Palace of Westminster: Restoration and Renewal

Earl of Kinnoull Excerpts

Tuesday 6th February 2018 Lords Chamber

[The Earl of Kinnoull (CB)]

My Lords, it is a pleasure to follow noble Lord, Lord Dobbs. What a sparkling contribution that was in the gloaming of this very interesting debate. I add my name to the long list of those praising the work of the Joint Committee in producing a very readable report on this complex subject that frames the issues well.

I have a great interest personally and professionally in heritage buildings and objects. I have seen many, insured many and repaired many. I fully accept—as I think we all do—that the Palace of Westminster needs major works, and I want to see all the necessary ones done immediately. I have had the basement tour—and, rather differently from some others, I have had many similar basement tours in other royal palaces and heritage buildings. It is interesting to note that, among those others, I assure noble Lords that many have similar challenges to those we have here. However, I am afraid that I want to address the Deloitte costing information contained in the independent options appraisal. That is home territory for me and my interest was sparked by a feeling that the costings were open to question.

With different financial information flowing from revised costings, the correct strategy for the care of our Parliament building will no doubt emerge. It may not equate wholly to any option on the table today—which was said with greater eloquence by the noble Lord, Lord Butler of Brockwell. In any event, it is a huge sum of money and we need robust and fully tested numbers to examine the issue properly.

I turn initially to the Deloitte costings for the full decant option. There are quite a few points but I will talk briefly about only two. The first is a small one, but with a big cost. Assumption E5 makes it clear that there is no additional cost for policing the two new buildings. I note that, if we increase the policing cost by a third of what it costs to police the current parliamentary estate, which would seem to be about proportionate, that across the build would be an extra £100 million. Assumption A53 covers the decant and reoccupation costs. This assumes that two buildings are purchased for the decant period and £331 million is spent fitting them out. At the end of the decant period they are sold for exactly the same price. There is no assumption about the cost of borrowing the money to buy and hold these buildings and no attempt to estimate any increased cost of working due to the business disruption of being delocalised—a point very ably made by the noble and learned Lord, Lord Hope of Craighead.

I could talk further about that assumption. After ringing around some agents, I found that the notional cost of buying 500,000 square feet of space across two buildings in our area—around half of the aggregate space of the Parliament building—could be estimated at being in the order of £600 million. Borrowing at 3% for 10 years would be a straight £180 million. Renting the same space at £70 per square foot—another figure checked with an agent—for 10 years would cost £350 million. These calculations just give directional guidance on the quantum of what has been left out, as what will actually be done is different. But it will be of that order and is a large sum that is not reflected in the full decant option. Thus the 2014 Deloitte decant option costings may have been considerably understated.

I now turn to the Deloitte remain on site costings. Here I feel that the model may have overstated matters. Again I shall talk about only two concerns. The first relates to the treatment of inflation. For the 2014 Deloitte numbers, this is taken as 3.64% for the whole period, whichever option is chosen. The totals of each option are made up of the number of 2014 pounds estimated to be spent, and then an inflation amount is added, depending on when the money is actually due to be spent. For example, let us assume that it costs £1 to knock a nail in today. The pound spent today on construction work will appear as £1 in the overall totals. For a nail knocked in in 32 years’ time, the £1 is inflated and will appear as £3.14 in the overall totals.

Any option that takes longer will be disadvantaged by this method of totting up the money. This is why businesses look at things, as well as on this basis, in net present cost terms, which takes account of the time value of money. This would make a huge difference to the costs of every option, in particular the remain on site one. Indeed, this can be seen directionally in the only net present cost number in the independent options appraisal, which is the whole-life costs number on page 19—where, interestingly, the remain on site option is the cheapest.

A further concern I have is in the treatment of risk. This is defined in paragraph 84 of the Joint Committee’s report as,

“to allow for changes to the budget as a result of unforeseen changes to the Programme’s scope, delivery or schedule”.

That, in other words, is very much what the noble Baroness, Lady McIntosh of Hudnall, talked about. Including VAT, risk for the remain on site option is £1.75 billion. I feel that we must be able to manage things better than that, and indeed I do not understand why the risk on scope, delivery or schedule cannot be better managed for all the options. I note that this is a major factor in making the remain on site option look less attractive, and in general this needs very careful consideration. So I am afraid that I feel that the Deloitte costings are significantly open to question.

But we must make progress and we need to pass the problem to the governance structure envisaged in paragraph (6) of the Motion immediately. Along with many noble Lords, I ask those involved to get on with it rapidly. As a risk professional, I observe that risks are additional, so the longer we delay the more risk there is of a catastrophic failure. This governance structure must then be trusted to make decisions. However, I submit that it should not feel constricted by paragraph (4) of the Motion, which rests on the rickety base of the 2014 Deloitte numbers.

European Union (Notification of Withdrawal) Bill

Earl of Kinnoull Excerpts

Monday 20th February 2017 Lords Chamber

[The Earl of Kinnoull (CB)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Featherstone, who spoke with her customary conviction and a little bit of entertaining European language. I declare my interests as set out in the register of the House and also that I am a member of the EU Select Committee, of which I shall speak further.

I note that the ratio of the number of words likely to be spoken in this Second Reading debate to that contained in the Bill is surely a parliamentary record. I will try not to add unduly to that ratio and confine my remarks to three issues. The first is the Bill itself. On this issue I associate myself wholly with the remarks and reasoning of my noble and learned friend Lord Hope of Craighead, in particular his “keen desire to get on”. There has been much eloquence arguing the same today and I would add only the simple observation that one does not drive successfully forward by always looking in the rear view mirror.

The second issue that I want to briefly touch on is that of uncertainty. Any amendment in this process that promotes uncertainty should be rejected as not being in our national interests. Others today have spoken of this but there are at least three areas of uncertainty that we must have regard to, and which worry me. The first is the status of our negotiators at any negotiations. The noble Lords, Lord Hill of Oareford and Lord Empey, were particularly good and thought-provoking about that and I wholly agree with them. Our negotiators must be empowered and cannot do a good job if they are not. The second is the truism that uncertainty is the enemy of commerce—which, after all, is the root of our prosperity—the success of which ultimately provides the very services we all hold so dear. The third is uncertainty of all different types, which is so deeply worrying for many of our 65 million fellow inhabitants of these islands. In short, there is a lot of uncertainty about. This Bill must certainly not add to that, and if it is passed in an unamended form, I think it will in fact reduce uncertainty, at least partially.

The third issue concerns the work of the EU Select Committee and, indeed, the other Committees of this House, such as the excellent Constitution Committee, chaired by the noble Lord, Lord Lang. I was with the EU Select Committee recently, both for the two-day visit to Brussels and the three-day visit to Strasbourg. The European Parliament very much feels that it is in the same position as this House—it is the same problem from the other end of the telescope. We discussed the parliamentary role, particularly during our three days in Strasbourg. Those discussions took place on a formal basis with 17 MEPs from 12 countries.

It seemed to me, though it is sometimes difficult to be absolutely clear, that they are going to rely on three things in scrutinising their own process at the other end of the telescope. They will rely, first, on their committee structures, which are a bit weaker than ours; secondly, on undertakings given to them about access to information; and thirdly on a special structure whereby one of their number, Mr Verhofstadt, with staff and other MEPs chosen by him, will have a special level of engagement in the process. It struck me that those three things in the round are not so different from where this House is today. At least those MEPs thought that was a reasonable place to be; and it therefore seems not unreasonable for me to agree with that.

The EU Select Committee and other Committees of this House are serving up quite a barrage of good reports aimed at helping the process, informing discussion and providing scrutiny generally. As other noble Lords have remarked, the EU Select Committee structure includes 73 active Members of this House, and there is the same number again of ex-Members. There are 25 full-time staff, and anyone who has come across them will know what high-quality staff we have. Since 23 June we have presented 10 reports for debate in this House, where everyone can have their say, and there are a further seven in the pipeline. I have some knowledge of those and they, too, are thought-provoking and helpful to the process. I note that the Select Committees are receiving a tremendous level of engagement from Ministers and their staff. I know that from personal experience—in fact, I was speaking to a Minister on Friday, who made me a promise.

The Committees of this House are a scrutiny tool that is seasoned, impartial, flexible and of this House. We should use them to their limits. In the end, that path will be far more effective at enabling the nation to achieve a successful Brexit—not just for our 65 million people but for all 500 million citizens of the EU 28.

House of Lords: Size

Earl of Kinnoull Excerpts

Monday 5th December 2016 Lords Chamber

[The Earl of Kinnoull (CB)]

It is a great pleasure to follow the noble Lord, Lord Gordon, who as ever was brimming with logic and wisdom. I too thank the noble Lords, Lord Cormack and Lord Norton, who have not only used hard work to get the debate going, but been responsible for educating a very large number of Members of the House in many of the issues around this complex and important problem. I also thank the Leader of the House.

I will make three points. The first concerns numerical facts about the net change in our numbers as supplied by our ever precise Library. I am afraid I do not apologise for repetition because, as others have observed, it is important. In the 16 years between 2000 and 2015 inclusive, the net change was plus 196 in our House in the aggregate, or just over 30% of our House. In the six years between 2010 and 2015 the net change was plus 125 in the aggregate. In other words, about two-thirds of the massive increase in the last 16 complete years has been in the last six. Thus, one could well argue that the rate of growth is accelerating. Certainly there is no evidence from the Prime Minister’s Office to suggest that this is not the case.

