House of Commons - Standards and Privileges

Select Committee on Standards and Privileges Ninth Report

NINTH REPORT

The Committee on Standards and Privileges has agreed to the following Report:—

COMPLAINTS AGAINST MR PETER MANDELSON

1. We have considered memoranda from the Parliamentary Commissioner for Standards relating to the complaints by Mr John Redwood, Member for Wokingham, and Mr R Henderson and other members of the public against Mr Peter Mandelson, Member for Hartlepool. The Commissioner's memoranda are appended to this Report, together with other written evidence. Certain details in the evidence which are not material have been omitted. We have also taken oral evidence from Mr Mandelson, which is published with this Report.

2. We agree with the Commissioner in not upholding the complaint about the non-registration of the flights in question. Members should nonetheless bear in mind that the requirement to register is governed not by their own conviction that their actions in Parliament will not be influenced by the gift, nor whether the giver intended to exercise influence, but by whether others might reasonably think that this might be the case. If there is any doubt a benefit ought to be registered.

3. The second complaint was of late registration of the loan from Mr Geoffrey Robinson. Mr Mandelson said that when he agreed the loan in October 1996 he relied on the assumption held by some Members that the rules on registration were concerned with benefits received from outside bodies and persons rather than from fellow Members. In her reply of 21 January to a letter from Mr Mandelson the Commissioner acknowledged that there was considerable doubt about the application of the Rules on registration to transactions between Members. She stated the general principle in the rules that if there is any doubt a benefit should be registered. She advised him to register the loan. He then did.[1] The loan has recently been repaid.

4. The Rules are not specific about benefits which one Member may receive from another. There is ambiguity in the Code of Conduct. On the one hand, it states that "Holders of public office should not place themselves under any financial or other obligation to outside individuals or organisations that might influence them in the performance of their official duties".[2] On the other hand, the main purpose of the Register is "to provide information of any pecuniary interest or other material benefit which a Member receives which might reasonably be thought by others to influence his or her actions, speeches, or votes in Parliament, or actions taken in his or her capacity as a Member of Parliament".[3] (Emphasis added.)

5. In our view the questions which need to be answered in deciding whether a benefit is registrable are the same whether the benefit is received from another Member or from someone outside the House:

— Might the benefit reasonably be thought by others to relate to membership of the House?

— Might it reasonably be thought by others to influence the Member who receives it?

— Might it reasonably be thought by others to be intended by the lender to influence the Member who receives it?

The answers to those questions will depend on the particular circumstances of the case. If the answer to any of the questions is 'Yes', and the value of the benefit exceeds the current de minimis limits (£125 in the case of gifts, or 0.5% of the current parliamentary salary in the case of other material benefits), the benefit is registrable under the Rules.

6. We consider that any loan or other arrangement from one Member to another, on whatever terms, which amounts as in this instance to eight times a Member's annual parliamentary salary could be thought to influence the conduct of the Member who receives it unless there is some compelling argument to the contrary, and should therefore be registered. We agree with the Commissioner in upholding the complaint. We do recognise the explanation given by Mr Mandelson that he assumed that loans between Members were not registrable. Mr Mandelson should have registered the loan from Mr Robinson at the latest by 27 July 1998, when he became Secretary of State for Trade and Industry.[4] The fact that a benefit is registrable does not imply that any impropriety attaches to it.

7. The third complaint related to Mr Mandelson's mortgage with the Britannia Building Society. We have considered whether this fell within our responsibilities, since in his dealings with Britannia Mr Mandelson was not acting in his capacity as a Member. There are arguments on both sides of the case. On the one hand, the House does not seek to regulate what its Members do in their purely private and personal lives. On the other hand, the maintenance of public trust in the integrity of Parliament requires Members to observe the highest standards of conduct in financial matters. The Nolan Committee recommended that the Code of Conduct for Members of Parliament should apply "to all aspects of public life". We understand that it may not have been the intention of the House, when it approved the Code on 24 July 1996, to remove this concept from the Code.[5] The Commissioner considered the complaint because the mortgage was directly linked to the loan from Mr Robinson.[6]

8. The substance of the third complaint was—

(a) from Mr Redwood, that the loan may have been "concessionary and therefore registrable";

(b) from Mr Henderson, that the loan may have been "improperly obtained".

