House of Commons Hansard Debates for 4 Nov 1991

Mr. Straw : To try to suggest that the senior chief inspector agreed to 175 is preposterous. The right hon. and learned Gentleman knows that that figure was forced upon him by Ministers collectively. From documents that I have been sent by the senior chief inspector it is clear that the total number of inspectors will be used as follows : 11 will conduct high- profile surveys and focus inspections, six will inspect schools at risk and another 26 will undertake inspections to supplement database evidence.

Privatisation used to be a badge of honour worn with pride by these Ministers. Now Ministers utter the word only in order to deny that it has happened. But the truth is that HMI is to be privatised by the back door because the half of HMI who will not be employed by it will have to go and set up as private consultants. The local inspectorate is to be privatised. As the documents make clear, many of these so-called inspectors will not be educationally qualified but will be drawn, in the senior chief inspector's words, from the top of the Clapham omnibus.

What is so damaging to the maintenance of educational standards is the perverse belief of the Secretary of State that to secure competition between the providers of education, there must be competition between the regulators. That is as absurd as if there were to be competition locally between environmental health officers or, nationally, if British Telecom and Mercury were to pick and pay for their own regulators. The Secretary of State's proposal runs contrary even to the better parts of Thatcherite philosophy, which sought to separate regulator from provider. The Secretary of State is making the provider the regulator--it is the provider who pays the regulator. The regulators will be picked and paid for by the providers. It will become impossible to secure any sensible maintenance of a consistent standard of education.

There is another bad aspect of the proposals. The Secretary of State emphasises regular inspections. That is fine--so do we. But a regular inspection every four or five years cannot by itself be sufficient protection for the parents or the children ; nor can it provide enough information by which to judge the effectiveness of a school.

Mr. Roger King (Birmingham, Northfield) : That is why we are going to publish exam results.

Mr. Straw : Publishing exam results is fine-- [Interruption.] We have been saying that for three years, but as the Secretary of State managed to point out in his contorted evidence to the teachers' pay review body, exam results alone provide only an elementary indication of the effectiveness of a school. A continuous flow of information about the effectiveness of schools is also needed, and it can come only from a corps of local inspectors, properly supervised by a national inspectorate. If inspection is handed over to companies such as Coopers and Lybrand--to consultants--there will be no corps of people at local level to produce the necessary data.

This Government have the worst record of any Government on nursery education. They are bottom of the league for 16 to 19-year-old education and training. They have produced a £3 billion backlog of repairs and renewals

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needed for our crumbling schools. They have left the teaching profession demoralised and undervalued. They have left students from low income homes in serious poverty. They lack commitment to the service, and they do not use it. They have applied double standards by funding favourably a few pupils in CTCs and grant-maintained schools while denying most schools the funds that they need. The proposals in this Gracious Speech are either irrelevant or positively damaging to the raising of school standards. They exhibit no commitment, no leadership and no ambition on the part of the Government to and for our children. We need a Government who will do better for our children and our young people, a Government with policies dedicated to making this country the best educated and trained nation in Europe. This country needs and will get a Labour Government.

9.38 pm

The Secretary of State for Education and Science (Mr. Kenneth Clarke) : Unusually in a debate of this kind, the hon. Member for Blackburn (Mr. Straw) has sat down leaving me with only 22 minutes in which to reply. I make no complaint about that. I would have been quite happy if he had gone on for longer. He exposed the paucity of his case as he went on and every now and again he made a tantalising admission that he--rather surprisingly--agreed with certain aspects of the policy embodied in our forthcoming legislation.

Like the hon. Gentleman, I must acknowledge that in such a wide-ranging debate I will not have time to deal with many of the points raised. My hon. Friend the Member for Ashford (Mr. Speed), the hon. Member for St. Helens, South (Mr. Bermingham) and my hon. Friend the Member for Mid-Kent (Mr. Rowe) touched on aspects of British Rail to which I was tempted to respond. It is, however, many years since I was at the Department of Transport, so I shall concentrate on education this evening.

I am surprised not only that 20 minutes is left to me, but that education has been tabled at this stage in the debate on the Loyal Address. Hon. Members will realise that the conduct of the debate on the Gracious Speech is in the hands of the Opposition, and rightly so. They determine the subjects for each day and the deployment of speakers. The Gracious Speech contains three Bills on education ; two English and one Scottish. They are drastic pieces of legislation which should rightly occupy a large part of the time of the House. One is on the parents charter, one on further and higher education in England and one on further and higher education in Scotland. These three large Bills probably rival the Bill that introduces the council tax and the asylum Bill as the heaviest pieces of legislation in this year's Queen's Speech.

This debate was tabled for a Monday night when, for the replies, Labour Front-Bench Members greatly outnumber those on the Back Benches, which is not surprising as it is a one-line Whip night. I take that as a compliment. The proposals in the three Bills presented by my right hon. Friends and myself have captured the public imagination and caught the Labour party without a policy. What is more, they have caught the Labour party without a spokesman able to put its objections clearly when he is called upon to address them. I would not normally have said that that was a reflection on the

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respective debating abilities of the hon. Members for Sedgefield (Mr. Blair) and for Blackburn. It would be invidious for me to make the choice.

I should like to reply to more of what was said by the hon. Member for Sedgefield when he opened the debate. I have not heard the "white heat of the technological revolution" speech made so well for many years. I understand that the right hon. Member for Islwyn (Mr. Kinnock) made it fairly well at this year's party conference. On the other hand, going back to my days in employment debates, it was curious that the hon. Gentleman skated over his party's policy on the minimum wage, enhanced benefits for maternity leave and so on. I trust that at some stage I will have the opportunity to tax him on the curious proposal that legislation which increases the wage bill of companies does not necessarily increase the costs of those companies and therefore can be regarded as having nil effect on their competitiveness. I had not heard that theory advanced with such bravura before.

Mr. Blair : The House will hear it again.

Mr. Clarke : The hon. Gentleman says that we will no doubt hear it again.

The hon. Gentleman got on to my area by making comparisons on education and training between this country and other countries. Some statistics were trotted out again both by him and, later, the hon. Member for Blackburn, seeking to show that we are miles behind other European countries in the league tables. The hon. Member for Blackburn, in a frenzied passion, was throwing pieces of paper into the air, saying that we were bottom of this league table and bottom of that league table, apparently without having read any of them. The cutting that he tossed across to us is part of an article from The Times Educational Supplement. The text reveals :

"the survey format does not allow for the fact that some respondents, both in the UK and elsewhere, are in part-time, rather than full-time, education."

I find that league table for 14 to 18-year-olds as unintelligible as the hon. Gentleman did. The text states :

"An EC spokesman admitted there were conceptual problems' in compiling the statistics, but it was the nearest they could get to being comparable."

The hon. Member for Sedgefield and I agree that the Anglo-German study is a useful basis for comparisons. When I quoted the study back at him, he resorted to some rather irrelevant quotation about the youth training scheme, in an attempt to fend off my criticisms. As I have the text in front of me, let me just remind him of the conclusions of the comparison between the preparedness of British young people and German young people for employment on the strength of the education and training systems in the two countries. Page 235 states :

"In our surveys the British samples reported the greater number of vocational learning experiences. In both cohorts, higher proportions of the British respondents reported experience of information technology, learning new skills, being challenged or tested, using their initiative and working co-operatively in groups."

I shall quote further from page 239, to give us an overall picture of the report. It says :

"Nevertheless, the overall picture of greater breadth of experience and skill in the British system, and the more positive appraisals by the British young people of what they were learning, is sustained."

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I quote that not to be complacent and not to say that, in this competitive world, we should not be striving, as the Bills outlined in the Gracious Speech help us to strive, for higher standards. The argument used by many commentators on our system--that the grass is overwhelmingly greener on the other side of the hill in every respect in Europe--is exaggerated. Every year, participation by our 16-year -olds increases by 4 per cent. We shall catch up and, I hope, forge ahead of the best. However, we should not assume that a great deal has not been achieved quite spectacularly in the past few years.

I admired the speech of the right hon. Member for Blaenau Gwent (Mr. Foot), one of the more distinguished orators in the House, against whom I debated only a week or two ago in the Oxford Union. I could not help thinking, when he criticised us for not participating in European Community efforts on education, that here was the last and most remarkable convert come to the communautaire viewpoint on these matters. I have listened to many of his speeches and I have never heard him advocate that before. The Labour party must be desperate to get into power if even such venerable leaders as the right hon. Gentleman have to make these obeisances in the direction of Brussels.

Mr. Foot : The right hon. and learned Gentleman is catching up. He should understand that I was in favour of a social charter in Europe before there was any such thing as the European Community. I hope that, when he is reporting our debate in Oxford, he will tell the House who won the vote. It would be satisfactory to have such a vote in the country.

