HL Deb 15 July 1909 vol 2 cc561-74


Order of the Day for the Second Reading read.


My Lords, the object of this Bill is to regulate and organise the profession of accountant by setting up a register and by ordering that persons who are not on the register should not offer themselves as, or take any name or title which may appear to imply that they are, professional accountants, and should not hold themselves out to the public as ready to undertake for pay the business of a professional accountant. The machinery set up by the Bill is a Registration Committee consisting of fifteen members, nine of whom would be appointed by the Council of the Institute of Chartered Accountants, and six by the Society of Incorporated Accountants and Auditors. The registrar of the committee would be the secretary of the Institute for the time being. Power is asked for under the Bill for the committee to make rules and regulations in regard to registration, for the holding of examinations, and generally for the execution of the business of the Bill. This body would possess disciplinary powers, but these powers are limited by Clause 13, under which, in cases where a name is struck off the register or where there is a refusal to register, an appeal to the High Court is allowed.

Before going further into the Bill I should like to say a few words about the position of the profession, and the duties which professional accountants may be called upon at any moment to perform. At the head of this profession there are the two great societies I have named. The Institute of Chartered Accountants was given its Charter in 1880, and it has no fewer than 4,000 members. Between seventy and eighty per cent. of those members have not only passed three examinations in order to become members but have also served under articles, the small percentage that remains having become members of the Institute on incorporation. The Society of Public Accountants and Auditors was incorporated five years later—namely, in 1885—and the Board of Trade then granted them a licence to omit the word "Limited" after their name. They have now a membership of well over 2,000, and also in their case there is a very stringent set of three examinations; and not only are articled clerks of five years service allowed to enter for their examinations, but also ordinary paid clerks, thereby allowing a class of men to enter the profession who might not be able to afford the considerable expense of articles.

These two institutions not only examine candidates before admitting them, but also exercise discipline over their members. But at present this discipline is almost entirely discounted by the fact that anyone may offer himself to the public as a public accountant. A man who is dismissed from one of these great societies through unprofessional or dishonourable conduct may to-morrow offer himself as a public accountant. In addition to the societies to which I have referred and those accountants of a free-lance character, a series of other societies has sprung up in recent years. The great difference between these young societies and the two great institutions of which I have spoken is this, that whereas these great institutions are courted by people who wish to become members, the newer societies, on the other hand, have to use considerable ingenuity and enterprise in obtaining members. This, of course, must lead one to wonder whether the qualifications that members of these companies are supposed to have are not, in fact, waived, and I am sorry to say that I have come to the conclusion that in a great many cases they are undoubtedly waived, with the probable exception of the entrance fee.

There is, therefore, very little guarantee to the public that the members of these societies are qualified accountants in any sense of the term. On the other hand, though we say these things about them as a body, the members would, of course, if they were able to prove that they possessed a proper qualification as accountants at the time of the passing of this Bill, be eligible for registration. That is provided for in Clause 4. A professional accountant may, under the Companies Act, be appointed liquidator of a public company. He may also be appointed a trustee in bankruptcy; but by far the commonest, though not the least important, of his duties is the auditing of public accounts. All of these duties require not only men of great professional knowledge, but also men who have seen practical work done by having been clerks or articled clerks in accountants' offices. Moreover, it is necessary that these duties should be done by men of great integrity and force of character, for what can be more responsible than the work of auditing the accounts of a public company? The auditor is appointed by the shareholders, to whom he is directly responsible, and he may very often, in the best managed concerns, come into conflict with the management of the company.

Under the Companies Consolidation Act of 1908 the duties and responsibilities of auditors have been very much increased. They not only now have to show in their report that the books of the company agree with the balance sheet presented, but they have to state whether or not they have obtained all the information and explanations they have required, and it is expressly stated that every auditor of a company shall have a right of access at all times to the books of the company and shall be entitled to require from the directors and officers such information as may be necessary for the performance of his duties. There is no doubt that these extra responsibilities have been responded to by the profession, and no one can have been in the City ten years, as I have been, without knowing something of the esteem in which the profession is held by all in the City, and the weight which the public attach to their services. I think it can hardly be doubted that they have earned the right to set their house in order.

