent silence which shows up very badly in this report.

Photo of Mr Tom Litterick Mr Tom Litterick , Birmingham, Selly Oak

It is called workers' control on the Opposition side.

Photo of Mr John Mendelson Mr John Mendelson , Penistone

Let us proceed in an orderly way. The second main aspect of the report which ought to be underlined at the earliest possible moment is the fact that, when one goes into the higher reaches of the Crown Agents, one finds that the traditional probity and traditional functions of the service are regarded as a great asset on the market. In fact—I shall come to this in more detail in a moment—in justifying the departure from time-honoured tradition, that is, to engage in dealings and trading on their own account, the officers of the Crown Agents pray in aid the argument that because they are a body of such high quality and such great standing they will be able to attract money from the banks and from other quarters on very good and easy terms.

That high tradition has been endangered by the operations of those 10 years. I wish therefore, at this early stage, to say that I do not underestimate the importtance of the work of the Crown Agents or the anxiety obviously felt by the Minister and the Government that that work should not be impaired. But I believe that it will be impaired much more by any hesitation to make clear where the guilty people are and what culpability has occurred and by trying to cover up what is a shocking and dismal story.

That brings me to the second item I outlined at the outset, namely, the kind of inquiry which is to take place. I do not accept the proposal by Her Majesty's Government that it should be an informal inquiry by a committee sitting in private and hearing evidence in private. I wish to tell the Government, so that there is no room for misunderstanding, that I shall make an alternative proposal. I hope that the Government will be persuaded before the end of this debate to accept the alternative proposal. But if they are not prepared either to accept it this afternoon or to give a firm undertaking that they will do so within the next few days, I shall ask the House to approve in a vote in the Division Lobbies at the end of the debate the alternative proposal that I wish to put to it.

I believe that the proposal so far emanating from the Government is inadequate on two major grounds. First, after the revelation of the loss of £200 million—I mention in passing that the fire service of the United Kingdom could be paid for in all its sections for a whole year with the sum of £200 million—and the statement by the Minister that it may be even more and that the Government may have to come back to the House and ask for further money, it is essential that the country should know that it will be fully informed on everything that has gone on. That is why a committee sitting in private is inadequate.

It is equally inadequate because of the nature of the committee proposed. One of the most shocking revelations in the report is that so many of those who are involved and have been engaged in lucrative activities for their own advantage have refused to give evidence to the Fay Committee. They must be made to give evidence, and the instrument now proposed by the Government does not do that. I therefore propose to the Government, and to the House, that instead of having the committee proposed by the Government a committee should be appointed under the procedure of the Tribunals of Inquiry (Evidence) Act 1921.

I realise, as will every right hon. and hon. Member, that such a committee is a very heavy instrument, empowered to call for papers, witnesses, and so on. I believe that on this occasion this heavy instrument is justified by the nature of the case and by the purposes of the inquiry. We ought to agree that it is the only way to deal with the present situation, from the point of view of the public and of those who will have to give evidence before such a tribunal. Such a tribunal also provides safeguards—for example, representation by counsel—for those who might be asked to give evidence.

I am fully aware, as are we all, that in years gone by there have been criticisms of proceedings before such tribunals. Having weighed the criticisms carefully, I believe that the public good demands that those disadvantages be taken care of, and that they are not a reason for rejecting the most public and searching inquiry, which can take place only before that kind of tribunal under the Act.

There is one safeguard that I particularly want to mention, because I anticipate that the Government may regard it as a stumbling block to the appointment of such a public tribunal. I have seen the argument advanced that the principals—people who hold their normal funds with the Crown Agents, whose job it is mainly, and, I hope, in future exclusively again, to act on the accounts of these principals and not engage in business on their own account—might be embarrassed by a tribunal under the 1921 Act, or that some, at any rate, might not wish to give evidence. That is provided for by the foresight of those who drafted the 1921 Act. Section 2 states: A tribunal to which this Act is so applied as aforesaid—(a) shall not refuse to allow the public or any portion of the public to be present at any of the proceedings of the tribunal unless in the opinion of the tribunal it is in the public interest expedient so to do for reasons connected with the subject matter of the inquiry or the nature of the evidence to be given". This covers the point I have just discussed. If the tribunal finds on some occasions that because of the nature of the evidence to be submitted, or the subject matter of such evidence, it would not be in the public interest for the public to be admitted, it has the power to sit occasionally in camera. It is to be hoped that it will do so as little as possible, but that covers the objection that might be reasonably advanced.

I turn to the final part of my submission, which concerns the nature of the public interest involved. I do not intend to go over most of the evidence in the report. Hon Members will have read the report, and the public have seen at least an analysis of the report in the Press.

However, even those who have been observing financial matters and economic affairs for many years find that the attitude of a firm of solicitors, for example, employed by the Crown Agents takes some beating. For a period of many years the firm was serving two masters, bringing clients, from whom it received remuneration, to the Crown Agents for apparently easy advances of money. On top of that, the leading officers of the Crown Agents knew that this firm was serving on both sides, without taking action against it. To top it all, that very same firm itself received a loan from the Crown Agents to the tune of £340,000. If "Alice" had to be rewritten, there would have to be a section on these transactions.

There are a number of cases which occur from time to time in public life which do not always lead to conclusions. That must not happen in the matter with which we are dealing this afternoon. It is now essential, in the public interest, to find those who must carry the blame. If they have gone on to work for other organisations, that should be no argument for not exposing them.

I was puzzled by a curious sentence in the Minister's submission to the House on Thursday, when my right hon. Friend said, in an aside, that some of the people concerned were no longer with the Crown Agents but were somewhere else. What has that to do with anything? It is of no consequence, and we should forget that it has ever been a factor. It does not matter where the former officers of the Crown Agents are. Indeed, one or two have joined firms which benefited from advances by the Crown Agents while those people were still at the Crown Agents. That is all the more reason to investigate their dealings and activities when they were officers of the Crown Agents.

There is a curious argument advanced in the Government report—not the Fay Report—that the impression of the evidence so far is that there has been no wrongdoing but incompetence and mal-adminstration, and the phrase has been repeated over the wireless and in the newspapers during the weekend. Of course, a further Committee of Inquiry has been appointed, which will apportion blame. However, if one examines some of the activities that have taken place one sees that to allege that anybody involved in the transactions was so simple that he did not know what he was doing, and was merely incompetent, is pushing simplicity too far. I refuse to accept that there has merely been incompetence. In order to make clear to the country at large what has been going on, the Government should agree, without delay, to the setting up of a tribunal. I hope that the House will endorse the proposal.

4.22 p.m.

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

I think that it will be for the convenience of the House if I intervene in this important debate at this point.

I am glad that my hon. Friend the member for Penistone (Mr. Mendelson) succeeded in his Standing Order No. 9 application and that we have this debate today. It is right that the House should take the earliest possible opportunity to discuss the questions raised in the document placed before the House last Thursday—the Fay Report, the Stevenson Report, the Government's statement and, of course, my own statement to the House. It is also right that the House should exert its own will and discuss the matter at this early opportunity. But the essence of the case, as I said last week, is a failure of public accountability, and that means a failure of the Executive to account to Parliament.

The House may find it useful if I enlarge upon, and explain, certain critical aspects which are likely to engage attention during the debate and, indeed, to which my hon. Friend has already drawn attention. First, I should like to outline the exact position concerning the loss of more than £200 million by the Crown Agents. It is an opportunity—which I have not had before—for me to give the House full information about the matter.

We should refer to a probable loss, a loss which should be accounted for as such. However, there is no question of an immediate transfer to the Crown Agents of £200 million which might otherwise be used for infinitely more desirable social purposes.

In the later months of 1974, after I had appointed the new Chairman and constituted a board of the Crown Agents, and after Cooper and Lybrand Limited had been commissioned to examine and analyse the accounts—it should be recalled that the accounts for 1972, such as they were, were not finally available until January 1975—it became clear that there was a serious risk of a liquidity crisis. I should point out that the Government then moved urgently, and only a short time passed from the day that Mr. Cuckney informed me of the position to the decision which I announced to the House on 18th December 1974, that the Government were providing a grant of £85 million, that there would be a Bank of England standby of £50 million, and that the Government stood behind the Crown Agents—as we do, and shall do.

As I said to the House last week, the £85 million grant is still intact, and the Crown Agents have not yet had to draw on the £50 million Bank of England standby. However, every month of further detailed investigation since then into the actual state of the Crown Agents' own-account finances—completely distinct from their normal and traditional services—and the further collapse of their unsecured lending and the property and secondary banking investments in which they had indulged, from which, according to my directive of July 1974, they were disengaging, showed that the residual losses could be much greater.

The latest assessment, as the Fay Report says and as the Crown Agents' accounts for 1976 show, suggests a deficit of some £212 million on the earlier own-account disastrous investments. That, therefore, is the figure that the House must have.

But, as the accounts also show, the Crown Agents now have reserves—that is, reserves in their normal business—of £45 million. At the same time, as Fay clearly indicates and explains, there is a major Australian property investment which was undertaken in 1970 and 1971. From this the Crown Agents, with my agreement, are disengaging gradually. Its written-down value at 31st December 1976, almost a year ago, was assessed at £127 million. It consists largely of office block and other commercial property.

It is clearly important to disengage from this investment on the best possible terms, and it may take several years to do so in order to minimise the cost to us. The £212 million includes the amount by which the Australian investment has been written down, but it may be possible to recoup that amount or more. We cannot know at this point.

More than half the estimated loss, therefore, is already covered by the £85 million grant in 1974 and the Crown Agents' reserves of £45 million—or they may now be a little more. That leaves about £80 million, some or all of which will almost certainly have to be made good sooner or later. There is no doubt about that. I am trying to steer a course between realism and optimism, with an awareness that optimism was too dominant in the past. Parliament has a right to know now the full facts as we have them.

Photo of Mr Cranley Onslow Mr Cranley Onslow , Woking

Could the right hon. Lady clarify a point about the reserves? It may be self-evident, but I have not grasped it. How were those reserves built up? Were any of them attributable to the own-account operations, or do they flow from other activities?

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

The hon. Member may take it that everything I say is divorced completely from the own-account business. That is a quite separate chapter, and all the figures relating to the own-account business are now covered in the Crown Agents' report by what is called the realisation account—that is, what is happening to investments undertaken on own-account business. The reserves, therefore, are in respect of the normal operations of the Crown Agents in their traditional services and have always been a perfectly normal practice. They have nothing to do with the own-account business. I think that that has answered the hon. Member, has it not?

Photo of Mr Cranley Onslow Mr Cranley Onslow , Woking

If those reserves are, as I suppose they must be, built up in the course of normal trading, is it fair that they should be offset against the losses incurred in totally abnormal trading?

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

That is not the position. The position is that when I come to the House and say, as I must, that the final losses amount, according to Fay, to £212 million, I must also give the House an accurate analysis of the precise financial position. If the hon. Member reads what I have just said and looks at the Crown Agents' accounts and at Fay—which he may or may not have done—I think that the position will be perfectly clear.

If and when a need arises, as I said last week, to provide further financial assistance from the Government, we shall put proposals to Parliament. But I can say now that the need is not so pressing that we should be forced, here and now, to find money if it were to be at the expense of other public expenditure. That is the point that I want to make clear.

I turn now to the present relationship between the Government and the Crown Agents. How is public accountability now secured? And is it satisfactorily secured? The House has a right to know, for this is the essential question that be-devilled the whole affair for so long. I raised the question of the constitutional relationship in February and March 1970, somewhat coincidentally. As Fay, in his sharp phrases, might have said, "It took a long time" for consideration of this to reach the surface. The appendices to the report reveal this.

I draw attention particularly—I am sure the whole House has read them—to paragraphs 18 to 20 of the Government statement, and to the annexes which reproduce in full two of the most important formal directives which have been given. Briefly, the Crown Agents have been directed to conduct a phased and orderly withdrawal from their own-account investments. A proper board has been established, including independent part-time members appointed by and directly responsible to me.

Photo of Mr Michael English Mr Michael English , Nottingham West

I appreciate that this direction has been issued. However, I am a little puzzled. As the constitutional position of the Crown Agents is exactly what it was in my right hon. Friend's previous term of office, how was it that then she was told—and, indeed, objected at the time—that she could not give directions to the Crown Agents? Apparently, she can do so now, although nothing in law has changed. A great deal has changed in politics, morality and finance, but nothing in the law has changed. Can she explain why she gets different advice now from that which she received then?

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

The problem is that when I asked the question in 1970 I was told that nobody knew what was the constitutional relationship. What happens now is that I act in the exercise of the Prerogative and therefore have the power—it is now discovered—to give the kind of directive that I have given. My hon. Friend is aware of the situation and has pointed the finger at one of the problems which was largely responsible in the first place, which was a lack of clarity in the constitutional relationship.

The accounts are now published in accordance with my directive and are designed to give the fullest measure of disclosure. Copies of the accounts together with an annual report from the Chairman, are placed in the Libraries of both Houses. Close working relationships have now been established and everybody necessary is consulted. I receive regular reports from the Crown Agents about their overall financial position, on which, of course, I consult my colleagues in other Departments, and on the progress made in disengaging from their own-account investment.

Photo of Mr Christopher Brocklebank-Fowler Mr Christopher Brocklebank-Fowler , North West Norfolk

The right hon. Lady said that everybody is consulted. I wonder whether she would care to tell the House what that means. I recall that when the Select Committee was considering the question of the Crown Agents, it had some reservations about the degree of consultation that took place not just at the level of the senior agents and their other agents, and between senior officers and senior members of her Department, but, perhaps more importantly, at the junior level on day-to-day matters. Would she care to tell the House what consultation exists now at the junior level of management between the Crown Agents and her Department?

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

A great deal as between my Ministry, the Treasury, the Bank of England and any other Department that might be involved. What is most important here is that any matter of substance that is drawn to my attention by the Crown Agents—the relationship between the Chairman and myself is such that any major matter is brought to my attention—becomes the subject of consultation between myself and my ministerial colleagues.

Within the Crown Agents, too, the situation revealed by the Fay Report has now completely altered. A full internal reporting system has been established. The management accounting and financial information system has been completely reorganised. Professionally qualified people have been brought in to fill senior appointments, and the Crown Agents have sought independent reliable professional advice on the management of their disinvestment programme.

