Constitutional Reform and Governance Bill

The Committee is grateful to the Secretary of State for his lucid explanation of a rather complicated series of amendments, which seek to implement the Kelly recommendations. Two months ago, there was some confusion in the Government as it was not clear that we would get the changes before a general election. Immediately after the report was published, all the party leaders said that it should be implemented in full. Although most of it was about the arrangements for IPSA, which are its responsibility and not ours, important proposals were designed to strengthen it, which the Committee on Standards in Public Life identified as requiring primary legislation. However, that was not mentioned in the Queen's Speech and, when cross-examined on the matter, the Prime Minister looked somewhat baffled. Then there was confusion, with half the Government claiming that no new legislation was necessary and the other half promising to do everything that was necessary. The Leader of the House appeared to take both positions at once. At business questions on 19 November, she conceded that some of the proposals would require legislation. She then said that they could be introduced "next Session", but subsequently seemed to backtrack by suggesting that no legislative changes were necessary""because the power in question already exists under the Parliamentary Standards Act 2009."—[Official Report, 19 November 2009; Vol. 501, c. 136.]" We are therefore grateful for the smack of firm government from the Secretary of State, who has decided that we need to make progress this afternoon and in this Session. As we have said throughout, it must be right for us to do everything in our power to ensure that the next Parliament can start with a clean sheet. While the Government still have a monopoly on the House's time, it is up to them to ensure that we get through all the reforms that are needed to allow the next generation of Members of Parliament to do their jobs, without being associated with the bad practice that has left the current Parliament so badly discredited. The amendments deal with the concerns that Kelly raises in his report about the remit and structure of IPSA. As he says, the new regulator "bears the scars" of the haste with which the Parliamentary Standards Bill was expedited through Parliament last summer. Many voices in both Houses urged caution at the time. Although we agreed with the Government on the need to demonstrate our commitment to urgent reform, it was inevitable—as my hon. Friend the Member for Rutland and Melton (Alan Duncan) said at the time—that we would need to revisit the Bill at a future date. Given that Parliament spent a great deal of time last July trying to sort out some of the constitutionally challenging aspects of the Bill—particularly those to do with privilege—it is right that we return now to look more closely at the role and responsibilities of IPSA. Much of what is before us has our unconditional support. We agree that the sanctions regime should be toughened, as it is in new clause 74, which would give IPSA the power—which the House exercised a few moments ago—to dock money from the resettlement grant for serious breaches of the allowances regime. We wholeheartedly endorse the move to give IPSA responsibility for determining and administering our pay and pensions, for which we have consistently called, to ensure that MPs no longer have a hand in our own remuneration. We should note that, despite a newspaper article last week, asserting that colleagues could be awarded a back-dated pay increase by IPSA, that is not possible under new clause 73, which states in proposed new section 4A(5) to the Parliamentary Standards Act 2009 that a salary determination""other than the first determination"" may have retrospective effect. I doubt whether Sir Ian Kennedy would oblige in any case, and I shall return to pensions in a moment. We accept new clause 76, which will return to the House responsibility for maintaining the Register of Members' Financial Interests and the code of conduct. As we warned at the time, giving IPSA responsibility for those matters could result in privilege disputes, which would be an unwelcome distraction from IPSA's main tasks. We support new clause 71, which appoints lay members to the Speaker's Committee for IPSA, which is an example of good practice. Their input to the Committee's deliberations will be helpful to broaden the base of experience and viewpoint. We also welcome new clause 72, which gives additional statutory duties to IPSA to carry out its functions and to support Members in their parliamentary roles in an""efficient, cost-effective and transparent"" manner. A number of colleagues raised legitimate concerns about IPSA's running costs during the debates last summer. Sir Ian Kennedy's consultation document gives us an idea of how IPSA will operate, including on pre-scrutiny and permission giving, scrutiny of claims, appeals, post-claim audits, regular audits of staff working practices and office set-ups, and administration of a loan scheme for MPs, to which we will today add responsibility for paying and setting MPs' salaries, and administration of pensions. IPSA will also run a very substantial property empire if the proposals for renting accommodation for MPs go ahead. In short, the processes being developed in IPSA are extremely wide ranging and likely to require a large staff to implement. We need to ensure a proper balance between the necessary checks and scrutiny of claims and value for money for the taxpayer. The Government have so far not provided costings for the likely extra administrative impacts that the proposals will have on IPSA. A money resolution was made earlier, but no figures were attached to it. Will the Secretary of State give an estimate of the additional costs of the proposals before the Committee? We have no concerns about new clause 81, which repeals the sunset provisions originally included in the Parliamentary Standards Act 2009. They were originally included because of the extraordinary haste with which we dealt with that measure, but the opportunity to return to the matter now, afforded to us by Kelly, allows us to put those concerns to rest. I welcome those measures, but I shall now turn to the Government proposals that merit further attention, and it would be useful if the Secretary of State responded to some of the points I am about to make. New clause 70 and new schedule 6 introduce