The Complaint

1. On 9 November 2001, Mr Dominic Grieve (the Member for Beaconsfield) wrote to the Chairman of the Committee on Standards and Privileges asking that the Committee authorise an inquiry into the allowance claims made by Mr Henry McLeish, whilst a Member of the House, in relation to his constituency office. A copy of Mr Grieve's letter is at Appendix 1. The Committee declined to authorise an inquiry at that time because the issues of concern to Mr Grieve were already the subject of investigation by the Fife Police.

2. On 6 December 2002, Mr Peter Duncan (the Member for Galloway and Upper Nithsdale) wrote to the Chairman referring to the ongoing police investigation, and added:

I believe it would be appropriate for your Committee to instigate an investigation into the appropriateness or otherwise of Mr McLeish's financial affairs, so far as they relate to his time as a Member of the House of Commons.

A copy of Mr Duncan's letter is at Appendix 2

3. On 21 March 2003, the Scottish Crown Office and Procurator Fiscal Service announced that:

no further action is to be taken into allegations relating to the sub-let of Mr Henry McLeish's constituency office in Glenrothes. Crown Counsel have instructed that no further action should be taken as they were satisfied there was no evidence of criminal intent.

4. Meeting on 8 April this year, the Committee decided to authorise me to conduct an investigation into the disciplinary aspects of the complaints by Mr Grieve and Mr Duncan, that is the issues they raised in relation to the Code of Conduct for Members and the associated Rules relating to the registration and declaration of interests. I now submit my report.

5. Although a comprehensive account of what came to be known, in some sections of the press, as "Officegate" is unnecessary in order to be able to address the complaints against Mr McLeish, it is impossible to understand the requests for an investigation by Mr Grieve and Mr Duncan without also understanding, in brief, the history of events which led up to them, particularly as these concern the obligations of Members under the Code of Conduct and Rules of the House.

6. The Scottish 'Mail on Sunday' of 1 April 2001 carried a report that Mr Henry McLeish—then Member for Central Fife in both the Westminster and Scottish Parliaments and First Minister in the Scottish Executive—had been sub-letting part of his constituency office in Glenrothes to a local firm of solicitors, Digby Brown, since 1998 in return for a rent of £4,000 per annum. Mr McLeish had not, however, declared the fact that he was receiving this income in the Register of Members' Interests.

7. The following day, Mr McLeish faxed the then Registrar of Members' Interests confirming that "over the past years I have sub-let the upstairs part of my office". Mr McLeish added "I would confirm that the income obtained has been put directly into my office account". He concluded:

I would be grateful if you could advise me whether or not an informal sub-lease should have been registered in my entry of members' interests. If this matter should have been registered I would be grateful if this could now be done and I would be very willing to provide any further details which you may require.

8. After consulting my predecessor, the Registrar replied the same day advising that, under Category 8 of the Rules on the registration of interests then in force, Members were required to register:

any land or property, other than any home used for the personal residential purposes of the Member or the Member's spouse, which has a substantial value or from which a substantial income is derived.

9. Mr McLeish informed the Registrar on 3 April that he wished an appropriate Register entry to be made "at the earliest opportunity". In response to a question from the Registrar, he confirmed that a sub-letting arrangement had operated since 22 December 1987. The following entry was included under Mr McLeish's name in the updated edition of the Register dated 4 April 2001:

Land and Property

Since December 1987 I have sub-let part of my constituency office in North Street, Glenrothes, Fife. The rental income has been paid directly into my office account.

Mr Grieve was informed of this when he inquired of my predecessor on 4 April whether Mr McLeish had sought her guidance and what advice she had given.

