HC Deb 02 May 1929 vol 227 cc1796-804

I beg to move, in page 11, line 21, after the word "auditors," to insert the words: (who shall have had no business or commercial relation with any of or all the parties to the agreement). This Amendment and the next Amendment which stands in my name, and which is consequential, relate to the qualifications of auditors. Our submission is that it is vitally necessary to secure the complete impartiality of any auditors appointed under this scheme, whether to audit the accounts of the associated undertakings or whether to audit the accounts of the common fund. These two Amendments provide, firstly, that the auditors appointed shall have had no business or commercial relation with any or all of the parties to the agreement, and, secondly, in the consequential Amendment, that they shall be disqualified from any other employment in connection with any of or all the combined undertakings. I hope that these Amendments will be favourably received by the power behind the Government, that is to say, by the hon. Members below the Gangway who appear to be determining the policy of the Government majority in this matter.

I would like to draw attention to one or two analagous restrictions in other Statutes which provide, I think, some justification for these Amendments, Those who have followed the development of our company law will have noticed that in recent years the qualifications for auditors have been more and more tightened up, and I think that that is a very proper and healthy development. In the Companies Act, 1928, and in the Consolidation Act of this year, it is provided that the auditor of a public company must not be a partner of any person who is a director of the company—a very proper provision, pointing in the same direction as the Amendment which I am now submitting to the House. Other analogies can also be given. I do not wish to go into them at any length, but may briefly mention that, in the case of receivers appointed by the Court, the practice at the present time, although there is no strict legal rule, is that no person shall be appointed a receiver who is in any way connected with either of the parties; and, similarly, in the case of liquidators appointed by the Court, it is becoming increasingly the practice to insist that the liquidator, like the receiver, must be entirely independent of any financial or commercial relationship with the business or with either of the parties.

I think that these analogies are apposite, and that, as we are starting upon this new experiment, under which very great liabilities attach to the various bodies who are coming in, and also possibilities for future profit, it is essential that we should recognise a principle which is being more applied in analogous branches of the law, and that these auditors should be wholly independent of any commercial relationship with either of the parties, so that we can ensure that what is really a quasi-public appointment shall in fact be marked by complete impartiality, and that the auditor dealing with very important duties, as he will be if this Bill becomes law, shall be entirely free from even the faintest suspicion of being in any way partial to any of the interests affected.


I beg to second the Amendment.

In view of the important duties that are going to fall upon the Minister, I am rather surprised that the appointment of auditors has not been placed in his hands. I should have thought that that would have got over some of the difficulties which have been referred to by my hon. Friend in moving this Amendment, because, when the Minister is asked to give his decision on questions of rates and fares, and also on the question of new capital, or certainly of ranking capital, it will be most important that he should have the advice of qualified auditors who know the full particulars in connection with all the various companies. Having regard to the fact that these matters may come before the Minister in the event of the interested parties failing to come to an agreement, I myself should have preferred to see the appointment of auditors made by the Minister. This Amendment does not go as far as that, but it seems to me that at any rate, in justice to the Minister as well as to the people of London, the auditor ought to be in an absolutely impartial position, and not in any way connected with any of the companies that are going to form a part of the Combine.


I regret that it is quite impossible to accept this Amendment. I need scarcely remind the House that public auditors who are engaged in auditing the accounts of the various undertakings connected with London passenger traffic are firms of very considerable reputation and status. They are familiar with all the intricacies of the undertakings, and are, therefore, able as all times to give advice on difficult questions of accountancy and finance. It cannot be suggested that these auditors would be in any way partial or prejudiced in favour of a particular company, and to insert an Amendment of this kind would seem to me to cast a very serious reflection on their integrity. On that ground alone I think the Amendment should be rejected. Moreover, if such an embargo were imposed, it might be quite impossible to obtain auditors of the front rank, such as would be necessary for these undertakings in the future. On these grounds I ask the House to reject the Amendment.


I think that the speech we have just heard from the hon. Member for Central Wandsworth (Sir H. Jackson) is exceedingly unsatisfactory. This is one of the most reasonable Amendments that have been put forward from this side of the House. The hon. Member says that those who are engaged in business as public auditors, and especially those firms who are associated with the auditing of the accounts of large concerns, are firms of great integrity, but there has not been from this side of the House any suggestion reflecting on their integrity. What we contend is that in auditing accounts, and in considering, after the audit, the presentation of profit and loss accounts, what sums shall be placed to depreciation and reserve, and questions of that kind, it is only human that any person who is financially interested in the concern in question is going, if there are two alternative points of view, to take the one which favours his own interest. That is human nature. It is not a thing to quarrel with, nor is it a reflection on the integrity of the person who is auditing the accounts.

