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Mr. Lilley : The Maxwell case was certainly a terrible scandal, but the hon. Member for Bolsover (Mr. Skinner) sees capitalist plots, scandals and conspiracies everywhere. If he intervenes too many times in my speech and his hon. Friends see the names Lilley and Skinner linked together in the pages of the Official Report, they will think that he is part of a major capitalist enterprise-- [Interruption.] I never thought that I should see the hon. Member for Bolsover lost for words--
Mr. Skinner rose --
Mr. Lilley : Those listening to the hon. Members for Oldham, West and for Bolsover would think that occupational pension schemes were disastrous and that all occupational pensioners were at risk of fraud. People
Column 217listening to the debate will realise that the hon. Member for Oldham, West has a hidden agenda to abolish private pension arrangements and replace them with an expanded state earnings- related pension scheme. The hon. Gentleman is doubly mistaken.
Occupational pension schemes have largely been a great success and 69 per cent. of recently retired pensioners now receive an occupational pension. That compares with just 54 per cent. in 1979. Average incomes from occupational pensions almost doubled between 1979 and 1988, the last year for which we have figures. Moreover, they increased the volume of long-term savings available for long-term investment in industry. There is no way in which public finances could accommodate the sort of expanded SERPS that the hon. Member for Oldham, West would like and appears to have in mind. Future generations could not possibly cope with the level of debt that would be stored up. The success of occupational pensions is matched by personal pensions which now extend to 4.5 million people.
Mr. Andrew Miller (Ellesmere Port and Neston) : Occupational pension schemes may have been extremely successful in recent years. However, does the Secretary of State agree that the profits from those investments, which are nothing less than the deferred earnings of the occupational pensioner, should be redirected in the interests of members of pension schemes and nobody else?
Personal pensions have dramatically widened the range of people with their own pension to supplement the state pension. They have also increased the volume of committed long-term savings available for investment in industry as well as giving millions of people greater flexibility and mobility. I accept that not just the private sector but the state has a role to play. The Government have ensured that total expenditure on benefits to the elderly has increased since 1979 by one third in real terms.
We have met our commitment to maintain the value of the basic pension and will continue to do so. We have provided systematically for real increases in pensioner premiums by directing money to the poorer pensioners. Overall pensioners' incomes have increased by 34 per cent. since we came to office. That is five times faster than under Labour, not least because under the last Labour Government pensioners lost heavily as a result of inflation. I am not in the mood to listen to self-righteous lectures from the Opposition on protecting pensions.
Mr. Meacher rose --
The Government recognise and share the real concerns expressed by hon. Members and by people outside about Maxwell pensioners. We also share the revulsion at the crime that was committed. We shall give the Maxwell pensioners as much peace of mind as possible about the immediate financial future. We shall help to unlock and to secure the return of assets that will pay the pensions in the months and years ahead. Through the review that we have established we shall do all that we can to ensure that similar crimes can never happen again. We are taking real and practical steps in a highly complex area and I commend them to the House.
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Mr. Frank Field (Birkenhead) : I shall be brief because many hon. Members with constituency interests wish to take part in the debate. I hope that the debate will send out three clear messages. The first is that the House welcomes the Government's rescue package. At this stage we are not especially interested in the amount of money or in where the idea for the amount came from. The House is anxious to ensure that in the short term every pensioner who was not receiving a pension and all those who were at risk of receiving a reduced pension will receive a full pension. We leave it to the Government to ensure that the funds are adequate to meet that important immediate objective.
The second message which I hope will go out is that the Secretary of State realises the extent of support from all hon. Members for his measures not only to retrieve the funds that were clearly misappropriated, but to reach those people who did well during the Maxwell years and who could make substantial contributions. We shall examine with interest the size of those contributions. I hope that the Secretary of State will not ignore the support in the House and that he will mobilise it if the need arises.
The third message is about the very long term. The Secretary of State rightly said that if he suggested that the taxpayer should foot the bill, few contributions would be forthcoming. He must realise what the feelings of his own hon. Friends and Opposition Members would be if his strategy failed or partially failed. The mood of the House is for him to press on urgently to get the contributions. We shall not be satisfied if at the end of the day those contributions are inadequate. The Secretary of State said that such statements might damage his efforts to regain assets and contributions for the scheme. I think not. Most matters that we deal with depend on the striking of a balance. Jimmy Thomas once said that if one could not ride two horses at once one should not be part of the circus. The Secretary of State must be aware that if his efforts to gain contributions are unsuccessful and he says that there is no help for these pensioners, the mood of the House will not be as easy-going as that of a circus.
