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Baroness Noakes moved Amendment No. 2:


"( ) There shall be a minimum of five and a maximum of 15 Commissioners.
( ) Commissioners shall be appointed only after a formal process of selection undertaken in accordance with the procedures for the time being laid down by the Civil Service Commissioners."

The noble Baroness said: This is a probing amendment designed to ascertain how the Government see the new Commissioners for Revenue and Customs Bill operating so far as the appointment of commissioners is concerned. Other amendments will deal with other aspects of the governance of the new organisation, but I will use this amendment to deal with some of the basic points, so that we can deal with the later amendments more efficiently.

The Bill is remarkably vague about how the new organisation is to operate. We are told that it is to be a non-ministerial government department, which I assume is a government department that is not headed by a Minister. I hope that the noble and learned Lord will be able to explain the significance of that in terms of the powers, responsibilities and accountabilities of the people who will make up Revenue and Customs. For example, under Clause 11, the Treasury is able to direct the commissioners. Does that mean that the commissioners are accountable to the Treasury? Is that Treasury Ministers, officials, or both? There is the question of which Treasury Ministers are involved. I hope that the Minister will say something about how that will work in practice and how the organisation will get a coherent sense of direction.

If the Revenue and Customs was being set up as a non-departmental public body, or a public corporation, the enabling legislation would have to contain explicit details about the structure of it and about who is to run it. Amendment No. 2 probes the question of how many commissioners are to be appointed, and why there are
 
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not limits set down in legislation. The Minister may well say that the existing legislation covering the Inland Revenue and Customs and Excise has no details covering the details sought by this amendment. Of course, the legislation constituting those bodies goes back a long way, as we explored a little in our previous debate. It certainly predates modern thinking on how organisations, whether in the public or the private sectors, should operate in today's more managerial world.

Therefore, Amendment No. 2 seeks an answer to what numbers of commissioners there will be and how they will be selected, because it is inappropriate in today's environment for the Act simply to state that Her Majesty will appoint an unspecified number of commissioners by Letters Patent. An upper and lower limit would be a sensible way to start to define what kind of organisation is being created by the Bill.

The second leg of the amendment refers to the way in which the commissioners are to be selected. The amendment is not intended to be controversial because it simply refers to a formal process of selection. I am sure that some formality of process is necessary prior to Her Majesty issuing Letters Patent. It refers for example to procedures laid down from time to time by Civil Service commissioners which would allow all procedures to change over time and evolve, as they have done, over the years. The purpose of the amendment is to show that there is a proper formal process of selection for those whose appointment may ultimately be formalised by Her Majesty. The steps leading up to that should be more clearly defined. I beg to move.

Lord Goldsmith: This is the first of a number of amendments which address the corporate governance arrangements of HM Revenue and Customs. I understand the reasoning and thoughts behind these amendments. The noble Baroness, Lady Noakes, made clear at Second Reading that she was interested in ensuring that the new department has the right corporate governance arrangements in place. She and the noble Baroness, Lady Wilcox, have experience of corporate governance from their previous roles with the Inland Revenue.

I will first explain the general approach taken by the Bill on corporate governance. HM Revenue and Customs will be a government department, so many of the requirements for its governance are already set out in arrangements that cover all such government departments. For example, there are government accounting responsibilities and other codes that touch on what government departments do and those will apply to the new department. There is therefore no need to overlay the Bill with detailed rules of governance that will often be found in statutes that govern non-departmental public bodies where it is necessary to set those out because there is no general body that applies.

It is right to underline, as the noble Baroness did, that this will be a non-ministerial government department. As the O'Donnell review noted—in paragraph 6.14, I believe—that is to underpin the
 
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importance of taxpayer confidentiality, maintaining the distance between Ministers and the department itself to which I made reference at Second Reading and to which I know that we will return. I am sure that we will also return to the issue of the wider, more general relationship between Ministers and the department—in relation to Clause 11, for example. If the noble Baroness permits, I will leave my observations on that until we get to the relevant amendments and clauses.

I return to the question of how much detail to set out about the governance arrangements. Given that the requirements on the new department are set by the overall requirements on central government departments, within that framework the detailed proceedings can be matters for the commissioners collectively to determine, as those details will be about their rules and arrangements for the discharge of their statutory responsibility for functions as set out in the Bill.

There is another point: as we have seen, particularly in the area of corporate governance—for example from the Cadbury report up to the current Combined Code on Corporate Governance—that it is a developing and sensitive area where what is best practice may change. So it is an advantage to leave a degree of flexibility in order to be able to adapt to the latest and best practice without being constrained by over-rigorous legislative revision.

Flexibility to develop and implement innovative approaches—which is what the O'Donnell review referred to—indicates the approach that has been taken in the Bill. I want to underline that that does not detract from the commissioners' accountability for their corporate governance arrangements. They will be subject to appropriate parliamentary scrutiny. For example, it is intended that the top-level governance arrangements will be published in the annual and spring reports of the department as part of its good corporate governance practice. The reports will include details of the current commissioners, the membership of the management board and the top-level committees, and details of any changes since the last report. Customs and Excise routinely follow such an approach and that will continue.

That indicates the general approach to corporate governance and what is said in the Bill. If we turn specifically to this amendment, Amendment No. 2 specifies a range of from five to 15 commissioners to be appointed at any one time. There are a number of factors, which will vary over time, that determine what the right number of commissioners will be. I recognise that the amendment appreciates that point by specifying a range.

But the question is whether the Bill ought to be specific on this issue. I do not consider that it needs to be. There will be clarity about the number of commissioners and their top-level governance arrangements, which will be reported to Parliament. But the commissioners will need flexibility to respond to the circumstances at the time—for example, to wider corporate governance issues generally; to the lessons learnt managing the new organisation; and to the skills and resources that are available to the commissioners. I accept that it is likely
 
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that a number between five and 15 will turn out to be appropriate as the correct number of commissioners in the future. But it is unnecessary to specify that in a statute.

I turn to the second element of the amendment, the procedures for the appointment of commissioners. There are safeguards. Ministers will be consulted on their selection and appointment, which is necessary as part of the process of appointing commissioners by Letters Patent. The consultation will include discussion on any major changes in their number so, to take an extreme example, if there were any risk of the number falling below five, I would anticipate that Ministers would seek assurance from the commissioners that the suggested number reflected the latest view of sound corporate governance practice.

I wish to make two points on the wider issue of the selection and appointment of commissioners. First, as required by Clause 1(5), they must be civil servants and they will act in accordance with civil service codes of conduct. For externally advertised candidates, that includes the full and proper involvement of the Civil Service Commissioners in their selection and appointment, with selection by interview, including independent panel members. One can see that the procedures are incorporated in those circumstances.

There are also instances when an internal candidate, already a civil servant, is selected to be a commissioner. For the predecessor commissioners, that would not require reference to the Civil Service Commissioners, except for the separate and particular arrangements when selecting a permanent secretary. There seems to be no reason for that to change. But I emphasise that, as part of the process of appointing a commissioner by Letters Patent, Ministers would be consulted.

In conclusion, I share the noble Baroness's desire to see that Revenue and Customs has proper corporate governance arrangements in place. But the Bill and existing arrangements outside and off the face of the Bill on the matters covered by the amendment already achieve that end. I hope that those assurances on how this works in practice will persuade the noble Baroness that it is not necessary to press the amendment.


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