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Lord Roberts of Conwy: My Lords, could the noble Lord tell us just how much of the growth increases in the first and second quarters was attributable to the new method of calculation? In other words, could we have both sets of figures?

Secondly, does the noble Lord agree that the Government should redouble their efforts to reduce bureaucratic costs in the public sector because they are taking far too much of the government increase in spending on public services?

Lord McIntosh of Haringey: My Lords, the components of the increase are much more complex than I can explain in the course of a Starred Question. But if I can send anything to the noble Lord, Lord Roberts, I will certainly do so.

On the noble Lord's second point, I am afraid that the so-called public sector inflation is a phoney figure—it cannot be given any more dignity than that. The Government consumption deflator is the ratio of current price government consumption to constant price government consumption, and it does not mean anything—it often works in the opposite direction. For example, if you take the ratio of inmates in custody to gaol officers, the measurement is prisoner nights in custody. You could, of course, increase so-called public sector inflation by increasing the number of prisoners per gaoler, but I suggest that the noble Lord, Lord Roberts, and the House would not think that desirable.

Lord Newby: My Lords, will the Minister accept that the real problem with public finances is that even if the Government reach their growth target, current projections are that income from taxation will be some #10 billion less than the Government projected because their projections were based on a wholly exceptional period during which City bonuses meant that any increase in growth led to a higher than usual level of tax revenues? Therefore, even if the Government hit their growth target, they will be faced with substantially larger borrowing requirements than they set out at the time of the Budget.

Lord McIntosh of Haringey: My Lords, I was happy to answer the question of the noble Lord, Lord Roberts,

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because it was a factual question about figures which have been published. The noble Lord, Lord Newby, knows perfectly well that I do not speculate on these figures in between—indeed, I do not speculate on them at all. The Government do not give a running commentary on macro-economic statistics. We will do that in the Budget Report and the Pre-Budget Report later this year.

Postal Workers: Industrial Action in London

3.19 p.m.

Baroness Miller of Hendon asked Her Majesty's Government:

    Whether they will take action to avert a second strike by postal workers.

Lord Davies of Oldham: My Lords, no one will benefit from a further strike by postal workers in London. It will disrupt services to consumers and businesses who rely on Royal Mail's services. Resolution of the dispute is a matter for the management of Royal Mail and the Communication Workers Union.

Baroness Miller of Hendon: My Lords, I thank the Minister for his reply although I suspect that it might cause problems for people who live in London and for businesses who were hoping for something a little more positive. Will the Minister confirm that in the national postal ballot postal workers turned down the idea of a strike, but that in a sense there was a different ballot of London postal workers who thought otherwise? Is there anything that the Government can do when faced with such a situation? Why are Her Majesty's Government spending so much time trying to force through legislation regarding the fire-fighters when the post is in such a mess? The post is, after all, a public service for people who live in our capital city.

Lord Davies of Oldham: My Lords, noble Lords will recognise that the fire service is an emergency service and that it is very different from the postal service. The legislation that we are taking through the House seeks to encourage the development of proper industrial relations in the fire service. Of course I recognise that the decision by the Communication Workers Union to strike over the London allowance will cause some disruption to the service although the impact of the first day of the dispute which occurred last week was not as extensive as some might have feared. As I am sure the noble Baroness knows, there was a vote against a national strike, but London postal workers voted in favour of strike action regarding the London allowance.

Lord Clarke of Hampstead: My Lords, I declare my interest as a former postman and a current member of the Communication Workers Union. Is my noble friend aware that the postal workers' dispute over

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London weighting is not just about a sum of money but rather the outdated boundaries that apply to inner and outer London vis-a-vis national pay rates? Is my noble friend aware that both parties believe that the time has come for a review? The CWU in particular wants to find a formula to avoid disputes arising in the future.