Clause 4 of the Bill enumerates the persons entitled to be registered under this Bill. They are—

  1. 1. All persons who are now members of the Institute or Society or who from time to time shall become members either of the Institute or of the Society and shall give notice in writing to the Professional Accountants' Register Committee by this Act constituted (hereinafter called the committee') of their intention to practise in England or Wales:
  2. 2. Any person who (although not a member of the Institute or of the Society) shall within six months from the passing of this Act give notice in writing to the committee and within twelve months from the passing of this Act prove to the satisfaction of the committee that he was in practice as a professional accountant in England or Wales at the passing of this Act subject nevertheless to the provisions of the section of this Act whereof the marginal note is 'Power to refuse registration in certain cases':
  3. 3. Any person who is now or shall hereafter become a member of the Society of Accountants in Edinburgh or of the Institute of Accountants and Actuaries in Glasgow or of the Society of Accountants in Aberdeen or of the Institute of Chartered Accountants in Ireland and who shall give notice in writing to the committee of his intention to practise as a professional accountant in England or Wales:
  4. 4. Any person who is now or shall hereafter become a member of any institute or society of professional accountants incorporated or duly constituted under the laws of any British colony or dependency (including India) or of any territory administered under royal charter or under the laws of the United States of America membership of which is considered from time to time by the committee in their absolute discretion having regard to all the circumstances to be a proper qualification and who shall give notice in writing to the committee of his intention to practise as a professional accountant in England or Wales.
Clause 5 entitles to registration any person not being entitled under Clause 4 who can satisfy the committee that he has passed an examination and has served under articles to a professional accountant practising in England or Wales, such accountant being either registered or entitled to be registered under the Bill. Provision is made in Clause 17 for the admission of women to membership, and consequently women will be given equal rights with men under the Bill. It does not appear that the profession of accountancy would be particularly attractive to members of the opposite sex, but there are female accountants who are now doing this work, and it has been represented to us that it would be a pity to close the door to any channel which might give occupation to them in future.

This question of registration is no new one. As is stated in the Memorandum prefixed to the Bill, several other learned professions have found it necessary, for the discipline and regulation of those professions, to organise and register. But a much nearer analogy is to be drawn from what has been done of late years in the Colonies. For instance, in the Transvaal in 1904 an Ordinance to provide for registration of accountants was assented to by Lord Milner. I believe that last year the Premier of New Zealand piloted through the Legislature a Bill of much the same character, and I understand that at the present time there is in Natal a Bill before the Legislature to provide for the registration of public accountants. Indeed, I think on all hands the principle of registration is admitted. I have not heard a single argument against it. But it would be foolish to conceal the fact that objections have been raised in detail, and if your Lordships will allow me I should like to refer to some of them, though I submit that none of them are Second Reading objections.

In the first place, it is pointed out that under Clause 4, subsection (2)—which I have read—a number of people would be admitted to registration whose qualifications as public accountants might be somewhat doubtful. I have nothing to say to that. That is absolutely true, but it is impossible to make a reform without paying for it, and that is the price we have to pay for the reform proposed in the Bill; and, after all, the objection is a passing one and will disappear in time. Then we have two objections from the great Scottish and Irish societies. I am not quite clear upon this, but I believe the Irish society signified that they were satisfied with what was said in reply to their objections. I am afraid, however, that that is not so in the case of the Scottish societies. It is rather unfortunate for this Bill that it should come up on a day when Scotland seems to be up in arms. These, I think, are the three objections they make most of. First, they say, We agree with registration, but why not include the whole of the United Kingdom? Our answer is that we believe it to be unworkable. We feel that there would be great inconvenience in getting members together from, say, Aberdeen, Dublin, and Edinburgh, and there is also the fact that the law of the three countries varies so greatly, and that makes another difficulty. But if in Committee it is urged that a Part II and a Part III should be added to the Bill, setting up a register for Scotland and one for Ireland, we should only be too glad to agree. We wish to meet these societies in every possible way.

