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"The first determination under section 4(4) of the Parliamentary Standards Act 2009 does not have to come into effect before 1 April 2012."
Mr. Straw: I have been through those provisions in some detail. Indeed, I did so when they were draft provisions, and I suggested to parliamentary counsel that the wording be made clearer. It is now clearer than it was, although the hon. Gentleman does not have the benefit of having seen the earlier drafts. IPSA does not believe that it has the capacity to set up- [ Interruption. ] Yes, I thought that that was the case, but I am very grateful to the Whip, as ever, for giving me instructions. IPSA, for very good reason, does not believe that it has the capacity to undertake and implement a major review of parliamentary salaries before 1 April 2012, and I am very grateful to the Whips, as ever, for keeping me in order. In the interim, the existing arrangements, which are based on the July 2008 decision of the House, will apply. They will apply until the provisions before us come into force.
Mr. Straw: There is some very odd numbering in new clause 73, and that is something that I had not noticed before. It goes (1), (2), (3), (4), (5), (6), and (7), and then (2) and (3), but anyway, new clause 73(2), on page 657 of the amendment paper, indicates that the key provisions in the new clause would not come into force until 1 April 2012.
New schedule 9 would provide for IPSA to make pension schemes for MPs, and for the Minister for the Civil Service to make pension schemes for Ministers and certain other officeholders, such as the Leader of the Opposition. That contrasts with the current arrangements, whereby the Leader of the House determines pension arrangements through regulations.
Mr. Straw: I cannot say precisely what discussions took place with the trustees. However, I can tell the right hon. Gentleman about conversations that I have had, particularly with my right hon. Friend the Member for Islwyn (Mr. Touhig), on behalf of the chairman of the trustees, who is currently indisposed through illness. I hope to give the Committee some comfort about two key issues that the trustees have raised with me.
The first issue relates to accrued rights-that is, the rights to a pension that Members have already accrued. These provisions are silent on whether IPSA could change accrued rights peremptorily, and there is some anxiety about that. That is no part of our intention, nor that of IPSA. The Committee will be aware that section 67 of the Pensions Act 1995 sets out the requirements that have to be followed if there are proposals to change accrued rights. If a so-called protective modification is to be made, the informed consent of the Members affected is required. Since what we are seeking to do through the whole IPSA arrangements is to put Members of Parliament in no better and no worse a position than members of the public in ordinary employment, we accept that there should be a similar protection for accrued rights. Discussions have taken place about how that might be done. Officials are considering whether, for example, provisions for Members' pensions should hook in with the provision in the 1995 Act, which might be the most sensible way of doing it.
The second issue, which relates to trustees, has been raised by several Members, including my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller). I have been to Ellesmere Port many times- [ Interruption. ] No, it was not briefly at all. There is a huge petrol refinery there, and when we almost ran out of petrol in September 2000, and I was Home Secretary and therefore to blame, I made it my business to visit all the refineries in the country to try to avoid a similar crisis happening again. That is why I know my hon. Friend's constituency intimately.
The provisions as drafted give IPSA the right to appoint whomsoever it wishes as trustees. There is provision in the Pensions Act 2004 that at least one third of trustees of any pension scheme should be representative of the members of the scheme. We propose to look at that to see whether such a provision could be brought in as an amendment on Report.
Andrew Miller (Ellesmere Port and Neston) (Lab): I accept what my right hon. Friend has said about the 1995 scheme in relation to accrued rights; that would be a sensible mechanism to develop. On his second point, under these provisions IPSA appears to have the power to remove a trustee from the fund. Under the 2004 Act, there are circumstances in which the trust body collectively can effectively dismiss a trustee. Can we be sure that my right hon. Friend does not intend to go any further than the requirements of the 2004 Act?
Mr. Straw: It is not our intention to do that. I cannot be absolutely certain that the wording does not take it further-that is why we are actively examining the matter. We will consult very quickly and come back with modifications, which I hope will accommodate the Committee's wishes.
"The IPSA may, after consulting the Minister for the Civil Service... remove a trustee of the fund".
"No provision of a scheme under this paragraph is to be construed as restricting the powers of the trustees under paragraph 2(1)."
