Select Committee on Public Administration Second Report

Conclusions and recommendations

Honours and peerages

1.  A peerage is more than an honour. An honour is a reflection of past achievement, whereas a peerage ought to be an appointment for future service. The procedures for appointing peers have grown organically out of the procedures for allocating honours, but it is time that a clean break was made. There is no reason for any surviving overlap between the two processes. (Paragraph 39)

2.  The honours system itself is much improved in its independence since our predecessors' report in 2004. Some of this results from the new processes recommended by Sir Hayden Phillips' review, but the more important development may be the last Prime Minister's commitment not to put his own names forward, a commitment maintained by the current Prime Minister. It is our view that this commitment should be binding on all future Prime Ministers. (Paragraph 40)

3.  We have nothing further to add to the recommendations on changes to the honours system in our interim report. The Government understandably awaited this report before responding, but we expect a response to those recommendations now. (Paragraph 41)

4.  There is a legitimate role for the police in investigating allegations that honours or peerages have been sold. Criminal offences serve no purpose if allegations that they have been committed cannot be investigated. (Paragraph 57)

The legal framework

5.  In order to avoid any possibility of prejudicing any prosecutions, we agreed to pause our original inquiry. This was on the understanding that, given the nature of the evidential test, the police investigation would be relatively brief. The fact that it turned out not to be brief meant that we were unable to carry out our inquiry in the way that we had originally intended to. In retrospect, it is not clear that the inability of a parliamentary committee to examine in public serious allegations of misconduct has served the public interest. (Paragraph 58)

6.  The Honours (Prevention of Abuses) Act still serves a purpose as a long stop. It defines behaviour which was totally unacceptable in 1925, and is totally unacceptable now. The failure of the police to secure a prosecution in recent years is not necessarily a failure of the Act - we do not know that anything illegal took place. We would therefore resist any proposals that suggested the Act should be repealed in the absence of more comprehensive legislation coming forward. (Paragraph 66)

7.  It does appear, however, that the likelihood of securing prosecutions under the 1925 Act will always be very low even if peerages or honours are covertly traded. The behaviour which the Act criminalises is deliberately very limited. One effect of that limitation is that to secure a conviction in practice, the police would almost certainly have to catch someone red-handed. Given the nature of clandestine deals, this seems unlikely to happen. We must therefore look for ways to improve the law in this area. (Paragraph 67)

8.  What is rightly regarded as reprehensible is the idea that donors are seeking, and getting, something in return for their donation. It is impossible to legislate for motivations. However, while it would be desirable to prevent people from even trying to buy favour, it makes more sense to ensure that even if they do try, they cannot succeed. This must be the objective of any reform. (Paragraph 70)

9.  It is hard to see what would be gained from seeking to criminalise any additional forms of behaviour beyond those already caught by the 1925 Act. An offence of giving money in the un-stated hope of some reward would never be possible to prove. It is already illegal implicitly to agree an exchange of cash for honours or peerages; the difficulty lies in the low likelihood of proof. If the police cannot find evidence of an unambiguous agreement, we can hardly make an offence out of an ambiguous one. (Paragraph 72)

10.  The legal advice we have received is that it is probably not compatible with the European Convention on Human Rights, and hence with the Human Rights Act, to change the burden of proof for offences under the 1925 Act. While we must ensure that corrupt behaviour is effectively prevented or, failing that, effectively punished, this has to be balanced against the human rights of those accused. In this case, we do not believe the case for changing the burden of proof is sufficient to justify the human rights implications. (Paragraph 78)

11.  Consideration should be given to subsuming the specific law on abuses around honours and peerages into a new general Corruption Act. The need for such an Act is not disputed. The Law Commission is currently working on something along these lines, at least with regard to bribery. We recommend they should consider incorporating the behaviour outlawed by the 1925 Act in their new draft Bill, and give serious attention to the points raised in this part of our Report. (Paragraph 82)