9. Issues raised in the complaint were dealt with in the course of the substantial investigation and fraud inquiry carried out by Herbert Smith solicitors at the request of the Britannia Building Society. In their report entitled "Project Offenbach" dated 22 March 1999, in relation to failures by Mr Mandelson fully to disclose all requisite material information and also material changes to the nature of the transaction, they state—

"(1) There was no obvious reason/motive for Mr Mandelson not to disclose details about Hutton when that mortgage was to be discharged as part of the transaction.

(2) The Britannia mortgage application form in use at that time was not specifically designed to extract details of second properties/second mortgages—it is therefore conceivable that Mr Mandelson was not properly focused by the questions in sections C and D on his ownership of Hutton.

(3) The interview was clearly "rushed"—Mr Mandelson informed us and it is clear from obvious mistakes in the form that it was not properly checked by Mr Mandelson before it was signed.

(4) A copy of the mortgage application form was not provided by the Society to WPF (it is not the Society's usual practice so to do). Accordingly, Stephen Wegg-Prosser could not later correct any failure by Mr Mandelson to disclose information during the interview nor, indeed, was he aware of any inaccuracies.

(5) Mr Mandelson was not advised at any time by Stephen Wegg-Prosser to disclose material changes in the transaction to the Society, as he should have been—he was let down by his adviser.

(6) The transaction took place immediately proceeding, during and immediately after, the last Labour Party Conference before the 1997 General Election. Mr Mandelson was the principal organiser and, we are told, was working round the clock. It is clear that Mr Mandelson's mind would have been fully focused on the conference and preparations for the forthcoming General Election throughout the whole of this period.

(7) There was never any financial risk to the Society in any of the actions/omissions because of the nature of the transaction and the value of the equity in Northumberland. The Society had a first charge over Northumberland. The interest arrangement agreed between Mr Mandelson and Mr Robinson in respect of the latter's loan was that interest was not immediately payable but would accrue and only become payable on an eventual sale of Northumberland. Accordingly, there was no risk that interest payments to Mr Robinson would prejudice in any way Mr Mandelson's ability to pay interest to the Society on his mortgage with the Society."[7]

In its recommendations the Herbert Smith report goes on to conclude that—

"Whilst there are some inconsistencies in the information given to us, as a result of our investigation (not least from our interview of Mr Mandelson) we have concluded that Mr Mandelson did not have any dishonest intent at any relevant time and did not consciously mislead the Society."[8]

10. We agree with the Commissioner that the terms of the mortgage offered by Britannia were not in themselves concessionary. Nevertheless the mortgage was obtained without the disclosure of all the requisite information. A non-Member in the same position would have been treated in the same way. We were told that Mr Mandelson's application was dealt with commercially at all times.[9]

11. As to whether the loan had been obtained improperly, the Commissioner states in her report that "Mr Mandelson, unknown to the Britannia Building Society, received his mortgage on a different basis from that which would properly have applied to other members of the public". (Emphasis added.)

12. Mr Mandelson ought to have given full and accurate information to Britannia. Under Britannia's general conditions his solicitor, who was acting as Britannia's agent, should have fully disclosed the change in the funding arrangements for the purchase of the property prior to Mr Mandelson's taking up the mortgage.

13. Mr Mandelson said that in omitting to inform the Britannia Building Society of three material facts in connection with his mortgage application, namely the mortgage on his house in Hartlepool, the loan from Mr Robinson and the delay in the sale of his London flat, it was not his intention to mislead Britannia. We accept that the Herbert Smith report (Project Offenbach) presents a fair assessment of issues surrounding the mortgage application and the subsequent allocation of the mortgage. Mr Mandelson's solicitor, who suffered a family tragedy shortly before the transaction started, has acknowledged that his management of the transaction fell below his usual standard, and that he should have thought to inform Britannia of the arrangement with Mr Robinson. We consider that Mr Mandelson acted without any dishonest intention.