House of Commons Public Administration Select Committee Propriety and Peerages Second Report of Session 2007–08 Report and Annex, together with formal minutes, oral and written evidence Ordered by The House of Commons to be printed 11 December 2007 HC 153 Published on 18 December 2007 [Incorporating HC 1049-i-iv, Session 2006–07] By authority of the House of Commons London: The Stationery Office Limited £0.00 The Public Administration Select Committee The Public Administration Select Committee is appointed by the House of Commons to examine the reports of the Parliamentary Commissioner for Administration, of the Health Service Commissioners for England, Scotland and Wales and of the Parliamentary Ombudsman for Northern Ireland, which are laid before this House, and matters in connection therewith, and to consider matters relating to the quality and standards of administration provided by civil service departments, and other matters relating to the civil service. Current membership Dr Tony Wright MP (Labour, Cannock Chase) (Chairman) Mr David Burrowes MP (Conservative, Enfield Southgate) Paul Flynn MP (Labour, Newport West) David Heyes MP (Labour, Ashton under Lyne) Kelvin Hopkins MP (Labour, Luton North) Mr Ian Liddell-Grainger MP (Conservative, Bridgewater) Julie Morgan MP (Labour, Cardiff North) Mr Gordon Prentice MP (Labour, Pendle) Paul Rowen MP (Liberal Democrats, Rochdale) Mr Charles Walker MP (Conservative, Broxbourne) Jenny Willott MP (Liberal Democrats, Cardiff Central) Powers The powers of the Committee are set out in House of Commons Standing Orders, principally in SO No 146. These are available on the Internet via www.parliament.uk. Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at http://www.parliament.uk/pasc. Committee staff The current staff of the Committee are Steven Mark (Clerk), James Gerard (Second Clerk), Louise Glen (Committee Assistant), Anne Woolhouse (Secretary) and James Bowman (Senior Office Clerk). Contacts All correspondence should be addressed to the Clerk of the Public Administration Select Committee, Committee Office, First Floor, 7 Millbank, House of Commons, London SW1P 3JA. The telephone number for general enquiries is 020 7219 3284; the Committee’s email address is [email protected]. Public Administration Select Committee: Propriety and Peerages 1 Contents Report Page Summary 3 1 Introduction 5 Background 5 Scope of the inquiry 7 2 Summary of recent events 9 3 Honours and peerages 12 The Honours system 12 Scope for patronage 13 Appointments to the House of Lords 14 The appointment of working peers 14 Honours and peerages: a comparison 15 Conclusions 16 4 The legal framework 18 The CPS decision and the 1925 Act 18 The evidential test for prosecution 19 An impossible test to pass? 21 The decision to investigate 21 Historical and hypothetical prosecutions 23 Refining the 1925 Act 25 Potential new offences 25 Changing the burden of proof 26 Reforming the general law of corruption 28 Conclusions 29 5 Loans and electoral administration 30 Loan funding 30 A regulatory failure? 31 6 House of Lords appointments 37 House of Lords reform: how we got to where we are 37 The House of Lords Appointments Commission 39 The 2005 draft working peers list 39 The powers of the Commission 41 A statutory Appointments Commission 43 7 An interim House of Lords Reform Bill 45 Reforming appointments processes 45 Honours and peerages: breaking the link 45 An exit route 46 Limiting party patronage 48 2 Public Administration Select Committee: Propriety and Peerages Setting out the criteria 48 The role of the statutory Appointments Commission 50 Internal party practices 52 Remaining elements of the Bill 53 8 Concluding thoughts 56 Conclusions and recommendations 58 Annex: advice to the Committee from Christopher Sallon QC 64 Witnesses 85 List of written evidence 86 List of Reports from the Committee during the current Parliament 87 Public Administration Select Committee: Propriety and Peerages 3 Summary This report into questions of propriety in the awarding of honours and peerages was much delayed by a lengthy police investigation. We paused our inquiry in March 2006 because we did not wish to risk prejudicing any criminal trial. Once it became apparent, however, that there would be no such trial, we have hastened to complete our inquiry and publish our findings as quickly as possible. We have been clear throughout our inquiry that our business was not to re-run the police inquiry or to judge the performance of the police. Our aim has been to examine the systems designed to ensure propriety and recommend improvements to those systems. The public impression of covert patronage created by the ‘cash for honours’ affair is at odds with a system that is, on the face of it, more transparent than ever before, thanks to recent measures to improve the regulation of party funding and of appointments to the House of Lords. More has been done since. Central to the affair was the regrettable loophole in the law which did not