12.  When a Bill is produced, we hope the Government will soon find time for it in the parliamentary schedule. The last Corruption Act was in 1916—a modern law is overdue. We would also suggest that this Committee or its Members should be invited to play some part in giving pre-legislative scrutiny to the draft Bill. (Paragraph 83)

13.  However, corruption in the public sector remains very rarely prosecuted, and it may always be difficult to secure convictions. Any attempt to bribe or to solicit bribes of any kind ought to be effectively punishable; but our first priority ought not to be refining the law to punish offenders. It must be preferable to take steps to prevent offences from being committed. (Paragraph 84)

Loans and electoral administration

14.  In retrospect, it was a mistake for the Political Parties, Elections and Referendums Act 2000 not to require the declaration of all loans, whether commercial or otherwise. The Government was right to acknowledge that mistake, and right to take swift steps to rectify it in the Electoral Administration Act 2006. (Paragraph 90)

15.  Our understanding of the 2000 Act is that it did not give the Electoral Commission the power to publish binding guidance on what would constitute a commercial loan. Therefore, the Commission's decision not to give advisory guidance was quite defensible, as to do so would not have given helpful clarity over the legal position. Instead, it might even in some circumstances have prevented justified prosecutions. The Commission was damned if it did and damned if it didn't. The failure to define a "commercial loan" was in the drafting of the 2000 Act. (Paragraph 97)

16.  The Electoral Commission's inability to give binding guidance was entirely consistent with the way the Commission was set up. There is now a striking consensus behind the need to make the Electoral Commission into a more effective, proactive regulator. We add our voice to that consensus. The Government is currently considering what steps to take next. One of these steps might need to be changes to legislation to give new powers to the Commission. (Paragraph 99)

17.  The pattern of events is clear. While legal advice was taken to ensure that no law was broken, a deliberate attempt was made to stretch the loophole on commercial loans as far as it would go. Having agreed legislation to make party funding transparent, parties appear to have gone to some lengths to get around it. (Paragraph 106)

18.  If there was any doubt about whether it was legally necessary to declare their loans, parties should have done so. If there was any doubt about whether it was legally necessary for candidates for peerages to disclose their loans, they should have done so. Even if there was no doubt on either of these matters, there is a strong ethical case that loans should have been declared. The letter of the law may not have been broken, but the spirit of the law was quite clear. (Paragraph 107)

House of Lords appointments

19.  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. (Paragraph 110)

20.  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. (Paragraph 115)

21.   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. (Paragraph 121)

22.  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. (Paragraph 122)

23.  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. (Paragraph 126)

24.  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. (Paragraph 129)

25.  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. (Paragraph 131)

26.  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. (Paragraph 132)

27.  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. (Paragraph 135)

An interim House of Lords Reform Bill

28.  One of the simplest ways to reduce the potential market value of peerages would be to separate the honour and the title from the seat in the legislature. The Government has already indicated it supports this, and that a cross-party group on Lords Reform has endorsed the principle. We recommend the inclusion of provisions along these lines in an interim House of Lords Reform Bill. (Paragraph 141)

29.  Consideration will have to be given to both the name of the House and how its members are referred to—clearly a linked question. We hope that the discussion will not get bogged down on this question of etiquette. The principle of the change is far more important than nomenclature. (Paragraph 142)

30.  It is illogical that while HoLAC can require that a putative Member of the House of Lords should be a UK resident for tax purposes, there is no provision to enforce this once someone is an actual Member. (Paragraph 145)

31.  Even with the best appointments mechanism in the world, there will be occasions when the conduct of members of the House of Lords will be such as to warrant their removal from the House. The example of Lord Laidlaw shows that the Appointments Commission cannot enforce the undertakings given by prospective peers—it took the Commission years to persuade him to relinquish his position in the House, and even now he can change his mind at any time. Leave of absence provisions are clearly not sustainable in a modern second chamber. (Paragraph 146)

32.  We do not suggest that the Appointments Commission should necessarily have the right to remove members of the reformed House. But it is surely right that as a general principle disqualification provisions are broadly consistent with the House of Commons. It is surely also right that there should be some mechanism for resignation from the House of Lords - on grounds of impropriety or on any other grounds. (Paragraph 147)

