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them are finding it difficult to get other jobs because they are tarred with the brush of the comments made by the Bank of England.Mr. Vaz : The hon. Lady is making a powerful and eloquent speech. I agree with everything she has said so far. May I tempt her a stage further and ask her to agree that, in view of the breach of supervisory duty that occurred and the passionate way in which she has put the case for the victims, the Government should consider the question of compensation? Does she further agree that people should be able to make representations so that the while matter may be examined, directly by the Government or in conjunction with Abu Dhabi?
Lady Olga Maitland : I do not regard it as the Government's responsibility to pay compensation, which would come out of the taxpayers' pockets. The real source for compensation must be the BCCI founders, ultimately Abu Dhabi. But we should make sure that the people who have suffered do not lose out.
I have a considerable Asian community in my constituency, including many former BCCI employees, depositors and a number of charities. It is cruel that charities, which invested in good faith, should be cheated. The Muslim Cultural and Welfare Association has many families on its books in Sutton. That association spent seven years raising £47,000 through jumble sales, fairs and so on, and at a stroke that money was swept away. I welcome the fact that, under the Government scheme, they received £15,000 compensation, but I hope that the Abu Dhabi Government will see them through further. The irony is that nobody would have put money into BCCI, had the bank not been propped up by the Bank of England. When the closure was happening, the Bank of England was discussing with BCCI's British operation its restructuring in the light of a variety of international scandals. The Bank's presence and involvement had the misleading result of persuading potential customers, investors and depositors that their money would be safe with BCCI. So the bank's integrity was believed. It is typical of people to say that the British way of doing things must be right.
The anger also lies in the fact that no heads have rolled. It is unbelievable and astonishing that no one has taken personal responsibility. The Governor of the Bank of England amazed me by saying that the Bank could not afford to lose scarce talent. That was cant of the highest order. What about people's life savings? Tell that to a family that has been beggared by the Bank of England's incompetence.
Many lessons can be learned. I welcome the setting up of a new fraud probe clearing body, the special investigation unit, designed to co-ordinate, exchange and collate information of all potential fraud on a regular basis, Let us ensure that it really works and that it is tough, resolute and meets regularly. We want to know how often, where and when it will meet and to ensure that it reports. Otherwise, the best endeavours of producing this important Bingham report will simply come to naught.
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1.56 pmMr. Clive Betts (Sheffield, Attercliffe) : I wish to concentrate my remarks on the local authorities that got into difficulties with BCCI and to draw two conclusions from that.
In 1990, when I was leader of Sheffield city council, I was approached through members of the Asian community in Sheffield to suggest that BCCI was an appropriate institution for the council to invest money in, for two reasons. First, it was offering a good financial deal and, secondly, a significant part of Sheffield's population originates from the Asian sub- continent. Those people felt that, as the bank had strong links with and lent to that community, it was right that the city in which they lived should make some of its money available for investment in BCCI.
I approached the professional officers in the city council and a meeting was arranged between the chair of finance, the deputy city treasurer and myself. We went to Bradford to meet senior officials of BCCI to tell them that an approach had been made to us and that we felt it right at least to investigate the matter.
Sheffield city council has a large treasury department with well-qualified and professional officers for whom I have the highest regard. Following the meeting, the council carried out an investigation of its own to see whether that institution was a proper place for the city to invest its money. On the basis of that investigation, the deputy city treasurer wrote to me and the chair of finance in April 1990 giving us advice, based on the information that the city council had found.
It was found that, although the bank was incorporated in Luxembourg, it was based in London. It was the largest private bank in the world with no clear lender of last resort. In 1979, when licensing arrangements for banks had changed in this country, BCCI had not immediately obtained a licence because of certain worries about it. In 1980, the Bank of America--one of BCCI's major funders--had pulled out. In October 1988, the Bin Mahsouz family, who controlled the National Commercial Bank in Saudi Arabia and had also been big funders of BCCI, had also pulled out. In 1988, the bank has been indicted of laundering drugs money in Florida. It had eventually come to a deal and accepted guilt.
