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I, too, am concerned about the public interest and the representation that we will receive in that regard. I have listened again to people saying that this sounds like a good idea but wondering how it is to work and how difficult it will be. I have yet another organisational chart here, this time from the LBRO; this one is so complicated that there is a dotted line on the bottom that says “Europe”. I am not sure whether that is where you go if all of this does not work very well. It is slightly less complicated than the other design but shows the same problems. I, too, would support the Government looking at this again and seeing whether it is possible to bring experience to bear.
Lord Bach: I thank the noble Baroness, Lady Hamwee, for tabling this amendment, although she will not be surprised that the Government do not agree with her. Perhaps I may explain why. As she acknowledged, the directors who have been appointed so far bring strong local government experience to the table.
I was asked by my noble friend Lord Borrie to say a bit more about them. They cover—the noble Lord, Lord Hodgson, I think, will be particularly delighted about this—business representation and Welsh representation in the figure of one member; namely, the chairman of the board, who apparently meets those qualifications admirably. The other eight, plus a chief executive who is also a member of the board—I shall not go through this in detail—include a member of the Security Industry Authority; a senior partner at Global Consulting; someone with Scottish Executive health department experience; someone who was an important member of the Department for Transport; the chief executive of the London Borough of Enfield; a commissioner with the Independent Police Complaints Commission; and a justice of the peace, who was formerly head of legal services for Sainsbury’s. The chairman, to whom I have already referred, is a company director and was until three
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I remind the Committee that the directors were appointed in full compliance with the recommendation of the Office of the Commissioner for Public Appointments. In practice, that means that the current board has been appointed using a process with the agreed higher standards. It is our intention that this would allow the current directors to transfer to the new body, which the Bill will form, without a further appointment process. The Office of the Commissioner for Public Appointments has specifically confirmed that that is an appropriate step.
It is not the Government’s intention that the LBRO board be representative of all the groups with an interest in its work, nor do I believe that members of the board should represent particular interest groups. The board should be made up of those people most capable of ensuring that it achieves its objective while taking into account the opinions and expertise of all its key stakeholders. For those reasons, we disagree with the noble Baroness in suggesting that a specific percentage of the board should come from local government.
The noble and learned Lord, Lord Lyell, raises an important and interesting point, to which I think we will return in Committee. I shall try to start the ball rolling on this issue. We do not agree that the LBRO is a kind of centralising force. It is about consistency where appropriate. I emphasise to the Committee that it will remain for local authorities to decide whether and when they should take regulatory action, and what that action should be, subject to this sensible requirement for some consistency. Macrory was not really about bigger penalties; the report was about targeted, flexible and appropriate enforcement, with lighter enforcement and penalties where appropriate. It was not about having people convicted of offences where that was completely inappropriate. I know that we will have interesting debates around Part 3 and Macrory. I say that just as a starter in reply to the noble and learned Lord and I look forward to the continued debate on that point.
As far as reassurances going ahead are concerned—the noble Baroness was concerned about that—the problem of a representative board is that, frankly, the LBRO has too many stakeholder groups. They involve business, small business, consumers, professional organisations such as the Trading Standards Institute and devolved Administrations. There are other stakeholders, too, for want of a better word. Where do we stop with appointments to the board? We firmly believe that the LBRO cannot function without a lot of input from the sector. That will be as important with future appointments as with the current board. I invite the noble Baroness to withdraw the amendment.
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4.15 pm
Lord Cope of Berkeley: Can the Minister confirm, therefore, that there is no one on the first board who has any direct experience of small business, and that there is no intention of that in the future either?
Lord Bach: I pause because I am looking at the lengthy CVs of the various members of the board. I am delighted to say that the board member who is a commissioner with the Independent Police Complaints Commission has held a number of board and operational positions in small businesses during her career. She also has extensive experience of local government. That is—
Lord Bach: As the noble Baroness says, that is a relief to me. I know that it will also be a relief to the noble Lord, Lord Cope.
Baroness Hamwee: I am grateful to everyone who has thrown their various concerns into this ring. I started by saying that I wanted to understand the criteria for appointments. Simply saying that something has gone through proper processes in the Office of the Commissioner for Public Appointments does not answer the question about criteria. I was not for a moment challenging propriety. Indeed, there are a lot of stakeholders—that is a terrible term. It is perhaps almost impossible to have every interest represented. There is certainly an argument to be made that one wants not necessarily representation but the ability to understand work of which one has no direct experience or general wisdom, and so on. The main point is about understanding how the Government or the chair, who will make future appointments, are going to approach the task.
To answer some of the points that have been made, I say to the noble Lord, Lord Hodgson, that I went for a percentage because there will be issues about the size of the board and we could have a variable number. I entirely take the point that there is no one right way of doing this. I did not table an amendment that included representation from the business world; I sometimes leap perhaps a little too fast to champion local authorities. I had assumed that the Conservative Front Bench would table amendments for the representation of business; perhaps that was wrong. I simply thought that business would have more champions.
