My Lords, I thank the noble Lord, Lord McKenzie, for tabling these amendments on the establishment of the body, and the noble Baroness, Lady Coussins, and my noble friend Lord Trenchard for their contributions. The approach we have taken to the legislation is to create a high-level framework that enables the body to be responsive in its focus. I welcome this opportunity to talk in more detail about the transition from the existing services and how the body will operate going forward.
Amendment 1 seeks to specify requirements that must be met in relation to the single financial guidance body’s business plans. Those requirements would be that business plans should cover a forward period of a minimum of three years and be updated annually; plans should be informed by an assessment of consumer need; and plans should be subject to public consultation.
The Department for Work and Pensions’ arm’s-length bodies are required to produce corporate strategies covering a forward period of three years. Corporate strategies must incorporate a detailed business plan for the first year. The business plan is then updated annually and discussed with the sponsor department before sign-off by the body’s board. Corporate strategies and annual business plans are published and placed in the Library of both Houses. These requirements reflect Her Majesty’s Treasury guidance that applies to all arm’s-length bodies across government. As for other
Department for Work and Pensions-sponsored bodies, these requirements will be written into the framework document that will be developed in the run-up to launch and agreed with the chief executive officer of the body. It will be reviewed regularly thereafter and will be published by the body.
The other requirements specified in Amendment 1 would make it necessary for the body to carry out a comprehensive assessment of consumer need to inform its business plans, and to consult on its business plans. I agree it is important for the single financial guidance body’s plans and activities to be informed by robust data, and information about its customers and their needs. There will also be aspects of the body’s work on which consultation will be helpful. Indeed, existing services have been developed and evolved based on data, research and consultation. We will ensure that this intelligence and experience is not lost in the transition.
As part of its functions, the body will liaise with stakeholders at strategic and operational levels all the time. This will include partners across the financial services industry, the devolved authorities and the public and voluntary sectors, informing the body’s thinking as it puts its plans together. The existing services regularly consult on matters which seek to assess consumer need without a statutory requirement to consult; for example, this week MAS published a consultation on debt advice commissioning. The body will work in a complex landscape. Without consultation on its plans and assessment of consumer needs, it would be failing in its objectives, set out in Clause 2(8), if it did not continuously assess the needs of the public and consult widely on its activities.
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With regard to timing, the aim is to appoint the board members of the single financial guidance body—that is, the chair and non-executive members, and the chief executive and other executive members—as soon as the legislative process allows. So as not to pre-empt parliamentary authorisation, the Treasury’s Managing Public Money sets out that expenditure on the implementation of a new service is allowable only before Royal Assent if specific conditions are met. These include that the Bill must have reached Second Reading in the Commons; that it is virtually certain to achieve Royal Assent with minimal change; and that early expenditure must be genuinely urgent in the public interest. If these conditions are met, the Treasury may make an advance from the Contingencies Fund for the expenditure to go ahead.
The exact timings will depend on the Bill’s progress through Parliament, but the aim is to have the chair, chief executive and other board members in place within four to six months of approval of any Contingencies Fund advance and in sufficient time to actively participate in shaping the new body’s strategy and design before the go-live date. All appointments will be conditional on the Bill receiving Royal Assent. If the Bill does not receive Royal Assent, the appointments will be cancelled. The body’s first corporate plan and business plan will be published as soon as possible after the board and chief executive have been appointed —in any event, by the time that the body goes live.
There is also a question about what happens to the money currently held in reserves when MAS closes down and the SFGB opens. Does it simply transfer over? MAS reserves could be used for some of the body’s set-up costs prior to launch. At the point of transfer, reserves will be transferred to the new body and should be used up in a year. At the end of the year, any unspent reserves will be returned to the Consolidated Fund. As the new body will be a non-departmental public body of central government, it will not be able to hold reserves.
Amendment 2 seeks to give the Secretary of State an ongoing duty to ensure that he is satisfied that those appointed as non-executive members of the single financial guidance body do not have a conflict of interest. The noble Lord makes a good point—that it is important that non-executive members do not have a conflict of interest. However, I believe that the provisions in the Bill and elsewhere already offer sufficient protections.
Schedule 1 makes provision for the tenure and pre-appointment checks of non-executive members. A conflict of interest is defined as,
“a financial or other interest which is likely to affect prejudicially the discharge by the person of his or her functions as a member or employee of the single financial guidance body, or as a member of a committee or sub-committee of the single financial guidance body”.
Schedule 1 also requires the Secretary of State to be satisfied that prospective non-executive members of the body do not have a conflict of interest. Paragraph 4(2) requires both existing and prospective non-executive members to provide the Secretary of State with information to determine whether they have a conflict of interest. Further, Paragraph 3 states:
“The Secretary of State may remove a non-executive member from office”,
if they have a conflict of interest.
Finally, requirements around declaring conflicts of interest are also covered in the Department for Work and Pensions’ terms and conditions of appointment for non-executive members of arm’s-length bodies; for example, the department may terminate an appointment by giving notice in writing if a non-executive fails to declare any conflict of interest. While I appreciate the noble Lord’s concern, I hope that I have reassured him that the Secretary of State will regularly satisfy himself that non-executive members of the single financial guidance body do not have a conflict of interest.
My noble friend Lord Trenchard questioned the issue of efficiency savings. Efficiencies are expected once the body is in a steady state in the medium term. We believe that it is too early to agree precise timings on this. Efficiencies are expected to come from back-office functions in particular, and will be redirected to front-line services.
I hope that noble Lords will accept that I have covered the questions raised. I also hope that the explanations I have given provide the assurance that they seek, and that the noble Lord will agree to withdraw Amendment 1.