House of Commons
|Session 2007 - 08|
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Public Bill Committee Debates
Draft Crown Agents Holding and Realisation Board (Prescribed Day) Order 2008
The Committee consisted of the following Members:
Celia Blacklock, Committee Clerk
attended the Committee
Second Delegated Legislation Committee
Monday 10 March 2008
[Mr. Mike Hancock in the Chair]
Draft Crown Agents Holding and Realisation Board (Prescribed Day) Order 2008
The Parliamentary Under-Secretary of State for International Development (Mr. Shahid Malik): I beg to move
That the Committee has considered the draft Crown Agents Holding and Realisation Board (Prescribed Day) Order 2008.
I am delighted to serve under your chairmanship, Mr. Hancock, for the consideration of the order, which deals with a subject that is not in the mainstream of the Department for International Developments business, and which has not been the subject of much recent parliamentary attention. I shall, therefore, set out some of the background to the creation of the Crown Agents Holding and Realisation Board, which I shall refer to as CAHRBnot an acronym that slips off the tongue readilyand our reasons for introducing the order to wind it up. I also draw hon. Members attention to the explanatory memorandum to the order and the CAHRB accounts, as laid before the House.
CAHRB was one of the two separate and distinct public bodies established by the Crown Agents Act 1979, which was taken through the House by the late Baroness Judith Hart, who served with such distinction as Minister for Overseas Development in the Governments of Harold Wilson and Jim Callaghan. The 1979 Act passed with broad cross-party support.
The Crown Agents was first established in 1833 to act as agents for the procurement of goods and services for colonial administrations. During the early 1970s, it incurred substantial losses in ill advised banking and property investments undertaken on its own account. The 1979 Act drew a line under the resultant financial difficulties by establishing two separate bodies. The Crown Agents was placed on a firm legal and financial basis, allowing it to continue its business as agents and advisers to overseas Governments. CAHRB was established as a separate body to recover whatever could be salvaged from the collapsed investment portfolio.
Under the Act, the Crown Agents became a statutory corporation responsible to Ministers, with the appropriate accountability and control, which provided an organisational structure that has allowed its business to thrive. In 1997, ownership of the business was transferred to a not-for-profit foundation in the private sector, since when the Crown Agents has continued to provide valuable services to DFID and many other Governments and organisations.
The Crown Agents was a public body, which meant that the Government had to finance the losses run up during the secondary banking crisis, which they did by injecting £175 million of grants into its balance sheet.
The amounts that CAHRB has realised have been paid over to the Consolidated Fund to offset the capital injected during the secondary banking crisis, although, given the nature of the losses in property and banking, it was never expected that realisations would recover the whole of the capital provided. Subject to confirmation in the final accounts, we expect that CAHRB will have recovered £38 million since 1979. Between 1979 and 1997, CAHRB, although legally separate from the Crown Agents, was managed in common with it. Most of CAHRBs significant recoveries were made during that period. Since 1997, there has been a separate board, but the day-to-day work has been carried out under contract by the Crown Agents.
The Committee will understand that some of the claims taken on by CAHRB related to companies in administration or subject to bankruptcy proceedings, some of which have taken a very long time to conclude. It was not until late last year, for example, that CAHRB received final payment from the liquidators of the Israel-British bank (London). None the less, it was clear that CAHRBs responsibilities for realisation would come to a natural end in due course. The most recent accounts show that CAHRBs net assets other than cash balances that have been or will be paid over to the Consolidated Fund were less than £100,000. In recent years, there has been only a trickle of realisations. In light of the situation, as my right hon. Friend the Secretary of State for International Development announced in a written statement on 7 January, we and the board judge that the work of CAHRB has reached its natural end.
The order is the first step in the procedure laid down in the 1979 Act for when CAHRBs work had been substantially completed. It will vest CAHRBs remaining assets in the Department for International Development with effect from 1 April 2008. The board will continue to exist formally until 31 March for the purpose of preparing final accounts. Once the accounts have been audited and presented to the House, my right hon. Friend will make a further order formally dissolving the board. The only significant asset that will transfer to DFID under the order will be the boards shareholding in a subsidiary company, Four Millbank Investments. That companys only asset is the title, as holders of the mortgage, to some parcels of land in the Bahamas. There has been some interest in those parcels of land, including from the Government of the Bahamas. DFID aims to dispose of them as soon as possible to an intermediary or final purchaser, subject to getting value for money.
The boards closure will have minimal staffing and financial consequences. The board comprises only a chairman and a deputy chairmanDavid Probert CBE and Peter Berry respectivelywho have done that work on an expenses-only basis. My right hon. Friend and I are grateful for their service in that capacity. The boards day-to-day work has been limited, and has been carried out under contract by Crown Agents staff. Administration costs in the last account were £27,000.
