LORD STEVENSON OF CODDENHAM CBE AND RT HON LORD HURD OF WESTWELL CH CBE

11 OCTOBER 2007

  Q144 Chairman: May I welcome our guests and witnesses this morning, Lord Stevenson and Lord Hurd, from the House of Lords Appointments Commission. You have been able to help us in the past and we thought you may be able to help us again. As you will know, we are trying to complete an inquiry, that was interrupted by the Metropolitan Police, into propriety and honours. We are now able to resume that inquiry and so resume the conversation that we started with you quite a long time ago. That is the context in which we would like to talk to you. Would either of you or both of you like to say anything by way of introduction?

Lord Stevenson of Coddenham: I have a very short introduction, in the nature of these things, which I think would be very helpful. We received the message that you were, as it were, seeking not to continue the police inquiry by any other means but to consider the policy and regulatory issues coming out of it. We are very anxious to help you in any way we can. As you know and as, indeed, you acknowledged in your report, we cannot provide details of personal information about individuals, but, subject to that, we will give our advice. We have a duty of confidentiality to them and our advice to the Prime Minister is confidential, but, within that constraint, we want to help in any way we can. It might be useful to summarise our role and the criteria we use in the scrutiny of nominees to the House of Lords. If you feel I am going over old territory, please interrupt me, but I thought it sensible to write it down. We have two roles. We recommend to her Majesty non-party political peers to join the crossbenches. To date we have recommended 42 individuals and we are in general pretty pleased with their contribution to the House and our work continues. Our second role is to advise the Prime Minister on the propriety of the working peers put forward by the political parties. Of course, we vet our own nominees before we put them forward. The essential difference between the two roles is that in respect of the non-party political nominees we are responsible for selecting the names; and in the case of the party political peers the Commission is not involved in the choice of individuals put forward: the political parties choose their own nominees and make their own judgment upon their suitability. On propriety: propriety is one of these words that mean different things to different people and the Commission have defined as clearly as we can, and publicly, what we take it to mean. First, we say the individual should be of good standing in the community in general and with particular regard to the regulatory authorities with whom we do checks. Second, the nominee should be a "credible nominee". This applies to all nominees but is, for obvious reasons, rather important for those who have made donations or loans. The Commission takes the view that donations or loans are not of themselves a bar to a peerage but nor are they a reason for one, and so we must be able to satisfy ourselves that if the donation or loan was placed on one side the individual would be a credible nominee. To state the obvious: credibility is in the eye of the beholder and is a matter of judgment. We have tried to be as precise as we can in defining criteria for it. The Commission's main criterion in assessing credibility is that nominees should enhance rather than diminish the workings and reputation of the House of Lords and the honours system more generally. The only other thing is to remind the Committee that we are an independent body made up of three independent members: myself, Angela Sarkis (who accompanied me last time but could not today) and Felicity Huston; and three nominees from the political parties: Lord Hurd, Brenda Dean and Navnit Dholakia. Lord Hurd and Lady Dean were members of our Predecessor Honours Scrutiny Committee and have served on the Commission since we started in 2000. That is my initial bromide. Please ask questions.

  Q145  Chairman: Thank you very much for that. Obviously the events of the last year or so provide the context for us talking to you today. Is it the case that if the regulatory system had been working well, there would have been no need for a police investigation? Or is it that the regulatory system was working so well that it revealed the need for a police investigation?

  Lord Stevenson of Coddenham: I do not think, Chairman, it would be appropriate or proper for us to be drawn into making judgments about whether there should or should not have been a police investigation. I will however make an observation, and perhaps I can preface it by saying that we are not complacent about the job we do. As I have told this Committee before, we constantly review what we are doing and try to make incremental improvements, so I do not want you to misunderstand what I am saying. If you regard us as a key part of the regulatory system in this, I hope—and it is for other people to judge this—the view would be taken that the regulatory system worked pretty well on the matters which led up to the police investigation. There is evidently a transparency to it that has not existed before (when these things were done from within No 10 or wherever). And, in our case, as a body that has acted completely independently—I think it evidently has—there was, understandably, some scepticism in our early years as to whether we were independent but I think it became evident—I would say that, wouldn't I?—I think broadly it has acted in the public interest. To that extent, I would say we can always improve the regulatory system. I hope it will be improved, but I think it is improved and has worked reasonably well. I cannot follow you into whether that justifies or does not justify a police inquiry.