Mr. Clarke : I concede the vote in the Oxford Union. The right hon. Gentleman still has the ability to mislead the young that he has shown in his distinguished past. I can well believe that he has always been in favour of a social charter in Europe, but he has never before asked us to be in Europe enjoying its disadvantages. I return to the subject of educational policy and the Bills that must consume most of our attention. I commend my hon. Friends the Members for Rugby and Kennilworth (Mr. Pawsey), for Dartford (Mr. Dunn) and for Battersea (Mr. Bowis) for their overall appraisal of our policy.

I shall concentrate on the point made by the hon. Member for Blackburn. One major Bill that will come before us is that putting into effect the parents charter. Until the hon. Gentleman turned to the future of the HMI, he was hard pressed to find anything that he wanted to oppose in the parents charter. His main concern appeared to be that he did not want too many parents to be able to read it because they would find it attractive.

As my hon. Friend the Member for Rugby and Kennilworth correctly said, the parents charter is based on two policies designed to help all the other steps that we shall be taking to raise standards of education. The first is a much better range of objective factual information about the performance of schools for the parents and local public in the communities that the schools serve. The so-called league tables will publish not just examination results but truancy rates, staying-on rates, the destination of pupils and other information. Knowledge of how schools perform will help to improve the choice of parents. As my hon. Friend the Member for Dartford said, in an

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intervention in the speech of the hon. Member for Truro (Mr. Taylor), not only will it help parents to choose in those parts of the country where choice is practicable because transport is readily available, but, even in rural areas where choice is difficult, it will, for the first time, give parents better means to influence schools because they will be able to see, set out objectively, the performance of those schools.

Mr. Matthew Taylor : Newspapers will use the raw detail that will be supplied by the league tables, especially on examination results. What will the right hon. and learned Gentleman do to protect schools which have many students with special needs, especially students who are not statemented but who are seen to have special needs? The right hon. and learned Gentleman nodded when I asked him the same question earlier, but he has not said how he will ensure fairness between schools and therefore, no discrimination against students with special needs.

Mr. Clarke : Any intelligent parent, intelligent governor or intelligent newspaper person will bear it in mind that various factors influence results. That is what will happen when we get what the hon. Gentleman describes as the raw data. It will be a complete change to report these facts instead of keeping them secret. There is no reason why information such as the number of statemented children and attainment levels in national curriculum tests should not be made freely available by our schools. The information will be accompanied by statements on the purpose of a school and its particular aims. The arrangements remain the same for special needs. If I do not get the chance later in my response to answer the comments of the hon. Member for Caernarfon (Mr. Wigley) on students with special needs in further education, I say now that I attach great importance to those students. There will be a duty on the Further Education Funding Council specifically to ensure that further education is provided for those with special educational needs beyond the age of 16. We can debate statementing when we examine the Bill. There is a genuine difference of opinion between the experts on whether statementing, as it is now applied in sixth-form schools but not in further education colleges, is a desirable tool. There is no desire on our part to play down the importance of providing for those with special educational needs throughout their school career and thereafter.

I return to the setting out of league tables. It is no good saying that they will comprise raw data. They will be data that parents have never been allowed to see before. In my part of the country--the county which I represent in part is not the only one in this position--Labour-controlled local authorities are still adamantly refusing to release the data to the general public. They are advising schools not to make them available. The commitment of the Labour party is set out in "The Parents' Partnership", which in my opinion is a pretty pale imitation of the Government's policy.

Mr. Blair : We got our policy out before the Government's.

Mr. Clarke : Yes. When the Labour party knew that the parents charter was coming, the hon. Gentleman did not half rush out its paper, and he did not draft it very well.

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The information in the Labour party's document all comes under the new education standards commission that will take over responsibility for Her Majesty's inspectorate of schools and co- ordinate the work of local inspectors. The following is then offered to the public : "Through reports, studies and inspections the Commission will assess educational standards of schools and of local education authorities as a whole and publish detailed information on how to judge a school's performance."

Does

"detailed information on how to judge a school's performance" mean that the system will be the same as our parents charter, or does it, as it sounds, means that there will be an extra layer of bureaucracy, taking into its embrace Her Majesty's inspectorate of schools and producing not what has been described as raw data, but information that colours it all?

