Its impact was used by three of Britain's most senior civil servants to defend vigorously their decision to spend pounds 4,700 of public money on helping Mr Lamont to deal with the publicity.
Sir Peter Middleton, Permanent Secretary when the story broke in April 1991, told the Public Accounts Committee that the story ran for days, with the press 'trying to make a connection' between the tenant and Mr Lamont.
'It was undoubtedly affecting his official business and his ability to perform his official duties. It was taking up time and it affected his reputation.'
That was why, Sir Peter said, he had advocated that the Treasury pay the costs that the taxpayer finally met of the law firm Peter Carter-Ruck for handling media inquiries over the weekend the story broke, and for getting an expedited hearing to evict Sara Dale. Sir Peter, now chairman of BZW, had suggested the Treasury should meet those costs and part of the eviction costs, arguing that the Chancellor would not have needed to evict Ms Dale had he been a private citizen because the lease ran out in September.
That proposed payment was scaled down to just Carter-Ruck's initial handling of the media, after Brian Fox, the principal finance officer at the Treasury, argued that the case for paying the other costs was 'weak'. Sir Peter said he was not surprised that Mr Fox had recommended a lower payment which his successor, Sir Terence Burns, approved. 'He is paid to take a sceptical view of things,' he said.
Sir Peter told the committee that Mr Lamont had not consulted any senior Treasury officials before deciding to hire a private law firm.
But Sir Peter, Sir Terence, and Sir Robin Butler, the Cabinet Secretary, all firmly defended the payment.
As Labour MPs questioned Carter- Ruck's level of charges, which they put at pounds 260 an hour, Sir Peter described it as 'extremely cheap' and 'astonishingly good value for money' given the firm's specialist expertise in libel law.
MPs on the committee questioned the three top civil servants on why an outside firm was used to handle the 'sex therapist' case, while the Treasury's own press office handled the 'Threshergate' affair.
Sir Terence argued that there had been a risk of libelling Sara Dale, the 'sex therapist' who leased Mr Lamont's home, but told a sceptical Terry Davies, Labour MP for Birmingham Hodge Hill, that there had been 'no material risk' of libelling the Thresher's employees over their untrue allegation that Mr Lamont had bought champagne and cigarettes.
The decision on which parts of Mr Lamont's legal bill to pay was taken in principle before the size of the bill was known, the MPs were told.
The sum paid had not been recorded separately, Sir Terence said, because 'we had no doubts about the propriety of the action. It did not occur to myself or my staff to inform the National Audit Office'. It did not appear to have fallen into the category defined as special payments.
Sir Robin Butler said he would have taken the same decisions again, but welcomed proposals to put together fresh guidance on such issues, while warning that guidelines could not cover every case. Civil servants would still need to use their judgement and Parliament might not agree to it in every case.
He had been concerned about comment criticising the civil service, and suggestions that the payment had become 'politicised'. 'We did look at the issue very rigorously and very conscientiously,' he said. 'Although not everyone might agree that we drew the line in the right place, we did at least try to draw it very rigorously'.
Both Sir Robin and Sir Terence strongly rejected suggestions of a cover- up over the payment, saying they had seen it in the same context as the wide range of ministerial expenses from use of official cars to the line between official and social engagements on which civil servants had to make judgements.
Dr Kim Howells, Labour MP for Pontypridd, told the civil servants at the end of the hearing: 'You have done a magnificent job of shielding the Chancellor, but we've here got a very senior government minister who panicked, rang the most expensive lawyer in London and you picked the tab up.'Reuse content