33.  The criteria to be used in deciding who sits in the House should be set out in the interim House of Lords Reform Bill. They should include criteria on both suitability and on propriety, to be applied equally to all prospective peers whether partisan or crossbench. On propriety, there should be enough detail to make it an objective judgement for the Appointments Commission and not a subjective one, in order to be fair to all candidates. (Paragraph 153)

34.  The Bill should make it explicit that one of the criteria for appointment to the House will be residence in the UK for tax purposes. (Paragraph 154)

35.  On balance, we do not believe the Bill should put any kind of limit on donors to political parties being nominated by those parties to the House of Lords. Donating to a cause you believe in can be virtuous—it should not be stigmatised. The Bill should formalise the current stipulation that a donation is neither an advantage nor a bar towards being appointed. (Paragraph 155)

36.  We recommend that the Bill introduces a longlist system for political party nominees to the House of Lords. Parties should publish a long list of candidates, explaining how they believe each one meets the criteria for membership. It should then be up to the Appointments Commission to choose those candidates from that list who they believe to be the most suitable against agreed criteria, as well as conducting the current propriety tests. All nominated candidates would then be chosen by the Appointments Commission. The scope for party patronage and hence sale of peerages is thereby dramatically reduced. (Paragraph 163)

37.  However, this will not work if parties are asked to list their preferences in order, as in that scenario non-selection would be a public slur. We believe the objective of transparency is more important than allowing parties to rank their nominees in order of preference. We therefore recommend that this one element of the Government's proposal is reconsidered. (Paragraph 164)

38.  The more robust and transparent the parties' nomination processes, the more credible and legitimate will be the names put before the Commission. (Paragraph 167)

39.  How parties choose their candidates for nomination to the House of Lords is rightly a matter for them to decide. We note, however, the observations of our witnesses that it does not reflect well on the public perception of politics and of individual parties if their processes are seen to be less than fully transparent. (Paragraph 168)

40.  A House of Lords Reform Bill must ensure that the role of the Appointments Commission is no longer only advisory. There is no excuse for a remaining Prime Ministerial veto over the Commission's decisions, even if that veto is only theoretical. (Paragraph 173)

41.  The Bill should also remove the Prime Ministerial role in appointing members of the Appointments Commission, and the role of the executive in sponsoring and supporting the Commission. The statutory Commission should be entirely accountable to Parliament. (Paragraph 174)

42.  Provision should be made to ensure that the Prime Minister no longer determines the size of the House of Lords and the party balance of the nominated element. The size and the proportion of non-partisan members may be determined in statute, but the party balance should be variable along with the prevailing mood of the nation. A formula should be devised, as the Government suggests. This formula should then be administered by the Appointments Commission. (Paragraph 175)

43.  Lastly, we note that it has now been agreed in principle by the House of Commons that the remaining hereditary peers should be removed from the House of Lords. This should also be part of the Reform Bill. (Paragraph 176)

44.  Although we have made legislative proposals, and believe this is the right way to proceed, it would be possible to achieve much of what we recommend without legislation. If there are problems about parliamentary time, or concerns on the part of the Government that a limited Bill might get derailed by wider issues of second chamber reform, there is a remedy to hand. Just as the last Prime Minister set up the House of Lords Appointments Commission without legislation, the current Prime Minister could make changes without needing Parliamentary approval. For example, he could implement tomorrow all the changes we suggest to House of Lords appointments procedures. He could call on all parties in future to submit longlists of nominees to the Appointments Commission, and give the Commission the formal power of selection. He could undertake never to veto or change any decision on either honours or peerages, effectively withdrawing himself from the process. He could allow the Commission to determine the size and party balance of the second chamber, on agreed principles. All of this ought to be formalised through legislation as soon as parliamentary time allows, but the point is that it could be done now if the Government wanted to. We believe that it should, as an immediate and proper response to the lessons to be learned from recent events. (Paragraph 181)

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