There are distinct approaches from the local government world and the business world. Many noble Lords will be aware of London First, which is now a business organisation but which had, when it was originally formed, I think in the 1980s, a rather wider membership. It was a very different organisation. I was one of the local authority members. When someone made a proposition, there were two distinct reactions. From the business community, there was, “That’s a good idea; let’s do it”. From the local government world, there was,
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I was particularly taken by the point about local concerns, which the noble and learned Lord, Lord Lyell of Markyate, made. This is not about a particular locality but about an understanding of what it feels like to have very local interests and to see things at a micro, but very important, level. I do not know whether there is any way of reflecting that in legislation, but the point was extremely well made.
This is Grand Committee and, with thanks to everyone, I have no alternative but to withdraw my amendment. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hodgson of Astley Abbotts moved Amendment No. 2:
The noble Lord said: We are in the same territory as the noble Baroness, but I shall explore a little further the structure of the board and the way in which it is proposed that it will be built up. I was delighted to hear the Minister’s assurance in response to the noble Baroness’s amendment that all the current appointments have been made with due process—not that I doubted that, but it is good to have it on the record.
I look forward to the future and to what might happen in other times and other circumstances. As I understand it, we have two classes of members. There are the ordinary members, who are appointed by the Secretary of State—although I note in paragraph 3(4) that the chairman must be consulted before those members, who include the chairman, are appointed—and the ex officio members, who include the chief executive and who are to be appointed by the chair after consulting the chief executive. I found the wording, particularly in line 27, quite strange. It certainly does not meet general corporate governance principles. When you serve on the board of a company, you have some say in who will join that board. The chairman does not appear one morning, saying, “Here is your new member”. He may lead the process, set the executive search people going and arrange the interviews. He may do all that—undoubtedly he and the chief executive will have considerable influence on how the shortlist is drawn up—but the members of the board will have some say.
What is set out in the paragraph is an unfortunate way to proceed, because it gives the chair huge power in the board. Although one cannot foresee what will happen, one is always concerned where there are no proper checks and balances. This is not just a theoretical question, because if the Bill is enforced in its current form and we have, say, four ordinary and four ex officio members—half and half, as laid down—on a board of eight, we would have three ordinary members and the chairman and three ex officio members and the chief executive. It is perfectly clear at that point that the chairman, the chief executive and the ex officio members will all be in the same loop. That is because the chief executive and
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Either we should limit the number of ex officio members and so limit the chairman’s power, as my amendment would do by saying that their number should not exceed half the number of ordinary members—I accept that the noble Baroness, Lady Hamwee, will say that half is 50 per cent, so it is just the same as saying four out of the eight—or we should find some other way in which the number will not be equal, thereby reducing the chairman’s power. Alternatively, we need to find a way—this is not in my amendment—to improve the appointment process for ex officio members so that, beyond peradventure, how these people are to arrive on the board is written into the Bill. The paragraph is not up to modern corporate governance practice and the Local Better Regulation Office should adhere to the best practice around in British commerce, industry and public life. I beg to move.
Baroness Hamwee: The noble Lord is quite right to raise the issue of the number of employees on the board. I was not going to tease him about 50 per cent but, as he has raised the matter, it occurs to me that he could try 50 per cent minus one, which would always be fewer than the non-employees.
Lord De Mauley: I support my noble friend. Like the noble Baroness, Lady Hamwee, and others, he has highlighted an important concern about the composition of the LBRO, which also relates to the powers of the chairman. It is clearly an important point. Will the Minister take this away and consider whether and how something can be done to improve matters?
Lord Bach: Yes, I will take it away and consider it. This may be a surprise to the Committee, but we hope that the Bill that comes out of this process will be better than the one that went in. This is one of those points where we think that the noble Lord, Lord Hodgson, has a substantial argument in his amendment. We are persuaded that there is a need for a limitation of some sort on the number of ex officio members beyond what is currently in the Bill. There will be a need for some consideration of the precise formula, which I hope the noble Lord will understand. I invite him to withdraw his amendment so that we can return to this matter on Report.
Lord Desai: The noble Lord, Lord Hodgson, was making a point about the method of appointment rather than just the numbers. He is worried about the power of the chair. There are two things to examine about that: first, who has the power to appoint ex officio members; and, secondly, whether there should be non-voting members. That would perhaps satisfy the numbers problem.
Lord Hodgson of Astley Abbotts: I am grateful to all noble Lords who have spoken in support of this amendment and to the Minister. I never suggested that this amendment was the bee’s knees; it was
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Amendment, by leave, withdrawn.
Lord Hodgson of Astley Abbotts moved Amendment No. 3:
The noble Lord said: Encouraged by my previous amendment, I am going on for a major prize. In paragraph 6(2) of Schedule 1, a person is appointed as an ordinary member of the LBRO for a term of less than five years and paragraph 6(5) states that the total term may not exceed 10 years—that is, two terms of office. I do not want the Minister to feel persecuted by me, but this is another place where his department must look outside at what is going on in the wider world. Almost everywhere there is now a maximum of three three-year terms—nine years. The purpose of that is quite simple. You have a year or 18 months to learn about the business, get involved in it and understand it, and a basic three-year term. If it has been a failure and you have not contributed, it can be brought to an end at three years. You then have another three-year term when you are contributing majorly to the discussions; if you are really contributing, you can be given a third three-year term, after which you should retire because you have probably become part of the furniture rather than part of the critique. Those three three-year terms are now enshrined in British corporate life.