My second point concerns the drivers of that growth. Obviously for the Bishops and hereditaries there is no growth. The Appointments Commission, with its wonderful record of success, is now rationed to just two people a year, which is not enough to keep it going. Sixty-two Members have come through that route; people are not going to live long enough. That is a problem. In other words, the Appointments Commission route is in “shrink mode” in the House—something that patronage of Prime Ministers, as so many have observed, is very far from being in. I agree with everyone else about the negative consequences of this enormous growth. I am not going to go into that, but I would ask the Leader of the House, if she were here, whether she might comment on my analysis of the Appointments Commission being in shrink mode.

My third and final point relates to our committee system and builds on a point made earlier by the noble and learned Lord, Lord Brown of Eaton-Under-Heywood. I had the great benefit of being on the Trade Union Bill committee, so ably chaired by the noble Lord, Lord Burns. At the beginning of what would be a very intense month, we had, as one can imagine, a room full of strident people with very strong views, covering all three parties, with two of us from the Cross Benches. I could not have been alone in thinking that we would have quite a problematic time in reaching consensus. However, the process over the month was extraordinary. We took lots of evidence and spend a lot of time chatting about things, sometimes in little corners and sometimes as a team of 12.

A month later, we produced a unanimous report. Later, we persuaded the House of the wisdom of that report and, later still, the Government. That report is now, effectively, the law of the land. Accordingly, I feel very confident that a Select Committee of this House can tackle this area successfully. I sincerely hope that such a committee will be formed in 2017.

I had intended to end there, but I was reminded earlier on by another speaker of an old business adage: if your business is evolving less rapidly than the world outside, then you are a dinosaur and you will be extinct. That is a business adage, but it is something that we might ponder successfully.

House of Lords: Domestic Committees

Earl of Kinnoull Excerpts

Monday 9th May 2016 Lords Chamber

[The Earl of Kinnoull (CB)]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Doocey. It is the sign of a good debate when one’s speaking notes are a morass of changes and notes, because everyone has made some good points already. I, too, congratulate warmly the noble Baroness, Lady Shephard, and her whole committee, on what I found a very clear and brief report that was full of wisdom.

In my 25 years at Hiscox, which is a FTSE 250 company, I spent, inter alia, a decent period as the group company secretary. Hiscox at the time operated in more than 10 countries, with regulated entities in all those countries and with independent non-executive directors, both at the senior board level and on a number of operating levels. I can assure noble Lords that the organigram of the group was at least as complicated as that of our committee structure here in the House. Things similar to that marvellous story about the printing ink probably happened—I have a nasty feeling that I might have been part of that story as well, but that is for another time. On top of that, the senior independent director at the time was also the dean of the Cass Business School, so we were doing things properly. I therefore thought it would be helpful to the House to look at the report with the eyes of FTSE corporate governance. I accept entirely what the noble Baroness, Lady Shephard, said. It is only persuasive authority and we cannot follow corporate governance slavishly, but I thought it would be instructive. I came up with four points.

The first point is to do with evolution, which a number of noble Lords have mentioned. I note that the corporate governance code in Britain started with the Cadbury committee in 1992, and the current corporate governance code, which came into force in September 2014, is the fifth iteration. That just goes to show how we should view this as an iterative step on our own journey to corporate governance over what will be many years.

My second point is to do with the number of independent non-executive directors that the senior committee will have. I feel that two is not enough, for three reasons. First, we will need a balance of skills on this committee; we need to pick carefully, and not all the skills needed will necessarily easily be found in only two people. Secondly—and speaking as someone who is a non-executive when occasionally there are not many other non-executives around—you need to have at least two non-executives along to each meeting. There is a danger that there would be only one because someone could not make it. Thirdly, non-executives take a very long time to train up. At Hiscox we felt that it took about two years for a non-executive to understand the entity, and I dare say that it would take at least that here. Accordingly, our experience bank would be pretty overdrawn if we lost either of the non-executives at any one time. Therefore I recommend that that number is increased to three or four.

My third point concerns board evaluation. This process was coming in as I was the company secretary, and I was initially quite a sceptic. However, I am now a comprehensive convert, and I believe that board evaluation would be extremely valuable on at least the senior committee and a number of the other committees as well. The second main principle of the UK Corporate Governance Code of September 2014 is effectiveness. It says:

“The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors”.

