HC Deb 26 October 1989 vol 158 cc1141-5

'.—(1) The Secretary of State may by regulations make such amendments of enactments as appear to him to be necessary or expedient in consequence of the provisions of Part II of this Act having effect in place of section 389 of the Companies Act 1985.

(2) That power extends to making such amendments as appear to the Secretary of State necessary or expedient of—

  1. (a) enactments referring by name to the bodies of accountants recognised for the purposes of section 389(1)(a) of the Companies Act 1985, and
  2. (b) enactments making with respect to other statutory auditors provision as to the matters dealt with in relation to company auditors by section 389 of the Companies Act 1985.

(3) The provision which may be made with respect to other statutory auditors includes provision as to—

  1. (a) eligibility for the appointment,
  2. (b) the effect of appointing a partnership which is not a legal person and the manner of exercise of the auditor's rights in such a case, and
  3. (c) ineligibility on the ground of lack of independence or any other ground.

(4) The regulations may contain such supplementary, incidental and transitional provision as appears to the Secretary of State to be necessary or expedient.

(5) The Secretary of State shall not make regulations under this section with respect to any statutory auditors without the consent of—

  1. (a) the Minister responsible for their appointment or responsible for the body or person by, or in relation to whom, they are appointed, or
  2. (b) if there is no such Minister, the person by whom they are appointed.

(6) In this section a "statutory auditor" means a person appointed auditor in pursuance of any enactment authorising or requiring the appointment of an auditor or auditors.

(7) Regulations under this section shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.'.—[Mr. Forth]

Brought up, and read the First time.

The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Eric Forth)

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker

With this it will be convenient to take Government new clause 18—Power to make provision in consequence of changes affecting accountancy bodies—and Government amendments Nos. 74 to 77.

Mr. Forth

This group of amendments concerns the consequential amendments which will have to be made to other enactments when section 389 of the Companies Act has been repealed and replaced by the provisions in part II of the Bill. Some of the amendments which need to be made are presently set down in schedule 15 to the Bill, but there is a considerable number of others. The amendments replace that schedule with a power to make all the necessary consequential amendments by regulations.

There are a number of reasons for this change in approach. As hon. Members will know, part II of the Bill will for the first time permit bodies corporate or partnerships which do not have separate legal personality to be appointed as company auditors. However, a number of the other enactments which make provision for the appointment of auditors proceed on the assumption that only individuals or partnerships with separate legal personality will be appointed. This reflects the present position under the Companies Act. In some cases, catering for the possibility that the auditors may be a body corporate or a partnership of this type will involve lengthy, if wholly technical, adjustment to the present provisions. We think this task will be better done at more leisure in the form of regulations which we will lay before the House in due course.

8.45 pm

Another reason is that we are not in a position to say definitively which other enactments need amendment. References in public Acts to section 389 and to the accountancy bodies specified in that section may of course be picked up by a computer search. But we know that there are some references in local and private Acts. Since these Acts have not been placed on a database, we cannot be sure of picking all of them up at this stage. The ability to make regulations will enable us to make the necessary provision for any references which only later come to light.

The third reason I would commend this approach to consequential amendments is that it will allow for some flexibility in later years in specifying which accountants a re to be eligible to carry out the auditing functions in other enactments. The effect of part II will be that the number of persons eligible in law to audit companies will fall. It may well also be that company auditing will become an even more specialised branch of the accountancy tree than it is at present. If that happens, one might wish not to follow the standard provision and restrict some of the functions to company auditors alone. One might wish to add certain other qualified accountants. This amendment will allow for that possibility.

I ought to mention one other amendment in this group, new clause 18. If a recognised supervisory body or one of the bodies presently recognised under section 389 were to change its name or merge with another body or otherwise be affected by a transfer of engagements, the Secretary of State would have discretion to recognise the new body. But he would not always be able to use the regulation-making power in new clause 17 to deal with the position under other enactments since that may only be used where a consequential amendment is necessary or the provision is concerned with auditing, and not with some of the other functions with which other enactments are concerned. New clause 18 therefore enables the Secretary of State to make by regulations such amendments of enactments as appear to him to be necessary or expedient in consequence of a change of name, merger or transfer of engagement affecting accountancy bodies recognised under enactments. I should mention that this new clause is supported by the Institute of Chartered Accountants, which had expressed concern about the legal position should one of them merge with another body.

