The Parliamentary Under-Secretary of State for Defence Procurement (Mr. Michael Neubert) : Competitive bids were sought from British shipyards for a batch of between one and four type 23s. Three yards--Cammell Laird Shipbuilders in Birkenhead, Swan Hunter Shipbuilders in Newcastle upon Tyne and Yarrow Shipbuilders in Glasgow--responded, and it has been an extremely keen and commercial competition, to the taxpayer's benefit. All three yards are to be thanked for taking part in it.
The competition demonstrated that our commercial approach is continuing to encourage improved efficiency in the industry, enabling it to compete more effectively here and abroad. It also underlined the benefit of ordering in batches and the better value for money that results from it. On this occasion, having invited tenders for up to four ships, we have decided to order three. To order four now, even all from one yard, would not give us significantly more attractive unit prices than ordering three. The new ships will be named Westminster, Northumberland and Richmond.
After evaluation of the bids, we have decided, subject to contract, to place the order with Swan Hunter Shipbuilders of Wallsend in Newcastle upon Tyne.
Swan Hunter's has won our order fairly and squarely on commercial terms. The value of the order is commercially confidential, but I can say that the average unit cost of the three new ships is significantly less in real terms than for the last order, which in its turn was lower than for previous ships of the class.
It follows that both Swan's and the other yards were extremely competitive this time. We are sure that they will be keen bidders for our future requirements. They will, for instance, be able to bid for another batch of type 23s, for which we hope to invite tenders next year.
Nine type 23s are now on order for the Royal Navy. It remains the Government's policy to maintain a surface escort fleet of about 50 destroyers and frigates. This latest order demonstrates as clearly as possible our commitment to NATO and to our nation's defence. At the same time, today's announcement confirms that we remain resolute in pursuit of value for money.
Mr. O'Neill : I thank the Under-Secretary of State for his announcement, which confirms the one that was made this morning in Press Association tapes. Although his statement will bring a sigh of relief to workers and their families on the Tyne, it will be a source of bitter disappointment to fellow workers elsewhere. Can the Minister give some hope to the rest of those employed in British warship building, by confirming the number of type 23s for which he will be seeking tenders in the forthcoming year?
Will he also confirm that he accepts the view of the Select Committee on Defence that orders of around 2.6 frigates per annum are necessary to maintain a surface fleet of about 50 vessels? Will the Under-Secretary of State confirm that price was the only factor involved in the
Column 198competitive tendering process? Does he acknowledge that although that process can drive down prices, it can also drive the losing yards out of business and thus prejudice future competition? Finally, what prospects can the Minister offer in the way of alternative and additional work on the Clyde and Mersey--for example, in maintaining our defence forces' amphibious capability? The Government have talked about that for many years, but they have yet to come up with any tenders.
Mr. Neubert : The hon. Gentleman gives a welcome, albeit grudging, to my announcement. Of course, the yards that have been unsuccessful must be disappointed--but not, I trust, despondent. On the previous occasion when an order for type 23s was announced--last July, by my hon. Friend the Member for Hove (Mr. Sainsbury), then Parliamentary Under-Secretary of State for Defence Procurement--the hon. Member for Rhondda (Mr. Rogers) forecast the possible closure of Swan Hunter, but that did not happen. Instead, I am able to announce today that an order has gone to that yard. I am unable to say how many frigates are likely to be ordered next year, although we shall again seek to invite tenders for a batch of frigates. At the time of last year's announcement by my hon. Friend the Member for Hove, my hon. Friend the Member for Hampshire, East (Mr. Mates), Chairman of the Select Committee on Defence, called on the Government to maintain the momentum by ordering two more frigates this year. We have done rather better than that. We have ordered three.
Mr. Barry Porter (Wirral, South) : Is my hon. Friend aware that his announcement will come as a bitter disappointment to the workers of Cammell Laird? I hope that he will take into account the possibility that, by next year, Cammell Laird may no longer exist to tender for orders.
Mr. Neubert : We take wider considerations into account, and my announcement is good news for the Navy, for NATO and for the yard that won the order this time--in the same way that it was good news for Yarrow's when it won last year's order. Cammell's has a substantial amount of Ministry of Defence business and it will be able to bid for the new type 23 order that we hope to place next year. We are also evaluating Cammell's tender for an aviation support ship, which it has submitted together with its parent company. We must hope that with improving productivity and increasing competition--the competition for the previous order was extremely keen--other yards will be successful in the future.