The council's investigation found that there were links with Noriega ; it found that the state of Florida had revoked BCCI's banking licence ; it found that Luxembourg, where the bank was incorporated, was currently investigating BCCI. If that investigation had resulted in the closure of the bank in Luxembourg, it would have had a consequence for its banking arrangements in Britain. It found that the bank had been guilty of currency regulation breaches in several countries and that in 1988 the bank had lost $48.7 million. The deputy city treasurer told the chair of finance and me that he could not recommend BCCI as an appropriate institution in which to put public money from Sheffield city council. I draw two conclusions from that. First, some might ask why, if Sheffield city council could find out that information, other city councils that invested money could not discover that information. The reason is that the Sheffield city council is a large authority with a large treasury department ; it employs specialists and it has contacts in the City. The council used those contacts to gather the information about BCCI.
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Many of the authorities that ran into difficulty are small and do not have the same sort of in-house expertise as Sheffield city council. The authorities that got into difficulty looked at an authorised list from the Bank of England, which was circulated by the Department of the Environment. Whatever the Government say about it now, I believe that at the time many local authorities thought that the organisations on the list were approved and accepted as ones in which to place public money.Even if that were not the case, the Bingham report accepts that the Department of the Environment was not approving the organisations on the list, but was circulating the list to assist in the progress so that the authorities could issue more accurate returns to the Government, showing the organisations from which they were borrowing and to which they were lending. The Department of the Environment and the Treasury must have been aware of which local authorities were investing in BCCI and the amounts that were invested.
If Sheffield city council's treasury department could discover that list of information about BCCI--which would have led any lay person to conclude that it was not a satisfactory institution in which to invest--why did our national Treasury not come to a similar conclusion? On the basis of its information about local authorities investing in BCCI, why did the Treasury not take steps to warn and advise the authorities of the potential risks that they were running? Why did it do nothing? If the advice was available to Sheffield city council treasury, why did not the national Treasury-- which was far more able to obtain that advice--take steps to warn local authorities about what was happening? Instead, it sat back and watched. That is an indictment which gives all the local authorities involved the right to say that they should be compensated for investing in an institution about which they were not warned, but should have been. My second conclusion is that the difference between Sheffield city council and the authorities that got into trouble was that Sheffield city council had its own in-house financial investment advice and did not rely on brokers. The Government are considering extending compulsory competitive tendering into white collar services in local government, including financial advice.
The Government should think carefully. Local authorities have a right to independent financial advice, which enables councils to carry out their fiduciary duty. It is important for that advice to be given by people who work for the authorities, not to them, and whose sole loyalty is to the council for which they work. If the Government push ahead, force competitive tendering in that sector, and force local authorities to look for the cheapest solution and use brokers when they believe that their in- house advice is better and more appropriate, they will begin to run the risk of encountering more difficulties involving local authority financial organisations and investments. The Government should think hard before abolishing the right of local authorities to take their in-house financial advice. Authorities such as Sheffield city council, which had that advice, did not make the same mistakes or encounter the same difficulties as those authorities that used private sector brokers.
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2.4 pmMr. Piers Merchant (Beckenham) : I will make a couple of brief points, including the issue of compensation. As I represent a constituency which is--at least in terms of postal area, if not administratively--in Kent, I was somewhat miffed that the hon. Member for Neath (Mr. Hain) did not include me in his far-reaching Kent political conspiracy theory.
I compliment the hon. Member for Leicester, East (Mr. Vaz) on the effectiveness with which he has pursued the campaign, especially in defence of the victims of BCCI, with whom I have the most profound sympathy. The better the compensation deal that can be given to those victims, the more satisfactory will be the position in relation to this and any future banking or financial scandal. The victims must get the best protection that the law can give them.
I cannot support the idea of total compensation. In classic economic terms, interest is partly a payment for risk taken. If we remove the risk entirely, we take responsibility away from individual decisions, and we take out of the banking system the differentiation between the various forms of investment which drives the system. There must be an element of risk and responsibility left to individuals, although I agree that compensation schemes should be generous.
It is worth considering strengthening the existing compensation to give a greater percentage for the first £5,000. The figures could be 90 per cent. for the first £5,000, 85 per cent. for the next £5,000 and 75 per cent. for investments above that.
The closure of BCCI was a disaster for many, and it was essential to have a full inquiry. The report shows that that was carried out. The report is not complacent or weak, and it includes significant findings and important recommendations. The House should not play politics with this issue ; to do so will not cause amusement for the people most affected. Instead, we should move swiftly to implement the recommendations of the report, and we should put into law adequate levels of protection and investigation.