I have set out the orders background and purpose. It is a small tidying up in the business of government that we believe it is now appropriate and worth while to make. If I am permitted to respond to the debate, I will try to answer hon. Members questions on any matter that I have not covered. I commend the order to the Committee.
Mr. Geoffrey Clifton-Brown (Cotswold) (Con): Mr. Hancock, I have always enjoyed serving under your good-humoured chairmanship; no doubt it will be the same today. I welcome the Minister to his first statutory instrument Committee. I am sure that it is the first of many and that, when he has done as many as I have, he will, like me, enjoy them hugely. He set out the factual reasons for the order remarkably well, and I pay tribute to him for it. I have a number of questions that I should like him to answer if he can. If he cannot answer them today, it would be useful to have a note subsequent to this sitting.
The Minister made it clear, as do the explanatory notes, that the order will come into effect on 1 April 2008, the day on which the property, rights, liabilities or obligations of the Crown Agents Holding and Realisation Board, set up under the Crown Agents Act 1979, will be transferred to the Secretary of State for International Development. Why was that particular date chosen, when the boards audited accounts cover each year to 31 December? Would it not have been tidier to wind it up on that date, concurrently with the closing date for each years accounts?
Paragraph 4.2 of the explanatory notes makes it clear that all assets should be transferred to the Consolidated Fund. I have examined the 2005-06 accounts. The board had an operating surplus of £35,296 in 2005 and a deficit of £15,178 in 2006. As far as I can see, the accounts make it quite clear that both of those sums were retained within the board and not transferred in or out of the Consolidated Fund. Will the Minister be clear about what he thinks is the value of the funds being transferred into the Consolidated Fund, taking into account a number of the matters that I am about to raise? It is a question not only of the possible accumulated surplus of operating funds, but the capital value of funds that are being transferred.
To date, the only accounts that are available on the internet are the 2005 and 2006 accounts; we do not yet have the 2007 accounts for the year ending 31 December 2006. The question arising from that is: are there any material differences between the 2006 and 2007 accounts? Are there any material differences that the 2007 accounts would not disclose prior to wind-up on 31 March 2008? In particular, will the Minister say something about the position of assets over liabilities? He made it clear, and the two sets of accounts concur with this, that the assets amount to £77,000 only, but there is also £1.7 million of cash in the accounts, which presumably will transfer straight into the Consolidated Fund. Will he confirm that?
The Minister said something about the assets. Will he tell us what liabilities exist, both contingent and actual, which may not be immediately apparent from
The accounts of Four Millbank Investments Ltd have not been consolidated as the consolidation adjustments are not considered material.
In other words, the Comptroller and Auditor General did not consider that they had any value, so perhaps he could clarify his statement against that of the Comptroller and Auditor General in paragraph 8. However, in paragraph 9, which may be connected, under the heading Contingent liabilities and guarantees it is stated:
There may be a liability in respect of proving title to the mortgage held over land in the Bahamas.
I do not know whether that is the same mortgage as the one that relates to Four Millbank Investments, or whether it is something different, so perhaps he would clarify that.
The 2005 accounts include a revision to the recoverable value. Will the Minister say whether there have been any revisions in the 2007 accounts, and whether it is envisioned that there will be revisions between 2007 and 31 March 2008, when the whole thing will be wound up? How many staff will be needed to manage the run-down of the board, and how long does he think it will take for the board to be wound up?
As I said, paragraph 7.4 makes it clear that £38 million of disposable monies were transferred to the Consolidated Fund by 31 December 2007. The Minister has told us today that that was mostly prior to the privatisation of the Crown Agents in 1997. In relation to the original grant of £175,000 that was made to cover the losses on the secondary banking crisis, is the £38 million that was transferred to the Consolidated Fund by 31 December 2007, as detailed in the explanatory notes, the only money that has been received towards that? On the £77,000 worth of assets, if there have not been any revisions to their likely recovery value, what is the estimate that he has given to his Treasury colleagues for what might eventually be achieved in the Consolidated Fund?
With those questions and provided we get satisfactory answersthe answers may spur other questionsit seems that the statutory instrument is relatively uncontroversial, from the documents that we have been provided with. Provided that the answers are satisfactory, as I expect them to be, I shall advise my colleagues that they will not need to oppose the measure. However, it will be interesting to hear what answers the Minister is able to give us.
The Chairman: It might be convenient for the Committee if I were to ask the Minister whether he would like to try to answer some of those questions now. It might help other Members.
The Chairman: I have not called you yet, Mr. Bottomley. I just wanted to see whether that was possible. Trying to be helpful, I wondered whether you would want to respond immediately, Minister, but if there is an insistence, I shall call Peter Bottomley to speak.
