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Lord Sharman: I support the general principle behind these amendments. When he spoke earlier, the Minister dismissed the parallels between this Bill and the Financial Services and Markets Act 2000 when it was being considered in this House—the legislation that created the Financial Services Authority. Essentially, we are dealing with the whole issue of corporate governance and accountability. It is the division of responsibility as between an executive authority and those who will govern or supervise it.
When creating bodies that are quangos with enormous power, it seems to me to be eminently sensible for the Government to follow the best principles of corporate governance, which is what
these amendments seek to do. The position of chairman and that of chief executive should be separate; there is no rationale for combining them. There should be a sensible division of those responsibilities. I support the amendments.
Lord Hunt of Wirral: The noble Lord, Lord Graham, should be congratulated on tabling some very relevant amendments. I thank my noble friend Lord Hodgson for adding some important points as regards the number of board members involved. As the noble Lord, Lord Sharman, has just pointed out, there is something of an anomaly in the Minister's refusal to acknowledge that there is any precedent in the Financial Services and Markets Act. Indeed, in a rather challenging statement the noble Lord virtually accused my noble friend Lord Kingsland of being a Little Englander—"a throwback to the world of national champions" and Japanese industrialists. In fact, all my noble friend was doing was quoting from the Minister's own Act; namely, the Financial Services and Markets Act 2000.
We are moving to yet another important area that I suppose in many ways lies behind a large part of this Bill. There is a paradox here. At present, everyone refers to the OFT, the Office of Fair Trading; but, in fact, there is no such organisation. There is only a Director-General of Fair Trading. The Government now seek to establish the OFT, which everyone thought was already established—but was not—and to abolish the post of Director-General of Fair Trading. We shall deal shortly with amendments in respect of which I shall be asking the Minister to justify that move.
As regards the setting up of the OFT, the noble Lord, Lord Graham, is quite right to advise us to perhaps draw back and review exactly what we are seeking to establish under the Bill. This is an excellent opportunity to do so. There is a confusion in the mind of the Government regarding the chairman, the chief executive and the director-general. That confusion came to light during the debate in Standing Committee B in another place on 16th April. No doubt Members of the Committee have spent some time reading carefully the Official Report of such debates. When discussing the Office of Fair Trading, Miss Melanie Johnson said that the Director-General of Fair Trading,
- "currently has a wide range of functions in the areas of competition and consumer protection, many of which are being reformed in the Bill. The Government believe that in the light of the reforms, it is no longer appropriate for all those powers to be vested in one individual".—[Official Report, Commons, Standing Committee B, 16/4/02; col. 12.]
The noble Lord, Lord Sharman, is quite right. No doubt we shall return to the issue a little later in our debates—the issue of vesting all the powers in the chairman and the chief executive and of both those positions being taken by one individual. This emphasises the importance of the points being made by my noble friend Lord Hodgson and by the noble Lord, Lord Graham of Edmonton. We should examine what kind of people will be serving on the board.
Some later amendments seek to ensure that there will be on the board people who are active in industry and commerce, but the amendments now before the Committee give us an opportunity to consider whether members of the board should be employees of the OFT. Presumably, the chief executive would be an employee of the OFT. Some confusion arises, which I hope the Minister will put right.
Then we turn to numbers. With all the powers vested in one person—the chairman and chief executive—it is essential that there be some strong directors. But we are told that if we wish to apply for the position, we will need to commit only a minimum of 30 days out of a total of 365. So that is not 30 days a month, as I suspect the present director general would say he works; it is a minimum of 30 days a year.
What do applicants need to qualify? They need a strong record at senior level in their own field. There is nothing in the advertisement about independence; nothing about being employees. I am happy to join with the noble Lord, Lord Graham, in requesting an explanation of those matters.
How many board members are there to be? The initial view was that there would be four or five. That was contained in the original press release. But then Melanie Johnson—helpful, as she always is—said in Standing Committee B,
- "We are looking at five to seven members".—[Official Report, Commons, Standing Committee B, col. 19.]
We shall discuss in a moment what parts of the economy the board members are to be drawn from. But the only response to the suggestion that the powers must not be vested in one individual is, "We will have five to seven and they need only sit 30 days a year". That is not adequate. I look forward to the Minister's response.
Lord Borrie: I am glad I was able to assist the noble Lord, Lord Hunt of Wirral, by pointing to the advertisement in the Sunday Times. That revealed a number of things, including the fact that the present
Director General of Fair Trading—not myself; I have not held that role for 10 years—Mr John Vickers, is expected to be the chairman and chief executive.I want to make two points in relation to my noble friend's amendment. First, unlike some Members of the Committee—for example, the noble Lord, Lord Sharman—I do not see any necessary play across from corporate governance and how a specific governmental authority should be run. Therefore I do not automatically see that, in relation to the Office of Fair Trading, the chairman and chief executive should be two separate persons. I remind those Members of the Committee on the Opposition Front Bench who are so fond of the Financial Services Authority that Sir Howard Davies is both chairman and chief executive of that body, although the noble Lord, Lord Kingsland, will remember, as I do, how much disputed that was at the time the Bill went through.
Lord Kingsland: The noble Lord will recall that these Benches fought extremely hard to try to ensure that the position of chairman and director general of the Financial Services Authority were separately held. It was a battle which, in the end, we lost.
Lord Borrie: That is absolutely correct.
Lord Sharman: I draw the noble Lord's attention to the annual report of the Financial Services Authority in which it justifies the combining of the titles of chairman and chief executive by reference to the fact that executive responsibility is divided among other members of the board, including members who are "managing directors". It concludes, as verified by the independent auditors of that body, that they are in compliance with the Cadbury code which recommends the division of those separate responsibilities.
Lord Borrie: I am grateful to the noble Lord, Lord Sharman. I persist with my original point that I do not necessarily see any write-across from corporate governance in the private field of companies to how a governmental authority should be run.
My other point on Amendment No. 2 is that, as I see it, it is not intended that Mr Vickers should be an employee of the OFT or that the members of the new body will be employees. As the schedule indicates at various points, they will be appointed on a certain salary for a certain period of time and will clearly be different from and unlike the employees of the OFT who would normally be full-time members of the Civil Service. That has been the case since the Office of Fair Trading was set up in 1973. All members of staff were civil servants except the Director General of Fair Trading whose special provisions, closely followed in Schedule 1, meant that dismissal could only occur on grounds of incapacity or misbehaviour and that the occupant of the post had a five-year contract which, indeed, is being continued.
Therefore the intention is already established that the chairman should be independent and should not be an employee. As for the numbers, I do not have a view. I shall be just as interested as other Members of the Committee in what the Minister has to say.
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