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12.20 pm
The Economic Secretary to the Treasury (Mrs. Angela Knight): I thank my hon. Friend the Member for Ludlow (Mr. Gill) for obtaining this important debate. It shows the importance that the Conservative party attaches to European matters that so many of my hon. Friends are here. It also shows the absence of concern on the part of Labour Members about a matter of vital importance for Britain that they feel that they have better things to do elsewhere.
Mr. Jenkin: They are beating up Harriet.
Mrs. Knight: I should not like to speculate about that, but we shall find out at lunchtime what happened.
I suppose that the hon. Member for North Warwickshire (Mr. O'Brien) should be congratulated on his efforts to find a fig leaf to cover the absence of a Labour party policy on Europe. He spoke about clear principles. Perhaps I may remind him of statements made by three of his Front-Bench colleagues recently. We shall be interested to know with which of these statements he agrees.
Perhaps the hon. Member for North Warwickshire agrees with the right hon. Member for Kingston upon Hull, East (Mr. Prescott), who said of a single currency:
Perhaps he agrees with the right hon. Member for Copeland (Dr. Cunningham), who said that he was
or with his party's Members of the European Parliament, who are in favour of a single currency within the time limits and timetable. Or does he agree with the hon. Member for Livingston (Mr. Cook), who said some time ago that setting such a timetable was "irresponsible"? Those clear variations exemplify a party with no policy on this vital topic.
I consider all the points made by my hon. Friends in this debate to be important and I will answer as many of them as I possibly can. On those points that I do not reach, I will write to my hon. Friends giving full and detailed answers.
The Government have consistently said that the United Kingdom would join a single currency only if it was in the national interest to do so, given the circumstances at the time. It is because the Prime Minister secured our right to opt out that Parliament and the Government can take a decision at the appropriate time in the light of all the circumstances.
I remind the House of the answer that my right hon. Friend the Prime Minister gave to my right hon. Friend the Member for Witney (Mr. Hurd) when he said:
I am sure that all my hon. Friends will agree with that.
It is clear that it would not be in the national interest of any European country to proceed with a single currency--or in Europe's interest for any country to do so--before conditions were right. A premature economic and monetary union could be disastrous for the future of Europe. Given the importance of the United Kingdom's trade with the rest of Europe, and the rest of the world, we have a strong interest in making sure that such a disaster does not occur, whether or not we take part.
The convergence criteria set out in the Maastricht treaty aim to ensure that economies are moving in the right direction towards economic convergence, a necessary condition for economic and monetary union. However,the criteria of reducing debt and low inflation are sensible economic criteria in their own right.
Growth rates in many European countries are relatively sluggish at present, a point made by many of my hon. Friends. The problems that France is experiencing spilled over into the streets at Christmas. Its economic activity has slowed substantially, strikes have destroyed jobs, unemployment is 3 million and rising, and a high percentage of the work force is unemployed. Germany also reports economic difficulties, with new investment plans being directed to former eastern European countries or to lower-cost countries such as Britain.
Fulfilment of convergence criteria, while necessary,is still an insufficient condition to ensure successful economic and monetary union. The criteria represent nominal convergence. That is important but only alongside proper convergence, which requires economic liberalisation to encourage economic growth--the sort of measures that we have already enacted. If Europe wants proper convergence to make a single currency obtainable, it will have to follow suit.
Integration of markets is important for assessing whether countries are ready for EMU. That is illustrated by unemployment, which was mentioned by my hon. Friends the Members for Southend, East (Sir T. Taylor) and for Ludlow. High unemployment is a problem for many of our European partners. It is rising in Germany
and high in France. In Italy it is 11.5 per cent. and in Spain over 22 per cent. In the United Kingdom, it is at8 per cent. and falling. Of the five largest European economies, Britain is not just doing well but doing substantially better than the others. It is worth looking at the reasons why that is so.
In Britain, for every £100 spent on wages, an employer has to add an extra £18 for non-wage costs. That same employer would have to add £32 in Germany, £34 in Spain, £41 in France and £44 in Italy. Those are substantial additional costs.
The head of the German CBI recently said that German labour laws were "too rigid" and that social costs and taxes were "too high". He added that Germany worked
and that
He went on to say:
The Germans' proposals to help reduce their economic problems include reducing employers' social costs--a policy that has been followed by the British Government. In addition, they are talking about cutting income tax--precisely what the British Government are doing.
In a week in which hypocrisy has hit an all-time high, is it not grossly hypocritical of the Labour party to want to introduce a European jobs tax into Britain by adopting the social chapter and thereby, at a stroke, increasing unemployment in Britain? Hypocrisy is saying one thing when another is in fact true. We all want Europe to follow the more flexible wage markets, lower tax burdens and lower non-wage costs that we have in Britain. We have the basis of an enterprise economy, and foreign investors recognise that.