Dr. Norman A. Godman (Greenock and Port Glasgow) : The Minister will know that his announcement will cause deep disappointment among the employees of Yarrow's--a goodly number of which are constituents of mine who found work at that yard following the closure of Scott Lithgow. However, I am sure that Yarrow's employees will not be too deeply dismayed because they know that they work in a first-class yard. Can the Minister say how commercially and financially realistic the successful bid was?
Mr. Neubert : The hon. Gentleman's final question concerns a matter of commercial confidentiality. I commend the HMS Norfolk--the first of class that came from the Yarrow yard--of which we have received
Column 199excellent reports. As the hon. Gentleman knows, Yarrow was also very successful in winning the previous two competitions. All that has been said is possible only against the background of a sound economy under a Conservative Government. The strength of our economy and the soundness of our defence policy is the greatest reassurance that one can give for the future of shipbuilding in this country. If the Labour party conference proposal of a £5 billion cut in Britain's defence was ever put into effect, the prospects for British shipbuilding would be bleak if not non-existent.
Mr. Neville Trotter (Tynemouth) : Does my hon. Friend accept that this is splendid news, not only for Tyneside, but for the Royal Navy, reflecting Swan Hunter's proven record for the delivery of frigates on time and without defects? Does he accept that it is a splendid boost for Tyneside as we enter the 1990s, with thousands of jobs ensured for years ahead? Does he further accept that Swan's has matched its proven record of quality and commercial success in winning the order against fierce competition?
Mr. Neubert : My hon. Friend the Member for Tynemouth (Mr. Trotter) has been exceptionally active inside and outside the House in the promotion of the interests of Swan Hunter's work force. He deservedly shares in its success today. Over recent years, the yard has established an enviable reputation. HMS Chatham was delivered without a single recorded shipbuilders' liability defect. It is a tribute to the efforts made in it and other yards that we had such a successful competition, which led to this outstanding result.
Mr. Jim Sillars (Glasgow, Govan) : Will the Minister confirm the remarks that he made a few moments ago to the hon. Member for Wirral, South (Mr. Porter), that wider considerations were taken into account in making the decision? Is that not a contradiction of his previous statement that he made a purely commercial decision? Does that not lead us to the conclusion that basically it was a political decision? Is it not the case that once again the Scottish Office has lost inside the Government machine?
Mr. Neubert : Given that Yarrow won the previous two competitions for type 23 frigates, it comes ill from the hon. Gentleman to complain because it was not successful in this competition, which was extremely keen. Price was a major consideration, which is the purpose of inviting tenders in batches and orders from competitive yards. However, that was not the only consideration. As a responsible Government, we must take all considerations into account. This represents the best value for money and the best for the Royal Navy and the defence of Britain.
Mr. Jonathan Sayeed (Bristol, East) : My hon. Friend will know that the value of batch ordering has been urged on his Department for a number of years. I am glad to note that it continues to respond to that advice. Will the next batch be of equal size--three? Will he give the in-service dates of the three frigates, and will he say whether they will be equipped with the type 23 command system?
Mr. Neubert : My hon Friend has a respected record of interest in these matters. At this stage, we cannot say how many there will be in the batch for which we hope to invite tenders next year, nor is it our practice to announce in
Column 200advance acceptance dates for such warships. I reassure my hon. Friend that the new frigates will have the new command system from their build.
Mr. Frank Field (Birkenhead) : Does the Minister need to be reminded how serious the implications of his statement are for the future of Cammell Laird? While he is thinking about that, may I ask him two questions? First, can he say when he will put out to tender the new work for frigates next year? Secondly, has he had time to reflect on the bidding skills of the board of Vickers Shipbuilding and Engineering Ltd.? Would it be fair to say that its skills do not yet match those of the men and women who build boats at Cammell Laird?
Mr. Neubert : I readily understand the disappointment that will be felt by the management and men of Cammell Laird, their families and all those whose livelihoods depend on the successful securing of new ship orders. A competition is a competition, and it was fairly and squarely won by a yard that is in an area of above average unemployment. I cannot give the number of frigates that might be ordered next year or the timing of the placing of the order, but Cammell Laird has that prospect for the future. The hon. Gentleman would not expect me to comment on the policy of the VSEL board.
Mr. Tim Devlin (Stockton, South) : Is my hon. Friend aware that there will be a wide welcome in the north for this magnificent news for the north-east, which has implications across the region for construction and other spin-offs? I predict that there will be cheering on Tyneside tonight. Will my hon. Friend confirm that no one area has a God-given right to build ships? The only right that anyone has to build ships for the Royal Navy is, after proper competition and on full economic grounds, through producing the best possible defect-free product for the Royal Navy.
Mr. Neubert : Yes. The order and the competition that precedes it demonstrate, first, the British commitment to our defence, which is important, secondly, the benefits of ordering by batches and, thirdly, the competition that that creates. There are other advantages. Tonight there will be rejoicing on Tyneside because, we calculate, this order is equivalent to 10,000 jobs being sustained for four or five years. It is a valuable boost to employment in an area with above-average unemployment.
Mr. Ted Garrett (Wallsend) : Does the Minister recognise that I for one give not a grudging welcome to his announcement, but a delighted one? I speak for the people of Wallsend. The shipyard is in my constituency and is where most of my employed constituents work. Does he agree that the tributes made this afternoon are to the credit of the work force, the management and the excellent trade union relationships? Finally, may I say that it gives me great personal pleasure that one of the ships is to be named after the noble county of Northumberland?
Mr. Neubert : The hon. Gentleman has spoken in character and I join him in paying tribute to the work force at Swan Hunter that has secured this order. I can also pay tribute to the other yards that I visited and that are showing signs of improved productivity and extremely keen bidding. It was a most competitive competition and there had to be losers as well as a winner, but all the yards can be commended for their efforts to secure the order.
Column 201Mr. James Couchman (Gillingham) : My hon. Friend will know that we look forward to welcoming HMS Chatham on the Medway in the near future after its successful commissioning. This is splendid news for Swan Hunter, the private management of which has grown in our respect in the past four years since privatisation. Does this order have ramifications for building a third auxiliary oiler replenishment vessel? Can my hon. Friend say anything about that yet?
Mr. Neubert : I welcome my hon. Friend's comments on HMS Chatham, which come so close to home. I cannot say anything about auxiliary oiler replenishment vessels now, but the order has no implications of the kind that my hon. Friend suggested.
Mr. Menzies Campbell (Fife, North-East) : I welcome the Minister's announcement but, like many hon. Members, I understand the disappointment that will be felt elsewhere among the unsuccessful yards. Does the Minister agree that that disappointment might be mitigated if the Government were now to adopt a consistent pattern for ordering ships, as the Select Committee on Defence urged them to do? Does he agree with the Select Committee's point that
"a single year's orders is not the same thing as a consistent ordering pattern over a number of years, and the two should not be confused."?
Mr. Neubert : That is the view of the Select Committee on Defence which the hon. and learned Gentleman has quoted. It is for us to decide at each stage what the needs of the Royal Navy are and what orders we should place to support a fleet of escort ships. As the hon. and learned Gentleman knows, the Government's policy is to have a fleet of about 50. I am pleased to say that as a result of the order announced today and with the number of existing ships, the total in the fleet is 49.
Several Hon. Members rose --
Mr. Julian Brazier (Canterbury) : My hon. Friend's announcement is the third in a row in which three ships have been ordered. For the benefit of the Opposition Front Bench, will he spell it out once more that these orders are placed not just on front-end costs, but on other valuable issues, such as quality, ability to deliver on time and maintaining a competitive base?
Mr. Neubert : I know that this is the Christmas season, but I hope that my hon. Friend will not see three ships coming in automatically. This time we have been able to order three ships. He is right that quality, delivery on time and general productive performance are important factors in securing a successful order.
Mr. Nicholas Brown (Newcastle upon Tyne, East) : Will the Minister confirm that quality also played a part in his choice of yard for the order? His announcement will be greeted with a great sigh of relief on Tyneside, in the constituencies represented by my hon. Friends the Members for Wallsend (Mr. Garrett) and for Jarrow (Mr. Dixon), and by me. All that our shipbuilding community has ever sought from the Ministry of Defence has been fair play. We have tried hard to accommodate ourselves to the current procurement regime and to survive. Will the Minister confirm that today's announcement reflects that our community has done just that? I am sorry that it was not possible to share the order with Yarrow, but I was even sorrier last time when Yarrow won all the frigates and it was not possible to share one with us.