The supporters of this Bill seem to ignore the fact that this is very extraordinary legislation. If it simply concerned the internal affairs of the combine or of the London County Council, there might be no reason for this Amendment, but the object of this legislation is to bring into close relationship with one another a municipal undertaking and a private enterprise undertaking. In such a case we want, above everything else, to conserve the public interest; and, in all matters involving the decision of technical questions, which will have very important effects in regard to the amount and distribution of the common fund, we desire that those responsible for the passing of the accounts should be entirely above suspicion.


I was hoping that someone on the other side would have said something more in defence of the rejection of this Amendment. The hon. Member for Central Wandsworth (Sir H. Jackson) leaves out of account the fact that all municipal accounts, whether trading accounts or otherwise, are, certainly in the case of the Metropolitan boroughs and the London County Council, audited by auditors specially appointed for the work. There is no question of casting aspersions on a great profession. We are simply asking that the auditors who carry out this work shall not be associated with any of these companies, and I think the hon. Member and his friends know that perfectly well, What we are asking is that the same principle shall be applied in the case of the auditors who will audit these accounts as is applied to the audit of the accounts of a big electricity undertaking, or of the London County Council tramways undertaking. I think it is worth while asking someone to answer—perhaps the Minister might do so—the argument put forward by my hon. Friend the Member for Mile End (Mr. Scurr), that we are dealing with an extraordinarily novel procedure. We are setting up an authority in which the dominant power and control over municipal property and undertakings is going to be placed in the hands of a private company or companies, and we are entitled to ask that, in the auditing of what must be very complicated accounts, those who audit these accounts shall not have any interest, direct or indirect, in any of the companies, or in other companies of a similar character.

It is only right to say, as I can from a long experience both on the London County Council and on local authorities, that, much as I sometimes disagree with auditors on matters of principle, the men who have been in charge of the auditing of municipal accounts in this Metropolis are men of the highest rank in their profession. [Interruption.] Then, why is it that you want to apply a different measure, and, when we ask that you should place one of these men in the responsible position of auditing these accounts, why should if he said that we are casting an aspersion on great firms of accountants and auditors? We are doing nothing of the kind. If there is any aspersion at all, this House cast aspersions on these honourable gentlemen long years ago when they took the auditing of municipal accounts out of their hands and put them into the hands of men specially appointed, I believe, by the Treasury. It is no use to say that they are going to audit very complicated accounts and, therefore, you must have men who are experienced in it. You have already men who do nothing but this complicated work in regard to tramway, electricity, and gas undertakings up and down the country.

That argument will not stand for a moment. The argument that does stand is that you are going to have an agreement which many of us have never seen—this is legislation by reference with a vengeance—a scheme which will never come before the House. [Interruption.] We do not know, and we do not know what time the House will have to consider it. We know perfectly well the manner in which this sort of memorandums and articles of agreement are put before the House, but at this moment we do not know anything about it. London is buying, or being sold, a pig in a poke. There is no argument, and no one has put up any argument on the other side. You are relying on your big battalions. Although it may be a matter of great hilarity to the Minister of Transport, it is not a matter of hilarity to the ratepayers, whose property is going to be stolen from them under this precious proposal. We are, at any rate, going to claim the right to ask that the House shall, by vote, determine whether the people who will audit these accounts are to be free and independent of the Combine, or any of the allied concerns of the Combine, or whether they shall be people who may be under the control of those whose interest it will be to make as much profit and dividend out of the travelling public as possible. No one knows what these proposals consist of, and the only safeguard is to see that whoever is appointed to audit these accounts shall be on the same sort of footing as the public auditors who audit the accounts of local authorities throughout the country.


I suppose it is no use appealing to those who are promoting the Bill to accept the Amendment, but I want to resent the suggestion that we are casting a reflection upon expert Members of a very honourable profession. No one suggests for a moment that the auditors appointed would not give their most conscientious services to the audits that they undertook, but we are not en- titled to legislate by faith. Over and over again we on this side of the House have been accused of believing that the world is made up of angels and that they can live without sin and all the rest, and we are constantly told that we have to take the world as it is. In that spirit we say this is a common business precaution which everyone takes in relation to his own business. It is casting no reflection at all upon anyone with whom I have dealings if I ask him or he asked me to sign an undertaking. Therefore we resent the suggestion that we are casting a reflection upon the probity of these gentlemen. I am sure they themselves will not feel it to be such for a moment. In ordinary affairs we do this and I want to know why we should make this exemption in this manner. After all, the public have a very considerable interest in it, and the public ought to be assured that the auditing is done without bias and with as much skill as it can be. That is an essential principle of our public life which I thought was accepted in every part of the business world, that we seek, as far as we can, that those who have to give a judgment upon public affairs do so with what we may call free minds upon the question. I appeal to the hon. Baronet to accept the Amendment.


I should also like to support the Amendment. It seems to me it is simply a question of business. Business is business and it is a business proposition. I also do not see why any question of sentiment should be allowed to creep into it. In fact I think the House is in a peculiar position. We ought to take every possible care, in passing a Bill like this dealing with what is now pubic property, that no insinuation can be made against us. One of His Majesty's Ministers—I do not know why—has accepted the most tremendous responsibility under the Bill. In the past the responsibilities in regard, for instance, to rates of interest and sinking funds and so forth were looked after by the. Treasury. Now the Minister of Transport has taken this most tremendous responsibility upon himself to a very great extent of looking after the interests of the public. I should have thought he would welcome this proposal if it was only to stave off the severe criticisms which will undoubtedly be made. I am aware that it is only by the good will of hon. Members opposite and of the Government that we can hope to get any Amendments through, but I think our appeal is justified, and I shall support the Amendment that the auditor shall be of the same class whose business it is

to look after the public accounts of local authorities.

Question put, "That these words be there inserted in the Bill."

The House divided: Ayes, 56; Noes, 134.

