Rifkind rejected investigation into death at sea to avert insurance claim

John Major's Conservative government refused to hold a British inquiry into the death of the publishing tycoon Robert Maxwell because they privately feared it would raise the question of whether his family should be paid £20m in accident insurance.

The Whitehall file on Maxwell's death released today at the National Archives, Kew, also shows that ministers feared that a British inquiry would upset the Spanish authorities and be taken as a "vote of no confidence" in their investigation.

The secret file confirms that the then transport secretary, Malcolm Rifkind, did have the power to launch a British inquiry into Maxwell's death after he mysteriously fell over board one night from his motor yacht, the Lady Ghislane, near Tenerife.

Maxwell died facing financial ruin after he had stolen £400m from his companies' pension funds in an abortive attempt to keep his failing publishing empire afloat.

The Transport Department file includes statements by the crew of the Lady Ghislane describing the search for his body, but they throw no new light on the question of did he fall or was he pushed.

When Mr Rifkind was considering whether to hold an inquiry, Patrick Fearn, the British ambassador in Madrid, warned that such an investigation should take place back in London not on Spanish soil.

He told Mr Rifkind the Spanish authorities would see it as "an extraordinary vote of no confidence" in their investigation and add an unwelcome political dimension to the affair.

He said the British press had already been full of "patronising and disobliging remarks" about the abilities of the Spanish authorities and Madrid would be hostile and uncooperative to the point that it would damage British-Spanish relations.

In the event, the Spanish did botch the job. When a second autopsy was carried out on his body in Jerusalem, the Israeli doctors criticised the quality of the Spanish work. One doctor said the head had been opened but it was done so badly there were pieces they did not recognise and could not tell if he had suffered a blow to the head.

In London, P Kitchen of the Transport Department said the Foreign Office had endorsed the ambassador's opposition and added that the British consul in Tenerife was not up to handling the case.

In November 1991 Mr Kitchen advised the shipping minister, Patrick McLoughlin, that there had been a statutory duty to hold an inquiry into deaths from British-registered ships but the power had become discretionary in 1979 to cover unexplained disappearances in the wake of John Stonehouse affair.

"The terms of the amendment seem to apply literally in the Maxwell case since there is uncertainty about whether he died in the ship or in the sea in consequence of having been lost from the ship," he advised.

Transport civil servants, however, also firmly advised against an inquiry in Britain saying little could be achieved without the body. "Furthermore there is a danger such an inquiry would be used by the unsuccessful party to reopen the matter of the circumstances of Maxwell's death, and therefore, payment of the £20m accident insurance."

He said a normal department inquiry would be ill-equipped to handle these issues and the accompanying media pressure. In the event, Mr Rifkind followed his advice but Whitehall press officers were not authorised to give a full explanation. Mr Kitchen says they were told to "merely say" such an inquiry would serve no purpose in the absence of the body.