Peter Bottomley: My grandfather was five years old when Crown Agents was established. In 1938 he became the senior Crown agent for the colonies, and he continued in that post until 1943. He would be entertained if he could return to No. 4 Millbank and see the remodelled building with its Edwardian elegance.
I have one question, and perhaps I could add a few words in case the answer is available. Why does article 2 appear in the order? I understand that the expression Secretary of State refers to any Secretary of State, but in the order we are told that it will refer only to the Secretary of State for International Development. I make that point, because Peter Hennessy, the Whitehall watcher, was not aware of it. It came up when my father was private secretary to Viscount Addison, a Minister in Attlees Government and the only Cabinet member who did not believe that Attlee should be Prime Minister; I think he was more than 80 years old at the time.
Viscount Addison was in Australia, and my father was asked by No. 10 to get a letter to him as fast as possible. My father arranged with the Royal Mail to send it through the British Overseas Airways Corporation. The letter went, but No. 10 urgently requested the letter back because, presumably, the Cabinet reshuffle had been cancelled, so my father got in touch with the Royal Mail and said, Can we have the letter back? It said, Under whose authority?, he said, The Prime Ministers, and it said, That is not good enough, you can only withdraw a letter from the Royal Mail under the authority of the Secretary of Stateany Secretary of Stateand only one Prime Minister, the Marquess of Salisbury. It led me to believe that in legislation, a reference to a Secretary of State meant that any Secretary of State could make the order. Why, in the order before us, is it only the Secretary of State for International Development who can do so? If the answer is not readily available, perhaps it can sent to me by letter later on.
The Chairman: It was a long way around, but we got there in the end, Mr. Bottomley. Thank you very muchvery entertaining.
Richard Younger-Ross (Teignbridge) (LD): I also welcome the Minister to the Committee. We have had many technical questions, which I shall not attempt to repeat, and a very interesting question about whether Secretary of State means a specific Secretary of State or not. I also welcome Mr. Hancock, whose friendliness is perhaps even greater today because of Pompeys success at the weekend in beating Manchester United.
I do not want to go through the technical questions, because I am sure that the Minister is waiting for enlightenment as I say these few words. We have discussed £38 million of money being paid back, and other land in the Bahamas about whose value we have not been given any information. We are told that one reason why the issue has run on for so long is that it involves liquidated assets from companies that have gone bankrupt. We do not have any idea what they are likely to be over time either.
On the roundness of the issue, why was today picked? Why was the organisation not wound up five or 10 years ago? Why has it taken until now to do so?
On the issue of time, what is the total cost? We were told the administration cost for this year, and that the people who currently undertake the work do so on an expenses-only basis, but what are the boards total running costs since it was set up, and how do they compare with what the board has been able to realise?
Mr. Malik: I thank the hon. Member for Cotswold for his thorough questions. Hon. Members asked how long this Committee might go on and, being a novice, I suggest that it might not be too long. There might not have been too many questions, but I am pleased that hon. Members asked them, because this is an important, interesting issue with a lot of history attached to it. I will not answer the questions in order.
Just to provide context, some £175 million was injected from the public purse. I think that the hon. Member for Cotswold mentioned £175,000 and many of us wish that it was just that amount, but, sadly, it was £175 million. The amount that was repaid in the early 1980s would be worth about £100 million in old money, so that gives hon. Members a rough idea.
On delays in winding up, a number of claims managed by the board related to payments from administrators and liquidators that have taken a long time to finalise. There is always a question about the balance of advantagewhether to manage the claims through a separate body or bring them back into governmentbut the statutory provision that the work of the board be substantially completed needed to be satisfied. We believe that the conditions are now fully satisfied and that the balance of advantage is now in favour of winding up the board.
On the transfer of cash, most of the £1.7 million cash held as of December 2006 was paid to the Consolidated Fund during 2007. With regard to the material differences between the 2007 accounts and those of 2006, there was no significant change between those two financial years. The accounts are for CAHRB to prepare, but I will write to the hon. Member for Cotswold on the detailed points that he has raised, having consulted CAHRB.
In terms of liability on the transfer of title, title has now been proven and vested in Four Millbank Investments. Therefore, liability has not materialised. Why has CAHRB not been able to realise revenues and moneys from the outstanding investments? I am sure that everybody is keen to find out what some of the outstanding potential assets might be. Those assets are undeveloped plots on a small island that are not yet linked to roads or services, which were bought in connection with a possible tourism development that never materialised. There was some dispute about legal title, but that has now been resolved. There are some 161 plots on Great Harbour Cay, which is just north of the Bahamasa map is available on Google for anybody who cares to look at it. Three of those plots, which are on the beach front, are under negotiation, one has a partially erected building on it and there are 157 smaller plots. There are 11 plots on Grand Bahama itself. Offers totalling $420,000 have been received for 24 of the plots.
