Examination of Witnesses (Questions 1-19)
FOREIGN AND
COMMONWEALTH OFFICE
& DEPARTMENT FOR
INTERNATIONAL DEVELOPMENT
10 DECEMBER 2007
Q1 Chairman: Good afternoon. Welcome
to the Public Accounts Committee where today we are looking into
the National Audit Office Report, Managing risk in the Overseas
Territories. We are joined by Sir Peter Ricketts, Permanent
Secretary, Foreign and Commonwealth Office. Would you like to
introduce your colleagues?
Sir Peter Ricketts: I have Minouche
Shafik from the Department for International Development with
me today at the table and a number of colleagues from our Overseas
Territories Directorate, including the Head of it, Leigh Turner,
who doubles in a number of roles, including Commissioner for the
British Antarctic Territory.
Q2 Chairman: Have we had the pleasure
of your company before at the PAC?
Sir Peter Ricketts: No, sir.
Q3 Chairman: I am sorry about that.
I hope it is an enjoyable experience for you. I see that the Argentines
have a new lady President and there are also reports that the
economy may now be overheating. What is the risk, do you think,
of Argentina increasing pressure on the Falkland Islands in the
foreseeable future?
Sir Peter Ricketts: We do not
believe that there will be pressure of a kind that is going to
create difficulties in the islands. This is something we shall
have to talk to the new Argentine President and her government
about but there is a lot of scope and mutual interest in cooperation
between us and Argentina on the Falklands.
Q4 Chairman: Can you speak up, please?
I did not quite hear what you said. The acoustics are not very
good in this room.
Sir Peter Ricketts: I said it
will be our intention to engage this new President and her team
to show that we have mutual interests in working together on the
Falkland Islands.
Q5 Chairman: Do you think that will
meet with a positive response, judging by what has happened, say,
in the last 18 months?
Sir Peter Ricketts: That is what
we will be working to achieve. Now that the lady is in power I
think we have every interest in engaging early on with her to
show that we have mutual interests here.
Q6 Chairman: Are there any risks
of inconveniences being re-ignited to any extent in Gibraltar
at the moment?
Sir Peter Ricketts: No, I think
things are positive in terms of managing the risks in Gibraltar.
As the Report sets out, we have made progress in mitigating a
number of the risks, for example, on the Gibraltar pensions issue,
and I think after the Cordoba Agreement last year things look
more positive now in Gibraltar.
Q7 Chairman: In terms of Montserrat,
physical risks there, what do you have in place to deal with that?
Sir Peter Ricketts: I visited
Montserrat earlier this year in fact because I was worried about
the risk management there. We have put an awful lot of scientific
expertise on to the island to monitor the volcano and we have
a Scientific Committee that meets twice a year to bring together
the best volcano watchers in the world to advise the Governor
on what is likely to happen with the volcano. I think it is probably
the most observed volcano in the world. There are some pretty
careful restrictions in place on the island so that, if there
were another eruption, the lava flow would not injure life. Some
of those restrictions are controversial on the island because
the volcano has not actually erupted for the last few years but
we are keeping it under very vigilant scrutiny.
Q8 Chairman: Can we look at risks
from money-laundering? If you look at paragraph 1.35 on page 23
of the Report under the heading "Limited capacity to investigate
and prosecute financial crime is a risk in most Territories",
if you look at the figure there, you can see, for instance, Bermuda,
number of suspicious activity reports, 313; estimated number employed
in financial services, 4,000; reports per 100 employed, only eight.
If you compare that with another example, say, the Isle of Man,
you will see reports per 100 employed, 24. It seems that most
suspicious activity reports are not being properly investigated,
so how can we know whether these territories constitute a significant
money-laundering risk?
Sir Peter Ricketts: I share your
worry about the risks in the financial services area, the risk
of money-laundering on the territories, particularly the smaller
territories, who, as the Report describes, do not yet have the
critical mass of regulatory expertise to follow up on these reports.
What we are trying to do is drive up capacity in the smaller territories
to be able to employ more regulators. We have a financial services
adviser based in the region whose job it is to go round territory
by territory, trying to drive up standards. We are supporting
the introduction of legislation in some of the smaller territories
that will give them rights to proceeds of crime and to civil recovery
so that they have more revenue with which to employ more regulators
so that they can follow up more of the suspicious activity reports.
I share your concern, Chairman, at the risks here. That is why
we have it very much on our—
Q9 Chairman: We are responsible for
this, are we not, obviously, if something goes badly wrong? For
instance, in paragraph 1.32 on page 21 we read of limited regulatory
capacity. This is particularly marked in the Turks and Caicos
Islands, Montserrat and Anguilla. Apparently, the Chief Auditor
of the Turks and Caicos Islands herself had to come to our own
Comptroller and Auditor General to express her concern about what
was going on in the Turks and Caicos Islands. Does this worry
you, the lack of regulatory activity and capacity?
Sir Peter Ricketts: Yes, it worries
me and we are doing everything we can to improve the capacity,
as I say, by increasing the revenues that these smaller territories
have by giving them advice from the UK. In the light of this Report,
Mr Chairman, I have written again to the other Departments concerned,
the Treasury, the Serious Organised Crime Agency, and others to
reinforce the need for all of us in Whitehall to be doing everything
we can to make sure that we are giving these smaller territories
the technical assistance they need to keep up to date with developments
and to pursue any suspicious activity.
Q10 Chairman: Can you say anything
more specifically about the Turks and Caicos Islands? It seems
to me one of the problems with these territories is that they
often have very small numbers of people involved in the legislature.
People shift from opposition to power and may be investigating
themselves almost. Tell us exactly what is happening in the Turks
and Caicos Islands and reassurance that you have got a grip there,
please.