Mr. Stephen Day (Cheadle) : I am grateful for this opportunity to speak on an issue that greatly concerns all hon. Members, and especially those of us who met pensioners yesterday. I am sure that all hon. Members have constituents who are affected. In my constituency, 40 to 50 pensioners are affected. I am sure that those who came to see me, and especially those who had been told that they had received their last cheque, will be well pleased with the Secretary of State's announcement yesterday.
Of course the announcement is no solution to the ultimate problems and the traumas that undoubtedly face pensioners. They have been placed in this situation not by the Government--although to hear the hon. Member for Oldham, West (Mr. Meacher) one would think that it was all the Government's fault--but by those who certainly should have known better and whose actions were no credit to themselves or to the human race.
Whatever our political viewpoint, we are all totally committed, as are the Government, to justice for the pensioners. We must ensure that Maxwell pensioners have long-term security, and the Secretary of State's
Column 219announcement yesterday goes some way towards providing that. The Government can only give a lead and they have accepted their responsibility by ensuring that short-term security is provided. That was one of the specific aims of the all-party group on which it specifically campaigned. I pay tribute to the hon. Members on that group who saw the issue to its conclusion.
I am distressed at what I heard from the hon. Member for Oldham, West. I have nothing but praise for the way in which the hon. Member for Birkenhead (Mr. Field) spoke. He spoke for me and, I suspect, for many hon. Members in that he encapsulated what I believe to be the true interests of the Maxwell pensioners. The hon. Member for Oldham, West, as I tried to intimate in my intervention during his speech, angered me enormously and did no service to the Maxwell pensioners. The worst possible scenario for the pensioners would be for those of us in the Chamber to start trying to score political points from the suffering of others.
Quite rightly, the Select Committee was involved in this matter for some time during the previous Parliament. When we were debating and investigating the issue, we acted on an all-party basis. In fact, there was no division when the report was written as it was supported unanimously. That is the position that I am determined to defend, despite the attempts of the hon. Member for Oldham, West to destroy that consensus. I hope that hon. Members will remember the words of the hon. Member for Birkenhead and those of us who support his stance. If, like myself, he is honoured to be reappointed to the Select Committee and continues as its Chairman, that will be the best thing for the interests of the Maxwell pensioners, as I know that he and most other hon. Members have their interests at heart. I commend what the Government have done in the short term. I hope that they will pursue the banks, which have a moral obligation to return the Maxwell pensioners' money that is in their hands because of the illegal action of others. I hope that the House will reject the motion and the intervention of the hon. Member for Oldham, West. 8.22 pm
Mr. Malcolm Bruce (Gordon) : I am glad that the debate is taking place, although not in every case is it being pursued in a way that is likely to achieve the best result. As the hon. Member for Cheadle (Mr. Day) acknowledged, there are probably very few hon. Members who do not have some constituents who are affected. Some of us have substantially more than the hon. Gentleman. I have the operational headquarters of British International Helicopters in my constituency and my hon. Friend the Member for Orkney and Shetland (Mr. Wallace) has its northern base. My hon. Friend the Member for Bath (Mr. Foster) is our representative on the all-party committee and is pushing the case for compensation. He has a substantial number of affected pensioners in his constituency, and my hon. and learned Friend the Member
Column 220for Montgomery (Mr. Carlile), who intervened during the statement yesterday, also has a considerable number affected. I wish to speak on the general principles on behalf of all my hon. Friends. I accept to some extent the Secretary of State's argument that, simply because people have broken the law, the Government should not be held fully responsible. However, we must acknowledge that what has arisen in many ordinary people's minds is surprise and shock that it should be possible for people to be able to get their hands on pension fund money in this way. To that extent, the House must welcome an urgent review to try to ensure that we plug that loophole as well as securing compensation for those who have suffered from the fact that the law is not up to scratch now.
It may be a naive question, but millions of people outside the House will probably want to know how it is possible for companies to get their hands on pension funds, which are the payments of employees and which are supposed to be held in trust and run by trustees. Is it right that pension funds should be able to invest in their own companies, given the conflict of interest that arises? Millions of people probably did not realise that that was possible and are surprised to know that it is. I hope that that will be taken into account in the review.
