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Mr. Ian Bruce (South Dorset): Does my right hon. Friend agree that the one thing that should have happened is that all those transactions should have been totally at arm's length and done on the basis of true value? Are we to assume that the Paymaster General has extraordinarily short arms?
Mr. Maclean: My hon. Friend makes an interesting point. I shall come to the arm's length attempt when I discuss Stenbell Ltd., but I must set out the chain of events if the House is to understand what has gone on. I have researched this in some detail, but I shall try to be as brief as possible. The House will find that the Paymaster General has attempted to put himself at arm's length from the Orion trust.
The Paymaster General has so far failed to answer several questions about the Orion trust. It was set up by the executors of Madam Bourgeois's will following a bequest in her will. The Paymaster General was one of her executors who had to set up the trust. He was the executor of her will from when she died in 1994, but he resigned abruptly in 1996, just a few months before the trust opened for business in Guernsey.
Who are the trustees? The Paymaster General will not tell us, except to say that they are independent. Offshore tax experts believe that they are professional trustees who manage various trust portfolios and that they are linked to a trust management company called Richmond Corporate Services. The first question that the Paymaster General has to answer is: did he, when he was executor of Madam Bourgeois's will, have any part in the selection of Richmond Corporate Services?
The Paymaster General and seven other family members are discretionary beneficiaries. The independent trustees advise the trust and decide when and how much
to pay, but, as the settlor of the trust, Madam Bourgeois, is dead, the normal modus operandi is for trustees of discretionary trusts to have a so-called "letter of wishes" from the individual whom they regard as their client, so that they can administer the trust as required. The second question for the Paymaster General is: has he ever written a letter of wishes to the Orion trustees? If he has, he has been even more economical with the truth than we have believed so far.
In June 1996, TransTec, the Paymaster General's highly successful company, of which he is chairman, decided to raise £58 million by a rights issue of five new shares for every nine. The chairman of TransTec, the Paymaster, had the right to buy 9,805,550 shares at 103p each--a discount on the market price. But the Paymaster did not take up the shares personally. He sold the rights to buy them to a company called Stenbell Ltd. Stenbell Ltd. has two directors; the Paymaster General is one. He says that he did not take up the shares himself because he could not afford to. He was quoted as saying on weekend television:
I have obtained the notes to the Stenbell accounts for the period ended 31 May 1997. They make interesting reading: Stenbell has an authorised share capital of 1,000 ordinary shares of £1 each. It only has two ordinary shares of £1 each allotted, called up and fully paid, and guess whose they are?
So is Stenbell a going concern? The notes to the Stenbell accounts say:
Therefore the third question for the Paymaster General is: did the "Geoffrey Robinson Personal Settlement" finance or guarantee the money so that his company, Stenbell, could buy the £10.1 million of shares from his company, TransTec?
As we now know, Stenbell did not retain the shares. They were sold to the Orion trust, whose trustees are, supposedly, independent, and if tax is to be genuinely and legally avoided, those trustees must operate without any influence from the Paymaster General. Indeed, when this affair broke, the Paymaster General's solicitors confirmed the independence of the trustees. His solicitors, Titmuss Sainer Dechert, rushed out a letter to The Observer, on 8 December 1997, stating:
However, a few days later, the Paymaster General moved from threatening legal offensives to a charm offensive, when he gave extensive interviews to the Sunday media. Among other things, he told us that he did influence the Orion trust to buy the TransTec rights issue that he had sold to Stenbell. As the Paymaster General is an honourable man and a Member of the House, I believe him. He did influence the independent trustees, or as he says:
Later, the same independent trustees were to jump at the Paymaster's next "suggestion", to buy his shares in Coventry City football club, which they did. Why should those apparently independent, professional trustees, listen to the Paymaster's suggestions unless they had a letter of wishes from him, as their principal beneficiary, giving guidance on how they should act?
I must accept that the Paymaster has operated the rules cleverly and well. Indeed, he is a highly successful and clever business man. He is the only man in history to buy a company from Robert Maxwell and find that it actually has more assets than liabilities. It is not appropriate today, but the Paymaster General's earlier dealings with Robert Maxwell deserve a thorough investigation. However, as far as the Orion operation is concerned, he would no doubt have succeeded if it were not for his public position now and the investigations of the press.
