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Lord Campbell of Alloway: It is almost the same point and I have to support the amendment. I feel that one ought to define the set-up and structure on the face of the Bill. That is a tidy way to do it and, in any event, if matters have to be dealt with in a court of law, which may well arise, any court will want to see the structure and how it is laid out. It is quite wrong—the same point arises—to leave the matter in the air or to the commissioners to sort out. It is the wrong approach.

Lord Goldsmith: The issue raised by this amendment is, in part, the issue we debated a moment ago and also the specific issue of whether it is necessary for the Bill to stipulate both that collectively the commissioners shall be called "the Board of Revenue and Customs" and that one of them be the chairman.

As I said in debating the previous amendment, there are requirements and guidance on corporate governance which flow from the fact that something is a government department. Beyond talking about government accounting issues, I did not indicate what those were. However, they include, for example, the Civil Service code and the Cabinet Office toolkit for boards, which is aimed at maximising the effectiveness of departmental boards. I can add that the Treasury is also reviewing corporate governance in central government departments with a view to producing a code of good practice which provides an overview of the processes and responsibilities within departments. So there will be another source from which the department will find guidance on its operation.

Returning to the two issues raised by the amendment, should the Bill stipulate that the commissioners should be called "the Board of Revenue and Customs"? It is certain that HM Revenue and Customs will have a board of management and I am happy to place that on record. However, this issue illustrates the advantage of not specifying details on the face of the Bill which may be unnecessary and perhaps unhelpful.

Let me explain. The element of the amendment requiring a board follows the current arrangements in the Inland Revenue where two or more commissioners acting together are referred to as "a Board of Inland Revenue". Plainly, it is not necessary for the legislation to require the commissioners to be referred to together as "a board". They are not referred to as such in Customs and Excise legislation and it seems unnecessary to
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perpetuate what is in fact a Victorian expression in relation to Inland Revenue which comes from the styling in the Inland Revenue Regulation Act 1890.

Let me take this one stage further. The amendment as it stands would identify the board as consisting solely of commissioners. That in itself may be unhelpful. The appointment of non-executives is a key part of modern corporate governance practices and it would therefore be a restriction of the way in which the department could be organised to say that the board is only and can only be commissioners. That may be a disadvantage in getting the right non-executives in post.

The noble Baroness will recall that she was a non-executive member not of the Board of the Inland Revenue but of the departmental board. For some people, being not of the board itself but of a different and apparently inferior board may be a disincentive. So putting this provision on the face of the Bill may be counterproductive and unhelpful.

As to how this will work in practice, the chairman designate of HM Revenue and Customs is yet to finalise the arrangements, but the intention is for the board of management's initial membership to be drawn from a combination of all the commissioners, plus all of the non-executive directors and some, but by no means all, of the executive directors. That would meet modern corporate governance practice. The precise composition will no doubt change over time with the needs of the organisation. The balance of executives and non-executives is a much discussed issue.

So, there is no advantage and much potential disadvantage in specifying the first element of the amendment in the Bill; so too in relation to the other element. Why does the Bill need to specify that one person should be designated the chairman? I am sure that the noble Baroness is right in saying that in all organisations there needs to be someone who takes the lead, but whether that person has the title of chairman, or some other title, will no doubt depend on the circumstances.

There will need to be a Permanent Secretary appointed to head the department, because this will be a central government department. That is not going to change; that was the basis of the appointment of David Varney. His recruitment was on the basis that as Permanent Secretary he would also be chairman. As covered in the Explanatory Notes to Clause 1, the intention is to continue the existing practice of the Permanent Secretary being designated as chairman in the appointments Letters Patent. It is going to happen; there will be someone in that position, but it would not be helpful to insist in the Bill that someone should have that specific title. I hope that that is more reassuring than the previous explanations were found to be relation to previous amendments.

Baroness Noakes: I thank the Minister for that, but he has neatly explained in his answer why I felt it necessary to table the amendment. I completely understand that under the Inland Revenue there is the statutory board, and the management board beneath. That is what happens across much of Whitehall. The
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point of tabling the amendment was in part to bring out the fact that we do not know what kind of organisation will be created by this Bill.

The Minister referred to the likely intention, which would follow practice both in Inland Revenue and Customs and Excise, that the board will comprise commissioners, some executives, and some non-executives, but the Bill does not state that. It is left entirely to the commissioners to work out their own organisation. I put it to the Minister that the Government would not create any body other than a government department in this way. We can look at any statute created recently, such as one that I worked on at the end of the last Session, the Pensions Bill, which created the Pensions Regulator and the new Pension Protection Fund. In each of those cases, the way in which the organisation was to be governed was set out, including executive appointments, non-executive appointments, and the fact that a person was to be called chairman. This is normal in other legislation.

