House of Commons Hansard Debates for 6 Jun 1995

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Federation and when did the West Indies Federation cease to exist?" I now realise why the Conservative party gets the candidates that it does. Sadly, future generations of Conservative Members will not search in their watermark trays for Crown watermarks on the back of their stamps, but for Foundation plc watermarks. Sentimentality may be a fine thing and Crown Agents is a fine thing, but sentimentality in itself is not a good reason for not privatising Crown Agents. We need to consider whether privatisation will make Crown Agents more efficient, more effective and more accountable to the people who go to it for its services. It would be possible for the Government to make the case that that would happen, but they have not done so to date. The reason that they have failed to do so is that they have set out in the Bill the framework, but not the detail about how the private Crown Agents will operate.

Without that detail, I am not prepared to take a gamble that the high ethical standards, the social commitment and the commitment to development which have characterised Crown Agents since it became a public corporation will be maintained. There are hon. Members who will seek that reassurance from the Government if they are to support the Bill. The Minister will have to say far more on Second Reading and in Committee to win that support and to achieve the cross-party consensus which exists about many parts of the Government's overseas aid programme.

Other hon. Members have quoted from the Financial Times article of 26 August 1993 which commented on Baroness Chalker's letter to the Chairman of the Foreign Affairs Select Committee outlining the Government's plans for the future of Crown Agents. The Financial Times reported that the Japanese

"lobbied the UK government against outright privatisation, arguing that this would imperil the honest broker status of the organisation."

In evidence to the Foreign Affairs Select Committee, Barry Ireton, an ODA official, said:

"I think it is fair to say the Japanese would have concerns if the Crown Agents simply became an ordinary commercial private business."

What the Japanese say matters not just because the Japanese are the second biggest customers of Crown Agents, putting hundreds of millions of pounds of business in its direction, but because Japan is an enormously important player in overseas development assistance. This year, for the first time, Japan has become the world's largest overseas aid donor--larger even than the United States. Japan may give less as a proportion of gross national product than the United Kingdom, but because its economy is hugely larger than the United Kingdom's, it gives more overseas aid.

Traditionally, Japanese overseas aid has gone to developing countries in its region of south-east Asia--to countries with which the Japanese have historically had trading or other ties. Those countries include the Asian tiger economies such as Korea, Taiwan, Singapore and Malaysia which have been development success stories. They are no longer poor or under- developed countries, but developed countries with strong economies and a high standard of living for many of their citizens. There is a limit to how much overseas aid one can give to a middle-income or high-income country.

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The Japanese, therefore--I applaud this--have turned to providing more aid for the benefit of poor people in poor countries. To do that, one must inevitably turn to providing aid for Africa, the poorest continent. In contrast to its historical links with countries in its region of south-east Asia, Japan historically has had little to do with Africa so it has turned to donor countries that have had a historical relationship with Africa, most notably the United Kingdom, for technical assistance and advice.

When, for example, the Japanese decided to send a contingent from their national defence force to assist Rwandan refugees in Goma--an important decision in itself because it was the first time that land forces from the Japanese national defence force had been deployed outside Japan--they went to the UK high commissioner in Nairobi for advice, which was willingly given, on the logistics and practicalities of working in such a role in Africa. Such advice does not apply only to emergency situations. The Japanese Government come to Crown Agents for advice about providing long- term development assistance in Africa. They use Crown Agents as an agent for the Japanese Government's overseas development programme in 14 sub- Saharan countries and they have put £720 million of business through its hands.

The amount of overseas assistance from Japan to Africa via Crown Agents is likely to increase because the Japanese economy is likely to grow and the priority that they give to Africa in their overseas development programme is likely to increase. The Japanese have found already that they can be helped ably by Crown Agents in terms of the expertise that they require to deliver their overseas aid objectives effectively.

