He had stepped in after a junior minister, Charles Wardle, an opponent of the Fayeds in business, had already taken a view on the issue, the statement said.
The two brothers, owners of Harrods, are believed to have been angered last week into leaking details of rewards they allegedly gave to two junior ministers out of revenge for the Government's failure, as they saw it, to deliver them British passports. One of the ministers, Tim Smith, resigned; the second, Neil Hamilton, is under pressure.
Yesterday, the Home Office was insisting that it never commented on applications, then in the evening, it issued a statement from Mr Howard, which said naturalisation applications were normally decided by officials, 'but especially difficult and sensitive cases are referred to ministers, when they are usually dealt with by the junior minister responsible for immigration and nationality'.
'The application was referred by the head of the nationality division on 23 December 1993, to my then junior minister, Charles Wardle. I had made it clear from the outset to Mr Wardle that I wished the application of Mr Ali al- Fayed to be decided by him. Subsequently, on 13 January, Mr Wardle's office referred the papers to my office and indicated that he wished to discuss the case with me and I saw him on January 21. I confirmed to Mr Wardle that the decision on this application should be taken by him.
'The case next came to my attention on April 27 when Mr Wardle's office referred to me his intended decision on the application of Mr Ali al-Fayed.
I made it clear that the decision was to be taken by Mr Wardle, but suggested further enquiries should be made before a final decision was reached.'
Mr Howard is understood to have told Mr Wardle not to be influenced by criticisms of the Fayeds in the Department of Trade and Industry's report on the Harrods takeover in 1985, but to ask the Bank of England for a more up-to-date reference on their business in Britain.
The statement concluded: 'Following the ministerial changes at the end of July, Nicholas Baker became the minister responsible for immigration and nationality. On August 29 his office passed to mine a further submission from the head of the nationality division containing proposals for taking the case forward, which I saw in early September after my return from Latin America.
'I subsequently briefly spoke to Mr Baker to confirm that I wanted him to deal with the applications.'
The statement did not say whether the decision had yet been made. Mr Wardle, now a trade and industry minister, declined to comment to the Independent last night. As a backbencher, he had a fully declared interest with Peat Marwick, the accountants retained by Lonrho, opponents of the Fayeds in the takeover battle with Lonrho.
In an adjournment debate on 27 March 1990, Mr Wardle, once again declaring his registered interest of 'part-time employment with a large firm of accountants', sharply criticised the DTI for not disqualifying the Fayeds from directorships after the DTI report into the takeover.
He complained that the department had taken character references from individuals and companies whose 'vested interest in the al-Fayeds' case was plain to see'.
The Bank of England has not been asked to provide a reference and is in any case banned by law from passing details from its banking files to immigration officials.
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