I really am confident that public accountability, through me or any other Minister for Overseas Development, to Parliament is now ensured. But—and this is the point which my hon. Friend the Member for Penistone raised—in achieving these administrative arrangements, I am relying on powers which I exercise under the Prerogative, and clearly it is essential that these should have full parliamentary authority and should be clearly laid down by statute. We need to incorporate the Crown Agents by legislation along the lines of our 1976 White Paper.

As soon as parliamentary time is available, we intend to introduce legislation giving the Crown Agents a corporate status which will be comprehensible to the public and to overseas principals, and will define clearly in statutory terms the constitutional relationship between the Crown Agents and the Government, and the Minister's powers of direction, and provide a financial framework for the Crown Agents in statutory terms.

Third—and I know that this is a matter about which the House is greatly concerned—may I go more fully than I could last week into the question of the Aarvold inquiry, which my right hon. Friend the Prime Minister is setting up?

Why have a further inquiry at all? My hon. Friend the Member for Bolsover (Mr. Skinner) asked last week why we could not get "these guilty people" into court. He and all other hon. Members here today will, since Thursday, have read the Fay Report in all its valuable detail.

The position on criminal and civil proceedings, in precise terms, is this: criminal proceedings for corruption are being taken against Mr. Finley in respect of loans made to Big City Finance Limited; criminal proceedings on grounds of corruption were being taken against Mr. Bernard Wheatley—the Crown Agents' former sterling money-market manager—when he died. The proceedings against Mr. Finley will continue, notwithstanding the setting up of this inquiry.

Other matters were referred by the Fay Committee to the Director of Public Prosecutions. After most careful investigation by the police, the Director has decided, and my right hon. and learned Friend the Attorney-General agrees, that these matters do not disclose evidence which would justify other prosecutions or any other further inquiry by the police.

Apart from that, the Fay Committee did not discover any evidence of other possible criminal offences. Investigation into possible exchange control offences is being, and will continue to be, pursued. Civil proceedings have been commenced by my right hon. and learned Friend the Attorney-General against Mr. Wheatley for breach of fiduciary duty and moneys received. Now that he is dead, that action will continue against his estate and also against Mr. Finley and Mr. Davidson for moneys which they received.

There is also an action by the liquidator of Tanwec Limited, at the instance of the Crown Agents, running concurrently with the first and against the same individuals. There is an action by Four Millbank Nominees—a company wholly owned by the Crown Agents—in respect of loans made to Murrayfield Securities, and an action by Four Millbank Nominees against William Stern in respect of loans made to the Stern Group. In consultation with my right hon. and learned Friend the Attorney-General and the Crown Agents, I am seeking further advice on whether, on the evidence presently available, other civil proceedings should be instituted against any other persons. The new inquiry will not delay obtaining that advice.

I should like to add a brief word on the action in relation to William Stern, because I am aware that investments in the Stern Group have been a matter of concern to some hon. Members, notably my hon. Friend the Member for Bolsover. The circumstances in which the Crown Agents became involved in lending to the Stern Group are set out fully in the Fay Report, and I cannot add to that. Their total loans and investments amount to about £41 million.

When it became clear in May 1974 that the Stern Group would be unable to meet its liabilities, the Crown Agents joined with other creditors to safeguard what they could of their investments.

The position now is that the Crown Agents made no settlement with Mr. Stern in respect of his personal liabilities to the Crown Agents, nor have they been precluded from taking bankruptcy proceedings. In fact, other creditors are taking proceedings which could lead to a petition in bankruptcy. The Crown Agents stand ready to take proceedings if necessary, the point being that only one company needs to take proceedings. If those proceedings were to come unstuck, the Crown Agents themselves would take proceedings.

Photo of Dennis Skinner Dennis Skinner , Bolsover

Initially, it seemed rather strange that the Crown Agents, as one of the 30 or so creditors of the Stern Group, agreed to this scheme, which was supposed to be organised on the basis of realising more of the assets than would otherwise be the case if those involved in the Group were made bankrupt. Why is it, then, that notwithstanding the fact that my right hon. Friend's Department and the Crown Agents agreed on this scheme of arrangement under the 1919 Act—or whatever it was—the realisation has been pathetically poor, according to the Fay Report? The returns will be infinitesimal compared with the massive losses as a result of the involvement with the Stern Group. Therefore, the argument dismally fails for taking part in that scheme of arrangement, instead of waiting for Keyser Ullman or the Chicago Bank, or those in Italy who were somehow put off by the Bank of England, as was suggested. That argument falls to the ground.

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

It is easy to say that now. I do not think that it did at the time. Clearly, there was some merit in trying to achieve an orderly rundown of the companies. The Crown Agents therefore entered into the scheme of arrangement in May 1975.

My hon. Friend has carefully monitored what has happened since. I should say that there was great merit at the beginning in thinking that a scheme of arrangement concerning all the creditors might yield more than a bankruptcy petition would. Now that Mr. Kenneth Cork, the administrator of the scheme, has done what is possible, it is clear that the action that now flows should flow. But I think that it was sensible to proceed in that way at that stage.

Photo of Dennis Skinner Dennis Skinner , Bolsover

Will my right hon. Friend now give a guarantee, after this searching inquiry, that none of the assets or properties that were owned by the Stern Group have not somehow found their way back to the Stern Group or something which looks very much like it?

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

I can give this assurance to my hon. Friend: if anything of that kind proves to be the case, he may be certain that my right hon. and learned Friend the Attorney-General and the Director of Public Prosecutions will be watching the situation closely. He can be quite sure of that.

Photo of Mr Frank Tomney Mr Frank Tomney , Hammersmith North

Can my right hon. Friend tell me, in addition to the recital of possible action that she may take, whether any special inquiry will be entered into in respect of the Australian investment? Is any action to be taken, or is any suggested, against Barrancoola Investments, although Mr. Fenston is now deceased?

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

Much of this is covered in the Fay Report, and I think that any further action would be covered by the further inquiry.

May I summarise what I have said so far. What can be done in the area of criminal or civil proceedings against individuals or their estates—the issue, in effect, of "take the guilty men into court"—is either being done or will be done. There are no inhibitions. I can give that undertaking to the House.

The Fay Report, in dealing with all the causes of catastrophe, says that they were due to the actions (and inaction) of individuals, coupled with a defective system". The report has made criticisms of individuals, some very serious, some less serious, which do not and clearly cannot lead to court proceedings. It is a story, to quote Fay again, of incompetence rather than misconduct apart from the instances that I have given where proceedings are either under consideration or are being taken. On the other hand, surely, we all agree—I think that the House does agree—that culpability in this sense cannot be assumed without an express inquiry to determine this. That was not, and could not be, the function of the Fay Committee.

Fay goes in considerable detail into the actions of individual members of the Crown Agents' staff and enables one to form a clear idea of who was to blame. But even there, more specific investigation of particular actions may be needed before culpability can be fully and fairly assessed; and in relation to the Ministry of Overseas Development, the Treasury, the Bank of England and the Exchequer and Audit Department, the report is much more generalised and does not deal with the specific responsibility of individuals.

Nor, indeed, was the Fay Committee asked to do so. It was asked to inquire into events. It is shown very clearly that there were most serious shortcomings and it has also made criticisms of some individuals. It is the Government's view that this is not enough. It is necessary to pinpoint every relevant neglect or breach of duty and, having done so, to take appropriate disciplinary or other steps. I should mention, as has been pointed out, that some of the key figures have retired and that the Social Security Act 1973 will not permit either reducing or stopping pensions except as a result of criminal conviction connected with previous employment. To establish precise responsibility and neglect of duty a further inquiry is necessary. I think the House will agree on that.

Then we come to the form of inquiry should take. There were before us three possibilities. The first would have been an inquiry under internal Whitehall procedures. We rejected that option. I am sure that the House will appreciate that it is important to understand the reasons which have led the Government to come to their decision on the form of the inquiry.

Having rejected internal Whitehall procedures, the second possibility would have been the kind of public inquiry which has been suggested and which my hon. Friend is, I think, favouring at the moment. This would be an inquiry under the Tribunals of Inquiry (Evidence) Act 1921. The House knows that such tribunals are rare, but that is not a reason against it. They may be set up where both Houses of Parliament resolve that it is expedient that a tribunal be established for inquiring into a definitive matter described in the resolution as of urgent public importance.

Of course, the Government have considered extremely carefuly whether this would be the appropriate form for the inquiry to take. [HON. MEMBERS: "The House must consider it."] Of course the House must consider it also, but I am saying that the Government have considered it. A tribunal set up under the 1921 Act has certain advantages over other forms of inquiry. It has power to compel the attendance of witnesses. It must admit the public to its proceedings, except in the very rare case, which my hon. Friend mentioned, where the tribunal is of the opinion that the public interest demands that it should sit wholly or partly in private.

I must tell my hon. Friend that the actual question of the interests of overseas principals was not one of the factors that loomed large in our consideration of this particular question of the inquiry because, of course, there is this provision. It has power to authorise or refuse the right to any person interested to be represented by a lawyer.

The Salmon Commission on Tribunals of Inquiry which reported in 1966 said that the exceptional inquisitorial powers conferred upon a tribunal under the 1921 Act should always be confined to matters of vital public importance"— certainly this is one— concerning which there is something in the nature of a nation-wide crisis of confidence"— where no other method of investigation would be adequate. [HON. MEMBERS: "Hear, hear."] I ask my hon. Friends to listen because there is a real argument here and I am stating all the cases.

A case might have been made for such a tribunal in lieu of the Fay Committee. On balance the arguments then were against it, but we are now at the stage—and this is one of the key points—where the Fay Committee has already made a very searching inquiry into what went wrong with the Crown Agents. It has covered the ground in enormous depth. It met on 85 occasions. It heard 46 witnesses. That inquiry was set up by me on 23rd April 1975. The Committee reported to me on 10th August this year. Its inquiry took well over two years. All its findings have been made public except those which could prejudice criminal proceedings.

In the Government's view, and it is a firm view reached after tremendous consideration, we would not be justified in setting up a further inquiry under the 1921 Act to go over again those matters so carefully and comprehensively investigated by Fay. That is why the terms of reference of the independent inquiry start with the words: In the light of the Report of the Fay Committee". The third option, which is the one we have decided upon, the Aarvold inquiry, follows the precedents of both Crichel Down and the Bossard case. Crichel Down was followed by the Woods Committee Report. The Security Commission's Report on Bossard was followed by the Wilson Smith inquiry. We have had both precedents very much in mind and I think that the House should take care to recall that. There can be no question whatever of a cover-up. Indeed, I believe it likely that in the light of the history of events the House would not believe that either I or my colleagues could countenance any such thing.

Perhaps I might explain first how the Aarvold Committee may be expected to operate. Its starting point will be Fay and all the evidence given to Fay, from the files to the transcripts of the evidence of witnesses. Fay has quoted from them but Fay has the transcripts of all the evidence given by every witness. Those will all be available to the Aarvold Committee. This will mean much greater speed, whereas were a 1921 Act tribunal to be set up it would have to start from scratch since every item of evidence must be produced and can be the subject of cross-examination.

I do not know whether the House wants the whole matter to go on for two or three years, which could happen in the circumstances of a 1921 Act inquiry, as against giving an inquiry the possibility of starting off with all the transcripts of evidence and all the papers in front of it, therefore leading to greater speed. Speed is one argument in this situation and I find it rather an important one. After the saga of 1967 to 1977, the sooner we get this matter disposed of the better.

Photo of Mr Ian Wrigglesworth Mr Ian Wrigglesworth , Teesside Thornaby

Could my right hon. Friend explain why the committee of inquiry suggested by my hon. Friend the Member for Penistone (Mr. Mendelson) could not do exactly the same sort of thing? Could not its terms of reference be framed in such a way as to make it possible for an inquiry to be short and specific?

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

I am advised—and even since Thursday I have looked into this further—that it is the case—my right hon. and learned Friend the Attorney-General will confirm this—that if it is a 1921 Act tribunal of inquiry even though evidence may be available, it still has to lead all of that evidence from first source, as it were, and therefore has to have it subjected to cross-examination. It cannot take the evidence that has been gathered as its starting point. I wish it were otherwise but it is not.

Photo of Mr Victor Goodhew Mr Victor Goodhew , St Albans

Were there any witnesses who refused to give evidence to the Fay Committee and, if so, would there be any greater powers under this proposed inquiry to require them to give evidence?

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

I was just about to come to the question of witnesses. It is true that that is one advantage of a 1921 Act tribunal—that witnesses can be obliged to attend. I think that we have to be extremely practical about this. There were three people who did not give evidence to the Fay Committee. One of them was Mr. Wheatley, who is now dead, one was Mr. Davidson and the other was Mr. Finley. All three were possibly subject to criminal proceedings.

I understand that if a witness in a 1921 Act tribunal were asked to give evidence but thought that he might be liable to criminal proceedings, he could refuse to give evidence. If we are looking at the need to establish the responsibility of those in the Bank of England, the Ministry of Overseas Development, the Treasury and the Exchequer and Audit Department—this is where Fay generalised rather than dealt specifically with individuals—we have to be practical. Assuming that we have looked at everything on the subject of criminal or civil proceedings—and we have to assume that everyone else not the subject of consideration for criminal or civil proceedings is unlikely to be so—we have to ask what would be the conclusions or judgments of the Aarvold Committee if civil or Crown Servants or employees of the Bank of England refused to give evidence to it. This would be a most bizarre situation and I am quite certain that the Committee would draw certain conclusions from that. I do not think that the power to compel the attendance of witnesses is, in this situation, a major point.

Photo of Mr John Mendelson Mr John Mendelson , Penistone

My right hon. Friend will be aware that the Government, in recent practice, have decided in contradistinction to previous years, to publish reports although there may be a danger that there will be criminal proceedings. Is not this an exact parallel? It would be of the greatest value to have a procedure under the 1921 Act which would reveal that people were refusing to give evidence because they thought that there would be criminal proceedings taken against them. We have not had that with Fay and we would not have it under the Aarvold Committee. That destroys my right hon. Friend's argument.

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

I do not think that it does. We now have two pieces of information, given almost simultaneously. The first came with the publication of the Fay Report last Thursday, and the second is what I am now telling the House, namely, that the three people who declined to give evidence—bearing in mind that Mr. Wheatley is now dead—are the subject of criminal or civil proceedings.