The Government have, in the Bill, responded to the view expressed by the Japanese that there should not be outright privatisation of Crown Agents. They have produced instead a curious hybrid--a privatisation without teeth. It is a toothless tiger which will create a public interest, private sector development organisation. It is toothless because all the profits created by this private development organisation will be recycled to pay for further development work and no dividends will be provided for shareholders. To date, all the Government's privatisations have been predicated on the assumption that it is the profit motive and the shareholders' insatiable desire for dividends which act as a spur to efficiency and effectiveness and which contribute to the benefit of privatisation. It is, therefore, something of a surprise that the Government now argue that privatisation can be equally effective without the incentives of the profit motive and dividends to shareholders. Why was British Gas not privatised on the basis that profits made would be reinvested for the benefit of customers and that dividends would not be paid?

Mr. Jacques Arnold: The losses.

Mr. Bayley: The hon. Member for Gravesham (Mr. Arnold) asks about losses. In the past, the losses were always paid for by the consumers so there would be no change in that regard. The same case could be made about the privatisation of British Telecom or the electricity boards.

With their proposed privatisation of Crown Agents the Government are creating an entirely new concept and a new entity--a private sector, public interest corporation. If they believe that that can be the basis of a successful

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privatisation, there are good arguments for using the same approach elsewhere. If the benefits of privatisation can be gained in that way, but with additional benefits and safeguards for the public interest and the customers, surely the principle could be applied elsewhere. I shall now ask the Minister a few specific questions. According to the Bill, the Crown Agents Holding and Realisation Board will have between two and 10 members. The Library briefing for the debate suggests that representatives of charities and other development organisations, among others, could be appointed to the board. If the Government wish to reassure the public and Opposition Members that the ethical principles and the commitment to development that have underpinned the work of Crown Agents to date will be retained under the new regime, one of the most effective ways of doing so would be to ensure that people with a commitment to development rather than to profit-making would have the whip hand on the board.

If there were one token representative from one development organisation I would not be reassured, but if a substantial proportion--perhaps 20 or 30 per cent.--of board members had that commitment I should welcome the fact.

Mr. Baldry: I understand and fully accept the reason why the hon. Gentleman was not present for my opening speech, but let me put his mind at rest now. I have already said several times that the Government will not appoint the members of the foundation. I would hope that all its members will have a strong and total commitment to the development purposes and philosophy of Crown Agents.

The Bill transfers Crown Agents from its present 1979 statutory format into a company limited by guarantee that the Secretary of State will on some future occasion transfer to the foundation--also a company limited by guarantee. The members of that foundation will not be appointed by the Secretary of State. Some of the existing people at Crown Agents, together with other charitable and philosophical organisations, will come forward and say that they wish to be members of the foundation. The Government will have to look at them in the round, consider their competence and probity and decide whether to hand over the body that the Bill sets up to that foundation. Clearly it is the intention that everyone involved with the foundation should be totally committed to the development purposes and philosophy that Crown Agents now espouses. We seek to provide the structure to enable it to do its work more successfully as we approach the 21st century.

Finally, without trespassing much further on your patience, Mr. Deputy Speaker, I should like to explain that if one is not careful the use of the word "privatisation" in the context of the Bill becomes a form of shorthand. Yes, the Bill will privatise Crown Agents in so far as it will take it out of the public sector, but if the hon. Gentleman had listened to my speech--

Mr. Deputy Speaker: Order. My patience is now at an end. That was a very long intervention.

Mr. Bayley: I thank the Minister for his intervention, and I shall certainly read his speech. There is still something that confuses me, and if it was not covered in the Minister's speech I should be grateful if he would deal with it in his summation. I had understood that the Crown

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Agents Holding and Realisation Board was intended to be a sort of stalking horse for the foundation--a foundation in waiting. Clause 11 says:

"The Board shall consist of not less than two and not more than ten members appointed by the Secretary of State".

It then makes further provision for the appointments. If I am wrong and the Minister has already explained why, I shall find out when I read his speech.

However, if there is a chance that the new foundation will grow out of the Crown Agents Holding and Realisation Board and its constitution and coming together is likely to be guided by that body, I shall want some reassurance from the Minister that a substantial presence on the Holding and Realisation Board will come from non-profit-making charities and non- governmental organisations with an interest in development issues.

