HC Deb 19 October 1976 vol 917 cc1359-68
Mr. Shersby

I beg to move Amendment No. 33, in page 17, line 7, at end insert 'The British Association of Accountants and Auditors Ltd.'.

Mr. Deputy Speaker

With this we may take the following amendments:

No. 34, in page 17, line 7, at end insert— '(2A) (a) If on the request of a body that it be added to subsection (1) above the Secretary of State refuses, or delays for a period exceeding six months, to comply with the request he shall, if required by that body, state in writing the reason for the refusal or delay, and the body may appeal to the Privy Council. (b) On any such appeal the Privy Council, after communication with the Secretary of State, may dismiss or uphold the appeal, and if the appeal is upheld the Secretary of State shall make regulations under this section to give effect thereto'.

No. 35, in page 17, line 24, leave out subsection (4).

Mr. Shersby

My intention is to probe further the reasons why the association has not been included in the clause, bearing in mind the events which have taken place since the Committee stage. In Committee the Under-Secretary said that he thought it inappropriate to write the name of the association into the Bill in advance of the association's formal application for inclusion. He also said, We are not satisfied with the examination and marking standards of the association. We say that they are not comparable with those of the professional bodies which are naturally and rightly concerned that the established standards should not be watered down."— [Official Report, Standing Committee C, 15th July 1976; c. 295.] Will the hon. Gentleman elucidate that reply? The association has no knowledge that the standard of examination papers has ever been questioned by the Department of Trade. I am advised by the association that the Department has never called for or examined work papers of the candidates. Had there been any communication of that kind between the Department and the association, surely it would follow that consultations would have taken place with the object of revising the syllabus up to the required standard. As I understand it, that has not happened. I may be wrong, and I hope that the Minister will clarify that point.

A great deal of water has flowed under the bridge since 15th July, and in the association there have been a number of developments which demonstrate that it has a case for saying that its name should be added to the list of associations set out in the Bill. I understand that the association gave formal notification to the Department on 8th December last year of its executive council's intention to make a further application for recognition. I believe that for all practical purposes we may take it that the application now lies upon the table at the Department.

I presume that it now remains only for the Secretary of State to be satisfied when the independent moderators, whom he suggested to the association, have pronounced upon the question of equivalence with the standards of the other recognised accounting bodies. Have those moderators yet been appointed?

It seems, on the admission of the Under-Secretary himself, that the association has made considerable efforts to improve its examination standards. I hope therefore that in the light of the progress which appears to have been made since the Committee stage the Under-Secretary will be able to indicate his support for the eventual inclusion of the name of this association either at a later stage or preferably in the Bill.

Mr. Ray Mawby (Totnes)

A constituent of mine is a member of the body concerned in the amendment. But I also have contact with many other accountants who are members of professional bodies in accountancy which until now have never been questioned on professional standards or the examinations that they hold for their members.

I certainly support my hon. Friend the Member for Uxbridge (Mr. Shersby) over the British Association of Accountants and Auditors. As far as I can see from my records the Department, while suggesting that the standard of the examination is low, has never indicated where it considers that the standard should be higher.

If the Bill goes through in its present form, I believe that a number of professional associations, which have operated for many years and which have made periodic applications to the Department of Trade for registration as professional bodies, will be deemed. Unless at least one of these amendments is passed, we shall condemn these organisations to a shotgun marriage with the British Association of Accountants and Auditors Limited, or to a steady deterioration because their standards of examination will not be accepted. Consequently those organisations will die.

It may be said that an appeal to the Privy Council is not the right way to proceed, but there should be some way in which professional bodies of long standing should be able to have the opportunity of being heard before an independent body so that at least they can be satisfied that they have some future if they are prepared to conform to reasonable requirements laid down by the Department of Trade.

I support Amendment No. 33 and, more important, I support Amendment No. 34 because it takes in other professional bodies that should be given proper consideration by the Government.

Mr. David Mitchell

Amendment No. 35 was tabled because of the existence of a parallel problem to that which was mentioned in an earlier debate. In this case I am referring to the problems faced by certain older people in country areas who are without professional qualifications and who are not able to secure such qualifications as would be required of young people now entering the profession.

The provisions of the Bill will give only 12 months for such people to be phased out and are a little unreasonable. A man who is 58 years of age and who has spent 20 years undertaking adequate and accurate auditing work on smallholdings and small sawmills in country areas should be allowed to continue to work out the rest of his time and not be thrown on the dole queue. I hope that the Government will allow such a man to do just that.

4.30 a.m.

Mr. Ben Ford (Bradford, North)

First, I declare an interest, I have a connection with an association of accountants. I am proposing that provision be made for a proper appeal procedure to be available to bodies applying to be recognised and named in the clause.