  Lord Hurd of Westwell: To sum up that point, the regulatory system was acting—and I think it was acting energetically and effectively in this case—and along came something which was not regulatory but a legal accusation that was made and the police have to deal with that. But I imagine they look at the whole scene, including what we are doing and not doing, before they decide how to handle such an accusation, which goes to them and not to us because it is a legal matter.

  Q146  Chairman: At the heart of the matter was the accusation that it was possible to buy and sell honours and to buy and sell peerages in particular. The reason I put it in the way that I did is that you are the body that ensures that it is not possible to buy and sell peerages, are you not? I am asking you how, in a sense, could it have been possible for anyone to pursue that proposition, if your mechanism was robust enough to ensure that it did not happen?

  Lord Stevenson of Coddenham: It is kind of you to put it that way and I would hope it is true—I think it is, but nemesis follows hubris and there is not any hubris here because this is difficult work—that the Commission's procedures and processes would be pretty good at giving the right advice to the Prime Minister of the day which would stop honours being wrongly bestowed. I hope that is the case. I think it is fair to say, however, as Douglas pointed out, that it is entirely conceivable that we might be doing our job correctly and that might end but the process that we had studied and on which we had given some advice to the Prime Minister could involve legal issues which would involve judgments by the police, advised by lawyers, as to whether a crime had taken place—which we would not have a locus in. We are not there, we are not a court of law, we are not making judgments about what is legal or illegal; we are making judgments about advice to give to the Prime Minister about the propriety of people going forward for peerages.

  Lord Hurd of Westwell: It is for the police obviously to investigate an allegation that the law has been broken, but they would have had two points in mind: first of all, that we are only advisory, as the Appointments Commission, so theoretically it is conceivable that the Prime Minister might disregard our advice, but, secondly, that in practice he has never done so.

  Q147  Chairman: You sent back some names, did you not? This was part of the origins of this story. When the names came in for the 2005 working peers list, you raised doubts about some of them and you sent them back, and for whatever reason this became public and that became part of the genesis of the police investigation. I was slightly puzzled when I read the CPS account, when they announced that there were no charges to be brought and then they went through the whole story. They talk about this 2005 list and they say, "There is, furthermore, substantial and reliable evidence that there were proper reasons for the inclusion of all those whose names appeared on the 2005 working peers list, or drafts of that list, that each was a credible candidate for a peerage irrespective of any financial assistance that they had given or might give to the Labour Party". You apply the credibility test—and we shall no doubt get on to that in a moment—but some of these people, for you, failed the credibility test, did they not, although the CPS is saying that they all passed it?

  Lord Stevenson of Coddenham: I wondered whether you would raise that. Could I put a background point which I think is a very important one, which Douglas made rather eloquently when we last met—or rather two background points. First, it was deeply unfortunate that the list, whatever it was, draft or otherwise, got in the public domain. Apart from the fact that it made our job much harder, it was very tough on the people on it, as I think I said to you last time. Second, our job is to give the Prime Minister advice as to the names put forward. The fact that we might advise the Prime Minister against someone does not necessarily mean that he or she is not an upright citizen, et cetera, et cetera. There could be all sorts of reasons coming from our criteria which would lead us to give advice—which is one of the reasons it is doubly unfortunate the list got in the public domain. In discussing the relationship between this and the public inquiry, it is an important point to make; if only out of respect for the people whom we advised about. On your point: I read that too, but, frankly, the CPS is doing one job, we are doing another. I do not know how they judge credibility but the context in which they are talking about credibility is very different from ours. I think it is "apples and pears", that we are simply doing different jobs.

  Q148  Chairman: But this is at the heart of your criteria. In your description in your annual report of how you apply the vetting process you say: "The Commission plays no part in selecting or assessing the suitability of those nominated by the political parties, which is a matter for the parties themselves". That is the basis for, I think, what was being run for a time as the "Downing Street defence"; which was: "If we want to fill the House of Lords with donors, that is up to us. It is perfectly our right to do that". That is, in a sense, true. But then the other part of your statement says that you "vet the nominations for peerages, including those by the political parties, for propriety" and you take the view, in this context, that propriety means, firstly, that individuals should be in good standing in the community and, secondly, that the individual should be a credible nominee. The Commission's main criterion in assessing this is whether the appointment would enhance rather than diminish the workings and the reputation of the House of Lords itself and the appointments system generally. I do not understand—and I know we have had this discussion before—how on the one hand you can say it is entirely up to the parties themselves who they want to put in the House: if they want to fill the Lords with donors, that is up to them—you could have a special donors bench, if you like—and at the same time you are saying that you are applying these propriety tests and all these reputational issues. These things are prima facie incompatible, are they not?