My second question about the Holding and Realisation Board has already been raised several times in the House in recent months, and indeed over the years. It concerns the pay and other remuneration of directors of privatised organisations. There is undoubtedly widespread public concern about the escalating salaries and fees being taken by such directors. There would be public outrage if six-figure salaries of the type that have caused so much concern when paid to the directors of other privatised public organisations were paid to directors of the new foundation or its subsidiary company--a body whose raison d'etre is to assist the process of development for the benefit of poor people in poor countries.

Mr. Enright: Does not my hon. Friend consider that a good example of what he is talking about is provided by Clare Spottiswoode, who was appointed to look after the public interest and operated at a public service or civil service level?. But we now know that she is putting in for a huge rise that will take her salary well into six figures.

Mr. Bayley: My hon. Friend draws attention to just one of the examples that have given rise to genuine public concern.

Lady Olga Maitland: I thank the hon. Gentleman for giving way, because I was becoming intensely frustrated by his gross slur on the integrity and probity of Crown Agents. He seems to suggest that its personnel will become corrupt and selfish in future. Will he retract any slur that he might have cast on Crown Agents?

Mr. Bayley: I was drawing a parallel not with Crown Agents but with what has happened in other public sector enterprises that have been privatised. If the hon. Lady thinks that it is a slur to refer to the fact that directors of privatised companies earn hundreds of thousands of pounds a year, perhaps if she manages to catch your eye later, Mr. Deputy Speaker, she will explain why. However, if she thinks that it would be appropriate for the directors of a privatised Crown Agents to receive six-figure salaries of the sort that have caused public concern elsewhere, perhaps she will make that case to the House instead.

I appreciate the fact that when there is a privatised body the Government will not set salary levels, but they will set levels for the interim body-- the Crown Agents Holding and Realisation Board. On page 6 of the Bill--

Mr. Baldry: It might be helpful if I clarified the matter before the House gets into a muddle. The Crown Agents Holding and Realisation Board is completely different

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from the organisation which the Bill is dealing with. The board was set up by the Crown Agents Act 1979 to handle the consequences of the speculative investments on its own accounts by Crown Agents in the 1970s. That was the whole reason for the legislation.

An organisation was needed which could draw a line under those losses and manage them, and that organisation is the Crown Agents Holding and Realisation Board which is dealt with in clause 11 of the Bill. It is totally separate from Crown Agents, and the Crown Agents Holding and Realisation Board--as I said in my opening speech--will not transfer to the private sector with Crown Agents. It will do the residual work which it has to do, and as soon as it has finished that work it will be wound up by the Secretary of State. The Crown Agents Holding and Realisation Board to which the hon. Gentleman refers is history, and relates to losses made in the 1970s.

Mr. Bayley: I thank the Minister for the explanation, and I do not need to pursue that matter further.

There are two other issues which I would like to put to the Minister. First, the aims and objectives of the foundation should be set out in the memorandum and articles for the company. This is not a technical detail--it is essential to the debate. Opposition Members, and some Conservative Members, are concerned that the privatisation of Crown Agents could destroy the ethical principles of social justice and development which are the hallmark of Crown Agents. Those principles attract its customers.

We need to be reassured that the new-style Crown Agents in the private sector will not change its nature, and that it will continue to subscribe to these principles under its no-dividend, profit-recycling constitution. That will be the point upon which the opinion of many Opposition Members will turn as to whether to support the Bill or not. If the Government genuinely want to maintain the high standards of public service provided by Crown Agents, I for one would not object in principle to that being done in the private sector rather than the public sector. But because of some things which have happened following other privatisations, I fear that the commitment to public service will be undermined unless those principles are firmly guaranteed in the founding constitution of the new-style private sector Crown Agents.

Will the Government give an undertaking to publish a draft of the memorandum and articles before the Bill goes into Committee? The debate will be meaningless if it is predicated on a "what-if" assumption and if we do not have the memorandum and articles before the Committee debate starts. If the Government wish to reassure the Opposition in Committee by going through in detail how it will work in practice, they should publish the memorandum and articles. If the Government wish to obscure the real nature of a privatised Crown Agents until after the House--with the benefit of the Government majority--has passed the Bill, they will come up against suspicion and opposition from the Opposition Benches.

