Select Committee on Standards and Privileges Written Evidence

18.  Written statement by Mr Mark MacGregor, 18 October 2003

[See also Volume III, PCS Oral Evidence 14]

1. Background

Having been asked to give evidence to Sir Phillip Mawer, I am writing in my capacity as former Chief Executive of the Conservative Party, a position I held from January 2002 to 14th February 2003. In that role, I had overall responsibility for the day to day management of Conservative Central Office (CCO), all staffing matters as well as the financial management of the organisation. This included, for example, the approval of all staffing appointments and redundancies, signing of any expenditure of more than £1,000, negotiating with the party's bankers in respect of the over-draft and all major political or fundraising initiatives. At that time, the organisation had an annual turnover of £13 million with approximately 190 staff including around 10 who worked in the Leader's Office under Jenny Ungless. As such, any payment to Betsy Duncan Smith was a comparatively minor matter. In fact, as this payment came out of the Leader's Office Cost Allowance, it was not part of my budget at all and therefore, at one level, was not my responsibility as Chief Executive of Conservative Central Office.

Prior to my employment starting on 1st January, I spent much of the previous month meeting the various Directors and Heads of Departments and discussing the operation of their departments, staffing matters, potential problems etc so that I had a proper understanding of how the organisation functioned and who performed what task. In the context of this enquiry, these discussions included the then head of the Leader's Office, Jenny Ungless.

To gain a full understanding of what was happening on a day to day basis with the organisation, I instituted a weekly catch up meeting with all Directors and the Heads of the Leader's and Chairman's Offices. I held regular meetings with Jenny Ungless as Head of the Leader's Office. Once I had gained a better understanding of the operation, I cancelled the weekly meeting and held, instead bi-monthly half day Directors' meeting which included Jenny Ungless and Vanessa Gearson.

2. The period from January 2002-September 2002

The financial position of the organisation was extremely precarious at the beginning of 2002, as we had not re-negated our overdraft agreement with the bank and there was a shortfall in income over expenditure of approximately £2-300k per month. My first action therefore was to agree a series of financial expenditure reductions together with a programme of income generation. This was aimed at reducing the annual net "trading" deficit of the organisation by around £1 million, to be achieved mostly by staff redundancies.

In this capacity, I went through every member of staff with their responsible Director, carefully identifying potential candidates for redundancy. This led to two rounds of redundancies, the first at the end of January 2002 and the second in May 2002 with approximately 30 members of staff being made redundant. One of the departments where staff were made redundant was the Leader's Office. In this case, I agreed with Jenny Ungless that to achieve the redundancies would require a restructuring of the roles within the office. Although it is true that members of the Leader's Constituency Office staff were not on the Conservative Central Office (CCO) payroll—and therefore in theory not part of my responsibility—whenever I discussed staffing matters with Jenny Ungless, we naturally covered the roles performed by the individuals who worked on constituency-related matters. This was in part because the Leader had asked for a Constituency Agent, Rikki Radford, to be directly employed by CCO and we had a responsibility to ensure that he was playing an effective role in organising the Leader's constituency and party related activities in his Parliamentary seat.

From all my discussions in the early months at CCO, it was clear to me what roles were being performed by the different members of the team in the Leader's Office. Indeed, as the Leader's Office was located for the mornings on the same floor of CCO as me, about 30 feet away from my own office, and I was a regular visitor to the Leader's Office, both to meet the Leader or to see other members of his team, I was extremely aware of the work that was being undertaken. I was involved in regular discussions with Jenny about some of the pressures she faced in attempting to manage the office as well as looking at the diary. Although I have no knowledge of whether Betsy Duncan Smith was constantly telephoning any of the Diary or Correspondence Secretaries or in regular email or written contact with the office, I find it surprising that at no time did anyone ever mention that Betsy Duncan Smith was performing a key role in the running of the office. Indeed the only conversations I ever had related to her in this period with members of staff who worked in the Leader's Office were in relation to persuading her or her children to attend events with Iain.

