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Lord Mackay of Ardbrecknish: My Lords, I am grateful to the noble Lord, Lord Taylor of Gryfe, for his introductory points. He is absolutely right in saying that it is a complex report; it was produced speedily and my right honourable friend the Chancellor published it not only speedily, but in full. I am glad for the noble Lord's endorsement in that regard.

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The noble Lord returned to the question of the people who lost money. If in this case, somebody—let us say the Government—were to pay back that money in some way, I fear that that may be taken by everybody else as meaning that when a similar eventuality happened in the future, the Government could be pushed into being morally obliged to pay out that money. That would have the result that I mentioned in my original answer to the noble Lord, Lord Eatwell; that is, that people would go into high risk strategies without any regard for the consequences, safe in the knowledge that the Government could be relied upon or bullied into bailing them out if it went wrong. That is the first point I want to make.

When the noble Lord reads the whole report he will not be able to come to the conclusion that the Bank was principally responsible. He will see that the responsibilities for this whole affair were largely in Barings and its management, and the way that they dealt with the situation. Also, when he reads the board's view on the part Mr. Leeson played, he will see that that was the key. I do not want to quote at too great a length, but in paragraph 5.3 the report points out,


    "It appears, therefore, that Leeson intended to use Account '88888'"—

which was the account into which he put the losses—


    "for unauthorised activity from the outset"—

that is, from the time that he went to Singapore—


    "and that the action noted above"—

that is, what he did in order to make sure that no information went from that account back to London—


    "was designed to exclude the account from the books and records of Barings".

The noble Lord, Lord Taylor of Gryfe, is being a little unkind therefore—I understand that because he has not had the chance to read the whole report—when he tries to finger the blame entirely on the Bank of England.

Lord Monson: My Lords, the noble Lord, Lord Eatwell, and others drew our attention to the disgraceful state of affairs whereby the new owners of Barings paid many tens of millions of pounds by way of bonuses to already well-paid employees at Barings at the expense of loan note holders, many of whom are not well off. While I accept that the Government are not in a position to bale out the loan note holders, does not the noble Lord, Lord Mackay, agree that the action of the new owners will make it more difficult and more expensive for solid, respectable, well-run British companies to raise fixed interest capital in the future?

Lord Mackay of Ardbrecknish: My Lords, I said earlier that my understanding is that those who left Barings did not receive bonuses. The bonuses' point is covered by ING Barings and relates to those people who continue to work for that company. To whom the bonuses should be paid is a matter for the new owners. Around 4,000 people worked in parts of Barings that had nothing to do with this matter in Singapore and nothing to do with these events. They were running a successful UK bank, and it is not right that we should confuse their position with that of the events in Singapore and the inability of the senior management of Barings to monitor those events properly.

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Nolan Report: Government Response

5.47 p.m.

The Minister of State, Home Office (Baroness Blatch): My Lords, with the leave of the House, I shall now repeat a Statement made in another place by the Chancellor of the Duchy of Lancaster. The Statement is as follows:

    "With permission, Madam Speaker, I should like to make a Statement to the House on the Government's response to the first Report of the Committee on Standards in Public Life which is being presented to the House today as Cm 2931.

    "My right honourable friend and distinguished predecessor, the Member for Wirral West, told the House on 18th May that the Government accepted the broad thrust of these recommendations. The response covers all the recommendations addressed to government: 45 of 55 recommendations in all.

    "The Prime Minister has made it clear that he is determined to uphold the highest standards in public life. The response details the Government's plans for implementation and action in respect of all the 45 recommendations addressed to government. It also sets out further proposals for a new Civil Service code, and for a new introduction to Questions of Procedure for Ministers.

    "We accept the Nolan Committee's recommendation that Ministers should be brought within the scope of the Advisory Committee on Business Appointments. The response emphasises the very great importance of continuing interchange between business and commercial life and ministerial office. We should do nothing to deter talented people with private sector experience from entering public life, and nothing which prevents those who have completed their ministerial career from applying that experience to the benefit of British industry and commerce.