Mr. Baldry: It would be disingenuous of me not to respond, as I would not want the hon. Gentleman to be misinformed when he votes at the end of the debate. I made clear in my opening speech and in response to interventions that we have nothing to hide, but I do not think that it will be possible to publish the memorandum and articles of association prior to the Bill going into

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Committee, for a number of reasons. Not the least of those is that we must consider whether the foundation should be a charity. Charity law at present is in a state of flux post-Barings. Hitherto, charity trustees have had an interest in placing all of their charitable funds in a secure bank because that--

Mr. Deputy Speaker: Order. I hesitate to stop the Minister, as I know that he tends to make helpful interventions. However, I assume that he will be winding up the debate, and he can then answer the questions which have been put to him.

Mr. Bayley: Without treading on your toes in any way, Mr. Deputy Speaker, I might say that it was thoughtful of the Minister to try to reassure me.

Some changes may be necessary to the final memorandum and articles before they are submitted to Companies House in view of what has happened to Barings and to the Barings trust. But that will not alter the substance of the memorandum and articles. I ask the Minister to publish a draft of the memorandum and articles, as that must be done if we are to have a constructive debate in Committee. If not, we will be debating the issue blindfold.

The Minister may have seen a draft which has reassured him, but he has not made such a draft available to the House. Without such a draft, the debate will be determined and dictated by the suspicions which obviously exist.

I understand that the Government are to take limited reserve powers over the foundation. They will have a golden share to prevent fundamental changes to the purpose of Crown Agents in its privatised form, but that golden share is only for a period of five years. I presume that the provision has been made because of concerns expressed by the Japanese Government and by other countries which use Crown Agents. They are seeking reassurance that the honest broker status of Crown Agents will be maintained. We need to give that reassurance for longer than five years.

Nothing is ever cast in stone for all time. If we find in five or ten years' time that the new-style Crown Agents has built up a track record and has reassured people that its commitment to development rather than to profit-making remains unchanged, the Government at the next appropriate overseas aid legislation could remove the provision and give away the golden share. But if we want to provide the reassurance which I believe is necessary for the 70 per cent. of Crown Agents' customers who come from overseas, five years is too short a period.

8.17 pm

Lady Olga Maitland (Sutton and Cheam): I give a warm welcome to the Bill, which is in response to Crown Agents' wish for greater commercial freedom. First, I declare a constituency interest, as Crown Agents has its headquarters in Sutton. I am enormously proud of its achievements, and I echo the remarks of my hon. Friend the Member for Carshalton and Wallington (Mr. Forman) in wishing Crown Agents well as it moves into the future.

Crown Agents is a unique organisation, whose historical background goes back 162 years. Its members were first appointed in 1833 as Crown servants acting under prerogative for the procurement of goods and services for colonial administrations. They formed the backbone of British interests overseas.

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Today, a meeting at the Crown Agents' Sutton headquarters is always stimulating. It always has something new to tell. Its staff, its proudest asset, are enthusiastic, dedicated, and totally committed to their work.

When one hears of the organisation's sheer range of activities, one well understands why it is one of Britain's great ambassadors across the globe, covering 150 different countries. It employs 850 staff in 30 offices worldwide, and places annual orders worth more than £200 million for its clients. More than 70 per cent. of its income originates outside, and that percentage is growing. Tantamount to its success is that it has now paid more than £20 million in capital and interest to the Government.

As we have heard throughout this debate, the Crown Agents provides a range of services for aid agencies such as the United Nations, the World bank and the European Union, and for a number of bilateral donors, including Japan, Sweden and the Netherlands. Similar work is carried out for a large number of public sector organisations around the world. Projects range from bank training in Tashkent to humanitarian relief in Bosnia.

