Select Committee on Public Administration Second Report

6  House of Lords appointments

108. In Chapter 3 we set out the arrangements for the appointment of party working peers, including the remit of the House of Lords Appointments Commission. We noted that some elements are a hangover from the system for allocating honours—which is inappropriate because a peerage is not just an honour but also a seat in the legislature. However, this is not the only reason why there are flaws in the arrangements for appointments to the House of Lords. Fundamentally, the House in its current shape—dominated by appointed peers rather than their hereditary counterparts—has existed for fewer than ten years. It is scarcely surprising that work is still needed to continue the reform of the second chamber.

109. This chapter begins with a survey of reforms to the function of, and appointments to, the House of Lords. We then go on to consider the current appointments system, especially in the light of current events, before making suggestions as to how the system could be improved.

110. The history of House of Lords reform is a long and tangled one, which we do not propose to set out in full here. Our purpose in providing this brief chronology is to draw out the events which led to the particular character of today's House—a largely nominated revising chamber with a plethora of entry routes. We are particularly interested in the reasoning behind the current appointment processes. On the other hand, we are not concerned here with the history of debate on an elected element in the new second chamber. An argument could be made that the best way to solve the problems of appointment processes would be to remove all elements of appointment from the House of Lords and have an entirely elected chamber. Indeed, in March 2007, the House of Commons in a free vote decided by a large majority in favour of a wholly elected House of Lords. The Government has indicated that it will develop reforms for a substantially or wholly elected second chamber and we wait to see how this evolves. This is not the place for these arguments, however. Experience shows that the failure to find consensus on a comprehensive reform package can prevent progress on the running repairs that are needed now. We recommend that the next stage of Lords reform should not wait for a consensus on elections.

House of Lords reform: how we got to where we are

111. The modern history of House of Lords reform began in 1911 with the passage of the Parliament Act. Following the Lords' rejection of Lloyd George's "People's Budget" of 1909, the Act ensured that the House of Lords could no longer prevent a Bill becoming law if the House of Commons agreed it in three consecutive sessions (later reduced to two). From this moment on, the upper House has effectively been a revising chamber. Other principles have flowed from that: that the Lords should be complementary to, and not a rival to, the Commons; that its strength should lie in its range of specialist expertise to be used for scrutiny; and that therefore heredity was not the correct principle for determining membership of the chamber. The Life Peerages Act of 1958 allowed the government to appoint non-hereditary peers for the purpose of putting qualified individuals into the House of Lords. It thereby allowed a measure of greater party balance to a traditionally Conservative-dominated House. The mechanism by which peers can take a voluntary "leave of absence" was also created in 1958.

112. The next significant reforms were those of the Labour Government elected in 1997, which came into power pledged to remove the hereditary peers from Parliament.[92] Its stated objectives included maintaining an independent cross-bench presence in the Lords, and ensuring that while the party composition of appointed members better reflected the spread of political opinion in the country, there would nonetheless never be a single party with overall control of the House. In 1999 Parliament passed a House of Lords Act, altering the composition of the House. An amendment was accepted to secure the Act's passage which allowed 92 hereditary peers to continue to sit "until the second stage of House of Lords reform has taken place."[93] As the 2007 White Paper on House of Lords reform noted, the Government did not say what this second stage would be, in particular not committing itself to any element of election.[94]

113. At the same time as taking legislation through Parliament, the Government also commissioned a Royal Commission on the Reform of the House of Lords (usually known as the Wakeham Commission after its Chairman, Lord Wakeham) to consider what a future House should look like. The Wakeham Commission published its report in January 2000.[95] Its proposals, too many to list here, informed subsequent Government proposals, but there were significant differences too—not least in the powers of a proposed new statutory appointments commission. Wakeham had argued that all appointments should be made through the commission, including party political appointments, but the Government's proposals left these appointments within the control of political parties. On this and other issues, the proposals produced only deadlock, culminating in the free votes on composition of February 2003 in which the House of Commons endorsed none of the seven options put before it. During this period our predecessor Committee produced a report on the future of the second chamber, recommending a mixed membership, which continues to be relevant today.[96]

114. That survey brings us to the present day. Early in 2007 the then Leader of the House of Commons, Rt Hon Jack Straw MP, attempted to revive the process with the publication of another White Paper and subsequent further free votes on the composition of the new House.[97] While the results of those votes did not settle the vexed issue of composition, they did give confirmation of the House of Commons' desire to remove the remaining hereditary peers. A cross-party working group has been established which is looking at the future of the Lords one more time, and the Government has stated its hope that all parties will make manifesto commitments to an agreed proposal for reform before the next general election. However, with that general election all but ruled out for 2008 and not assured for 2009 either, comprehensive Lords reform seems to be not an immediate prospect.