The only point at which we find that the Government do not apply this perfectly sensible approach to specifying what kind of organisation we are creating, is when we get to this organisation, which is a non-ministerial government department. We are allowed to have a complete mystery about how the organisation is to work in practice. It is to be left to people, who are appointed in a way that is not entirely clear, to work out among themselves how they are to organise, and which people to put on their management board, leaving everything else to be worked out away from any form of public scrutiny. It is curious that we have a completely different rule for this important government department than for any other body that the Government have created in the past seven, going on eight years. I find that very strange.

For today, I am happy to withdraw the amendment, as that is the custom in Grand Committee. Indeed, the amendment is not perfect, as the noble and learned Lord will be aware. However, it has highlighted that we have a Bill that is completely lacking in clarity about how Revenue and Customs will operate in practice. While that has been the case in the past, we are missing an opportunity to lay down a structure that can then be looked at from the outside and explained in a rational way. I beg leave to withdraw the amendment.

Baroness Noakes moved Amendment No. 4:

"(1A) The Commissioners may appoint one or more persons to be non-executive directors provided that the number of non-executive directors may not exceed the number of Commissioners.
(1B) Non-executive directors appointed under subsection (1A) shall be appointed on terms and conditions to be set by the Commissioners, but shall not be regarded as staff for the purposes of section 2."

The noble Baroness said: Committee Members will be pleased to know that this is the last of the governance amendments for a while, although there will be some a little later. The issues that arise here
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relate to non-executive directors and build on matters that we have just been talking about, and I do not want to repeat those arguments. The amendment deals with how non-executive directors can be appointed and states that they can never be in the majority. The amendment also deals with the status of non-executive directors.

This is another probing amendment. On its own it does not fit within the Bill because it requires a board of a certain type in order to work. But I want to use it to debate the issues that arise in relation to non-executive directors, which are another aspect of the lack of clarity that has not been dealt with by the Bill.

As the noble and learned Lord said a moment ago and as I explained at Second Reading, my noble friend Lady Wilcox and I were appointed as non-executive members of the management board of the Inland Revenue back in 1992. I believe that those were the first such appointments to management boards across Whitehall and it is fair to say that there was a considerable lack of clarity about what we were, what we were supposed to do, what our status was and what our roles and responsibilities were.

For example—this will explain my personal interest in tabling the amendment—I had a vigorous dispute with a Treasury nitpicker, who is now in a yet more elevated post in Whitehall, over my legal status as a non-executive member of the Inland Revenue management board. The dispute eventually cost me a lot of money. The details need not trouble this Committee, but the plain fact is that there was no clarity about my status as a non-executive member of the Inland Revenue and the individual chose to exploit that. That is why I have a personal interest—although not a continuing personal interest—in putting something in this Bill to place non-executives on a proper basis.

That is particularly the rationale for the proposed new subsection (1B) in Amendment No. 4, which sets out that non-executive members are not staff for the purposes of Clause 2, and therefore they are not officers of Revenue and Customs. It also provides that their terms and conditions are to be set out by the commissioners. I do not know what the current experience is in Whitehall, but in the early days there was a considerable lack of clarity about the matter. We should be clear about the status of non-executives who are invited into government departments to assist in some way.

As the noble and learned Lord said and as is clear from the Explanatory Notes, it is the intention at present to use non-executives, which is why Clause 14 allows the commissioners to draft them in. Proposed new subsection (1A) of Amendment No. 4 would legislate for non-executives clearly in the Bill, as opposed to leaving their inclusion to be inferred from the more permissive conditions of Clause 14.

As I said earlier, the amendment allows for the number of non-executives not to exceed the number of commissioners. That is not in accordance with private sector corporate governance. However, for the purposes of debate, it is necessary to identify that non-executives
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must be in a certain proportion and I have assumed that it would always be right for a government department never to have a majority, although I have to say that that is not clear from the Bill either. Clause 14 could be used in quite another way.

I hope that the noble and learned Lord will see that my purpose in tabling Amendment No. 4 is to get him to set out how the Government see non-executives fitting into the Revenue and Customs organisation. I hope that he will explain why it is appropriate for the Bill to be silent on this category of person. I beg to move.

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