Let us consider the chain of events in summary. The Paymaster is executor of Madam Bourgeois's will, but resigns just before the Orion trust is operative. At the same time, his company, TransTec, planned to have a rights issue which will gain him almost 10 million new shares. He sells the rights to those shares to his company, Stenbell, which buys the shares--presumably financed by the "Geoffrey Robinson Personal Settlement"--and sells them on to the offshore Orion trust, which just happens to have acted on his suggestion to buy them. Why involve Stenbell? That is simply to add another link to the chain and make it look more like an arm's-length operation. If Orion bought the shares directly from the Paymaster General, he could be deemed by the Inland Revenue to be the settlor of the shares, and full income tax liability would attach, as a result of legal changes made by the previous, Tory, Government.
It is a classic case of the use of intermediate companies and offshore trusts to avoid tax on a massive scale, perfectly legally. The Paymaster's dealings have been designed to persuade the Inland Revenue that he was acting at arm's length.
We need to consider two further curious little events. The first concerns an interesting note that I found in the Stenbell accounts. It says that for the period ending 31 May 1997, Stenbell sold on shares to the Orion trust:
Therefore, the fourth question for the Paymaster General is: are the Stenbell accounts, which he has produced, from a company that he controls, wrong? Have
they misrepresented his actual position as a potential discretionary beneficiary, which he tells us that he is? We need to know.
Then there is what I call the "eve of poll affair." The eve of poll was not a happy night for me and many of my Conservative colleagues, who saw election defeat looming, but it was a great day for the Paymaster General. Not only did he sense victory on the morrow and a job in Government, but the Orion trust was suddenly informed that another 2.95 million TransTec shares were to be settled on it. The Paymaster General says that he knows nothing about it. He says:
Surely it is uncharacteristically careless of the Paymaster, the successful and clever business man, to have, shall we say, "mislaid" 2.95 million of his own company's shares, which he failed to settle on the Orion trust, of which he is a beneficiary, at the outset, but which was then settled by a deed of arrangement, completed on 30 April, the eve of the general election. And the Paymaster General says that he has no idea how that convoluted state of affairs and amazing coincidences came about. I am afraid he must tell us.
The next question to the Paymaster General is: who informed the Orion trust of the 2.95 million missing TransTec shares, and why were they not transferred with the original bequest?
The Paymaster says that we need to ask the settlors that. No we do not. We are asking the Paymaster that question. He is the one who needs to come clean. We have no influence on the settlors of the Orion trustees, but we know that the Paymaster has. If the Paymaster General can influence them to buy his TransTec and Coventry City shares, surely he can influence them to tell him the circumstances surrounding this extraordinary share transfer--and then he can tell the House of Commons. It is about time he said something in the House of Commons about his dealings.
The legal technicalities of offshore trusts have served the Paymaster well. Apart from the tax avoidance advantages, they have enabled him to shelter behind highly evasive answers to parliamentary questions. As the House can see, this is a complex matter which is difficult to set out simply. That has enabled the Paymaster General to hide behind arcane offshore trust law. But slowly and surely, the complex web of his transfers and share dealings has been untangled, and day by day his position becomes more untenable.
The latest ministerial code, revised and endorsed by the Prime Minister--the one I have still refers to Ministers' spouses, not their partners--states:
Thus if we take the Paymaster's version of events, which I believe to be true, as a Minister of the Crown he has looked at the policy options on tax evasion which his Treasury civil servants have provided, and he has advised the Chancellor to adopt an option or options disadvantageous to his personal financial interests. That is a noble thing for him to have done, but it is still a clear contravention of the ministerial code. That code, endorsed by the Prime Minister, does not advise Ministers to act against their personal interests when they face a conflict of interest. It tells them to avoid any "actual or apparent" conflict in the first place.
I must admit that the Prime Minister is showing more resolve in bluffing out this flouting of the code by the Paymaster General than the latter showed with his threat to sue the press for libel.
The Paymaster General is the Minister responsible for corporate taxation and general accounting issues in the Treasury. It is not possible for him to avoid any apparent conflict of interest so long as he is a discretionary beneficiary of an offshore tax haven. The ministerial code is quite specific:
That, of course, is not how this Government of pals and cronies act. We read that when the code was about to be flagrantly breached by the Foreign Secretary, the Prime Minister apparently revised it to accommodate his right hon. Friend's private arrangements.
The Prime Minister has stood loyally by his friend the Paymaster. We read that they are very good friends; indeed, on at least two occasions the Paymaster General has put his luxury villa in Tuscany at the disposal of the Prime Minister and his family. My reading of the press reports suggests that this is not a self-catering "bring your own sheets and flea powder" establishment. It is apparently a very high-class joint--the sort of place I am not allowed into. I have not tried to calculate how much more four weeks in Tuscany in a luxury villa in August might cost than, say, a few nights in the Ritz hotel in Paris. No doubt others will do the calculation for me.