Mr. Neubert : The hon. Gentleman's comments are genuine and heartfelt. I have no hesitation in repeating my tribute to the quality of work at Swan Hunter, which undoubtedly led to the improved performance that has enabled it to make such a successful bid. It is a lesson for all yards that they must continue to work for better performance, to sharpen their competitive edge for orders here and overseas.
The report of the Parliamentary Commissioner for Administration on Barlow Clowes is published today, as are the Government's observations on it. Copies of both are available in the Vote Office. The House will be pleased to know that, after very careful consideration, the Government have decided, in the exceptional circumstances of this case and out of respect for the office of the Parliamentary Commissioner, to make substantial ex gratia payments to all investors who have suffered loss. I shall give the details later. Equally, I want to make it clear that the Government do not accept the Parliamentary Commissioner's main findings, nor are the Government legally liable.
These are important questions upon which I want to make the Government's position clear. I am therefore publishing separately today the Government's observations on the PCA's report. I hope that right hon. and hon. Members will read these observations carefully : I will not rehearse the detailed arguments here.
There are, however, a number of unusual features which taken together distinguish this case from other business failures. Although at the relevant time the Government had started on the process of overhauling the legislative background, before April 1988 the regulatory machinery was inadequate. It is also true that a large number of investors, many of them elderly, have suffered hardship. Many believed, although wrongly, that they were investing in gilts. They were led to believe that their investment was safer than it was.
When disagreeing with the findings in the PCA's report, the Government are not asserting that the conduct of the Department was beyond criticism, given the benefit of hindsight, but in the Government's view, the Department's handling of the case was within the acceptable range of standards reasonably to be expected of a regulator.
For the reasons that I have given, the Government have decided to offer substantial payments, without admission of fault or liability, to investors who have suffered loss.
The Government have decided that investors who invested up to £50, 000, including reinvested interest calculated at building society rates, should be able to recover 90 per cent. of their investment. It is important to maintain the principle, which the PCA recognises, that investors should bear some of the loss themselves. This is particularly so for larger investors, who must be expected to bear a greater part of the responsibility for their own decisions. To reflect this, the Government have decided that investors should be able to recover 80 per cent. of their investments between £50,000 and £100,000 and 60 per cent. of investments over £100,000. The detailed terms of the scheme are set out in the Government's printed observations.
The scheme will be administered on the Government's behalf by firms which are already acting in the liquidation and receivership of the Barlow Clowes businesses. A letter has today been sent to all investors, giving them an outline of the Government's proposals. Detailed terms will be sent in mid- January, and we hope that processing of payments will be completed in February.
Column 204The Government believe that there are others whose role in the Barlow Clowes affair deserves close examination and who cannot escape part, at least, of the blame for what happened. It will be a condition of payment that investors assign to me their rights in the liquidation and receivership and against third parties. I give notice of our intention to pursue vigorously any claims which show prospects of reducing the cost to the public purse of these payments. Parliamentary approval of this expenditure will be sought in a Supplementary Estimate in due course. Pending that approval, urgent expenditure estimated at £150 million will be met by repayable advances from the Contingencies Fund. Receipts from subsequent recoveries will be credited to the Consolidated Fund.
Recent legislation and recent jurisprudence make it clear that regulators are not liable to investors in the exercise of their regulatory functions. The Government do not believe that it would be right for this case to be treated as a precedent, and if similar proposals are made in the future, they intend to respond to them in the light of the principles set out in their observations. However, because of the exceptional combination of circumstances in the Barlow Clowes affair, the Government have decided to respond generously to relieve the hardship caused to large numbers of people.
Mr. Gordon Brown (Dunfermline, East) : I welcome, after 18 months, this first payment to Barlow Clowes investors after the clear and unmistakable evidence in the ombudsman's report of five significant areas of maladministration by the Department of Trade and Industry. Many pensioners have until today lost their life savings, and retired workers their redundancy payments. Can the Secretary of State confirm, in as precise detail as possible, what the average payment is likely to be, whether payments are to be made to the dependants of the 600 people who have died, whether there will be any contribution from intermediaries whom Lord Young has already criticised, whether he will definitely take court action against those whom he considers responsible to recover taxpayers' money, and whether the first payments are likely to be made before February so that investors who have waited for more than a year, some of them on the edge of bankruptcy, will not experience further delays?