On the other hand, there is positive advantage in the kind of inquiry we propose. There is, first, the aspect of speed, with which I have dealt. Second, there is an encouragement to witnesses to give evidence before the inquiry knowing that what they say is said in private. That consideration is generally recognised—and this is one of the reasons why the Salmon Commission came to the views that it stated—as a rather effective inducement to witnesses to be less guarded and much more frank in giving their evidence. The inquiry can freely check the evidence given by one witness against that given by another. Indeed, it becomes the job of the inquiry to double-check what people have said and to see where they contradict one another.

Photo of Mr Tom Litterick Mr Tom Litterick , Birmingham, Selly Oak

I am amazed by this line of argument. The emphasis on speed seems to be misplaced since so many years have gone by. The horses have bolted, the stable doors are shut. We heard the Minister last week closing the doors. What the Minister seems not to have noticed—although the public has—is the conspiratorial nature of these events which she, no doubt inadvertently, appears to be wishing to perpetuate—I say that most carefully—in wanting another private investigation which, by definition, will doctor the results.

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

There is a difference here in that some of us have, frankly, known for a long time about this while others awoke to it only last Thursday. My hon. Friend must allow me to say that if he supposes that there is any intention on my part or the part of the Government to carry out a cover-up he had better go right back through the history of this affair. As for the question of speed, for any member of the public who awoke to the situation only last Thursday, who realised the catastrophe and the scandal then, of course it does not seem entirely necessary to be speedy in the way we dispose of the rest of this. The Crown Agents, the Government and everyone who has been involved in this affair are aware that the years have gone by, and we do not want more years to go by. That is important. All these matters must be taken into account in the Government's view of the relationships between the various aspects of this complex history.

In terms of what my hon. Friend calls "a conspiracy", in terms of exposing the kind of thing that was going on in this field of investment in property and secondary banking and on the question of solicitors and firms being used for various purposes, all that is already there in great detail in the Fay Report. All these facts were clearly established in the report on the basis of evidence and it will not take us any further forward to have a tribunal inquiry looking into it. Fay said everything publicly that could be said about it, and did so so powerfully and so conclusively that the whole country knows.

Because we do not want a cover-up and because it seems to us that if there has been a neglect of duty by Crown or civil servants this should be established, we need the kind of inquiry that is likely to be most effective, productive and speedy in establishing the facts. That is why we have chosen this kind of inquiry.

Photo of Mr David Crouch Mr David Crouch , Canterbury

Will the right hon. Lady say whether the witnesses who give evidence to the Aarvold Committee will be able to interrogate the committee about the questions that are put? Also, will a witness be able to sit in on the hearings of the committee throughout?

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

The answer to the second point is "No". On the first point, witnesses who were heard by the Fay Committee were able to ask questions and could engage in some discussions. I asked one or two questions myself in order to clarify certain points. There will be that kind of coming and going—a slightly lesser degree of formality which, I believe, allows the truth to be established more effectively. Witnesses will be able to take along a lawyer or a friend if they wish for their protection. This will mean a slightly greater degree of informality.

There is one crucial argument of logic which will not have escaped hon. Members—the Fay Report is a most effective exposé; it hides nothing.

Photo of Mr Michael English Mr Michael English , Nottingham West

I put down a Question to the Minister of State today because nowhere in the Fay Report is there a simple little list of the borrowings of the Crown Agents and loans on their own account as distinguished from that of their principals.

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

If my hon. Friend has put down a Question, I shall be answering it. I believe most of that is in the Crown Agents' accounts. The Fay Report has given the exposé and has alerted the country to the failure of public accountability. I has held back nothing. It is the opposite of a cover-up. The Fay Committee was exactly the kind of committee of inquiry that we now propose to take matters further. One cannot praise Fay and condemn the formation of the Aarvold Committee.

Photo of Mr Christopher Brocklebank-Fowler Mr Christopher Brocklebank-Fowler , North West Norfolk

The Fay Report came at the end of several years of inquiry initiated by the hon. Member for Islington, South and Finsbury (Mr. Cunningham) and carried on by the right hon. Lady the Minister of State. Will there be any publication of the evidence of the Select Committee on Overseas Development which had interviews with the Crown Agents on a number of occasions in private? If matters which disclosed the extent to which there were irregularities are included, will that evidence be made available to the Aarvold Committee?

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

That is entirely a matter for the House. If the House chose to make the evidence available to the Aarvold Committee, of course it would be given this evidence. It is not for me to say, but the Select Committee may wish to consider how it wishes to proceed in this matter.

Photo of Bernard Braine Bernard Braine , Essex South East

As I was chairman of the Select Committee, I would be delighted if that evidence was published. The right hon. Lady was a member of the Committee and she will recall how searching the questions were.

Photo of Mr George Cunningham Mr George Cunningham , Islington South and Finsbury

Some time we shall have to clear up the evidence before the Select Committee during 1973–74 and in the short Parliament of 1974. These proceedings are now in limbo, but they are not in the possession of the Select Committee of this Parliament. I certainly propose to quote from them if I am called to speak today. I believe that any hon. Member is free to have access to the proceedings, because, even though they were not published, they were reported to the House.

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

This is a little like my publishing the Stevenson Report. I am informed by the Attorney-General that it is conceivable that a resolution of the House could resolve the matter.

There have been questions asked over the weekend about the Crown Agents as an institution. It is true that they are a most extraordinarily idiosyncratic legacy of our colonial past, but I am absolutely certain that they should continue. They are part—and a very important part—of our Commonwealth relationship, quite apart from our relationships with other countries outside the Commonwealth. They are immensely valuable to the countries they serve, in relation to saving scarce manpower and guaranteeing a good standard of supplies and services. They also play an important part in creating a relationship between the major part of the world and our own industry and professionalism, and nothing we say today should underrate that.

On the relationship between Government and Ministers during the period, between Parliament and Government Departments and between the Executive and Parliament, I can and do answer for all that I did in 1970 and from March 1974 onwards. I cannot answer for the period between 1970 and 1974, nor am I prepared to impute responsibility for that period. The House only now is seized of the problem; for me it has been an eight-year saga.

The issues raised go far beyond the immediate one with which this debate is concerned this afternoon. Those issues concern the relationship between officials at various levels in Whitehall, between officials and Ministers, and inevitably they concern the degree of information given to Ministers by officials. They also concern the relationship between the executive and Parliament. It is these matters, stretching beyond the precise area of our debate today, which should concern us all on both sides of the House. They fundamentally and importantly affect our whole system of government.

5.8 p.m.

Photo of Hon. Richard Wood Hon. Richard Wood , Bridlington

I listened with interest to the hon. Member for Penistone (Mr. Mendelson) and the right hon. Lady. I hope that they will both forgive me for not following them closely because, encouraged by one of the last sentences of the Minister's speech, I believe that the most valuable contribution that I can make to the debate is to give some account of my own part in this matter between 1970 and 1974. Later, in relation to what the right hon. Lady said towards the end of her speech, I shall offer certain views about the further examination of these grave matters.

I doubt whether any of us in the House feels that he can add effectively, either in incisiveness or authority, to the criticisms of individual failure made so clearly and so charitably in the Fay Report. The only criticism that I shall have to add is a degree of self-criticism. The House will be able to judge whether that self-criticism is adequate, insufficient or, conceivably, excessive.

I first thank the Minister for her great courtesy to me recently, both in connection with the publication of the Fay Report and also for the long warning that she gave me of her decision—contrary to the decision that I took five and a half years ago—to publish the Stevenson Report. In the light of the Fay Report, I came to the conclusion that the Minister had no alternative to publication. Indeed, although it may surprise some hon. Members, when the Stevenson Report reached me in 1972 I should have been glad to publish it and should have found it helpful to do so. However, having stated the view that I did when the committee was set up—that the relationship between the Crown Agents and a number of independent Governments would make publication undesirable—I still think that it would have been wrong, after all the evidence had been given, to have reversed that decision.

It is difficult, seven years later, to recall accurately the atmosphere of comparative great calm that surrounded the activities of the Crown Agents at the time the Government changed in 1970. As the Government statement makes clear, a total of 18 Questions were put down on the subject between 1909 and 1973—that is, one Question every three and a half years. This did not point to overwhelming evidence of anxious public concern. Nonetheless, to the credit of the right hon. Lady and the Ministry of Overseas Development, an examination of the constitutional relationship was put in hand in the spring of 1970 and, just before he retired as Permanent Secretary to the Ministry for Overseas Development, Sir Geoffrey Wilson summarised the result of that examination in a minute to me which is reproduced in Appendix X of the Fay Report.

Meanwhile, the Minister of Overseas Development had become a so-called functional wing of the Foreign and Commonwealth Office under my now re-ennobled right hon. Friend Lord Home of the Hirsel. I obtained his agreement to set up the Stevenson Committee in 1971, but, for reasons given in paragraphs 191 to 193 of the report, the Committee did not start work until late that summer. Looking back now, at the end of 1977, I can see much more clearly than then the dangerous significance of that 18-month vacuum from the beginning of 1971 during which, to quote from paragraph 194, all opportunity of obtaining information or exerting control by the Ministry or any other government department was lost". In retrospect, I see that we tied our hands by our own act for a long time. However, I have no apologies whatever to offer for the short summary of the Stevenson Report that I gave to Parliament in July 1972. This has been called misleading, but I thought then, and I think now, that it was an adequate and accurate reflection of the committee's conclusions. Having again compared the statement I made and the general conclusions of the Stevenson Report, I find that they correspond closely.

It is significant that some of my advisers at the Ministry of Overseas Development were disquieted by the favourable nature of the conclusions that Stevenson had reached. Indeed, I should have been guilty of misleading Parliament if I had suggested that the committee's conclusions had been at all unfavourable.

Photo of Ms Audrey Wise Ms Audrey Wise , Coventry South West

How can the right hon. Member reconcile his statement with that in the Stevenson Report that: Although we cannot say that any significant damage has been done we cannot in view of these defects and associated risks recommend the continuance of the Crown Agents with their present status, composition and range of functions."? Yet when the right hon. Gentleman reported to the House he said: Briefly, the committee found that the interests of the Crown Agents' principals and others concerned would best be served by the continuation of the whole range of services which the Crown Agents provide. Can those statements be reconciled?

Photo of Hon. Richard Wood Hon. Richard Wood , Bridlington

I do not often find it easy to reconcile statements, but I can solve the hon. Lady's difficulty quite easily. The Stevenson Report said that the Crown Agents' financial activities, as a whole, should continue. That accords with my statement that the interests of the principals were best served by the Crown Agents continuing their full range of services. The Stevenson Report did indeed comment on the status, structure and responsibility of the Crown Agents and said that changes should be made. I subsequently said that the committee had recommended that there should be clearly defined status, structure and responsibility for the Crown Agents and had made suggestions for my consideration, and that I had accepted the committee's recommendations.

So I urge the hon. Lady to believe that what I said was entirely in accord with the suggestion that the Stevenson Committee had made. If the hon. Lady is still not satisfied, perhaps we could meet outside and I can go through the Government statement and the Stevenson Report and make both plain.

Photo of Hon. Richard Wood Hon. Richard Wood , Bridlington

The hon. Lady can read, I can read, and we can both read together later.

Stevenson suggested four suitable models for the future organisation and that presented me with a difficult dilemma. It was improbable that sufficient backing would be available from private or overseas sources. This ruled out two of the models—what I might call the private model and the overseas model.

On the other hand, there was the view passionately, and I believe wholly sincerely, held by Sir Claude Hayes that the relationship between the Crown Agents and its principals abroad would be imperilled by too close an association between the Crown Agents and Her Majesty's Government. That view has since been shown to lack substance, but that is not the point. At that time it loomed large in every discussion that I had with Sir Claude Hayes. Looking back now, it is clear that I should have discounted it, but that was certainly much less clear then. It seemed to be a reasonable fear—if fears can ever be reasonable. I shrank from a course that could possibly have put at risk the main foundation of the Crown Agents' business. It was this inhibition that so prolonged the search for effective working arrangements and the proper modern relationship between the Government and the Crown Agents.

Nevertheless, I blame myself less for that delay than for the failure to make the arrangements more effective when they were decided. Neither before nor after the imposition of the working arrangements of 1973 did I ask or cause to be asked of the Crown Agents enough questions to ensure that the information that we expected was in our hands. In particular, I did not examine with sufficient care the facts and statistics upon which I based answers that I gave to the House on 21st November 1973. I see here today the hon. Member for Islington, South and Finsbury (Mr. Cunningham) who asked one of those Questions, and I should like to take this opportunity to apologise to him for the answer which was not consciously dishonest, but was undoubtedly misleading.

The Fay Report has generously said that this ignorance was not the fault of the Ministry for Overseas Development, but I should be happier today if, at that time, I had—

Photo of Mr Michael English Mr Michael English , Nottingham West

On page 89 of the Fay Report it is suggested that the Ministry as well as the Crown Agents did not give information to the Stevenson Committee.

Photo of Hon. Richard Wood Hon. Richard Wood , Bridlington

I shall have to look that up. I thought that we gave a good deal of information to the Committee.

I should be happier in this discussion if I had at that time made more strenuous and more successful efforts to secure the information that we had a right to receive. As the Minister at that time, I recognise my share in the responsibility for the descent to disaster in the following year. However, my main disquiet today is about the course that the Government are proposing for the future.

The Fay Report accords praise or blame to a number of individuals, both inside and outside the Crown Agents. This masterly analysis enables us to see not only the mistakes made by the Crown Agents, but the failure of those outside to bring the situation under control. Despite what the Minister has said, the Fay Report seems already to have established what are described in the terms of reference for the proposed new inquiry as the nature and gravity of any neglect or breach of duty by individuals. Much of that is in the report, and I wonder whether it is necessary for much familiar ground to be laboriously explored again.

If it is judged necessary—and I gather that the feeling of the House is that, on the whole, it should be examined—I beg the right hon. Lady to reconsider her decision that the committee should sit in private. I do not often make common cause with the hon. Member for Penistone. Our meetings in the Lobby are always delightful, but they are rather rare. We may possibly have another opportunity to renew our acquaintance later tonight.

Under open examination, which the hon. Member for Penistone, I myself and a number of my hon. Friends would prefer, those of us who are concerned will be able to give evidence and we shall be found guilty or not guilty; the world will be able to see the steps leading to that judgment. However great our confidence in the inquiry's fairness and impartiality, there are dangers involved in secret trials which it is in the Minister's power to avoid. I, therefore, strongly urge her to reconsider this and to avoid such dangers. I hope that my hon. Friends will support me in urging this course upon the right hon. Lady.