There is also a new angle on which the Prime Minister must act--now. Because of revelations concerning the influence that the Paymaster General exerted on Orion to buy his TransTec shares, and the probability that he has therefore tainted the offshore trust and technically brought it onshore, it is said that the Inland Revenue is investigating his links with the Orion trust. Is that true? The normal rules ensuring strict client confidentiality for ordinary citizens in their tax affairs are absolutely right and proper. But this is no ordinary citizen: this is a senior Minister in Her Majesty's Treasury with special responsibility relating to taxation who may be under investigation for tax avoidance. He cannot therefore shelter behind the client confidentiality rule. He must answer the question, and answer it soon. Is the Paymaster aware of any Inland Revenue investigation into the TransTec shares transfer to the Orion trust, or into his influence on their purchase? On that he must come clean.
Furthermore, has the right hon. Gentleman now told the permanent secretary at the Treasury, Sir Terry Burns, the full facts? I feel sorry for the permanent secretary; like all good perm secs of my experience he will do his utmost to defend his Minister and protect him from his own folly. The Paymaster General said in a statement of 29 November:
What would the permanent secretary to the Treasury say now that more of the truth has come out? Wisely, like any great man who has been duped, he is saying very little. He has still not replied to the shadow Chancellor's letter of 12 December, in which he pointed out that the dealings of the Orion trust cannot be compared with a blind trust. That of course was the assumption on which the permanent secretary worked when the Paymaster General told him of his "beneficial family trust". In truth, the permanent secretary cannot reply, and I do not criticise him for that. Any reply that he could make would kill off his Minister.
The time has come for the Paymaster General to go. He has ducked and dived, he has threatened and charmed, but he has failed to answer the crucial questions on his business affairs. The Chancellor of the Exchequer is also guilty of hiding the facts from the House. My right hon. Friend the shadow Chancellor has repeatedly asked him for details of the Paymaster's dealings, yet the Chancellor relies for answer on the press statement issued by the Paymaster on 8 December. That press notice contains the infamous Titmuss Sainer Dechert letter stating that the Paymaster did not control or influence the Orion trust. We now know that assertion to be false; yet the Chancellor in his parliamentary answers merely refers to it for his defence. It is disgraceful and astonishing that the best defence the Second Lord of the Treasury can muster is based on a lawyers' letter which, as I said earlier, lied, lied and lied again.
It is time for the Paymaster to go, not just because he has been economical with the truth, as my detailed account today has revealed, but because of the apparent and obvious conflict of interest. Who in the country will believe that a man who benefits from at least £12 million in a tax haven has no conflict of interest when doing his job of clamping down on tax evasion? It beggars belief. And who will believe that the Inland Revenue will fearlessly investigate the status of the Orion trust and the supposed independence of its trustees when one of the principal beneficiaries includes the Revenue's own Minister at the Treasury?
It is time for the Paymaster to go because of the double standards that this case exposes. The Government are vitriolic about offshore trusts, yet one of their senior Ministers benefits enormously from such a trust. Here we have a Minister who presided at a press conference to launch the Government's new savings accounts, which clobber 300,000 middle-class savers, just 18 months after he suggested to Orion that it buy 10 million of his shares and then tuck them away in a tax haven for his and his family's use. If the right hon. Gentleman does not see the inconsistency or hypocrisy in that, he is the only one who does not. The Deputy Prime Minister sees it, but apparently our Prime Minister does not.
It is time for the Paymaster General to go because he has failed to answer any of the crucial questions that must be answered if he is to be left with any credibility or trust. So that the Minister answering today has a clear and concise list of them, let me summarise the questions that must be answered by the Paymaster. First, did he have any part in the selection of Richmond Corporate Services as trustees of the Orion trust? Secondly, has he ever written a letter of wishes to the Orion trustees?
Thirdly, did the "Geoffrey Robinson Personal Settlement" finance or guarantee the money so that Stenbell Ltd. could buy the TransTec shares? Fourthly, Stenbell Ltd., of which the Paymaster General was a director, has produced accounts describing him as a beneficiary, not a discretionary beneficiary, of the Orion trust. Are those accounts wrong?
Fifthly, who informed the Orion trust of the 2.95 million TransTec shares that were settled on 30 April? Sixthly, why were those TransTec shares not transferred with the original bequest to Orion? Seventhly, is the Paymaster aware of any Inland Revenue investigation of the TransTec shares transfer to the Orion trust, or his influence on their purchase?