I must ask why we have had to rely on the ombudsman to confirm the mismanagement, maladministration and incompetence that was widely known about more than one year ago. Will the Secretary of State explain--I acknowledge that he was not the Secretary of State at the time--why it took an internal inquiry, a departmental inquiry and now the ombudsman's investigation, instigated by my right hon. Friend the Leader of the Opposition, before justice began to be done? Does the Secretary of State agree that the House will find it strange that he is prepared to pay out at least £150 million but he continues to deny the Government's responsibility for mistakes and does not even apologise for his Department's role? Will he confirm that, while the need for compensation is agreed, the reason for the payment of this public money--our public money-- is not the fecklessness, gullibility or incompetence of the small investors but the fecklessness, gullibility and incompetence
Column 205of the Government who, for months and years, ignored all the warnings about Barlow Clowes that were available to them? Will the Secretary of State confirm that the ombudsman's conclusion is that mismanagement happened throughout the 1980s, not just in 1985 and afterwards, when the firm was licensed and relicensed? That mismanagement continued during the 1980s, with the failure to heed at least 10 warnings, including warnings from the stock exchange, the Bank of England and the regulatory bodies. Will the right hon. Gentleman now tell us who in the Government intends to take responsibility for this negligence on a vast scale that is costing huge sums of public money?
Will the Secretary of State now show that his Department has learnt some lessons so that public money will never again be used in this way? Will he compel financial intermediaries to take out indemnity insurance against negligence and fraud, ensure minimum standards of competence among intermediaries and take up the Securities and Investments Board's proposals for tougher regulation?
Will the Secretary of State demonstrate that his aim is not just to lure investors into the market place but that he regards it as his duty to give them proper protection from the unprincipled and the unscrupulous?
Mr. Ridley : The hon. Gentleman made many presumptions about the record of the regulators in my Department and what they may have done wrong. As he says, there are five charges of maladministration in the report of the Parliamentary Commissioners for Administration. I recommend him to study at length and with care those accusations of maladministration and the Government's response to them. He will notice that the only one to which the PCA attaches great significance is a new point that has never been raised before concerning the partnership in Jersey. I invite the hon. Gentleman, partial as he is, to decide whether his own thinking bears out what he said from the Opposition Dispatch Box this afternoon. He may find it does not. The first criticism of regulators in my Department dates from 1975. Therefore, he should not seek to make a party political point about the time during which these matters took place.
The hon. Gentleman asked what the payments will be. I repeat that they will be 90 per cent. of sums up to £50,000, 80 per cent. of sums between that and £100,000, and 60 per cent. of sums above £100,000. Those figures are based on taking 90 per cent. of the capital value, plus the compound interest due from the last time that interest was received by the investor up to the date of liquidation. To that 90 per cent. will be added the interest due since then. That is a generous way of recompensing those, particularly the smaller investors, who have lost money.
I confirm that the dependants or estates of the deceased will be eligible to claim their share of compensation. The hon. Gentleman knows that it is up to the Financial Intermediaries, Managers and Brokers Regulatory Association or the Securities and Investments Board to determine what to do about financial intermediaries. We shall pursue as vigorously as we can third parties from whom it might be possible to recover some of the costs. I hope that all the money will be paid out in February, but that requires investors or their estates to
Column 206make the necessary claims as quickly as possible after they receive the forms so that we can issue the payments to them. Although the gross cost of what I have announced is £150 million, the liquidators expect to be able to return more than £60 million from the funds that they still have so that the net cost will be much less, and even less if further sums are recovered from third parties.
We have decided to make these generous payments, despite the fact that the Government do not accept liability, for the reasons that I have given, plus the important additional reason, which I think the hon. Gentleman will respect, that we felt that we should respond to the recommendations for making redress put before the House by the PCA. That we have done.
Mr. Ian Stewart (Hertfordshire, North) : On behalf of many of my constituents and no doubt those of other hon. Members, I thank the Secretary of State for his full statement and the handsome scheme of recompense that he has announced this afternoon. No doubt it will be welcomed up and down the country.
When the Secretary of State reflects on the lessons to be learned from this sorry story, will he take it from me that it did not require a great deal of insight in 1985 to appreciate that the business of Barlow Clowes was not then being run in a fashion that would make it an obvious candidate for a licence? His Department's explanation that a cessation of business then would have been against investors' interests is difficult to understand, because if the money had been there, the investors would not have missed out, and if the money had not been there, there would have been no case for granting a licence at that time.