Anyone who is appraising a school will take account of the socio-economic backgrounds of different schools, for example. Much stress is placed on that. There will be serious dangers, however, if the information that is set out in performance tables is clouded by footnotes and qualifications, which sometimes are advocated because they are designed to prove that whatever the differences between examination performances there is no such thing as a good school or a bad school. It is thought that that will be the result if enough factors are taken into account.

I fully accept that it requires a good school to achieve good examination results, especially in an inner-city area rather than in a well-favoured suburb. A danger arises, however, from the constant emphasis that left-wing commentators put on socio-economic data. It is not right to assume that those in inner-city areas cannot be expected to achieve good examination results. The league studies show that there are positive dangers in assuming that in poor areas there will be poor results, and regarding that as an excuse. As my hon. Friend the Member for Dartford said, there were systems which ensured that that did not happen.

The hon. Member for Blackburn and I passed through education on a route that was remarkably similar to that followed by many hon. Members. We both went to state primary schools ; we both passed the 11-plus ; we both had local government scholarships--the hon. Gentleman went to a direct grant school while I went to what was then an independent school. The hon. Gentleman came not from an especially poor background, but not from an especially advantaged one either. He was not told that socio-economic circumstances meant that he could expect to get bad examination results. His talents were demonstrated through a system that gave him opportunities and brought out the best in him. Too many people in the Labour party kick away the ladder by which they rose through the education system and seek to defend poor performance where there is no economic advantage.

Inspection is very important, as it is the second string of raising the quality of education in our schools. The hon. Gentleman has changed his wording--at last, he did not accuse us of privatising HMI. It is a pity that debate on public services is reduced to such a silly level. He now accepts that we are not privatising HMI. The Bill will give HMI a new, independent, statutory role, with its own powers and duties separate from those of the Secretary of State. It will continue to inspect, and an important part of its role will be to advise, to produce reports, and so on. It will also monitor the new system of inspection which, for

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the first time, will produce more than 6,000 reports a year. More importantly, those reports will be produced for the benefit of the parents who read them.

Mr. Straw : Tonight I said nothing different from what I said before. Will the Secretary of State now admit that he intends to privatise part of the local schools inspectorate? It will in part become local, privately owned and controlled consultants. In other words, it will be a privatised inspectorate.

Mr. Clarke : Local authorities can continue to inspect in their areas. Alongside them will be the new inspectors, from private organisations-- [Interruption.] I repeat that we are not privatising HMI. There will still be local government inspectors--we are not privatising them. However, there will be new inspectors, who will provide an alternative--

Mr. Straw rose --

Mr. Clarke : No, I am not giving way.

Mr. Straw rose --

Mr. Speaker : Order. One hon. Member at a time, please.

Mr. Straw : The new privatised inspectors will be instead of public service inspectors.

Mr. Clarke : We cannot privatise people who were not there before. Currently, 6,000 inspections are not carried out every year. The number of reports that will be produced for parents will be not diminished, but greatly increased.

With respect to the hon. Member for Blackburn, the hon. Member for Truro made slightly more careful progress through the arguments. However, I wanted to ask both hon. Gentlemen what would be the alternative. We are introducing a new system that will generate 6,000 straightforward reports a year. As my hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman) said, they will be intelligible to those who read them. Parents, almost universally, never read Her Majesty's inspectorate reports on their schools. Indeed, it is unusual for parents even to see such reports. Some 3,000 to 5,000 inspectors will be required to produce those reports. Is the Labour party proposing that Her Majesty's inspectorate should suddenly take on 3,000 to 5,000 inspectors in one great national monolithic inspecting organisation? Perhaps that is the proposal--

[Interruption.] The hon. Member for Blackburn is not sure whether that is or is not his proposal.

I suspect that the Labour party, because of the pressures on it, will be driven to suggesting that all inspectors should be local council inspectors, inspecting the councils' schools. The Labour party is always huffing and puffing about privatisation and independence, but it believes that every school in the country should be run by local councils and inspected by those councils. Who should inspect the schools for councils but ex-teachers, because they are deemed to be the only people properly qualified? Apparently, anyone who is not a teacher or who does not work for the council should not be allowed to undertake an inspection. That is not standards or objectivity, but giving in to the usual pressures from the National Union of Teachers and NALGO, to which Labour Members always give in.

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I do not have time to debate now the Further and Higher Education Bill. Other than wanting local authority control of further education, Labour has no policy on that matter either.

