§ The Minister of Overseas Development (Mrs. Judith Hart)
With permission, I wish to make a statement about the financial position of the Crown Agents.
The House will recall that on 31st July I announced my arrangements for the restructuring of the Crown Agents. There is now a Board of Crown Agents, including up to seven part-time members with a full-time chairman. After discussion with the new chairman I agreed as an interim measure to appoint only three part-time Crown Agents in view of the immediate and pressing problems facing him. While continuing the practice of non-intervention in the activities of the Crown Agents on behalf of their overseas principals, I reserve the right to give the board directives, and indeed have already done so in relation to their own account business.
The new chairman of the Crown Agents, John Cuckney, who took up his appointment on 1st October, appointed Coopers and Lybrand as consulting accountants to review the present financial position and the future financial requirements of the Crown Agents and their subsidiary companies. Morgan Grenfell and Company Limited have since been appointed to advise on general banking matters.
The chairman, supported by the three members newly appointed to his board, has now reported to me that a decline in market value of some of the assets of the Crown Agents has led to an immediate problem of reserves and liquidity. He has made a formal request to the Government for financial assistance.
The requirement is related to the realistic writing down of assets values in the accounts, and to the need to ensure financial backing appropriate to operations involving some £600 million, excluding funds of some £200 million managed for principals.
The Government have agreed to provide £85 million, subject to parliamentary authority, which will be recoverable, by 1579 direction, from future earnings or appreciation of assets. Standby facilities have been arranged by the Bank of England.
These arangements will demonstrate beyond all doubt that the Government stand behind the Crown Agents so that the position of all depositors is fully safeguarded; that the confidence of their overseas principals is fully maintained; and that the important services provided to the principals are continued. In the light of the history of the relationship between Government and the Crown Agents in the last four years, involving, as it has, my own initiation of inquiries in 1970, followed by the Stevenson Report to my predecessor, the right hon. Member for Bridlington (Mr. Wood), which was unpublished, and the inquiries made by a Select Committee of this House, hon. Members will clearly want to know how the circumstances necessitating this financial support have arisen. I have asked the Chairman of the Crown Agents to send me a full report on this, and I shall keep the House informed. Thereafter I shall consider whether any further action is necessary.
I have also asked to be informed in detail of outstanding longer-term commitments of the Crown Agents, including certain property investments in Australia, and of any suggestions which the new board may have for the organisation and management of its financial business in the future. I have reserved the right to direct that monies now being advanced shall be repaid from Crown Agents' resources in the course of any reconstruction of the business.
The House will, I know, appreciate that the present Chairman, John Cuckney, and the three members of his board, John Goble, John Gordon and Leslie Kirkley, have had only a very short time to assess the position and report to the Government. On taking office they were confronted with most difficult circumstances, as the House will clearly understand.
This situation, which I am sorry to report to the House, is one which we are seeking to correct. I am immensely grateful to them and would like to take this opportunity to tell the House that I have complete confidence in them. Their prime concern, as it is mine, and, I am sure, that of the House, too, will be that the Crown Agents, with their long history of 1580 service and capability, are able to continue to provide for their overseas principals the full range of their services.
§ Mr. Rippon
I thank the right hon. Lady for making her statement at the earliest opportunity. May I also express a welcome for the Government's determination to maintain full confidence in the Crown Agents? As the statement says that parliamentary authority will be required for the £85 million, does the right hon. Lady expect a debate to take place so that we may have the opportunity of a fuller discussion?
Can the right hon. Lady say a little more about the terms and conditions on which the £85 million is to be provided? In particular, what is meant by the phrase "recoverable, by direction"? Its it to be a loan, or a grant, or what?
Not only do I welcome what the right hon. Lady said about a full report being made by the chairman in due course and further statements being made by herself, but I associate the Opposition with what she has said about the confidence which we should have in the new chairman. He has had great experience in public service and outside it, and we fully share the sentiments which the right hon. Lady has expressed about him.
§ Mrs. Hart
I am grateful to the right hon. and learned Gentleman. As to whether it is a loan or a grant, the position is that the money will be advanced to the Crown Agents but, given the reconstruction of the business that they would contemplate carrying out, there are clearly possibilities that much of it can be recoverable as their assets increase in value or as they make certain changes. Therefore, the position is a little flexible, but we hope that there will be the possibility of recovering some of the money. Nevertheless, it is not precisely a loan, but a grant which we hope will be recoverable. [HON. MEMBERS: "Oh."] Right hon. and hon. Gentlemen opposite must understand that a situation which has been in the making for at least four or five years is not so easily recoverable by a single stroke of the pen on one day. That is the arrangement we have made, and I think that the right hon. and learned Gentleman will agree that on the whole it is the best arrangement to be arrived at.