10. A week after its initial story, the Scottish 'Mail on Sunday' carried a further report to the effect that during the period in which Mr McLeish had been sub-letting part of his office, he had also been claiming its full rental cost under the allowance paid to Members of the Westminster Parliament to help them maintain an office in their constituency (the Office Costs Allowance, OCA). Two days later, Mr Grieve wrote to the then Commissioner asking if Mr McLeish had clarified whether he had set off the rental income he had received from sub-letting against any claim he had made under the OCA. Copying his letter to Mr McLeish, Mr Grieve added:

The Scottish newspapers are currently full of allegations relating to this issue and it seems to me that it is a matter that should be clarified as soon as possible. I assume that if a Member of Parliament were to claim for the full rental costs of a constituency office, whilst in fact part of that rental cost was being met by an undeclared sub-let, this would constitute a breach of the House of Commons Code of Conduct.

11. My predecessor immediately wrote to Mr McLeish asking for his response to Mr Grieve's query "so that I can decide whether I need to take any action". Mr McLeish replied on 4 May: a copy of the letter is at Appendix 3. The main points Mr McLeish made were:

a)  that when elected to the Commons in 1987 he had wished to provide the best possible service to his constituents. This had involved finding a central and accessible location for his constituency office, which was relatively expensive.

b)  from the end of 1987, part of the office had been sub-let ."Any income obtained was paid into my business office account and then contributed to the running costs of my constituency office and the services I provided to my constituents".

c)  after the issue of registering the sub-let had been raised, he had immediately sought advice and the matter had now been registered in the Register of Members' Interests in both London and Edinburgh.

d)  since 1987, Mr McLeish had claimed reimbursement of his office rental under the OCA. The costs he claimed under the OCA were, like the rent from the sub-let, used for parliamentary/constituency business "and I have gained no personal/private benefit from this".

Mr McLeish concluded:

As with registration, I would be grateful for your further advice on the sub-let arrangements.

12. My predecessor replied to Mr McLeish on 9 May asking for some further information in order to enable her to respond to his request for advice. The General Election intervened, at which Mr McLeish stood down from his Westminster seat in order to focus on his responsibilities in Scotland. This, of course, removed him from the direct ambit of the House's standards arrangements. It also meant that my predecessor was unable to pursue her preliminary inquiries further without a formal decision by the Committee on Standards and Privileges authorising her to conduct an investigation.

13. Nonetheless, Mr McLeish continued to be in contact with my predecessor with a view to resolving the issues which had been raised. He wrote to her on 22 June 2001 in response to her queries, confirming that the rent of his office had been established following a valuation by the owner and a firm of chartered surveyors. He had claimed reimbursement under OCA of the total rent for the whole premises and of the business rate for that part of it which he occupied. The other part of the premises had been sub-let to a variety of tenants over the years: the rent they paid had gone into his office account "which covers my parliamentary constituency activities"; the basis of the rent level paid had been agreed "very informally". The sub-tenants paid directly to Fife Council the business rate for the part of the premises they occupied. A copy of this letter is at Appendix 4.

14. Following this letter, the then Commissioner arranged to see Mr McLeish and advised him to contact the Finance and Administration Department of the House "to discuss with them whether reimbursement is required". When Mr McLeish and Ms Filkin met on 2 July, Mr McLeish said that he would take her advice and contact the Department. My predecessor asked him to let her know when the matter had been resolved with the Department. This would then enable her to deal with the complaint and to write to the complainant to say that the matter had been settled.

15. Mr McLeish wrote on 13 July 2001, to say that he was in touch with the Finance Department. Thereafter, he contacted my predecessor at intervals to let her know how matters were progressing (as did Mr Grieve to find out what was happening). The contacts between Mr McLeish and the Finance Department resulted in a letter to my predecessor dated 18 October 2001 in which Mr Archie Cameron, Head of the Fees Office, said:

... I am glad to be able to tell you that this matter has been dealt with to my satisfaction. Mr McLeish has provided me with an oral undertaking that he will repay the money he over-claimed from the Office Costs Allowance. He has apologised for the error. As you know, this arose from sub-letting part of his constituency office but continuing to submit claims from his Office Costs Allowance (OCA) for the full quarterly rentals billed to him by the landlord.