As we speak, with tension rising all the time in Bosnia, another aid convoy with food and medical supplies is crawling slowly over the mountains to reach such desperate towns as Banja Luka, Sarajevo, Mostar, Zenica and Gorni Vakuf. The drivers are all supplied by the Crown Agents, called in by the ODA to do a job that calls for unremitting courage and determination. The ultimate result is that they are saving thousands and thousands of lives. Their lot is full of risks, driving in perilous conditions.

Paul Goodall paid the ultimate price when he was killed in a vehicle hijack in Bosnia. His colleagues, Simon King and David Court, were seriously injured, and were duly recognised in the Queen's 1994 birthday honours list. Drivers John Crosthwaite, John Ellis, Raymond Milton, Nigel Moore, David MacAdam, Bob Phillips, Tony Winton, Edward Perks and Cyril Dawes fully deserve their honours from the Queen for keeping the aid convoys going in extremely difficult circumstances. I salute those men all the more for their modesty because, unlike the soldiers who protect them, they do not receive public acclaim. Although they are often overlooked, they are the key to the humanitarian programme's success. I therefore welcome the Prime Minister's decision last week to send troop reinforcements to secure the protection of those valuable convoys.

The House has heard many references to the Japanese Government, who have such a high regard for the Crown Agents that they have chosen to place their aid programmes in its hands. In their first pilot aid programme, they asked the Crown Agents to deliver food aid to the far eastern sector of Siberia. That package was worth £25 million and, as expected, the programme was a success.

Indeed, it was such a success that today the Crown Agents has a major office in Tokyo, which I have visited. It supervises Japan's aid programme, which is worth $590 million since 1988 and covers 40 individual grants to 14 countries in sub-Saharan Africa, the Philippines and Peru. The Japanese Government are now the second biggest client after the ODA.

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The European Commission, through European procurement agents on behalf of the European Union, has nominated the Crown Agents, one of its members, to carry out a number of contracts across the world in countries ranging from Malawi to Bangladesh.

The Crown Agents' work is far wider than delivering assistance to the third world. The know-how fund makes full use of the Crown Agents. One project is the management and training programme in Belarus to assist the republic to change to a market-based economy. As my hon. Friend the Member for Gravesham (Mr. Arnold) said, the Crown Agents is also active in the Caribbean, where it works on development in both the public and private sectors. In Asia and the Pacific, it focuses on aid, economic management and public sector development such as tax administration. I pay tribute to the rapidly growing and successful department that deals with tax administration, which is developing a vigour of its own.

The Crown Agents has been teaching countries to create self-sustaining projects such as bank training in Tashkent and Vietnam, bringing their performance up to international standards. In Africa, it provides not only support for major health and education programmes but international banking, account and foreign exchange services to Governments and central banks.

Those services are crucial to developing countries such as Malawi, which I visited last year and where I had a chance to talk to some of the Crown Agents' representatives there. I join my hon. Friend the Member for Ribble Valley (Mr. Evans) in wishing the newly elected Government well. By bringing in an ordered democratic government, Malawi is more likely to benefit fully from the Crown Agents' work. The range of the Crown Agents' work extends to other countries such as Tanzania, where it undertook a comprehensive review of public procurement and supply of management arrangements.

Given the range of activities, we might ask why so many countries choose to turn to the Crown Agents to deliver and handle those aid programmes. The clue might lie in the fact that it delivers real value for money. Not a penny is wasted. In the 1993 annual review of the Crown Agents' activities, Mr. Peter Berry, the managing director, stated:

"Increasingly, as aid becomes subject to a more detailed cost-benefit scrutiny than in previous cycles, we find ourselves able to demonstrate our effectiveness on several levels. Our cost-effectiveness in the actual spending of aid is self-evident. Yet we can also monitor the aid process, interfacing between donor and client to provide surety to each that their money is being well spent, and we can manage and train recipients to handle effectively and accountably the funds made available to them."

That sums up one of the qualities of the Crown Agents.

A brief resume of the Crown Agents' wide-ranging work will help to understand why I welcome the Bill: it is vital that it should now be able to develop further. Times have moved on since the passing of the Crown Agents Act 1979, when it became a public corporation with a board appointed by the Secretary of State for Foreign and Commonwealth Affairs. It came into being after a turbulent history, which prompted a regulatory framework designed to give the Government tight control over its affairs.

