By Huw Macartney
Over the past decade, several posts on the PSA Parliaments blog have grappled with the unfinished business of House of Lords reform. One question has featured prominently: why do hereditary peers, whose seats derive from the accident of birth, continue to occupy places in the upper chamber? The underlying assumption, reflected in public opinion polls, is that inherited privilege has no place in a modern parliamentary democracy. Hereditary peers, after all, sat uneasily alongside the principles of a meritocracy that supposedly underpin the post-1999 House of Lords. With the final departure of the remaining hereditary peers, we might therefore assume that the last obstacle to a more representative, legitimate and meritocratic second chamber has finally been removed. But has it?
Indeed, one of the last major studies of the House of Lords in 2013 concluded that the chamber had become more diverse, representative and, perhaps most significantly, that the connection between wealth and power had largely been broken. This latter claim formed the basis for a two-year project led by myself and a team of researchers at the University of Birmingham. Our aim was to compile what is – to the best of our knowledge – the largest repository of the financial, educational, professional, and political activities of the House of Lords. These findings have now been published in our book, The Assetocracy.
What we found was concerning. Since the arrival of the Conservative government in 2010, first in coalition and then ruling alone, the upper house has been filled with extraordinarily wealthy peers. A new economic elite has replaced the old aristocracy.
More than 260 peers, the majority of whom were appointed since 2010, hold multiple, individual shareholdings – stakes in listed companies – worth more than £100,000 apiece. In fact, some Lords held over 200 individual holdings, each valued in excess of £100,000. Further, 14 Lords appear in The Sunday Times Rich List, with a combined net worth of £27.8bn.
One finding in particular caught our attention though. We found that over 250 of the Lords hold paid, private directorships; a grand total of over 800 directorships. At the upper end a sizeable number of Lords held more than 10 directorships.
From the perspective of the company itself there are important benefits to having a “Lord on the board”. A study of companies in the US with a high degree of political connections found that they were beneficial to the overall performance of the firm, because they had a substantial impact on the allocation of government resources. Indeed, this was also the conclusion of journalist Andrew Roth when he compiled the first comprehensive list of the directorships of private companies held by members of the House of Lords in 1961.
Our own research showed that data on earnings for these external roles was patchy at best, emphasising the need for better disclosure requirements on the Register of Interests. Yet certain details were made available. Several Lords earned between £2100-£2500 a month for 4-7 hours’ work, for example – or roughly £418 per hour. Another declared earning £108,000 per year, for 18 hours work a month – approximately £500 per hour. And this is hardly surprising, given that peers are board members for some of the UK’s largest listed firms. A full list of these FTSE 100 and FTSE 350 corporations with Lords on boards is shown below.
Members of the Lords also work as advisers and consultants to overseas companies and foreign governments. One peer declared receiving between £100,001 and £200,000 for work for an African bank. Another received £150,000 for membership of an advisory board in the Gulf. A third was paid £284,000 as an adviser to a Middle Eastern finance ministry. These external earnings come on top of the daily allowance peers can claim for attending the House of Lords.
But it was not simply the total number of directorships or the names of the companies, but the fact that being appointed as a Lord was directly correlated with an increase in offers of directorships. We compared the number of directorships held by particular Lords on the date of their appointment with the number they hold now. In 92% of cases, the number had increased.
Although correlation does not equal causation – there is no evidence that being appointed to the Lords was the cause of offers of directorships – the finding raises three related concerns about the potential implications of close ties between private interests and public office. I describe these as “the three C’s”: corruption, conflicts of interest and credibility.
The first is corruption, where Lords are simply puppets of their private sector masters, influencing policy in a particular direction. The book makes no attempt to prove this case, not only because such allegations are difficult to substantiate, but because they oversimplify the complexities of Westminster policymaking and risk exaggerating the influence of individual peers. As Andrew Roth observed, ‘hiring…Lords to influence legislation is a fairly minor activity’.
The second is conflicts of interest, where the value of a peer lies less in their direct influence over legislation than in their privileged access to political information and networks. As Roth continued, ‘providing useful information for companies which employ them as directors or consultants… can be extremely valuable for a particular firm or industry, to know in advance which way politics are moving in their field’.
The third, however, is credibility. What matters here is not the explicit proof of corruption but the perception of Lords using public office for private gain. The suggestion of such a link undermines public trust in the second chamber. Indeed, the question was raised by Baroness Miller of Chilthorne Domer herself, when she asked whether those appointments would have been offered in the first place had they been Mr or Mrs Bloggs rather than Lord or Baroness Bloggs – in debate before the Lords’ Conduct Committee.
This matters because the House of Lords already faces a profound crisis of democratic legitimacy. As an unelected chamber, its authority rests heavily on the perceived independence, integrity and expertise of its members. Yet the resurgent entanglement of public office and private wealth threatens to undermine precisely those qualities that justify its continued existence.
Our book makes a series of recommendations in the concluding chapter. But perhaps the most relevant to the question of credibility is the need for far greater transparency in the Register of Interests. The Register has, of course, improved in recent decades. But more – and more consistent – detailed information about peers’ external earnings, the time devoted to private appointments and the nature of the services they provide is essential.
This alone will not address the credibility deficit of the upper house. But it is a step in the right direction and, as Meg Russell noted, when it comes to House of Lords reform we should not underestimate the significance of incremental reforms.
About the author
Macartney is an Associate Professor in Political Economy at the University of Birmingham. His research is is broadly concerned with the politics of banking and financial services. His new book on the wealth, power and elitism of the House of Lords, The Assetocracy, can be found here.