My predecessor telephoned Mr Grieve on 22 October to inform him that his concerns about Mr McLeish's OCA claims had been settled to Mr Cameron's satisfaction. Mr McLeish confirmed the position himself the following day.

16. News of this settlement reignited controversy about the matter in the Scottish press. The headlines over the story in the Scottish edition of the Daily Mail on 23 October, for example, read "McLeish in secret deal over false office expense claims". Mr Grieve wrote to Mr Speaker on 25 October recounting his contacts with Ms Filkin; expressing concern both about the secrecy surrounding the settlement and the absence of the formal investigation which would have been possible had Mr McLeish still been a Member of the House; and seeking "public reassurance ... that there has been no impropriety in this case".

17. Amid mounting pressure about the matter in the Scottish Parliament and media, stories circulated that:

—  Mr McLeish had repaid £9,000 to the Finance and Administration Department

—  Mr McLeish's office address had appeared on a leaflet published at the time of the 1999 elections to the Scottish Parliament

—  Digby Brown had not staffed the premises they had rented.

On 1 November 2001, the Fife Police told my predecessor that they had received an allegation against Mr McLeish of criminal fraud, made by a third-party. On the same day, Mr McLeish was reported to have confirmed on the BBC programme "Question Time" that part of his office had been sub-let to others prior to the sub-let to Digby Brown in 1998, but to have indicated that he did not know how much money he had received in rent before 1998. Further newspaper reports on 7 November said that, in affirming the previous day his intention to repay the money he owed, Mr McLeish had revealed that he had received a total of £36,000 from 5 tenants over a 14 year period. He had, however, claimed, "this was a muddle, not a fiddle".

18. On 8 November, Mr McLeish resigned as First Minister, immediately prior to a debate on an Opposition motion in the Scottish Parliament calling for him to step down. The following day, Mr Grieve wrote requesting an inquiry into Mr McLeish's allowance claims.

Subsequent Developments

19. As I have earlier indicated, on 20 November 2001, the Committee on Standards and Privileges decided that it would not be appropriate to authorise a parliamentary investigation whilst a police investigation into the sub-letting of Mr McLeish's office was underway. Reporting this to Mr Grieve, the Chairman said:

The Committee is concerned to avoid doing anything which might prejudice that investigation or any proceeding which may result from it. We have accordingly decided to await the outcome of the current police investigation before deciding whether to invite the Parliamentary Commissioner for Standards to carry out an inquiry. We will also be asking the Fees Office to keep the Commissioner informed of the outcome of its own investigation.

20. The Director of Operations and Head of the Fees Office, Mr Cameron, wrote to me on 5 April 2002 to confirm that he had received a total repayment from Mr McLeish of £38,550 in respect of the income Mr McLeish had received from sub-letting part of his constituency office during his time as a Member of Parliament. Mr McLeish had made a payment of £10,000 on account on 20 December 2001 and had now paid the balance of the amount. Mr Cameron continued:

During the four year period from 1994/95 to 1997/98, Mr McLeish made additional payments from his own resources to meet expenditure on parliamentary business which could not be covered by his Office Costs Allowance because there was not sufficient funds in that allowance to enable him to do so. If it can be demonstrated that these resources represented sub-let income then I am still prepared to set those off against the total amount repaid. Additionally, if Mr McLeish can produce information or documents which will substantiate a claim that sub-let income prior to 1994/95 was used to pay for expenses wholly, exclusively and necessarily incurred on parliamentary business that, too can be considered for set off against the amount repaid. Mr McLeish has co-operated fully in this matter.

21. On 6 December 2002, Mr Duncan wrote, referring to the ongoing police investigation and requesting a parliamentary inquiry into Mr McLeish's financial affairs as a Member. I replied on 17 December indicating that his request would be considered further once the outcome of the police investigation was known.

