Select Committee on Standards and Privileges Minutes of Evidence

Examination of Witness (Questions 200 - 219)



  200.  Have you got a copy of it with you?
  (Mr Mandelson)  Yes.

  201.  Can you look at the page where you signed it at the back and read out section 14.
  (Mr Mandelson)  Section 14?

  202.  On the page on which you signed.
  (Mr Mandelson)  "I/We have not arranged any other loan, second mortgage or improvement grant in connection with the property."

  203.  Is it right to say that you knew at the time you signed that that if your mother did not come across with the money, whether as a loan or a gift, Geoffrey Robinson would provide the money?
  (Mr Mandelson)  Assuming that I had proceeded with a purchase of a house, and assuming I proceeded with the purchase of this house in particular, yes, I did believe that Geoffrey was available to help me finance the purchase but it was not agreed or arranged at that time. Therefore, that declaration is not invalid. That is terribly important.

  204.  I was asking a question, I was not necessarily asking for an answer to a question I had not put. Can I ask you do you think that the Britannia Building Society would have given you a loan of £150,000 if they had known that you were borrowing 80 per cent of the cost of the property from somebody else?
  (Mr Mandelson)  Yes, of course they would, because what they were lending to me was a fraction of the value of the property. They were completely covered and secured at all times.

  205.  I was not asking whether they were covered and secured, I was asking do you believe that the Britannia Building Society would have lent you £150,000, that is to say 32 per cent of the cost of the property, if they had known that you were borrowing elsewhere 80 per cent of the cost of the property?
  (Mr Mandelson)  Yes, I do. Yes, I do. Partly because that 80 per cent represented no charge on the property and partly because they have intimated so to me since.

  206.  If they have I am not sure we have seen that. In the mortgage application where you indicate the size of the mortgage on Wilmington Square and the value of Wilmington Square, do you believe that the Britannia Building Society knew that a significant part of the difference would be used to reduce or eliminate a loan somewhere else, or alternatively do you think they had the impression the difference between the sale of Wilmington Square and the repayment of the mortgage on Wilmington Square would be available for buying Northumberland?
  (Mr Mandelson)  I cannot tell you what was in their minds. You are asking me an entirely hypothetical question which you are entirely entitled to ask. I would say that given that my finances were pretty comprehensively covered I do not think they would have had any problem at all in doing that. They understand that when you buy property you are going to do something with that property, you are going to change it, you are going to repair it or do whatever it is, it is a very, very common practice for people to do that.

  207.  When you say that your finances were covered do you mean uncovered or what do you mean?
  (Mr Mandelson)  Supported I mean.

  208.  Do you think they knew that you were going to be borrowing £373,000 from somewhere else?
  (Mr Mandelson)  Yes.

  209.  How would they have?
  (Mr Mandelson)  I am not saying £373,000 but they knew that I was going to have to find the balance of the purchase price and that I was going to do that from my own arrangements. That was always understood between us.

  210.  By borrowing?
  (Mr Mandelson)  No, because if my mother had paid it it would have been different, it would have been effectively a gift. The key thing, if I could suggest, is what is important to the building society is whether I am borrowing from a source that is going to result in a prior charge being placed on that property. So they tell me, and I have had many conversations with them and Herbert Smith since, what concerns them is their financial risk. They asked me, are they in jeopardy? Am I making an arrangement? Am I extending myself? Am I making a commitment that is going to jeopardise my ability to repay them their money? The answer is no, I was not, but then even if I was, which I was not, they could force a sale of my property and they would easily get their £150,000 back because it is a relatively small fraction of the value of the property. So if I had defaulted or if I had done something wrong or, I do not know, just gone belly-up in some way, what would they have done? They had a first charge on my house. They would have said, "Sorry, we're calling this in. You either give us the money or you sell the house, actually you probably sell the house." £150,000 in the context of a house of that value, even at its original price of 465, let alone what was happening to the price as the market rose, that £150,000 is not a risk for them; it is a small fraction of the value of that house. This is how building societies work, I get the impression, and I have learned much more about building societies now than I knew at the time, but that is their consideration. They come first. As long as they get their money back before anyone else, as long as they are not at risk, they are not going to weep. Yes, they want their application forms filled in accurately and, yes, they want all their procedures to be followed, but when it comes down to it what they care about is the ability of the borrower to repay the lender, and at no stage in any circumstances was that ever in jeopardy.

  211.  The question I was asking was not actually about the first charge on the property. The first loan you had in relation to that property was the £373,000 from Geoffrey Robinson, was it not?
  (Mr Mandelson)  The first loan? How do you mean?

  212.  The mortgage loan came in at completion?
  (Mr Mandelson)  Yes.

  213.  A month before that you exchanged contracts?
  (Mr Mandelson)  Yes.

  214.  The first borrowings you had in relation to that house——
  (Mr Mandelson)  Were the deposit.

  215.  The deposit, and at the time the building society provided £150,000 to your solicitor to add to the rest of the money from Geoffrey, was a subsequent loan but a first charge?
  (Mr Mandelson)  They would have come together on the day of completion, yes.

  216.  So in effect, you had borrowed the money from Geoffrey for the deposit and the rest and you had also got the money from the building society which became the first charge on the property?
  (Mr Mandelson)  But the point is that——

  217.  I am just trying to establish the facts before we get to the point.
  (Mr Mandelson)  They came together with my solicitor at the point of completion.

  218.  But the first loan you had had was from Geoffrey Robinson?
  (Mr Mandelson)  No, the first agreement of a loan came from the building society.

  219.  The money coming is a loan. The money for the deposit was a loan. It was in relation to that house, was it not?
  (Mr Mandelson)  The first agreement——

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