Fox broke ministerial code

Sir Gus O'Donnell's report into the conduct of the former Defence Secretary has been published.

The report into the conduct of the Defence Secretary Liam Fox has just been published, and it has found -- as expected -- that the former minister committed "a clear breach of the Ministerial Code". Fox stood down on Friday amid mounting pressure over his relationship with his close friend and self-styled adviser, Adam Werritty.

The report has reiterated that the Cabinet Office was not aware of Werritty, saying that he was "neither a special adviser nor an official unpaid adviser". It concludes that "there was an inappropriate blurring of lines between official and personal relationships". It says that there is no evidence that Fox gained financially from the relationship, but that the "impression" of a blurring of interests was created.

To prevent such a situation arising again, it recommends that "officials should accompany Ministers to all official visits and meetings overseas at which it is expected that official matters may be raised".

Here are the conclusions on Fox's conduct:

He should have declared to his Permanent Secretary that Mr Werritty was a friend who had a company, Pargav, which was funded by a number of donors, some of whom had provided funding to Dr Fox when in Opposition.

22. The Ministerial Code requires Ministers to ensure that no conflict arises, or could reasonably be perceived to arise, between their public duties and their private interests, financial or otherwise. Dr Fox's actions clearly constitute a breach of the Ministerial Code which Dr Fox has already acknowledged. This was a failure of judgement on his part for which he has taken the ultimate responsibility in resigning office. Your foreword to the Ministerial Code makes clear that you expect Ministers to act in the national interest, above improper influence, and to serve to the highest standards of conduct. The Ministerial Code sets out very clearly the standards of behaviour required from Ministers. Dr Fox did not live up to these standards which he has since acknowledged.

23. Dr Fox's close and visible association with Mr Werrity in the UK and overseas, and the latter's use of misleading business cards, has fuelled a general impression that Mr Werritty spoke on behalf of the UK Government. The risks of Dr Fox's association with Mr Werritty were raised with Dr Fox by both his private office and the Permanent Secretary. Dr Fox took action in respect of business cards but clearly made a judgement that his contact with Mr Werritty should continue. This may have been a reasonable judgement had the contacts been minimal and purely personal and had not involved Mr Werritty's frequent attendance at meetings in the MoD main building and on overseas visits. The damage arose because the frequency, range and extent of these contacts were not regulated as well as they should have been and this was exacerbated by the fact that Dr Fox did not make his department aware of all the various contacts. I also conclude that the links and a lack of clarity of roles means that the donations given to Mr Werritty could be seen as giving rise to the perception of a conflict of interest.

24. In this case there was an inappropriate blurring of lines between official and personal relationships. Mr Werritty should not have been provided with access to Dr Fox's diary and itinerary. Nor should he have been allowed to participate in the social elements of the then Defence Secretary's overseas trips in a way which might have given rise to the impression that he was part of the official party. He should have had meetings in the MOD with such frequency as did occur, as this access may have provided others with a belief that Mr Werritty was speaking for Government and was part of an official entourage. This impression was of course reinforced by the business cards which Mr Werritty provided to people. However, I have found no evidence that Dr Fox gained financially in any way from this relationship.

UPDATE: Fox has now responded, Coffee House has the full statement which is partly extracted below:

I am pleased that the report makes clear that the two most serious allegations, namely of any financial gain sought, expected or received by myself and any breach of national security, have no basis. As I said in the House of Commons last week, I accept that it was a mistake to allow the distinctions between government and private roles to become blurred, and I must take my share of the responsibility for this.

More care should have been taken to avoid the impression that anyone other than Minsters and Officials were speaking on behalf of the Government, as this was not the case. Although there were no actual conflicts of interest I acknowledge that in order to avoid any possible perception of this, all private interests should have been fully declared to the Permanent Secretary. :

 

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.