That is a very good way of attempting to deal with known problems or allowing unknown problems to surface. I am not necessarily in favour of a huge, very time-consuming exercise. It is quite possible to do such an evaluation on an internal basis, with each member of a committee spending only an hour or so on it. Obviously the chairman would have to spend more time on it, as would someone whom I call the governance secretary, about which more in a second.

Paragraph 48 of the report worried me. It says:

“We conclude that relationships between members and staff could be improved”.

That is a Gypsy’s warning, and a board evaluation process is one part of trying to deal with that. I strongly urge that a board evaluation process is considered.

My final point concerns the creation of a governance secretary. The governance bit of a company secretary’s work is only part of the role but it is very important. To me, it was the most interesting part. There are a number of things that the governance secretary would have to do. First, for instance, there would need to be an induction programme for every member to find out about the committee, even if it involved only providing some documents. Secondly, there would need to be some sort of search process for replacements on the committee. Thirdly, there is the board evaluation, which I have just mentioned. So such a person would be needed for a number of reasons. He or she would also be needed as a “go to” person. If the chairman had a question about governance, he would need to ask someone for help. The same would go for any of the members of the committees, and indeed for anybody who was interested in the work of the committees from a governance point of view. I think that it is a part-time role—I am sure that it could be folded into the work of the Clerk of the Parliaments’ busy staff—but it would be greatly to the benefit of governance improvement.

All those points notwithstanding, on our iterative road of evolution, I think that the report is truly excellent and I hope that the changes it seeks will be implemented rapidly.

Strathclyde Review

Earl of Kinnoull Excerpts

Wednesday 13th January 2016 Lords Chamber

[The Earl of Kinnoull (CB)]

My Lords, I begin by joining in congratulating the noble Baroness, Lady Bowles, and the noble Lord, Lord Darling, on their engaging maiden speeches. As a Perthshire resident I also echo the thanks of the noble and learned Lord, Lord Hope, to the noble Lord, Lord Darling. I do not thank that he has ever really been thanked enough for his efforts. In very trying circumstances he was immensely dignified and effective. We should also thank the noble Lord, Lord Strathclyde, for his review. It is much more difficult to write a short letter than a long one. The review is short, well written and readable. Really, it contains everything that one might want to have on the topic.

I will confine myself to three areas or themes that came out of the review. The first is that of clarity. I notice that the word appears on the first page and the last, and it appeared in the speech of noble Lord, Lord Strathclyde, earlier on. As a relatively new Member of the House, I found it interesting to be asking on 26 October quite a lot of more experienced Members of the House about the conventional position. There was a total lack of clarity among the membership of the House, particularly among the more junior Members, as to what the position was. So I thought that I would do a bit of research on this, because, as a newish Member, I had recently been handed all the relevant bits and pieces of paper—and that was difficult.

My first suggestion, on which it will be very interesting to hear a comment, is that there could be in some place some recording of what the conventions might be. I say very carefully here that I have read the relevant parts of the Joint Committee on Conventions report of 2006 and I agree that it is fresh—a word used by the noble Lord, Lord Strathclyde. I agree with it all. I am not suggesting that anything should be codified in any way. I am merely suggesting recording it, so that there is at least somewhere to which people like me can go in order to form a view on what the conventions are.

My second point is about skeleton Bills. In my mind these have been rebranded by the noble Lord, Lord Cormack, as Christmas tree Bills. That is a better way of thinking about them. I will read out again the relevant bit that appears twice in the review, about the Government taking,

“steps to ensure that Bills contain an appropriate level of detail and that too much is not left for implementation by statutory instrument”.

As a quid pro quo that is good news if the third option is taken. However, it deals with future Bills and not with the problem of Christmas tree Bills already on the statute book. In six minutes it is not possible to develop that, but it occurs to me, considering this point further, that one has to deal with old Christmas tree Bills and old provisions for statutory instruments as well.

I will make some more general points, and my next comment is on timing. As has often been observed today, there was another choice for those tabling legislation for the Government as to the route that they took. There was a certain route and even if that was a bit clunky, the Government have the ability to conduct their business. As we grapple with the issues that have been raised in this debate, I do not therefore feel that this House or the other place should be in any rush; it is important to get it right.

Building on that, of course the functions, powers and composition of this House are interrelated. If you are going to tinker with those functions and powers, then, as the noble Lord, Lord Norton, said, there are quite a few difficulties that, as you scratch the surface, you come across. A number of people have suggested that a Joint Committee of the two Houses would be appropriate, and I would support that. But anyway, the document is pithy and would be very valuable were such a Joint Committee to be formed in the future. However, I do not feel that the document is a good basis today for piecemeal constitutional meddling.