2.6 pm
Mr. Darling : With the leave of the House, Mr. Deputy Speaker, may I say that one feature of the debate is that it has been remarkably free of political bias.
First, does the Minister understand that almost every hon. Member who has contributed to the debate has stressed that the Bank of England was found to be at fault? Almost every hon. Member has made the point that the Governor should take responsibility for what has happened. Will the Minister convey that fact to the Governor? The Governor and the Government have not grasped the scale and nature of the problem.
Secondly, will the Minister tell us specifically whether the Government will consider the establishment of a separate regulatory organisation away from the Bank's other activities? Thirdly, although I appreciate that he is not here to answer for the Foreign Office or for the Department of Trade and Industry, will the Minister undertake, if he cannot answer the points made, that the appropriate Secretaries of State will communicate to those who attended the debate their views on two points?
No one in the Chamber can have failed to be moved by what the hon. Member for Spelthorne (Mr. Wilshire) told us about the difficulties being faced by British citizens who
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are now in gaol and about his constituent who died earlier this week. My hon. Friend the Member for Leicester, East (Mr. Vaz), who deserved every plaudit he was given for his efforts, has made a powerful point about the fact that the Government, especially through the Department of Trade and Industry, have information which should be made available unless there are good reasons for not doing so. Will the Minister attend to that?The hon. Member for Beckenham (Mr. Merchant) suggested that we cannot remove the element of risk. Of course we cannot. An individual always has to exercise judgment. However, the risk that people took in putting money into BCCI, whether individuals or local authorities, was a risk that they took in the light of the fact that BCCI was regulated by the Bank of England. The regulator has let them down. That must have some bearing on the question of compensation and we cannot walk away from that.
Will the Minister tell us when he expects that the Government will bring forward legislation or, if he has a White Paper in mind, when it will be produced? As I said earlier, we simply cannot wait much longer for a clear indication of the Government's intentions. 2.9 pm
Mr. Nelson : With the leave of the House, I shall reply to this most interesting debate. I am grateful to the hon. Member for Edinburgh, Central (Mr. Darling) for his measured winding-up speech for the Opposition. I am also grateful to all hon. Members for their thoughtful contributions on this most important issue. Their words will be heard outside the House with interest, not just by those who were affected by the collapse of BCCI. For the most part, the quality of the speeches has been outstanding and, on behalf of the Government, I express my appreciation. The issues are wide ranging and complex, but I hope that I shall be able to answer most points. I am anxious to refer to all those hon. Members who spoke.
The hon. Member for Edinburgh, Central said that the signs should have been read earlier and that options other than closure were available. I acknowledge that, because restrictions and measures short of revocation of authorisation can be imposed by the Bank of England. As I said in my opening speech, the Bank did that in other cases, to the advantage of employees and depositors alike. Like many hon. Members, the hon. Gentleman called for the resignation of the Government-- [Interruption.] I mean the Governor. This must be the only day when there has not been a call for the Government's resignation. This place is getting rather like Turandot because it is the fashion to call for heads every day. It is also the fashion to resist such calls, and I do so now.
The hon. Member for Edinburgh, Central asked who would accept responsibility. In his response to the Select Committee on the Treasury earlier this week and in other ways the Governor has behaved in a wholly proper manner in answering the criticisms in the Bingham report and in bringing forward measures of redress. The hon. Gentleman and many other hon. Members, including, in particular, my right hon. Friend the Member for Worthing (Mr. Higgins), spoke about the case for separating central banking responsibilities from authorisation and supervision. I acknowledge that a case can be made for that, but
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the Bingham report does not conclude that there is such a case on the basis of BCCI. Bingham does not say that such a case should not be considered more generally, but does not believe that it is justified on the findings of the supervision of BCCI. Many hon. Members have expressed that view from time to time and it is a matter of record that I did so perhaps as much as seven years ago and more recently in the House. However, it is not the Government's view at this time that such a separation is called for and it is not being considered.As I said earlier, it is not my view that by changing structures we necessarily get better decisions. I would far rather have better human judgments with a defective structure than poor human judgments with an ideal structure. At the end of the day, it is people judgments that matter. I am sure that everyone agrees, although some hon. Members have said that people judgments have been brought into question.
Those who argue for a banking commission, a separation of powers, do so on the basis that it would perhaps provide a permanent core of expertise and professionalism in supervision. They argue that an independent supervisor would improve communication with other regulatory bodies such as the Securities and Investments Board which is also concerned about similar judgments on such matters as fit and proper persons. Often the same fit and proper persons are in banks and financial services companies. The SIB sees logic in a similarity of commission of supervision.
