Mandatory Reports to Be Made by Banks

Part of New Clause 3 – in the House of Commons at 4:45 pm on 15th July 1991.

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Photo of Mr Calum MacDonald Mr Calum MacDonald , Na h-Eileanan an Iar 4:45 pm, 15th July 1991

I was not a member of the Committee that examined the Finance Bill, and I speak as a Member who represents a constituency that has been badly affected by the collapse and the crisis.

I was dismayed by the attitudes shown by Conservative Members, which were exemplified in the speech of the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark). Labour Members and local authorities are not denying that mistakes and errors were made and that there were misjudgments, but, despite what the hon. Member for Selly Oak said, it has to be remembered that local authorities and their finance divisions are amateurs in the money markets. I do not know what the finance director in Selly Oak is paid. If it is £70,000, that is not the case in the Western Isles. The only people earning that kind of money of whom I know are those who are supposed to be running the Bank of England and looking after the interests of the depositors.

The professionals dealing with the money markets are the Bank of England regulators, who look after the interests of the public. As my hon. Friend the Member for Redcar (Ms. Mowlam) said, brokers who gave advice to local authorities in these matters have some responsibility as well. If it is a matter of surprise and concern that a local authority such as Western Isles placed £23 million in a bank like BCCI, what about the nature of the professional advice received by that local authority, particularly when it now emerges that the local authority expressed to its brokers doubt and concern about the bank? The brokers came all the way to Stornoway to persuade the local authority that BCCI was a legitimate bank and that it was all right to leave the £23 million in the account there.

It is no surprise that people whose day-to-day expertise is that of a director of finance in a local authority have had their fingers burnt in a crisis of this sort. The real surprise, and the cause for concern and dismay, is that the much-vaunted financial professionals in London and in Edinburgh also got their fingers burnt, and that their advice caused local authorities to get their fingers burnt.

There is a contrast between the attitude taken by local authorities in the middle of the crisis and that taken by the regulators, the Government and the brokers involved. In every local authority, there is a searching inquiry as to why things went wrong and money was lost, nowhere more so than in the Western Isles where there has been an honest admission of error, self-criticism and a determination to put things right so that such mistakes are not made again. However, the professional brokers who advised the local authorities have produced nothing but a stone wall of silence. There has been no hint of self-criticism or admission of failure or an apology for the bad advice that they gave. The Bank of England and the Government have exhibited the same stone wall of silence. It is not good enough for the Government and the Bank of England to wash their hands of the matter and to claim that it is up to the local authorities.

The people who will suffer if that attitude is taken will be the only innocents in this affair—the old folk who rely on home services, the children in schools who rely on continuing levels of expenditure to provide them with an adequate education, and poll tax payers. The impact of these losses will fall on their backs unless the Government take a more positive and constructive attitude. Somebody will have to pick up all the bills for this. Either the receivers of local authority services and poll tax payers will pay for all, or the burden will be shared so that the Government and the general public take on some of it. The Government will have no moral or political credit if they continue stonewalling in the way shown by the Prime Minister last Tuesday and Thursday and by Ministers today.