I also find it surprising, in the light of subsequent claims that Betsy Duncan Smith was doing 25 hours work each week that I never once spoke to her on the telephone, received an email or letter from her about any aspect of that work during my entire time at Conservative Central Office despite the fact that I had regular contact with evey other member of the Leader's staff. In fact, I was not even aware that Betsy Duncan Smith was being paid at all until the summer of 2002, though I did know that Iain was spending up to the limit of the Office Cost Allowance. If I had been aware that Betsy Duncan Smith was being paid any amount during the period when we were making staff redundant, I would have certainly have raised the issue with Jenny Ungless to see if we could use that money to fund other members of staff who could legitimately have been paid out of that allowance. For example, it was certainly the case that part of Rikki Radford's role was assisting the Leader in constituency-related activity which could have been reclaimed from the Office Cost Allowance, had there been any spare funds to pay for that part of his time.

I cannot recall precisely when I did learn that Betsy Duncan Smith was receiving a payment from the Office Cost Allowance but I believe I had a conversation with Jenny Ungless in the early summer of 2002 when the issue was raised in passing. At the time, I did not think any more about the issue in part because, having never worked in the House of Commons, I was not aware of the rules over employment of spouses though I knew that there had been concern in the papers about MPs abusing the payments in the past. I thought no more about the matter until it was raised again in early September by the new Head of Iain's office, Vanessa Gearson.

Throughout this whole period, at no point did any other Director or other member of staff refer to work undertaken by Betsy or her role either in the constituency or within CCO, except in arranging when she or the children would attend functions either in the constituency or elsewhere. I should also add that I had frequent meetings with Iain and others about his Diary, particularly in the run up to Conservative Party Conference in October 2002 where I was responsible for ensuring that actions were taken to put events into his diary. Again, at no time did either Iain or any other member of staff suggest that I should liaise with Betsy Duncan Smith either about constituency or party related activity.

3. The Employment Position of Annabelle Eyre

The only other issue relating to staffing matters within the Leader's Office that I have not already covered, concerned the status of Annabelle Eyre. In the Spring of 2002, I was told by Jenny Ungless that there was a problem over the employment of Annabelle Eyre. The problem, in essence, was that, although she was still at that stage undertaking some work for the Leader that could be legitimately claimed back from the Office Cost Allowance, the majority of her work was now assisting with work in the Leader's Office on tours and events outside his constituency. As such, Jenny Ungless explained that we would have to move her across from being paid by the Fees Office to the Leader's Office budget. I explained to her that, while I was willing to consider such a move, budgets had now been set for the year and we would have to find savings elsewhere before she could be taken on to the Central Office payroll.

We did not resolve the matter immediately though it was raised again both by Iain and Jenny in meetings with me. It was not seen as an especially urgent issue to resolve and therefore, as I had many other far more pressing matters to deal with, the matter simply was left. Annabelle Eyre herself raised the matter with me on one occasion in the corridor by saying that she would have to move across to the CCO payroll but there seemed to be no deadline for the action to be taken. If I had been informed that she was coming off the OCA on a specific date then clearly she would have to have been taken onto the Leader's Office budget as Iain saw her as a key member of his staff. Because of the sensitivities of my getting involved in the running of the Leader's office, which Iain clearly saw as his domain, I also saw this primarily as a matter for the Leader to resolve with Jenny Ungless directly.

In all of the 3-4 conversations I had about this issue, it was always absolutely clear that all those involved were aware that the majority of the work that Annabelle Eyre was undertaking was not reclaimable under the OCA.

When Vanessa Gearson took over in September 2002, the issue was resolved, after considerable argument, when a donor agreed to fund Annabelle Eyre directly. She was then employed, initially, as part of a small team to organise events for Iain around the country in the aftermath of the Party Conference which was merely an extension of the work she had been previously performing.

4. The period from September 2002-January 2003

It was not until Vanessa Gearson was taken on as the Head of the Leader's Office in September 2002 that I became aware that there might be a problem with the employment of Betsy Duncan Smith. Because Vanessa Gearson and I had worked together while she was working for the Chairman of the Party, we already had a good professional relationship. I briefed her on the budget and some of the other personnel issues within the office and, with her background in the House of Commons, I believed that she could get a proper grip on the management of the Office which had been left in a void since the departure of Jenny Ungless in July 2002.

The issue of the employment of Betsy Duncan Smith was first raised with me by Vanessa Gearson in mid or early September at a meeting in my office. The subject was raised with me, in part because it was related to the matter of taking on another member of staff, Cara Walker, to replace Christine Watson who was supposed to come on to the CCO payroll and in part because Vanessa wished to ask for my advice about how the matter should be handled. She simply explained, in very clear terms, that Iain was paying Betsy Duncan Smith out of the OCA and, in her view, no work seemed to be being undertaken in return. I stated that we needed, as a matter of urgency, to protect the reputation of the Leader and suggested that she raise the matter initially with Owen Paterson, his Parliamentary Private Secretary.

