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Government Departments: Non-Executive Directors

Volume 814: debated on Wednesday 8 September 2021


Asked by

To ask Her Majesty’s Government what professional expertise and qualifications they look for when appointing non-executive directors of Government departments.

My Lords, departmental non-executive board members are appointed by the Secretary of State following the principle of selection based on merit. The majority of roles are advertised on Her Majesty’s Government’s public appointments website. The corporate governance code for central government departments states that appointees shall be

“experts from outside government … primarily from the commercial private sector, with experience of managing large and complex organisations”.

The Minister will be aware of the comments that the Committee on Standards in Public Life made in Standards Matter 2. Paragraph 88 states:

“However there is an increasing trend amongst ministers to appoint supporters or political allies as NEDs. This both undermines the ability of NEDs to scrutinise the work of their departments, and has a knock-on effect on the appointments process elsewhere.”

Does the Minister accept that criticism and does he also accept the strong recommendation of the Committee on Standards in Public Life that the appointments process for non-executive directors of government departments should be regulated?

My Lords, the Government obviously respect the recommendations in any report from the Committee on Standards in Public Life, and we will consider and respond to those recommendations in due course. I believe that talent is not confined to people of a single political opinion. Therefore, I do not follow the noble Lord in the implication that anybody who has ever supported the Conservative Party should be disqualified from one of these roles.

My Lords, the Government have adopted a model of non-executive directorships which has been used at BHS, Carillion, crashed banks and other scandal-ridden entities. The non-executive directors there were friends of executive directors; they lacked independence and were ineffective. If the Government are to persist with non-executives, can the Minister give an undertaking that they will be directly elected by employees and users of the services of the relevant departments?

My Lords, I am grateful to the BEIS website, which points us to the 2014-15 annual report on departmental boards. In it, there is fulsome praise from the then Paymaster-General for how such departmental boards

“help the Whitehall machine function more effectively”.

That was one Matt Hancock—and we all know how, six years later, that ended up. However, it is not just in the Department of Health that the non-executive appointment process and the purpose of NEDs have become opaque. As we have heard, the whole system has become the captive of political appointees. Does the Minister agree that these are public appointments and that, for the public to see benefit from them, there should be clarity in the appointments and clear objectives as to how they operate?

On the gravamen of the noble Lord’s rather lengthy question, I repeat that I believe, and I think successive Governments have believed, that there is benefit in bringing the experience and knowledge of people from outside the Civil Service into supporting and assisting the public service. I think that that is agreed by many senior people in the Civil Service. I hope that the noble Lord is not suggesting that the system of non-executive directors be done away with.

My Lords, I welcome the appointment of NEDs to government departments, but can my noble friend explain why, according to the GOV.UK website, there are seven NEDs at HMRC and eight at the Home Office, but only three at MHCLG and only two at BEIS?

My Lords, the code of practice which I referred to sets out at point 3.3:

“The board should be balanced, with approximately equal numbers of ministers, senior officials and non-executive board members.”

The Home Office has eight Ministers and has appointed eight NEDs. MHCLG has five Ministers; it currently has six. There is an effort to ensure that there is a broad balance.

My Lords, if it walks like a duck and quacks like a duck, it probably is a duck. If NEDs, ethical advisers and heads of Ofcom and quangos look like political donors, look like political colleagues and look like friends of the Prime Minister or other Ministers, they probably are. So is it not time that the Government either admitted this and said that they want to appoint their own friends and political trusties to these bodies, and did just that, getting rid of the pretence that these are independent appointments, or reverted to impartial, open and fair recruitment, properly regulated by the Commissioner for Public Appointments?

My Lords, I repeat that the vacancies for non-executive board members are advertised on the Government’s public appointments website. Appointees are subject to a shortlisting panel interview, with the appropriate mediators and the appropriate composition.

My Lords, in a speech in June this year, the Minister for the Cabinet Office, Michael Gove, opined on the useful challenge and enhanced scrutiny that non-executive directors would bring to boards—yet in August last year the Times found that eight out of 13 appointments, including four to the Cabinet Office board, were, as the noble Baroness, Lady Hayter, might say, “ducks”. They all had close allegiance to the Conservative Party. Will the Minister explain how merit determined that eight out of 13 should have close political allegiance?

My Lords, again, I am not following any implication of disparagement of the honour of those who are serving as non-executive board members. The Government are grateful and I would submit that, if we could see into the future, we would probably find that future Governments will be grateful for the public spirit of those people who come forward to help government departments run in a more businesslike manner. The majority will be people with great business experience who are used to driving up performance in large organisations. I cite from the Cabinet Office, for example, the noble Lord, Lord Hogan-Howe.

My Lords, I wonder whether our Cabinet Office Minister could tell the House how the Government decided that the best person with the expertise and qualifications to provide objective scrutiny of the Cabinet Office was a former Labour MP who supported the Tory Government’s Vote Leave campaign.

For those noble Lords who are not aware, I believe that the noble Lord is referring to the noble Baroness, Lady Stuart. I pay tribute to her outstanding contribution to the work of the Cabinet Office from personal experience of it.

My Lords, I declare an interest as a holder of a public appointment. I want to turn to ethnic minorities. The Minister will note the figure of 15.3%, which is the representation of ethnic minorities on public boards at the moment. This is an increase from 11.9% in the past year, which is very welcome. However, the figure for chairs from ethnic minority backgrounds is still low, at 5.4%, although that is an increase from 2.9%. What efforts are the Government making to increase senior positions such as chairs within the public appointments framework for ethnic minorities?

My Lords, the noble Baroness raises an important point. I agree that every effort should be made to improve the standards that we have now. The more that appointments reflect the ethnic diversity of our country, the better, and I will certainly take the spirit of her comments back to my colleagues.

My Lords, going through the list of all the non-executive directors appointed to the different government departments, I was perturbed to see so many Members of your Lordships’ House—not just from one side but from other sides, too—and so many others who had recently been Members of Parliament. I wonder whether there is a constitutional issue here around the scrutiny role of Members of your Lordships’ House in relation to Ministers, and the scrutiny role of non-executive directors on departmental boards performing a different function. Should there perhaps be some rules that do not allow Members of your Lordships’ House to serve in these roles and that set a time limit from leaving Parliament for former MPs as well? There is a real conflict between the scrutiny roles in these two Houses of Parliament and the scrutiny role of an NED, and the Government might want to look at that.

My Lords, the noble Lord, as ever, raises a thoughtful and interesting point. I do not follow him entirely, because I believe that it is the essence of your Lordships’ House that it contains people of enormous experience—past and current—whose input into our public affairs is to the benefit of the country generally. I will reflect on what he said. Obviously, in relation to leaving time before taking up an appointment, in the current circumstances, no one ever leaves the House of Lords until they retire at the very end of their days.