The pensioners have had a long and anxious wait and yesterday's announcement, although welcome, is not the end of the road. I agree with the hon. Member for Birkenhead (Mr. Field) that the argument about the sum of money is really irrelevant. The important issue, as was said yesterday by my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood), is to seek the assurance that for the period designated by the Secretary of State every pensioner who would not be getting a pension because of the parlous state of the pension fund will receive their pension in full. That is the simple assurance that everybody is looking for. The Secretary of State has made progress on that, although I hope that in the reply the Minister will make it absolutely and unequivocally clear that that is the case. It is inevitable that parallels will be drawn with the Barlow Clowes affair. However, I accept that it is not exactly the same thing. I accept the Secretary of State's argument that to suggest that those who invested in Barlow Clowes were wild speculators is absurd. Nevertheless, there is a recognised distinction in that those people decided to invest in something that was giving a better-than-average return. They were taking a risk and should have appreciated that. However, they did so in the belief that the company was properly regulated by a Government agency. Clearly, the ombudsman took the view that they had some justification for that faith, that the agency had failed and that there was at least a moral responsibility. As a result, the Government put up £180 million as a rescue package.
Pensioners who have deducted at source a percentage of their salary to be invested through trustees to provide them with an income after retirement expect to have a regime that protects the pension fund. They will inevitably make comparisons if they do not secure full compensation. However, I agree with the hon. Member for Birkenhead and the Secretary of State that pressure of every kind must be brought to bear on the banks and the City financial institutions to make a full and proper contribution to the rescue fund. Many questions will be asked and people will want to know under what sort of morality or business
Column 221practice banks are prepared to hang on to stolen money when its return would save some of their other customers from personal bankruptcy. People will believe, rightly, that the banking profession is in grave danger of bringing itself into disrepute if it does not release that money and contribute to the refunding of the pension fund.
The City institutions must think about this, too. It is important to put it on record that the vast majority of pension funds run by the City of London are honestly and well-managed and achieve substantial capital growth in relation to the contributions made. After all, that is the City's unique reputation in both the national and international market. However, that reputation could be seriously tarnished if this scandal is not resolved in a way that gives honour, satisfaction and comfort to the innocent victims who are very ordinary people.
Mr. Frank Field : Is not the point stronger than that ? The pension schemes kept saying that everything was safe and those of us who raised questions about safety and reform were told by the bigwigs in the pension industry that we were creating trouble. It is their moral responsibility to make a large contribution to this scheme.
Mr. Bruce : I am grateful to the hon. Gentleman, who makes the case extremely well. I hope that when the institutions outside the House read this debate they will understand the strength of feeling behind it.
Those institutions should consider an additional point. In the early part of the previous Parliament I was a member of the Select Committee on Trade and Industry. We investigated the implications of the single market for the financial services industry in Britain. The Committee visited many of the main financial centres in Europe, notably, and most importantly, Frankfurt. We pressed the German Government to recognise the expertise that exists in the City of London and the important opportunity for German consumers to gain access to such expertise.
The House will be aware that the Germans thought that the City of London's practices were risky. They did not like the way in which moneys could be mixed without absolute guarantees and security for pensioners. The net result is that German pension funds are more expensive than ours but are more securely guaranteed, or at least that will be the German perception. If City institutions do not contribute, they will severely damage their ability to sell their expertise in the single market as it is established in the next few years. Even if they are not prepared to accept the moral strictures of the House, that fact should be taken into account. It is bad business.
I should like finally to deal with my interest in British International Helicopters. The Secretary of State will be aware that I and others believe that the company is different from others in the Maxwell group, for reasons that were partially explained in my intervention. I am grateful for his agreeing to meet the separate all-party group that has been established, when we will have an opportunity to press our case in more detail.
British International Helicopters was the helicopter company of British Airways when it was a nationalised industry. Its main operational base is at Aberdeen airport in my constituency. It has bases in Sumburgh in Shetland and covering the Scilly isles in the constituency of the hon. Member for St. Ives (Mr. Harris). The company's
Column 222southern access to the North sea is based in the constituency of the hon. Member for Waveney (Mr. Porter), and its head office is in Oxford.