Our Bills are all of a part with those objectives praised by my hon. Friends the Members for Elmet (Mr. Batiste) and for Saffron Walden (Mr. Haselhurst)--the drive to get better standards back into our education system, to increase yet further the participation of our young people, and to match the quality of education and training provided by our competitors abroad.

It being Ten o'clock, the debate stood adjourned.

Debate to be resumed tomorrow.

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BCCI

Motion made, and Question proposed, That this House do now adjourn.-- [Mr. Sackville.]

10 pm

Mr. Keith Vaz (Leicester, East) : This is only the second time that the House has been given an opportunity to debate the momentous consequences of the closure of the Bank of Credit and Commerce International. The past three months have seen almost daily developments, and a 15-minute speech and 15-minute reply cannot do justice to the huge amount of information that must be shared and analysed.

Over the past few months, I and members of the campaign team visited depositors and BCCI staff members all over the world. We visited Abu Dhabi and Dubai, where we met members of the royal family and other officials ; Hong Kong ; Gibraltar ; and other towns and cities in Britain.

We met people who remain stunned and bewildered, like victims after some great natural disaster. It is impossible to comfort them. We heard stories of such sadness and desolation that it was difficult not to be moved to tears. Those are the innocent victims, who knew nothing of the serious fraud. They put their faith and money in a bank that was being monitored and restructured under the close supervision of the Bank of England.

During the campaign, we met the Governor of the Bank of England, three times ; the Chancellor of the Exchequer, twice ; the Foreign Secretary ; and the Economic Secretary to the Treasury, twice. We had numerous meetings with the provisional liquidator, Christopher Morris ; the majority shareholders' solicitors, Simmonds and Simmonds ; and the restructuring advisers, Schroder Wagg. My right hon. Friend the Leader of the Opposition and the leader of the Liberal Democrats were by far the most supportive. People were unfailingly courteous and showed great sympathy--but throughout, all eyes were firmly on Abu Dhabi.

I pay tribute to the tireless efforts of members of the campaign committee. Associations were formed and meetings held to get people organised and to keep them informed. Only last night, at a meeting chaired by Ahmed Shazad at Brent town hall, depositors and staff reaffirmed their commitment to the campaign. Bankers and international business persons are not supposed to be natural campaigners, but they have proved themselves a match for this moment.

The expectations and hopes of those people and of many others, which were given life by the excellent judgment of the

Vice-Chancellor of the High Court on 30 July, were cruelly dashed by the decision of the major City shareholders that the bank could not be reconstructed. That decision, announced on 3 October, was a bitter disappointment. We were told later that the fraud was so enormous--a total of $10 million--that reconstruction was impossible, and that any money the majority shareholders could put in would soon disappear into a large hole. We were told that one cannot reconstruct something that is not there.

From being the bank that refused to die, BCCI became the bank that ceased to exist. It was merely a shell with glittering branches at the best addresses in London.

Has the Minister any information as to what has become of that $10 million? Nobody seems to know. I am

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informed that the bank's liquidation will probably occur on 2 December, and I have a number of specific questions, of which I have given the Economic Secretary notice.

Will he outline for the record what steps the Government took to support the reconstruction process, and what approaches were made prior to 3 October to the majority shareholders, to see what could be done to help?

Has the Minister met, or received a report from, his hon. and learned Friend the Minister of State, Foreign and Commonwealth Office concerning his visit to Abu Dhabi? Members of the campaign called for that visit, which we saw as a vital step on the road to an acceptable settlement.

Did the Minister ask the majority shareholder whether he was prepared to assist in finding a solution to the problem? I am certain that the BCCI issue was raised ; what issue in the whole saga did the discussion centre on, and who exactly did the Minister meet? Does the Minister not agree that the package to members of staff was shamefully low ? Will he support their reasonable request for a reasonable redundancy package that will take into consideration their length of service and undoubted loyalty to the bank ?

Will the Minister take this opportunity to confirm that the Governor has now retracted his blanket criticism of members of staff on the ground that they were involved in a criminal culture ? Has he seen the BBC's "Money Programme" of 27 October ? He will know that the programme disclosed that, on 26 April, the Bank of England issued a section 39 notice which required the production of named documents. The case came to court and was decided on 10 May. In his affidavit to the court, Roger Barnes, the head of banking supervision, demanded that the 6,000 files--the so-called Naqvi files, which were held by Allen and Overy, the solicitor of the Sheik of Abu Dhabi --be handed over to the Bank of England.