the most radical departure from the 2009 Act by scrapping the external Commissioner for Parliamentary Investigations and replacing him with an internal compliance officer. That relates to recommendation 44 in the Kelly report. The Committee on Standards in Public Life was concerned about the confusion that would be caused by having a Parliamentary Commissioner for Investigations examining financial wrongdoings, and the Parliamentary Commissioner for Standards looking at cases in which Members have, for example, breached the code of conduct, unless that breach related wholly to expenses or the rules on financial interests. Of course, the Committee has a point. However, does new clause 79 create an equal source of duplication? That was mentioned in earlier exchanges. Proposed new section 10A(3) of the 2009 Act states:""Nothing in section 9 to 9B (or Schedule 4) affects the disciplinary powers of the House of Commons."" I think I understand what the Government are aiming at, but the proposal means that Members who breach the rules can be submitted to the disciplinary processes of the House, including possible suspension, and then be liable to be turned over by IPSA for the same offence. That strikes me as double jeopardy, and I wonder whether the Government think that desirable. On top of that, we have IPSA's compliance and enforcement regime, which, as envisaged by the proposals, raises some rather profound issues. Under schedule 2 to the 2009 Act, the commissioner for investigations was to be appointed by Her Majesty, with the terms and conditions to be determined by Mr. Speaker. However, under new schedule 6, the compliance officer, as the Secretary of State said, will be appointed by IPSA, with terms and conditions to be determined by IPSA. Indeed, proposed new schedule 2(9) to the 2009 Act will allow IPSA staff to double-job with the role of the compliance officer for up to six months if there is a vacancy. Before, we had a proper firewall between the investigator and the day-to-day administration of IPSA, but that has now gone. This is important because, in my experience of cases in which Members have been accused of a financial misdemeanour, sometimes the source of the error can be traced to misdirected advice from the Fees Office, as the Secretary of State mentioned. Two recent Standards and Privileges reports underline this. In one, the Parliamentary Commissioner for Standards notes that the Department of Resources was forced to conclude that "in retrospect" advice given to one Member was "flawed" and that the Member""cannot be blamed for taking the advice he was given"" In another, the Committee is more scathing, concluding that""the House authorities' failure to act on the deadline they had themselves set for"" the Member""to bring his second home arrangements within the revised rules was equally serious and that it allowed a highly unsatisfactory state of affairs to continue for far too long. This failure does not absolve"" the Member""of his responsibilities, but it is something that causes us great concern"." The Government may be proceeding on the basis that IPSA will so efficiently administer the new regime that such misunderstandings will not recur. I think that that would be a heroic assumption. In the provisions on "Investigations", in new clause 77 (9)(6), we see that, in the event of an investigation, the compliance officer will be asked to prepare a statement of his original findings which may include""findings about the role of the IPSA in the matters under investigation"." As drafted, the compliance officer will therefore be asked to pass judgment on either the rules or people within the organisation by which he is employed. Moreover, subsection (9A)(1) states:""IPSA must determine procedures to be followed by the Compliance Officer in relation to investigations"." However, that would begin to compromise the independence of the current system. At present, the Parliamentary Commissioner for Standards follows his own rules, rather than those provided by the House, but under the Bill we would have a compliance officer appointed, employed and thus constrained by IPSA. That is exactly what the Commissioner for Standards warned against in evidence to Kelly. The Committee dismissed the concerns by citing the satisfactory working of "similar compliance roles" in HMRC. That is not the best comparison. In HMRC, the adjudicator works as a referee holding HMRC to account on behalf of its customers—the taxpayers. That is the normal role of a compliance officer in the financial services industry. But this is not what we are asking of this compliance officer, who would be holding the customers to account on behalf of the regulator, even in situations where the regulator itself had erred. This debate is taking place against the backdrop of Legg and Kennedy and the appeals, some of which have already leaked into the public domain. As has been demonstrated by the press reports, the interpretation of the rules is a complex task. In some cases, the Fees Office, Members, Legg and Kennedy have all reached different conclusions about the same case. However hard IPSA tries to remove any ambiguity from the new regime, the rules will never be codified and there will always be grey areas. That is why we all thought back in July that it was so important to have an external investigator who has the independence to come to a final, considered judgment. I wish to make one further point about the compliance officer. Although the original Act stipulated a role for a Parliamentary Commissioner for Investigations, the position was not advertised or appointed at the same time as Sir Ian Kennedy or the other members of IPSA. It may be that the Government were envisaging that John Lyon would take over both roles in the future. Whatever the reason, the idea of a Commissioner for Parliamentary Investigations was quietly dropped after Kelly. As things stand now, IPSA will not be able to appoint the new compliance officer until after Royal Assent has been given to this Bill. Given that IPSA aims to be fully operational by the beginning of the next Parliament, do the Government think that they will be able to fill the compliance officer post in time? If not, what will be the procedure for complaints? We also left hanging in the air the question posed by my hon. Friend the Member for Worthing, West (Peter Bottomley) about dual mandates. Unless something happens to the rules within the House, it will still be possible for