That may have worked at the time, helping to build public confidence, but, by the same token, as the years went by and the range and scale of business done on

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behalf of other Governments and agencies increased, it became evident that the constraints were unrealistic. In short, the Crown Agents had outgrown its constitution. It needed to be set free to compete with the world in the 1990s and beyond.

The problems were first set out clearly in the annual report of as long ago as 1992 by the chairman, David Probert. My right hon. Friend the Minister for Overseas Development recognised those problems and stated in another place that she would review the status of the Crown Agents. Her responsiveness is typical.

Given that the Crown Agents receives not a single penny from the Government in any subsidy, and the fact that Government contracts are significantly down due to changes in Britain's bilateral aid, the Crown Agents has had to compete in the international arena in order to survive. During those initial days, however, it passed through a crisis and had to lay off staff, much to its regret. Even with its hands tied behind its back due to restrictions imposed upon it, it has done extremely well.

Just imagine how the Crown Agents would prosper if it was granted total freedom from the Government's apron strings. It would be able to make major decisions fast without having to refer back to a Government Department, where red tape and bureaucracy cannot respond with the necessary sense of urgency. Even a simple decision on a proposed joint venture scheme can take weeks, even months--or, in one case, well over a year. That is not good business practice, and opportunities can be lost.

To begin with, slow progress was made in responding to the problems highlighted by the Crown Agents. The chairman, assisted by his able and energetic managing director, Peter Berry, kept up the pressure. In the 1993 annual report, they noted that their advisers, Price Waterhouse and S. G. Warburg, recommended that the ideal solution would be to transfer the business and assets to a specially formed foundation, the profits of which would not be distributed but would be retained for the development of the organisation and its services to clients. Such a structure would ensure that the Crown Agents continues to be good for development, good for the transfer of skills and good for international trade.

I have been somewhat saddened by the remarks of Opposition Members, who seem determined to retain the Crown Agents within the public sector. I totally reject that idea, which would hamper its freedom. The Opposition were asking the wrong question. The right question is why the Crown Agents should continue to be owned by the Government. The blindness and hostility of the hon. Member for Eccles (Miss Lestor) to privatisation is so well known that all she could do was rampage in and focus on other privatised industries. She drew attention to certain high-profile examples, and drew a direct parallel between them and the Crown Agents, but did not accept that it operates in a different sphere.

The hon. Lady did not say what would happen if there ever were a Labour Government. I am confident that that will not happen, but we must still ask whether she would try to claw the Crown Agents back into the state sector. If she did so, she would kill the Crown Agents stone dead. She would cramp its style in an extremely difficult and competitive world.

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For the Crown Agents to prosper, the Government should be able to stand back from detailed control, but they cannot do that as long as they continue to bear ultimate financial responsibility for it. Government ownership requires the Government to take an internal interest in the affairs of the Crown Agents, or, as some would suggest, to interfere. There is no need for that.

No one is suggesting that there will be any repetition of the events that influenced the introduction of legislation in 1979. In any case, the Government would retain an interest as a customer of the Crown Agents. I therefore welcome the fact that the Government support the transfer to a foundation in principle, but that is not reflected in the Bill.

An enabling Bill simply gives the Government the means to transfer the Crown Agents to another status at a later stage. That may suit the Government when considering other forms of legislation, but this case is different. In terms of client confidence, especially of Japan, which is the second single major customer of the Crown Agents, it is necessary to include in the Bill a commitment to make the transfer into a foundation.

It is not enough just to leave that in the air and trust to hope that the Government will do as they have promised verbally. The blinds are being pulled down over exactly what will happen next during the transfer, and the final outcome will not be subject to any control.

I am concerned that, at this stage, key factors concerning the future of the Crown Agents are still to be resolved. I share the concerns expressed by the Opposition about the memorandum and articles of association. I find it disturbing that, so far, the Government have not produced their own memorandum and articles of association of the companies.

