13.48 The Committee has a number of concerns about the independent regulator’s governance arrangements,
and the extent to which they adequately protect its independence and effectiveness. These concerns centre on the method of appointment of members of the new body, the terms of their appointment, the funding of the body and its accountability.
Appointments
Method of appointment
13.49 Under the Act the members of the new body (the equivalent of the board of directors) are Crown
appointees. Appointments are approved by the House of Commons following selection by the Speaker on the basis of fair and open competition and with the agreement of the Speaker’s Committee.15
13.50 There are obvious public perception issues in an independent body being appointed by those it is
supposed to be regulating.
13.51 The reason for setting up the arrangements in this way is the difficulty of devising an alternative method of
appointment which still respects parliamentary sovereignty. The Committee understands that in practice the first appointments will be made in the same way as that adopted for the recent appointment of the chair of the Electoral Commission, also a Crown appointment made on the basis of a recommendation from the House of Commons. In that case a firm of headhunters was engaged and an independent panel appointed under the chairmanship of an ex-Commissioner of Public Appointments. The panel recommended a single candidate to the Speaker to go forward to the statutory stages. Formally speaking, the post did not fall within the category of those which need to be monitored by the Office of the Commissioner for Public Appointments (OCPA). But the Speaker and the Speaker’s Committee agreed that the appointment should be treated as if it did, including having an independent assessor on the panel to ensure that the process was in accordance with the Code for Public Appointments.16
CHaPTeR 13: oveRSigHT, adMiNiSTRaTioN aNd eNfoRCeMeNT
13.54 The Committee is concerned about the implications of the possibility of reappointment for the real or
perceived independence of those appointed. It is important that the judgment and decisions of the chair and members of the new body are not coloured by any desire for re-appointment, and that any perception of regulatory capture is avoided.
13.55 We therefore have a strong preference for single non-renewable terms for members of the new body,
especially the chair. Single non-renewable terms are increasingly the norm for ethical regulators. They apply, for example, to the chairs of the Committee on Standards in Public Life and of the Electoral Commission.
13.56 The Committee understands that the possibility of second terms was created so as to make it possible
to stagger subsequent appointments and preserve some continuity in membership, rather than having to change all the membership at the same time. Some flexibility in applying the principle of no reappointment may therefore be necessary in relation to the first round of appointments.
Recommendation 47 x
The chair of the new regulatory body should be appointed for a single, non-renewable five year term. The other members of the new body should in principle be appointed on the same basis. But, some flexibility may need to be shown in relation to those appointed in the first round.
Funding
13.57 The independence of an organisation can be undermined by limiting its funding. The former Parliamentary
Commissioner for Standards, Elizabeth Filkin, in her open letter of resignation indicated the difficulties she encountered when the House authorities refused to grant her the additional resources she had requested to enable her to carry out her duties.17
13.58 The Parliamentary Standards Act provides for the independent regulator’s budget, in the form of an annual
Estimate, to be channelled through the Speaker’s Committee which, after consulting the Treasury, lays the Estimate before the House. If the Committee modifies the Estimate or disregards any advice from the Treasury, it must publish a statement of its reasons for so doing.18 These arrangements place the new body in
the highly unusual position of being dependent for its funding on the very organisation whose financial affairs it is charged with regulating. It would certainly be preferable if this were not the case. But the Committee accepts that since Parliament is, by one route or another, the ultimate source of authority for all public expenditure, no viable arrangement is available which entirely avoids this conflict of interest. It would certainly not be desirable, for example, to give control over the independent regulator’s budget to the Executive.
13.59 In practice it is unlikely that the House of Commons would seek to interfere with the budget of the
independent regulator. If that did happen, the requirement of transparency in the Parliamentary Standards Act should ensure that any such unwarranted interference became public. The Committee nevertheless believes that, in an area where perception matters as much as reality, an additional safeguard is needed. We therefore propose that the new Speaker’s Committee should include in its membership three people drawn from outside Parliament who have not previously been MPs or peers. They should be chosen through the official public appointments process and formally approved by the House.
13.60 This proposal would be beneficial in that it would:
Bring an external view to the deliberations of a body which would otherwise be entirely Westminster-
focused. It would also allay some of the public’s concerns that the Speaker’s Committee may be too inward-looking and in the pocket of vested interests.
Reflect the growing practice in self-regulatory bodies such as the General Medical Council and the
General Council of the Bar, which have accepted lay membership not only as a way of mitigating charges of being parti pris, but also of widening their horizon, increasing their experience base and strengthening their legitimacy with the public. There is no reason why similar principles should not apply to the new Speaker’s Committee.
13.61 Introducing an element of non-political membership into a committee of the House is not a revolutionary
idea. This Committee has canvassed the possibility before and it already exists in the case of the Members Estimate Audit Committee.
Recommendation 48 x
The Speaker’s Committee on the independent regulator should include three lay members drawn from outside Parliament who have not previously been MPs or peers. They should be chosen through the official public appointments process and formally approved by the House.
Accountability
13.62 Under the Parliamentary Standards Act the independent regulator is required to produce an annual report
on its activities, which is laid before Parliament. The Committee favours two measures which would further enhance accountability.
13.63 First, a specific duty should be placed on the new body to be as transparent as possible, consistent
with data protection requirements, in its dealings with MPs and in reporting on its disbursement of public money. Individual electors must be able to ascertain the expenses claims of their own (or any other) MP, through the publication of receipts and related information.
13.64 Second, a requirement should be laid on the new body to engage directly with the public in ways which
might include open meetings and opinion surveys.
Recommendation 49 x
The independent regulator should be placed under a general duty to act openly and transparently, to give reasons for any revisions to the expenses scheme, and to report, and take account of, the views of the general public as well as the House of Commons.