Examination of Witnesses (Questions 160-179)
LORD STEVENSON
OF CODDENHAM
CBE AND RT
HON LORD
HURD OF
WESTWELL CH CBE
11 OCTOBER 2007
Q160 Jenny Willott: I wondered whether
you had considered passing the papers you have about Lord Laidlaw
to HMRC because there is quite a clear understanding that he gave
to come on as a UK resident for tax purposes for 2004.
Lord Stevenson of Coddenham: The
answer is no. Would we? I do not know, because it would be a legal
issue. As a matter of fact, because of FOI, HMRC, who I am reliably
told gets a lot of its leads from the newspapers, will be quite
well informed because some of our correspondence has been quite
publicly aired.
Q161 Mr Prentice: May I stick with
Lord Laidlaw for a moment. He donated £2.7 million to the
Conservative Party and loaned the Conservative Party £3.5
million—so there is a lot of money there—and he was
elevated to the House of Lords in 2004. Why did you not rule him
out in 2004 on the grounds that he was not a UK resident for
tax purposes? Why did you not say to yourselves: "It is inappropriate
to put someone in the House of Lords who is a tax exile".
I know the situation has been changed subsequently, but why did
you not have that discussion in the Commission in 2004?
Lord Stevenson of Coddenham: For
the simple reason that he told us that within a matter of days
he would not be a tax exile.
Q162 Mr Prentice: No, that is not
the point I am making.
Lord Stevenson of Coddenham: Let
me finish. There is a perfectly reasonable question. Let us assume
he had come onshore—and he has not, as far as I am aware,
to date, but let us assume he had three days later—the question
is, "Hold on, this chap had been a tax exile for a very long
time, surely that is not an appropriate person to be in the Lords
and you should have said no". I would make the following
observation to that: it is a matter of judgment. Second—and
I am very anxious to be fair to Lord Laidlaw, I am uncomfortable
about talking about him ad hominem, but it is in the public
domain—first of all, he said very clearly, and I believe
it to be true, that the reason he was not paying UK taxes is that
he had built up a worldwide business that was largely not in the
UK. He had, if you like, a legitimate reason: he was not living
in the UK. He was building up one of the largest, whatever it
is, businesses and it was based in other parts of the world, mainly
apart from the UK. To be fair to him, he was retiring from the
business and selling it, hence his ability to come back to the
UK. That would be one reason. Second, as I said to you earlier,
he is not a man I know very well but he is a man of great ability.
It is quite clear, there is no question, he is a man of huge ability
who, aside from his business interests, has done a great deal.
Going back to the discussion we had with the Chairman about the
system, his party said to us, "He is suitable".
Q163 Mr Prentice: Yes.
Lord Stevenson of Coddenham: "He
is a good guy and he will make a terrific contribution".
It is not for us to second-guess that beyond the judgment call,
which is the one area where you might say, "Hold on a moment,
is someone who has been outside the UK for all these years appropriate?"
Q164 Mr Prentice: I understand all
that. In 2004, when you had your discussions with him, did you
suggest to him that he should pay back to the Exchequer the tax
that he had not paid because of his non resident status?
Lord Stevenson of Coddenham: No.
Q165 Mr Prentice: Why not?
Lord Stevenson of Coddenham: Because
it would have been inappropriate. Here was a man who had been
living away from the UK, quite legitimately paying tax in other
countries because he was not living in the UK. It was a perfectly
reasonable thing to do. If you went to live tomorrow in another
country, they would quite soon ask you to pay tax there. He was
now saying, "I'm coming back to the UK and I want to be in
the Lords" and we said, "Fine, you jolly well pay tax
here". But I think it would have been inappropriate for us
to do that.
Q166 Mr Prentice: Okay, here is this
man who is building up a worldwide empire, not living in the UK,
wants to be in the House of Lords as a working peer. What is your
definition of a working peer in that context? He is not living
in the United Kingdom?
Lord Stevenson of Coddenham: I
would just stop and say that is not what was proposed. Here was
a man saying, "I'm coming back to the UK. I am going to pay
tax in the UK. I am at the end of the business career and I want
give time to it" so I do not want to be drawn on to those
things. I am slightly uncomfortable talking ad hominem,
but I think I have explained enough about the situation.
Q167 Mr Prentice: I am still in the
dark about what constitutes a working peer. It is part of the
Commission's remit to look at these propriety issues for working
peers. Here we are being told that a man lives overseas, is a
tax exile, and you wave him through as a working peer.
Lord Hurd of Westwell: On the
basis that he was going to come back.
Lord Stevenson of Coddenham: He
said he would not be a tax exile and he would not be overseas.