Mr. John Garrett

Will the Minister confirm that new clauses 17 and 18 are items of secondary legislation which can be enacted by negative resolution? Is that not yet another example of a number of cases of secondary legislation in the Bill which is subject to the negative rather than to the positive form of resolution? Will he tell us why?

Mr. Forth

The hon. Gentleman may well be teasing me and the House slightly. I suggest that he knows the answer to the question, but I shall give it to him again. The ground was covered in Committee, but there is no reason why it should not be covered again on Report.

In this area we are dealing with complex matters which are not yet fully resolved and may not even be fully seen yet. Therefore, the only practical way forward is to give the Secretary of State the sort of delegated powers in the new clauses and amendments and they would be dealt with by negative resolution.

That is a familiar way to deal with such matters. It would be impractical for the House to attempt to deal with such a measure by positive resolution in the kind of detail and complexity which may well arise. Business managers and Opposition Members are familiar with the negative resolution procedure, which is a satisfactory, effective and practical way of dealing with matters of such complexity. I hope that the hon. Gentleman will accept and understand that explanation. I think that he well understands the complexity of these matters and the importance of dealing with them in a practical and realistic way. It is for those reasons that the new clauses have been drafted in the way that they have.

Mr. Cousins

The procedural point has been clarified, but we are still left with the substantive issues.

As the Minister has said, we are faced with considerable and rapid changes in the structure of the accountancy world. As the hon. Gentleman admitted in his short elucidatory statement, those changes make some difficulties for us, raising substantially new and different issues. He has not enlightened us about how he proposes to deal with the matters of substance contained in the new clause.

We are faced with the possibility of the issuing of regulations at a later date to deal with significant matters: the eligibility for appointment as auditors, the effect of appointing partnerships that are not legal persons and, in particular, ineligibility because of a lack of independence. I need not detain the House unduly by referring to recent events which give those matters considerable moment and significance. The Minister, however, has moved the new clause very late in the proceedings, when we are all at a disadvantage—and he will recognise that we are at an additional disadvantage owing to the timetable motion.

I apologise to the House for raising the matter, but it has to be raised. I feel that the Minister owes it to the House to give some indication of the substantive nature of the regulations that he proposes with regard to the three issues that I have raised, particularly that of ineligibility on the ground of lack of independence.

The matter is of considerable public interest, at a time when we are seeing the accountancy world shrink into a small number of large partnerships—which, moreover, may change their status. It is important to the markets and to everyone concerned with such issues, and the Minister should elucidate a little more.

Mr. Hanley

I welcome the new clause. Throughout the summer—and, indeed, in Committee—the Government have been talking to the requisite authorities, including the Institute of Chartered Accountants in England and Wales. The new clause is the result. I assure the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) that there is nothing sinister about it or its fellows; if anything, they enable the Government to deal with problems that might arise in the accountancy world very much more quickly and effectively. They would, in fact, deal better than any existing legislation with exactly the matters that the hon. Gentleman has raised.

The initial reason for discussion was the proposed merger between the Institute of Chartered Accountants in England and Wales and the ICA in Scotland. In the end that merger did not occur, regrettably in my view. Rationalisations will, however, take place in the accountancy world. These proposals will enable the law and the requisite protection of the consumer to continue without the need for any legislation. They will enable the existing protections of the Department of Trade and Industry to move quickly from one body to another, new body, and I believe that accountancy welcomes them. Certainly they are not easier than the regulations that have obtained in the past, but they will speed up, as well as tighten, the process of consumer protection.

Mr. Forth

I understand why the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) wanted to pursue this point; however, I think that he provided the explanation in the terms in which he put his question. He conceded what we all know, and then gave examples. As he said, considerable changes are taking place in the accountancy world, and that is precisely why we have cast the new clauses and amendments as we have.

Surely the hon. Gentleman must also concede that, given that background of change and development, to attempt to set any of our proposals in concrete would be counter-productive, and might even go against the objectives that he himself has set out. I suggest that the new clause is the best way to deal effectively with the profession in the face of such a rate of change.

I am grateful to my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) for adding his expert and knowledgeable comments. Following our dealings in Committee, I think we all agree that few know as much as he does about the profession, and his words of support are very welcome.

My hon. Friend mentioned that we had been careful to consult the profession. We have tried, I think successfully, to bring to the House a form of words that will provide the right framework for a modern and effective profession.

Mr. Cousins

rose——

Mr. Deputy Speaker

Order. The hon. Gentleman has already spoken. I do not think that the Minister is giving way.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

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