Division No. 293.] AYES. [7.57 p.m.
Adamson, Rt. Han. W. (Fife, West) Hall, G. H. (Merthyr Tydvil) Russell, Richard (Eddisbury)
A damson, W. M. (Staff., Cannock) Hardle, George D. Saltor, Dr. Alfred
Barr, J. Henderson, Right Hon. A. (Burnley) Shepherd, Arthur Lewis
Bellamy, A. Henderson, T. (Glasgow) Short, Alfred (Wednesbury)
Bennett, William (Battersea, South) Jenkins, W. (Glamorgan, Neath) Smith, Ben (Bermondsey, Rotherhithe)
Bowerman, Rt. Hon. Charles W. Kelly, W. T. Smith, Rennie (Penistone)
Brown, Ernest (Leith) Lansbury, George Stephen, Campbell
Buchanan, G. Lawson, John James Strauss, E. A.
Buxton, Rt. Hon. Noel Lowth, T. Sullivan, Joseph
Cluse, W. S. MacLaren, Andrew Taylor R. A.
Connolly, M. March, S. Tinker, John Joseph
Dalton, Hugh Morrison, R. C. (Tottenham, N.) Wallhead, Richard C.
Dunnico, H. Owen, Major G. Welsh, I. C.
Gillett, George M. Palin, John Henry Williams, C. P. (Denbigh, Wrexham)
Graham, D. M. (Lanark, Hamilton) Paling, W. Williams, T. (York, Don Valley)
Graham, Rt. Hon. Wm. (Edin., Cent.) Parkinson, John Allen (Wigan) Wilson, R. J. (Jarrow)
Grenfell, D. R. (Glamorgan) Potts, John S.
Griffith, F. Kingsley Richardson, R. (Houghton-le-Spring) TELLERS FOR THE AYES.—
Griffiths, T. (Monmouth, Pontypool) Roberts, Rt. Hon. F. O. (W. Bromwich) Mr. Scurr and Mr. Snell.
Groves, T Robinson, W. C. (Yorks, W. R., Elland)
Acland-Troyte, Lieut.-Colonel Gretton, Colonel Rt. Hon. John Oman, Sir Charles William C.
Ainsworth, Lieut.-Col. Charles Guinness, Rt. Hon. Walter E. Penny, Frederick George
Albery, Irving James Hacking, Douglas H. Perkins. Colonel E. K.
Applin, Colonel R. V. K. Hall, Lieut.-Col. Sir F. (Dulwich) Peto, G. (Somerset, Frome)
Ashley, Lt.-Col. Rt. Hon. Wilfrid W. Hamilton, Sir George Pilcher, G.
Atholl, Duchess of Hanbury, C. Price, Major C. W. M.
Balfour, George (Hampstead) Harvey, G. (Lambeth, Kennington) Raine, Sir Walter
Bainlel, Lord Headlam, Lieut.-Colonel C. M. Reid, Capt. Cunningham (Warrington)
Barclay-Harvey, C. M. Henderson, Lieut.-Col. Sir Vivian Reid, D. D. (County Down)
Beamish, Rear-Admiral T. P. H. Hennessy, Major Sir G. R. J. Remer, J. R.
Betterton, Henry B. Herbert, S. (York, N.R., Scar, & Wh'by) Rhys, Hon. C. A. U.
Bourne, Captain Robert Croft Hills, Major John Waller Richardson, Sir P. W. (Sur'y, Ch'ts'y)
Bowyer, Captain G. E. W. Hohler, Sir Gerald Fitzroy Roberts. Sir Samuel (Hereford)
Briscoe, Richard George Holbrook, Sir Arthur Richard Rodd, Rt. Hon. Sir James Rennell
Brittain, Sir Harry Hopkins, J. W. W. Ross, R. D.
Brooke, Brigadier-General C. R. I. Howard-Bury, Colonel C. K. Rye, F. G.
Burman, J. B. Hudson, Capt. A. U. M. (Hackney, N.) Samuel, A. M. (Surrey, Farnham)
Cadogan, Major Hon. Edward Hume, Sir G. H. Samuel, Samuel (W'dsworth, Putney)
Campbell, E. T. Hunter-Weston, Lt.-Gen. Sir Aylmer Sandeman, N. Stewart
Cautley, Sir Henry S. Iliffe, Sir Edward M. Sanders, Sir Robert A.
Cecil, Rt. Hon. Sir Evelyn (Aston) James, Lieut.-Colonel Hon. Cuthbert Sanderson, Sir Frank
Charteris, Brigadier-General J. Kindersley, Major G. M. Savery, S. S.
Churchman, Sir Arthur C. King, Commodore Henry Douglas Shaw, Lt.-Col. A. D. McI. (Renfrew, W.)
Clayton, G. C. Lamb, J. Q. Smithers, Waldron
Cochrane, Commander Hon. A. D. Little, Dr. E. Graham Southby, Commander A. R. J.
Colfox, Major Wm. Phillips Lucas-Tooth, Sir Hugh Vere Sugden, Sir Wilfrid
Colman, N. C. D. MacIntyre, Ian Tasker, R. Inigo.
Conway, Sir W. Martin McLean, Major A. Templeton, W. P.
Cope, Major Sir William Macquisten, F. A. Thompson, Luke (Sunderland)
Courtauld, Major J. S. MacRobert, Alexander M. Thomson, Sir Frederick
Craig, Sir Ernest (Chester, Crewe) Makins, Brigadier-General E. Titchfield, Major the Marquess of
Crooke, J. Smedley (Deritend) Manningham-Buller, Sir Mervyn Tryon, Rt. Hon. George Clement
Culverwell, C. T. (Bristol, West) Margesson, Captain D. Wallace, Captain D. E.
Davies, Dr. Vernon Marriott, Sir J. A. R. Warner, Brigadier-General W. W.
Edmondson, Major A. J. Mason, Colonel Glyn K. Warrender, Sir Victor
Edwards, J. Hugh (Accrington) Mitchell, S. (Lanark, Lanark) Watts, Sir Thomas
Elliot, Major Walter E. Mitchell, W. Foot (Saffron Walden) Wayland, Sir William A.
Fairfax, Captain J. G. Mitchell, Sir W. Lane (Streatham) Wells, S. R.
Fielden, E. B. Monsell, Eyres, Com. Rt. Hon. B. M. Withers, John James
Ford, Sir P. J. Moore-Brabazon, Lieut.-Col. J. T. C. Womersley, W. J.
Forestier-Walker, Sir L. Morden, Col. W. Grant Worthington-Evans, at. Hon. Sir L.
Forrest, W. Moreing, Captain A. H. Yerburgh, Major Robert D. T
Foster, Sir Harry S. Nail, Colonel Sir Joseph
Gates, Percy Neville, Sir Reginald J. TELLERS FOR THE NOES.—
Gower, Sir Robert Nicholson, O. (Westminster) Sir Henry Jackson and Sir Cyrli Cobb.
Greene, W. P. Crawford O'Connor, T. J. (Bedford, Luton)