Treasury mandarin backs Robinson as Lilley steps up financial attack

The Treasury's top civil servant has insisted that the Paymaster General, Geoffrey Robinson, acted correctly in the handling of his financial affairs.

The comments by Sir Terry Burns, Permanent Secretary, come in a letter to the shadow Chancellor, Peter Lilley, in a response to queries about Mr Robinson's position.

Controversy flared when it emerged that Mr Robinson was the discretionary beneficiary of an offshore trust established by a Belgian friend who has since died.

Sir Terry's letter refers first to Mr Robinson's personal holdings - worth at least pounds 18m. It says: "My discussions with the Paymaster General about his financial interests focused on his beneficial holdings and my advice to him was that it would be appropriate to transfer them to a blind trust, which is what happened. During the course of the discussion the Paymaster General told me of the existence of a family trust. Since this vehicle already existed, and offered similar protection to that provided by a blind trust, there was no reason to consider it further."

Sir Terry's reference to "protection" is an allusion to Mr Robinson's relationship to the Orion Trust set up by his Belgian friend. He insists that he has no say over the handling of the trust - as is the case now with the blind trust containing his personal holdings.

Mr Robinson commented later: "Sir Terry Burns completely vindicated me. I acted in accordance with the ministerial code and on the advice of the Treasury Permanent Secretary."

Mr Lilley claimed, however, that Sir Terry's letter indicated he had not known all the details of the affair. "Over the past few days, it has become clear that the Paymaster General has been economical with the truth in public statements about his personal financial arrangements," he said. "It has now emerged that he even kept the Permanent Secretary to the Treasury in the dark about the nature of his offshore family trust in Guernsey."

The shadow Chancellor said he had asked Sir Terry in a letter last week how much Mr Robinson had told him.

"Did Sir Terry know that the Orion Trust had been involved in complicated share transactions with Mr Robinson's company, Stenbell Limited?

"Did Sir Terry know that the Orion Trust now owns a significant stake in Mr Robinson's former company, TransTec?

"Sir Terry's reply confirms that he was not made aware of these important - and highly relevant - matters."

Mr Lilley has written again to Sir Terry, asking if he would now revise his advice to the minister "in the light of the facts that have now come to light".