5.23 p.m.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

The House will thank the right hon. Member for Bridlington (Mr. Wood) for the manner in which he has addressed the House. We all understand the difficulties under which he spoke, and some of the things he said served only to reinforce some of the suspicions that were held in the early 1970s and, not least, the doubts on how far the right hon. Gentleman was being kept in touch or not being given all the information that was available.

I intend to delay the House for only a few minutes but I believe that, even with the publication of the Fay Report, the long overdue publication of the Stevenson Report and the Government's statement published last week, there are still facts which should be put on the record. They are relevant not only to the central question of unprevented and un-audited waste and the withholding of facts but also to the remarkable fact of the Parliament which did not bark in the night in those years. I shall come to this matter later.

On the issues so far raised in the debate, I believe that there is a strong case—to put it no higher than that—for an open inquiry. If the fear is that this would damage the standing of the newly reformed Crown Agents Department in Commonwealth countries, I have to say that we have been told repeatedly that the harm has already been done. Indeed, that argument has been overdone. It was used in the early 1970s against anyone raising the matter or stirring it up in any way.

The long story of suppression will lead to the suspicion—which I believe to be unworthy—that there is still a cover-up going on. Whether or not the inquiry is open to the Press and public—and I think that there is a case for that—it is essential that it should at least have full powers to send for all relevant persons and papers.

I hope that at least one thing is clear to the House, namely that my right hon. Friend the Member for Lanark (Mrs. Hart) cannot face a scintilla of criticism in this story, certainly not in respect of pre-June 1970 or since her return—or perhaps. I should say "returns"—to the Department. It is clear that what was going on remained a closely guarded secret until 1970. Having heard the right hon. Member for Bridlington—and I think that a lot was kept from him during that period—and having read the reports that refer to two very late approaches during that Parliament, one by the overseas audit and one by the Bank of England in January and May 1970 respectively, it is clear that these did not come to my right hon. Friend in January and May 1970. All she could have known about when she attended the lunch with the Crown Agents that we read about on page 39 of the Fay Report was the £7 million investment—the story of a half share in a merchant bank, which obviously interested her considerably but which did not foreshadow losses of hundreds of millions of pounds.

It is fairly clear that my right hon. Friend first became worried about the irresponsibility—and I use that word in the legal and management sense—of the Crown Agents when she tried to involve them in the early months of 1970 in the major task of sending relief supplies to Biafra, in which she and I were closely involved. That is when she began to have doubts about the separatism, lack of involvement or irresponsibility in the sense that I have defined it.

It was not until 1972—and this is confirmed by what the right hon Member for Bridlington has fairly said—that the issues not only of control but of widespread speculative activity and more than a breath of corruption began to surface. In fact, it was not so much that they began to surface—they were never allowed to do that—as that they started to rumble subterraneously. The whole thing began to come out much later.

My right hon. Friend, who was shadow spokesman and a former Minister at that time, came to see me with a view to demanding an inquiry and blowing the whole thing wide open. She had prepared full documentation that was horrifying to read even if it were only partly true—and we now know that it was an understatement. Reporting to me at every stage in what she was trying to do, my right hon. Friend ran into the most formidable system of fortifications obstructing her progress that it is possible to conceive.

I do not feel justified in using the word "conspiracy" unless it becomes justified by any report of the inquiry which is being set up. I prefer to say that there was a closing of the ranks, a cover-up perhaps, that was all connected with the atmosphere described by the right hon. Member for Bridlington who gave the impression of there having been an almost supernatural calm during this period when we know there were a lot of serious developments.

Then there was the legal question. The legal advisers available to the then Opposition were not only cautious but categorical in their warnings about all these matters. My right hon. Friend was warned that should she publish what she had, or even a fraction of it, she could face defamation actions involving many thousands of pounds, her selling her house—the lot. There was strong pressure from many quarters against even raising the matter in Parliament. It was said that there was an answer to everything that was being spread around, her case would collapse and my right hon. Friend would fall flat on her parliamentary face if she tried to raise the matter in the House. Other reasons were adduced, including what seems to have been the last refuge of everyone concerned—the effect on the Commonwealth and the 80 countries if we were to demonstrate any doubts about the efficiency, honesty and the rest of the Crown Agents.

There was another reason that my right hon. Friend adduced as to why she should not raise it in the House—it was all being fed through—and that was the very fact, as she has mentioned this afternoon, that this was a matter for the Royal Prerogative. My right hon. Friend has been able to tell us in the House this afternoon of the two totally different sets of advice about the invocation of the Prerogative, one four years ago and one at present. I suspect that similar warnings would have been issued to any members of the Press—I do not know whether there were any—who at that time had reason to suspect that all this was going on.

In this House we are familiar with the usual channels operating between the two Front Benches, frequently to the advantage of the work of the House and of inestimable value to every hon. Member, wherever he or she may sit in the House. But the usual channels between Law Officers and those on the opposite side represent not so much a series of dealings in the no-man's-land between the two Front Benches as a kind of camaraderie transcending the vulgar differences which exist between Ministers and shadow Ministers or which subsist between the general membership of the two major and other parties.

Then, of course, there was the further problem, almost constituted by, and certainly controlled by, age-old precedent, which seemed to limit parliamentary action, when my right hon. Friend and other hon. Friends of mine and, I strongly suspect, some Opposition Members, wanted to raise the matter.

Before this unhappy situation is put to rest, before the offenders are all identified, if they have not been identified already, we must take clear action, including full accountability to Parliament, which we have not had, to end all these scandalous practices and to bring the system within ministerial control and parliamentary responsibility.

I hope that specific action will be directed to asking why we as Members of this House failed to exercise control. I take my full share of the responsibility that we all bear, particularly since it is now known that there were, of course, Select Committees going into these matters with great vigour and thoroughness, and somehow they have ploughed into the sand together with nearly everything else. Thanks to the vigorous action that my right hon. Friend the present Minister took immediately on taking office—this is very clear from the Fay Report and the other documents—I believe—I hope that I am right—that the action that she has taken has cleared up most of the mess, though, of course, it cannot act with retrospective effect in terms of the recovery of hundreds of millions of pounds of public money which has been lost. In particular, I welcome her re-organisation of the Crown Agents and of the Department.

I particularly welcomed, as I think other Merseyside Members did, the appointment of Mr. Cuckney as chairman, because he was known to many of us as a highly successful chairman of the Mersey Docks and Harbour Company after the reconstitution of the old board in conditions of, let us say, almost equal sadness and to some extent incompetence. We were very glad to hear of this from my right hon. Friend. Indeed, she telephoned me about it knowing that all of us from Merseyside would know him, and I was glad that she had appointed him.

We cannot yet be sure that everything which should be known is known, and that all necessary action has been taken. But of one thing I am sure, and today's debate is a proof of this, I think. Parliament, the whole House, every part of the House, will not let go of this question until all the facts have come to light and everything capable of remedial action has been dealt with, and dealt with from now on under the constant vigilance and supervision of the House of Commons.

5.36 p.m.

Photo of Mr Michael Havers Mr Michael Havers , Wimbledon

I intervene at this moment simply on the question of the nature of the tribunal. As I see it, the problem—it is a real problem that is faced by the Government—is that there are only two alternatives: either a tribunal under the 1921 Act or a secret inquiry of the Aarvold type. That is if we answer the preliminary question "Yes"—the question posed by Lord Justice Salmon in the 1966 report whether this inquiry should be confined to matters of vital public importance concerning which there is something in the nature of a nation-wide crisis of confidence. Assuming that the answer to the question is "Yes", bearing in mind the huge sums of money involved and the severe criticisms apparent in the Fay Report, and that some sort of inquiry is necessary, can it be the sort of inquiry which the Government have suggested?

If one looks again at the Salmon Report, which I should have thought was extremely helpful to everybody on this, one sees that Lord Justice Salmon said at paragraph 38 on page 20: If, however, there is in reality an evil to be exposed and any of the allegations or rumours causing the nation-wide crisis of confidence are true, it is extremely difficult, if not practically impossible, for the report —that would be the Profumo-type report, like the Aarvold one— to establish the truth. When a person against whom allegations are made is not even allowed to hear the evidence brought against him, let alone to check it by cross-examination, when he has ' never had the chance to rebut' the case against him, how can any judicially-minded Tribunal be satisfied, save in the most exceptional circumstances, that the allegations have been made out? The report went on: We do not believe that it can ever be right for any inquiry of this kind to be held entirely in secret save on the grounds of security. The report concluded—this is what creates the difficulty in my mind— We recommend that no Government in the future should ever in any circumstances whatsoever set up a Tribunal of the type adopted in the Profumo case to investigate any matter causing nation-wide public concern. For the reasons we have stated, we are satisfied that such a method of inquiry is inferior to, and certainly no acceptable substitute for, an inquiry under the Act of 1921. I should like to tell the House of a personal experience that I had as counsel in one of the Profumo-type inquiries. It is completely unsatisfactory. One goes with one's client and one is given a brief summary of what the case against one's client is. One is not told by whom the allegations are made, and one has no right to cross-examine. One of the difficulties is that, however fair and impartial the chairman of the inquiry may be, he does not have the information that counsel has upon which to cross-examine. I can cross-examine if I am properly instructed and I know all the facts because my client is the victim, or perhaps the victim, in a way that no chairman such as Lord Denning or Sir Carl Aarvold will ever be able to do because he will not be instructed in the way in which counsel is instructed. That is why I intervened on Thursday on the rather narrow issue, but one that worried me as a lawyer, about the risk of injustice to individuals in this sort of inquiry.

If one reads through the Salmon Report, particularly paragraph 115 on page 38, one sees that Lord Salmon is saying that it is absolutely essential that this sort of inquiry should be public. One knows that the expense and the delay are enormous. We know that the 1921 Act tribunal is a blunderbuss.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

As the right hon. and learned Gentleman knows, I was rather pressing the case for an open inquiry, which he obviously is doing. Would the right hon. and learned Gentleman look into the question—he just seemed to drop the thought—that a 1921 Act inquiry is inevitably a very long one? I am not sure that it is. Is it not a fact, for example, that the Aberfan inquiry was relatively short in time? Particularly as so much of the information has been assembled in this case by Fay and all the rest, and a lot of other information is obviously available in the Department, which has been studying this, is it necessary to assume that a 1921 Act tribunal is ruled out simply because it will take twice as long as anything else?

Photo of Mr Michael Havers Mr Michael Havers , Wimbledon

When I said "delay", I meant delay in setting it up for its first sitting. If one accepts the recommendations of Lord Salmon, there are certain preliminary things which he said are essential in the interests of justice which should be carried out. He recommended that, if necessary, the tribunal should delay in its real work for a while. I do not think that it will take any longer, and I think that there is a great deal to be said, as the right hon. Gentleman has, for part of the work having been done.

I accept the advice that the right hon. Lady was given by the Attorney-General that, unless everyone agrees, we shall have to start to some extent at the beginning. There will be delay and cost, but the alternative to the use of the blunderbuss is the risk of injustice. With that alternative, rumour breeds upon rumour. Let there be no mistake about it in this case. The Fay Report has named many people and the Press will know, whether the inquiry takes place in secret or not, who is attending. They will see people going through the door and so the rumours will grow. It will be known that X, Y or Z has attended before the tribunal and the public will be reminded of what was said by the Fay Committee concerning what those people had done or not done.

We are left—and this is where we are lacking something—with the two choices I have described. A Royal Commission clearly is not suitable. Select Committees to look into this sort of inquiry went out of fashion a long time ago for the reasons stated in the Salmon Report. If there were a halfway house and the Aarvold Committee could be held in public without being turned into the blunderbuss type of tribunal under the 1921 Act, I should welcome that. In reality, however, I do not see how that can be done effectively, and that sort of inquiry would be less effective because it would not have the power to compel and it would not be able to offer protection to witnesses.

Photo of Hon. Sam Silkin Hon. Sam Silkin , Southwark Dulwich

Does the right hon. and learned Gentleman agree, however, that when the Salmon Report was referring to the Profumo inquiry—the right hon. and learned Gentleman made this point himself—it was dealing with the sort of inquiry where witnesses do not know what other witnesses have said or the source of evidence, and so on? That is not an inherent aspect of the kind of inquiry that the Government are now suggesting. It is not an inherent aspect, for example, of inquiries under Section 165 of the Companies Act where witnesses have put to them whole pages of evidence, if necessary, of what other witnesses have said. That is regarded as the best way in which that kind of inquiry can be conducted. Up to now there has been no attempt radically to alter that system.

Photo of Mr Michael Havers Mr Michael Havers , Wimbledon

The Board of Trade type of inquiry of which the Attorney-General is speaking is perfectly acceptable where the collapse, for example, of a particular company is being investigated. But it is clear from the terms of reference given to us last week by the right hon. Lady that this inquiry goes very much wider. It involves a whole number of Government Departments and thus a whole number of Government officials, and in my view it simply could not come within the scope of the sort of Board of Trade inquiry of which the Attorney-General is speaking.

Photo of Mr Alex Lyon Mr Alex Lyon , City of York

On previous occasions when we have pressed for an inquiry under the 1921 Act I have heard my right hon. Friend the Member for Huyton (Sir H. Wilson) and the right hon. and learned Gentleman himself decline such an inquiry on the basis that it might affect innocent people who would be named in the course of it and who would not then have an opportunity of dealing with the matter before the judgment of the inquiry, which might come many weeks or even months later. In that time their reputations will have been quite unnecessarily destroyed. I have always understood that this was the greatest defect of the 1921 Act procedure. I should have thought that it applied here. Why does the right hon. and learned Gentleman say it does not?

Photo of Mr Michael Havers Mr Michael Havers , Wimbledon

My reasons are that a lot of the damage, if there be damage, has been done by the Fay Report. Furthermore, if the hon. Member for York (Mr. Lyon) reads the 1966 Salmon Report he will find this argued out there, and I believe that that report reaches the right conclusions.

Law Officers and former Prime Ministers have said in the past that the 1921 Act procedure should not be used if there are real villains whom one wants to see prosecuted in the criminal courts. As the Salmon Report points out, once such people have been through the 1921 Act procedure it is almost impossible thereafter to take them through the courts because the prejudice against them is enormous and there is the real risk of their not getting a fair trial. However, I understand from what the Minister said, particularly from what she said about proceedings against certain people, that no such reason of that kind arises in this case.

