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

It was right for my hon. Friend the Member for Hackney, South and Shoreditch to call for the resignation of the Governor of the Bank of England if he was incapable of keeping an eye on what was happening.

The Chancellor said yesterday that there would now be all these supervisors, but questions on that subject have been asked since 23 October 1984. I asked about supervision because I spotted in a journal that only one Bank of England employee was watching countless banks in Britain to see whether they were doing their job. When I asked that question, it was shrugged to one side.

Now the Government have decided to have some sort of supervision. So the Chancellor of the Exchequer has been negligent throughout the whole affair. Those who called for his resignation—my hon. Friend the Member for Hackney, South and Shoreditch, myself and others—were right to do so, because the Chancellor was not keeping his eye on the ball.

What can we expect, anyway? If the Government decide to run a free market economy and to let interest rates go into double figures for about six years non-stop, sometimes at 17 per cent.—banks can make money hand over fist when interest rates are that high—is it any wonder that there has to be a day of reckoning eventually? It cannot be allowed to go on for ever. In that scenario, with the Johnson Matthey bank bubbling away, the Chancellor should have seen the warning signs. That is why we do not believe him when he says that he knew nothing about the crisis.

Consider the bizarre rescue. Imagine what happened on 30 September. Imagine the telephone call when the Chancellor of the Exchequer says to the Prime Minister, "It's uneconomic." She says, "Shut it, then." It in the middle of the pit strike. The Chancellor says, "But it's a bank, Prime Minister". "Oh", says the Prime Minister., "keep it open if it's a bank. I thought it was a pit". That is roughly what happened.

The Prime Minister has the philosophy that a company must make a profit or die, but that philosophy does not apply to the casino economy, or when the Government's own friends are at risk, or when it is their people's money. If it is a little firm in the Rhondda valley or in Hackney, all the pleading by Labour Members to save 150 jobs falls on deaf ears with this Government, this Prime Minister. this Chancellor of the Exchequer and this chairman of the Tory party. It has to make a profit or go under, like all those miners who were chucked out of work.

The Government have double standards. A different law is applied to banks. They can be bailed out. There is no monetarist policy then, no free for all, no "Stand on your own two feet". At that point the Tory Government say, "Bail them out, and the use taxpayers' money if necessary to do it"—taxpayers' money that should be spent in areas such as Newcastle, where there is mass unemployment.

The debate is important because it shows the Tory party's morality in relation to the industrial economy and to the casino economy, Johnson Matthey, Lloyd's, the stock exchange, or anywhere that the Tory party's people proliferate, with the most powerful lobby in this building.

Imagine the scene, with all the people waddling up Threadneedle street, called by the Governor of the Bank of England to bail out Johnson Matthey Bankers. I wrote to the Prime Minister asking why all the shareholders were not allowed to go to the meeting. Only those who could be contacted at the time were called to the meeting. Why was there no ballot? All the talk in the autumn of 1984 was about having a ballot of miners. There was no ballot for the shareholders. Instead there was what is called an aggregate meeting. There they were, with their little square briefcases on a Sunday night. Just imagine 200 people going up Threadneedle street at midnight on a Sunday. They were not stopped at Dartford tunnel. The police knew that they were on a special journey—to bail out a segment of the Tories' beloved economy. There were different rules for them—one law for the banks and another for the rest.

There is another aspect of the case that has not been covered adequately. Why was not the parent company made to look after its errant child? Johnson Matthey plc spawned Johnson Matthey Bankers. The Prime Minister talks about the family; about parents having to look after the children when they go wrong. Yet when Johnson Matthey plc found that its bank was going under, what happened? The Tory Government sent in the social workers to look after the brat. They used taxpayers money to bail it out. Completely different standards were applied to the bank.

Why was Charter Consolidated, a major shareholder in the company, not told, "You have a bank that is bankrupt. We ask you to put your money where your mouth is"? But Charter Consolidated conned the Government and Anglo-American. The bank was saved while 20,000 bankruptcies occurred in Britain that year.

To top it off, according to the information available at the time, when the rest of the City people were asked to put in money to save the Johnson Matthey bank, some of the city financiers said, "We think that Charter Consolidated should bear more of the burden than it has. We are not happy about putting some of our money in. We might be putting more good money after bad." They were tipped off that they would be looked after by the tax authorities.

I sent another letter to the Prime Minister asking why those City financiers and institutions were given the nod and the wink and told that, if they put their money into saving the Johnson Matthey bank, along with the £100 million from the taxpayers, they could write off every penny against taxes in case they became bad debts.

It would be wonderful if the parents of the 4 million people on the dole could set off tax relief to look after the 20-year-olds who have never had a job. Different standards are applied to them.

Yesterday, the Chancellor launched a violent attack on my hon. Friend the Member for Hackney, South and Shoreditch because of his questioning in past months. The right hon. Gentleman tried to imply that we had come across this information in July after he had made his statement. It is on the record that several Opposition Members had been raising the matter since the bank collapsed. On 11 November 1984, I asked the Attorney-General, who said that he was concerned about the level of crime in the City, to send in the fraud squad. He refused. The Chancellor is wrong to suggest that we have not argued about this case for long enough.

The fraud squad did not find the crooks in London and County Securities or in Keyser Ullman, although the crooks were staring them in the face. It did not find them in all the other secondary banks. Almost no one was tackled when Crown Agents went under. The fraud squad was sent in eight months after I had asked that question in November. I am not naive enough to suppose that the fraud squad is capable of catching someone who has been given eight months' start. The Government did not give the miners eight months' start when they were engaged in their battle to save their jobs.

Now the Government have the cheek to talk about self-regulation for the City. It means keeping it in the family for banks, for Lloyd's and for the stock exchange. Yet, during the past six years, the Government have said to the trade unions, "No self-regulation for you. We shall tell you not only how to organise yourself but you must conduct ballots when we say so. You must ballot to elect all your executives." Why do not the Government start on Lloyd's? Why not have a few ballots in Lloyd's and in the stock exchange?