My hon. Friend the Member for Ludlow asked about the pros and cons and costs and benefits of a single currency. It is too early to judge the costs and benefits,as the Prime Minister said in the debate on 1 March. That illustrates the value of the United Kingdom's opt-out, because it is impossible to judge something until one gets closer to it. The views of industry vary considerably.The business world has mixed views on the subject,but UK businesses are sure that if the single currency goes ahead it will have important implications for them whether or not Britain participates, so it is important that it is well planned. One reason why Britain is participating in the negotiations is to ensure that practical issues such as that are properly considered.
The City of London is also a subject of vital concern. It is a centre for international financial excellence and innovation and it is the overwhelming choice as the European headquarters for major international banks.It handles more currency than all the other European Union centres put together and I am confident that it will remain competitive and rise to the challenges, whether or not the United Kingdom participates in the single currency.
My hon. Friend the Member for Southend, East raised five issues, which I shall address one by one--
Madam Deputy Speaker (Dame Janet Fookes):
Order. I am afraid that we must move to the next topic.
Mr. David Jamieson (Plymouth, Devonport):
I am pleased to have been granted this short debate, as there are important questions to be answered about the ROM-Data Corporation and the way in which the Department of Trade and Industry grant aid has been given to companies in the south-west. I am happy to allow the hon. Member for Falmouth and Camborne (Mr. Coe) to have some time to speak in the Adjournment debate that I have initiated.
The south-west is in great need of economic regeneration; there has been a rundown in defence industries and many of the primary industries that used to exist in Cornwall and parts of Devon. As you will know, Madam Deputy Speaker, unemployment is high, not only in Plymouth, but in Falmouth and Camborne. That is why inward investment is essential to create new jobs and improve the long-term economic conditions of the south-west.
I welcome the regional office that has been set up in our area, which has helped to make improvements in some of those sectors. I fully appreciate that there are limited and finite resources available for that assistance, which is why those resources must be used well and effectively.I also appreciate that, when those grants are given to companies, spotting winners is difficult, that only some companies can benefit from those funds, and that no Department can ever guarantee success. It is sometimes easier to spot losers and guaranteed failure.
The Department of Trade and Industry has an absolute responsibility to undertake the most careful checks before large sums of taxpayers' money are given to any company. At least two factors must be considered:the first is that a proper, skilled assessment of business plans must be conducted by an independent authority. Secondly, careful checks into the financial background of directors should be carried out to discover any former bankruptcies, liquidations or even fraud.
In the case of the ROM-Data Corporation, various questions are raised. The first involves the competence of the advice given to the DTI. The second relates to the DTI's policy when giving grants to people with dubious financial backgrounds. Were checks made of the ROM-Data Corporation? Was there a full and proper scrutiny of the company's business plans before the grant was made?
I shall give a brief history of the ROM-Data Corporation. It was set up in Falmouth in 1991 to do the job of data processing. In that year, it received regional selective assistance of £825,000 of taxpayers' money--a substantial sum. It is the sort of sum that many companies in the south-west would like to enjoy, and they would welcome receiving a fraction of it. A promise was made that many jobs would be created.
Early in 1994, wages and value added tax were unpaid, and, I believe, the company approached the hon. Member for Falmouth and Camborne, who assisted it to obtain more time to pay the VAT. That is what any Member of Parliament would have done in those circumstances.
Later that year, the company received £250,000 of loan guarantee--another substantial sum of taxpayers' money--despite the fact that it had not been paying wages, and was clearly experiencing financial difficulties.
At the end of 1994, not only were wages and bills unpaid, but the company went into liquidation. It left many creditors; the wages of many workers in the Falmouth area, Cornwall and Devon were not paid. Many small businesses suffered as their bills were not settled.
The question must be asked: what checks were made in 1991 by the DTI into the directors of the ROM-Data Corporation, particularly Mr. John Dawson? Mr. Dawson was a former Bath Conservative councillor whose firm, John Dawson (Motor Holdings) Ltd, in 1981, suffered a spectacular bankruptcy--one of the largest bankruptcies in the south-west at that time. Mr. Dawson left more than £2 million of debts. Wages were unpaid; there were many creditors--many of which were small businesses--who were hurt when the company went into liquidation.I believe that Mr. Dawson fled to the West Indies on his yacht, and a warrant was issued for his arrest.
What checks were made into Mr. Dawson's background, and, more importantly, what did they reveal? The DTI Minister, Baroness Denton, wrote a letter to the hon. Member for Ryedale (Mr. Greenway), who had quite properly inquired why one of his constituents had not received his money from ROM-Data. On 12 January 1992, the Minister wrote to the hon. Gentleman saying:
The hon. Gentleman must have pressed the matter further on behalf of his constituent, as the same Minister admitted on 2 April 1993 in a further letter to the hon. Gentleman:
She was presumably referring to the liquidation that amounted to more than £2 million and the fact that the police were looking for Mr. Dawson in 1981.
On 2 March last year, I asked a question of the former President of the Board of Trade, now the Deputy Prime Minister, about what checks were made. The answer that I received stated:
On 19 July 1995, I asked a further written question of the President of the Board of Trade. I asked him whether the Department was aware of the previous bankruptcy of the director, John Dawson. The reply that I received stated:
The bankruptcy did not come to light, despite the checks that had been made with the Insolvency Service, but, in 1993, Baroness Denton had had the information at her disposal--she said that Mr. Dawson had
She must have known then the information held by the DTI, so why was that not made clear in the answer before the House in July 1995?