I can describe my intention by reading a short quotation from the speech that I made in Committee on a similar amendment. The amendment was not carried only because of the Chairman's casting vote. I said: 'The purpose of the amendment is to provide a machinery for ensuring that responsible representations made to the Secretary of State for the inclusion of a further accounting body in the list of qualified bodies are not only taken fully into consideration, and within a reasonable period, but are also seen to be subject to a method of adjudication in the event of an unfavourable decision by the Secretary of State. The amendment is in the interests of the Secretary of State as well as the appellant body, because it is important—and I believe doubly so in a matter of this nature—that justice should not only be done but should manifestly be seen to be done. The four bodies named in subsection (1) are eminently respectable bodies which have for nearly 30 years, been recognised and accepted by the Secretary of State under the provisions of Section 161 of the Companies Act 1948, which the new procedure is designed in the first place to consolidate. But the very fact that these four bodies have an entrenched status must of necessity make it more difficult for a new body to break the magic ring."—[Official Report, Standing, Committee C, 15th July 1976; c. 300–1 The question arises of the form that the appeal machinery should take. It appears from my researches that the Privy Council is the only appropriate body to be the recipient of such appeals. The Department of Trade, in granting or withholding recognition to professional bodies under Clause 13, is acting in a manner similar to the governing council for a professional. It sets standards and does all the things that a governing council would undertake. For instance, it has recently, and very publicly, demonstrated its interest in disciplinary procedures in the accountancy profession.

It is my contention that the Department of Trade should be in the same position as a governing council. Such a council derives its existence from Parliament. The Department also derives its existence from Parliament, but the difference is that whereas there is provision in statute for an appeal to the Privy Coucil in the case of decisions of governing councils, there is no such provision where the Department is concerned.

I shall quote a number of Acts where the principle applies. There is the Pharmacy Act 1954, where the Privy Council can take decisions about the appointment of examiners. Under the Medical Act 1956 the Privy Council can adjudicate on courses of studies and appeals regarding the registration of individuals. There is the Dentists Act 1957, where the Privy Council concerns itself with regulations concerning qualifications for the registration of foreign and Commonwealth practitioners. Those registrations must be approved by the Privy Council. The Opticians Act 1958 states that the institution or body may make representations to the Privy Coucil for either withdrawal of approval by the General Council. In default the Privy Council may discharge any function of the General Optical Council. In the Professions Supplementary Medicine Act 1960 the Privy Council may adjudicate on the suitability of courses of training. The body or persons affected may appeal. In the Veterinary Surgeons Act 1966 the Privy Council may adjudicate on courses of training offered by colleges or universities. It is clear that the Privy Council is involved in more than a purely judicial role in these matters and that it would be capable of arranging to adjudicate on a matter of departmental determination regarding accountancy.

I hope that no one will suggest that accountancy is in any way more testing or important than medicine. I contend that by naming these bodies in statute the matter of recognition has been removed from the administrative arena and into a situation where non-recognition will enormously increase the downgrading effect upon bodies not mentioned. The purpose of recognition is to define eligibility for appointment as an auditor to a company incorporated under the Companies Act. It is neither an assessment of competency nor is it a barrier to the provision of accountancy services to the public.

It is a fact, however, that overseas Governments apply recognition under Section 161 as a precedent for recognition within their countries in the belief that the section was introduced to define the only reputable bodies of accountants. This places an incubus upon the qualified accountant seeking appointments or wishing to practice in those countries. I submit that Section 161 (1)(a) is being used out of its statutory context. Recognition under Section 161 is taken by those bodies having recognition as an indication of professional superiority, a purpose for which Parliament never intended this section to be used.

Because of the provisions of the Companies Acts, members of accountancy bodies not recognised under such Acts are continually being labelled with the classification of "unrecognised". Since 1948 other Bills have been promoted, having nothing whatever to do with limited companies, but which nevertheless quote the audit provisions of the Companies Acts and so restrict the area of work carried out by those not recognised within the Companies Acts. I will not develop this but I have a list of functions and Acts which demonstrate my thesis.

In my view a new and unique situation has been created by the inclusion of this clause. This requires a remedy to be available to bodies not named in the Act. My Amendment No. 34 offers such a remedy and would enable justice manifestly to be seen to be done.

Mr. Douglas-Mann

At half-past four in the morning I do not propose to set my judgment against what I expect the Minister's judgment is likely to be on Amendment No. 34. I ask the Minister to consider the amendment and the possibility of dealing with the principle embodied in it when the next lot of company legislation comes before the House. It it not desirable that we should seek to incorporate amendments of this kind at the tail end of the Session.

I can see some problems about giving jurisdiction to the Privy Council without giving any criteria about the judgment it has to apply. I feel apprehensive about giving to these bodies a statutory recognition and responsibility when there is no adequate appeals mechanism available to enable consideration to be given not only whether the bodies are performing the function adequately but whether there are other bodies which might not be performing that function adequately.

I have in mind particularly the body controlling my own profession, the Law Society. I am by no means always satisfied that it does all it might within that profession. It may well be that there are other bodies which could perform, in accountancy or law, the functions which professional bodies such as the Law Society perform. I would like to feel that there is a means by which another body could come into being. I do not propose to support the amendment but I hope that when company legislation is before us in future we shall have proposals from the Government which will enable other bodies to be put forward as competent to represent qualified auditors able to act for these purposes.