It is also argued that there is a conflict of interest between a central bank and the supervision of banks. That was mentioned by the right hon. Member for Berwick-upon-Tweed (Mr. Beith) and by my right hon. Friend the Member for Worthing. It is said that a banking comission would be more accountable to Parliament and might be able to detect a problem bank rather earlier. Some have said that even a strengthened Board of Banking Supervision is not the best way to spot the bad apples in the tray. It has also been pointed out that other countries in Europe, such as Germany, France and Switzerland, have banking commissions. I acknowledge also that there is an argument that, if and when the evolution towards a European central bank is completed, the responsibilities of such a central bank, as far as I am aware, would not encompass supervision of banks, so some changes might be necessary in the light of that.
It remains the Government's position that they do not favour, and do not believe that the report makes the case for, such a separation of powers. A separation would undoubtedly involve a great deal of administrative upheaval and loss of continuity. Bingham and the Government consider that the case for separation is not made by the report, that no system of banking supervision is perfect in detecting dodgy banks, and that there is already an established expertise and authority in the Bank of England that we would be reluctant to unsettle.
The hon. Member for Edinburgh, Central spoke about the need for common standards of supervision in the European Community, and I agree about the importance of that. My right hon. Friend the Member for Worthing made a similar point when he spoke about the passporting of banking facilities both within the European Community and from without into this country and other EC states. The second banking co-ordination directive will enable such passporting. That is to say, other banks within EC countries will be able to passport their services into here,
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and our banks will be able to go to other EC countries. The foreign subsidiaries of banks in other EC states will be able to have branches in this country.Given all that, it is important that we have common and high standards of banking supervision and prudential control. The second consolidated supervision directive, tied together with the solvency directive, the own funds directive and the deposit guarantee directive, all of which have either been agreed or are in the process of being negotiated, are directed to this end. They should ensure that the high standards that we insist on are more widely promulgated within the European Community and that we are able to withhold from the Community authorisation for banks that do not meet those standards. Outside the Community, one relies much more on the Basle concordat for high and common standards of supervision. The work that is being done and the recent improvement in minimum standards, which was agreed in July, will mark a major step forward in this direction.
Mr. Higgins : Will we be able to withhold authorisation if, in our view, another Community country does not impose standards that are sufficiently high?
Mr. Nelson : We shall not be able to withhold authorisation from a bank that has been authorised elsewhere in the Community. Where we are not satisfied with the system of authorisation and supervision in a country, we intend to address that through the system of peer group review, to which my right hon. Friend referred, by the system within the Community of observance of the directives and infraction proceedings and by the other challenges that can be made. The basis of the peer group review is checking on each other's systems to our own advantage to ensure that they comply with the high standards set by the directives and are common to all EC states.
The hon. Member for Edinburgh, Central spoke, like others, about local authorities, and some have spoken about the list. The Select Committee on the Treasury and the Civil Service has made it clear that the existence, by itself, of a list of banks that have been authorised does not absolve local authorities of the responsibility to husband their resources and to be careful. It is not a guarantee of credit worthiness that an authorised bank appears on a list. It is a point which the hon. Member for Sheffield, Attercliffe (Mr. Betts) also made. It is said that if a local authority, such as Sheffield city council, can learn that it is perhaps not the best- quality deposit to make, why should the Treasury not provide that information? I suggest that it is not the Treasury's job to draw up credit ratings of banks or other investment businesses. It can provide to the best of its ability, through an agency such as the Bank of England or others, an authorisation procedure, but individuals and local authorities still have to make their own decisions.
What is proper--it is the recommendation of the Select Committee--is that local authorities should perhaps get together for some central advice on these matters, either through the Chartered Institute of Public Finance and Accountancy or the local authority associations. In the Government's response to the Select Committee's report there is an acceptance and endorsement of that proposal.