This point is not just about what is going on in the wider world. A bad chairman for five years can do an enormous amount of harm. I am not saying that we will have a bad chairman, but we could. He or she could make this organisation lose its reputation. Shorter periods of time are part of the modern practice, so people are being properly assessed on whether they are delivering on what is part of their basic role. We have been through this again and again. We went through it at some length in the Charities Bill. There we were getting two five-year terms, but the noble Lord, Lord Phillips of Sudbury—sadly, he has now taken leave of absence—persuaded the Government that three terms of three years was the right way to proceed.
This is an easy win for the Minister. There is no need to redraft; even the parliamentary draftsmen could not find a reason why this had to be taken away to be redrafted. All the Minister has to say is, “I understand that this is modern corporate governance practice and I am happy to accept it”. I encourage him so to do. It would set us off in the right form and with a spring in our step. I beg to move.
4.30 pm
Lord Borrie: I am not at all sure of the rightness of the argument of the noble Lord, Lord Hodgson. I am not at all sure that the practice of corporate governance—meaning business—is necessarily the right one to be brought into the public sector, particularly when we are talking about posts that are part time.
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Lord Hodgson of Astley Abbotts: This is not the public sector; this is a body corporate, as Clause 1 says.
Lord Borrie: I accept the technicality, but the body is working in the public area as distinct from the commercial or business area. My point is that it takes some time to get to know the ropes in an organisation that is full of people working part time. It is quite different if you turn up Monday to Friday every week, for weeks and months on end. This is a part-time post and it will take a considerable time to learn the ropes, whatever the person’s background and experience. Of course, the members have to get to know one another, their strengths and weaknesses, the staff and so on.
There is provision for reappointment, so three years does not seem to be too short a period in one sense. However, in another sense, you get into the swing of things and get to know what you are doing in the second year; in the third year, if you are interested in the job, you are concerned about whether you will be able to continue in it. You may give a lot of attention to whether you will be reappointed and whether you will upset the Secretary of State if you go in a certain direction. The Secretary of State, in consultation with the chairman, will determine reappointment. Of course, there is no magic, whether the period is three years, five years or six years. All sorts of organisations have had similar periods and have changed; there is no absolutely correct way. I suggest that three years seems a little short for a part-time position in a public body. You would soon get to the third year and be thinking of retirement or reappointment and attitudes may change because of that. I am not at all sure that the Government have got it wrong.
Lord Cope of Berkeley: The noble Lord, Lord Borrie, attracted me to his view when he pointed out that, if the members served for five years, they would be more likely to stand up to the Secretary of State.
Lord Cope of Berkeley: The noble Lord did not quite put it like that, but that was clearly what he intended. I admit that when I first saw Amendments Nos. 3 and 4—I think that they are a pair—it seemed to me that there would be greater flexibility to the Secretary of State and the chair of the new body if they were able to keep that balance, which is essential, between continuity and turnover of people. If you can serve three terms of three years, with a total of nine years, and everyone else has three terms of three years, I believe that statistically you can achieve a balance of continuity more easily than if people can do only two terms, with half leaving every time you get to the end of the five-year period. It seems to me from a management point of view that it might be easier to do this as my noble friend suggests rather than as the Bill states.
Lord De Mauley: The intention of my noble friend in proposing a reduction in the length of tenure of the ordinary members is to ensure that the membership
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Lord Bach: This amendment and the next group are welcome in that they provide us with an opportunity to discuss the provision that we have made for the LBRO’s constitution and accountability. We do not believe that the amendment is necessary. I hope that I have not given false encouragement to the noble Lord by making a concession on the previous amendment. I know that he is too experienced to expect too many presents.
I understand very well the arguments made by the noble Lord in moving his amendment, but I can confirm that the provisions regarding the appointments to the board closely follow a recent precedent. The precedent on which I rely for five years being the maximum period—I emphasise “the maximum”—in the relevant paragraph of the schedule is the model set for the Serious and Organised Crime Agency. Although the three-year cycle argument is interesting, there are perhaps two points to make about it. Most of the public appointments here are on a three-year basis already, but I argue that that does not take away from the fact that there should be a five-year maximum. Of course, the noble Lord will know that appointments can be revoked because of paragraph 6(4) of Schedule 1, which states:
The Deputy Chairman of Committees: I am sorry to interrupt the noble Lord again. There is a Division in the Chamber. We shall resume after 10 minutes.
[The Sitting was suspended for a Division in the House from 4.37 to 4.44 pm.]
Lord Bach: I was just completing my reply to the amendment moved by the noble Lord, Lord Hodgson. I should point out—I am grateful to my noble friend Lord Desai for this—that paragraph 6(5) states:
“A person who has ceased to be an ordinary member is eligible for reappointment for a further term or terms”.
That makes the point that the five years is a maximum that may or may not be used. Our view is that that is a useful flexibility. For those reasons, we are tempted to stick by what is in the schedule.
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