Examination of Witnesses (Questions 100-119)
DEPARTMENT OF
TRADE AND
INDUSTRY AND
ADVANTAGE WEST
MIDLANDS
20 MARCH 2006
Q100 Greg Clark: I am merely trying
to understand, and actually we have pretty much established, where
the pressure came from. May I invite the witnesses to turn to
page 34 of the Report? In paragraph 2.23, towards the bottom,
there is a statement which says, this is talking about the pressure
on Her Majesty's Customs and Excise to defer tax, "The Department
told Her Majesty's Customs and Excise that the Company had stated
that SAIC had already paid MG Rover £67 million". That
seems to be a very convoluted way of putting it, "The Department
told Her Majesty's Customs and Excise that the Company had stated
that SAIC had already paid" the money. Ms Bell, did you have
evidence that this money had been transferred?
Ms Bell: It had been constantly
stated by MGR that the money had been paid.
Q101 Greg Clark: I understand that,
but did the Department ... Perhaps Mr Russell could help us?
Mr Russell: The wording is convoluted
for precisely that point: we did not have evidence.
Q102 Greg Clark: You did not have
evidence?
Mr Russell: We did not have evidence
that it had been paid. We had not seen a bank account, but we
had been told that the cash had passed.
Q103 Greg Clark: This is very significant
is it not? You are vouching for the likelihood that this sale
should take place and you were not even able to verify that £67
million from a previous arrangement had actually come into the
company. Is that correct?
Mr Russell: This was one component
of laying out to Customs and Excise what we had been told in terms
of the financial state of affairs for MGR. We as a Department
had not done detailed due diligence on any of the figures.
Q104 Greg Clark: On page 32, paragraph
2.17, it says that you commissioned a detailed survey.
Mr Russell: Indeed; from publicly
available information. There was no due diligence on that.
Q105 Greg Clark: There was no due
diligence, so when MGR said that they had received the £67
million, the Department was not able to confirm that.
Mr Russell: At that stage we were
passing over our original reports which were put together from
publicly available information, supplemented by information that
we had been given by the company
Q106 Greg Clark: Is it your view
now that the money had been paid over?
Mr Russell: Yes, we are almost
certain that it had been paid over, otherwise they would not have
kept going.
Q107 Greg Clark: You are almost certain.
Mr Russell: We are certain it
had been paid over.
Q108 Greg Clark: You were not at
the time.
Mr Russell: No, because at that
stage we had not sent in our accountants to do due diligence.
We were merely representing to Customs and Excise what we had
been told by the company.
Q109 Greg Clark: But then you were
using that, your knowledge of the company, to intercede with Customs
and Excise to have deferred tax payments. The one piece of evidence
which strikes me as crucial to understanding whether there was
a reasonable prospect of a deal is to see whether they paid over
the £67 million that they were contracted to do, but you
had no idea as to that.
Mr Russell: Very simply, we were
saying to Customs and Excise that we had been told by the company.
We said that this was simply what we had been told by the company
in addition to what we had found from the public domain. It was
up to them to verify that.
Q110 Greg Clark: Why were you directly
interceding with Customs and Excise? Is that a standard practice?
Mr Russell: We were not interceding.
What we were doing was explaining to Customs and Excise what we
had been told; nothing more than that.
Q111 Greg Clark: Why could the company
not do that directly?
Mr Russell: They did and Customs
and Excise simply asked us what we had been told about the business?
Q112 Greg Clark: But they could have
asked directly.
Mr Russell: We very simply passed
over what we had been told.
Ms Diggle: Maybe I can help you
here. Customs and Excise then and HMRC now, try to use the best
management of debt principles they can, using all the sources
of data and information that they possibly can get hold of. I
imagine that they were simply trying to learn what they could
and to check out what facts they could. DTI were not able to check
it out but they were able to explain what they knew. That was
what was happening at the time.
Q113 Greg Clark: But the Department
was taking a view based on the recommendation of the £6 million,
if not the consideration of the £100 million, that there
was a material prospect of a deal. You were advising or certainly
making a case to Customs and Excise to defer another great public
liability in terms of the foregone tax revenue based on the prospect
of a deal with SAIC and yet you did not know at the time whether
the money that SAIC was contracted to have paid originally had
been paid over. Is that not extraordinary?
Mr Russell: No. At the time we
were considering the loan, KPMG have verified cash had passed.
If cash had not been passed, the company would have fallen over
much earlier. This was a pre-payment to keep the company going.
Q114 Greg Clark: But when you were
talking to Customs and Excise, you had no idea whether this money
had come in.
Mr Russell: No, we had not verified
the fact by sending in accountants.
Q115 Kitty Ussher: I should probably
also start off my remarks by saying that I was Patricia Hewitt's
special adviser from September 2001 until February 2004 when I
left because I was selected as a parliamentary candidate. As far
as I can recall, I was not involved in any way with this project,
although I was involved in other very similar projects for entirely
unrelated companies and obviously I know some of the witnesses
quite well. I just want to clarify this issue around the direction.
No direction, no ministerial direction, that is ministers overruling
the advice of the accounting officer and her team, was given on
the decision to grant a loan to the administrators. That is correct,
yes?
Sir Brian Bender: Correct.
Q116 Kitty Ussher: No direction was
given on the bridging loan, because the bridging loan obviously
did not take place. However, Ms Bell, you did advise the Secretary
of State that if she wanted that bridging loan to go ahead, she
would have to seek a direction, that is overrule your advice as
Accounting Officer.
Ms Bell: That is entirely correct
on all counts.
Q117 Kitty Ussher: She decided not
to in effect, although circumstances did change at the last minute.
I am sure there would have been huge political pressure on her
to do so because it would have effectively kept the company afloat
until the end of May and we all know what happened on 5 May, but
I should just like to clarify for the record that that was never
done and the advice of officers was not overruled for political
or any other purposes by ministers. Is that correct?
Ms Bell: That is indeed correct
and the focus of the discussion, once the company had gone into
administration, was on the one-week breathing space, as we have
already discussed.
Q118 Kitty Ussher: Indeed. Are there
any other examples of ministers overruling crucial decisions for
political reasons in terms of accounting officer direction?
Sir Brian Bender: May I just be
clear? Accounting Officer direction is not necessarily overruling
for political reasons. There would be advice from the Accounting
Officer about whether or not this was good value for money and
the minister may decide for policy reasons that it is worth making
that investment despite the advice of the Accounting Officer.
Whenever that happens, the National Audit Office and this Committee
are informed; so there are incidents from time to time. I just
wanted to correct the impression that you are giving about overruling:
it need not necessarily be like that. There are some historic
cases where it certainly appeared like that.
Ms Diggle: May I add that they
are very rare?
Q119 Kitty Ussher: Indeed, and there
was none in this timescale around April 2005.
Sir Brian Bender: No.
| 