The right hon. Lady seemed to suggest that if evidence is given in private the witnesses might be more forthcoming and the evidence therefore more valuable. The Salmon Report dealt with that. In effect it said that the public did not have confidence in evidence which was given in private and that judges were inclined to treat such evidence as being debased rather than valid. One is left with the problem of having either a secret inquiry which no one likes—I do not believe even the Government like it—or having the blunderbuss. It is in the end for the House to say whether such an inquiry is necessary, and, if it is to be an inquiry, whether it is to be held in private.

Nothing I have heard from the Minister has reassured me that she is giving any further reconsideration to this matter, but we are to hear from her again tonight before the debate finishes. If she tells us that she will reconsider, I do not intend to vote in the forthcoming Division, if one is called. But if she says that it is the Government's intention to stick to their present resolution I, at the moment, without having firmly made up my mind, feel that I shall have to vote for the motion moved by the hon. Member for Penistone (Mr. Mendelson).

Several Hon. Members:

Several Hon. Members rose

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. I remind the House that this is a short debate. I hope that hon. Members will bear that in mind.

5.47 p.m.

Photo of Mr Michael English Mr Michael English , Nottingham West

May I first suggest to my right hon. Friend the Minister that certain statements have been made and bandied about which do not seem to be true? The first is that the Fay Committee Report is complete. My right hon. Friend herself changed the phrase when she was making her speech. She said that the parts relating to future prosecutions and so forth were not published, which was the statement in the report.

However, there is one great difference even now between this published report and other published reports either of this House or of a court of law or of a tribunal. There is no statement of the evidence given to Judge Fay and his Committee. Frequently the report quotes at great length from evidence given. Of course, there are appendices, some of which give documents in full. But nowhere do I see a complete list of all the witnesses or a complete list of the verbatim texts of all the evidence that they gave in the way that a Select Committee of this House would publish such a list, if it published a report, and there is no doubt good reason for that. Probably even this report could not be published without the protection of this House from possible actions for defamation, a protection provided by the Return procedure.

But there are other incompletenesses here. Judge Fay suggests that the Crown Agents are not civil servants. I do not know where he gets the evidence for that, because there is no evidence to that effect in the report. The appendix to the Expenditure Committee Report on the Civil Service gives the legal definition of a civil servant as in the Superannuation Acts. The details are given in that report, but for practical purposes it means that if one gets a Civil Service pension one is a civil servant.

On that basis, as I understand it, by implication in her discussion of pensions my right hon. Friend admitted then that the Crown Agents are civil servants just as the officers of the Royal Household are civil servants under that definition, even though under a quite non-legal definition by a commission set up in the 1930s they might not be so described since they are not paid out of an Estimate presented to this House. They are appointed by the Crown and they can be dismissed in the same way; they are pensionable as civil servants, and that makes them civil servants in law.

This is an important point because it raises other issues. It seems that one of the principal people at fault in this case is not someone extensively mentioned in the report, but the person who appointed Sir Claude Hayes to the job. He had a great share in appointments to the Civil Service. He was Assistant Director of Examinations for the Civil Service Commission before the war. After the usual war-time experiences he eventually became Director of Examinations for the Civil Service Commission. Probably no man alive is more responsible for admitting to the Civil Service the people who are now in control of it, but that does not justify someone being put in charge of what is a very large business when he has no business experience whatsoever.

Judge Fay is not clear on how the appointment came to be made. As far as one can see, it was either on the recommendation of Sir Andrew Cohen, just before he died, or by Sir Geoffrey Wilson, contrary to Sir Stephen Luke's recommendation that a banker should be put in charge. Indeed, if Mr. Cuckney had been put in charge in those days, none of this would have happened. Contrary to the recommendation, the appointment was made simply because it was Buggins' turn. In other words, the man appointed was the one in the Ministry who had had some connection with the Crown Agents. It was evidently thought, therefore, that he should be put into the job of Senior Crown Agent.

The Expenditure Committee has criticised this sort of thing in times past. The methods of recruitment to the Civil Service may be admirable for securing the sort of person who will make a good decision in the Home Office on a delicate case, but they are not very admirable when applied to the running of business operations. As we have seen, Sir Claude made the similar mistakes of appointing a non-accountant as head of his finance department—a man who had not even been in the department until he became its head.

This sort of incompetence ought to be ended. I entirely agree that we need a public tribunal, with the power to summon witnesses. We also need to do something to reform the system.

Apart from the Crown Agents, there is one other body which claimed before the Expenditure Committee the same degree of independence. It claimed more independence even than a judge. A judge must consider a case that is brought before him in the court, but Sir Douglas Henley, the Comptroller and Auditor General, said that he did not even have to look into something unless he and his department felt like doing it. His department raised very mildly with the Treasury some doubts whether the Crown Agents were increasing their activities, but it felt somewhat inhibited because its jurisdiction was quite specific.

In general, one is forced to say that another parliamentary watchdog, the Public Accounts Committee, failed in this case, for it did not take up the issue until after the Crown Agents had, in effect, gone bankrupt. Its apparent officer failed to inform it fully of what was going on. The Comptroller and Auditor General should be its officer but he is not. He is an independent officer, as is the Senior Crown Agent. In other words, there was a failure to state at a sufficiently early stage what was going on between 1967 and 1974.

All these things have been reported upon three months ago by the Expenditure Committee, and I will not weary the House now with the details, save to point out the absolute and complete relevance of this House as a whole receiving an adequate reply upon the points which were put forward as to what was wrong in the Civil Service.

I will give one more example. We said that there was no single person in the Civil Service responsible for the efficiency of the whole of it. That is clear, surely, when we have the Stevenson Committee not being told by the Ministry or the Crown Agents what is going on, and when we have the Treasury spoken to by the Bank of England but the Bank of England otherwise keeping quiet, and when the Treasury spends three years at one point chasing £70,000 which has been lost but makes no great mention of £212 million which is disappearing down the drain.

No one in the Civil Service is responsible for its efficiency as a whole. If, as we suggested, the Treasury had been responsible, The Treasury might possibly have taken greater control over a situation of which it had been informed by the Comptroller and Auditor General in one way, by the Director of Overseas Audit in another, and by the Bank of England in a third way. But it was felt to be too delicate a matter to justify treading on the prerogatives of the Ministry of Overseas Development.

We need to alter something in a system in which Departments are so independent of each other that one Department is reluctant even to criticise another when it feels that there is incompetence or even criminal activity taking place.

5.55 p.m.

Photo of Bernard Braine Bernard Braine , Essex South East

The hon. Member for Penistone (Mr. Mendelson) put a very powerful case to the House for the proposal that this grave matter should be the subject of an investigation by a tribunal and not left to be investigated privately. I am bound to say that I agree with the hon. Gentleman about the principle of openness.

I hope that from the debate we shall establish the lessons to be drawn from this sorry affair. One lesson surely is that the secrecy which has overshadowed this matter for so long should be swept away. The Fay Report has done a very useful service in that regard. I am not convinced that a tribunal would delay matters. It is surely not beyond the wit of the lawyers to devise a means of proceeding in a way which takes into account what has already been found by the Fay Committee and which safeguards the interests of those who may be brought before it. I therefore endorse the very frank statement made by my right hon. Friend the Member for Bridlington (Mr. Wood).

Another lesson to be drawn concerns the adequacy or otherwise of our own parliamentary procedures to investigate and control abuses. That is a point which the hon. Member for Nottingham, West (Mr. English) touched upon a moment ago. I must tell the House that there were difficulties when the Select Committee on Overseas Development, of which I was Chairman at the time, looked into the matter in December 1973. The Minister herself, in her very full and frank statement this afternoon, indicated that there were very real difficulties from her point of view in coming to grips with what the Crown Agents were doing betwen 1968 and 1974. So it was with the Select Committee.

The evidence we took, although reported in the House, was not published. With the advantage of hindsight, I can say now that that was a pity, but there were very good reasons for what was done at the time. I intervened a little earlier, Mr. Speaker, in order to make this point in case I failed to catch your eye later on. If the House wills, I see no reason why that evidence should not now be published. The committee comprised not only the right hon. Lady but the hon. Member for Islington, South and Finsbury (Mr. Cunningham), who has played an honourable part in focusing attention upon the matter over a good many years.

If that evidence is published, the House will see that the Select Committee did a useful job in revealing a very unsatisfactory state of affairs. I say this because there was an article in the Sunday Times yesterday which implied that the Select Committee—of which I was Chairman when the investigation began—behaved irresponsibly by deciding to suspend its inquiries in May 1974. The impression may have been created, therefore, that somehow or other a Select Committee of this House failed in its duty. That is a travesty of the truth, and I should like to say why.

In early December 1973, the Select Committee had agreed to a special report, which I proposed, setting out its subjects of inquiry for the Session 1973–74. The committee was proposing to discuss, first, trade and aid, debt, rural development, and allied matters; and, secondly, the affairs of the Crown Agents, with particular reference to banking and investment. Our small, hard-working committee agreed to meet twice a week in order to carry out that programme. We took evidence on two occasions in December on the subject of the Crown Agents: first, from the Ministry of Overseas Development and then from Mr. Claude Hayes, as he then was.

However, following the Select Committee's second meeting, two developments, which everybody seems to have forgotten, interrupted our inquiries into the Crown Agents. First, we went to the Indian subcontinent in pursuance of our other inquiry, because we had arranged that trip months before, and we were abroad when the news of the dissolution of Parliament was announced. Second, there followed a General Election and a change of Government. The Select Committee no longer existed. It was not until May 1974 that a new Select Committee met, and I was not its chairman.

However, there had been a significant development. On the change of Government, two distinguished members of the Select Committee, over which I had presided, became Ministers. The right hon. Member for Lanark (Mrs. Hart) became, for the second time, the Minister of State for Overseas Development. The right hon. Lady had taken an active part in and been a valuable member of the previous Select Committee. Frankly—I say this quite objectively—the members of that Select Committee were absolutely delighted that she had been entrusted with her new responsibility at the Ministry of Overseas Development. It meant that she was now in a position to take effective action, and she took it. The right hon. Lady lost no time. By the autumn she had appointed Mr. John Cuckney to replace Sir Claude Hayes. That was a wholly admirable appointment.

The new Select Committee, in communicating its decision not to proceed further with the inquiry undertaken by the previous Select Committee, referred in its report to the House that the Minister was taking action. The Committee therefore felt that it should get on with its other inquiry, for which it had already taken a great deal of evidence, and to resume the inquiry into the Crown Agents later, if necessary, in the light of what the Minister might do. The committee had high confidence in the right hon. Lady. I should like to point out that I still have high confidence in her in this regard.

The committee decided that, in view of the serious impact of the oil crisis in the autumn of 1973 and the months that followed, it should switch to a study of its implications on the economies of developing countries and on the British aid programme. That is what the Committee's terms of reference primarily required it to do.

After the second election in 1974, as the Minister set up the committee of inquiry, under a distinguished judge, there did not seem to be a need for the Committee to mount a further inquiry at the same time. It is always easy to be wise after the event, but I do not think that the Committee's decision was irresponsible.

Last Thursday the Minister quite rightly said that the action of the Crown Agents in fringe banking was one of the most serious betrayals of public accountability for many years. That was absolutely right. However, the Crown Agents, as we discovered in our investigations, are not to be compared with any other organisation. They were set up to undertake tasks on behalf of their principals which, at that time, were colonial dependencies. But in the 1960s most of the Crown Agents' principals were the Governments of sovereign, independent States. What is more, after the devaluation in 1967, the Crown Agents' principals were pressing for diversification out of sterling. Therefore, it was, and, I suppose, still remains, imperative that the Crown Agents should carry out their traditional tasks free of pressure from United Kingdom Ministers.

One can understand why there was this cloud over the fringe activities into which the Crown Agents had entered in the 1960s. No one wanted to disturb the traditional valuable relationship of the Crown Agents with their principals and with the economy of this country. That they carried out those traditional tasks well is evidenced by the fact that their principals' deposits in 1972 totalled £247 million. But, by the end of 1974, after all the publicity, the criticism, the investigations and so on—that is, after the scandal had begun to be exposed—those deposits totalled £806 million. I suggest that is eloquent testimony to what I have been saying.

The entry of the Crown Agents into fringe banking activities began long before the Select Committee decided to investigate. Incidentally, no one asked the Select Committee to investigate the Crown Agents. The committee decided of its own volition, with the encouragement of the hon. Member for Islington, South and Finsbury, to whom I paid a well deserved tribute earlier, to look into the matter. The Crown Agents' entry into these fringe activities began six years earlier in 1968 under the Labour Government and continued under the Conservative Government.

Photo of Mr Christopher Brocklebank-Fowler Mr Christopher Brocklebank-Fowler , North West Norfolk

For the record, will my hon. Friend confirm that the Select Committee decided by a majority to go ahead with the investigation into the activities of the Crown Agents because, even at that stage, certain members of the committee were so jealous of the international reputation of the Crown Agents that they preferred to avoid a Select Committee looking into the matters that we are discussing today?

Photo of Bernard Braine Bernard Braine , Essex South East

My hon. Friend may be correct in his recollection.

Photo of Bernard Braine Bernard Braine , Essex South East

The point that I want to make as firmly as I can is that the Select Committee was not really the most appropriate body to investigate such a complex matter. We found serious difficulties from the start. For example, there was the uniqueness of the relationship between the Crown Agents and the Minister. Because their first duty was to their principals, there was a reluctance on the part of the Crown Agents to give full and frank answers on the ground that at that time—December 1973—we were in the aftermath of the Yom Kippur war. The argument was that the petroleum crisis had disturbed the world's money markets and that too close an investigation would damage the relationship between the Crown Agents and their principals.

The Select Committee also encountered considerable difficulty in getting expert advisers who could steer it through the maze of financial investment detail. If the Select Committee's evidence is published, as I hope it will be, hon. Members will see that members of the Committee quickly put searching questions of substance and importance to the Crown Agents. I have little doubt that the right hon. Lady, who had taken part in our inquiry, gained a valuable insight into the whole matter as a result. Indeed, her subsequent action reflects the work that was done by the Select Committee in its two meetings.