Another objection is that under the Bill Scottish accountants would not be able to hold audits in London of branch banks, and so on, without registration. Nothing is further from the intention of the promoters of this Bill, and we say there is nothing in the Bill which makes that view possible, but if any form of words would make it clearer, we should be only too glad to accept them. I admit that the clause is very badly drafted, and I believe a new clause has already been drawn up which, I hope, will put the matter right. Then, of course, there will be opposition from the limited companies to which I have referred. In the public interest we cannot admit that those small limited companies which have been registered in the last four years and give no guarantee to the public of any status whatever should be represented; but, as I have said, if any of their members prove qualification they will be eligible for registration.

In conclusion I ask your Lordships to believe, as I sincerely believe, that this Bill has not been put before you with any desire to set up a selfish monopoly. The only motive which has actuated the promoters is a desire to elevate the profession and the standard of professional skill and integrity. To do that would be in the public interest, and it is for that reason that we hope your Lordships will be good enough to give a Second Reading to this Bill and send it to a Joint Committee of both Houses before whom the whole matter can be thrashed out.

Moved, That the Bill be now read 2a.—(The Earl of Chichester.)

*LORD SALTOUN, who had given notice, on the Motion for the Second Reading, to move that the Bill be read a second time this day six months, said: My Lords, I will not follow the noble Lord who has moved the Second Reading by making a long statement, but will try and put my objections to the Bill as shortly as I can. The noble Earl has truly described to your Lordships the two English associations, but we have three bodies in Scotland who all act under Royal Charters dating back to the middle of the last century. Their Charters are world-wide, and the members go to any part of the United Kingdom where their profession may call them and undertake public auditing. Your Lordships will understand that it is a great convenience to those of their clients, such as banks and insurance companies, having branches in different parts of the United Kingdom, that they should be able to audit the books at the several branches. That is their right under their present Charters, and that is what we wish to see continued.

Scottish accountants object to the reduction of their powers implied in the provision of the Bill which entitles them to registration only if they give notice of their intention to practise in England or Wales. There is no definition of the word "practice," and that is an important omission. That, however, is a question for Committee. Our main objection to this Bill is that it decreases the powers we now possess under our Charters and makes England and Wales practically a close corporation for Scottish accountants, who will not be able to follow up their business except under very arduous conditions which we do not think it is fair to put upon them. The City of London is not merely the Capital of England, it is the Capital of the United Kingdom, and the centre to which all business gravitates, and Scottish accountants should be able as at present to do audit work here. Scottish accountants may be required to attend private Committees in your Lordships' House or attend to business at the Scottish Office or the Local Government Board, but they would be debarred unless they submitted to these onerous conditions. Then under the rules of the committee appointed by these English societies there would be a power to reject or refuse to register them at all.

Further, we would be prevented under this Bill, if we did come to London, from using the letters which we consider are letters of distinction in our profession. Whether we register in England or not we should be debarred from using those letters unless they were first approved of by this committee. These are really very serious objections. We take exception to the penal clauses as being harsh and unfair. The noble Earl who moved the Second Reading suggested that in Committee clauses might be moved on behalf of Scotland, but I would remind the House that the title of the Bill is— An Act to provide for the Registration of Professional Accountants in England and Wales; and for other relative purposes. The title of the Bill would have to be changed and the Bill itself entirely redrafted if the societies in Scotland and Ireland were to be included. In these circumstances I suggest that the Bill ought to be either withdrawn or rejected, and a new Bill introduced to apply to the United Kingdom. If it is desired to have three registers there is no objection; but if it is necessary to have the Bill at all it should be one Bill for the United Kingdom, giving the bodies of chartered accountants in each of the three countries the powers they have now.

Amendment moved— To leave out the word 'now,' and to add at the end of the Motion the words 'this day six months.'"—Lord Saltoun.)


My Lords, the noble Earl who moved the Second Reading of this Bill obviously felt that the measure presented substantial difficulties, and he has placed a Motion on the Paper that in the event of the Bill being read a second time it should be referred to a Joint Committee of both Houses of Parliament. I think that a wise course. It is manifest that a Bill dealing with such wide interests has not the slightest chance of passing into law this session. It is also obvious that a Bill dealing with a great profession could not be satisfactory which ignored the case of Scotland and Ireland, and in my opinion the Bill should be redrafted so as to include all members of this profession practising in the United Kingdom.