require parties to declare loans that were received on commercial terms, without adequately defining what those terms were. The passage of the Electoral Administration Act 2006 has closed this loophole. However, the spirit of the law on loan funding was very clear. If all parties had acted in that spirit, many of the subsequent difficulties could have been avoided. A package of reforms is needed. Proposals relating to party funding are already being considered by the Government, hopefully in conjunction with other parties. The Electoral Commission’s role is to be refocused on enforcement of standards. Our proposals complete the package. The Honours (Prevention of Abuses) Act was severely tested by the police investigation. In our view, its scope remains appropriate, even if the behaviour it criminalises is inherently difficult to prove to the necessary standard. In the longer term, we hope that these offences can be incorporated into a more general law on public sector corruption, a modern version of which is long overdue. However, while the ability successfully to prosecute offences is essential, an effective system would act to prevent corrupt behaviour in the first place. The core of this matter is party leaders’ powers of patronage. Political patronage has been effectively removed from the honours system; its scope should also be greatly reduced in the awarding of peerages. This would, at a stroke, remove much of the room for abuse in the alleged link between donations and peerages. Our main proposal is for an immediate House of Lords reform measure, clearly defined in scale and scope. Its primary purpose would be to put the independent House of Lords Appointments Commission onto a statutory footing, and empower it to take decisions on the size, balance and composition of the House against agreed and explicit criteria. A mechanism is also needed for peers to resign from the House—or, in some circumstances, 4 Public Administration Select Committee: Propriety and Peerages to be compelled to leave. Although these proposals ought to be, and some need to be, set out in legislation, the Government should not wait where it does not have to. The Government could implement immediately our proposal for new peers to be chosen by the Appointments Commission rather than by political parties. Under our proposals, the Commission would choose candidates from “long lists” provided and published by the parties, with the qualifications of nominees made public. The methods used by the parties to choose candidates to put on those long lists would be for the parties themselves to decide, but we suggest that more transparent arrangements will be more likely to command public confidence. Lastly, the report argues that the link between the honours system and the award of seats in the legislature—already significantly weakened—should be broken for good. Honours and titles should be for past service; a seat in Parliament for potential future service. Our recommendations build on principles to which the major parties have already signed up. We hope that the experience of the last two years will provide the impetus to make them happen, and with a proper urgency. Public Administration Select Committee: Propriety and Peerages 5 1 Introduction Background 1. This Committee has a longstanding interest in the administration of the honours system, the award of peerages and standards of conduct in public life. In 2004 our predecessor committee conducted a major inquiry into the honours system.1 In 2005, we embarked on a wider inquiry into the entire field of ethics and standards in public life.2 Subsequently on 14 March 2006, partly in response to allegations concerning the possible offer of peerages in exchange for financial assistance to political parties, we announced that, as part of our inquiry into ethics and standards, we would investigate whether the system of scrutiny for propriety of honours and peerages for political service was satisfactory. 2. Following the subsequent announcement by the Metropolitan Police that they were to conduct a criminal investigation into the allegations, we met privately with representatives of the police and the Crown Prosecution Service (CPS). They advised us of their concerns that our inquiry, if conducted wholly in public, might prejudice their investigations. Having taken legal advice, we agreed to a “short pause” in our inquiry, writing: The matters alleged go to the heart of the political and parliamentary process, and we think it vital that Parliament should investigate as soon as possible. The sub judice rule does not apply in this case. No criminal charges have yet been made. We have discussed the implications of continuing a high profile inquiry for future court proceedings with the police and Speaker's Counsel. In the light of advice, we have decided to have a short pause in our inquiry, of no more than a matter of weeks, to allow the police to tell us whether there is a realistic prospect of charges being brought.