I can understand that the Government do not want to set a precedent, but the Crown Agents is a unique organisation. Its strength lies in the morale of its employees. As they are largely my constituents, I have a special interest to express on their behalf.

My hon. Friend the Minister will be aware of the staff's nervousness about their future. It is reassuring to note that there are no plans to change their pension arrangements or to announce any staff redundancies in the future. None the less, the whole structure of the employees' working environment is enormously important to them. As staff morale is the key asset of the Crown Agents, they deserve priority treatment.

It would make a great difference to the staff if my hon. Friend produced a memorandum and articles of association sooner rather than later, so that they may have a clear idea of exactly what he has in mind on their behalf. A clear statement about that today would be much appreciated.

Such a statement would also increase confidence among the many major customers of the Crown Agents. I appreciate, however, that my right hon. Friend the Minister for Overseas Development has discussed the options, and taken full account of the concerns of the Japanese Government as well as of other clients.

The constitution of the future foundation will be bound by the operational structure of the successor organisation. I understand that the Crown Agents would like a sleek, single company, limited by guarantee, which cannot distribute profits to its members. That equates with the continental not- for-profit foundations, well understood by

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the Crown Agents' clients overseas. Research bodies have been transferred to the private sector in that way. It appears, however, that the Government have other ideas, which are frankly cumbersome. They have proposed an interlinked, two-company structure, which is unwieldy and unnecessary.

The Government have suggested that the holding company might have charitable status. As I understood it from my meeting with the Minister, that is still under consideration. In my view, that proposal is inappropriate. I understand that the Government are anxious to ensure that there should be no exploitation. We all share that concern. The very word "charity" means good, but charitable status is extremely restrictive, and could tie up the operational nature of the foundation in such knots and create so many complications that that could damage the potential for development of its business. From the Government's point of view, charitable status achieves the objective of external regulation of the holding company by the charity commissioners.

Matters are not helped by recent press comment in the wake of the Barings collapse, which has highlighted the duty of charitable trustees to operate their investments for the benefit of their charitable objects rather than moral considerations. In this case, charitable status, as opposed to not- for-profit status, could have a negative impact on the market position of the Crown Agents. Clients want to be assured that the operating company is run commercially but for a social purpose, rather than geared to generating maximum profits for distribution by a charitable parent. Clients would want the Crown Agents to plough more resources into its operations, rather than make disbursements in accordance with the company's charitable objectives.

Another factor that is extremely important to the Crown Agents is capitalisation. That is crucial to the future of the Crown Agents. It affects the whole viability of the new foundation. The Government say that they are anxious that the foundation should be viable. My hon. Friend the Minister said earlier that he did not want it to be overburdened with debt. However, that must be balanced with an obligation to repay its debts to the taxpayer on a good value for money basis.

One cannot have it both ways. Either one burdens a new foundation to such a degree that it is unable to flourish, or else one gives it the lift-off so that it can really float free. Therefore, I was worried to notice that in clause 2 the Bill makes provisions for a clawback of the commencing capital debt of about £2 million plus. Including that debt, the capital and reserves of the Crown Agents are extremely modest, totalling £15 million. That is a meagre amount when one takes into account the fact that working capital needs are increasing all the time. Reduce that sum by £2 million being called in by the Government, and one might wonder how any major company could achieve client confidence with a working capital and reserves of only £13 million. Accountants that I have spoken to tell me that it is simply not credible in a commercial world. Indeed, in my opinion, the Crown Agents would be better served by buying a lottery ticket and trying to raise capital that way. It certainly could end up with more.

Even as a layman, I was amazed, when I looked at the balance sheet, how near the bone the Crown Agents operate. No one could say that it is wallowing in a fortune of greed; quite the opposite. There is never any suggestion

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from its bank accounts and its balance sheet that it could be profiteering, and I doubt that it would ever be the case in future. The Crown Agents has no real estate to call upon. The headquarters in Sutton is leased. The only capital equipment could be the computers, which depreciate. The real asset is beyond price--the quality of the staff, their dedication and sheer professionalism.