1581 The question whether there will be a debate is a matter for the House. I shall be reporting further, and it will be necessary to consider what kind of inquiry should take place. I hope that the House will have a little patience about this because the overseas principals are involved and they, too, will need to be consulted about the form it should take. There is no doubt that the House will be more fully informed and will have a full opportunity to consider the position which has arisen.
§ Mr. George Cunningham
Will the Minister agree that these enormous difficulties are exactly the difficulties which many of us have been predicting for a long time in the light of the odd constitutional relationship between the Crown Agents and the Government? This is characterised by at least one hon. Member on the Opposition benches for attack as a phoney campaign. Will my right hon. Friend say roughly how much of the loss sustained on the investment side of the Crown Agents' business is attributable to the fall in the value of shares of First National Finance Corporation, one of whose present deputy chairmen was, immediately before he took up that position, Financial Director of the Crown Agents?
Finally, will my right hon. Friend say whether the Government of the day ever gave to the Crown Agents approval to go into this business of investment by comparison with their traditional buying and selling role, which I am sure continues to have the full support of everyone in the House?
§ Mrs. Hart
My hon. Friend and I, as I know one or two other hon. Members appreciate, have had a continuing and deep concern about the position of the Crown Agents and their involvement particularly in the money market and the property market. That may not be known to some hon. Members, but it is so, and the Select Committee on Overseas Development gave some consideration to these matters.
I cannot give my hon. Friend a precise answer as to the involvement of a particular company. I can tell him that one of the factors involved, which is not unexpected, is that the Crown Agents had considerable investments in property. The 1582 decline in property values over the last year has intensified the problems that might concern any organisation that put a great deal of money into property, and this is a matter which is dealt with in the report which I have had from the Chairman of the Crown Agents. The further report which I shall hope to make available to the House, at least in summary, will show that clearly.
As to the member of the staff of the Crown Agents to whom my hon. Friend referred, that is a matter which is perhaps better not discussed in the House at the moment, as my hon. Friend will appreciate. If there is an inquiry, whatever form it takes, it might well be a proper subject for the inquiry.
§ Mr. Pardoe
Is the right hon. Lady aware that the House will be somewhat mystified, in that the Government appeal to have agreed to provide £85 million but have only now asked for a full report into the circumstances which make this financial support necessary? Does not the Minister think that it might have been better to have asked for the full report first and to have provided the finance thereafter?
Although many will welcome the fact that the Government stand behind the Crown Agents, is the right hon. Lady aware that if this kind of nonsense goes on the world will want to know who stands behind the Government?
§ Mrs. Hart
I am afraid that the hon. Gentleman is falling rather short of his own standards here. He might be well advised to do a little research into the reports of the proceedings of the House in HANSARD over the last four years. It is all there.
I was the first to express serious concern early in 1970 when I was Minister of Overseas Development. That led to my asking my Department for a paper on the constitutional relationship between the Crown Agents and the Government, which was somewhat obscure. That led my predecessor the right hon. Member for Bridlington (Mr. Wood) to ask for the Stevenson Inquiry which, reported, but that report, despite pressure from the then Opposition, was not published. That led to the Select Committee's inquiries which, as soon as I came back into office in March, led to my initiating changes in 1583 the structure which in turn led to the revelation of what has been going on. The hon. Member for Cornwall, North (Mr. Pardoe) would do better to do some research.
§ Sir G. de Freitas
Will my right hon. Friend recognise that many of us who have followed for some time the affairs of the Select Committee and the Crown Agents were highly critical in the past? However that may be, there are many of us now who give full support to the present Crown Agents and their chairman?
§ Mrs. Hart
I am grateful to my right hon. Friend. I must be absolutely frank with the House. This is an unfortunate report to have to make to the House. It follows a series of events and a history of some years. I think that we are now doing the right thing, and I am certain that the Government's duty is to give full backing to the Crown Agents because of their importance and value and because the name of Britain is involved.
§ Sir Bernard Braine
Does the right hon. Lady accept that there are some Opposition Members—I was, after all, Chairman of the Select Committee that inquired into this matter—who were anxious about the financial activities of the Crown Agents precisely because they cut across a superb, unique record of service to the Crown Agents' principals in the Commonwealth and to the British economy? I very much welcome, although with some sadness, the statement which the right hon. Lady has made today. May I ask whether at any stage any of the principals have been critical of the conduct of the Crown Agents in the carrying out of their normal business?
§ Mrs. Hart
The answer to the last part of the question is "No". What emerges is that the matter is not as simple as the right hon. Gentleman might suppose. The answer is "No". The overseas principals still have every confidence in the Crown Agents, and I should like to reinforce what the right hon. Gentleman said. What we are talking about today is the consequence of operations in the money market and the property market which left undisturbed the complete efficiency and good faith of the operations 1584 of the Crown Agents in procurement and in service, which are the real bases of their operations.