The hon. Member for Edinburgh, Central spoke about the limit under the deposit protection scheme and whether it should be raised. The limit is rather more generous than
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that proposed in the European directive. I know that it is less under the compensation scheme in the investment sector, which is regarded as being a different area in which people put all their money into investments. We are talking, of course, about a compensation scheme that is paid for by the rest of the banking community.The hon. Member for Edinburgh, Central, with others, raised the wider issue of regulation. There is the prospect of a personal investment authority in the light of some recent remarks. The review that is being conducted by Mr. Andrew Large of SIB's supervision is not a wider review of the entire regulatory system. It is a follow-up to the IMRO investigation of Maxwell. It is an attempt to ascertain whether there is a proper implementation of responsibilities under the Financial Services Act 1986 and whether there are ways in which the SIB can sharpen up its act and improve communication. The review is not a re-look at the fundamentals of our statutory-based system of practitioners self-regulation. A separate case may be made for and against that, but Mr. Andrew Large is not engaged in that exercise. My right hon. Friend the Member for Worthing spoke about the quality of regulators and asked whether special treatment was being provided in the case of BCCI. Indeed, it was special treatment. The Government's response to my right hon. Friend's Select Committee's report concluded that the existence of the college of regulators was in the end responsible for unearthing--
Mr. Higgins indicated dissent.
Mr. Nelson : That was the Government's conclusion. In my view, a reading of the report suggests that it was only when the college got together and was able in consolidation to look into BCCI more adequately that the worms started coming out of the can and became rather more apparent.
My right hon. Friend asked whether there would be blackballing of certain states under the Basle concordat. The answer is no. There will not be blackballing, but there will be new minimum standards, which have been promulgated since 6 July by the Basle arrangements. My right hon. Friend talked also about the case for separation, on which I have already responded.
The right hon. Member for Berwick-upon-Tweed said that the Bank of England was undoubtedly at fault. He said that nobody resigns and nobody pays. We have heard that refrain recently. I hear what he says, but I believe that the conclusions of the Bingham report justify the view that while serious mistakes were made, they have been addressed. The report does not conclude that there was negligence. It is for others to assess the extent to which the mistakes, faults and criticisms are serious or less serious. The Government and the Bank have taken the findings of the report extremely seriously, as is reflected in the range of measures announced by my right hon. Friend the Chancellor of the Exchequer.
My hon. Friend the Member for Bromsgrove (Mr. Thomason) said that there is a record of the Bank acting properly and carefully. I was grateful to him for saying that. On a day when there has been much criticism, understandably, cast about the Bank of England, it is important to recognise that it has an outstanding record of supervising our banking system. It is easy to criticise in a case where things may have gone wrong, but it is appropriate to remind the public that the Bank has a good
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record, over a long period, of fulfilling difficultresponsibilities and statutory duties with great ability, sensitivity and confidentiality.
The hon. Member for Leicester, East (Mr. Vaz) has taken an active part in the BCCI affair for a long time, and I pay tribute to him for his interest. He felt that the Governor of the Bank of England should go, and drew attention to the human plight of those affected by the BCCI fraud. We were all moved by the cases that he recited, and we understand the difficulties confronted by those who lost out, as well as by those who cannot find jobs.
Most reasonable people accept that there are good and bad in any organisation. It is unusual for a company's employees to be wholly bad or wholly good. That being the case, it is unfair and disappointing that many BCCI employees who attended to their duties with great diligence and integrity should be besmirched by events. The hon. Member for Leicester, East spoke also of compensation and cited Barlow Clowes. I explained in an intervention earlier why I thought that case was different. The hon. Gentleman mentioned the important issue of liquidation fees, as did other hon. Members. I will disclose a few facts, because I feel strongly about that issue. I have tried to do my homework, and the House and the public are entitled to more information.
I understand the restraints and difficulties that confront liquidators, and I must be careful about Government involvement in pressurising or leaning on them. That would be quite improper--but a request to know the facts is not unreasonable. The fees and expenses of the liquidators to date amount to some £69 million. Of that sum, some £28 million was incurred in respect of their role as provisional liquidators prior to the winding-up order on 14 January, and some £48 million since then. The court has approved the payment of fees up to 15 April 1992, since which time--with the authority of the court and the approval of the creditors' committee-- they have drawn on account of fees yet to be formally approved.
Fees are currently running at approximately £1 million a week, not all of which is accounted for by the liquidators. Legal and other professional fees amount to some £22 million
My information is that the cash book receipts of the liquidators in respect of BCCI SA England amounted to just over £325 million, and that cash book payments amounted to £124,684,000--leaving a balance at 15 July 1992 of £200,318,000.
Mr. Vaz : Will the Minister give way?