The House of Lords Appointments Commission

115. The House of Lords Appointments Commission (HoLAC) was established by the then Prime Minister in May 2000. We have already set out its three roles in chapter 2—to select non-party-political peers, to vet some nominees for higher honours for propriety, and to do the same for prospective party working peers. It is crucial to note that this design of an Appointments Commission was never intended to be permanent; the Government clearly envisaged that the second stage of Lords reform would have happened by now.[98] It was therefore a pragmatic decision not to spend legislative time on the creation of an Appointments Commission which would be replaced soon after its inception (especially as it could be created without legislation). The intention was always to create a Statutory Appointments Commission as part of the second stage of Lords reform. This inquiry has demonstrated why it is now important that this happens sooner rather than later.

THE 2005 DRAFT WORKING PEERS LIST

116. We have already cited the Appointments Commission's interpretation of its own role with regard to party nominees—that it checks them for propriety, not suitability.[99] We do not know, because the Commission considers it to be confidential, precisely why the decision was made to query the names on the Labour Party's list of nominations in 2005. We do know, however, from Lord Stevenson that the names on the list were queried with the Prime Minister before the Commission became aware of the loans:

What happened was we got the list in October or something like that, and we went back to the Prime Minister at the beginning of February, there or thereabouts, and we only discovered a very few weeks after that that there had been a loan from one of them, and we then moved very fast to ask the political parties to tell us what other loans there were and if there was anything else we should know.

It is quite an important piece of fact that we had given our advice to the Prime Minister without knowledge of the loans which subsequently came to light.[100]

117. Lord Stevenson put it to us that this showed that HoLAC was doing its job quite well:

I hope—and it is for other people to judge this—the view would be taken that the regulatory system worked pretty well on the matters which led up to the police investigation. There is evidently a transparency to it that has not existed before (when these things were done from within No 10 or wherever) ... I think it became evident—I would say that, wouldn't I?—I think broadly it has acted in the public interest.[101]

118. We are not sure that we take his point about there being a transparency to the system; it strikes us that there is only transparency in this case because the draft list of working peers was somehow leaked to the press. But on the more important point, Lord Stevenson's assertion that the regulatory system worked well, he was supported by Dr Pinto-Duschinsky:

In my opinion, the procedure did work broadly as intended. The House of Lords Appointments Committee [sic] (HoLAC) scrutinised the suitability of the Prime Minister's nominees for peerages and rejected several of them.[102]

119. In our interim report we noted the complaint made by Dr Chai Patel to the Appointments Commission that he had never had a chance to present the evidence from his standpoint.[103] This does suggest a flaw in the system—perhaps a hangover from the honours system, where candidates who failed a propriety test would never know they had been nominated in the first place. Based on his letter to the Chairman of this Committee, Sir Gulam Noon was clearly equally upset by the fact that he was unable to defend himself publicly.[104]

120. On the other hand, the four people whose appointments were blocked were only impugned because the list was leaked, which does not imply a systemic failure of regulation. If nobody else had known that HoLAC had advised against them, it would have been less important that the reasoning was not made clear to them. We believe it is quite commonplace in other fields of work for prospective employees who fail security checks not to be told on what grounds they were rejected. We have received a letter from Lord Stevenson, again published with this report, reporting that the Commission has in its seven years of life asked further questions about ten nominees, and advised against five.[105] Presuming that this includes the four who were at the centre of the police inquiry, that means there has been one other nominee who was put forward and subsequently withdrawn (as we know that HoLAC's advice has never been rejected[106]). As we do not know who this person was, we can safely say that he or she has not suffered undue reputational damage from HoLAC's decision to advise against their nomination.

121. It appears that the regulatory system for assuring the propriety of party nominees to the House of Lords had the right outcome, in that those who made undeclared loans to a party were blocked from becoming peers. It would certainly have cast the House of Lords in a very bad light if the four nominees had become peers and the loans had subsequently come to light after they had been ennobled.