Sir Peter Ricketts: First of all,
the Governor—
Q11 Chairman: For instance, our Clerk
has just shown me that on page 32 we see that not all territories
have a committee of public accounts or similar scrutiny body.
Some that do only meet in private. I am sure many Permanent Secretaries
would like us to meet in private or not exist at all, but we do.
Sir Peter Ricketts: Mr Chairman,
I am delighted to respond to that. On the question of committees
of public accounts, there is a problem in some of these tiny places
with tiny legislatures in constituting and having a properly functioning
committee of public accounts, and indeed producing properly audited
accounts. There is some good practice, even from the smaller territories.
I know that Montserrat has introduced a practice of having an
ex officio member of the public accounts committee who
can bring in from the outside some expertise. I think that is
something we could do more of around the Caribbean overseas territories.
We had all the elected Chief Ministers here for a conference last
week and I took the opportunity of going through the Report with
them, including this point, and recommending that they think about
perhaps a pool of expertise on public accounts that they could
draw on so that they do not have to have it all resident on the
islands all the time but can draw on it. You referred to the Turks
and Caicos Islands. I too am concerned that there is still not
enough capacity to deal with the regulatory issues that they face.
The Governor is very conscious of that. The Governor himself watches
this very closely. We make sure that our financial services, and
other, advisers visit regularly. We have organised a link between
the public service in the Turks and Caicos Islands and the National
School of Government here to introduce public service reform and
to make available to them the best expertise we have in the UK
to try and improve the capacity on the islands to manage these
difficult issues. I think provision of advice and technical assistance
is probably the best contribution that we can make, Mr Chairman.
Q12 Chairman: Is there a problem
that in these territories the Governor is responsible for law
and order but the local government pays for it and there might
be a tension there? For instance, we read on page 43 about Anguilla's
prison. It was built in 1996 with UK funding. "However, it
currently fails to meet minimum standards of security and segregation.
A serious assault led to the death of a remand prisoner in 2006.
The prison's town centre location and its basic perimeter fence
enables contraband goods to enter the site. There have been three
breakouts in the last two years." How do you resolve this
tension? What more can Governors do when they feel that law and
order is threatened by under-resource and by local government?
Sir Peter Ricketts: I do not think
there is an easy solution because I think it has to be right,
Mr Chairman, that the Governor has responsibility in the end for
law and order in his or her territory. On the other hand, I do
not think any of us would want HMG to be financially liable for
all the costs of law enforcement and prison improvement in the
islands. They do have their own revenues and, in the end, it comes
down to a question of priorities as to how they apply those revenues.
The Governor in the first place has the responsibility, I think,
to encourage and cajole the local governments to spend the money
necessary on police, on prisons, to make sure that there is a
properly functioning criminal justice system. I do not think the
answer would be to take back—
Q13 Chairman: This has always been
a problem, has it not, the fact that the government is responsible
for law and order but the local parliament has to pay for it?
This is what caused the American Revolution in the first place,
was it not? In a tiny scale, you are trying to resolve the same
problems, are you not?
Sir Peter Ricketts: Yes, you are.
As I say, I do not think the answer is to repatriate the financial
responsibility. I think the answer is to make sure that we have
proper advice. We have a prison reform co-ordinator resident in
Miami who is there to help Governors and governments on what needs
to be done. At the end of the day it is a question of prioritisation
and I think it is up to the Governor and his Executive Council,
his Ministers, to decide on the prioritisation that gives enough
resources to law and order.
Q14 Chairman: Can I ask one of you—it
may be DfID can comment here—on figure 11, right at the
bottom, the Tristan da Cunha harbour saga. What happened there?
What went wrong?
Dr Shafik: That issue dates from
about 15 years ago, when we were asked to look at the harbour
and there were modifications made to the original design in response
to the local fishing community. They finished it in time for the
winter storms. As a result of that the conditions in the harbour
deteriorated and they were damaged. I am pleased to inform you
though that we have now got agreement from the Royal Engineers,
who will be going to repair that harbour in time for the next
winter in March.
Q15 Chairman: How many of these places
have you been to, Sir Peter, as a matter of interest?
Sir Peter Ricketts: I personally
in this job have been to Montserrat so far.
Q16 Mr Mitchell: Can I just ask you
about the Chagos Islands? We have a letter from David Snoxell,
[1]who
was High Commissioner in Mauritius until November 2004. He questions
the expenditure on the lawsuits to keep the islanders from going
home. Could you tell us how much these have cost over the years?
Sir Peter Ricketts: I believe
we have incurred legal costs of several hundred thousand pounds
so far, in the order, I think, of £300,000, from memory.
Q17 Mr Mitchell: The legal costs
that have to be paid by HMG were admitted by the FCO to be in
excess of £2,171,000. That is in an answer to a PQ. That
is substantially higher than that.
Sir Peter Ricketts: That, I think,
relates to all the legal costs paid in the successive cases since
the year 2000, the costs of the Chagos Islanders themselves. The
figure I have here is £1.8 million. That is the total cost
of all legal proceedings. My figure, I think, was the cost of
our appeal to the House of Lords on this point of law.
Q18 Mr Mitchell: Mr Snoxell estimates
the total cost to be in excess of £3 million, not counting
the cost of going to the House of Lords, as we now are. Is it
justified to spend this amount of money?
Sir Peter Ricketts: We believe
it is.
Q19 Mr Mitchell: Why?
Sir Peter Ricketts: For two reasons.
First of all, there is a very important point of law here on whether
the Government can make laws for the overseas territories by Order
in Council or not and, if not, then there are serious implications
for the governance of the overseas territories.
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