All in all, however, I do not think that the Select Committee was as equipped as it should have been to undertake an inquiry, not into aid and development matters overseas, for which it had been set up, but into fringe banking divorced from the traditional rôle and functions of the Crown Agents. In my view, that matter was more properly one for a powerful Public Accounts Committee.

Photo of Bernard Braine Bernard Braine , Essex South East

Perhaps I might just finish: we assumed that, because no one else was willing to undertake the task, the Select Committee should do so.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

The hon. Gentleman will recall that, until the General Election at which I lost my seat, I was a member of that committee. Does he agree that the view that he is giving is his own view and that it would not necessarily be shared by all the then members of that Committee who began to find that some of the answers that they were getting and some of the notes for which they were asking from both the Ministry of Overseas Development and the Crown Agents were very worrying at that time?

Photo of Bernard Braine Bernard Braine , Essex South East

Yes; I agree entirely with the hon. Gentleman. However, he does me an injustice. He will recall the way in which I conducted my part of the inquiry. I must not refer to that because so far the evidence has not been published. But it was a very worrying experience for us all, and not only he played a notable part in extracting some very disturbing information.

I was saying that that was a matter which should not have been left to the Select Committee on Overseas Development to undertake.

Photo of Bernard Braine Bernard Braine , Essex South East

Because the seriousness of the matter required a very thorough and scientific investigation.

Photo of Mr Max Madden Mr Max Madden , Sowerby

What deliberations took place in the Select Committee about the suitability of that committee to investigate these matters? Did the majority of its members share with the hon. Gentleman the view that it was not a suitable inquiry? Why did not the Select Committee suggest what in its view was a more appropriate Select Committee to undertake the investigation?

Photo of Bernard Braine Bernard Braine , Essex South East

The hon. Gentleman is talking with the advantage of hindsight. At the time, we felt that this was a subject that we should undertake. No one else was willing to undertake it. The hon. Member for Islington, South and Finsbury argued the case powerfully, and the committee agreed to undertake it. But, with the advantage of hindsight now, I am saying that this was a matter which automatically should have been remitted to a much more powerful committee, and I am arguing now in general terms for a complete recasting of the Select Committee system of this House.

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

The hon. Gentleman will recollect that, in a brief exchange in the House last Thursday, I mentioned that I had offered to give evidence myself as a former Minister—I was not a Minister at the time—to the Public Accounts Committee, and that my offer was refused. There are matters about our Select Committee system which might be looked into by the House itself.

Photo of Bernard Braine Bernard Braine , Essex South East

The right hon. Lady underlines what I have been saying. Although, for reasons which I do not know, her offer was refused, she offered to give evidence to a more appropriate Select Committee.

Photo of Bernard Braine Bernard Braine , Essex South East

I am not trying to go over old history so much as to draw out of our experience a lesson for the future. It is that the remedy lies with the House itself in giving its Select Committees far more political authority than they possess at the moment and certainly more than the House has been willing so far to concede.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

The hon. Member for Essex, South-East (Sir B. Braine) keeps giving way. He has been as long as the hon. Member for Penistone (Mr. Mendelson), who opened the debate. If he persists in giving way, it will mean that a number of right hon. and hon. Members who have the right to speak will not be called.

Photo of Bernard Braine Bernard Braine , Essex South East

You are absolutely right, Mr. Speaker. I was trying to be courteous to the House in giving way to hon. Members who sought to intervene. However, I have only two more sentences.

As I understand it, the Select Committee on Procedure is currently looking at these matters. I fervently hope that, following this debate, that committee draws the right conclusions.

6.14 p.m.

Photo of Mr George Cunningham Mr George Cunningham , Islington South and Finsbury

On the general view just expressed by the hon. Member for Essex, South-East (Sir B. Braine) about the need for a review of the functions of Select Committees of the House, I am sure that he will get a great deal of support. But it is worth recollecting that one of the subject Committees which we had then—and which we still have—whose job was to shadow one Government Department was the Select Committee on Overseas Development. The House will not get any better mechanism, even if we have a restructuring of the Committee system. The whole idea is to ensure that every Department has a shadowing Committee of exactly that sort.

The Public Accounts Committee could not have done this job. The Public Accounts Committee did not supervise the Exchequer and Audit Department with regard to the accounts of the Crown Agents. The accounts of the Crown Agents were referred to the E and AD by Treasury Minute. This was not a Government Department. Until the time that Exchequer money went into the Crown Agents, the PAC had no locus standi in the matter at all. It was only after Exchequer money went into the Crown Agents that the PAC picked up the subject, and it was on that occasion that my right hon. Friend the Minister of State for Overseas Development was seeking to give her views to the PAC.

I must say to the House that I thought that it gave my right hon. Friend a rough ride today. Some of my hon. Friends sitting below the Gangway, not all of whom were totally versed in the subject of the Crown Agents until last Thursday, ought to have been rather kinder to her. Tributes have been paid to me for my long-term interest, for which I am extremely grateful. However, my right hon. Friend's interest in these matters is of longer standing than my own. Many of the investigations made in 1972–73 we made together. The House also owes her a debt of gratitude for clearing up this mess once she went into office.

It was suggested by my right hon. Friend the Member for Huyton (Sir H. Wilson) that until about 1972 no one really knew the terrible things that were happening with the Crown Agents. I am afraid that his memory is wrong. It was the Press, way back in 1970, especially Charles Raw of the Sunday Times and of The Guardian, whose articles first exposed in great detail the difficulties of the constitutional relationship, the speculative work that the Crown Agents were getting into, and the possible financial dangers for Her Majesty's Government which followed from that. As with other matters, the House of Commons picked it up very late from the Press.

It is typical of the House of Commons that we are now debating the Crown Agents after the report is out, after the £200 million horse has bolted from the stable, after the stable has been cleaned up—not by Parliament but by the Government—and after the stable door has been securely locked several times. At this stage, the House of Commons gets round to talking about it and to deciding that we should revamp our Committee system to try to prevent this happening again.

The lesson that needs to come out of this is that if people are looking round for a culprit in this matter, they do not need to look very far outside the walls of this Chamber. The House of Commons itself is one of the most serious culprits.

I say that not only because the House should have found out what was going on and not just picked up the Press reports, though they should have been enough, and with them the House should have been aware of what was happening; am thinking especially of what happened in the Select Committee.

It was on 17th October 1973 that I wrote to the Chairman of the Committee and proposed that faute de mieux, possibly, we should undertake an investigation of the Crown Agents, and I set out at length the various allegations which were being made.

The Committee considered the matter on 5th December and voted by five to one to initiate an investigation. I should add that in the vital next vote about whether we should initiate the investigation immediately or wait until we had finished our airy-fairy investigation into rural development in Khatmandu or whatever it was, the voting was closer. It was in fact four to three, and was a straight vote of Labour and Conservative Members, the hon. Member for Essex, South-East having no vote, since he was in the Chair and there had not been a tie. It was on that narrow vote that we got started on the investigation.

There is something in what the former Chairman said about the difficulty of staffing. We cast round quite a bit to obtain one or two financial advisers to the Committee. As I recollect, it took us some weeks to find them. We also made enormously heavy weather about getting one very good chap in the House of Commons Library, Mr. Clark, to assist us with a bit of research on this mighty endeavour. Here is another lesson for the House. We had tremendous difficulty in achieving that.

When we came to take evidence, we found that the accounts of the Crown Agents which were presented to us were in enormous confusion. It was impossible to tell what was being done by the Crown Agents in their own name, for Millbank Investments or Four Millbank Nominees and other subsidiary and associated companies. At that time, I am sure that it was not our impression that the Crown Agents were falling over themselves looking for expert guidance in their investment work, as I heard suggested last week.

Indeed, we asked questions about the investment advisory panel which the Crown Agents had but which had been pretty moribund for several years before our investigations started. The attitude that we encountered was that we should keep out of that. It brought back to mind the first paragraphs of the proceedings of the 1909 Committee inquiring into the Crown Agents, when a senior Crown Agent appeared before the Committee and said in effect "Before you start asking any questions, I should tell you that I don't think this has anything to do with the House of Commons. "That was the kind of attitude that we first encountered.

I think that we must now find a way of publishing the proceedings at our two sittings when we took evidence from officials of the Ministry and then from officials of the Crown Agents. It appears that although they have not been published they have technically been reported to the House by the hon. Member for Essex, South-East and therefore, as I understand it, any Member is entitled to look at them. But it is now time other people were able to look at them, too.

The time when we initiated our inquiry, in December 1973, was the time when, in the words of the Fay Report: Had a new mind come to the direction of the Crown Agents' finances in November 1973 a great deal of money would have been saved. That appears on page 168 in connection with the finding of a successor to Mr. Challis, the Finance Director. Instead of proceeding with that vital inquiry, our Committee got stuck because we were at the same time—and as a primary duty, on the decision of the Committee—doing a study of rural development, which took the Committee to Katmandu.

Photo of Mr George Cunningham Mr George Cunningham , Islington South and Finsbury

There is a lesson to be drawn on what things it is appropriate for a House of Commons Committee to do. Studies of rural development and the like can be done by academics far better than by the House of Commons. Indeed, when the House tries to do them, they are done by the academics and we just print the report. But things like the investigation of the Crown Agents were particularly appropriate to a Select Committee of the House for the following reasons.

First, a Select Committee has power to summon witnesses and make them answer questions. Secondly, it has from time to time either to print all its evidence or to keep some of it from the public. When we decided to make this investigation we conciously decided that we would not print the evidence as we went along but would wait until the end and then decide what needed to be kept secret because of the relationship with principals.

Even after May 1974, when the vote was taken—with myself and my hon. Friend the Member for Enfield, North (Mr. Davies) opposing—to suspend the investigation, Fay says that for many months—until October 1974, when Mr. Cuckney took over—the Ministry of Overseas Development was not well informed at all about what was happening within the Crown Agents. I think that if the Select Committee had operated during that summer we could have helped the Minister to find out what was happening, through the greater power and perhaps greater willpower that we have as compared with the Ministry.

It was on 13th May 1974 that, according to Fay, there was a meeting in the Treasury, where the Bank of England, the Treasury and the Ministry of Overseas Development agreed that the Crown Agents were bust or were capable of being bust. It was on 22nd May, nine days later, that the House of Commons Select Committee decided that it would not bother to investigate but would leave it to the Executive.

It is on those grounds that I say that a major culprit in this whole business is the House of Commons itself and the failure of those members of the Committee who opposed the investigation in the first place and who voted for the suspension of the investigation later. That failure must be brought out in any later inquiry.

I am frankly very dubious about the need for any further inquiry. I should say—it is not so much declaring an interest but declaring a prejudice perhaps—that I know personally many of the officials closely involved. But may I use that fact to make this point: if there was over many, many years an accepted attitude—accepted not only by civil servants, the Bank of England and so on, but by Ministers too, that the Crown Agents should be left alone and should not be interfered with, and indeed that there was not much power to interfere with them—are we who are collectively very blameworthy in this matter to set up a Committee to find which civil servants are to be blamed? I do not find it a very attractive idea. If it is to be done, such Committee as there is must be free to lay blame also upon Ministers. Of course, no blame will attach to the present Minister of State for Overseas Development, and I do not say that any blame will attach to any Minister, but the Committee must be free to attach blame to Ministers, and I am not sure that on its present terms of reference it is free to do so. The Committee must also be free to express opinions about the House's rôle in this matter.

I have one final point, and I leave it till last because it is a party political point. I have heard it reported that some Conservatives are saying "Terrible loss arising during the period of Labour Government". It just so happens by accident that the period when the failings of the Crown Agents first became well known was 1970 and the time when the tidying-up job started was 1974. If that had been a period of Labour Government, we should be being crucified now for our failure to understand about business, our failure to take the necessary steps, and so on. Therefore, I hope that no Conservative will accuse us in this matter of being at all lacking. [Interruption.] It has been done. [Interruption.] The greatest failures took place during that period, and it as well for that to be publicly stated.

6.28 p.m.

Photo of Mr Peter Brooke Mr Peter Brooke , City of London and Westminster South

It is a considerable privilege to follow in debate the hon. Member for Islington, South and Finsbury (Mr. Cunningham), who has played so distinguished a rôle in the unravelling of this matter. I must say that I am a customer of, and the firm of which I am a partner is both a customer and adviser to, the Continental Illinois National Bank, which is mentioned in the Fay Report. I do not think that it is relevant, but I owe it to the standards of the House to mention it.

Like my right hon. Friend the Member for Bridlington (Mr. Wood), I feel mild surprise at being in the company of the hon. Member for Penistone (Mr. Mendelson) in supporting an open inquiry, as I do, if there is to be an inquiry. But I take exception to one of the hon. Gentleman's observations about the City of London, which falls within my constituency. He said that the Crown Agents had defended their actions on the grounds that these things went on in the City all the time. If I understood him correctly, he said that that was a sad reflection both on the Crown Agents and on the City. I have been through the Fay Committee's admirable and comprehensive report, and as far as I can see there is only one such reference as a defence by the Crown Agents, in paragraph 140, in dealing with the presentation of a balance sheet: This is not the only short-term window-dressing loan by the Crown Agents that we have come across. The only object of the device is to present a false picture to readers of the balance sheet and we regard it as a deplorable practice. Mr. Challis's comment on the practice was:It was, and for all I know still is, a major City practice and it would be nice if this were not done, but one has to live in the world as it is.'". The matter of a balance sheet is in the first instance a matter for the company which presents it, and in the second instance it is a matter for its auditors. I have been in private business for 16 years, and I consider myself lucky in the choice of auditors which we made 16 years ago. They have always been extremely tough on us as a firm regarding the manner in which we presented our balance sheet. One sleeps more easily at night for that, and one knows that one can take year in and year out with confidence.

As a House of Commons, in terms of legislating for the behaviour of companies, we put that responsibility on auditors, and it seems to me that if there is a failing it is one which should come back to this House. The House should tighten the regulations and rules according to which balance sheets are prepared.

I am not here to defend every action taken in the City of London. There are rotten apples in any barrel, and, human nature being what it is, I dare say that there are as many rotten apples in the Penistone barrel as there are in the City of London.

The good name of the Crown Agents has been cited as an important issue throughout this debate and in the exchanges last Thursday. Under the admirable leadership of Mr. Cuckney, whom I am proud to have as a constituent, the Crown Agents have vindicated the confidence which has been placed in them in terms of their ordinary business.