Eighthly, has the Paymaster now told the permanent secretary at the Treasury, Sir Terry Burns, that he has influenced the Orion trust by suggesting that it buy his shares in TransTec and Coventry City football club, and is the permanent secretary still of the view that Orion is no different from a blind trust?
Ninthly, does the Paymaster General still believe that he is complying with the rules in the ministerial code that insist that there should be no apparent conflict of interest, when he benefits from £12 million in a tax haven, despite the fact that his ministerial responsibilities include closing tax loopholes? Finally, does he believe that full disclosure on all financial dealings is the only way to ensure that he has acted with due propriety and fairness? Those are important words.
I shall table all those questions today as official parliamentary questions. The Paymaster General must answer them. Indeed, the Chancellor of the Exchequer must answer them; no longer can he dodge them by hiding behind a lawyer's letter that we now know to be totally untrue. If the Paymaster General--or the Chancellor or the Financial Secretary today on his behalf--does not answer those questions, he must go, and go now, not just because of his conflict of interest, not just because of his economy with the truth, and not just because of the evident double standards. He must go because he has failed his own ethical test.
In a letter to The Times critical of the Conservative Government's handling of the sale of The Times and The Sunday Times to Rupert Murdoch, the Paymaster General wrote:
"I didn't have the £10 million handy to do it"--
but apparently his own company, Stenbell, did have the £10 million handy to do it.
"At the period end, the company had a deficit of assets over liabilities of £240,850. The continued trading of the company is dependent upon the continued support of its principal creditor, the Geoffrey Robinson Personal Settlement. In the opinion of the directors, this support is likely to be forthcoming for the foreseeable future, as evidenced by a further injection of loan capital since the year end. Accordingly, in the opinion of the directors, it is appropriate to prepare the statements on a going concern basis."
That is pretty clear, is it not? Stenbell has no assets whatever except those that the "Geoffrey Robinson Personal Settlement" give it.
"Our client did not appoint the trustees of the Orion Trust, who act entirely independently of him and are not controlled, or their decisions influenced, by him in any way; the trustees of Orion make their own decisions."
They threatened immediate libel proceedings if the newspaper continued to publish further reports--threats which were all bluff and have now been quietly dropped.
"I did suggest that they took up the rights issue and they did".
I can only conclude that, as the Paymaster General is an honourable man, Titmuss Sainer Dechert have the psychological flaw that the Prime Minister sees in his Chancellor, and that they, his solicitors, lied, lied and lied again in their letter of 8 December when they said that the Orion trustees did not have their decisions influenced by Her Majesty's Paymaster General.
"A Trust in which Mr G Robinson MP is a beneficiary".
Note the wording "a beneficiary", not a discretionary beneficiary, as we had been told by the Paymaster.
"You'd have to ask the settlors that. I'm not briefed"--
but apparently the settlor was the late Madame Bourgeois and, of course, the Paymaster General was the executor of her will before he resigned just before the Orion trust became operative and he could be a beneficiary.
"Ministers must scrupulously avoid any danger of an actual or apparent conflict of interest between their ministerial position and their private financial interests".
The Prime Minister says that the Paymaster General has followed the code--that he has avoided any apparent conflict of interest. But in his television interviews, the Paymaster General has admitted that on some issues he has given advice to the Chancellor of the Exchequer which goes against his own financial interests.
"In some cases it may not be possible to devise such a mechanism . . . in such a case, it may be necessary for the Minister in question to cease to hold the office in question".
The Prime Minister even states in the foreword:
"I will expect all Ministers to work within the letter and the spirit of the Code".
If the Prime Minister is to follow his own code, he must immediately ask for the Paymaster General's resignation.
"I informed him"--
the permanent secretary--
"that I was a discretionary beneficiary under a trust established for my family. After advice from the Permanent Secretary and Titmuss Sainer and Dechert, I decided in accordance with their advice, that there was no need to include this in the blind trust arrangements, since I was a discretionary beneficiary."
It is interesting that Sir Gordon Downey took a different view when he looked into the matter, but I shall not go into that today. I am concerned with the Paymaster General's dealings as a Minister of the Crown, not with any failure on his part to register his interests as a Member of Parliament.
"What is required therefore is the full disclosure of all the financial documents and legal opinions. Only in this way can the public be satisfied that this important transaction has been handled with due propriety and fairness."
He continued:
"It is an occasion where proper behaviour must be seen to have been observed and the public assured that the right judgment has been arrived at."
Those are the Paymaster General's words, not mine. He has written his own political suicide note. He stands condemned in his own words. He has no credibility left. He must go.
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