Now is not the time to become discursive about what that may or may not mean, but I know of no pension scheme, outside the civil service, where the Minister for the civil service can be the only person who comments on a proposal to dismiss one or all trustees. I am therefore grateful to the Justice Secretary for saying that he will think more about the matter.
Two months ago, there was some confusion in the Government as it was not clear that we would get the changes before a general election. Immediately after the report was published, all the party leaders said that it should be implemented in full. Although most of it was about the arrangements for IPSA, which are its responsibility and not ours, important proposals were designed to strengthen it, which the Committee on Standards in Public Life identified as requiring primary legislation. However, that was not mentioned in the Queen's Speech and, when cross-examined on the matter, the Prime Minister looked somewhat baffled. Then there was confusion, with half the Government claiming that no new legislation was necessary and the other half promising to do everything that was necessary.
The Leader of the House appeared to take both positions at once. At business questions on 19 November, she conceded that some of the proposals would require legislation. She then said that they could be introduced "next Session", but subsequently seemed to backtrack by suggesting that no legislative changes were necessary
"because the power in question already exists under the Parliamentary Standards Act 2009."-[ Official Report, 19 November 2009; Vol. 501, c. 136.]
As we have said throughout, it must be right for us to do everything in our power to ensure that the next Parliament can start with a clean sheet. While the Government still have a monopoly on the House's time, it is up to them to ensure that we get through all the reforms that are needed to allow the next generation of Members of Parliament to do their jobs, without being associated with the bad practice that has left the current Parliament so badly discredited.
The amendments deal with the concerns that Kelly raises in his report about the remit and structure of IPSA. As he says, the new regulator "bears the scars" of the haste with which the Parliamentary Standards Bill was expedited through Parliament last summer. Many voices in both Houses urged caution at the time. Although we agreed with the Government on the need to demonstrate our commitment to urgent reform, it was inevitable-as my hon. Friend the Member for Rutland and Melton (Alan Duncan) said at the time-that we would need to revisit the Bill at a future date.
Given that Parliament spent a great deal of time last July trying to sort out some of the constitutionally challenging aspects of the Bill-particularly those to do with privilege-it is right that we return now to look more closely at the role and responsibilities of IPSA.
Much of what is before us has our unconditional support. We agree that the sanctions regime should be toughened, as it is in new clause 74, which would give IPSA the power-which the House exercised a few moments ago-to dock money from the resettlement grant for serious breaches of the allowances regime.
We wholeheartedly endorse the move to give IPSA responsibility for determining and administering our pay and pensions, for which we have consistently called, to ensure that MPs no longer have a hand in our own remuneration. We should note that, despite a newspaper article last week, asserting that colleagues could be awarded a backdated pay increase by IPSA, that is not possible under new clause 73, which states in proposed new section 4A(5) to the Parliamentary Standards Act 2009 that a salary determination
"other than the first determination"
We accept new clause 76, which will return to the House responsibility for maintaining the Register of Members' Financial Interests and the code of conduct. As we warned at the time, giving IPSA responsibility for those matters could result in privilege disputes, which would be an unwelcome distraction from IPSA's main tasks.
We support new clause 71, which appoints lay members to the Speaker's Committee for IPSA, which is an example of good practice. Their input to the Committee's deliberations will be helpful to broaden the base of experience and viewpoint.
"efficient, cost-effective and transparent"
A number of colleagues raised legitimate concerns about IPSA's running costs during the debates last summer. Sir Ian Kennedy's consultation document gives us an idea of how IPSA will operate, including on pre-scrutiny and permission giving, scrutiny of claims, appeals, post-claim audits, regular audits of staff working practices and office set-ups, and administration of a loan scheme for MPs, to which we will today add responsibility for paying and setting MPs' salaries, and administration of pensions. IPSA will also run a very substantial property empire if the proposals for renting accommodation for MPs go ahead.
In short, the processes being developed in IPSA are extremely wide ranging and likely to require a large staff to implement. We need to ensure a proper balance between the necessary checks and scrutiny of claims and value for money for the taxpayer. The Government have so far not provided costings for the likely extra administrative impacts that the proposals will have on IPSA. A money resolution was made earlier, but no figures were attached to it. Will the Secretary of State give an estimate of the additional costs of the proposals before the Committee?