122. We do not know on what grounds the House of Lords Appointments Commission advised against these four candidates being ennobled, or what the source of the leak of the names was, but we commend the Commission for the robust performance of its scrutiny role.

THE POWERS OF THE COMMISSION

123. We have seen that the regulatory process for appointments to the upper House appears to be providing broadly satisfactory outcomes. Yet our inquiry uncovered real doubts over the processes which led to those outcomes. These can be summarised in one question: from where does the House of Lords Appointments Commission derive the authority to act as it does? We put this question in various forms to several of our witnesses.

124. One easy test of this question is the Commission's decision that new peers have to be tax resident in the United Kingdom. We entirely agree on the principle that members of the UK legislature should pay UK taxes. However, it is not illegal to go into tax exile deliberately. It is not illegal to serve in the legislature and not be tax resident, even if maintaining this status does mean that the person in question must remain outside the UK for a substantial proportion of the year. There is no minimum attendance requirement for peers in the law or in the Standing Orders of the House of Lords.

125. The question therefore arises of from where the Appointments Commission derived the power to advise against potential peers on these grounds. We are told by the Commission that they check nominees only for propriety, not suitability, so they must consider it improper not to be tax resident even though it is perfectly legal. They also tell us that to them propriety means that "the individual should be in good standing in the community in general and with particular regard to the public regulatory authorities"; and that "the appointment would enhance rather than diminish the workings and the reputation of the House of Lords itself and the appointments system generally."[107] We asked Lord Stevenson on which of these grounds they had decided that nominees had to be tax resident, and he replied:

The truth is it is based on a fundamental view which I think PHSC[108] had before, and we have and I certainly feel. I would not go so far as to say I would agree with everything Mr Prentice said a little time ago, but I rather agree with the direction that it is inappropriate for people to be in the Lords who do not pay UK taxes. It is as simple as that.[109]

We rather suspect that it is indeed "as simple as that" for the Appointments Commission effectively to make up the rules as it goes along. One of its members, Lord Hurd, appeared to agree:

We have been working out our own criteria. We have had to, in order to do the job which we have been asked to do.[110]

Lord Stevenson did note that the Commission had not started from a blank sheet of paper in working out its criteria, but had inherited and adapted the working practices of the now defunct Political Honours Scrutiny Committee.[111]

126. We agree with Lord Stevenson that it is inappropriate for people who are not tax resident in the UK to serve in the legislature, and we understand that the Commission has had largely to make up the rules as it goes along, because it is operating in an area where there are no rules. We make no criticism of the House of Lords Appointments Commission. But it cannot be right that the rules for entry to one half of our legislature are made by just six people, whoever they may be, and can be unmade or re-made at any moment without any proper process.

Suitability, Propriety and Credibility

127. Although we are largely content with the outcomes of the Commission's work, another example demonstrates a central confusion in the Commission's role which in our view is near impossible to sustain. That confusion derives from their claim to assess potential non-party candidates for their suitability, and to vet party nominees for propriety only.

128. We acknowledge that on paper there is a distinct difference between those two roles—especially as in the case of the non-party peers, the Commission is choosing its own candidates, whereas the candidates for party peerages come from the parties themselves. A system could be devised without ambiguity where HoLAC carried out its current role with regard to non-party peers and also vetted party nominees for propriety. However, the Commission's interpretation of propriety seems to us to go well beyond our understanding of the word, or what we believe to be the public understanding. We have already cited their definition, but it is important enough to set out again:

The Commission takes the view that in this context, propriety means: first, the individual should be in good standing in the community in general and with particular regard to the public regulatory authorities; and second, the individual should be a credible nominee. The Commission's main criterion in assessing this is whether the appointment would enhance rather than diminish the workings and the reputation of the House of Lords itself and the appointments system generally.[112]

129. We take no issue with the requirement that the individual should be in good standing in the community in general and with regulatory authorities in particular; that seems to us to be the very essence of what propriety is. It is the second half of the Commission's definition that we have continually questioned—that the individual should be a "credible nominee". We believe there is a fundamental problem with the House of Lords Appointments Commission's aim to judge party nominees to the House of Lords on their credibility but not on their suitability. We do not see a difference of anything but degree between suitability and credibility. A candidate is credible if he or she is sufficiently suitable; we see no other means of measuring it. We cannot visualise a candidate who is credible but unsuitable.