April is not the financial end date for the board. However, it was convenient for the Department for International Development as it is our financial year end date.
In respect of the question asked by the right hon. Member for Hitchin and Harpenden
Mr. Malik: Of course I withdraw the comment, Mr. Hancock. Just to let you in on a little secret, the hon. Member for Worthing, West was the first person to give me any advice on dealing with the media. That was in 1999, and I am for ever grateful to him for it. I do not think that I have gone too far wrong in following his advice, which I shall not repeat.
As I think the hon. Gentleman anticipates, I shall get back to him on his question. There is a great deal of enlightenment in this room, but not sufficient to deal with it.
Peter Bottomley: I am grateful to the Minister for his kind words about 1999. His response is perfectly acceptable. The question is on a slightly arcane point, but it is one to which it would be nice to have an answer. Because one or two people suggested that I ought to have added one more sentence
Peter Bottomley: No, just to say that my father found that Chuter Ede, the Home Secretary, was willing to sign the authorisation, so the letter was withdrawn from the Royal Mail.
Mr. Clifton-Brown: May I suggest to the Minister that, as far as the Committee is concerned, two important questions are outstanding? The most important is how long he envisages it will take his Department to run off all the remaining assets. Secondly, he told us that he found some plots, which I have no doubt hon. Members are interested in looking at, for which he has already received an offer of $427,000I was not quite clear whether that was for all or part of themwhereas the accounts state that there were only £77,000 worth of assets in total. The total assets as stated in the accounts have already been well exceeded. Could the Minister tell us whether he has found any other gems, and, if he has not, whether he has looked for them?
Mr. Malik: There are three beach-front plots of land, which are under negotiation for some $300,000, the partially erected building that I spoke of for $30,000, and some 157 smaller parcels of land, away from the beach. Twenty of those are under negotiation for $90,000. That is the current information. The hon. Gentleman will recognise that, in disposing of all outstanding assets, we will ensure that we get value for money for the public purse.
Richard Younger-Ross: On realising the value of the assets, can the Minister state who is responsible for the valuation and sale of them? In the past, the Foreign Affairs Committee has been critical of the sale of assets and properties, and deals that have been entered into. We would like some assurance that these assets are being disposed of in a way that realises the greatest benefit to the Government.
Mr. Malik: I am quite hopeful and confident that that is the case. I tried to give an idea of the assets that were outstanding, which is why I brought the map.
The Chairman: Order. I am sorry, Mr. Malik. There are some rulesI know that this is your first statutory instrument Committeeand no maps or exhibits are allowed. You can refer to hon. Members getting the information from another source but not demonstrate it.
Mr. Malik: I accept that, Mr. Hancock. The main point is that the plots are undeveloped parcels of land with limited road access, and significant investment would be needed for them to have greater values than those that I gave earlier. In any sales, we will ensure that we get value for money for the public purse.
Richard Younger-Ross: Will the Minister write to us with further details on that important issue? Perhaps, Mr. Hancock, Hansard should move into the 21st century and develop the ability to present maps. That would certainly make it better reading.
Mr. Malik: I am more than happy to furnish the hon. Gentleman and other Members with pertinent information. Might I add, however, that we are employing professional agents to maximise the value of any sales that might result in the Bahamas?
Mr. Clifton-Brown: In addition to the information that the Liberal Democrat spokesman requested, will the Minister give us the latest, up-to-date estimate of how much value he expects to recover? I have pressed him on that twice, and each time I have uncovered a few thousand dollars more, so I would be grateful if he looked carefully at all the assets and put a note in the Library.
Mr. Clifton-Brown: Indeed; I think that my hon. Friend is pushing for information on the price and availability of the plots as well.
I have one, final point to make about the two members of the board, who are unpaid. According to the accounts, D. H. Probert CBE, the chairman, and P. F. Berry CMG have probably been in place since 1997. If they have done the job unpaid since then, I am sure that the Minister would like to thank them; the Opposition certainly thank them.
Mr. Malik: On the first question, I cannot give a hard answer on what might be realised, but, apart from the plots of land that I have mentioned, we believe that the current value of the outstanding plots is between $500,000 and $700,000.
I paid tribute to the chairman and the deputy chairman in my opening speech, and I am sure that the Committee would also like to pay tribute to them. Few people work only for expenses in this day and age, and it is commendable that they do so.
The Chairman: Before I put the question, may I thank all members of the Committee for their good humour and contributions? Mr. Clifton-Brown, in particular, has convinced me that one can get blood out of a stone.
Question put and agreed to.
That the Committee has considered the draft Crown Agents Holding and Realisation Board (Prescribed Day) Order 2008.
Committee rose at three minutes past Five oclock.
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