  Lord Stevenson of Coddenham: Let me try to put that one to bed as precisely as I can by using the two nouns "suitability" and "propriety". It is our perception and view that the political parties, through the Prime Minister of the day, put forward people whom they regard as being suitable in the House of Lords and it is not part of our job to vet or check that. I remember you pursued me quite hard, Chairman, when I was last here—and I venture to quote—something to do with "deadbeat MPs getting into the Lords" or some such—

  Q149  Chairman: I hope I did not say that. There is no such category.

  Lord Stevenson of Coddenham: Indeed. I am so, sorry. I said that it was not part of our remit to vet people for their suitability. That is entirely what is rendered unto the political parties. In the sense that you extracted that from what we are saying, that is what we mean. We are there to vet for something called propriety. Propriety, as I said in the beginning, is in the eye of the beholder. We have tried to go quite far in defining what we mean by propriety. It is a matter of judgment as to what we mean by propriety and then exercising that judgment involves a judgment. We are responsible for propriety but the political parties and the political system at this point in time are responsible for saying this chap or this woman is suitable. We might privately think that some such person is not particularly suitable but it is not our job to comment on that. It is only our job to quote if that person "fails" our propriety test.

  Q150  Chairman: If someone is a donor, they then get your special attention, do they not, because then it activates the certificates and all that and you do the inquiries? If they send party hacks up the line, people who are not going to enhance the workings and reputation of the House and so on, you just nod them through, do you not?

  Lord Stevenson of Coddenham: No. We vet them for propriety. But we do not vet them for suitability.

  Q151  Chairman: I wonder if there is a bit of a muddle here. I wonder if, out of all that has happened, it would not be useful—rather like you do when you are appointing the non-party people, when you have a more explicit criteria set—certainly if we were to put you on a statutory basis, that we would not have to equip you with a more defined set of criteria that we would expect to be applied to appointments.

  Lord Stevenson of Coddenham: I think the case can be made—meeting your point and then Douglas can chip in—that we do say, where people are donors or lenders, that we have to satisfy ourselves that they were credible nominees. You could argue—I would not like to have to cross words with you and definitions—and it is at the heart of what you are saying: "Does that not get you into a bit of suitability?" and you would have a point. But I think this is a practical matter and I would say it is the right thing for us to do. We do this small job: we take the lists that come, put them through the processes which we have defined and let them out the other end. So it is ours not to reason why, it is for the Prime Minister, if we are an independent, non-departmental public body, to change the remit or if we are a statutory Commission, the same. I think what you have said is entirely feasible.

  Lord Hurd of Westwell: We have been working out our own criteria. We have had to, in order to do the job which we have been asked to do. I think what we have been saying and acting on is perfectly reasonable. It is not for us to say whether Mr X or Mrs Y, nominated by a party leader, is the best person who might have been chosen, or that Mr Z or Ms P would have been better, but we are entitled to look beyond any question of donation (which is neither a justification nor a bar) for other evidence that they would enhance the reputation of the Lords. And we have said that. You made a recommendation in your last report that we should discuss criteria with the parties, and I can see a case for that, but that would be in the context of having an Appointments Commission which was set up by Parliament—which was one of your other recommendations which I strongly agree with—which was statutory and where these things were thrashed out and discussed. It is a bit difficult for us, in our position, which is a temporary, holding position. It is constantly being prolonged, because reform of the House of Lords never seems to happen, so we coast along doing our best in the job that we have been set to do, but if it were a statutory Appointments Commission—which I am sure it should be if there are going to be any nominations to the House of Lords—then, yes, the criteria should be discussed. They should be debated and discussed with the parties and worked out, and there might well be other criteria beyond the ones on which we ourselves have said we are operating.

  Q152  Chairman: This is the final question before I hand over. There is a perception, which is based on good historical evidence, that there is a strong correlation over time between giving money, large amounts of money, to a political party and finishing up in the House of Lords. The evidence of the correlation is incontrovertible. It has been demonstrated statistically over and over again. The police investigation went into that, as it were, correlation through looking for example, failed to find enough to stack up evidentially, and yet we know the connection is there. I think people have difficulty reconciling the historical evidence about the connection between donation and peerage with the statement that says, "The system for preventing that happening is a robust one". As it were, the two things cannot both be true, can they?

