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Lord Jenkin of Roding moved Amendment No. 2:
- Page 2, line 34, leave out from "Where" to end of line 39 and insert "there are executive members in addition to the chief executive, the total number of executive members shall not be greater than three"
The noble Lord said: I added my name at the last moment to Amendments Nos. 2 and 3, which are taken together, and I will start by offering the apologies of my noble friend Lord Dixon-Smith, who had hoped to be here to speak to the amendments himself. Sadly, he is not well, and he asked me to move these in his place.
They can be dealt with quite briefly. The subsections in Clause 2 which refer to the setting up and the constitution of the NDA are, for the most part, perfectly reasonable and straightforward, until we come to the question of the relationship between the executive directors and the non-executive directors. I shall have occasion during the debates on the Bill to refer back to the House of Lords Select Committee, five years ago, on which I had the honour to serve, and from which an astonishing amount has been carried forward, even though it seems to have taken an incorrigibly long time.
One of the things that we recognised then, in recommending that there should be a commission to take this forward, was that the commission should have among its directors a wide range of skills and experience to serve. Although we did not attempt to make any suggestions as between executive and non-executive directors, it was implicit in our recommendations that the majority of the directors of the commission—which had a different name from this but was the same sort of animal—would have been non-executive directors. That was on the grounds that that is what such an operation calls for.
I entirely agree that it would be inappropriate that we should try to constrain the NDA according to "Higgs principles". That would not be right. At the same time, I also agree that there should be a majority of non-executive directors. However, the Bill goes further and attempts first of all to impose surprising limits on the constitution of the board.
The point of Amendment No. 2 is that the Bill gives the Government a wholly unnecessary power to make various changes. If ever there was a question of wanting to set up something that would have statutory authority from the beginning, it should be in the Bill. Subsection (7) says that the Secretary of State may make a direction to the NDA, and that,
- "the number of the executive members in addition to the chief executive—
- (a) is not less than the minimum set by the direction; and
- (b) does not exclude the maximum so set;
- and the direction must not set a maximum of more than three".
- "there are executive members in addition to the chief executive, the total number of executive members shall not be greater than three".
The Committee may have a little difficulty finding Schedule 1; it is on page 130. It provides for quorums and states what will constitute a majority. It will require there to be a majority of the non-executive directors, which I support, but, again, it is a convoluted provision. The whole thing could be much simpler if, after "unless", we inserted the words:
- "it is taken by a simple majority of the membership".
Let me say at once that I support that provision. Having chaired a company and sat on a board with a large number of executive directors. I am well aware of the danger of the executives, who, after all, spend their entire career and whole life doing such work, having an influence that it is difficult for non-executive directors to override. So I do not quarrel with the intention; I merely suggest that it could be more simply expressed and that the wording of Amendments Nos. 2 and 3 would achieve that.
I hope that my noble friend Lord Dixon-Smith, who has experience in these matters, would have made much the same speech. I beg to move.
3.45 p.m.
Baroness Miller of Hendon: The words in the schedule are somewhat complicated, and I thank my noble friend for trying to make it simple, using the words tabled by my noble friend Lord Dixon-Smith who, regrettably, is in hospital today and cannot be with us.
Obviously, we do not vote in Grand Committee—we know the rules—and it is always difficult at the beginning of the Bill for a Minister to accept what we say, but it would be so easy for him to accept the amendment, which is simple and only makes this convoluted provision somewhat easier to understand. I hope that he will. I recall from the days when I was involved in marketing that I was taught this silly phrase, which we used to have to write on the board: KISS, which stands for "Keep it simple, stupid". The amendment is one of the easiest ways for us to improve the Bill in a simple way that in no way affects its meaning.
Lord Ezra: I support the amendment moved by the noble Lord, Lord Jenkin, for the reasons stated by the noble Baroness, Lady Miller. This paragraph is a convoluted way of saying, "Whatever path you take, you end up with three". We ought to stipulate three from the outset and be done with it. There is enough that is complicated in the Bill without complicating the simple issue of whether there are one, two or three executive members.
Baroness Carnegy of Lour: It is interesting that it is proposed that, before appointing the chairman and non-executive members, the Secretary of State—presumably, the Secretary of State for Trade and Industry—must consult Scottish Ministers. He must also do so before proposing the appointment of the
chief executive. But there is no requirement, so far as I can see, for anyone to consult Scottish Ministers on the appointment of executive members. Why is that?That matters because the Government have clearly recognised the crucial importance for Scotland of the body and of its ability to work closely with Scottish local authorities and the Scottish Parliament, remembering that planning and environment are devolved matters. The Government have taken account of that; they have taken much account of Scottish matters in the Bill. I commend them for that. The working between the two Parliaments is evolving well. The Bill refers to Scottish Ministers—which probably means the Minister responsible for the environment, although it may be the First Minister. The Scottish Executive must be happy that there is a balance which includes people who understand the circumstances of Scotland. That will give the people of Scotland confidence that the body, when operating in a non-devolved matter, understands the Scottish situation. It would be interesting if the Minister could give a reason for that. There may be a very good one. I do not know.
Baroness O'Cathain: I support the amendments, particularly the first one. As has been pointed out, the clause uses crazy language and is very convoluted. The second amendment is particularly important.
I have studied the text on page 130. It could give rise to a situation where several of the non-executive members of the NDA were abroad, ill, involved in traffic jams and so on and were not at a meeting. That would mean that the majority at the meeting could well turn out to be executive members. That would support the point made by my noble friend Lord Jenkin that the executive members would have to be calmed down a bit, although that is probably not the right word.
The problem is that sometimes there are strains between the non-executive directors and executive directors, and if there is a majority of non-executive directors, it should obviously be the non-executive directors who sway the decision. If it happened that for some reason two or three were missing, it could well be the other way round. So I commend Amendment No. 3.
Lord Davies of Oldham: I am grateful for the way in which the amendments have been moved. I express our wishes that the noble Lord, Lord Dixon-Smith, will soon be back with us to help in our deliberations on the Bill.
In producing what has been referred to as a convoluted section of the clause, the Government are concerned that the NDA should be constituted in a way that is fit for purpose throughout its life, which is expected to be many decades. So there is a case for flexibility, given the perspective that it could last for a long time.
On the issue of membership, the Committee will recognise that the key principle we wish to establish—which is set out in Clause 2(8)—is that the non-executives will at all times be in the majority. That will enable the non-executive members effectively to challenge the executive management team and ensure that the NDA becomes a champion of openness and transparency.
Within that framework, we consider that flexibility on the number of executive members is sensible. While we may all agree that three executive members ought to be the norm, in the early years the NDA will face a substantial challenge in establishing itself, and the systems and processes need to be in place for it to carry out its functions effectively. Our view is that, in those circumstances, there could be a case for four executive members to deal with the full range of responsibilities of the NDA at board level in the early period.
Over the longer term, the need for a large executive presence on the board may indeed be expected to decline. But while we want to leave individual appointments of executive members to the non-executives as a matter of the good use of public funds, it is entirely proper that the Secretary of State should retain an ability to determine the overall size of the board within the limits set out in subsection (1).
I should say to the noble Baroness, Lady Carnegy, with regard to consultation that the non-executives will make these decisions on the board, not the Secretary of State. We have got proper consultation with Scottish Ministers when the Secretary of State is setting up the board, but the executive will be chosen by the non-executive members. It would not therefore be appropriate to write into the Bill a necessity for consultation with Scottish Ministers because the UK Minister will not at that point be directly involved in the choice of executive members.
As to the question of the NDA's procedures, we have limited the statutory requirements to the minimum with the focus on ensuring that non-executives are able to control the strategic direction of the NDA, which I believe is the burden of the remarks of all noble Lords who spoke on the point. Provisions with regard to the NDA's rules of procedure are to be found in Schedule 1, a matter to which the noble Lord, Lord Jenkins, referred.
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