It is all very well for the Treasury to try to extract every penny it can. That is its responsibility. However, that must be balanced by the fact that it is reducing severely, at a stroke, the ability of the Crown Agents to withstand a crisis.

If I may, I wish to give an example. In recent years, the Crown Agents has had to weather events such as the sudden change since 1992 in procurement volume from the Overseas Development Administration. Uncertainties have developed created by totally outside events, such as the collapse of a long -established bank such as Barings, which might affect the Crown Agents at any time.

It would be most embarrassing for the Government if they set a foundation free only to find that it then had difficulties because it had been starved at the start of much-needed resources. The foundation needs to embark on its rebirth with a robust financial base, not--to quote the Viscount of Oxfuird on Second Reading in the other place--

"born into a state of penury."--[ Official Report, House of Lords , 28 February 1995; Vol. 561, c. 1432.]

Crown Agents is under-capitalised as it is. Far from the Government grabbing the £2 million, they should be topping up the capital and reserves of at least £20 million, thus strengthening the foundation and giving it the boost that it deserves. After all, faced with the future and with all the internal costs that it will have as it goes into the future, that is essential.

It is not only generous-spirited to ensure the viability of the Crown Agents; it is plain common and commercial good sense. I trust that when the Government consult independent financial advisers, they will agree with me. Indeed, if I may remind the House, my hon. Friend the Minister did say that he wanted the foundation to have a healthy rebirth.

Generally, the good news is that the scene is set for a bright future, facilitated by the Bill. When I survey the vast array of work that Crown Agents does, the good will that it engenders throughout the world, the benefits that we as a nation receive from basking in its reflected glory, its story is born of modesty, professionalism and pride. Crown Agents reflects the best of Great Britain today, and it is my proud boast that I happen to be its Member of Parliament. 8.44 pm

Mr. George Foulkes (Carrick, Cumnock and Doon Valley): I do not think that I shall be able to follow the hon. Member for Sutton and Cheam (Lady Olga Maitland) in her stirring and heroic manner, although I agree with some of her arguments in relation to the memorandum and articles of association of the foundation, the role of the staff, the excellent work done by the staff and the role of the Treasury. I shall return to those later.

The debate has been useful. Someone said earlier that it had been a surprisingly interesting debate. It is no surprise to me that it has been interesting. For those of us who are involved, and have been for some time, in

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development, it is an important and interesting subject. It has been good that so many people have participated. Some of my colleagues have been unable to do so because of service on Select and Standing Committees, although I pay tribute to my hon. Friend the Member for York (Mr. Bayley) for coming out for some time from the Select Committee on which he serves to participate and to make such a brilliant speech.

The debate as a whole--I know you have not been able to sit through it as I have, Mr. Deputy Speaker--has been surprisingly full of philatelists. I had not realised the high correlation between philately and interest in development, but it has emerged strongly tonight, especially among Conservative Members. The debate has also been full of world travellers. It was surprising how many hon. Members prefaced or interspersed or concluded their speeches with mention of their travels around the world, to Malawi or Sri Lanka--not all as members of the Welsh Select Committee, although it did entrance us to know that the hon. Member for Worcester (Mr. Luff) had been to Barcelona as a member of the Welsh Select Committee. It has been a remarkable revelation of a debate.

I wish, on behalf of the Opposition, to reiterate what has been said on several occasions--the Leader of the House will be pleased to know that I am still on my first paragraph--from both sides of the House, and I do not mean the effusive congratulations and effusive words that were said about Baroness Chalker. She would be embarrassed if we were to go any further along those lines.

We all agree about the great value of the work--brilliantly described by the hon. Member for Sutton and Cheam--undertaken by Crown Agents, and the exemplary way in which it has performed those tasks to date. I shall not disappoint the hon. Member for Worcester. It occurs to some Labour Members, and perhaps even, occasionally, to some Conservative Members, that if Crown Agents is so good, has been working so well and has done so much in so many sectors in so many countries so effectively and so brilliantly, why do we need to change it? What is the purpose of the Bill? What is it all about? I think it was an American who said, if it ain't broke, why mend it?

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