MoD staff told to sell shares

CHRIS BLACKHURST

Westminster Correspondent

Civil servants at the Ministry of Defence have been ordered to sell their private shareholdings in large companies to avoid possible conflicts of interest. Five staff in the Procurement Executive have been forced to dispose of shares in firms ranging from British Telecom to Racal Electronics.

The move reflects a tougher policy by officials and ministers anxious to avoid allegations of sleaze and is believed to be the first time a department has ordered staff to off-load their private investments.

Malcolm McIntosh, chief of defence procurement at the MoD, has written to MPs on the Commons Public Accounts Committee to tell them of the share sales, which comprised:

t A grade-7 official ordered to dispose of 500 BT shares;

t A civilian staff member told to get rid of 150 Rolls-Royce shares;

t A grade-3 official who held 2,060 shares in Alfred McAlpine;

t A grade-6 official with 440 BT shares;

t A senior official, grade not given, who was required to dispose of 4,000 Racal shares.

Another senior official was told to put 3,700 British Aerospace and 700 BT shares in a trust over which he had no control.

In all, 13 cases have been voluntarily brought to the attention of personnel officers by the shareowners. They advised a sale where it was felt the shares were inappropriate, given their owners' official duties. The system is self-regulating and shareholdings are only referred to the personnel department for a decision in cases of doubt. In line with other Whitehall departments, MoD staff do not have to disclose their shareholdings to their managers.

Dr McIntosh's disclosure was prompted by frauds in the procurement executive - the PAC is examining the scope for fraud there - and the desire, after the setting up of the Nolan inquiry into standards in public life, to be seen to be whiter than white.

The National Audit Office, the public-finance watchdog, and the PAC have repeatedly stressed the need to reduce the temptation to commit fraud, especially in the awarding of big contracts and orders.

Britain trails well behind the United States, where Conflict of Interest Statutes ban any government employee from dealing with any organisation in which he or she or their spouse, partner, or children, have a financial interest. Some agencies require officials to file a report on their investments, while others demand disclosure only from staff awarding contracts over a certain size. In the Defense Department, 130,000 civilian staff have to complete confidential financial-disclosure reports.

Alan Milburn, MP for Darlington and a PAC member, welcomed the MoD crackdown but said: "These cases may well be the tip of the iceberg, since there is no requirement on government staff to report shareholdings which may represent a conflict of interest."