Since the early days of the North sea, the company has provided taxi services to and from the rigs and platforms. Lord King, the chairman of British Airways, conducted a strenuous campaign to ensure that the Nott assurances--that British Airways should be privatised as a single entity-- were honoured. As part of the campaign, myself, the hon. Member for Aberdeen, North (Mr. Hughes) and the then hon. Member for Banff and Buchan were invited to present ourselves--I cannot put it another way--at a public meeting in my constituency, which most of the employees attended. Before several hundred people, we were invited to give categorical assurances that we would support the campaign to privatise British Airways as a single entity. Not surprisingly, faced with so many constituents, we agreed to do so. Before the privatisation took place, British Airways sold the company. It tried to sell it to a business man--I remember blowing the whistle on him at Prime Minister's Question Time--who certainly was not fit to run it. It was subsequently sold to Mr. Maxwell, 15 years after the Department of Trade and Industry certified him as not being a fit person to take over a public company. In those circumstances, it is not acceptable for the Secretary of State to take the stance of lecturing City institutions and bankers about the moral position--which I support--while denying the moral pressure that is on the Government for having acceded to the sale.
At the time of the sale, I was told that pension rights would be secured because pensioners would continue to be members of the British Airways pension fund. Later, they were offered inducements and sweeteners to transfer to the Maxwell pension fund, which they were assured--I have the notice here--was a better fund to which British Airways was making a transitional contribution.
Mr. David Harris (St. Ives) : Will the hon. Gentleman confirm that it was a condition of employment with British International Helicopters that pensions be transferred to the Maxwell pension fund? I met two people yesterday who retained partial pension rights in British Airways' pension fund because, they told me, they did not trust Maxwell, but from then on they had to be members of what turned out to be Mirror Group Newspapers. Will the hon. Gentleman confirm that, at the time of the Maxwell bid, the bid of the management of British International Helicopters was rejected? Presumably, the Government had a considerable hand in its rejection. Those are two extra reasons why many hon. Members who represent British International Helicopters staff, past and present, feel that there is a special case to be made.
Mr. Bruce : I am grateful for the hon. Gentleman's intervention. He offers a degree of all-party solidarity to the point that I am making. The terms on which employees could retain their British Airways pension rights were disadvantageous. There was little incentive for anybody to retain those rights, and thereafter they all switched to the Mirror group in circumstances that offered them no real choice. The situation, therefore, is different from that of other companies.
We have never really got to the bottom of who paid what. I wrote to British Airways this year and received a reply from Lord King, who is adept at writing letters that
Column 223tell one something but not enough. He pointed out that the company that bought British International Helicopters paid more than £12 million--less than the in-house bid. He neglected to say that British Airways subsequently made a payment of £9.5 million to transfer contributions to the pension fund. It is extremely difficult to determine whether Mr. Maxwell's offer was a better net offer to the taxpayer than the in-house offer. Perhaps we shall never know. It is the firm view of the current management of British International Helicopters
"that at the time of the sale the British Airways Board consulted the then Secretary of State for Transport, John Moore, about the provisional sale agreement with the company owned jointly by the Scottish Daily Record and Sunday Mail and Robert Maxwell. He saw no objection to it and the sale was completed."
That shows that, although the Government may not have authorised it, they raised no objections. I repeat what the Secretary of State said yesterday :
"the warning was made in public for all to see and those who dealt with Maxwell did so potentially knowingly."--[ Official Report, 8 June 1992 ; Vol. 209, c. 26.]
That includes the Government, and they have a moral obligation. The Secretary of State said earlier that he was treating pensioners as part of the Mirror group pension fund. The Mirror group has thrown them out of the pension fund unilaterally, having kicked out the trustee some time previously. They are not part of the Mirror group pension fund but are standing on their own. In those circumstances, I hope that the Secretary of State will accept that the position of British International Helicopters is different from that of any other company. If anyone is entitled to full compensation, its employees are. All those who trusted the City, the banks and the regulatory regime have every reason to believe that they should get not only a short-term rescue package that eases their immediate problems but a full-scale rescue package to which all those who have benefited from Maxwell in the past make a full and positive contribution. Several Hon. Members rose --
My immediate predecessor as Member for Hertfordshire, North was Sir Ian Stewart, who came to the House in 1974. He was an expert in economic affairs and finance and was known as a numismatist--an expert on coinage. He started as PPS to Sir Geoffrey Howe, became a Treasury Minister and subsequently was Minister for the Armed Forces and Northern Ireland security Minister. I know that all hon. Members will be sad that he had to retire through ill-health. In the constituency, he is remembered for his vigorous efforts on behalf of his constituents. His immediate predecessor was Shirley Williams who is remembered as a hard-working
Column 224constituency Member of Parliament, although she did not always attend events on time. Of course, she also had a notable ministerial career, so I have a lot to live up to.
North Hertfordshire covers the towns of Royston, Baldock, Letchworth and Hitchin and three ancient market towns. Letchworth was the first garden city, set up by Ebenezer Howard in 1903. It has recently reached the size originally intended for it--30,000 people--and is a city concept that has been followed the world over. It has many imitators as far away as Japan.
Because of the time restriction, I shall not mention all the interests in north Hertfordshire in the traditional way. We want to protect the local environment, we want roads but we do not want them to spoil the villages and, in addition, we have lost many defence jobs. North Hertfordshire is presently applying for EC periphera funding to ease the change to employment in other industries, which should be successful.
The issue that has dominated my post bag since I arrived in the House has been that of the Maxwell pensioners. BDC Technical Services Ltd. of Baldock is a member of the AGB pension fund, and there has been considerable anxiety and distress among many of my constituents. I give two examples. I quote from a letter by a 63-year-old man who recently retired because of heart disease. He wrote :
"I am now informed that my pension will not be paid after June 1992. I always assumed that the pension scheme was as safe as the Bank of England. I am very concerned about my future."
I also received a letter from a 78-year-old woman, who wrote : "My pension payment is £59 per month, a relatively small amount, but quite important to me as apart from my old age pension, it is my only other income."
Therefore, when I heard that there was an all-party group of hon. Members fighting on behalf of the Maxwell pensioners, the first thing that I did was join it. The words that we heard tonight from the hon. Member for Birkenhead (Mr. Field) were exactly those that he used at the first meeting of the group and on which we all agreed and which, I believe, have had a powerful effect on the Government.
When I explained to the Maxwell pensioners in north Hertfordshire what was proposed by the all-party group, they were more than satisfied with the fight being put up on their behalf. They were here yesterday to lobby, and I spoke to them shortly after the statement. They were relieved and content that the payments were to be continued with the life-belt funding for which we had argued.
I believe that the spectacle of major banks holding on to securities stolen from the pension funds is disgraceful. They should give back the assets. As a lawyer, I appreciate that there might be nice legal arguments to be employed by the banks. It might be that the argument that the banks' licences should be withdrawn is a complete non-starter because there are legal arguments that can be employed by the banks.
However, the case that must be made is the moral one. A second-hand shop that buys stolen goods expects to give them back if it is later discovered that they were stolen. For major banks--for example, National Westminster-- to refuse to return the securities is a disgrace, and it is right that moral pressure should be applied. Legal pressure would possibly not work, but I am sure that the moral pressures that the House can bring to bear have every
Column 225chance of success. That is why I welcomed the Government's statement. It seemed that what was being said was that the drip-feed funding would enable pensioners to have peace of mind while the institutions were approached seriously and to be made to meet their responsibilities.
With regard to the deliberations of the Goode committee, there are three aspects that I hope will be considered. It will take a year for a major aspect of law such as this to be considered because the complexities--and I am a lawyer--seem to be marked. Let us first consider trust law. For years, ever since they began, occupational pension funds have been governed by the principles of trust law. The great advantage of trusts has always been their flexibility--that for generation after generation they can meet modern conditions--but what seems to have gone wrong with occupational pension funds which are self-managed is that that flexibility has been used by the employer to dominate the fund and to put himself in a position in which, if he is dishonest, he can take advantage of the trust in a way which no lawyer would condone and which now needs serious consideration. It seems that trust law is no longer adequate for the purpose of dealing with the large occupational pension funds and that what needs to be considered is a system of regulation akin to the Companies Acts which requires regular accounts and statements to beneficiaries, the possibility of annual pensioners' meetings and penalties for non-compliance. The type of regulation required is so
wide-ranging--one has only to think of what the Companies Acts requires-- that it will take at least a year to put together a proper system.
Every share certificate or document of title in respect of a pension fund asset should have it clearly marked on the document, and the register of shareholdings kept at Companies house should be annotated to that effect. There are numerous registers in the legal world including the land registry and many others, all of which are capable of having such an annotation system imposed on them. It has worked extremely well with the class F land charge which applies in matrimonial proceedings and protects wives in respect of houses. There is no reason why the same principle in this aspect of law should not be applied to ensure that shareholdings are protected equally.
Another matter that I hope will be considered is a permanent compensation scheme to help the victims of pension fraud with reference to occupational pensions. It should be funded by a levy across the pensions industry. It could start in the way outlined yesterday by my right hon. Friend the Secretary of State and could become a settled part of a new pensions Act, giving peace of mind to occupational pensioners.