Mr. Nelson : I am sorry, but I must insist on replying to other hon. Members.
My hon. Friend the Member for Ryedale (Mr. Greenway) said that the Bingham report found no evidence of negligence on the Government's part, and I am grateful for that. He welcomed the proposals on auditors
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and spoke with great knowledge about the PIA, the Insurance Brokers' Registration Council, and the 49 per cent. limit--to which he has drawn my attention before.The hon. Member for Western Isles (Mr. Macdonald) said that although the report did not find evidence of negligence, its findings pointed to that. He said that the Bank of England was too easily deterred by BCCI in 1984. The reasons, though not wholly accepted by Lord Justice Bingham, are given in paragraphs 244 and 245. The hon. Gentleman said that not all criticisms were made with the benefit of hindsight, and I believe that that is accepted.
My hon. Friend the Member for Spelthorne (Mr. Wilshire) spoke of the death of a constituent. He said that the treatment in Abu Dhabi was appalling and that he wanted a complaint lodged. There have been discussions at the highest level.
The right hon. Member for Lagan Valley (Mr. Molyneaux) said that as the legislation was defective, compensation should be paid. He also raised the case of Mr. George Finbar Ross. I shall take both his comments very seriously, and examine them carefully.
My hon. Friend the Member for Dover (Mr. Shaw) made a thoughtful and realistic speech. I am most grateful to him for the way in which, in measured tones, he defended both the Bank of England and its Governor. In contrast, the hon. Member for Neath (Mr. Hain) attacked self-regulation and City ethics. He made wounding remarks to me personally, describing me as bland and complacent ; and he called the Governor dishonest, a charge which he should certainly withdraw. I think that every other hon. Member will agree that, without doubt, the Governor is a man of total integrity. He needs to be defended, and I consider that what the hon. Gentleman said went way over the top. He was paranoid about the role of British security.
I am grateful to my hon. Friends the Members for Sutton and Cheam (Lady Olga Maitland), to the hon. Member for Attercliffe--
It being half past Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.
MAINTENANCE ORDERS (RECIPROCAL ENFORCEMENT) BILL [LORDS] Ordered,
That, in respect of the Maintenance Orders (Reciprocal Enforcement) Bill [Lords], notices of Amendments, new Clauses and new Schedules to be moved in Committee may be accepted by the Clerks at the Table before the Bill has been read a second time.-- [Mr. Bosworth.]
LIAISON
Ordered,
That Mr. Robert Adley, Sir Nicholas Bonsor, Mr. Richard Caborn, Mr. Bob Cryer, Mr. Frank Field, Mr. Jimmy Hood, Mr. Terence L. Higgins, Mr. David Howell, Mr. Greville Janner, Mr. Robert B. Jones, Mr. Gerald Kaufman, Mr. Archy Kirkwood, Sir Ivan Lawrence, Mr. William McKelvey, Mrs. Marion Roe, Sir Giles Shaw, Mr. Robert Sheldon, Sir Malcolm Thornton, Mr. Gareth Wardell, Mr. John Watts and Mr. Jerry Wiggin be members of the Liaison Committee.-- [Mr. Bosworth.]
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Military Ceremonial Duties
Motion made, and Question proposed, That this House do now adjourn.-- [Mr. Boswell.]
2.31 pm
Dr. Charles Goodson-Wickes (Wimbledon) : I declare an interest at the outset as a reserve officer in the Life Guards who has in the past served in both the service regiment and the Household Cavalry Mounted Regiment. I am delighted that you are in the Chair, Mr. Deputy Speaker, as I know of your family connections with the Army. I am grateful for the opportunity to address the subject of military ceremonial duties. It is important both in itself and as a case study of what I believe to be the ill-thought-out implications of "Options for Change". A Friday Adjournment debate, when most hon. Members are in their constituencies, is never a well -attended occasion, but I especially welcome my right hon. Friend the Member for Southend, West (Mr. Channon) and others. Many more hon. Members have sent messages of support.
It was Harold Macmillan who once wisely advised that any Government took on the National Union of Mineworkers or the Brigade of Guards at their peril. Just over a fortnight ago, the Government succeeded in taking on not one but both, and--in defiance of all military principles--opened two fronts on the same day. The debate on the pit closures conveniently disguised the fact that dramatic reductions in the Household Division were being confirmed by means of a written answer. The House has thus had no opportunity until now to consider the matter.