Mr. Ridley : I thank my right hon. Friend for his opening remarks. I am sure that the payments will be greatly appreciated by those who have suffered grievous loss. Many of them are poor people. On my hon. Friend's second point, I invite him to consider the extent to which what he alleges was indeed a lack of insight or whether it was a lack of hindsight. There is a great danger of mixing the two.
Mr. Alfred Morris (Manchester, Wythenshawe) : I welcome today's important step forward for the victims of this huge and vile swindle. The Secretary of State is aware of my special interest on behalf of two elderly constituents who lost not only their total life savings but their home.
Is the right hon. Gentleman aware of the further hammer blow that has hit my constituents and others today? They have received demands from the Inland Revenue for thousands of pounds of taxation that they were told by Barlow Clowes had been deducted at source. If the Government are not to take back with one hand what they give with the other, will the right hon. Gentleman urgently consult the Chancellor of the Exchequer to stop further suffering for elderly and vulnerable people?
Mr. Ridley : I am glad that the right hon. Gentleman made that point about taxation, because I may be able to help him. I am grateful for what he said about my statement. As I understand it, the Inland Revenue believes that the payments that I announced today, both of capital and in lieu of interest--it is not interest, but compensation for the interest that was not received--would not usually be subject to income tax. There will be some cases where there is a complication with the question of whether
Column 207investor's funds were transferred from the international fund to the national fund. I advise hon. Members whose constituents have a tax problem immediately to get in touch with the Inland Revenue or my hon. Friend the Financial Secretary to the Treasury. I am sure that the Inland Revenue will be only too keen to ensure that the tax law is correctly and appropriately applied in all cases. It will be a considerable relief to hon. Members to know that the payments that I announced today will, in general, attract no tax.
Mr. Nicholas Winterton (Macclesfield) : As the first hon. Member to warn the Department of Trade and Industry about the activities of Barlow Clowes in late 1984 and again in early 1985, as a result of information given to me by my constituent Mr. Peter Hayes of the Plan Invest Group, I warmly congratulate my right hon. Friend on his statement. I thank him and the Government for the generous level of compensation that has been announced. It will be most welcome to the small investor, about whom all hon. Members are deeply concerned. My right hon. Friend has restored the confidence of investors in those institutions and the capital market.
Mr. Merlyn Rees (Morley and Leeds, South) : Did you note Mr. Speaker, that the Secretary of State advised my hon. Friend the Member for Dunfermline, East (Mr. Brown) to study the report carefully? Because of the way that matters have been handled today, with the report coming out at 3.30 pm and a statement being made immediately afterwards, it has not been possible to do that. We have had only a quick reading of it and of the statement.
Is it not odd that, although the Government disagree with the findings of the ombudsman--he should have the congratulations of the House because he found five cases of maladministration--they are nevertheless paying up because, they say, they like the ombudsman? It is a curious way for a Government to proceed.
Many of us will want to contact our constituents this evening and tomorrow because the mail is difficult at this time of the year. I notice that page 21 of the report states :
"Investors will have approximately one month to decide whether they wish to accept the Department's offer".
The statement says :
"A letter has today been sent to all investors Detailed terms will be sent in mid-January."
Does that mean that we should tell our constituents that they have a month from mid-January or a month from now? That is the sort of question that we will be asked, so what should we answer?
Mr. Ridley : If the right hon. Gentleman reads it, he will see that the Parliamentary Commissioner's report includes the Government's decisions in relation to what he has suggested. The right hon. Gentleman will agree that it would be wrong for the major statement of important Government policy that I have just made not to be the subject of a Government announcement to Parliament. There may be a procedural difficulty here, because it is rare that a Parliamentary Commissioner's report is the subject of a statement to Parliament rather than a written communication to the hon. Member concerned. If that is
Column 208not a happy procedure, I am sure that the relevant procedural Committee of the House would wish to consider it, but there are difficulties on both sides.
I have written to all investors--including, I hope, the constituents of the right hon. Gentleman--informing them of my statement today. They will receive detailed forms in the middle of January and it will be for them to claim the compensation that I have announced. If they fill in that claim form rapidly, they should receive the compensation early. I cannot guarantee that they will receive the compensation if they do not return their claim forms early-- [Interruption.] I have said already that they will receive the claim forms in the middle of January. [ Hon. Members :-- "One month."] I said that we hope that all claims will then be paid during February. They cannot be paid during February if the liquidators do not receive the returned claims forms. It is entirely up to those investors who are due compensation to make sure that they get in their forms, or we cannot pay them in February. There is no cut-off date. I said that we hoped that all claims would be met by then.