Q168 Mr Prentice: Three years later,
he is still not paying UK taxes, still in the House of Lords—admittedly
on leave of absence. What should happen to Lord Laidlaw? Have
you been in discussion with the Prime Minister about Lord Laidlaw?
You specifically drew it to his attention in your annual report.
Lord Stevenson of Coddenham: No,
we have written to the Prime Minister. We have briefed the Prime
Minister on what is happening. We are not in discussion with him.
I come back to the fact that our role is a relatively small, circumscribed
one. You are proceeding, if I may say so, from a slightly false
premise. This guy was a guy who had been living out of the country
building up a business. He had come out of his business, sold
his business, and was coming back to live here, to pay UK taxes,
to work in the House of Lords. We discovered he was not, so, with
the limited powers, we put pressure on and he has taken leave
of absence. The rest is between him and the tax authorities.
Q169 Mr Prentice: I think it is quite
a big deal for someone to be elevated to the House of Lords and
to have given you an assurance way back in 2004 that from April
2004 he was going to become a UK resident for tax purposes and
three years on he is still not paying UK taxes. I think that is
a big deal. I wonder what the Government's view is. You have not
discussed this with the Prime Minister, but what about Jack Straw,
the Ministry of Justice? Do you have any idea what the Government's
view is, given the fact that you flagged this up publicly in your
annual report?
Lord Stevenson of Coddenham: May
I say that we think it is quite a big deal too, which is why we
went out of our way to draw attention to it, with the result—and
result is the right word—that he took leave of absence from
the House of Lords. I think your question is an entirely legitimate
one but one to be asked of the Government and not us.
Q170 Mr Prentice: I have but I am
not getting anywhere. I have written to the Prime Minister. He,
in a strange kind of circular way, referred me back to your annual
report which triggered the whole thing in the first place. I hope
I am not doing the Ministry of Justice a disservice but I think
I am still waiting to hear from them. Finally—I think I
have almost squeezed the orange dry here—leave of absence.
Is that good enough? Should we not just invite Lord Laidlaw to
hang up his ermine and leave the House of Lords? What penalty
is there?
Lord Stevenson of Coddenham: There
is a legitimate question. It is not really for us. It appears
to be that you cannot resign or be sacked from the Lords. There
is a legitimate public interest question as to whether that is
right, but, if I may say so, it is not for us doing our little
thing, it is for you.
Q171 Mr Prentice: I think it is appropriate
for you, with respect, to venture an opinion. I say, with respect,
that in the circumstances of this case leave of absence is inappropriate.
You recommended him for a peerage. You could make a recommendation
to the Prime Minister, for example, in view of what has happened,
that he was no longer a fit person to serve in the Lords.
Lord Stevenson of Coddenham: On
the matter of fact, we did not recommend him for a peerage; we
vetted him and did not advise the Prime Minister against it. The
most you will be able to draw from me is to say that I do think,
in the light of that case and other things that happened, there
is a legitimate question as to whether the arrangements whereby
people can voluntarily leave the Lords or involuntarily leave
the Lords should be reconsidered.
Q172 Chairman: Surely what does cause
problems for you all the time is this running together of service
in a second chamber and the honours system, because you are dealing
very often with people who do not necessarily want to serve in
a second chamber but they do want to be a lord. Is that not a
difficulty which is at the heart of this?
Lord Hurd of Westwell: Yes. Of
course it is. It is a problem of culture. It takes a long, long
time to change. If you ask most people in the street or in the
newspapers what a peerage was, they would say it was an honour,
and you get into these difficulties. We struggle against this.
I doubt if you will find anywhere in literature the concept that
a peerage is an ability to perform further services. It will take
a long time to change.
Q173 Chairman: Whatever else we do,
we surely have to separate out service in the second chamber from
the honours system, do we not?
Lord Stevenson of Coddenham: Speaking
personally ... This is not a Commission matter. I keep repeating
that boring thing: we do quite a small, narrow job that gets involved
in this. It is kind of you to ask, but we have no locus on it.
Speaking personally, I am rather inclined to agree with you, but
that is a very personal view.
Q174 Mr Burrowes: On the issue of
non-residency, on which you have decided you are not going to
vet such nominations, is that based on the criterion of credibility
or the criterion of whether it would enhance or diminish the House
of Lords or both?
Lord Stevenson of Coddenham: The
truth is it is based on a fundamental view which I think PHSC[2]
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. That was a conclusion we decided
very early on in our life.
Q175 Mr Burrowes: If you came to that
conclusion there, have you thought about or would it be appropriate
then to make a conclusion over those who have substantial financial
links to a party? On that criterion, would you think those who
do have substantial financial links and are committed to a party
enhance or diminish the House of Lords?