  Lord Stevenson of Coddenham: I am not sure that this is ground that is really our job to enter and I would rather avoid that question. I think you could reconcile the two, Chairman, but it is getting us into a sort of metaphysical discussion. Perhaps I might just talk about our role in that. Our role, which is a relatively minor, small one, is to take the nominations, to get the tightest possible assurances from the parties—and you will notice that over the years we have tightened that up, and tightened it up—putting themselves behind the coincidence of the connection between money and award—and you can be as cynical or uncynical as you like about it—and to satisfy ourselves of two things (a) that the human being who has made the loan or the donation was a credible nominee even if they had not made their loan or donation—which is not the same as saying they would have been nominated; we cannot judge that—and (b) satisfy ourselves that they would pass our propriety tests. That is our role. It is quite a narrow one. If I put it in the context of what you have said, that could be consistent—and I have no knowledge of this—with a rather sinister interpretation of the relationship between money and honours. It could be consistent with a society where, yes, people give money, perhaps it brings them to attention, but there is no causal effect. It is not for me to judge. That is our role: checking to satisfy ourselves that the human beings were credible nominees in their own right and to satisfy ourselves that they pass our propriety tests. I think we have tightened up quite hard on both of those. That is as far as we can go without change in the system.

  Chairman: I agree about the tightening up. Tightening up has been important in this whole process, and it should not be underestimated. In some sense, the lesson of what has happened is how more effective the regulatory system has become, which is not often said. I think you have played a large role in that. Let me bring some colleagues in, if I may.

  Q153  Jenny Willott: You were just saying that candidates must be in good standing with the regulatory authorities. What sort of information from the authorities would disbar somebody from being a candidate?

  Lord Stevenson of Coddenham: I am loath to get specific. Let us just talk about what we do. Candidates sign to give us permission to make inquiries, whatever we want, and we will use common sense about where to go to within government. I am making it up, so I hope there has been no one like it, but if you are a large arable farmer, big in bio-fuels in East Anglia we would certainly go to Defra to take the case, and then we would certainly go to the Revenue and the security services and look at police records, the Home Office, et cetera. In its most general form, if one of the security services raised questions about someone, we would want to look at them very hard. We all have our moments with the Revenue—at least, speaking for myself, I do, and I am sure others too—but if it became plain that there were some big, big issues with the Revenue, we would just want to look at that. We would take our time, being very thorough. It is just obvious feedbacks of that kind. We of course believe in the rehabilitation of the offender, et cetera, et cetera, but, clearly, if someone has a criminal record for doing a number of things we would reasonably want to look at it a bit more. If there had been some great scandal or somebody in the department said this had happened 10 years ago, we would want to understand it. So it is fairly major things.

  Q154  Jenny Willott: You also talk about it being important for people to enhance rather than diminish the reputation of the House of Lords. I want to ask you about Lord Laidlaw and some of the issues his case raised, both in terms of the regulatory authorities and in terms of his contribution to the House of Lords. You changed the rules in 2005 in your vetting process so that people had to be already resident for tax purposes in the UK before you would vet them. Was that as a direct result of his nomination?

  Lord Hurd of Westwell: I do not think so. It was something that was in there and we wanted to pin it down and make it clear. We have applied it before but we have not made it clear.

  Lord Stevenson of Coddenham: Happily, we do not come across many people who are nominated who have that problem. If something had been in the air, we could. It is obviously something I could check out with the officials and let you know, but I do not think so.[1] I think we were on our way. But that sure settled it.

  Q155 Jenny Willott: Has that change meant that some potential problems with other nominations have been avoided?

  Lord Stevenson of Coddenham: I do not know. I think it is fair to say that the world is not full of people paying tax offshore who nominate themselves to the House of Lords. That is mainly because they tend to live offshore. The world is full of some quite rich, powerful people who are clever about their tax arrangements. I would guess, but I cannot ever prove it, probably yes, over time.

  Q156  Jenny Willott: We are looking at what needs to be done and the lessons that can be learned from some of the incidents that have happened already. From the situation with Lord Laidlaw, are there lessons that could be learned from his behaviour that could be taken into account in future when looking at nominations for peerages? It seems that the system so far is: a gentleman's word is his bond. I am not sure whether that is accurate or that is reliable, but are there things that could be done to tighten up the system that should be as a result of this particular case?