Mr. Barnes said that BCCI appeared to have made false and fraudulent statements to the governors of the Federal Reserve Bank in America. He said :

"if true these matters are of concern to the Bank as supervisors of the defendant and raise questions as to the continued fulfillment of the minimum criteria for authorisation under the banking act". Before that time, Federal Reserve investigators were in London, and they went to Abu Dhabi between 16 and 22 March this year. In view of that information, has the Minister called for a report from the Bank of England ?

This afternoon, I spoke to Mrs. Barbara Mills, the head of the Serious Fraud Office. She confirmed that the SFO had received documentation concerning the BCCI fraud only on 4 July ; yet on 10 May the head of banking supervision was referring to false and fraudulent statements. Does the Minister not agree that the SFO ought to have been involved at that early stage ? Does he not also agree that, as the matter was not raised before the Select Committee, it would be helpful if the Governor gave evidence to the Committee again ?

The Bingham inquiry, of course, needs to consider that and other points. Last week, I received a letter from Lord Justice Bingham in which he said that he was prepared to visit Abu Dhabi, provided that he was able to see individuals who would help his inquiry, and as long as it was within his terms of reference. Will the Minister confirm that the Government will assist in any way possible to arrange any meetings that are necessary for Lord Justice Bingham?

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Lord Justice Bingham went on to tell me that he could not predict when his report would be published, but that he would report as soon as "humanly possible". Will the Minister join me in urging that the report be prepared as quickly as possible?

Will the Minister tell the House when he expects the Prime Minister and the Chancellor to give evidence to the inquiry? The Bingham inquiry is important, because it is the only way in which we shall be able to get to the truth of these important matters.

Does the Minister agree that there is a very strong case for temporarily relieving the Governor of the Bank of England of his duties, so that he can give even greater assistance to both the Bingham inquiry and the Treasury Select Committee? It must be extraordinarily difficult for the Governor to deal with the aftermath of BCCI as well as with his other important duties. A secondment, with the Government's blessing, may be the answer.

Let me make it clear that I am not calling for the removal or resignation of the Governor. In my view, however, it may well speed up the entire process if he makes himself available in the way that I have suggested. Will the Minister consider my suggestion? Does the Minister stand by his statement, which was confirmed by the Chancellor, that, should the Bingham inquiry show that the Bank of England was negligent, he will consider the question of compensation?

There are only 28 days left before the crucial hearing on 2 December. This has been a catastrophe for so many people. I believe that the worst is yet to come. Does the Minister have any estimates of the likely impact of the closure of BCCI on the British economy? We know how many staff jobs have been lost, but does the Minister have any idea what the knock-on effect will be? It has been put to me that, after 2 December, billions of pounds could be lost in exports and lost orders, and that business closures will result in job losses, which will be an even greater burden on the employment benefit and social security system.

Both official and private bodies that import goods from the United Kingdom have lost substantial sums. Does the Minister seriously believe that what is perceived as a default by British regulators will have no impact on British exports? As of today, only 9,000 of the 40,000 depositors have made claims under the interim scheme. There are two trusts still in existence.

There is, in my view, a strong case for applying what remains in those trusts for the benefit of staff and others who will suffer hardship, notwithstanding the deposit protection scheme. Will the Minister consider an amendment to the law that would activate the deposit protection fund on provisional rather than full liquidation? The depositors protection association has raised with me a number of concerns about the operation of the scheme. First, the scheme is mean, compared with the scheme in the United States. The compensation limit was fixed at 75 per cent. of £10,000 in 1979. It was raised to 75 per cent. of £20,000 in 1987, and that limit remains the same. Secondly, only sterling deposits were covered. More than half the United Kingdom deposits, by value, were by non-sterling depositors, for whom there is no protection.

Are the Government prepared to commit themselves to improvements to the scheme? In the United States, the

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cover is for up to $100,000 in any currency. Is British protection to be second-class? What signal does that give to our overseas clients about the British banking system?

This House ought to be concerned about the reputation of the United Kingdom as a banking centre. We must also be concerned about this country's reputation in the Gulf. The Minister of State is quoted as saying that there is no lack of confidence in Britain as a result of what has happened but, as we found on our visit, officials are very polite in public but voice many concerns and criticisms in private. The chairman of the depositors protection association has had discussions with many substantial depositors who have lost money and who are now actively reconsidering where they should place their deposits in future and whether or not other European Community states may provide more beneficial protection than the United Kingdom. That could have a serious impact on the funds available to United Kingdom lending institutions.