When pressed on the matter of the checks, the new President of the Board of Trade came clean in a written answer to me on 19 December last year. He said:
In a further letter to the hon. Member for Ryedale,the President of the Board of Trade said of the answers given to me earlier in the year:
In his letter, he underlined the word "were".
The answers given to me in the House were indeed misleading: they were untruthful and incorrect. The President of the Board of Trade said that checks were made, but in December he said that there was no evidence that those checks were made. The President of the Board of Trade has therefore admitted that the previous President of the Board of Trade misled the House on that important issue.
I shall now discuss the way in which those grants are assessed. A panel has been set up by the DTI, composed of people employed by the DTI, to inquire into those matters. I have not received answers from the President of the Board of Trade, which were due on 15 January 1996, to questions about the role of a Mr. Kenneth Holmes. I believe that he was an accountant. He was appointed to the DTI, I believe in the late 1980s, to help assess grant applications to decide whether they were the right type of applications to be eligible for substantial grants.
I ask the Minister today, because he has failed to answer that question so far in written questions that I have tabled: was Mr. Holmes involved in the vetting of the ROM-Data application for grant in 1991? The answer needs to be given to that, and I shall return to that later.
Was it known that Mr. Holmes, as it is alleged, has been involved with other companies that have had financial difficulties? I quote the company H. Bear and Sons, which he bought in 1987, which I believe went into liquidation in 1989.
If Mr. Holmes vetted the ROM-Data application,was he given permission by the DTI to become,on 21 November 1993, not only a director but the chairman of the ROM-Data Corporation? Only 12 months before ROM-Data went into liquidation, the man who had approved the grants had become a director and a chairman of a company that subsequently went into liquidation.The company has left unpaid the wages of constituents of the hon. Member for Falmouth and Camborne, and has many creditors for more than £2 million. I am pleased to note that the Serious Fraud Office is now inquiring into those matters.
Does the Minister approve of employees of the Department of Trade and Industry, who are carrying out the extremely sensitive work of vetting grants of substantial sums of taxpayers' money, becoming directors of companies that have benefited financially from their own decisions? How does he feel about a DTI official approving a grant and later becoming a director of that company, which then owes the DTI that money? Is it a coincidence that Mr. Holmes, like Mr. Dawson, is a member of the Conservative party? I believe that his wife is vice-chairman of the Totnes Conservative party. In spite of his liquidations, Mr. Holmes carries on in a very comfortable life style.
The DTI should have conducted a searching internal investigation, and a careful analysis of what went wrong. I have been told by the President of the Board of Trade that those investigations are now complete. They are so detailed that, I believe, the two most important players, Mr. Dawson and Mr. Holmes, have not even been interviewed. I want to know from the Minister why those two people have not been interviewed in connection with that important matter.
I am sure that the hon. Member for Falmouth and Camborne, in whose constituency the events occurred, has acted honourably in this matter throughout. He played a part in helping the ROM-Data Corporation to defer payments of VAT, as any hon. Member would have done for a time.
I believe that the hon. Member for Falmouth and Camborne also helped the company obtain the loan guarantee. I question whether that was entirely wise.I notice that, in July 1995, the hon. Gentleman was quoted in the Daily Mail. He said that he had not investigated Mr. Dawson's background
[Interruption.] A quick check with the House of Commons Library would have given him the information he wanted.
"Yes we are against a single currency".
"Personally . . . in favour of a single currency";
"I can certainly reassure my right hon. Friend that, for a decision of such magnitude, we shall keep in mind the possibility of a referendum, if the Cabinet were to recommend British entry. That has been in my mind, as my right hon. Friend knows, for a long time and it remains there. I think that it is right to keep that before us for consideration."--[Official Report, 18 December 1995;Vol. 268, c. 1225.]
"the shortest working week in Europe"
"the German Government spends 50 per cent. of GDP as opposed to 34 per cent. in Britain".
"No wonder Germany has a problem".
12.30 pm
"all applications for Regional Selective Assistance are rigorously appraised by officials within this Department."
"Mr. Dawson may have made a commercial mistake in his past."
"A range of inquiries were undertaken by the Department and others into the background of ROM-Data, including checks on the directors of the company through the Companies House and the insolvency service".--[Official Report, 2 March 1995; Vol. 255,c. 716.]
"The Department made certain inquiries into the background of the directors prior to the offer of grant in 1991. However, the bankruptcy record referred to did not come to light at the time."--[Official Report, 19 July 1995; Vol. 263, c. 1562.]
"made a commercial mistake in his past."
"although some checks may have been made . . . the subsequent investigation has revealed no documentary evidence that these checks were made."--[Official Report, 19 December 1995;Vol. 268, c. 1091-92.]
"Answers which had been given earlier this year . . . were misleading."
"because I am only an MP and cannot be expected to rush off to Companies House to check out track records every time a business wants help".
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