The employment of Betsy Duncan Smith was raised on a number of subsequent occasions by Vanessa Gearson, and on at least one such occasion, Stephen Gilbert, with whom I shared an office, was also present. At no point in the discussion of the matter did Vanessa ever indicate that anyone had said to her that the payments to Betsy were legitimate as she was undertaking constituency work for the Leader. We decided that it was best to continue to press Owen Paterson to raise the matter directly with Iain for two reasons. First, because he was Iain's closest Parliamentary colleague and it was an extremely sensitive topic that needed to be handled carefully, especially as Iain had a tendency to react badly to discussions of a personal nature unless they were handled with great skill. Second, as a Member of Parliament himself, Owen had a full understanding of the rules and regulations of the House and would appreciate the potential political sensitivities of the issue.

I am unable to say how often this issue was raised directly with Iain by Owen but, obviously, as this period coincided with the 2002 Conservative Party Conference and the post Conference Leader's Tour, it was a very busy time. However, in subsequent discussions with Owen both by myself and with others, he confirmed that the matter had been discussed with Iain.

It was during this period that I also instituted a weekly Chairman's Communications meeting where the key players at CCO would discuss the forthcoming week and any major issues that needed to be tackled. One of the key items on the agenda was the Leader's Diary for the month ahead. We were never asked to contact Betsy Duncan Smith about any of the arrangements or changes being made to the diary nor to discuss any other issue except, intermittently, about her own personal attendance at events. However, the issue of how to persuade the Leader to take his wife off the OCA payroll was raised on at least two occasions at which Theresa May, Sir Stanley Kalms, Owen Paterson, Stephen Gilbert and Vanessa Gearson were present.

Throughout this period, although the matter was seen as sensitive, it was only ever seen as fairly straightforward and simply required Iain to take his wife off the OCA payroll. There were no long debates or discussions. To illustrate how difficult it was for us to believe that Betsy Duncan Smith was undertaking work for the Leader in his constituency, I would mention the example of the Leader's Tour in November 2002. As I stated above, I created a special team in September 2002 to organise a 3-4 week tour for the Leader immediately after Conservative Party Conference. As part of the tour, Iain would still have to maintain a limited programme of constituency events, usually on a Friday. I pulled together a team of people from around the organisation to manage this tour and held an initial brainstorming meeting to define what needed to be done as well as other regular planning meetings with the team. We naturally discussed how the constituency activity would be fitted in around the rest of the tour and how the team would liaise with Christine Watson. But, at no time did anyone mention that another person for us to talk to or pass papers to was Betsy Duncan Smith, except in respect of the very limited number of meetings where she would be expected to attend in her capacity as the Leader's wife.

No progress had been made to resolve the issue of Betsy's employment by November 2002. At this point, the story broke in the newspapers about the abuse of payments by Michael Trend MP. Both at private one-on-one meetings with Vanessa Gearson and Owen Paterson and at the regular weekly Chairman's Communications meeting, I raised my growing concern about the political sensitivities of the employment status of Betsy. Everyone understood the ramifications of possible revelations that the Leader of the Conservative Party was making payments to his wife without her undertaking any work. I raised privately with Owen that I thought we might have to look at whether some proportion of the money should be repaid to the Fees Office.

At no time, during discussion of this matter, did anyone present at any of the Chairman's communications Meetings or any other bilateral meetings, including those who were in possession of the facts, such as Owen Paterson and Vanessa Gearson, say that Betsy Duncan Smith was or had undertaken any work in return for the payment. In fact, precisely the opposite is the case: the only discussion was how to persuade Iain that the payment should be stopped, not whether the payments could in any way be justified.

Some weeks later, in December, I was assured by both Owen and Vanessa that Iain had agreed to take Betsy Duncan Smith off the OCA and to end her employment. That this had in fact been done was confirmed to me in early January.

Although I remained of the view that the money that had been improperly paid to Betsy Duncan Smith should have been repaid, I was so relieved that the problem had been dealt with and had so many pressing matters to handle that I decided to keep my opinion to myself.

18 October 2003

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