I should be very sorry if any harm were done to the reputation of the City of London as a consequence of this matter. I have a slight feeling that the hon. Member for Penistone was trying to score a separate point by his reference to the City of London. Fortunately, the rest of the world takes a better view of the City than does the hon. Member for Penistone, as is indicated by our invisible earnings. But I am quite sure that my constituents in the City would much rather see an open inquiry than any suggestion that anything was being hidden. I am certain that that view would be shared also by my constituent, Continental Illinois National Bank, which has already given evidence.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

I wish to inform the House that the two Front Benches have agreed not to seek to wind up until twenty minutes to seven, and that will allow three minutes for the hon. Member for Penistone (Mr. Mendelson), who opened the debate.

6.32 p.m.

Photo of Dennis Skinner Dennis Skinner , Bolsover

That does not leave me much time, either. I wish, first, to take up the point raised by my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) with reference to our right hon. Friend the Minister. I do not think that my hon. Friend should get excited about what some of us say regarding a cover-up and so on. One should not take that as any reflection on my right hon. Friend the Minister. In fact, the only person on these Benches who so far has had it in for the Minister was my other right hon. Friend the Member for Huyton (Sir H. Wilson), who sacked her.

From the beginning, therefore, we ought to make clear that we all appreciate the dogged work which my right hon. Friend the Minister was doing, especially when she was in opposition. It is all there laid out in the evidence and documents. What worries us is that she might have been seduced—metaphorically speaking—by the civil servants, the Cabinet machine and so on into thinking that what is now proposed is the best way of proceeding. That is the point of difference between many of my hon. Friends and myself and the Minister.

What has been evidenced here is Civil Service power. It has been evidenced probably in a way which has never before enabled us to examine the way in which civil servants carry on, without any restrictions whatever being put upon them by the House of Commons, as my hon. Friend the Member for Islington, South and Finsbury said, or by anybody else because they are so remote and so powerful. That is the key issue. The right hon. Member for Bridlington (Mr. Wood) made clear that they were not telling him anything—or, at least, he gave me that impression—and as for the period when my right hon. Friend was the Minister previously, in 1967, the period when the Crown Agents started—[Interruption.] She was there until 1970. I agree that she was not there all the time, and I am trying to explain what happened when the Crown Agents started these transactions. That is when they started the betting shop. That is roughly what they did. It was like someone coming into the office and saying "Put a couple of quid on that horse which is running today, called Property Boom'"—

Photo of Dennis Skinner Dennis Skinner , Bolsover

Yes, out of the petty cash. Off they went, thinking that they could make a few extra bob and feel a bit stronger as a result.

Then, having put some bets on that horse "Property Boom" which was runing against a few scrubbers at a few meetings, they managed to make a few extra pounds. But on top of that they were not satisfied. They said to themselves "There is a betting shop coming vacant down the road. Let us take it over. "Next, not satisfied with that, they went a stage further.

That is what the civil servants were doing. Let there be no mistake about it. If the same sort of thing had happened in the High Street of any town in the country, woe betide any one who got caught. We know how it would have been treated, especially before the Betting and Gaming Act came in. A number of people would have been dealt with severely, unlike some of these people who, apparently will get off.

The Bank of England played an honourable rôle, did not it? This is the Bank which refuses to answer questions from me about the lifeboat, yet the Bank authorities have wasted £120 million of taxpayers' money. In view of what we have heard today, it is high time for my right hon. Friend the Leader of the House to say to the Bank of England "Let us have a look into where that £120 million has been spent. Members of Parliament are disgusted with what you did with the Crown Agents. You bolted the door after the horse had gone. Let us make sure that we do not wait another 10 years before we bolt this one." That is what my right hon. Friend ought to be saying to the Bank of England.

What about the Treasury, too? The Treasury spends a lot of time advising every Government, no matter what their colour, on incomes policy. Treasury officials have all the time in the world and all the expertise to advise on incomes policies, telling Ministers that they are a great idea. They are still at it, but they did not find time to investigate this matter just down the road. People were coining money, but the Bank of England and the Treasury were sitting on the sidelines and taking no notice.

Of course, we are told that they did not know—that they really did not know what was happening. I am not prepared to believe that, and I am not prepared to accept it, either, when my hon. Friend the Member for Islington, South and Finsbury says that it is the fault of the House of Commons. The problem with the House of Commons is that it has not the powers and it does not want the powers to ensure that we control people in the Civil Service. I do not go for the fancy argument that one should not attack people who sit in the Official Box and who do not have a chance to answer back. The top civil servants answer back to me and to people like me, to working-class people, the trade union movement and the Labour movement. They do it every day.

When a new Government come in on a manifesto commitment to redistribute wealth in favour of working-class people and their families, these top civil servants do not tear the policy up in front of the Minister's face when they are on their knees grovelling and saying "Yes, Minister—no, Minister" and the rest. They have a more subtle way. It will take 12 or 18 months—that is about the maximum—for them to manage to deal with the new Government and curb their radicalism.

That is what the top civil servants do and this occasion gives us an opportunity to examine exactly what some of them have been up to. There might be a few more at it. There certainly have been a few at it in the lifeboat operations. A lot of people are worried about that being exposed.

However, I make a constructive plea in this debate. Having seen all this mess, let us examine it. As for the Select Committee, the hon. Member for Essex, South East (Sir B. Braine) cancelled it after two meetings. Nine days after that very important statement, he stopped the show. I tell him now that if he had organised about 50 trips to all the principal countries involved, he would still have been meeting now.

Photo of Bernard Braine Bernard Braine , Essex South East

The hon. Gentleman has to have his fun, and I am enjoying it as much as anyone else is, but he is completely forgetting that we are talking about two different Select Committees. I was not the Chairman of the second one. It had a Labour Chairman.

Photo of Dennis Skinner Dennis Skinner , Bolsover

The hon. Gentleman would still have been meeting—

Photo of Dennis Skinner Dennis Skinner , Bolsover

I am sorry, no. I do not have time. The hon. Gentleman cannot get away from that. That is what happens in this place, and I am only reporting what happens. I am not glossing things over and saying what is supposed to happen. I am trying to explain to the House that these things do happen, and that that Select Committee would have gone on meeting. I am not saying that it would have managed to unearth whatever was underneath the stones. I do not for a moment suggest that it would have done that, because there would have been some civil servant tapping members of the Committee on the shoulder and saying "Do not go that far—come back—you might discover something." That is what the debate is about.

Firemen in London are being stopped from organising collections to find a little money for the strikers and their families because it is against the law, yet for 10 years these top people, the top brass from the public schools, have played around with £212 million of taxpayers' money. We have heard talk about British justice. We shall be here and talking about it for the next decade, and perhaps two or three more. We shall hear about the wonderful system that we have under which everybody is treated alike, but this debate has made it clear that that is not so.

The newspapers that became involved in this matter at the beginning are to be complimented because they were on the table long before we heard from some of the people on the Treasury Bench, but what has happened has shown that there is one law for the rich and one for the poor.

That is what is happening now. Even now a back-door attempt is being made to ensure that nobody is found out. That is why we are to have a committee of inquiry. I should have thought that there was plenty of evidence in the Fay Report, and in the other one also, to some extent, for the matter to be dealt with.

If we are to have a committee of inquiry, why is it not to be public? Why are these people not to be treated like ordinary citizens, like the people who sent us here? The people who have sent us here would not be shielded in this way if they were involved in pilfering from Woolworths. They would be dealt with accordingly. Nobody would say "Give them preferential treatment".

This has been a sordid matter, and I hope that when my right hon. Friend replies to the debate she will make it clear that if we are to have a committee of inquiry it will be a public one, and, more importantly, that those who refuse to answer questions will be made to do so in future.

My right hon. and learned Friend the Attorney-General is present and has been listening to the debate. Because there is to be an inquiry, that is no reason for not taking action on some of the papers that are before him. The Director of Public Prosecutions acts very quickly when somebody from out of the sticks is involved. He does not seem to hang about then in the way that he has done in this matter.

My right hon. Friend did not tell us how long this committee would take. She concentrated on how speedy, how efficient and how effective it must be, but she did not at any time tell us how long it would take. She merely said that the inquiry would take a long time. I should like her to tell us how long it will take. Will it be as speedy as she suggested?

For all those reasons, it is important that this be a public inquiry, that it is treated in the way that I have suggested, and that we should be able to bring to book those who have played around in this way with public money.

I see only one Liberal Member present. I think that only one Liberal has been present throughout the debate. I suppose the Liberals have been consulted on what the strategy should be on this occasion. I suppose they do not want the inquiry to be public. I suppose they have told my right hon. Friend and members of the Cabinet what they think should be done, but not one of them has spoken in this debate.

I say to my right hon. Friend and our colleagues on the Front Bench who are shaking their heads that they should take another look at this matter. Never mind the Liberals. My right hon. Friends should listen to those on these Benches who are calling for a public inquiry. At the end of the day we are more important than the Liberals will ever be. That is my plea to my Front Bench.

6.44 p.m.

Photo of Mr Richard Luce Mr Richard Luce , Shoreham

I find, having listened to the welter of invective from the hon. Member for Bolsover (Mr. Skinner), that I agree with his last remark. It is unlikely that the Liberal Party will ever have the power or the influence that his party—or the Conservative Party—has today.

We have a welter of information about the Crown Agents. We have the Stevenson Report, the Fay Report, the Government's statement, the enormous interest of the Press and now today's debate. It seems to me of great importance that we should, in an objective fashion, pick out the distinctive issues that arise from this important debate.

My right hon. and learned Friend the Member for Wimbledon (Sir M. Havers) has already raised questions with regard to the proposed committee of inquiry. I do not propose to address any of my remarks to that issue, save to say that I thoroughly agree with everything that he said.

I believe that there is great distrust about Whitehall and about Parliament, and if we are to overcome that and the prospect of a whitewash the inquiry must be held in public and there must be judicial procedures to give adequate protection to those against whom serious allegations might be made. I therefore take a similar view to that taken by my right hon. and learned Friend.

It is noticeable that very few hon. Members, with the exception of the hon. Member for Islington, South and Finsbury (Mr. Cunningham) and my hon. Friend the Member for Essex, South-East (Sir B. Braine), have highlighted the distinctive and important role that the traditional services of the Crown Agents play for this country and for other countries, too. They serve more than 100 other Governments. They serve more than 200 other public authorities. They provide a growing range of financial, professional, technical and commercial services.

The Crown Agents manage about £1·75 billion worth of foreign business on behalf of those Governments. They have reserves of £45 million. They make an enormous contribution to our visible and invisible earnings. They help to procure orders for British industry, and therefore jobs for people in British industry. They do a great service. All that has not been mentioned by any Labour Member, with the exception of the hon. Member for Islington, South and Finsbury. They provide help to many under-developed countries, and that is something for which I thought the Labour Party stood.

We see these traditional services expanding. Under the able leadership of Mr. Cuckney and his management team, in the past three years the traditional services have broken out of a deficit situation into a surplus of £10 million in 1976 on their services to the principal parties. The Crown Agents have an important future, and I believe that this House must have an influence on how their traditional services expand for the benefit of this country and for many others, too.

I now come quickly to the so-called "own-account" activities. I do not know whether I am right, but I thought that in the opening remarks of the hon. Member for Penistone (Mr. Mendelson)—I agreed with everything that he said about the need for a public inquiry—I detected a slight indication that he was trying to launch an attack upon private enterprise. If I am wrong, perhaps the hon. Gentleman will correct me at the end of the debate. If he was doing that, the first thing that I must point out is that the Crown Agents have very little to do with private enterprise, and I hope that he will not launch into a debate on that account.

The Fay Report has examined the own-account activities over the last 10 years of the Crown Agents—their fatal decision to launch into their own money-making activities, and the way in which they put all their eggs into the basket of secondary banking and property. The report condemns the Ministry of Overseas Development, the Crown Agents, civil servants, people in the Treasury, the Bank of England and the Exchequer and Audit Department.

I believe that we have here a classic example of slothfulness and buck-passing in this amorphous mass of bureaucracy in Whitehall, but in listening to the impressive speech of my right hon. Friend the Member for Bridlington (Mr. Wood) we had a refreshing degree of frankness from him. We had a degree of frankness that we do not get in politics or in public today. He said that, in all honesty, he believes that he has a share—but a small share, I believe the House will come to judge—in the responsibility for these developments.

If my right hon. Friend has a share, there are many other people in Whitehall and in the House who have an important share as well. That is why I agree with the remarks made by many hon. Members, including my hon. Friend the Member for Essex, South-East and the hon. Member for Islington, South and Finsbury, that this Parliament must carry much of the blame for what has happened with regard to the Crown Agents. This is a matter which goes much wider than the Select Committee on Overseas Development. I believe that it is a question of the Legislature not being fully equipped to challenge the now all-pervading power of any Executive of the day. This is a balance which needs to be redressed and Parliament must reassert itself in its authority over the Executive.

In my final few minutes I want to address myself to the future. I hope that the right hon. Lady the Minister will answer these points. First, with regard to the Stevenson recommendation that there must be a clearly defined status and structure and that the Crown Agents must become generally accountable both in financial matters and in general terms to the public, the Minister has said that, although she is satisfied with the present situation and that the present management team has strong internal control, it is necessary to have legislation to put the Crown Agents on a similar footing to that of other statutory authorities.

If that is necessary, will the Minister say—if she believes as she has implied, that the matter is urgent—when she proposes to introduce the Bill, and whether the Bill will be short and comprehensible, as I hope that it will be.

The second point I wish to probe is in regard to the estimated £200 million loss. As the right hon. Lady said, this is a probable loss. It is most important to make a separation between the realisation account and the traditional services. It was slightly misleading of the right hon. Lady to use the figure of £45 million worth of reserves in relation to how we deal in future with the elimination of this loss on the realisation account. I hope that she will clarify that position. If we were to use those reserves, we should be letting down the 100 Governments all over the world with whom we deal.

I believe that this issue presents Parliament with an opportunity, either in the form of a Select Committee or in any other way, to reassert its authority and to monitor the way in which taxpayers' money is to be spent with regard to the elimination of this loss on the realisation account.

If other fiascos of the nature that we have seen with the Crown Agents are to be avoided in the future, it is not just a question of pinpointing the culpability of civil servants in various Departments, important though that it. It is a question of Parliament using its muscle on behalf of the British public and, indeed, on behalf of those 100 principal Governments to whom we owe an obligation. This terrible episode of the Crown Agents' own account activities should act as a test case of our ability to do so, for our credibility is at stake as much as that of Whitehall.