I believe in occupational pensions and in the remarkable change which they have wrought in British society in the past 20 or 30 years. Pensioners as a group are now the fastest rising income group in society, largely due to the confidence they have had in occupational pensions and, of course, in the private schemes which have already been mentioned. It is absolutely right that they should have a copper-bottomed guarantee that their pensions are safe so that the hope of my constituents is met by pensions being as safe as the Bank of England.
Ms. Janet Anderson (Rossendale and Darwen) : May I congratulate the hon. Member for Hertfordshire, North (Mr. Heald) on an excellent maiden speech. His experience on the soap box at Speakers' corner will obviously stand him in good stead in his future career in the House.
I am grateful for this opportunity to make my maiden speech as the hon. Member for Rossendale and Darwen, a constituency which embraces five proud, separate and independent towns--Darwen, Haslingden, Rawtenstall, Bacup and Whitworth--and which has previously been represented by the late Tony Greenwood--later Lord Greenwood of Rossendale--and Mike Noble, both of whom are still remembered with great affection by many of their former constituents.
I am also fortunate to have the honour to represent a constituency which must rank among those with the greatest areas of natural beauty. When I am able to enjoy the rare opportunities for recreation which hon. Members have with their families, walking along the Rossendale way, through Sunnyhurst woods to Darwen tower, or across the west Pennine moors, stopping when we can for refreshment at the Strawbury Duck in Entwistle, or to watch the Britannia Coconutters at Rawtenstall station on the recently reopened east Lancashire line, I count myself very lucky indeed.
It was, therefore, appropriate that my predecessor should have served in the previous Government as Minister for the Countryside and that he should have represented a truly northern constituency. The recently knighted former hon. Member for Rossendale and Darwen, David Trippier, will surely be remembered as the Mr. Green and the Mr. North of the Conservative Benches. Not only was he one of few Conservative Members to have been born north of Watford, but he displayed a real understanding of the needs of the northern region. I take this opportunity of congratulating Sir David on his newly acquired status, and I wish him well in his chosen new career. It is also apt that I should have the opportunity to speak in a debate on the protection of pensioners and their rights. Almost one in five of my constituents are of pensionable age. The majority of them have toiled for years in the shoe factories and the textile mills, often for meagre wages. During the past 13 years, too many of them have lost their jobs, time and again, yet they have struggled to retrain, to bounce back and to do their best for their families. It has come as a great shock to some of them to find that years of contributions to pension funds have left them with little. We are here tonight to talk about the plight of the Maxwell pensioners, and I will come to that as there are many of them in my constituency. However, I must tell the House that a similar plight has befallen my constituents who worked in shoe and textile factories which have gone to the wall and who have then found that their pensions are no longer secure. It is essential that the Government introduce measures to give greater protection to all members of occupational pension schemes.
One example illustrates the problem clearly. One of my constituents is a current pensioner of AGB Research, a company that has already been mentioned in the debate. It was one of many companies privately owned by Robert Maxwell. My constituent worked from 1925 until 1972 for the Newton Chambers group of companies. A mandatory
Column 227condition of his employment was the joining of the company's pension scheme to which he contributed for no fewer than 47 years. At present, he has a pension of £1,157 a year from the Maxwell-owned Headington group pension, formerly Pergamon. Through a series of takeovers, the Newton Chambers pension fund finally landed in the hands of the Maxwell group. My constituent has now been informed that his pension fund is being wound up.
My constituent is 83 years old and his wife is 73. His current works pension helps to pay his poll tax liability, and his electricity, gas and water bills--charges which, as the House is only too well aware, continue their relentless increase. If my constituent loses his pension, he will not only have difficulty in meeting those bills, but he and his wife will also have to sell their small car, which is essential at their age for shopping and local journeys. I cannot help wondering whether, as Mrs. Maxwell languishes in her French chateau and the younger Maxwells continue to enjoy their apparently opulent lifestyle, they ever give a thought to my constituent who, any day now, may no longer be able to depend on the little extra which enables him and his wife to do their shopping, to visit the doctor, to see family and friends with reasonable ease, and to maintain dignity and independence.
Of course, my constituent is not alone in his plight ; thousands are similarly affected. The Government have a moral responsibility to all those whose pensions have been stolen by an unscrupulous employer. The reason why the Government should accept that they have that responsibility is that the money, the deferred earnings of ordinary working people, was taken from them by virtue of a bad law. A number of guilty parties are involved--the Government, the banks and the regulators--but the one group who are entirely innocent are the pensioners.