In Ireland we have a very powerful body of accountants, composed of gentlemen of the highest capacity, acting under a Royal Charter. In Scotland, as Lord Saltoun has said, there are three well-known societies, and it is clear that a Bill dealing with this great profession must include the case of Ireland and Scotland. There are other claims also to be considered. I am not prepared to say offhand that persons who are not chartered accountants, but who are able to do valuable accountancy work, and are, in fact, professional accountants in the more general sense, should be penalised if they are not on the register and fined to the tune of £20 while they are earning their bread fairly and honestly.

Moreover, whereas in any other Bill I have ever heard of the body exercising such powers is made amenable to some public authority, here the registration authority is purely self-appointed and can make rules unchecked and unfettered. They may put charges on Scottish and Irish members which would be resented as grossly unfair, and yet there is no appeal to any public authority such as the Board of Trade. It is manifest that the noble Earl in charge of the Bill recognises the difficulties and sees the need of copious redrafting in order to meet the most important of the objections that have been raised. I hope, therefore, that he will be satisfied for this session with the discussion that has taken place and that he will reframe the Bill and introduce it again next session.


My Lords, under this Bill at present there is no reciprocity whatever. An English accountant can carry on his profession in Ireland, he can audit the books of an Irish branch of an English business, but a Scotsman or an Irishman cannot do the same in regard to English branches of businesses conducted by their clients, and there are many businesses in Scotland and Ireland which have branches in England. Clause 18 of the Bill provides that a person not registered shall not exercise any function prescribed by law as having to be exercised by a professional accountant. It is not at all that he shall not be a professional accountant, but that he shall not do the business of a professional accountant. That is absolutely intolerable and could not be allowed to pass. The noble Earl the more he studies this will see that he never can bring in a working Bill which will give the necessary reciprocity without dividing it into three Parts, one setting up a register for England, another setting up a register for Scotland, and the other setting up a register for Ireland, and then giving the registered accountant power to pursue his profession in any of the three countries he may choose. That is the only solution. I doubt whether the suggested Parts II and III could be added to a Bill the title of which is, "To provide for the Registration of Professional Accountants in England and Wales." The noble Earl gains nothing by sending a truncated measure like this to a Committee, and it cannot lead to a satisfactory arrangement.


My Lords, the noble Earl in charge of the Bill said that from what he had heard he believed the accountants in Ireland were satisfied. I had a communication from them two days ago and they were by no means satisfied. I do not know, therefore, what ground the noble Earl had for his statement. No communication has reached me or my noble friend on the Front Bench to that effect, and the objections on the part of Ireland are similar to those stated by Lord Saltoun and the noble and learned Lord who has just sat down—namely, the absolute want of reciprocity.


My Lords, the noble Earl said at the conclusion of his remarks that he did not wish to be selfish. I must say that I do not remember ever having before read such a selfish measure. It means that English accountants are to set up an institution of their own. They are to be empowered to practise in Scotland and Ireland, but Scottish and Irish accountants are not to practise in England. That is pure unadulterated selfishness. The committee set up by the Bill can constitute themselves into a close trust and say to accountants that if they do not join they will suffer all sorts of pains and penalties. I wish to protest most strongly against the Bill, and if my noble friend Lord Saltoun goes to a Division I shall support him in the Lobby.


As my noble friend Lord Clonbrock referred to me, I ought to say that I believe the noble Earl who introduced the Bill met the Irish view with great courtesy, and I am informed that the Irish representatives, although very strongly determined that they would get justice, thought that the idea of a separate Irish register was not an unreasonable one, and they decided to fall in with that.