22. On 21 March 2003, the Crown Office and Procurator Fiscal Service in Scotland announced that no proceedings would be taken against Mr McLeish. This cleared the way for the Committee on Standards and Privileges to consider whether to authorise me to inquire into the issues raised by the case in relation to the Code and Guide to the Rules for Members.

23. The Committee had previously established a clear practice that, before accepting for investigation a complaint against a former Member of the House, the Commissioner should consult the Committee. In its Nineteenth Report in Session 1997-98 (HC 1147), the Committee said:

We would expect to invite the Commissioner to proceed with an investigation into such a complaint if the allegation were of a serious nature.

The Committee had authorised two such inquiries on previous occasions. In addition, in another case, the investigation of which bridged a General Election, the Committee found against several former Members and indicated what punishments it would have recommended had they still been Members of the House (First, Seventh and Eighth Reports, HC (1997-98) 30, 240 and 261). At its meeting on 8 April, the Committee authorised me to inquire into the complaints by Mr Grieve and Mr Duncan.

My Inquiries

24. In accordance with my normal procedure, I wrote to Mr McLeish on 8 April reminding him that the Committee had put Mr Grieve's complaint on hold pending the outcome of the police investigation, and informing him that they had now authorised me to investigate it. I drew Mr McLeish's attention, in particular, to the provision of the Code of Conduct for Members which reads:

No improper use shall be made of any payment or allowance made to Members for public purposes and the administrative rules which apply to such payments and allowances must be strictly observed.

I also drew to his notice the complaint by Mr Duncan. I invited Mr McLeish's account of the circumstances relating to the complaint and, in particular, asked if he would set out the periods during which, and the persons to whom, any part of his constituency office was sub-let during the time when he rented the office and was claiming rent on it under the Office Costs Allowance. I asked how fully those parts of the office were utilised during the periods when they were sub-let and how precisely the income from the sub-letting was used.

25. At the same time I wrote to Mr Grieve and Mr Duncan telling them that I was proceeding with my inquiries and giving them the opportunity to submit further material in support of their complaints if they so wished. Neither has done so. I have also been in touch with the Finance and Administration Department and with the Fife Police.

Mr McLeish's Response

26. Having received my letter, Mr McLeish telephoned to say that he was about to go abroad for a period but would write on his return. I received his reply on 4 June. A copy is at Appendix 5.

27. The main points Mr McLeish makes amplify what he had earlier told my predecessor:

a)  on his election to Westminster in 1987 he was "determined to provide a first class parliamentary constituency office for the people of Central Fife".

b)  the town centre location he chose was excellent but the rent high. The landlord declined to lease him half the property, so he found himself with more space than he needed.

c)  from December 1987 onwards, he therefore sub-let part of the premises to a total of six different tenants for varying periods between then and June 2001.

d)  the income from the lets and the reimbursement of the rental costs from the Fees Office was spent entirely on his parliamentary constituency office.

e)  once he became aware of concern that he had failed to register the sub-lets in the Register of Members' Interests, the omission was rectified immediately.

f)  after discussion with my predecessor, he had contacted the Head of the Fees Office, Mr Cameron, to resolve how the income from the lets should be treated. Mr McLeish continues:

Despite the vagueness of the rules and regulations governing the payment of office cost allowance (reflected in the dramatic tightening up of the rules after the 2001 election), despite the fact that the Fees Office had no records covering the period between 1987 to 1995/96 and despite the fact that I had no records covering the same period, I was determined to resolve the matter as soon as possible. After discussing the matter in some detail with the Fees Office, including a meeting in London, and accepting Mr Cameron's advice, I agreed to pay back the amount I had claimed from the Fees Office equivalent to the income received from the sub-lets ...

g)  Mr McLeish had always complied fully with the advice he had received from Mr Cameron and from my predecessor, as well as from the staff of the Standards Committee of the Scottish Parliament.