130. When we put to Lord Stevenson that the claim to judge party nominees for credibility but not suitability was unsustainable, the HoLAC Chairman defended their criteria:

We are responsible for propriety but the political parties and the political system at this point in time are responsible for saying this chap or this woman is suitable. We might privately think that some such person is not particularly suitable but it is not our job to comment on that.[113]

However, he later conceded the point to an extent:

You could argue—I would not like to have to cross words with you and definitions—and it is at the heart of what you are saying: "Does that not get you into a bit of suitability?" and you would have a point.[114]

It is interesting that the description of the Appointments Commission's role in relation to party nominees, as set out in the 1999 White Paper describing the Government's plans for HoLAC, reads that "the Appointments Commission will also take on and reinforce the present function of the Political Honours Scrutiny Committee in vetting the suitability of all nominations to life peerages."[115] There is clearly an unsatisfactory confusion.

131. The House of Lords Appointments Commission seems to us to be judging party nominees for their suitability as well as non-party nominees. The difference would appear to be that the bar is set lower—whereas non-party peers have to be the most suitable candidate of many, party peers only have to be suitable enough to not diminish the workings and the reputation of the House of Lords and the appointments system.

132. We are not surprised to find ambiguity in the Commission's rules. Rules need to be consulted on in draft; and rules of this nature ought to be made through proper Parliamentary processes. The criteria used in vetting prospective peers must be clarified.

A STATUTORY APPOINTMENTS COMMISSION

133. Most of our witnesses argued that the best way to clarify the remit of the Appointments Commission would be through putting it onto a statutory footing. Certainly the two members of the Appointments Commission who gave evidence to us were entirely of the view that this was necessary. Asked if he would favour the Commission being put on a statutory footing, Lord Stevenson answered simply "yes".[116] Lord Hurd told us that he was sure there should be a statutory Appointments Commission if there was to be any nominated element in the House of Lords.[117]

134. It is not just the Commission's members themselves who favour the statutory model. Dr Russell told us she had been involved in a survey of peers which found that 91% favoured the Commission becoming statutory.[118] We have already seen that the Government itself indicated in its last White Paper on the Lords that it supports this approach in principle.[119] Indeed, we have not heard a single dissenting voice. Our experience, however, tells us that the challenge is not just to persuade the Government in principle, but to find the parliamentary time.

135. One of the major lessons to be drawn from the events of the last two years is that the rules for entry to the House of Lords are far too ad hoc. They must be clear; they must be widely agreed; and they must be of unquestionable legitimacy. In short, they must be statutory. We call upon the Government to legislate as soon as parliamentary time allows to put the House of Lords Appointments Commission onto a statutory footing.

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92   Labour Party General Election Manifesto, 1997 Back

93   HL Deb, 30 March 1999, col 207 (quote is from the then Lord Chancellor, Lord Irvine of Lairg) Back

94   Leader of the House of Commons, The House of Lords: Reform, Cm 7027, February 2007, para 3.28 Back

95   Royal Commission on the Reform of the House of Lords, A House for the Future, Cm 4534, January 2000 Back

96   Public Administration Select Committee, Fifth Report of Session 2001-02, The Second Chamber: Continuing the Reform, HC 494 Back

97   Leader of the House of Commons, The House of Lords: Reform, Cm 7027, February 2007 Back

98   Prime Minister, The House of Lords: Completing the Reform, Cm 5291, November 2001 Back

99   http://www.lordsappointments.gov.uk/vetting.aspx Back

100   Q 228 Back

101   Q 145 Back

102   Ev 65 Back

103   http://news.bbc.co.uk/ Back

104   Ev 73-74 Back

105   Ev 64 Back

106   Public Administration Select Committee, Fourth Report of Session 2005-06, Propriety and Honours: Interim Findings, HC 1119, Q 103 Back

107   http://www.lordsappointments.gov.uk/vetting.aspx Back

108   The Political Honours Scrutiny Committee Back

109   Q 174 Back

110   Q 151 Back

111   Q 226 Back

112   http://www.lordsappointments.gov.uk/vetting.aspx Back

113   Q 149 Back

114   Q 151 Back

115   Prime Minister, Modernising Parliament, Reforming the House of Lords, Cm 4183, January 1999, Chapter 6, para 10 Back

116   Q 210 Back

117   Q 151 Back

118   Q 390 Back

119   Leader of the House of Commons, The House of Lords: Reform, Cm 7027, February 2007, para 8.15 Back

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Prepared 18 December 2007