Revealed: George Osborne’s secret veto on fraud inquiries

Chancellor writes SFO cheques - so is there a conflict of interest?

George Osborne has a secret veto over large and potentially politically sensitive fraud investigations, The Independent has learnt.

Under a government agreement the Serious Fraud Office must get permission from the Treasury to launch any complex new inquiry which comes on top of its normal budget.

But controversially the Treasury can keep its decisions secret – potentially allowing it to veto politically sensitive fraud inquiries, either before or midway through an investigation, without public scrutiny.

Ministers have now become the final arbiters of which major financial crimes are investigated as a result of 25 per cent cuts to the SFO’s budget over the past three years, Labour warned.

The move is particularly sensitive as the Government has intervened in the past to halt embarrassing fraud investigations.

In 2006 the then Attorney General Lord Goldsmith announced that an SFO investigation into claims that BAE Systems had paid bribes to secure an arms deal with Saudi Arabia was being dropped. The announcement came weeks after reports that the Saudis were threatening to pull out of a deal to buy 72 Eurofighter jets from BAE.

Critics warned that the Government could use the veto to prevent investigations into alleged fraud at RBS in the run-up to the financial crisis – which have the potential to cost the Government millions in compensation.

The bank, now state-owned, is facing a civil action over claims that senior executives must have known about it perilous financial state when it launched a £12bn rights issue months before the financial crisis. If the SFO were to investigate and prove criminal liability it would force the Government to pay out to those who lost money by investing in the rights issue.

The veto came to light in parliamentary answers to the shadow Attorney General, Emily Thornberry.

She asked the Attorney General if he would give public notification of each occasion on which the Serious Fraud Office requests additional funding from the Treasury.

However he declined to do so, claiming it would “not be possible to do this without the risk of prejudice to the success of the Office’s operations”.

Ms Thornberry said the decision effectively amounted to giving the Chancellor a secret say over controversial investigations which might never see the light of day.

“It looks as though George Osborne will have a secret veto over what gets investigated and that’s unacceptable,” she said. “Investigators and prosecutors should not have to go running to politicians for funding case by case. If they do, they are no longer politically independent and the public will lose faith in what they do.”

Robert Barrington, executive director of Transparency International, which campaigns against corruption, pointed out that the SFO had not brought a single prosecution under a new law that allows UK companies to be prosecuted for bribery abroad.

He said there was potentially a “clear conflict of interest” in the Treasury’s role promoting economic growth and deciding whether to investigate a UK company for misdeeds in a foreign country which might damage its reputation and finances. “Either by design or accident you could easily get a situation where egregious corruption is simply not investigated,” he said.

“We have already seen political interference in the case of BAE and it is simply wrong that the Treasury should have the power to withhold exceptional funding to investigate cases of corruption. The SFO should be a properly funded institution with the ability to decide independently which cases it investigates without the suggestion of political motives at play.”

A spokesman for the Attorney General insisted that the director of the Serious Fraud Office “alone” determined which cases the SFO would investigate, based on its case selection criteria. 

However the spokesman added: “Where an exceptionally large case needs to be investigated the Treasury will consider SFO’s ability to fund the case from existing resources.” Decisions had to remain private because “to publish such information could prejudice the investigation”, the spokesman said.

SFO investigations

Asil Nadir The former head of Polly Peck was jailed last year for fraud ten years after the SFO began its investigation into the collapse of the company. But it’s estimated the final prosecution alone cost 10 per cent of its £30 million budget.

 

Al Yamamah The SFO’s long-running investigation into whether British the arms company BAE paid bribes to Saudi officials for lucrative defence the contacts. The investigation was scrapped at the behest of the British Government after the Saudi’s warned them that it could jeopardise future sales.

Libor The Government has already announced an extra £3.5 million for the SFO to investigate the possible criminal rigging of the Libor markets by bankers working in the city. The SFO have arrested three people but no-one has yet been charged.

Vincent Tchenguiz The property tycoon is suing the SFO for £200 million after its failed investigation into the collapse of the Icelandic bank Kaupthing. The probe ended in humiliation after the SFO admitted to blunders, including unlawfully obtaining search warrants.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Office / Sales Manager

£22000 - £32000 per annum: Recruitment Genius: Established and expanding South...

Recruitment Genius: Administrative Assistant / Order Fulfilment

£14000 per annum: Recruitment Genius: An exciting opportunity to join a thrivi...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + Uncapped OTE: SThree: Trainee Recruitment Consulta...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + Uncapped OTE: SThree: Trainee Recruitment Consulta...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones