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Lord Borrie: In commenting on Amendment No. 1 I should repeat the declaration of interest that I made at Second Reading; namely, I am a non-executive member of the Management Board of the Office of Gas and Electricity Markets, commonly known as Ofgem. It is particularly appropriate to mention that interest in relation to this amendment. Ofgem is intended as a model for the new authority that is to be set up under the Bill. It may assist the Committee if I say that the Management Board of Ofgem was intended to consist of a total of 10 members: five executives and five non-executives (including myself). However, one of the non-executive members has resigned, so that currently the total is nine. The noble Baroness who moved the amendment will note that that number is rather higher than the maximum of five which she proposes.
I believe that informed opinion has moved on from the government statements during consultation to which the noble Baroness referred and that it is generally accepted as desirable that the authority, rather like Ofgem at the moment, should consist of both executives and a sprinkling of non-executives. If one has not only the chief executive but perhaps one, two or three (without specifying a precise number) of his key lieutenants and one adds a sprinkling of two or three non-executives, bearing in mind that sometimes there is illness or non-attendances for some reason and a quorum may be required, to place a maximum of five in the statute will unduly hobble the desirable composition of the authority.
One does not suggest that nine or 10 is the ideal; one can think of other figures. However, it is much better to have a minimum rather than a specified maximum as the Bill stands at the moment.
Baroness Buscombe: Does the noble Lord disagree with the Government in this matter? The Government have said that,
- "in light of detailed consideration ... small executive boards of three full-time members should provide the most effective regulatory model for all the sectors",
Lord Borrie: I believe that the authority should consist of a mix of executives and non-executives. I
note that the Minister nods. The noble Baroness is a little out of step with current thinking on these matters. My experience in both the public and private sector, bearing in mind all the committees that have debated this subject in relation to the private sector--Cadbury, Greenbury, Turnbull and the rest--is that it is widely understood that non-executives with their greater responsibilities in the private sector, very properly, are usefully replicated in this sphere of the public sector. To confine the total membership to only five would inhibit, if not make practically impossible, the desirable mix that I have suggested. I ask the Committee to reject Amendment No. 1.
Lord Ezra: I support the comments of the noble Lord, Lord Borrie, based on my experience in a publicly-owned enterprise. For many years I served on the National Coal Board. It was very important that that board should have a mixture of executives and a sprinkling of non-executive personalities from other walks of life who could add to the knowledge and understanding of the many problems which it then had to face. I should have thought that it is going too far to limit the total membership of the new authority to five. That would limit very much the number of executives and non-executives on the board. Therefore, I feel great sympathy for the views expressed by the noble Lord, Lord Borrie.
3.30 p.m.
Lord Peyton of Yeovil: I should like to make a modest point in relation to the rather odd notion that the chairman of the House of Commons Select Committee on Trade and Industry should be asked to confirm, or be consulted about, appointments. I wonder where my noble friend Lady Buscombe got that idea from. I believe that I heard her refer to the chairman of the Treasury Committee. I imagine that she meant the chairman of the House of Commons Treasury Select Committee. In that case, she was sheltering behind what I believe to be a rather bad precedent. I have great misgivings about the notion of consulting whoever may be from time to time the chairman of a House of Commons Select Committee. I should be grateful if my noble friend would tell me whether I have misunderstood the point.
Baroness Buscombe: My noble friend has not misunderstood. That is what we are asking for.
Lord Peyton of Yeovil: I believed that that was so. However, I still find it an astonishing proposal and it is not one that I should be persuaded easily to support. I hope very much that my noble friends will think again before they elevate an unknown chairman. I am sure that the present chairman is a most admirable man or woman; I have no idea who he or she is. However, I should certainly not wish to confer powers, privileges or rights upon such an unknown person in the future.
Lord McIntosh of Haringey: I am most grateful to the noble Baroness, Lady Buscombe, for reminding us
of the genesis of the proposals in the Bill. She quoted correctly and is quite right in saying that we are looking to have a small cadre of high quality professional regulators. Indeed, that is what we have under the chairmanship of Callum McCarthy. The authority has three executive directors, John Neilson, Dr Eileen Marshall and Richard Morse, who are all Ofgem employees.However, my noble friend Lord Borrie is also right in saying that the amendment does not refer separately either to executive or non-executive directors; it refers to all directors. The result is that the noble Baroness's amendment would squeeze the number of non-executive directors to not more than two. That seems to me, as it does to my noble friend Lord Borrie, a thoroughly bad idea which is in conflict with the principles of corporate governance developed over the years with the assistance of the Cadbury and Hampel committees. Indeed, it is in great conflict with current practice, as debated during the course of the Financial Services and Markets Bill, which is nearly an Act.
The effect of Amendment No. 1 would be to limit the size of the authority. That would deprive us of non-executive members, who play an important role in ensuring that the authority has a wide range of skills, perspectives and experience upon which to draw. For example, one member may be appointed because of a particular knowledge of the issues surrounding fuel poverty; another may be appointed as an expert in economic analysis, competition matters or related businesses. They would have a role in de-personalising regulatory decision-making, which is a key government objective in replacing individual regulators with a regulatory authority.
That is why in relation to the authority we have adopted similar principles to the recommendations of Cadbury and Hampel and, indeed, what I believe is now generally accepted as best practice in business. Currently we do not envisage a membership of more than nine, as it is at present. However, the membership may need to increase; for example, for changeover periods between the appointment of a new member and the stepping down of an old one, or we may need to draw on particular skills or expertise that would call for the appointment of a supernumerary member of the authority.
After a great deal of thought, we have drafted the Bill in a way that affords flexibility regarding the size and composition of the authority, its overall numbers, the proportion of executive and non-executive members and whether they work full or part-time. We do not believe that it would be right to write a statutory maximum into the Bill.
Amendment No. 4 would restrict the flexibility of the Secretary of State by requiring him to publish criteria to be used for appointments to the authority. It would require him not only to publish criteria but to publish them only once; that is, prior to the coming into force of this paragraph. Of course, it is right that he should publish criteria. It is entirely possible that the criteria may change over time; for example, as progress towards competition in the gas and electricity
industries advances, it is possible that the mix of skills required in the authority will change over time. Amendment No. 4 would simply make that impossible.Amendments Nos. 2, 3, 5 and 7 require the appointments to be subject to prior consultation with the Trade and Industry Select Committee in the House of Commons. I believe that both the noble Lord, Lord Peyton, and the noble Baroness, Lady Buscombe, were wrong about the amendments. They have nothing to do with the chairman of the Trade and Industry Committee; they concern the committee itself. That is an interesting suggestion which has been made on many occasions. Personally, as a supporter of the legislature against the executive as a matter of political theory, I am rather in favour of it. However, one does not make a change of that kind in a Bill such as this without thinking very carefully about it.
Two years ago I was responsible for piloting the Bank of England Bill through the House of Lords. At that time, there were suggestions that appointments to the Monetary Policy Committee should be subject to confirmation by the Treasury Select Committee. The noble Baroness, Lady Buscombe, seems to believe that that is the case, but it is not. The appointments are made by the Chancellor of the Exchequer and it is entirely within the powers of the Treasury Select Committee to invite those who are proposed for nomination to the Monetary Policy Committee to appear before the Treasury Select Committee. Indeed, it does so. Within only the past couple of weeks it called Charles Allsop before it and suggested that he should not be made a member of the Monetary Policy Committee. Having listened carefully to their views, the Chancellor went away and did something else; in other words, he did appoint him to the committee.
Therefore, the Treasury Select Committee does not have power over the membership of the Monetary Policy Committee. No committee in another place has powers over public appointments of that kind. The noble Lord, Lord Peyton, believes that it is a very bad idea. I believe that, if it were properly thought through, it may be quite a good idea. However, it is certainly not appropriate to introduce it in this Bill at this time.
Amendment No. 14 would require both the authority and the consumer council to send copies of their draft forward work programmes to the Trade and Industry Select Committee. However, those bodies are already--or will be under the Bill--under a statutory obligation to publish their forward work programmes in such a manner as to bring them to the attention of persons likely to be affected by them and to consider any representation made in respect of the draft forward work programmes.
That will ensure that the information is in the public domain; it will provide an opportunity for alternative suggestions to be made, and allow for improvements before the final programmes are published. Surely there is plenty of transparency in those arrangements.
As for parliamentary scrutiny, the authority, the GECC and the Secretary of State can all be called to account before the parliamentary committees; not just
the Trade and Industry Committee, which is named in the amendment, but also the Environmental Audit, the Social Security and the Public Accounts Select Committees. They all have interests.Parliamentary scrutiny is addressed in the Green Paper, A Fair Deal for Consumers, which the noble Baroness, Lady Buscombe, quoted. It was asked whether a new Select Committee to scrutinise utility regulation was required. There was not much support for that, so we responded that the current arrangements for parliamentary scrutiny were adequate, but that Parliament might wish to take further steps to ensure effective co-ordination between the existing committees when it addressed the utilities issue.
I turn finally and briefly to Amendment No. 6, which would require Treasury approval for the number and the terms and conditions of service of authority staff. We have consulted the Treasury about its involvement. It used to be standard practice to write into legislation requirements for Treasury approval, but that is no longer the case. The Treasury is content to be consulted by the Secretary of State administratively and we are therefore satisfied that sound administration will result in it being consulted about pay scales and the associated terms and conditions of service of authority staff.
For those various reasons, we are not sympathetic to any of the amendments.
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