Mr. Higgins

We debated these issues at great length in Committee, though I well understand that hon. Members who did not serve on the Committee may feel that they wish to comment on the fairly important issues arising on this clause.

I wish to make three quick points. First, on the matter raised by my hon. Friend the Member for Basingstoke (Mr. Mitchell), my understanding is that the Minister should be able to give my hon. Friend some reassurance about existing practitioners. I hope that the hon. Gentleman is able to do that.

Secondly, on the issue referred to by the hon. Member for Bradford, North (Mr. Ford), I still feel that reference to the Privy Council is not satisfactory, as I said in Committee. However, I understand that further discussions may have taken place about the body with which he is concerned, and no doubt the Minister can bring us up to date on the position.

Finally, as regards the British Association of Accountants and Auditors Limited, I know that there has been an exchange of correspondence since the Committee Stage, and I hope that it will be possible to make progress which will be of advantage to that body. My hon. Friend the Member for Uxbridge (Mr. Shersby) was right to raise the matter on this occasion in order to give the Minister an opportunity to put the current position on record

Mr. Clinton Davis

Our attitude and, indeed, that of our predecessors to the specific case of the BAAA is that, in order to achieve parity of recognition, there also has to be parity of standards in the syllabus, examination and marking. I am afraid that the BAAA has not yet satisfied the Secretary of State that those standards are comparable with those of the bodies which are already recognised. It would be quite wrong to dilute those standards, because we are considering here creditors and shareholders, as well as the interests of the accountancy profession.

The criteria are spelt out very clearly to everyone who is involved in seeking to qualify, and the BAAA knows what those criteria are.

The reason why an independent assessment of the BAAA's marking standards has only recently been suggested is that until a short time ago officials were able to conclude that the association's examinations did not offer as vigorous a test of the necessary accountancy disciplines as those of the recognised bodies. They were able to do that merely by looking at the syllabi and examination papers of the association.

The latest position is that the BAAA has submitted to the Department a draft new syllabus. This was done in June 1976. This shows a very considerable improvement, and the way is now open for an independent assessment of its marking standards. This is shortly to be discussed with the association. A meeting has been fixed for 4th November. It is important that there should be an independent assessment by moderators. I think that I shall carry the whole House with me in saying that.

As for Amendment No. 34, the hon. Member for Totnes (Mr. Mawby) conceded that it was not right to introduce into legislation an appeal to the Privy Council. I do not think that I need labour this point at any length, because we had a long debate about it.

The precedents which my hon. Friend the Member for Bradford, North (Mr. Ford) seeks to adduce in support of this proposition are not relevant to what we are discussing. They all relate to restricted professions where there are statutory registration councils. The appeal, where it exists, is basically from the statutory council, largely dominated by the profession, to a Minister or Ministers of the Crown. Its purpose appears to be to provide accountability to Parliament from bodies which would otherwise be totally non-accountable. A decision in this case concerning the recognition of a qualification is taken directly by the Secretary of State, who is accountable to Parliament. What is more, a body of this kind can have recourse, if it feels that there has been maladministration, to the Parliamentary Commissioner. I do not think it right to proceed in the way suggested, for a number of reasons which have been mentioned already.

On Amendment No. 35, I can give the hon. Member for Basingstoke (Mr. Mitchell) the assurance that auditors who have already been approved by the Secretary of State under Section 161 (1) (b) will not be affected by this legislation. There is also a 12-month phasing-in period.

However, the procedure of basing recognition on adequate knowledge or experience is hardly used now. I do not think that it would be sensible for it to be perpetuated. The people concerned need not be member of a professional body or subscribe to any professional discipline. There are few applicants.

We are seeking to tighten the criteria and to ensure a higher degree of competence among auditors. Eliminating these provisions is one way of achieving it.

4.45 a.m.

Mr. David Mitchell

I think that the hon. Gentleman is giving the assurance I want. Will a person who is now practising as an auditor in the sticks and who is unqualified and aged, say, 50, be able to carry on until retirement at 65?

Mr. Davis

If an auditor has been approved by the Secretary of State under Section 161(1)(b), he will not be affected by this legislation. He will, of course, be subject to the disciplines and statutory provisions which now apply, but apart from that, his position will be unchanged.

Mr. Shersby

In the light of the Minister's assurances, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: No. 34, in page 17, line 7, at end insert— '(2A) (a) If on the request of a body that it be added to subsection (1) above the Secretary of State refuses, or delays for a period exceeding six months, to comply with the request he shall, if required by that body, state in writing the reason for the refusal or delay, and the body may appeal to the Privy Council. (b) On any such appeal the Privy Council, after communication with the Secretary of State, may dismiss or uphold the appeal, and if the appeal is upheld the Secretary of State shall make regulations under this section to give effect thereto.'.—[Mr. Ford.]

Amendment negatived.

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