    "The Nolan Committee strongly supported that principle, and to translate it into action we shall draw up rules setting out specific criteria, to be administered by the Advisory Committee on Business Appointments, to establish the circumstances in which Ministers should be advised to delay a particular appointment, or make its acceptance subject to conditions. We intend to publish a text for consultation before introducing the rules from the start of the next Session of Parliament. We intend to have a debate on this and the White Paper as a whole in the spillover Session. We shall also consult to the same timetable on an extension of business appointments rules to Ministers' special advisers.

    "On the registration of hospitality accepted by Ministers, our response builds on the arrangements for registration of Members' interests in this House and on the guidance already contained in Questions of Procedure that Ministers should not accept hospitality which would or might appear to place them under an obligation. In the words of the Select Committee on Members' Interests,

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    'it is neither possible nor desirable to make a clear distinction between a Minister's conduct as a Minister and his conduct as a Member of Parliament'.

    "We shall act quickly and positively on the Nolan Committee's recommendations concerning appointments and propriety in public bodies and the National Health Service, building on many of the continuing initiatives which the committee endorsed. In particular we shall appoint a new commissioner for public appointments to offer guidance, monitor and audit departmental appointment procedures. This post will be advertised in a matter of days.

    "We shall extend the use of advisory panels, including an independent element, to advise on appointments to executive public bodies and the National Health Service. This has been successfully piloted in a number of areas. All departments will introduce their own arrangements as soon as practical to allow the new commissioner to influence the procedures introduced. We believe that at the outside this will require no more than 12 months.

    "My honourable friend the Member for Orpington announced last month a review of the legal framework governing propriety and accountability in public bodies, and their arrangements for external audit. We intend to reach preliminary conclusions by the end of the year, well ahead of the timetable envisaged in the committee's report.

    "We have accepted the recommendations of Lord Nolan's Committee that there should be opportunities under the Civil Service code for a civil servant to raise concerns about actions in which he or she is not personally involved, and for nominated officials to investigate concerns raised confidentially.

    "Our consultation period on the Civil Service code will now be extended to mid-September to allow further opportunities for comment. We accept the Nolan Committee's recommendation that implementation need not then await a legislative opportunity, and our intention is to have the code in action before the end of the calendar year.

    "I am confident that the action we have set out will show the House, and the country as a whole, our determination to take practical steps which will uphold and sustain the highest standards of propriety, while ensuring that men and women of talent and experience continue to contribute to our public life."

My Lords, that concludes the Statement.

5.52 p.m.

Lord McIntosh of Haringey: My Lords, the House will be grateful to the Minister for repeating the Statement just made in another place. The first thing that has to be said is that, in numerical terms, when one looks at the White Paper which accompanies the Statement, it is true that a very high proportion of the recommendations made by the Nolan Committee have been accepted by the Government. It is important to put that on the record first. However, we have to read a little further to understand the implications of the Government's approach to the issues raised by Nolan. I

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am afraid that when we read a little further the situation is by no means as satisfactory as it appears from the simple enumeration of recommendations and responses.

Perhaps I may take, first, the issue of Ministers and private sector jobs after Ministers leave office. The problem is well-known. It is well-known that it is a problem peculiar to this Government. I am not conscious that any significant number of remunerative posts have been offered to former Labour Cabinet Ministers on leaving office. It is a problem which is peculiar in that it has applied particularly to those Ministers who have taken an active part in the privatisation of public sector companies and have then proceeded, almost directly in many cases, onto the boards of those privatised companies after they have left office. We hope that that may be a finite problem which will not arise in the future. Both of them may be finite problems which will not arise in the future. But they are particular problems and their political implications should not be forgotten.

When we look at the Government's response to the problem of taking up business appointments after leaving office we find that, although the Government claim to accept the recommendation, they do not in fact accept the recommendation that there should be a minimum three-month gap. They are perfectly willing to accept that there should be a maximum two-year gap but there is no acceptance of the minimum three-month gap. I wonder whether the Minister can tell us why that should be the case?