6.53 p.m.

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

I shall take, with the permission of the House, only three minutes or so because I know that my hon. Friend the Member for Penistone (Mr. Mendelson) will wish to reply.

This has obviously been a debate which has stretched in the issues it has covered way beyond the actual problems relating to the Crown Agents. We have been talking about the relationship between Parliament, the Legislature and the Executive and about the responsibilities of Parliament. In the contributions that have been made it has been a very worthwhile debate. Again I congratulate my hon. Friend on stimulating the occasion for it.

I can pick up only one or two brief points. I should like to endorse what has been said by my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) and the rôle he himself has played and also support him in the tribute he paid to one or two of the journalists, in particular, Mr. Charles Raw. It should go on to the record of the House that there are journalists—Mr. Raw is one—who stand out above all others. He contributed to human knowledge on this matter in a way which at the time we were unable to get.

Having said that, I pay tribute to the right hon. Member for Bridlington (Mr. Wood) for his very courageous speech.

To take up the two points that the hon. Member for Shoreham (Mr. Luce) has just put to me, we shall legislate as soon as we can. Unfortunately the Bill cannot be a very short one, but we shall bring it in as soon as we can. The hon. Gentleman's second point is a little difficult to deal with now and therefore I will write to him. My understanding is that everything I said this afternoon about the distinction between the realisation account and the other aspects of the activities of the Crown Agents was completely understood and agreed amongst everybody concerned and that it was an accurate statement of the matter.

I turn to the basic question which has been raised as it has emerged during the debate—that is, the question of what form the inquiry should take. Clearly, the House recognises that there are real problems. I was asked what the time scale was likely to be as between the two options the House is considering—the committee we have proposed so far and a 1921 Act tribunal of inquiry. It rather looks as though the first option—the Aarvold Committee—will have completed its work, we hope, and been able to report within a period of six to nine months. It equally looks as though the second option—a tribunal of inquiry—might be likely to take up to two years, but it is only a guess.

There is no doubt but that this is a question on which the House has wished to express its views. There is equally no doubt that it is a matter on which the House is right to have its own concern, and I note the strong views which have been expressed on both sides of the House in favour of some kind of public inquiry. Indeed, this is what the right hon. Member for Bridlington said.

I have already pointed out to the House the grave problems that would arise if, following on from the Fay Committee Report, this inquiry were to follow the 1921 Act procedures. However, we of course wish to take fully into account the views of the House and I will undertake on behalf of the Government to consider the matter further. I think that would be a suitable response to the views that have been expressed today.

6.57 p.m.

Photo of Mr John Mendelson Mr John Mendelson , Penistone

Mr. Mendelson rose—

Photo of Mr George Thomas Mr George Thomas , Cardiff West

May I advise the hon. Gentleman that at three minutes past seven the debate comes to an end.

Photo of Mr John Mendelson Mr John Mendelson , Penistone

The debate has shown quite definitely two main tendencies. The first has been one of grave concern about the revelations made in the Fay Committee Report, reflecting equally great concern and shock throughout the nation. The second tendency has been a desire to have an inquiry in public.

That second trend has been contributed to very convincingly by right hon. and hon. Members on both sides, not least by the right hon. Member for Bridlington (Mr. Wood), who made a very remarkable contribution. The right hon. Gentleman moved me deeply when he said that he himself wanted to be able to give evidence in public and to make his case, and he spoke for a good many others. That is an argument that should cer tainly persuade some right hon. and hon. Members who were not certain at the beginning of the debate, perhaps, which side of the argument on procedure they should support.

Further, I think that it would be a rather unfortunate conclusion to this important debate if the nation were told tonight that all that we had produced was a promise of further consideration. The country is fed up with promises of further consideration. If we want a certain type of action we as a Parliament had better say so. I therefore am not satisfied with the promise given by the Minister of State for Overseas Development—

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

Mrs. Hart rose—

Photo of Mr John Mendelson Mr John Mendelson , Penistone

No, I have no time just now. I do not want to interrupt this train of thought. If the Minister of State cannot on behalf of Her Majesty's Government give the House a firm commitment now that she will appoint a tribunal under the Tribunals of Inquiry (Evidence) Act 1921, I shall put the motion to a vote.

Photo of Mrs Judith Hart Mrs Judith Hart , Lanark

My hon. Friend will surely appreciate that the decision that we announced to the House to appoint the Aarvold committee of inquiry was a collective decision. I have given an assurance that we shall reconsider that, but I cannot go further than that tonight.

Photo of Mr John Mendelson Mr John Mendelson , Penistone

If my right hon. Friend cannot go any further than that, those of us who want a decision cannot change our course of action. It is quite clear that the nation expects us to announce a course of action tonight. All the advantages of a public inquiry have been pointed out by hon. Members on both sides of the House, very convincingly by the Opposition Front Bench spokesman. They were also clearly expressed in a demand by the national Press over the weekend. I fully agree with those of my hon. Friends who have put on record our indebtedness to the courageous journalists who were among the first to highlight this particular scandal. It would not be wrong to listen to some of their views in coming to a decision tonight.

Further, if a decision is made by the House, the House of Commons will be saying that we want to make it clear that we accept the Government's assurance that they have now made new arrangements, that the Crown Agents are continuing their useful work for their overseas principals in the traditional and honourable manner, and that they will not continue with the practices criticised in the Fay Report. We would say further that Parliament insists that in future everybody should be aware that if anybody behaves badly again he will be found out and will be brought to account.

That is the decisive reason why I cannot accept my right hon. Friend's assurance on this matter. The voice of Parliament must be on the side of those who say that we want to bring people to account, not for the purpose of persecuting anybody—that is not in our minds—but to make sure that the same kind of thing does not happen in future. I call on the House to endorse the proposal by voting for the Adjournment of the House.

Question put, That this House do now adjourn:—

The House divided: Ayes 158, Noes 126.

Division No. 34]AYES[7.2 p.m.
Abse, LeoGrant, George (Morpeth)O'Halloran, Michael
Adley, RobertGrimond, Rt Hon J.Onslow, Cranley
Aitken, JonathanGrylls, MichaelPendry, Tom
Allaun, FrankHamilton, W. W. (Central Fife)Raison, Timothy
Atkins, Ronald (Preston N)Haselhurst, AlanRathbone, Tim
Atkinson, NormanHeffer, Eric SRees, Peter (Dover & Deal)
Bain, Mrs MargaretHenderson, DouglasRees-Davies, W. R.
Baker, KennethHodgson, RobinRhodes James, R.
Bean, R. E.Holland, PhilipRichardson, Miss Jo
Beith, A. J.Hooley, FrankRifkind, Malcolm
Benyon, W.Hooson, EmlynRoberts, Gwilym (Cannock)
Bidwell, SydneyHordern, PeterRodgers, Sir John (Sevenoaks)
Biffen, John.Howell, Ralph (North Norfolk)Rooker, J. W.
Blaker, PeterHughes, Mark (Durham)Roper, John
Bowden, A. (Brighton, Kemptown)Hughes, Robert (Aberdeen N)Ross, Stephen (Isle of Wight)
Braine, Sir BernardHughes, Roy (Newport)Rost, Peter (SE Derbyshire)
Bray, Dr JeremyHunter, AdamRoyle, Sir Anthony
Brocklebank-Fowler, C.Hutchison, Michael ClarkShaw, Giles (Pudsey)
Brooke, PeterJeger, Mrs LenaSims, Roger
Brown, Ronald (Hackney S)Jenkins, Hugh (Putney)Skinner, Dennis
Buchan, NormanJessel, TobySmall, William
Canavan, DennisJohnson, James (Hull West)Smith, Cyril (Rochdale)
Carmichael, NeilJohnston, Russell (Inverness)Smith, Dudley (Warwick)
Castle, Rt Hon BarbaraKellett-Bowman, Mrs ElaineSpearing, Nigel
Channon, PaulKerr, RussellSpence, John
Clark, William (Croydon S)Kinnock. NeilSpriggs, Leslie
Clemitson, IvorKnight, Mrs JillStanbrook, Ivor
Cohen, StanleyLamond, JamesSteel, Rt Hon David
Colquhoun, Ms MaureenLatham, Arthur (Paddington)Stewart, Rt Hon Donald
Cook, Robin F. (Edin C)Lawrence, IvanStoddart, David
Cope, JohnLeadbitter, TedTaylor, R. (Croydon NW)
Costain, A. P.Lee, JohnTemple-Morris, Peter
Craigen, Jim (Maryhill)Lestor, Miss Joan (Eton & Slough)Thomas, Ron (Bristol NW)
Crawshaw, RichardLewis, Ron (Carlisle)Thompson, George
Crouch, DavidLitterick, TomThorne, Stan (Preston South)
Dean, Joseph (Leeds West)Loveridge, JohnThorpe, Rt Hon Jeremy (N Devon)
Dodsworth, GeoffreyLyon, Alexander (York)Torney, Tom
Doig, PeterMacCormick, IainTownsend, Cyril D.
Durant, TonyMacfarlane, NeilViggers, Peter
Dykes, HughMacFarquhar, RoderickWainwright, Richard (Colne V)
Edge, GeoffMacKay, Andrew (Stechford)Walder, David (Clitheroe)
Ellis, John (Brigg & Scun)Madden, MaxWard, Michael
English, MichaelMarshall, Michael (Arundel)Watkinson, John
Evans, Ioan (Aberdare)Marten, NeilWhitehead, Phillip
Evans, John (Newton)Mayhew, PatrickWigley, Dafydd
Flannery, MartinMaynard, Miss JoanWilson, Alexander (Hamilton)
Fletcher, Ted (Darlington)Mendelson, JohnWilson, Gordon (Dundee E)
Fowler, Gerald (The Wrekin)Mikardo, IanWise, Mrs Audrey
Gardiner, George (Reigate)Miller, Hal (Bromsgrove)Wood, Rt Hon Richard
Gardner, Edward (S Fylde)Miller, Dr M. S. (E Kilbride)Wrigglesworth, Ian
Garrett, John (Norwich S)Moate, Roger
Glyn, Dr AlanMolloy, WilliamTELLERS FOR THE AYES:
Goodhew, VictorMontgomery, FergusMr. Bryan Davies and
Gow, Ian (Eastbourne)Nelson, AnthonyMr. Kevin McNamara.
Anderson, DonaldGrant, John (Islington C)Perry, Ernest
Archer, Rt Hon PeterHardy, PeterPrice, William (Rugby)
Armstrong, ErnestHarrison, Rt Hon WalterRadice, Giles
Bagier, Gordon A, T.Hart, Rt Hon JudithRees, Rt Hon Merlyn (Leeds S)
Barnett, Guy (Greenwich)Hattersley, Rt Hon RoyRoberts, Albert (Normanton)
Barnett, Rt Hon Joel (Heywood)Hatton, FrankRoss, Rt Hon W. (Kilmarnock)
Bates, AlfHayman, Mrs HeleneRowlands, Ted
Benn, Rt Hon Anthony WedgwoodHealey, Rt Hon DenisSever, John
Blenkinsop, ArthurHoram, JohnShaw, Arnold (Ilford South)
Booth, Rt Hon AlbertHowell, Rt Hon Denis (B'ham, Sm H)Sheldon, Rt Hon Robert
Boothroyd, Miss BettyHuckfield, LesShort, Mrs Renée (Wolv NE)
Brown, Hugh D. (Provan)Jackson, Colin (Brighouse)Silkin, Rt Hon S. C. (Dulwich)
Brown, Robert C. (Newcastle W)Jackson, Miss Margaret (Lincoln)Smith, John (N Lanarkshire)
Buchanan, RichardJanner, GrevilleSnape, Peter
Callaghan, Jim (Middleton & P)John, BrynmorStallard, A. W.
Campbell, IanJones Alec (Rhondda)Stott, Roger
Carter, RayJones, Barry (East Flint)Strang, Gavin
Cartwright, JohnJudd, FrankSummerskill, Hon Dr Shirley
Cocks, Rt Hon Michael (Bristol S)Kaufman, GeraldTaylor, Mrs Ann (Bolton W)
Coleman, DonaldLamborn, HarryThomas, Jeffrey (Abertillery)
Cox, Thomas (Tooting)Lever, Rt Hon HaroldThomas, Mike (Newcastle E)
Cronin, JohnLuard, EvanTinn, James
Cryer, BobMabon, Rt Hon Dr J. DicksonTuck, Raphael
Cunningham, G. (Islington S)McCartney, HughVarley, Rt Hon Eric G.
Davidson, ArthurMcElhone, FrankWainwright, Edwin (Dearne V)
Davies, Denzil (Llanelli)Mackenzie, Rt Hon GregorWalker, Harold (Doncaster)
Davis, Clinton (Hackney C)Maclennan, RobertWalker, Terry (Kingswood)
Deakins, EricMarks, KennethWatkins, David
de Freitas, Rt Hon Sir GeoffreyMarshall, Dr Edmund (Goole)Wellbeloved, James
Dormand, J. D.Marshall, Jim (Leicester S)White, Frank R. (Bury)
Duffy, A. E. P.Meacher, MichaelWhite, James (Pollok)
Dunnett, JackMellish, Rt Hon RobertWhitlock, William
Dunwoody, Mrs GwynethMorris, Alfred (Wythenshawe)Willey, Rt Hon Frederick
Eadie, AlexMorris, Charles R. (Openshaw)Williams, Rt Hon Alan (Swansea W)
Ellis, Tom (Wrexham)Morris, Rt Hon J.(Aberavon)Williams, Rt Hon Shirley (Hertford)
Ewing, Harry (Stirling)Moyle, RolandWilliams, Sir Thomas (Warrington)
Foot, Rt Hon MichaelMurray, Rt Hon Ronald KingWilson, William (Coventry SE)
Fraser, John (Lambeth, N'w'd)Noble, MikeWoodall, Alec
Freeson, Rt Hon ReginaldOrbach, MauriceYoung, David (Bolton E)
George, BruceOrme, Rt Hon Stanley
Gilbert, Dr JohnOvenden, JohnTELLERS FOR THE NOES:
Golding, JohnParker, JohnMr. Joseph Harper and
Graham, TedPavitt, LaurieMr. James Hamilton.

Question accordingly agreed to.

Adjourned at thirteen minutes past Seven o'clock.