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Crown Agents Holding and Realisation Board (Prescribed Day) Order 2008

Volume 700: debated on Tuesday 18 March 2008

rose to move, That the Grand Committee do report to the House that it has considered the Crown Agents Holding and Realisation Board (Prescribed Day) Order 2008.

The noble Baroness said: I am pleased to introduce this order, and I hope that I may do so briefly, as I do not want to repeat information in the Explanatory Memorandum. I hope, however, that I can provide some further detail on its consequences.

The order is about a small tidying up in the business of government. The Crown Agents Holding and Realisation Board—CAHRB—is a statutory corporation which was created in 1979 to deal with a specific task. Its task has now been largely completed, and my right honourable friend the Secretary of State for International Development, with the agreement of the board, has concluded that there is no further need to maintain a separate statutory body in existence. The very limited remaining tasks will be done in the name of the Department for International Development.

In its 10th report, the Statutory Instruments Committee summarised the order’s effect as being to wind up the board. Although correct in substance, that is not quite formally accurate. The effect of the order will be to vest the remaining assets of CAHRB in DfID with effect from 1 April 2008. The board will then formally continue in existence for the purpose of preparing its final accounts. Once these have been audited and presented to the House, my right honourable friend the Secretary of State will make a separate order, which will formally dissolve the board.

It may be useful if I say a few words about the origin of CAHRB. It came into existence as one of two separate and distinct public bodies established by the Crown Agents Act 1979. The main purpose of the Act was to put the Crown Agents on a firm legal and financial basis following the losses which the so-called unincorporated Crown Agents incurred in ill advised banking and property investments on their own account in the early 1970s.

The 1979 Act ensured that the business of the Crown Agents as agents and advisers to overseas government would be carried on by a statutory corporation which was responsible to Ministers with the appropriate accountability and control. That organisational structure has allowed the Crown Agents’ business to thrive. Under the ownership of a not-for-profit foundation in the private sector since 1997, the Crown Agents have continued to provide valuable services to DfID and to many other Governments and organisations.

The 1979 Act also set up CAHRB as a separate body to deal with the assets and claims left over from the unincorporated Crown Agents’ ventures in property and banking which it was thought might have some value and which had, in the mean time, been ring-fenced in a realisation account. That was to manage them for value, to get back what it could over time, and to pay the proceeds to the Exchequer in partial compensation of the grants that the Government had had to provide to the Crown Agents in the secondary banking crisis back in the early 1970s.

Most of the significant recoveries made by CAHRB were completed within a few years. Since then, however, there has been quite a long tail of claims related to companies which were in administration or subject to bankruptcy proceedings. Some final payments from liquidators were received as recently as last year. However, as my right honourable friend the Secretary of State announced in a Written Statement on 7 January, repeated in this House, the Government—and the board itself—judge that the appropriate end-point for CAHRB's work has now been reached. The order is made under the provisions in the 1979 Act for the time when the work of the board had been substantially completed.

The latest published accounts for CAHRB are those for 2006. The 2007 accounts are being prepared by CAHRB and will be audited by the National Audit Office. There will be a supplementary account for 1 January to 31 March. We do not expect the final balances transferring to DfID to be significantly different from those reported in 2006, except that £1.6 million of the cash balances of that date has now been repaid to the Consolidated Fund. The holding value of the board's subsidiary company may also be reviewed.

The board has reported to my right honourable friend the Secretary of State that it is not aware of any actual or contingent liabilities that will be transferred to DfID. There are no more proceeds of claims in bankruptcy to come in. In fact, the only asset which will transfer to DfID under the order will be the board's shareholding in a subsidiary company called Four Millbank Investments. The only asset of that company is title as holders of the mortgage in some parcels of land in the Bahamas; those are mostly on the small island of Great Harbour Cay and relate to historic and as yet unfulfilled plans for resort development. The board, through its subsidiary company, has had offers for some of those parcels of land adding up to about $420,000. DfID, through the company, will take appropriate professional advice on what the remaining holdings might fetch and ensure that the assets remaining in the subsidiary company are realised for the best available value.