  Lord Stevenson of Coddenham: I think the main lesson is a simple one—and I am not quite sure of the cause and effect—which is that we can avoid there ever being this situation again by doing what we have done, which is saying we will only consider people who are tax resident in the UK. Beyond that, not really. It raises issues. You could say that our job stops with the nomination, and we took the view in this situation that it should not and we followed through. That might raise questions about our powers and our roles. There are questions which I would rather consider in the general than the specific, very interesting questions, that it is very difficult for anyone to leave the House of Lords either by his or her wish or other people's, and there is an issue there. That would be my general view of the issues raised. I would make one point, by the way, at this moment we are doing what we fundamentally set our face against: talking about a particular person. I would like to make the point to the Committee this is the exception that proves the general rule: in the situation we found ourselves, we had virtually no choice, partly because Lord Laidlaw made certain things public, partly because there were FOI inquiries which resulted in ad hominem things being said. But I am just making that point: we do not, as a matter of agreement, and we are very unhappy about talking about individuals, precisely because of the effect it may have on future nominees not being completely frank with us.

  Lord Hurd of Westwell: Obviously we have no penal power. The only power we had in a case like this was that of publicity and we exercised that. In one way or another, Lord Laidlaw no longer takes part in the proceedings in the House of Lords.

  Q157  Jenny Willott: You have made it clear in some of the letters that have been released under Freedom of Information that had you been aware that his tax status would be changed and he would remain a non-UK resident, you would not have put him forward as a suitable nomination. Given that you feel that that was the case, do you feel there is a loophole there that does show there are problems in the system?

  Lord Stevenson of Coddenham: There is not now because it can never happen again. If you are saying, ever so politely, were we naive, was I naive, to take that gentleman's word—it is in the eye of the beholder—this is a very odd situation. The answer to that could be yes, but I could also say, frankly, that the reasonable calculation would be that for someone to say, "I am going around to my accountants to come onshore now" when so much was at stake, if he or she—obviously generalising it—was then not going to honour that, would be such a stupid thing to do, why would they do it? However, it is now academic. If there was a loophole—and there was: it happened—there is not now. By the way, just to be absolutely clear, I very much hope, and I do not really know Lord Laidlaw—I have met him a couple of times—that he will reflect on it and will see fit to pay whatever back taxes would have been due. I hope that is going to be the outcome.

  Q158  Jenny Willott: You have already mentioned that your role is, you feel, finished when you have made a recommendation on the nomination. Given that you have been talking about the role that political parties have in making nominations and that it is their role to assess suitability, in cases where somebody's suitability or credibility comes into question after they have been nominated, is there a mechanism or something that should be put in place so that it gets referred back to political parties if it does not go back to you?

  Lord Stevenson of Coddenham: I think you are asking the question of could or should the Commission's remit be widened—rather as the Chairman was implying 10 or 20 minutes ago—to include wider criteria, which would probably be criteria of suitability. We do not. It is not our job to have a view on this as a Commission—so I can talk personally and Douglas can talk personally—because we have this quite precise, small role. I would not use words like "political hacks" or anything like that, but I personally think it is entirely feasible to imagine, if we remain an independent body, the Prime Minister, or, if we are a statutory body, a statute to. I can imagine it being feasible and I can imagine some quite strong arguments for it, for our role being widened, in some sense, to exercise quality control, call it what you will, on people being nominated. I have read various suggestions that parties could give lists of more than the number of peerages to be appointed and so on and so forth, but, yes, I think it is perfectly feasible, personally.

  Lord Hurd of Westwell: We mentioned all of this on the Royal Commission. The wheel goes round and round on this subject. You will see that we were very adventurous there. We made suggestions so that after consulting the party leaderships about all party nominations, people who are outside the respectable centre of a party, eccentrics of one kind or another, might find a perfectly good logical place in the House of Lords even though they remained strongly political. There is no reason why they should be outlawed from public life simply because they were out of favour with the whips or the leader. But that was more adventurous and our role is miles and miles from that, as Dennis Stevenson has been saying. Once we get around to discussing seriously, as opposed to cosmetically, the future of the House of Lords, the nominated element, if there is one, this should be one of the main subjects of discussion. I think there is room for a bit more sophistication in the choosing of political peers, working peers.

  Q159  Jenny Willott: Should there be a way for people to leave the House of Lords?

  Lord Stevenson of Coddenham: As Chairman of the Commission, I do not really have a view, and I personally have not really thought about it.

  Lord Hurd of Westwell: There is, in effect. You ask for leave. It is an ancient way of doing it.