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The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Beverley Hughes): I congratulate my hon. Friend the Member for Middlesbrough, South and Cleveland, East (Dr. Kumar) on securing this debate and on the assiduous way in which he has campaigned on this matter and persisted in raising in many places what he feels to be serious issues concerning the way in which the former Teesside development corporation conducted its affairs.
In many ways, I can understand my hon. Friend's concerns, and the genuine frustration that he feels, because, from his perspective, matters have not come to a satisfactory conclusion. I am grateful for the opportunity to put on record what my Department has done in
Ms Hughes: My hon. Friend the Member for Middlesbrough, South and Cleveland, East talked exclusively about the report prepared by the internal audit services division of my Department, which we made public this year. I want to set out some of the stages along the road to its publication.
Nearly two years ago, my hon. Friend met my predecessor in the Department and made a number of allegations about the way in which the former Teesside development corporation had operated and wound down. Those allegations were discussed with the National Audit Office. The NAO made it clear that it did not wish to undertake an investigation at that time, particularly in view of the possibly criminal nature of some of the allegations. Nevertheless, it reserved its position for the future.
My Department's internal audit services division therefore talked to my hon. Friend and followed up the leads that he gave them. At the same time, my hon. Friend the Member for Stockton, North also approached my Department with information concerning a company in his constituency and its relationship with the corporation. The auditors agreed to follow up that information as well. During the course of the investigations, it became clear that a number of people had deeply held concerns about the way in which the corporation had gone about its business.
My hon. Friend has criticised the scope of the investigation and the report, and the way in which the investigation was conducted. Let me make it clear what this internal report was designed to do. Because of the large number of allegations against TDC and its officers, it was agreed that the team would first conduct a preliminary investigation by interviewing my hon. Friend and his colleagues to explore the availability and whereabouts of evidence. On completion of the initial investigation, the team reviewed the results of those interviews and agreed that further work should concentrate on the three allegations which seemed to provide reasonable prospects of obtaining evidence of wrongdoing. My hon. Friend has referred to those three allegations.
It became apparent during their investigations that the auditors were being referred from one person to another. They went to considerable lengths to identify people who might have relevant information and persuade them to provide tangible evidence.
The auditors never doubted the motives of the people to whom they spoke. However, for one reason or another, most of those people were unwilling or unable to produce any evidence. Some suggested that the auditors should question the judgments of professionals--individuals and companies--who had acted for the corporation. The implication was that they might not have acted with due diligence. As will be appreciated, making such
With the best will in the world, the auditors were largely unable to obtain the evidence that would have allowed them to take matters further. This left them in an unfortunate position--they were unable to disprove all the allegations, as my hon. Friend said, but were not given the evidence to substantiate them.
Shortly before the auditors finalised their report last year, they were shown papers suggesting that the proceeds of a grant made by the development corporation to the Haverton Hill Engineering Company had been transferred out of the company's bank account. The company co-operated with the auditors to obtain confirmation from their bank that this was the case. The result of that line of inquiry was that the auditors passed their papers over to the police.
During subsequent discussions, the police and the auditors reviewed each of the allegations and all of the papers that the auditors had assembled on the matters to which my hon. Friend has referred. The final report by the auditors was sent to the Minister for Local Government and the Regions shortly before Christmas, against the background of police investigations being under way. My hon. Friend criticised the time scale but, although my right hon. Friend the Minister received the report just before Christmas, the police investigation was continuing. It was felt to be important that the people affected by the report had the opportunity to comment on it, so my right hon. Friend sent a copy to the former chair of the corporation and later met with both him and former deputy chair. She also met my hon. Friends the Members for Middlesbrough, South and Cleveland, East and for Stockton, North before the report was made public--as a matter of courtesy--to talk about its findings and the way forward.
As a result of those meetings, it was decided that a copy of the report should be placed in the Library. The House was informed on 7 June in an answer to a written question. I must stress to my hon. Friend that, during that period, the Cleveland police remained active. They made official visits to the offices of English Partnerships to look more closely at all the corporation's files, which were now that body's responsibility.
The police investigation continued from early this year--after the report had been written--until very recently. In the last few days, my officials have been told by the police that they do not intend to refer to the Crown Prosecution Service any of the evidence relating to the grant diversion and that they will be filing all the papers unless and until further evidence comes to light.
I must conclude from that that, although the police have investigated the range of material with which the auditors presented them and investigated the leads that that information presented, they have now decided not to refer the matters to the CPS. I have no hard information, but we all know that the normal reason why the police do not refer
The National Audit Office--the body that oversees the proper use of public funds and the behaviour of public bodies--has been fully informed of developments along the way. My hon. Friend will appreciate that I cannot speak for the NAO as to its future intentions; it must be independent of Government and it will decide about the inquiries it wants to pursue. However, the NAO has received a copy of the auditors report and is aware of the involvement of the police. I can only suggest that my hon. Friend talks directly to the Comptroller and Auditor General about whether the NAO wishes to pursue the matter.
Dr. Kumar: What about my suggestions concerning the many people who were not talked to and are still available? Will the Minister ask the audit team to talk to those people, as they might shed some more light and bring some more evidence forward?
Ms Hughes: If people have not been interviewed, the question is who is best placed and has the appropriate powers to pursue investigations further. The Government have no wish to see any form of whitewash, but believe that we have fully tested all the internal audit systems available to us. The auditors have done what they were asked to do by following up the allegations. My hon. Friend must bear in mind the fact that the auditors have no special powers. Unlike the police, they cannot demand that people be interviewed or produce documents. They must rely on people's co-operation. In some cases, for that reason, their leads did not take them far.
We have made all our information available to the police. We have no reason to believe that the police have been anything less than assiduous in investigating the matter or in following up all the leads that presented themselves in the documents. The police were apparently unable to find anything substantially new. We have kept the NAO informed at all stages, and it too has seen the audit report. I assume that the NAO was aware of the police involvement.
It is open to my hon. Friend to pursue other avenues and ask why the police did not pursue the investigation further. He can discuss the matter with the CAG at the NAO. That role does not fall to the Government, because the NAO is, rightly, independent of the Government. Unless the police or the NAO pursue the matter further, there appears to be no immediate prospect of further criminal investigations. There is no new firm evidence of wrongdoing. I realise that my hon. Friend may be disappointed by that, but he must understand that the limited powers available to an internal audit of a Government Department have been fully tested and that we have given all the available information to other bodies that have greater powers to further the investigation.