28. Commenting on what happened, Mr McLeish said that:

a)  he was not aware of any problem concerning what he was doing with the sub-lets until April 2001.

b)  he had made no improper use of any payment or allowance made to him for public purposes.

c)  the income from the sub-lets was used for public purposes, i.e. the running of his constituency office.

d)  the matter had been thoroughly investigated by the Fees Office (with total repayment being made of his expenses claim equivalent to the total income from the sub-lets), the Inland Revenue and the police.

29. He concluded:

I therefore regret what has happened. I and my family have paid a very heavy price for my failure to register the interest and to seek advice earlier on the question of the sub-lets and the income received.

If I had done this, appropriate and early action would have been taken. And all of this could have been avoided.

The Relevant Provisions of the Code and Guide

30. Before summing up my findings of fact and conclusions, it is appropriate to set out the provisions of the Code of Conduct and the Guide to the Rules on the Registration and Declaration of Interests which were in force when Mr McLeish was a Member of the House and are particularly relevant to an evaluation of what happened in this case. It is also necessary to set out the main rules attaching to the payment of the Office Costs Allowance (OCA).

31. The penultimate paragraph of the Code reads:

No improper use shall be made of any payment or allowance made to Members for public purposes and the administrative rules which apply to such payments and allowances must be strictly observed.

No change was made to this provision of the Code when it was revised in May 2002.

32. Under Category 8 of the Rules on the Registration and Declaration of Interests then in force, Members were required to register any land or property (other than their homes) "which has a substantial value or from which a substantial income is derived". The term "substantial income" was not defined until the revision of May 2002, when the House set a value on this of more than 10% of the current parliamentary salary, i.e. at present £5,500.

33. The guidance to Members on the payment of the Office Costs Allowance (OCA) has been revised regularly over the years, with the approval of the Speaker. Most recently, the House's Resolutions of 5 July 2001 introduced new allowances and governance arrangements. Under the new arrangements, the cost of constituency office accommodation may be met from the Incidental Expenses Provision. However, the fundamental principle of the rules has remained unchanged throughout. The edition of the guidance issued to Members in May 1999, for example, said:

The Office Costs Allowance (OCA) should be used to cover the normal expenses required to set up and run a parliamentary office, including the payment of secretarial and research assistance. To qualify for OCA, any expenditure must be incurred wholly, exclusively and necessarily in the performance of parliamentary duties. This is a strict and long-established rule, approved by successive Speakers. You cannot therefore claim for expenditure that is personal or party-political.

Findings of Fact

34. Although comprehensive records covering the whole period of Mr McLeish's OCA claims are no longer available, there is no dispute about the essential facts in this case:

a)  on his election to the Parliament at Westminster in 1987, Mr McLeish rented a town centre constituency office in Glenrothes which was too big for his needs.

b)  over the period between December 1987 and June 2001, he sub-let the part of the premises he did not need to a total of six different sub-tenants. Information supplied by Mr McLeish about the names of and rent received from each of those sub-tenants is at Appendix 6.

c)  during this period, Mr McLeish claimed under the OCA the total cost of renting the whole of the premises. He did not off-set against his claim the income he received from the sub-lets.

d)  the income from the sub-lets went into his constituency office account. There is no evidence that Mr McLeish benefited personally from it and the police inquiry found no evidence of any criminal intent.

e)  Mr McLeish did not register the fact that he was receiving rental income from the sub-lets in the Register of Members' Interests until April 2001, after the matter had come to light following the report in the Scottish 'Mail on Sunday'. However, once the error emerged he rapidly took advice and rectified his omission.

f)  similarly, after the issue had been raised publicly, he took advice on the treatment of the income from the sub-lets, accepted that advice, and repaid a sum equivalent to the total income he had received (£38,550).

35. Mr McLeish denies any improper use of the allowances he received and has expressed his regret for what happened.