For some 18 months, discussions on what I believe to have been a well- informed basis have been taking place with successive Secretaries of State for Defence, and with my right hon. Friend the Minister of State for the Armed Forces. He will know that a group of us--I should like my remarks to be associated with our former colleagues, Robert Boscawen and Sir Charles Morrison--also took our case to our right hon. Friend the Prime Minister. The strength of our arguments was recognised, but I submit that no adequate answer--let alone any significant concession--has emerged. I make an exception for the welcome retention of the Ceremony of the Keys at the Tower of London.
In his typically generous way, my right hon. Friend--along with my right hon. and learned Friend the Secretary of State for Defence--has apologised to me and, by implication, to the whole House, for failing to give proper notice of the decision. I do not wish to dwell on the issue, but it was indeed curious that the military seems to know more about the proceedings of this House than hon. Members do, despite numerous inquiries to the Ministry of Defence and to business managers.
At the risk of sounding trite, let me say that the Government's decisions on the two issues ensured that the miners went on the march, but put in grave doubt the Household Division's ability to do so in a way that is compatible with its incomparable history, standards and reputation. I wish to sketch my grave reservations, the legitimacy of which can be supported by statistics in my possession. I shall try not to bog the House down in a mass of figures, however, as those might obscure fundamental arguments. I also wish to ensure that my right hon. Friend has an opportunity to reply.
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The overriding aim of the Household Division is to produce first-class operational soldiers who also provide the finest ceremonial in the world--a unique dual role. The fact that they have been able to do so for centuries is a tribute to the skill and dedication of officers, NCOs, guardsmen and troopers to uphold standards that have long been forsaken elsewhere. Their ability to continue these commitments is, I submit, being severely undermined by the Government's proposals.There are two component parts to the problem, the Foot Guards and the Household Cavalry, which I put in the context of the need to reduce the Army in this changed, but still highly unstable, world and the inevitable pressure of the public expenditure round. The Foot Guards are to be reduced from eight to five battalions--a cut substantially larger, in percentage terms, than those in the infantry as a whole. The House should not forget that the Household Division in London and elsewhere not only supports the monarchy but shows off this country to its best advantage in terms of prestige and excellence.
The ceremonial duties, with their colour and music, are carried out supremely well. The troops, in a brilliantly British way, act as a reserve force. They are financially self-supporting, by virtue of the tourist industry. They could be used at any time to give security to the capital and to maintain public order. No more efficient or cost-effective set-up is conceivable. What is that very special institution now being required to do? It is being required to accept duties which range from the Queen's birthday parade, through state visits, guards of honour, the Cenotaph parade, the State Opening, and so on, which may mean Foot Guard battalions being based in London district for eight to 10 years as against the present maximum of around five years, which is already considered unacceptable. That period of eight to 10 years will be interrupted only by six months of unaccompanied emergency tours to Northern Ireland.
What sort of future does that offer to soldiers and their families in terms of career progression and quality of life? I cannot see a great rush to take on or to maintain such daunting and demanding duties. Already officers and men of the Foot Guards and the Household Division generally--the very people whom they least want to lose--are applying for redundancy.
The Government tell us that nobody will notice that the birthday parade has been cut from eight to six guards. The precedent of the Falklands campaign is prayed in aid. I suggest that at that time the country's thoughts were concentrated at least as much on the Foot Guards fighting far afield, as on a reduced parade. It may suit the Government to settle on a six-guard parade, but it will soon become clear that that is the maximum.
Where shall we obtain extra fighting soldiers, if the Army is stripped to a skeleton? The Foot Guards are not up to strength now and rumours of imminent recruit capping abound. Initially what the Secretary of State describes as "discretionary commitments"--by this curious term I imagine that he meant the deployment of troops in the Gulf and Bosnia, let alone other unforeseen emergencies--will have implications for the Foot Guards, on top of the difficulties of fulfilling our commitments in Northern Ireland and elsewhere. The very existence of the birthday parade as a proper spectacle worthy of the monarch must be put in doubt.