Lord Stevenson of Coddenham: Our
view is very similar, that making a donation or a loan absolutely
should not be a reason for getting a peerage but should not be
a bar. We can get back into the same discussion I think I had
with the Chairman earlier on on that. We have a role to play,
I think, but we cannot be sure it is absolutely 100% perfect,
in satisfying ourselves by tightening up the reassurances we get
from the parties about the causality; we have a role in satisfying
ourselves that the people who have been put forward are credible
nominees, even without the money; and we have a role in satisfying
ourselves that they are proper people, that they have passed the
propriety test. But I do not think we have a role in saying if
you have given money or lent money you cannot have a peerage.
Q176 Mr Burrowes: With the controversy
over cash for honours, the investigation and public concern, would
you not agree that there is a concern whether financial links
do, indeed, enhance or diminish the House of Lords and whether
there is a case that could be made for, perhaps over a period
of time, having a distance between that financial link and their
nomination to the Lords.
Lord Stevenson of Coddenham: As
a citizen and speaking personally, this is a key debating ground,
a key issue and it is a jolly difficult one, way beyond my understanding,
bringing up, as it does, the question of how parties are to be
funded, et cetera, et cetera—the work that
I think Hayden Phillips is doing. As a citizen, I would agree
there is an issue there. Our role, in the situation we are in,
is to try to make it as good as it possibly can be. But I would
accept, speaking personally, that it is perfectly legitimate to
say: "Would it not be a good idea if there was no possibility
of anyone ever seeking any linkage between money and any honour".
But our role is in the situation we find ourselves to try to tighten
things up and make it much, much, much less likely that the wrong
people will get honours or peerages for the wrong reasons.
Q177 Mr Walker: Lord Stevenson, you
have been Chair of HoLAC[3]
since 2000, that is seven years. At what stage did you start to
feel perhaps a little uncomfortable about the process or the type
of people being put forward for peerages? I cannot imagine it
was just when you sent some names back in 2005. I am sure prior
to that you began to just say to your colleagues, "Look,
I think we've got some problems brewing here".
Lord Stevenson of Coddenham: It
will be a slightly boring answer, but I want to be as helpful
as I can, because we have this rule of not talking about particular
things. The distinctive characteristic of what happened was the
leak of the list, which meant—and I deeply sympathise with
the people involved—that everyone knew who was being put
forward and who did not get one. We have had the same processes—I
mean we have been improving them and testing them, but roughly
the same processes—for the whole of those seven years. It
would be wrong to presume there had not been other situations
where we had advised. We had given advice at different times.
That is just one observation. Second, I think I can say for all
my colleagues, we have not had a sort of gathering sense of unease.
I think it is fair also to say that this was most unfortunate
and it was unlike any other list we have had to look at.
Q178 Mr Walker: You are a business
leader of a very large company and you understand merit and promotion
on ability. I am sure, prior to 2005, you might have discussed
it with your colleagues. I use an unscientific phrase "swinging
the lead" but, for some of the people coming before you,
really, quite frankly, it was a pretty marginal decision. You
were made to feel uncomfortable about some of the people you were
looking at. That is what I am saying.
Lord Stevenson of Coddenham: You
are going on the same ground as your Chairman. Ours is quite a
small role: vetting the political nominees for propriety. I cannot
speak for everyone, but I am sure some of my colleagues and I
might have had views about the suitability of particular people
coming forward. That was not within our brief. We have already
addressed the question as to whether perhaps it could or should
be, and, speaking personally, I think there is an argument for
that.
Q179 Mr Walker: You have seen a range
of people who you have vetted and passed through who have become
lords. Some of them—absolute no-brainer—are wonderful
people. What happens amongst you when there is a question mark?
Do you sit around? Does Lord Hurd join you and the other members
of this board and put it to a vote? Do you discuss the pros and
cons? Do you discuss your concerns and what other measures or
investigations you can take to answer those concerns? How does
it work? Do you have a vote at the end of the day and say, "Hands
up who thinks Mr Bloggins should become Lord Bloggins"? How
does that work?
Lord Stevenson of Coddenham: I
do not think we have ever had a vote, have we?
Lord Hurd of Westwell: No. Of
course most of our work has been on the non-party peers. That
is the bulk of our work. Occasionally we get into this area in
which the Committee is particularly interested and we have a thorough
process. We can have many discussions on a particular proposal
and come back to it again and again, until under the Chairman
we reach agreement. That is what we do. I would just add one point:
the psychology of all this has changed, particularly in view of
recent events. Party leaders are neither stupid nor blind; nor,
indeed, are party treasurers. They know, perhaps more clearly
than before, that we are an effective regulatory body and I think
that will affect/is affecting the way in which people think and
the sort of assumptions that might lie in the background beforehand.
2 Political Honours Scrutiny Committee Back
3
House of Lords Appointments Commission Back
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