Sir Antony Buck (Colchester, North) : Does my right hon. Friend appreciate that hon. Members on both sides of the House welcome the generous response by the Government to the victims of this affair? Does he agree that this may be a serious situation here, with the Government disagreeing with the findings of the Parliamentary Commissioner? Will my right hon. Friend look into that further so that the matter can be considered perhaps by the Select Committee on the Parliamentary Commissioner for Administration, of which I have the privilege of being Chairman?
Mr. Ridley : The Government are perfectly entitled to have their views about the chain of reasoning which the PCA has employed in this case ; my predecessors had doubts at the time of the Le Quesne report. We, too, have similar doubts, although on slightly different grounds, this time. The Government cannot be coerced not to put forward their view of such matters.
I am sure that my hon. and learned Friend will agree that the important point is that the Government have accepted the recommendations for compensation, even though they cannot accept the reasoning. I invite the House to study the arguments on both sides, and perhaps many hon. Members will come to the conclusion that the Government were right in their reasoning.
Mr. Matthew Taylor (Truro) : The constituents of all hon. Members, including mine, who have been affected by the Barlow Clowes affair will welcome the compensation that the Secretary of State has announced. But the idea that the confidence of investors will be restored is more dubious in view of the Minister's rejection of the ombudsman's finding, which I read leaves the ombudsman absolutely unconvinced. I suspect that our constituents will be able to draw their own conclusions as to who they believe has the best judgment, the ombudsman or the Secretary of State. But can they at least be reassured that even if the right hon. Gentleman does not accept the findings, he will ensure that his officials study them and act on them to make sure that these events do not recur?
Column 209regulators are not liable at law for matters of this sort. That is still the position. If the Financial Services Act 1986 had been in place when these events occurred, 15 years ago, there would have been no question but that investors could have been compensated by the Securities and Investments Board scheme only if the rules of that scheme had been met. For that reason we have a different position now. But I do not believe that the principle should be allowed to be established that regulators are liable at law for any loss suffered as a result of their actions.
Mr. Michael Grylls (Surrey, North-West) : Obviously the House is very pleased to hear of such generous compensation, which will help many vulnerable people who were worried about the results of the Barlow Clowes affair. Will my right hon. Friend bear it in mind, however, that the money will come from the generality of taxpayers, most of whom did not invest in Barlow Clowes and who therefore will receive no compensation? Is it not essential for my right hon. Friend to pursue every possible avenue with the utmost vigour in his efforts to get all the money back for the good of the generality of taxpayers?
Does my right hon. Friend agree that one lesson to be learnt from the affair is that high-return investments often carry the highest risk? If they pay some attention to that factor, the public may learn the lesson so that such an awful tragedy does not occur again.
Mr. Ridley : I am grateful to my hon. Friend. I assure him that the Government will seek to make the maximum possible recovery, through the courts, from any third parties who appear to have been to blame. My hon. Friend is right : a high-risk investment is likely to be one with a high return. It was, I believe, in recognition of that factor that the Parliamentary Commissioner suggested that there should be an abatement, which he agreed should amount to 10 per cent. for investments of up to £50,000 and a little more for larger investments.
It cannot be assumed that higher and higher returns can be offered, along with the safe knowledge that if they get through the regulator compensation will follow. That is a clear reason for not allowing a precedent to be established.
Mr. Doug Hoyle (Warrington, North) : Will the Secretary of State make it clear whether he will now publish the report by Mr. Ziman and Mr. Hoffman, the DTI inspectors who were appointed on 4 June 1988 under section 432 of the Companies Act 1985, to inquire into Barlow Clowes Gilt Managers? If not, why not?
Mr. Ridley : I have not yet received the report. When I receive it, I shall have to check with my legal advisers to find out whether I can publish it immediately, but I intend to publish it as soon as that is established.
Mr. Stephen Day (Cheadle) : May I join my hon. Friends, and some Opposition Members, who have been active on behalf of the investors in thanking my right hon. Friend warmly for his statement? Does he agree that, although the vast majority of investors will be delighted at the announcement, they will find the discussions now hovering round the technicalities of what was and was not done rather irrelevant? For the first time, those investors will be able to celebrate Christmas again. I am sure that
Column 210they simply wish hon. Members to thank my right hon. Friend the Secretary of State for a very generous statement.