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Baroness Hollis of Heigham: We do not disagree that in terms of the amendment this is an appropriate description of how the board should operate. As I said, in that sense it is apple-pie stuff: being efficient, economical, resourceful, full of integrity, and so on. The point is that within the framework of general administrative law, that is how an NDPB must operate; those are its responsibilities; those are its requirements; and those are its controls. Therefore, the only difference between us is whether or not we spell it all out on the face of the Bill. We say that that is not necessary because that is already the framework within which that body must operate.
As regards the FSA, the difference is that the FSA is a statutory body; it is not an NDPB. It has power to make its own legislation; it is not accountable to Parliament in the usual way; and it does not come within the framework of general administrative law which is the vocabulary, the language, the narrative, if you like, within which those bodies will operate. That is the basic distinction. It is a distinction that was explored earlier this evening.
I assure noble Lords that I do not believe that there is any difference in principle between us. We do not believe that this is necessary on the face of the Bill because to perform its duties properly and diligently it has to perform exactly in the way described by the noble Lord, as general administrative law requires it to do.
Lord Higgins: My Lords, why did the Minister say that it was unworkable?
Baroness Hollis of Heigham: My Lords, we could have fun with some of the words in this clause; for example,
"the need to minimise any adverse effects that may arise from anything done in the need to discharge of those functions".
One could have questions about conflicting interests between various parties, the need for openness with regard to its activities—we have problems there with tax information, and so on, which again would probably make it unworkable—and legal provision information. If the noble Lord really wants me to, I could have a go at most of the paragraphs of the amendment. However, I do not believe that the amendment adds anything to the way in which, subject to general administrative law and good practice, the regulator and the pension protection fund are required to operate. I suppose I think it is redundant.
Lord Higgins: My Lords, I do not find that to be a satisfactory reply, even at this hour of night. The noble Baroness has not explained her opening remark that the provision was "unworkable", which is the kind of phrase which ministerial drafts tend typically to use. She has not demonstrated how it is unworkable; still
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less has she demonstrated why the FSA finds that its provisions are unworkable. I really think that there is a fairly close analogy with regard to that.
Having said that, I would not wish to pursue the matter this late at night. However, I shall wish to consider it rather more carefully again. I thought the Minister gave an unsatisfactory answer. There is a case for giving the provision a statutory framework, rather than leaving it to be decided after the matter has passed into law. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lucas moved Amendment No. 133:
The noble Lord said: My Lords, we had a long discussion in Grand Committee about this rather strange and unusual arrangement for a non-executive committee. The noble Baroness assured us that there was a precedent in government that worked beautifully, but that she would go away and check that that was so and that everything was tickety-boo. I think that the Bank of England is the only example of this arrangement having been perpetrated in the UK. I should very much like a report from the noble Baroness on her researches. I beg to move.
Baroness Noakes: My Lords, I should like to say a couple of things before the noble Baroness replies. Since we discussed the matter in Grand Committee, I have gone away and looked again at the two examples that were quoted: first, the Bank of England; and, secondly, the FSA. The FSA has a rather restricted set of functions for its non-executive directors. If you look at its annual report you will find absolutely no mention of it. The FSA operates itself as though this requirement for a non-executive committee does not exist. You can find in an obscure bit of the website a typed-up government statement that there is a non-executive committee which repeats the Act, but it appears to have no impact whatever on how the FSA operates.
It is some years now since I was associated with the Bank of England, but in its annual report there is a governance and accountability statement which explains how "Nedco"—the non-executive committee—actually works. As I explained to the Grand Committee, Nedco is chaired by its senior non-executive and has the executive to the bank in attendance. The court then meets. Both meetings—Nedco and court—have the same people. They do not have separate people, so the concept of Nedco as a separate organisation has no meaning in the Bank of England. The final sentence in the particular paragraph in the Bank of England's annual report for 2004 says that,
"from time to time Nedco has a private meeting without the executive present to consider matters such as its own annual report".
The net effect of all that is that the Bank of England operates as though the Act did not exist. It does not have a separate non-executive committee in any meaningful sense at all.
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This grand experiment was brought in post-1997. It does not exist throughout the public sector and did not exist before 1997. It was brought in only by those bodies that the Treasury had significant influence on in the early days of the Labour Government.
I suggest to the Minister that this experiment has been a failure and should not be visited on all future bodies that are created by government. We should go back to unitary boards, which has been the conventional model for all public sector bodies for as long as I can remember.
Lord Higgins: My Lords, I very much agree with my noble friend. We discussed this matter at some length in Grand Committee. I think that the effect of creating this sort of subgroup tends to be divisive. On balance, we think that it would not be appropriate to go down that route. I agree with my noble friend.
Baroness Hollis of Heigham: My Lords, the first question asked of me was what research we have done. Basically, that was the research that I was going after. I was just checking back on what I said in July. I am certainly willing to seek advice and briefing on the effect on the Bank of England, but in all the briefing that I have read, I am led to believe that NDPBs, as they are now developed by government, will proceed down that road, unless there are very good reasons to proceed otherwise and that that is where best practice lies, as based on both the Higgs report and the report on corporate governance.
I know that it is late at night and, in any case, I defer to the Baroness, Lady Noakes, who has served as a non-executive director of the Bank of England, but I have briefing here on the Bank of England structure that suggests that this is an appropriate model for us to follow.
As I said, we discussed it at great length and there was perhaps more common ground between us than has been acknowledged. I hope that, as a House, we can agree that, first, as a body corporate, the PPF needs a unitary governing board that is empowered as a whole to make decisions on the strategic direction, management and finances of the organisation.
Secondly, I hope that we agree that the role of the non-executive members of the board is distinct from that of the executives and should be recognised as such. Thirdly, I hope that we agree that the PPF is a new kind of organisation with an especially sensitive remit. Therefore, as I say, we have produced a structure that we believe is consistent with the Higgs report and the Combined Code on Corporate Governance. We think that the non-executive committee will have a key role to play: for example, in the strategic direction of the board; in ensuring that the board meets its objectives while ensuring that its financial affairs are properly controlled; and in monitoring the board's adherence to its reporting requirements to the Secretary of State.
We think that the board's performance will therefore be strengthened by having a formalised non-executive committee, but we see that very much as complementing and not subverting the meetings of the
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board as a whole. That is better for transparency than having an informal system of get-togethers among non-executive members that would not be guaranteed to encompass all the roles that we envisage, and where they were not required to account for their actions in the board's annual report—for example, in scrutinising performance.
I could go on, but I did what I said I would do, which is to research the structure of the Bank of England. I am led to believe that that was an appropriate model for us to follow. The noble Baroness shakes her head; she may be right. I would not wish to engage in hand-to-hand fighting about the Bank of England, for she has infinitely greater experience of this than I, but all the guidance that we are now receiving from both the Higgs report and the combined code suggests that this is the way to go. That is why I fear that the Government have not heard anything tonight or in Committee to suggest that we should change our mind about the clause.
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