HC Deb 19 February 1987 vol 110 cc1120-3
Dr. McDonald

I beg to move amendment No. 42, in page 36, line 29, leave out 'annulment in pursuance of a resolution of and insert 'affirmative resolution in'.

The clause deals with communications by the auditor with the bank and in subsection (6) makes it clear that the Government will lay down regulations to make various provisions for the kind of information that auditors may be expected to give to the Bank of England. My purpose in tabling the amendment is to provide for these regulations to be scrutinised by both Houses and to allow for them to be voted down by either House of Parliament. The reason for this is that this issue needs examination. As the Minister knows, I have expressed doubts about the change in the role of auditors and the possible conflict of interest that they may have in reporting on the institution for which they act as auditors and in also being auditors and possibly fulfilling other functions in relation to that institution. Any regulations should be examined in that way by both Houses.

Mr. Cash

The amendment is very interesting, because it would change the procedure that is operated with regard to the class of accountant referred to in subsection (5). The auditors are persons who would be qualified and referred to under section 389 of the Companies Act 1985, and who used to be recognised by the Department of Trade and Industry under sections 161(1)(a) and 161(1)(b) of the Companies Act 1948. Therein lies a tale. The classification of auditors under the 1948 Act raises the whole issue of the regulation of accountants in respect of which the eighth directive has been generated by the Commission and is open now for further consideration and consultation.

I am bound to say that the definition of an auditor is really left to the Secretary of State for Trade and Industry and there is no way in which I—argued this on the Financial Services Act 1986 and in relation to other matters—one can say with any degree of assurance that merely because a person is an auditor who has prescribed functions with regard to the audit of companies, it necessarily follows that he would be competent to have anything to say with any certainty about, for example, financial services. Those who are interested in following what I am saying — I am attempting to truncate the argument to some extent — may wish to refer to the proceedings in Committee on the Financial Services Bill. An important issue lies at the root of this matter.

7.30 pm

I hesitate to mention this, but my great-grandfather, William Cash, was a founding member of the Institute of Chartered Accountants and his son was president. Therefore, what I am about to say is with no disrespect to the institute, but I say it with feeling. I should declare an interest, because for many years I have been the legal adviser to the Society of Company and Commercial Accountants. The members of this society are accountants who would fall within the class of clause 44 (5). They have satisfactory rules made or guidance issued by a professional body".

Therefore, I would be deeply concerned if there was any circumstance in which the members of a body which was not chartered—in other words not regarded as being on the inside track — would in any way be discriminated against simply because they were accountants from what some might incorrectly regard as the wrong stable.

The whole question of audit and auditors, of who is competent to be an accountant and who should give advice on tax questions, is very important to those who are giving the advice and to their clients. The Society of Company and Commercial Accountants has, I understand, through its membership, about 100,000 clients. The members of the society are small businesses and they advise small business men. There is nothing of which I am aware that has ever been raised to demonstrate to me that the society has anything but the highest standing, although it is not, at this juncture, a chartered body. Therefore, it is important that this provision is in the Bill and I congratulate the Government on the fact that it does appear in it; in other words, that it is not a provision confined to auditors, but applies to accountants. However, I have to issue the caveat that if any attempt were made to discriminate against the members of the Society of Company and Commercial Accountants in favour of chartered bodies in the way in which it has been done in the past with regard to the Companies Act legislation, it would be necessary to take appropriate action in relation to the regulations.

The question whether the regulations may be hybrid could arise out of whether they were subject to the affirmative procedure or annulment. It so happens that this provision is currently cast on the basis of its being subject to the annulment procedure. 1 believe that there is a strong case—I would be interested to hear what my hon. Friend has to say about this—for saying that they should be subject to the affirmative procedure so that, if the issue of discrimination went to the House of Lords, which is where such questions are sorted out, there would be no doubt that the society would be in a position to petition on the ground that it was being discriminated against. Having been involved in the defence of the ship repairers in the Aircraft and Shipbuilding Industries Act 1977—I was the adviser on that case and appeared in the House of Lords in a professional capacity before I was elected to the House—I am well aware that there can be circumstances in which people may need to have a defence made available to them and the procedure that follows as a result of this being made subject to the affirmative procedure.

I ask my hon. Friend to consider, not only because justice should be seen to be done, but in anticipation of the Society of Company and Commercial Accountants being in a position to have available to it the procedures I have described, that this matter should be made subject to the affirmative procedure. I would be surprised if he were to say that he was not prepared to do that.

The credentials of the society are well known, and I have explained them. Discussions are taking place with Sir Kenneth Berrill over the position under the Securities and Investments Board and the documentation that he has just submitted to the Department of Trade and Industry. Indeed, I can inform my hon. Friend that the matter is also being raised with the Office of Fair Trading. It would be wrong for a society, which is perhaps small in number but none the less important in relation to its clients and its standing, to be given rough justice and unfair treatment simply because it does not fit neatly and conveniently into the packages provided through the auspices of the chartered bodies.

I know a little about this subject because I have been involved in advising on matters relating to audit and accountancy for nearly 15 years. I hope that my hon. Friend will listen carefully to what I have said and be good enough, in all justice, to enable the Society of Company and Commercial Accountants to have an assurance that there will be no discrimination against it or, alternatively, to have available to it the affirmative procedure so that it can petition in the House of Lords if it were to be a hybrid instrument.

Mr. Ian Stewart

The hon. Member for Thurrock (Dr. McDonald) has suggested that regulations under clause 44(6) should be subject to affirmative resolution instead of the negative resolution procedure. My hon. Friend the Member for Stafford (Mr. Cash) has given rather different grounds for suggesting the same thing. The regulations under clause 44(6) are reserve powers, only to be introduced if the conditions specified in clause 44(5) are not fulfilled; that is if satisfactory rules or guidance are not issued by the professional bodies concerned. However, the more I think about it, the more I am persuaded that there is merit in making such a change. Therefore, I am inclined to accept what the hon. Lady proposed in principle. Unfortunately, when the wording of the amendment was checked it was found to be technically deficient. Therefore, I am not able to accept it in substance as opposed to in principle. However, in a fit of energy, I asked if it would be possible for parliamentary counsel to produce an amendment which would be satisfactory. I do not know whether the Chair would be willing to accept a manuscript amendment in substitution for amendment No. 42. which achieves precisely the effect wished for by hon. Members. If you were willing to accept that, Mr. Deputy Speaker, I have a copy in my hand and it might be for the convenience of the House if we were able to consider it.

Mr. Deputy Speaker

I cannot accept the amendment because Mr. Speaker accepts amendments. It has been submitted too late. I am sorry about that.

Mr. Stewart

I regret that my efforts to assist the House have not been successful, even on those practical grounds which I understand. I had decided that this change should be made and therefore the drafting of the amendment would have to occur at some stage. I will ensure that it is tabled in another place.

Dr. McDonald

In view of what the Minister said—and I thank him for his acceptance of the principle of this amendment — I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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