The wind-up of the board will have minimal staffing and running-cost consequences. Its day-to-day work has recently been limited and carried out under contract by staff of the Crown Agents. DfID will consider contracting out any remaining work to dispose of residual assets, and that will not therefore add significantly to DfID's workload. Proceeds received will offset costs.

The board itself has latterly comprised only a chairman and deputy chairman, respectively David Probert CBE and Peter Berry CMG. They have done that work on an expenses-only basis. The Government are very grateful for their public service in that capacity and I pay tribute to them for it. With those thanks, I beg to move.

Moved, That the Grand Committee do report to the House that it has considered the Crown Agents Holding and Realisation Board (Prescribed Day) Order 2008. 10th Report from the Joint Committee on Statutory Instruments.—(Baroness Crawley.)

I am grateful to the Minister for introducing this order and explaining the background of the Crown Agents so clearly. I am also very grateful to my honourable friend in another place who has already raised many of the questions that spring to mind. I see no reason to waste noble Lords’ time by repeating questions to which we already have answers.

However, several questions were left unanswered. I shall probe a little further on what will happen after the Secretary of State has transferred all the remaining assets from the board to DfID. There is still uncertainty about whether they will be administered by DfID civil servants or contracted out, as is now the case. Can the Minister explain why this decision has not yet been made, as arrangements will surely need to be made soon if DfID is to take over the administration on 1 April? I imagine the decision will rest largely on how long the Government expect the remaining assets will take to be wound up. I understand that the share in Four Millbank Investments must be sold to taxpayers’ best advantage. What competition has been injected into the contracts? Is there any reason for delaying the sale of the rest of the asset book? How long does the Minister expect it to take for DfID to be finished with this business once and for all?

The administration will cost the department something. I note from the debate in another place that the administration costs were £27,000 in the last set of accounts. Does the Minister expect them to be reduced as the asset book is wound up? At a later date, can we have a list of the assets? Can she also shed light on who will pay the costs? Are they to be met by the realised revenue or will DfID pay? Finally, can the Minister confirm that the money realised from the eventual sale of Four Millbank Investments and the other remaining assets will be paid into the Consolidated Fund? Those assets should be set against the original £175 million and not just be quietly absorbed into DfID’s funding.

I appreciate the work done by the board over the years. Now that its tasks have been fulfilled, the sensible thing is for it to be wound up. It no longer has any meaningful tasks that cannot be undertaken by the Department for International Development. We wish DfID well in the massive work it has to do. On these Benches, we welcome the order.

For my own satisfaction, I shall ask the Minister two questions which I am sure she has already answered. Can she confirm that no job losses will be involved in this dissolution? Can she confirm that there is no property to be disposed of? I would think that any property that there is should go to the international development fund.

I shall start by answering the question asked by the noble Lord, Lord Roberts, about job losses. I thank him for his remarks wishing the order well. As far as I am aware, there will be no job losses. I shall come to his second point when I address the questions asked by the noble Baroness, Lady Rawlings.

I thank the noble Baroness for her remarks and for wishing the order well. She asked why no decision had been made on contracting out. No formal decision has been taken, but it is very likely that the work will be contracted out to Crown Agents. We wanted to ensure that Parliament had a good opportunity to look at this order before coming to a final decision. As I said in my opening statement, the Crown Agents’ staff have been working for the board for some time.

The noble Baroness also asked who would pay the costs. As I understand it, they will be met from revenue. I was also asked whether DfID would profit from transferred assets. Within the provisions of the Treasury’s consolidated budgeting guidance, DfID will retain cash realised within the capital departmental expenditure limits agreed in the Comprehensive Spending Review.

I am looking to see if I have answers to any other questions that were asked. The 1979 Act, as I recall, in effect—I choose my words carefully—wrote off the £175 million. In that sense, that is no longer a book liability. I am looking to the officials for confirmation of that. The Explanatory Memorandum mentions it; the Act, as it were, wrote off that sum. The sum might be a book sum, but it does not exist in practical terms.

Will the proceeds go to the Consolidated Fund? Yes, they will. I think that I have covered most of the questions. If there are any more, will Members of the Committee please come back to me?

There was just one question. We take it that there is no property or office accommodation to be disposed of.

No, as I understand it, there is no office accommodation to be disposed of.

On Question, Motion agreed to.