I say to the noble Baroness, Lady Miller of Hendon, who tabled the Question, that the postal worker who delivers her mail will receive as a London allowance in the outer London area the princely sum of #39 a week. Will my noble friend the Minister consider for a moment other allowances a little nearer to home and compare them with the #39 these people receive for getting up at the crack of dawn six days a week? It is not good enough for the Government to stand back and say that it is a matter between the two parties. The only shareholder in Royal Mail and the Post Office is the Government. When the Postal Services Act went through this House it was made clear that the Government would remain—I say this in parenthesis at the moment—the sole shareholder. Does my noble friend agree that rather than washing his hands of this debate he would do well to get on the phone and tell the two sides—one of which today repeated its willingness to meet the employers—to get some sense into the situation?

Lord Davies of Oldham: My Lords, I recognise my noble friend's deep interest in and long experience of the industry. Of course I recognise that the dispute is about more than just the London allowance but we expect that to be the subject of proper negotiation between management and the unions. After all, both management and the unions supported and, in fact, asked for, the Post Office to be a commercial operation from which the Government would stand back. That is exactly what we propose to do.

The national issues have gone a long way towards being resolved. I believe my noble friend will recognise that there has been an improvement in industrial relations in the Post Office in recent years, not least through the efforts and constructive work of my noble friend Lord Sawyer. I say in the spirit of the final point that my noble friend Lord Clarke made that it is for management and unions to meet together to resolve the issue.

Lord Newby: My Lords, are there any circumstances in which, should strikes continue in London, the Secretary of State might use the reserve powers in legislation to provide alternative methods for the delivery of the post in London?

Lord Davies of Oldham: My Lords, the Secretary of State has reserve powers to suspend the monopoly of Royal Mail in circumstances of dire emergency, but we are nowhere near that stage yet and I am confident that we shall not remotely approach it. However, it is necessary for the two sides to resolve the outstanding issues.

Lord Clinton-Davis: My Lords, does my noble friend understand that this is a time when heads should be

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banged together? It is vitally important for the Government to ensure that the management and the unions talk because talk between now and the threatened strike is absolutely vital.

Lord Davies of Oldham: My Lords, I agree with the point that my noble friend made. I am sure that the whole House agrees that the potential disruption to the very vital service which the Post Office provides would be a massive inconvenience to all people in London. Of course, the impact would be felt beyond the capital city. My noble friend is absolutely right to say that it is very important that the two sides get together to discuss the issue as rapidly as possible.

Lord Swinfen: My Lords, does the Minister agree that short questions and short answers, like short letters, are much to be desired and much easier to deliver?

Lord Davies of Oldham: Yes, my Lords.

Health and Social Care (Community Health and Standards) Bill

3.26 p.m.

House again in Committee on Schedule 1.

Baroness Noakes moved Amendment No. 41:

    Page 110, line 8, leave out "corporation" and insert "board of governors"

The noble Baroness said: I rise to move Amendment No. 41 and also speak to Amendments Nos. 42 and 49. These amendments touch upon the position of the chairman of the board of governors and the overlap between the two boards. There are some complex issues here and I fear that I shall need several minutes of the Committee's time to explain them.

I start with the meatiest of the amendments, Amendment No. 41, which seeks to amend paragraph 11 of Schedule 1. Paragraph 11 currently refers to a person being a chairman of the public benefit corporation. My amendment would refer to the person being a chairman of the board of governors. I say in passing how refreshing it is to see that the word "chairman", rather than the politically correct nonsense of "chair", is used in this Bill.

Amendment No. 49 is in part a probing amendment. I do not understand how a corporation can have a chairman. Surely a person chairs a board or a committee or something like that. There seems to be a presumption in Schedule 1 that the chairman of the corporation automatically chairs the board of governors but I cannot see that that is actually specified. The powers of the corporation are exercisable by the board of directors—that is what paragraph 14 tells us—so I can see that if there is a chairman of the corporation he would expect to be chairman of the place where the powers are exercised: that is, the board of directors. However, I cannot see any natural presumption about the board of

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governors—which we discussed this morning—which has no defined powers, other than that of appointment, in this Bill.

The plot thickens when we look at the Government's guide to developing governance arrangements which was issued last month. It came as a complete surprise to me that section 2.1 stated that,

    "the board of governors and the board of directors will share the same Chair".

