MPs abandon plan to urge BCCI pay-out

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A COMMONS select committee has abandoned plans to ask Norman Lamont, the Chancellor, to consider compensating victims of the BCCI banking scandal amid allegations of ministerial and whips' pressure on Tory MPs.

A report by the all-party Treasury and Civil Service Select Committee due for publication on Thursday will be highly critical of the role played in the affair by the Bank of England, its governor- designate Eddie George and the present Governor - from whom Mr George is to take over in July - Robin Leigh-Pemberton.

But a recommendation for a pounds 160m Treasury pay-out for the victims of the crashed bank has been dropped, although a discussion of the compensation issue will remain in the body of the committee's report.

The development will come as a blow to the thousands of out-of- pocket BCCI depositors and their supporters, who believe that the prospects for a government- funded compensation scheme will have been severely weakened, leaving them to take their chance of obtaining severely reduced payments through the courts.

The kind of compensation package mooted by the committee would see out-of-pocket investors getting their money back up to a limit of pounds 100,000 each, with the total sum in line with the pounds 150m government package in 1989 for the victims of the Barlow Clowes debacle. In that instance, 18,000 people got between 80 and 90 per cent of their money back.

The U-turn is the more surprising because the compensation call was originally pressed by a Conservative member of the committee. But it was overturned last week as five Tories outvoted three Labour members and one Liberal Democrat.

The committee's Conservative chairman, John Watts, the MP for Slough, took no part in the committee's deliberations, having declared an interest at the outset.

The chair was taken by Giles Radice, Labour MP for Durham North, who is understood to have abstained from the vote on the ground that the chairman should remain neutral.