We know that the Nolan Committee talked about advice to Ministers rather than prohibition on Ministers. However, the phrasing used in the Statement,


    "circumstances in which Ministers should be advised to delay a particular appointment",

is a little weak in the circumstances. I wonder whether the Minister would care to comment on the implication of that statement.

We welcome the suggestion made by Nolan and accepted by the Government that these timetables and rules should apply to special advisers and that special advisers should to that extent be brought within the scope of the Civil Service. I do not think there is anything very much we would want to say about the registration of hospitality. Nolan found that that on the whole is acceptable. Nolan's detailed proposals about registration, although they have not been accepted by the Government, do not cause us particular concern.

Where we start to have greatest concern is about quangos—non-departmental government bodies. Here we are told not that there is a response now to the recommendations of Nolan, but that Mr. John Horam has set up a review of the legal framework governing propriety and accountability. While acknowledging the appointment of a commissioner for public appointments, why is it that the Nolan recommendation that the appointment should be outside the Cabinet has not been accepted? Indeed, the staff of the commissioner are to work within the Cabinet Office. That is a worrying consideration.

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When we come to appointments, all of the formal procedures proposed can very well be defended. But the formal procedures which we have had in the past have in effect been defended by Ministers over a number of years. We all know the reality. For a very large number of these appointments, departments and Ministers go round to the Whips' Office to get a suitable party candidate. What assurance do we have that the formal procedures that have been defended in the past and have clearly not worked will work in the future? What changes have taken place which give us that assurance?

We come to the propriety of the actions of the members of quangos. However many codes of conduct there may be, unless propriety is ensured by something much more comparable to the rules which apply to elected members of local authorities rather than to these appointed bodies, we shall not have very much confidence in them. Members of local authorities have been required by Parliament, following the Widdecombe Report, to obey very detailed rules on particular interests as opposed to general interests. I see no evidence in the Government's response—I do not see enough evidence in Nolan's analysis—of the need for non-elected members of quangos to be subject to at least the same rigour of rules as elected members of local authorities, including the threat of suspension and financial penalties, which do not seem to exist at the present time.

There is a good deal of reference in the Nolan Report to openness. There is some reflection of that in the Government's response. What does openness mean? It should mean that the activities of these bodies—the health authorities and so on—are as open as the activities of local government. In other words, except when there are particular issues of commercial confidence which need to be determined in private, non-departmental public bodies should conduct their activities in public in just the same way as local authorities. So far as I can see, there is no reference to that in the Government's response.

It is all very well, when talking about quangos, to speak about removing abuse of the system; but we must recognise that the system itself is an abuse. It is a fact that, even on the low estimates of Nolan, there are 9,000 appointments and £40 billion of public expenditure involved. Unless we are determined to bring those activities under democratic control, all of the codes of conduct and codes of standards will be of little value.

6 p.m.

Lord Rodgers of Quarry Bank: My Lords, we on these Benches also greatly welcome the Statement. It is a most important Statement but inevitably a short one. Just as the Statement in another place produced the promise of a debate in the final part of the current Session, we also feel very strongly about the matter and would like to have a debate on it. There is so much detail in fine print which we cannot possibly pursue today because there is important business before the House; and, indeed, another Statement has already been discussed. However, I hope that we shall have such a debate during the spill-over period. That would give us an opportunity to pursue a number of matters that we cannot discuss today.

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Naturally—and I make no complaint about it—such a Statement is selective. It is selective because of time and space but also because inevitably the Government want to put the best complexion on the decisions that they have made. I believe that it is for this House to scrutinise very carefully the White Paper itself against the Nolan Report. The Statement refers to a statement made in another place on 18th May that the Government accepted the broad thrust of the Nolan Report. It would help us this afternoon, and perhaps help to avoid further detailed questions, if the Minister could say, having accepted the broad thrust, where principally in the decisions set out in the White Paper the Government have actually departed from the Nolan Report.

