King’s Speech

Baroness Falkner of Margravine Excerpts

Tuesday 23rd July 2024 Lords Chamber

[Baroness Falkner of Margravine (CB)]

My Lords, I declare an interest as chair of the Equality and Human Rights Commission and as a member of the Enforcement Decision Making Committee of the Bank of England. I will stick to my self-imposed convention of not commenting on affairs to do with either of those institutions.

I congratulate the noble and learned Lord, Lord Hermer, the Attorney-General, on his thought-provoking maiden speech. I will pick up some of his emphasis on fairness and the rule of law, but the points I really want to cover today relate to public appointments rather than having a direct bearing on the Government’s programme for other reforms on appointments, ethics and integrity.

Public appointments are a small but neglected part of our constitutional structure. I could not find any debate where I might be able to express some thoughts on this other than today, so I hope that noble Lords will be tolerant. There are approximately 4,500 public appointments where people serve on a range of institutions that make the country function—non-departmental public bodies in the jargon. In the single financial year 2021-22, there were just under 1,200 appointments signed off by Government Ministers. The competition is stringent, relatively transparent and usually run by civil servants.

Most public appointees I have met who serve on a board as a non-executive do so from a sense of public service. The remuneration is not generous given the time commitment—at least 50% more is always required than what is advertised. It is undertaken by people who have existing expertise in the given area and a desire to contribute to improving it. Most expect to do it selflessly—in keeping with the Nolan principles and other codes of conduct—and do it in honesty and good faith.

However, the system does not respond in the spirit of good faith. I emphasise that conduct has a specific meaning in regulatory and legal terms, and that is not the way I am using it here, although I am partially using it in that sense. If a public appointee, in other words a non-executive board member, faces allegations of having transgressed in their conduct or is alleged to have behaved improperly, the institution in which they serve has no parameters imposed by His Majesty’s Treasury or the Cabinet Office as to how it should expend public funds in that matter. There are no ceilings imposed, even as a proportion of a non-departmental public body’s budget that can be expended on a single matter for review or investigation. Expenditure running into hundreds of thousands of pounds can be spent when expensive lawyers are hired to review matters, irrespective of substantiation or gravity of allegations.

On the other side, the individual accused of misconduct is required to fund themselves entirely without support. This is a unique category. In the private sector, directors’ insurance is virtually compulsory; no one would work without it. It can run to many millions, especially since, in certain sectors, the fit and proper tests have become more stringent. Even third-sector organisations that have hybrid models, such as housing associations, also have directors’ insurance. Of course, in all cases it is contingent on the appointee having acted in good faith in discharging their responsibilities and in keeping with various codes of conduct and so on. So it is uniquely this category—government-appointed non-executive directors—that is entirely exposed. HM Treasury in its manual Managing Public Money explicitly considers providing some form of insurance and dismisses it as unwarranted expenditure, so bodies are, in effect, banned from procuring it for their boards.

What is to be done? Going forward, this Government will make some 6,000 appointments to different types of public bodies during this first term until 2029. One way to approach this would be to allow arm’s-length bodies the discretion to pay for insurance up to a maximum amount and under stringent conditions—for example, the need to have conducted an internal review of the allegations or to seek ACAS support or a Cabinet Office non-executive review. Ultimately, if expensive lawyers are to be engaged, in the interests of fairness, public appointees deserve some small level of insurance or public funding to obtain at least a preliminary amount of professional legal advice.

The Attorney-General has made a great deal of the importance of the rule of law—I agree with his sentiments—but the foundation of the rule of law is fairness. It is time that this group serving in the public interest was treated fairly, and I urge the Government to do something about this anomaly.