City of London (Fraud)

Part of the debate – in the House of Commons at 1:54 am on 18th December 1985.

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Photo of Dennis Skinner Dennis Skinner Member, Labour Party National Executive Committee 1:54 am, 18th December 1985

Yes, there was a pact all right, with the previous chairman of the 1922 Committee of the Tory party. The chairman of Keyser Ullman temporarily tried to bail out London and County Securities—I mentioned it in the House at the time—in order to try to save the leader of the Liberal party's neck. It did not work because as a result of that banking crisis and the domino effect Keyser Ullman ran into the same trouble. It is no wonder he sometimes has a job to pay his rates. That is another story.

One of the things about that banking crisis was that the banks were given a long lease and a long rein. None of the big fish was caught. We have heard how the PCW people escaped to America and Costa Rica with the money they got from Lloyd's. Gerald Kaplan, the head of London and County Securities, went off to America as well. When I asked questions in the House, my hon. Friends in the Labour Government said that they could not get hold of him because he was in America.

I had not heard of sequestration in those days. That came up during the miners' strike. It is marvellous how the Government can sequestrate all the miners' money in what I thought were rock-solid banks in Switzerland and Luxembourg. I had been led to believe that anyone who gets hold of a million or so and wants to avoid taxation just has to put it in one of those banks and no one would be able to find out anything about it. But when the NUM did the same it was not long before a Conservative official was found to drop over and break into a rock-solid bank. By using their friends in the law courts and the City, the Tories managed to sequestrate the lot. There is certainly a lesson in that for the next Labour Government. About £50 billion has gone overseas as a result of exchange controls being lifted by the Government to help the City. We should have an official sequestrator—a Minister even—acting full time to bring that money back and have it taxed in this country. Then we could build up the National Health Service, pay decent pensions, get people off the dole queues, build houses and all the rest.

Those are the double standards under which the Tories operate. The Chancellor referred yesterday to the secondary banking crisis in an attempt to chide my hon. Friends for not doing enough about it. Why did he do nothing about Johnson Matthey Bankers when the climate was worse? Everyone acknowledges that, however great and corrupt and fraudulent the secondary banking crisis was, it was not so big as the crisis today. When the Chancellor saw Johnson Matthey going down the drain, he should have done something about it, but he and his predecessor promoted a free market economy which allowed the banks to make money hand over fist through high interest rates and made the Barber boom of 1972 look insignificant in comparison. In a climate like that a decent Chancellor would have recognised that the banks were in greater peril than they were in the 1970s because there were problems abroad as well as in England.

We have been surrounded by an international debt crisis for several years and it is growing all the time. I am told that about $975 billion is owed by about 50 out of 150 countries in the world. Imagine running a shop with 150 customers and 50 of them not paying anything off their debts but still shopping. There is an international debt crisis. The International Monetary Fund went bankrupt about three months ago and had to be bailed out temporarily. The United States has a $130 billion deficit. Fancy becoming a debtor and going to the top of the first division in one fell swoop. In a financial climate like that, any Chancellor who knew what he was doing would have decided to keep an eye on the little banks in case there was another banking crisis. If there was a crisis in 1972 when the international climate was so different, just think what could happen now. The Chancellor gave the game away yesterday by linking the 1972 crisis with the problems we face today. He should have recognised that special care was needed to see exactly what was happening in the banking sector, but he did not.

Is it any wonder that Johnson Matthey lent all this money to all these curious people? It lent Sipra about £70 million, and Abdul Shamji, who owed about £20 million, occasionally saw the chairman of the Tory party and was a friend of the Prime Minister and other Tory Members. If he was friendly with all these people in the Tory Government, is it not just conceivable that someone might have known that he was borrowing all this money from the Johnson Matthey bank? That same man, Abdul Shamji, finished up in an enterprise zone in Stroud in Kent, and he did so, according to my information, before anyone else knew that it was an enterprise zone. Is it not just conceivable that he was tipped off by the Tory Government and that some members of that Government knew where his money had come from?

In such a climate, would not a responsible Chancellor of the Exchequer have said, "We had better keep an eye on the Johnson Matthey bank. It is lending to people who do not have the collateral to pay back"? When I and other hon. Members put questions to the Prime Minister in 1984–85, she said that they had to rescue Johnson Matthey because it might have an effect on the others. The private lobbying that appeared in the newspapers—attributable or otherwise—suggested that one of the reasons was that the Midland bank was in trouble.

I suppose that the Chancellor knew that the Midland bank had problems. My hon. Friend the member for Hackney, South and Shoreditch said that the rescue was wrapped up with three different problems. I managed to spot the Midland's difficulties with Crocker in America whose debt ratio suggested real problems.

With an international debt crisis, with Midland bank tottering about, and with 80 American banks last year going bankrupt, is it not just conceivable that someone in the Tory Government should have kept an eye on Johnson Matthey bank? Should not someone have asked Ronald Leigh-Pemberton—appointed by the Prime Minister because, as she put it, "He is one of us"—"By the way, are you watching Johnson Matthey bank, because we think that it is a bit dodgy? We have a crisis nationally and internationally, and we have funny borrowers who are not likely to pay back. Are you keeping an eye on it, Ronald?" [HON. MEMBERS: "He is called Robin."] As a matter of fact, that is a more Tory name. It certainly was not Christopher Robin.