There are one or two points to which I should like to refer. I do not pretend in any way that the Statement misleads the House, but I believe that inevitably the White Paper has rather more to say in its fine print than such a Statement. For example, Recommendation 14 is an acceptance of the need for the proper investigation of cases of "alleged impropriety affecting Ministers". In the White Paper there are also statements of the Government's position that they accept that recommendation. But, having discussed the problem and said that there is a range of alternative courses of action to be decided upon in each case, the White Paper does not spell out what those alternative courses might be. If not today, I hope in the debate that we may have in the spill-over period, the Minister will clarify the position more fully.

Again, there is reference in Recommendation 16 of the White Paper to the arrangements parallel to those of the Civil Service to which the noble Lord, Lord McIntosh, referred. The White Paper says:


    "The Government accepts this recommendation, but believes there will be many circumstances in which the Advisory Committee will reasonably be able to recommend that the three month waiting period need not apply".

There are a good deal of parentheses in the document of acceptance of the recommendations of Nolan followed by a "but" or a "however". As I said, although we cannot pursue all such matters today, I believe that we need a recognition of that on the part of the Minister, together with a statement of where principally the White Paper departs from the report.

There is another matter to which I should like to refer; namely, Annex A which deals with the conduct and procedure of Ministers. In itself, it is a significant document; indeed, I would make the case for a separate debate upon it. It is perfectly true that years ago no such statements were published. In fact, there was a time when Ministers had no such guidance. However, I must have been one of many Ministers who was guided by such a document. I am bothered by the fact that there are now some significant changes in Annex A to the document. For example, the first of the principles is:


    "Ministers must uphold the principle of collective responsibility".

Whether that is right or wrong, it is quite a different question to the conduct and procedure of Ministers. It is not something which might apply to all governments: it is a political process which we take for granted and which Prime Ministers often, rather unsuccessfully, try

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to enforce. However, I am not quarrelling with the thought—although I would be happy to discuss it—I am quarrelling only with why it is in the document.

Further, and more importantly, there is the introduction of the word "knowingly" into the paragraph in QPM which previously said:


    "Ministers must not mislead Parliament".

Now the document is to say:


    "Ministers must not knowingly mislead Parliament".

Perhaps the Minister will be able to say why I was able to live with the words,


    "Ministers must not mislead Parliament",

but apparently she is unable to live, given the Prime Minister's decision on the matter, with the words "knowingly mislead Parliament".

Yet again, referring to Ministers, the annex says:


    "Ministers should avoid accepting any gift or hospitality which might, or might reasonably appear to, compromise their judgement".

In my time the wording simply said, "or might appear". However, "reasonably appear" has now been introduced into the document.

I also note that another paragraph which said,


    "Ministers must keep their party and ministerial roles separate",

has now been changed to read,


    "Ministers must not use public resources for party political purposes. They must uphold the political impartiality of the Civil Service".

I am not saying that there is no case for change, but it seems to me that those changes soften the rules for the conduct and procedure of Ministers. It would be most helpful if the Minister in this House could spell out very briefly today why she believes that the Prime Minister is obliged to make those changes.

As the Statement says, and as the White Paper very fairly makes plain, the latter deals only with those recommendations of the Nolan Committee which concern Ministers and the Executive; it does not deal with the recommendation of Nolan affecting Members of Parliament. I have no complaint at all about that because, as the White Paper says, it is for the Government to respond on those matters which affect the Executive; but it is for Parliament—and by that I mean both Houses of Parliament—to respond on the other issues of Nolan.

When the moment comes, as in our consideration of the Government's Statement today, I hope that we do not allow ourselves to be distracted unknowingly in our debate on the White Paper into the thought that the public are mainly concerned about the matters dealt with by the White Paper. Of course the public are concerned—and rightly so—but people are more concerned with the conduct of Members of Parliament; and, indeed, although it is a matter for the House at a future date, with the matters being considered by the sub-committee under the noble and learned Lord, Lord Griffiths.

Therefore, virtuous though many of the recommendations are, and good though there may be in most of the Government's acceptance of them, let us not forget that the people outside look to us in the conduct of our affairs to ensure most of all that our standards of public life in this country are as high as they ought to be.

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