We have no concerns about new clause 81, which repeals the sunset provisions originally included in the Parliamentary Standards Act 2009. They were originally included because of the extraordinary haste with which we dealt with that measure, but the opportunity to return to the matter now, afforded to us by Kelly, allows us to put those concerns to rest.
I welcome those measures, but I shall now turn to the Government proposals that merit further attention, and it would be useful if the Secretary of State responded to some of the points I am about to make. New clause 70 and new schedule 6 introduce the most radical departure from the 2009 Act by scrapping the external Commissioner for Parliamentary Investigations and replacing him with an internal compliance officer. That relates to recommendation 44 in the Kelly report.
The Committee on Standards in Public Life was concerned about the confusion that would be caused by having a Parliamentary Commissioner for Investigations examining financial wrongdoings, and the Parliamentary Commissioner for Standards looking at cases in which Members have, for example, breached the code of conduct, unless that breach related wholly to expenses or the rules on financial interests. Of course, the Committee has a point. However, does new clause 79 create an equal source of duplication? That was mentioned in earlier exchanges. Proposed new section 10A(3) of the 2009 Act states:
"Nothing in section 9 to 9B (or Schedule 4) affects the disciplinary powers of the House of Commons."
I think I understand what the Government are aiming at, but the proposal means that Members who breach the rules can be submitted to the disciplinary processes of the House, including possible suspension, and then be liable to be turned over by IPSA for the same offence. That strikes me as double jeopardy, and I wonder whether the Government think that desirable.
On top of that, we have IPSA's compliance and enforcement regime, which, as envisaged by the proposals, raises some rather profound issues. Under schedule 2 to the 2009 Act, the commissioner for investigations was to be appointed by Her Majesty, with the terms and conditions to be determined by Mr. Speaker. However, under new schedule 6, the compliance officer, as the Secretary of State said, will be appointed by IPSA, with terms and conditions to be determined by IPSA. Indeed, proposed new schedule 2(9) to the 2009 Act will allow IPSA staff to double-job with the role of the compliance officer for up to six months if there is a vacancy.
Before, we had a proper firewall between the investigator and the day-to-day administration of IPSA, but that has now gone. This is important because, in my experience of cases in which Members have been accused of a financial misdemeanour, sometimes the source of the
error can be traced to misdirected advice from the Fees Office, as the Secretary of State mentioned. Two recent Standards and Privileges reports underline this. In one, the Parliamentary Commissioner for Standards notes that the Department of Resources was forced to conclude that "in retrospect" advice given to one Member was "flawed" and that the Member
"cannot be blamed for taking the advice he was given"
"the House authorities' failure to act on the deadline they had themselves set for"
"to bring his second home arrangements within the revised rules was equally serious and that it allowed a highly unsatisfactory state of affairs to continue for far too long. This failure does not absolve"
"of his responsibilities, but it is something that causes us great concern".
The Government may be proceeding on the basis that IPSA will so efficiently administer the new regime that such misunderstandings will not recur. I think that that would be a heroic assumption. In the provisions on "Investigations", in new clause 77, in proposed new section (9)(6), we see that, in the event of an investigation, the compliance officer will be asked to prepare a statement of his original findings which may include
"findings about the role of the IPSA in the matters under investigation".
As the Bill is drafted, the compliance officer will therefore be asked to pass judgment on either the rules or the people within the organisation by which he is employed. Moreover, proposed new section (9A)(1) states:
"IPSA must determine procedures to be followed by the Compliance Officer in relation to investigations".
However, that would begin to compromise the independence of the current system. At present, the Parliamentary Commissioner for Standards follows his own rules, rather than those provided by the House, but under the Bill we would have a compliance officer appointed, employed and thus constrained by IPSA. That is exactly what the Commissioner for Standards warned against in evidence to Kelly.
The committee dismissed the concerns by citing the satisfactory working of "similar compliance roles" in HMRC. That is not the best comparison. In HMRC, the adjudicator works as a referee holding HMRC to account on behalf of its customers-the taxpayers. That is the normal role of a compliance officer in the financial services industry. But this is not what we are asking of this compliance officer, who would be holding the customers to account on behalf of the regulator, even in situations where the regulator itself had erred.
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