The problem is one of loose law. Pension funds are covered only in part by the Financial Services Act 1986 ; they are mainly covered by trust law. Under that, regulation is looser and the position of trustees under the law is unclear. Both the Investment Management Regulatory Organisation and the Securities and Investments Board warned the Department of Trade and Industry on a number of occasions of the problems that would arise because of the discrepancy between trust law and the Financial Services Act. Indeed, the Hayton report, commissioned and published by IMRO and the SIB, made that point. We must ask why the Department did not heed the warnings. In the short term, we need proper compensation for the pensioners whose pensions have been stopped or reduced. The Government conceded the principle of compensation for the Barlow Clowes victims. Those investors had at least made a conscious decision to make a financial risk investment. The pensioners whom we are considering tonight believed that they were taking no risk and that their futures were secure. Moreover, for many of them, contributions to the pension scheme were a mandatory condition of their employment. They had no choice.
There must be a considerable extension of the rights of pensioners in all occupational pension schemes. They must have information about their pensions, such as where they
Column 228are being invested and their on-going values. The Government must guarantee that no pensioner will suffer as a result of this fraud. An urgent review of the legislation is essential. Pensioners must be treated as preferential creditors of pension funds, increasing their protection and their right to compensation. The review must include a statutory compensation scheme. The discrepancy between trust law and the Financial Services Act must be resolved and the law must ensure the independence of trustees from employers.
This is a sad and sorry episode out of which none of the parties--the Government, the banks or the regulators--emerges with credit. They should all accept their responsibilities now, and they should do so with good grace.
Mr. David Shaw (Dover) : We have just heard two excellent maiden speeches. I congratulate my hon. Friend the Member for Hertfordshire, North (Mr. Heald) on his maiden speech, which displayed considerable knowledge about his constituents and their problems, especially in relation to the Maxwell affair. I also congratulate the hon. Member for Rossendale and Darwen (Ms. Anderson) on her maiden speech. I predict early promotion for her to the Opposition Front Bench as I noted that the whole House enjoyed listening to her. I also believe that the whole House enjoyed listening to her fulsome and appropriate comments about her predecessor, who was much loved by all hon. Members, especially Conservative Members. David Trippier co-ordinated the Royal Marines group of Members in the House as well as carrying out extensive ministerial duties on environment issues. He also took a strong interest in small businesses. I am delighted that the Queen has made him a knight of the realm.
The debate is about the Government measures that were announced yesterday to protect the Maxwell pensioners and about other issues. Those measures were right and my right hon. Friend the Secretary of State for Social Security has done well in extracting help for the Maxwell pensioners from the Treasury at a time when there are many competing demands on the social security expenditure budget. Those Government measures should meet the immediate needs of the 5, 000 Maxwell Communication Corporation works pensioners who face reduced pensions from this month and the 240 people in the Headington pension plan whose pensions have been stopped.
The measures are a welcome start while the recovery of the money takes place with a view to ensuring that the pension funds are fully, or almost fully, restored to what they were. That is why the implementation by the Government of section 58B of the Social Security Act 1990 and the setting up of a recovery unit in the Department of Social Security are most helpful. Those actions should result in much of the money being recovered.
This tragedy, which has brought misery to 32,000 people, is a disgrace. It is a disgrace which reflects very badly on the regulator, the banks and the financial institutions that had dealings with Mr. Maxwell. Yes, Mr. Maxwell may have committed the frauds, but the banks, financial institutions and bad regulation made it possible for him to do so.
Column 229Regretfully, I must say that IMRO is first in line. I say "regretfully" because I believe that the IMRO representatives who appeared before the Select Committee were honest and well meaning. I do not believe, however, that they and their colleagues had the necessary skills and support to deal with the problems that they faced. There were failures in authorisation on the part of IMRO : neither Bishopsgate Investment Management nor LBI should have been authorised. The implications of the Liechtenstein connection were not understood by IMRO.
IMRO should have realised, first, that no recovery of money can occur if fraud takes place in a Liechtenstein operation ; secondly, that no up-to- date financial information will ever be available for a Liechtenstein- controlled operation ; and, thirdly, that Mr. Maxwell--who was in absolute control--was likely to trade fraudulently in the end, because honest United Kingdom businesses do not need to operate from Liechtenstein. There was obviously bad regulation by IMRO of the two Maxwell companies. Accounting weaknesses were found ; there was no adequate separation of duties within the companies ; Maxwell controlled absolutely everything, and IMRO staff were too junior and too inexperienced to handle a man like Maxwell. I find it strange that, even as I speak, at least £6 billion of United Kingdom investors' money is still controlled from Liechtenstein. GT Fund Management Group, a United Kingdom company, was taken over by the Bank of Liechtenstein in 1991, and IMRO is its regulator. That is a disaster waiting to happen. Who will pay up when the collapse occurs, as it surely will one day? The City regulators seem afraid to act, because the bank is controlled by the Prince of Liechtenstein. What does he know about fund management that Robert Maxwell did not know?