As for the position of the Household Cavalry, historically it is made up of two regiments--the Life
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Guards and the Blues and Royals. Powerful though the arguments are over the Foot Guards, the Household Cavalry's problems are much more acute. Nearly three weeks ago the Life Guards and the Blues and Royals underwent the most extraordinary process--a so-called "union", by which two service regiments were brought together but still wearing separate cap badges.In addition to its duties as an armoured reconnaissance regiment, it will be expected to find the Mounted Regiment in London not from two service regiments but from one. In other words, there will be the same commitment but from a different base. It will also be expected to continue to carry out ceremonial duties of a highly sophisticated kind from that reduced base. No other formula would be so certain a guarantee of damaged career prospects, disillusion and overstretch. Neither my right hon. Friend the Minister of State for the Armed Forces nor I doubts the willingness of the Household Division as a whole to make the proposal work--that is its ethos. However, serving soldiers are in a peculiarly inhibited position from which to express their strong doubts as to the medium-term and long-term sustainability of the plan, especially as the initial reorganisation would mask the problem for a while. Soldiers cannot speak up for themselves if they consider the Government's plan unworkable. They will continue to struggle to make it work, but the mathematics prove that it will not.
The most infuriating aspect for the Household Cavalry is that the solution is instantly available. There is a perceived need for a third regular recce regiment for the rapid reaction corps. I suggest to my right hon. Friend that if "union" is to be more than clever semantics and there is a true distinction between it and "amalgamation" either the Life Guards or the Blues and Royals could take on that role.
I know that the Foot Guards are grateful for their increment, and the Household Cavalry for its training wing, albeit both look better on paper than in practice, but those are not enough.
My right hon. Friend has it in his power to rectify the situation, and I wish to give him time to reply specifically to what I have said rather than to regurgitate old and, I suggest, discredited arguments. I wish to press him on the following three points, which his long experience as Minister of State for the Armed Forces will enable him to answer.
First, will my right hon. Friend confirm that reservations and caveats have been expressed in many of the most experienced quarters both through the chain of command and through other channels? Question number two is : will my right hon. Friend confirm that an undertaking has been given that no additional pressure will be brought to bear on the Household Division? As a rider to that question, will he further confirm that never again will there be more than two state visits a year?
The third and most important question is : will my right hon. Friend confirm on the record that a verbal undertaking has been given both by the Prime Minister and by the Secretary of State for Defence that the proposals for the Household Division are for a trial period only, and that if the reductions prove unworkable the whole situation will be reviewed?
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Without those assurances I believe that what has been admitted to be a highly theoretical exercise will have to be rethought immediately, before it is too late to retrieve the situation. Only in that way can the country continue to maintain the military expertise and excellence for which it is so widely respected throughout the world.2.42 pm
Mr. Paul Channon (Southend, West) : I am grateful to my hon. Friend the Member for Wimbledon (Dr. Goodson-Wickes) for allowing me a moment or two to take part in the debate. I agree with every word of his argument.
The House knows that we do not have to have ceremonial duties in London if the Government of the day think it a bad idea. Nevertheless, it would be foolish to abandon them, and if we are to have them we must ensure that those who carry them out are given the opportunity and the conditions in which to do so without appalling strain being put upon them. If they are not, the present state of affairs cannot survive long.
I ask my right hon. Friend the Minister of State for the Armed Forces to give us two assurances when he replies to my hon. Friend the Member for Wimbledon. The first is that if the situation that the Government have imposed on the Household Division does not work, it will be kept under careful review and changes will be made if that proves necessary. Secondly- -again I echo what my hon. Friend has said--will my right hon. Friend ensure that no additional pressures are brought to bear upon soldiers who already face a very difficult and demanding task in London? If he cannot give those assurances, the new arrangements will remain extremely unsatisfactory and the Government should not countenance them.
Is it really the case that the Foot Guard battalions will be kept in London for up to eight years? If so, I cannot believe that that arrangement can last for long.
The public like ceremonial duties ; they appreciate them. There is no doubt that the amount of tourism that is attracted by those ceremonial duties means that they represent one part of the armed forces that clearly pays for itself. Those duties are not, of course, essential to the defence of Britain, but I believe that if they are to be undertaken, they must be done well. My right hon. Friend owes it to those who undertake those duties now and those who will undertake them in the future to ensure that the new arrangements work. Everyone concerned wants to make them work, but I doubt whether they can--I hope that I am wrong.
If those arrangements do not work I urge the Government to give us an assurance that this matter will be kept under review. I also urge them to ensure that no undue strain is put on the Foot Guard battalions or on the Household Cavalry in undertaking the task that they have been given in the difficult conditions set by the Government.
2.45 pm
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