That has also come as a surprise to a number of people from the NHS to whom I have spoken. I do not understand how that can be read from the Bill. Furthermore, I believe that it is wrong in principle if the same person chairs the body that has the powers of the corporation and chairs the body that is supposed to advise the first body or, in some senses, sit in judgment on it. Their functions are supposed to be different, although we did not get to the bottom of that issue in our debate earlier. A single appointment would make the chairman both judge and jury or, worse, both prosecuting counsel and defence counsel.

That brings me to Amendment No. 49, which provides that a non-executive member of the board of directors may not be a member or the chairman of the board of governors. In our view, not only is it wrong to have a joint chairman, but there should be no overlap between the two. Paragraph 5.2 of the guide to developing governance arrangements states:

    "The Department of Health does not expect non-executive directors also to be governors".

However, as the guide notes, the legislation does not preclude that. Why on earth is that the case? Can the Minister give any circumstances in which it might be appropriate? Does he not agree that the independence of a non-executive director could be fatally flawed by his acting also as a governor?

The amendment is probing, as I do not believe that the Bill adequately reflects a proper and balanced approach to governance. Amendments Nos. 41 and 49 would go part of the way to dealing with the issues, but the Bill almost certainly needs much more extensive changes if it is to make sense.

Amendment No. 42 is not probing but designed to fill a lacuna in the Bill. Paragraph 13 of Schedule 1 lists all the factors for which the constitution must make provision. The glaring omission is that it says nothing about the election of the chairman of the board of governors. Paragraph 16 states:

    "It is for the board of governors at a general meeting to appoint or remove the chairman",

but that clearly refers to the chairman of the board of directors, not of the board of governors. The Minister may well say that they are the same person, but it is nonsense to say that a board of governors chaired by Mr " can appoint him to be chairman of the board of directors, and that that automatically makes him chairman of the board of governors. It is not merely nonsense, but circular nonsense.

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Amendment No. 42 will ensure that a foundation trust has proper procedures for the election of the chairman of the board of governors. That will ensure that a properly constituted board of governors exists with its own chairman.

I hope that the Minister will also shed some light on how the processes will ensure that an appropriate, skilled and experienced chairman of the board of governors will be chosen. The Minister in another place said on 15th May in Committee that:

    "Applications for NHS foundation trust status must include constitutions that contain a process to ensure that appointees are suitable, appropriately qualified and vetted".—[Official Report, Commons Standing Committee E, 15/5/03; col. 176.]

Will the Minister show me where in Schedule 1 or the rest of the Bill we can find a requirement for those processes? In particular, what power does the regulator have after the first board has been appointed? What will the processes contain? If we do not have clear processes, how can the regulator ensure that chairmen are appointed in an appropriate way? I have also searched the much-vaunted governance guide and found absolutely no guidance on that vital topic.

As we discussed this morning, the Government have not thought through the governance arrangements. They are illogical, confusing and incomplete. I shall listen carefully to what the Minister has to say, but I shall take a lot of convincing that the schedule does not need significant alteration. I beg to move.

3.30 p.m.

Lord Hunt of Kings Heath: I am glad that the noble Baroness has allowed us, once again, to debate governance and the relationship between the board of directors and the board of governors. However, I am concerned that if we were to accept the amendments, either now or if she returned to the matter on Report, we would have a totally different membership in terms of the non-execs on the board of directors from that on the board of governors, including the chair.

The noble Baroness does not share my view but she will know that I am concerned that there is potential for conflict in the construction that we now have, in which the board of governors is essentially an advisory council privileged to make comments on the running of the organisation but with no involvement whatever in its running. Anyone who has put themselves forward for election and been elected will believe themselves to have the legitimacy to make decisions—greater legitimacy, I would suggest, than appointed non-executives. That is what elections do to people—they make them feel legitimate.

If under the amendments one completely separates the board of directors, who are appointed, from the governors, a majority of whom are elected, instead of making the governance arrangements more straightforward one is setting up a conflict between the two. I would be grateful if the noble Baroness would comment on my worry.

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