Chief Minister Allan Bell gave a statement about the Sefton loans affair in Tynwald today.
Mr Bell was speaking to the court in the wake of one of the biggest controversies to knock his government.
UK barrister Richard Moules said that the loans had been made ‘ultra vires’ or, in his words ‘not lawfully’.
Economic Development Minister John Shimmin took responsibility and resigned.
Today in Tynwald Mr Bell gave the following statement:
During the June 2014 sitting of Tynwald this Honourable Court received the legal opinion of Mr Richard Moules in relation to the assistance given by the Government to the Sefton Group in respect of the loan given in 2012 of £450,000; the loan provided in 2013 of £1.3m; and the purchase and subsequent leaseback arrangement of the Middlemarch site.
Honourable Members will be well aware that Mr Moules considered that the loan transactions were likely to be found to be ultra vires if tested in a court of law, and that a course of action was required to ratify or regularise the transactions entered into by the Department concerned.
At the time of June Tynwald the Treasury Minister committed the Council of Ministers to return to Tynwald at this sitting by which point we would have had the opportunity to fully consider the legal opinion of Mr Moules.
I am pleased to report that since then not only has the original legal opinion been considered, but Government has also taken the necessary steps required to bring this matter to a conclusion.
You will be aware that following the June sitting of Tynwald I reluctantly accepted the resignation of the Minister for Economic Development. I say reluctantly as I believe that Mr Shimmin brought positivity, drive and success to the Department and that we have lost an asset; but I accept that he wished to honour his word and that some Honourable Members believed retaining his position would compromise public confidence in Government.
With regard to the legal opinion, following the conclusion of June Tynwald immediate steps were taken to make a further request of Mr Moules, to secure his opinion on how Government could ratify or regularise the transactions entered into by the Government to assist the Sefton Group.
I am pleased to state that Mr Moules considered the options for government and specifically advised that there were 3 courses available:-
Treasury has the requisite powers under the Financial Provisions and Currency Act 2011 to regularise the matter;
New legislation to validate the payments could be made retrospectively;
Government may elect to make a decision not to seek restitution.
He concluded that, and I quote: -
1)Treasury has power (without needing Tynwald consent) under the 2011 Financial Provisions and Currency Act 2011 to regularise the loans by using its section 4 power to make the loans or to enter into an arrangement/agreement with the Sefton to settle the restitution claim and secure repayment.
2)Alternatively, the Government could promote new legislation to validate the loans retrospectively or to amend the 2009 Regulations retrospectively.
3)The Government could also simply decide not to seek restitution, but this would not regularise the transactions and there might be difficulties in securing repayment. I do not recommend this option.
Discounting the third option, Council of Ministers agreed that the most appropriate way to regularise the situation would be to proceed with option 1, and to enter into a tripartite agreement with the Treasury, the Department of Economic Development and the Sefton Group, under the provisions of the Financial Provisions and Currency Act 2011.
Therefore acting upon the advice of learned Counsel, who provided the initial opinion on the vires of the loans, we have since followed the design of the same expert to remedy the matter and I am able to report that this tripartite agreement is now in force and I would like to put on record my thanks to the Sefton Group for their co-operation in this matter. I can confirm to this Court that the new agreement does not change the terms of the original agreements in any way and is therefore neutral on all parties.
Going forward, Honourable Members will be pleased to note that the necessary governance arrangements have also been put in place. The revised arrangements with respect to these loans will be reported in Government’s Annual Accounts with an accompanying explanatory note and I am advised that the Treasury has already engaged in discussions with the Government Auditors in this respect. Furthermore, the transaction will be reported in the July 2015 Annual Report to Tynwald on the application of the Financial Provisions and Currency Act 2011.
Madam President, Honourable Members,
As Chief Minister, I do not condone the situation that has arisen and steps are being taken to understand how it occurred and to ensure lessons have been learnt. I do, however, believe that the mistakes were made in good faith and we are now in a position where the vires issue is resolved and I am satisfied that the necessary governance arrangements are adequate.
More on this story in Thursday’s Manx Independent