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Lord Phillips of Sudbury: I hope that the Minister will tell us what precedents there are in respect of comparable offices for the length of appointment and for leaving some power to remove a senior official for misbehaviour. I shall await what he says on that before proffering any further thoughts.
[The Sitting was suspended for a Division in the House from 4.26 to 4.36 p.m.]
Lord Evans of Temple Guiting: We are delighted that the noble Lord, Lord Glentoran, welcomes the role and appointment of the regulator. The proposal was outlined in the consultation document of March last year. As my noble friend Lord Sainsbury of Turville said at Second Reading, the Government, having explored a number of alternatives, decided to create a new regulator. We have concluded and the public consultation has confirmed that a small independent regulator of CICs would be the most effective way of ensuring that CICs continued to operate for the public benefit and of building public confidence in that new type of company.
The Bill provides for the Secretary of State to appoint the regulator, and the appointment will, of course, be conducted in accordance with the code of practice for ministerial appointments to public bodies published by the Commissioner for Public Appointments. Perhaps I should declare an interest, in that I am on the panel of interviewers for the Commissioner for Public Appointments. I might find myself interviewing the new regulator. There are various issues related to the appointment, and I will come to them in a moment.
The provisions of subsection (2) are sufficient to ensure that the regulator will be appointed under the proper procedure. There are many precedents in legislation for the provision, including, quite recently, the independent regulator of NHS foundation trusts. Similar provision is made for the appointment of members of the Housing Corporation and the appointment of the Charity Commissioners.
For the avoidance of doubt, I should say that the regulator will be independent of government. The Secretary of State will have no power to direct the regulator on the performance of his functions, save as permitted or provided for in the Bill. It is for that reason, for instance, that subsection (5) of Clause 24 has to make express provision empowering the Secretary to State to require the regulator to issue guidance.
The fact that the code of practice on ministerial appointments will apply makes Amendment No. 107 redundant. The code provides that appointees should serve for no more than two terms of office, which must not exceed 10 years in total. The amendment would be incompatible with the code.
The noble Lord, Lord Phillips of Sudbury, asked about the period for such an appointment. The most common period is three years. However, a statutory requirement for a fixed period of office for a regulator may limit negotiations with candidates, with the result that the Government will not be able to recruit the best candidate. For instance, it may reduce the scope for flexibility in appointing an appropriate candidate for a shorter term by mutual agreement. In view of those points, the Government believe that paragraph 1(1) of Schedule 3, as currently drafted, is the appropriate way of providing for the regulator's appointment.
I should say a few words about the fact that Amendment No. 108 would prevent the Secretary of State removing the regulator on the grounds of misbehaviour, leaving incapacity as the only ground on which the regulator could be dismissed.
I am a little puzzled by the suggestion that misbehaviour should not be a ground for removing the regulator from office, as suggested by the amendment but as not suggested by the speech of the noble Lord, Lord Glentoran.
Lord Glentoran: I thank the Minister for giving way. I missed the last part of what he said. I wanted some clarification on what "misbehaviour" might mean.
Lord Evans of Temple Guiting: So I am not a little puzzled; I know exactly what the situation is.
It is a well used legislative basis for removal from office. For instance, the Courts Act 2003 enables the Lord Chancellor to remove a lay justice from office on the ground of incapacity or misbehaviour. Likewise, the independent regulator of NHS foundation trusts may be removed by the Secretary of State on those grounds.
What counts as misbehaviour justifying removal will of course depend on the particular circumstances of any situation. Its ordinary meaning is to behave badly, or to conduct oneself improperly. It has been said in this House that "misbehaviour" could include, for example, a conviction for drink-driving; any offence involving violence, dishonesty or moral turpitude; or behaviour likely to cause offence on religious or racial grounds or that amounts to sexual harassment.
It should cover any misbehaviour which threatens confidence in the regulator. It is sensible to give the Secretary of State the power to act in the event of such misbehaviour on the part of the regulator. That would be important, to maintain confidence in the position and therefore in CICs in general. If a regulator who had lost credibility as a result of misbehaviour were able to remain in office, that would undermine his or her authority and that of the office.
Finally, I should like to advise the Committee that following discussions with the National Audit Office, the Government are considering an amendment to Schedule 3. That will allow the Secretary of State to require the regulator to produce accounts as well as reports. The regulator will initially be accounted for through the department's accounts, but it seems sensible to provide for separate accounts to be required if necessary. We intend to table an amendment before Report.
A number of additional questions were asked which I should attempt to answer. On the question of proportionality, common law already provides for powers to be exercised in a way that is procedurally fair and not unreasonable or irrational. The requirement for decisions not to be excessively onerous, harsh or oppressive when less restrictive measures are available is part of the general requirement for reasonableness in decision making. That, with the other provisions in the Bill on how powers are to be exercised, should provide reassurance that the regulator's actions will be proportionate.
The noble Lord, Lord Glentoran, asked about the regulator's proposed salary. We have not decided that at this point, but we are taking soundings with recruitment specialists. Our current thinking is that the post should be remunerated at around the same level as senior—but not the most senior—civil servants. I have no idea what that figure may be, but we can find out.
The noble Lord asked about the selection process. I think I have said that it will be handled in the Nolan way. We have already committed ourselves to involving the social enterprise sector in the establishment of a
regulator. It is in everybody's interest for the selection process to be as professional as possible so that we get the best person.The noble Lord, Lord Glentoran, was also interested in the onerous powers that the regulator would have. It is our view that the regulator will operate with a light touch. We will set up a small-scale operation that will primarily register CICs, receive copies of the community interest company reports and investigate where there are stakeholder concerns.
The manner in which the regulator can discharge his functions and exercise his powers is restricted by the requirements set out in subsection (4) and by the general principles of administrative law. The supervisory powers are further restricted by the requirements in Clause 38, in particular the requirement that the regulator must only exercise those powers to the extent necessary to maintain confidence in CICs. The powers available to the regulator are necessary to ensure that the asset lock has integrity and that CICs can be made to comply with their obligations under the Bill. This is vital to ensure confidence in CICs and the protection of the community interest.
I think that that answers all the questions, with the exception of why the regulator does not have statutory objectives relating to transparency, accountability and consistency. The regulator has an overarching obligation to discharge his functions in a manner that is based on good regulatory practice. In addition, the regulator will be accountable to Parliament and to the courts. The publication of guidance will ensure that the regulator's processes are transparent to users and his consistency will be contestable in court. All those who exercise public functions are required to do so in a manner that is not unreasonable and that is procedurally fair. This is a general principle of administrative law and includes a requirement for consistency and impartiality.
4.45 p.m.
Lord Glentoran: I thank the Minister for that detailed response. It is certainly, to some extent, comforting. However, I shall probably come back on Report and attempt to get some of what he has said onto the face of the Bill, probably in a schedule. I think that there are some significant gaps that would not be difficult to fill in. The Minister has filled most of them in now and, with thought and careful drafting, they could usefully be included in a schedule to the Bill. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Phillips of Sudbury moved Amendment No. 104:
- Page 27, line 3, leave out "most efficient and economic way" and insert "way which best advances the community interest objects of the companies."
The noble Lord said: This amendment is designed to provide a better set of objectives for the regulator under Clause 24(4), given that the provisions of that subjection will control and inform the way in which he
carries out his function. The third yardstick by which he must operate is the desirability of using resources in the:
- "most efficient and economic way".
- "way which best advances the community interest objects of the companies".
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