It is, however, the banks, in their many different roles, that are to blame for most of the losses incurred by the pension funds. Those banks range from the simple London clearing bank to some of the most sophisticated investment banks in the world. The position is not straightforward ; what is clear and simple is the fact that they all failed to act properly, either because of incompetence, weak accounting and weak internal control systems or because of greed, recklessness or even criminal intent--I believe that that applies to at least one case.
In my view, the lending banks were negligent or reckless. They did not ask for consolidated accounts ; it seems that they did not even ask for accounts of the entity to which they were lending. They did not check the gearing--the debt-to-equity ratio--of Mr. Maxwell's empire, or the cash flow of the group or of individual companies. Warnings in the media went unheeded by the bankers. On 5 November 1988, for instance, the Financial Times Lex column commented : "Again the need to degear now makes Mr. Maxwell something of a forced seller."
He was indeed a forced seller, but a forced seller of the pensioners' assets rather than his own.
The investment banks that dealt in MCC shares have a heavy responsibility for the losses that were incurred. Their option arrangements were--if not illegal--devious. Moreover, MCC share purchases through Liechtenstein were clearly designed to avoid City rules and Companies Act disclosures. When one of the smartest investment banks in the world says that it did not know that Mr. Maxwell was behind the Liechtenstein purchases of MCC
Column 230shares, the position is unbelievable. If an investment bank is as stupid as that, it is not fit to be in business and its banking licence should be withdrawn.
At least one investment banker in New York knew enough to be suspicious. He should have refused to carry out the share transactions ; instead, he asked Mr. Maxwell the simplest of questions, and Mr. Maxwell told that sophisticated investment banker the simplest of lies.
The MCC share transactions carried out by that banker were designed to circumvent the voluntary code under which the City operates. There is no point in self-regulation if investment bankers can get away with hundreds of millions of pounds in shady deals without so much as a fine from the body that is responsible for their regulation. The Bank of England must show that it is prepared to withdraw banking licences ; the stock exchange must show that it is prepared to withdraw authorisation to deal.
If the Bank of England and the stock exchange have neither the teeth nor the inclination to regulate the banks in regard to the Maxwell affair-- given that the banks have so blatantly disregarded the principles behind the stock exchange's rules and regulations, and company law--we must all ask what is the point of self-regulation. So far, the Maxwell affair has shown it to be a fraudster's paradise, in which only the little man loses.
If the Bank of England and the stock exchange cannot police the United States investment banks, I hope that Members of Parliament will take the Maxwell pensioners' case to our friends in the United States Congress, as well as those in the United States Securities and Exchange Commission and the Federal Reserve Bank of New York. They, at least, can police the United States investment banks, and they have the teeth and the inclination to do it.
What of the custodian banks? They pride themselves on looking after mutual funds and pension fund assets. Some £38 million of Maxwell pensioners' investments were passed by the Bank of America to Credit Suisse for use by the Maxwell family in transactions not authorised by the full trustees of the pension funds. I hope that those banks will speedily arrange to replace the lost investments. Those banks must realise that their credibility as custodians and lending institutions is being called into question by Members of Parliament and the public. That will damage their future business in this country and abroad.
What of the fund management companies which lent shares, often registered with pension fund ownership marked clearly on the share certificates, back to Mr. Maxwell on the signature of Kevin Maxwell? About £38.5 million and £11.5 million respectively were removed from Capel Cure Myers and Invesco MIM fund management by complex stock lending fiddles involving the Maxwells, and again without the authorisation or knowledge of the pension fund trustees. Those investment houses must make good that shortfall, and soon. We should make it clear that those banks and investment institutions that hold back until the matter goes to court will not be popular, and I hope that that is an understatement.
I wish to make two brief points about Liechtenstein and the other tax havens. How can the Government go on allowing tax havens such as Liechtenstein to help in robbing our citizens? In the past 10 years, at least nine Department of Trade and Industry investigations have found fraud or wrongdoing and have named Switzerland or Liechtenstein. When will the Government act to prevent that from happening again? The Treasury and the