Non-executive members

I am advised by my fellow Chairman, Sir John Butterfill, that you may wish to move amendment No. 14 formally, Mr. Fallon.

I do not wish to move amendment No. 14, but I hope to catch your eye if there is a stand part debate, Mr. Olner.

Question proposed, That the clause stand part of the Bill.

I want to raise three technical, house-keeping points about the clause. I fully recognise that the Minister might not be able to respond to my points on his feet, so I should be quite happy for him to answer them in the course of our proceeding. First, can non-executive members of the board be reappointed? The wording of subsections (1) and (6) leads me to conclude that they can be reappointed, although on first reading of subsection (1), one might get the impression that they can serve only a five-year term. I take it from reading both subsections together that a member can be reappointed, although it would be useful to have that clarified. The explanatory notes on the clause refer to

“the rules for the appointment of, resignation or dismissal of, and reappointment of, non-executive members”.

I hope that I am correct in my assumption, although if I am not, I hope that the Minister can clarify the matter.

Secondly, there is the issue that amendment No. 14 would have raised, and which applies more generally, of dismissal under subsection (4) seeming to be entirely summary. I assume that the non-executive members are not employees. If they are, I am at a loss as to how to reconcile the provision allowing them to be summarily dismissed—I shall not go over the arguments about misbehaviour—without having the normal recourse to the protection of employment law. Perhaps the Minister will advise me that they are not employees, but enjoy a different employment status.

Finally, there is the issue of compensation for dismissal under subsection (5). Having set up the independent board and having been told throughout  the debate that it will be independent, that the Treasury will not be running it and so on, I am disappointed to find out that the board is not allowed to deal with compensation for summary dismissal, but that it has to be approved by the Treasury. I understand the reason for protecting public funds, but it does not say much for the independence of the board if it cannot deal with employment matters, which all have to be regulated and directed by the Treasury.

I want to tuck right in behind the hon. Gentleman on this. Because of the compensation provisions in subsection (5), and without rehearsing the debate on amendment No. 14, I urge my hon. Friend the Financial Secretary to reconsider subsection (4)(d) and adopt the Fats Waller approach—“Ain’t Misbehavin’”. The word should be removed or changed to misconduct. We referred earlier to misconduct. That is a potential minefield, which could lead to the sort of compensation payments that the hon. Gentleman mentioned. That word might be used in a railway or energy Act. As a lawyer, I have to say that it is most unsatisfactory, and I suspect that the hon. Member for South-West Hertfordshire would agree. Misbehaved does not need to be in there; it should say “misconduct” or nothing.

Perhaps I can deal with the four points that have been raised now, rather than in writing. On the first point made by the hon. Member for Sevenoaks, yes, non-executive members of the board can be reappointed. It is a feature of the guidance issued by the Office of the Commissioner for Public Appointments. I have stressed that we will follow the procedures and the guidance. If he will permit me to reflect on the need for clarity in the legislation about the fact that reappointment is possible for non-executive members, I shall do so.

For what it is worth, I agree with that interpretation. Does the Financial Secretary share my concern that where there is a power of reappointment, serving members of the board might be perceived to feel some pressure to comply with the person or entity making the appointment—in this case, as it is currently drafted, the Treasury. The benefit of reappointment is that expertise is retained. Does he recognise that concern?

I recognise it only in the most conceptual way. In practice, there is a process for the appointment of board members selected by the Treasury through the Office of the Commissioner for Public Appointments, which is well established and well regarded. The Treasury Committee has said that it will give sufficient independence to those appointments. If we get those right, the composition and conduct of the board will rapidly establish its authority and its credibility, and will demonstrate the distance that it has from Ministers—a distance at which it will be able to set the statistical system. The conceptual problem that worries the hon. Gentleman will prove not to be a problem in practice.

On the second point raised by the hon. Member for Sevenoaks. Non-executive members of the board will not be employees. In the event of a problem, they will have recourse to a judicial review or, conceivably, the  ombudsman. The answer to his third question is that these are matters not of employment, but of appointment. The Government rightly remain involved in the appointment, as we have discussed, hence the wording of subsection (5)(b).

My hon. Friend the Member for Wolverhampton, South-West has an endearing habit of not giving up on something that he feels is not correct. We had a full discussion this morning, but he is clearly not satisfied with the fact that there are legislative precedents for the criteria concerned. Neither is he satisfied that the provision is an attempt to bring up to date some of the terminology that we use in legislation. As a lawyer, he will know that the equivalent of misbehaviour is malfeasance. Essentially, they mean the same thing. If he is disturbed by subsection (4)(d), I will take a fresh look at it to see whether there is a case for making amendments that could achieve precisely the same effect but avoid the use of the term misbehaviour, which he does not feel is appropriate for use in legislation.

I am grateful to the Minister for answering most of those points. I hope that he understands our concern that we want the non-executive members to be as independent as possible; they should not have to be skating carefully all the time. I hope that he will reflect on the drafting, which—I think inadvertently—gives the impression that the members can be reappointed only on the whim of the Treasury and can be summarily fired for the slightest misbehaviour. I am grateful for his offer to re-examine the drafting.

Does hon. Gentleman not recognise that the examples that I suggested might constitute misbehaviour were certainly not trivial or light? They were very serious indeed. The concept of misbehaviour as framed in the Bill is by no means a light offence.

I understand that. As the rest of the Committee is suggesting, it would have to be reasonably serious to justify summary dismissal. I do not want to over-egg the issue, but when we pressed the Minister earlier he went into the area of misconduct. We spoke this morning of corruption and violence, in which case I do not think that compensation would be paid for loss of office; it would be strange if it were. Today, he has introduced the concept of malfeasance, the proving of which leads down a tricky legal path. I urge him to have another look at the drafting. He may be able to strengthen it in all our interests.

Question put and agreed to.

Clause 4 ordered to stand part of the Bill.