Will the Minister spare a thought for the depositors in Hong Kong, Gibraltar and the Isle of Man? There was a conditional purchaser in Hong Kong. I should like to praise the efforts of Mr. David Doo and others who campaigned for that. However, Gibraltar and the Isle of Man are not protected, and they need protection.

Finally, what steps are being taken by the Secretary of State for the Environment to help the local authorities which relied on the authorised investment list and lost millions of pounds? Will they be given permission to take steps to prevent their losses from burdening the poll taxpayers in their area? From the Western Isles in Scotland, through Bury, down to Southwark in London, local authorities and directors of finance acted in good faith. They should not be left to face the consequences, unaided by the Government.

I was heartened this afternoon to hear from the provisional liquidator, Christopher Morris, that negotiations are still going on in Abu Dhabi to see whether anything above realistic assets could be raised by the majority shareholders to provide a better deal than the deal on offer by means of the deposit protection scheme. I welcome those negotiations. They need the Government's support. Will the Minister give his full support tonight to the negotiations? I urge the Government, through the Chancellor of the Exchequer, to convene an emergency meeting between representatives of the majority shareholders, the Bank of England, the provisional liquidators, the depositors and former members of staff to see what can be done to help both the depositors and the former members of staff. Only the Chancellor of the Exchequer has the political clout to do so. The Government cannot sit by and watch the lives of so many people being destroyed. I implore the Minister not to abandon those who have suffered and who will suffer if the Government do nothing. To fail to act now will only compound the tragedy.

10.15 pm

The Economic Secretary to the Treasury (Mr. John Maples) : The hon. Member for Leicester, East (Mr. Vaz) eloquently stated the problems that this bank fraud has caused its employees, depositors and customers. He asked what has happened to the $10 billion. That is the crux of

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the matter : it has been stolen. The bank has been defrauded of that sum. The section 41 report, which is broadly in the public domain, shows how those frauds were perpetrated, and I hope that, as the Serious Fraud Office investigation continues and as prosecutions in this and other countries are initiated, other details will be revealed.

The hon. Gentleman asked me to say what steps the Government took to support reconstruction. We made it clear that the Bank of England would consider any proposal for reconstruction. As he knows, no such proposal was made. Shareholders took the advice of a leading London merchant bank but decided that they were not in a position or were not prepared to put a proposal to the bank. It would not have been proper for the Bank to promote a reconstruction, because it would have had to sit in a quasi-judicial capacity and decide whether its proposals should be allowed a banking licence.

Nor would it have been appropriate for the Government to play a positive role in such a reconstruction. Again, if the Government were the applicant or were behind the application, the bank would have been placed in a difficult position. In addition, that was not necessary, because shareholders and their advisers knew what had to be done to put a proposal for reconstruction to the bank, and there was nothing that the Government could have added to that. The hon. Member for Leicester, East asked what my hon. and learned Friend the Minister of State, Foreign and Commonwealth Office discussed on his visit to Abu Dhabi. He did not specifically discuss BCCI, although he raised the subject while he was there. He returned only last week, and I understand that he has said that he will write to the hon. Member and presumably let him know what was discussed. It became clear that relations between the United Kingdom and the Emirates are still close and cordial and that the BCCI affair, although sad, will not be allowed to affect our relations adversely. Reconstruction was not raised while my hon. and learned Friend was in Abu Dhabi, but he mentioned the plight of BCCI depositors and staff in the United Kingdom, and he made it plain that, although he recognised that the majority shareholder had suffered greatly, many in the United Kingdom were also suffering. He arranged for letters from the BCCI depositors protection association and the BCCI campaign committee to be handed to the Abu Dhabi authorities.

The Abu Dhabi Government are as keen as we are for the depositors to get back as much money as possible and for employees to be given fair severance terms. The authorities made it clear to my hon. and learned Friend that they had set up a committee to handle those issues.

The hon. Member for Leicester, East asked about redundancy terms for staff. I do not think that anybody would pretend that the terms are generous, but they meet the statutory obligations. Anything more generous is a matter for the shareholder. I understand that the insolvency and redundancy payments that are made before the winding-up order is passed will not be subject to any deduction or set-off for loans that are owed by employees to the bank. There is a dispute about whether redundancy payments made after the winding -up order has been made are subject to set-off, and the Department of Employment is taking legal advice to establish a joint position with the liquidators. At the moment, they disagree about that, and

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