FUNCTIONS TO BE CARRIED OUT BY NON-EXECUTIVE MEMBERS (Hansard, 22 January 1998)

§ Mr. Darling
I beg to move amendment No. 41, in page 2, line 23, at end insert— '(2A) At a meeting of the sub-committee the quorum shall be 7.'

§ Mr. Deputy Speaker
With this, it will be convenient to discuss the following amendments: Government amendment No. 42.
No. 14, in page 2, leave out lines 26 and 27.

§ Mr. Darling
I said during the debates in Standing Committee on clause 3 that I accepted that the clause was deficient to the extent that it did not contain any specific standing orders. Amendment No. 41 will give the sub-committee a quorum of seven. Amendment No. 42 adapts the existing standing orders for the court.
With amendment No. 41 is grouped amendment No. 14, which was tabled by the Opposition. Its effect would be to remove the power of the sub-committee to delegate its functions to two or more of its members. I believe that that power is important simply because its makes for good management.
Anyone who has ever sat on any committee or has had anything to do with running a business will know that it is common for a board or committee to delegate its functions to perhaps two or three individuals, for them to report back to the parent committee or board, and for the board or committee to make a final decision. Even if the sub-committee delegates responsibility for certain functions to a sub-committee of two or more, it as a whole has statutory and collective responsibility for the duties set out in the Bill.
The Opposition amendment would simply hamper the smooth operation of the sub-committee. Therefore, I urge the House to accept the two Government amendments and to reject the Opposition amendment.

§ Mr. Fallon
It is in the nature of the grouping of the amendments that the Chief Secretary finds himself replying to an amendment that I have not yet explained, and trying to assume the arguments behind it. Be that as it may, let us begin with Government amendments Nos. 41 and 42.
I hope that the House will not be deceived by the graceful note with which the Chief Secretary moved the amendments. That was not the tone that he adopted in Committee. [HON. MEMBERS: "You were not there."' I have read the proceedings of the Committee, and I am about to quote from them. When the matter was raised in Committee by my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley), the Chief Secretary said of my hon. Friend: The hon. Gentleman is talking nonsense. Now the Government have had to table amendments to meet precisely the point that my hon. Friend raised in Committee—the interaction between clause 3(4) and the rest of the Bill. I had hoped that, in moving the amendments, the Chief Secretary would begin with something of an apology to my hon. Friend.
1194 Perhaps I can remind the Chief Secretary that, when he told my hon. Friend that he was talking nonsense, he went on to say: It is sufficient to specify in the Bill the quorum of the court."—[Official Report, Standing Committee D, 20 November 1997; c. 64.] We now learn that it is not sufficient simply to specify the quorum of the court. Ministers have been forced to reconsider and to make it clear that, even if its functions are delegated under subsection (4) to as few as two members, the quorum of the sub-committee must be seven. That is an improvement on the arrangements that the Chief Secretary put to the Standing Committee. I look forward to the expert opinion on that improvement which I know my hon. Friend the Member for Bury St. Edmunds will shortly give.
Amendment No. 42—something else that the Government have had to reconsider—is certainly an improvement. The Opposition welcome the propriety introduced there. These are late changes to the Bill. I sometimes wonder whether Ministers who take great pride in claiming credit for legislation are also prepared to take credit for improving the drafting instructions sent to counsel, presumably some time last autumn, which have now had to be rapidly revised.
We have tabled amendment No. 14. Even with the safeguard that amendment No. 41 provides, which we welcome, it is wrong to delegate to as few as two people the functions of the sub-committee. That happens in some companies, certainly very small companies. I have served on an audit committee and a remuneration committee. Indeed, I have chaired an audit committee of as few as two directors. But I have always felt uncomfortable about doing so. It has always been one of the arguments for strengthening the role of non-executive directors and improving corporate governance that one does not get into the position, especially on matters affecting remuneration, in which as few as two people can decide the large sums of shareholders' money paid.
We are not talking here of some very small company. We are talking about the Bank of England and the most major functions that are now to be entrusted to it. We think that, as a minimum, the quorum ought to be three or four members, but we prefer to delete the subsection altogether. I am happy to give the Chief Secretary one last chance to persuade us that we should not.

§ Mr. Ruffley
I shall keep my remarks brief, because my hon. Friend the Member for Sevenoaks (Mr. Fallon) has set out clearly the burden of our argument. I was surprised—astonished is probably a better word—that, in Committee, the Chief Secretary did not pick up the non-partisan point that, while schedule 1(13)(2) provides for a quorum of nine for the sub-committee of the court of directors, in practice, it would be possible to sub-sub-delegate to a quorum of two. It is not called a quorum of two, but the provision is for two of the directors to exercise powers on behalf of the whole of the sub-committee. The Chief Secretary denied that, and called it nonsense, but it is clearly the effect of the provision as drafted.
With amendment No. 14, we are merely drawing attention to the unfortunate state of affairs where decisions relating to the important functions discharged by the court of directors could be taken by as few as two individuals. The Chief Secretary says that the whole of 1195 the court will be responsible: there will be collective and corporate responsibility for the actions of those two individuals—if, indeed, two individuals take the decision. He is right, but that is not an argument to prove that the amendment is of no effect.
If everything done in the name of the committee is ultimately the responsibility of the committee, why bother having a quorum of any number? By that argument, there is no logical reason for having quorums at all—we might as well say that one individual can take a decision, and justify that by saying that, at the end of the day, the whole committee is responsible for what that individual does.
It was surprising that the Chief Secretary did not acknowledge that what is effectively a sub-sub-delegation is a potentially dangerous state of affairs. My hon. Friend the Member for Sevenoaks rightly pointed out that we are not dealing with a small or medium-sized company; we are talking about the functions to be discharged by the court of the Bank of England. It is unfortunate that the Bill as it stands would allow as few as two people to take such important decisions. We tabled the amendment to ensure that those potential unfortunate consequences do not come to pass, and, in that spirit of non-political partisanship, I support amendment No. 14.