a constituent to make a complaint to the Parliamentary Commissioner for Standards at the same time as a complaint is being considered by the alternative route. Those consequential issues need to be addressed. In fairness to the Secretary of State, he has tried to address some of the issues that I have just been talking about by tabling new clause 75, which gives MPs the right to appeal to a first-tier tribunal. That is a welcome step, but the first time the tribunal finds against the compliance officer, as it could under new schedule 7, there is a risk that the whole compliance system could be compromised. I want briefly to return to new clause 77, on investigations, and note that proposed new sections 9A(2)(b) and 9A(3) of the Parliamentary Standards Act 2009 give Members under investigation an opportunity to call and examine witnesses. That was not contained in the Kelly report and it is not current practice. It would be helpful if the Government could explain the rationale for what is a fairly radical change in the process and say why it is a good idea. There are two concerns about new schedule 7. First, what is the source of paragraphs 1(4)(a) and (b) of proposed new schedule 4 to the 2009 Act? In the event of an overpayment, they allow IPSA not only to charge interest but to ask Members to bear the costs""incurred by the IPSA in relation to the overpayment, including the costs of the Compliance Officer"." That is an entirely new provision—there is no mention of it in Kelly—and what it allows for is not current practice. Any charge incurred could be extremely significant. I have known some cases, from when I was the Chairman of the Standards and Privileges Committee, that ran into many thousands of pounds. For example, the inquiry into the hon. Member for Bethnal Green and Bow (Mr. Galloway) involved considerable expense and a large amount of fees for translation. We also note that the adjudicator's services are entirely free of charge, whatever the verdict. What is the Government's reasoning for including paragraphs 1(4)(a) and (b), which were not part of Kelly? The whole procedure is just beginning to look rather bureaucratic. IPSA has to "prepare guidance" on the disciplinary regime, under paragraph 2(1) of proposed new schedule 4 to the 2009 Act, as well as having to consult the Speaker, the Leader of the House and other people, all within a short space of time. I contrast the relative speed of the current disciplinary process, whereby a case can be resolved within a matter of weeks, with the rather cumbersome, top-heavy and, I fear, slow-moving new regime that we are about to introduce. Let me briefly mention new clause 87, standing in my name and that of my hon. Friend the Member for North-West Cambridgeshire (Mr. Vara), about which the Secretary of State spoke movingly. [Interruption.] He spoke movingly, but he was unable to accept it. New clause 87 would give IPSA a duty to offer advice to Members on claims and seeks to implement a recommendation in the Kelly report—recommendation 44, I think—that IPSA should be able to give advice to Members and "promote good practice". It would be a waste of time and resources if Members were left having to interpret the rules as they saw fit, only to have claims continually rejected. The current IPSA consultation document is silent on giving advice. However, I am grateful to the Secretary of State for saying that he would have another look at that before Report. A considerable influx of new Members is expected in the next Parliament who will be required to get to grips very quickly indeed with a new system. For that reason, if for no other, IPSA needs to have the capacity and ability to give them guidance. There are already stories of some candidates pledging to avoid claiming expenses altogether, owing to the confusion of events over the past year. MPs should not feel discouraged from legitimately claiming for expenditure incurred in the course of their duties. That point is underlined in the IPSA consultation. Kelly has suggested that advice to Members should be channelled through the compliance officer, but that would be illogical. The title "compliance officer" implies that he will audit, review and determine outcomes, not offer advice. If a compliance officer gave advice about a claim that was later investigated, he would have compromised his role in any inquiry. We do not want to return to the culture of secrecy and collusion that may have existed in the past, but there is a recommendation in the Kelly report about giving advice, and we feel that it should be acted on. Let me turn to new clause 84 and new schedule 9, and return to pensions. Kelly is quite clear that salary and pensions should be taken out of the hands of Parliament, and we agree. However, although he is clear-cut on the need for a total separation between IPSA and Parliament on pay, there is much more ambiguity in how he envisages IPSA handling pensions. As he says:""the independent regulator may decide, as a matter of practicality, to contract out the day to day running of the parliamentary pensions scheme to the existing professional administrators."" However, real concerns are being expressed by trustees of the fund about the Government's amendments, as drafted. We discovered that the Government had not been able to carry out any consultation before the amendments were tabled, and I am glad that that will now urgently take place. In moving to the new scheme, as outlined in new schedule 9(3), will Members have the same safeguards in relation to the benefits that they have accrued over time as would employees of a company that is part of a takeover bid? I think that the Secretary of State gave such a guarantee in his remarks, but it would be nice to see it enshrined in the legislation. We raise a further issue in our probing amendment (a). The new schedule as it stands seems to imply that no MP or ex-MP will even be consulted in the strategic oversight of the pension scheme. My hon. Friend the Member for Worthing, West said that he knew of no parallel in the private sector where such provision exists. Although the measure does not say so explicitly, it does not specify who the trustees should be. It seems odd that, once the fund is transferred into IPSA's competence, the appointment of the trustees is to be left entirely up to IPSA, which will need to consult only the Prime Minister. One wonders what the Prime Minister's interest in this matter is, as opposed to everyone else's.