My Lords, there has been considerable criticism of the details of my noble friend's Bill, but I do not think that anyone who has spoken has denied that this measure is a very important one and that it deals with a very important matter. That is certainly the opinion of the Department which I represent. The profession of accountancy is becoming yearly of increasing importance with the growth of the system of carrying on business by means of public companies, and it is certainly thought at the Board of Trade that it would probably be to the public advantage that those who carry on the very responsible duties of public accountants should be organised and should be regulated in the same way as the great professions of the law and of medicine are regulated, and with the object of securing that end it is probably desirable that some such machinery should be set up as is provided by this Bill. Up to that point I think I may say that my noble friend has made out a very strong primâ facie case in favour of his Bill. But, of course, in allowing the creation of a close corporation of this kind it is necessary to take the utmost possible pains to prevent injustice being done to any individual or class of persons, and certainly neither I nor my noble friend behind me the Secretary for Scotland would be found consenting to any injustice being done to our fellow-countrymen.


What about Ireland?


I am sure Ireland would be looked after, too. The suggestion I have to make on behalf of the Government is that the Bill should be read a second time on the understanding that it is to be referred to a Joint Committee of both Houses, where full inquiry can be held and where any persons who are aggrieved can have an opportunity of appearing and making their grievances known. On those grounds we should support my noble friend's Bill.


My Lords, I do not intend, at this important hour of the evening, to detain your Lordships for more than a moment or two, but the noble Lord who has just sat down used words to the effect that no one contested the principle of this Bill. I think the reason why the principle of the Bill was not contested was that the discussion was overlaid by that friendly international jealousy with which we are familiar in debates in both Houses of Parliament. The noble Lord opposite has come in contact with the sentiment with which I am very familiar—the great local patriotism of the two sister kingdoms. That has occupied your Lordships' time this evening. I longed to say all the time my noble friends were speaking that that is not the only objection to the Bill. When the Second Reading of a Bill is moved, the first thing to make out, in my judgment, is that there is a grievance or an evil to be remedied for which the measure is necessary. As far as I could make out from the noble Earl's speech, he never touched on that at all, but simply spoke of the provisions of the Bill. He told us there were similar provisions in the legislation of other countries; he told us he would accept Amendments; but he did not tell us there was any grievance to be remedied. Until that is explained to your Lordships I cannot assent to the Second Reading of the Bill. It seems to me that these close corporations are only justifiable if there is great good to be performed or a great evil to be remedied, and those things have to be made out first of all. This is the old medieval system; it is the old guild system coming back again. It is no doubt necessary in the medical profession, but it has to be shown to be necessary in the case of professional accountants; and until it is I must rank myself with my noble friend who moved the rejection of the Bill.


I am really very sorry to hear of the noble Marquess's great objection to this Bill. He says there ought to be some great evil to be remedied.


Some evil, at any rate.


The object of the Bill is to prevent improper persons becoming accountants.


But is it the case that there are a great number of accountants who ought not to be accountants? Is there any evidence of the fact?


I am not able to say there are a great number, but I have no doubt there would be a possibility of improper persons becoming accountants. But I leave that point. I have only risen to say a word as to the attitude of the Government. The attitude of the Government is of a benevolent description. It is what the Foreign Office would call "cool and correct," and we think that the reference of the Bill to a Joint Committee of both Houses a reasonable proposal. The whole question would have to be postponed for twelve months, and I do respectfully suggest that it is not unreasonable to ask the House to agree to the Second Reading on the understanding that there should be an inquiry into the subject.


My Lords, I am sorry to find that your Lordships for many reasons seem not disposed to give a Second Reading to this Bill. I can assure the House that we did start out with the full intention of doing justice to Ireland and Scotland. We have the greatest respect for the great societies in the sister countries, and wish always to live on reciprocal terms with them. But after all, this is our Bill. We want to regulate ourselves, to set up a register for ourselves, and to organise the profession in London, and it is because we were thinking of this that your Lordships have discovered that it would not be easy to set up a register in this Bill for Ireland and Scotland. If your Lordships will accord the Bill a Second Reading, I will give my personal guarantee that absolute equality of treatment shall be meted out to Scotland and Ireland. That, I know, is the intention of the


According to Standing Order No. XXXIII, it appearing that thirty Lords are not present in the House, I declare the question not decided

promoters, and if it is not in the Bill it is due to a fault in the drafting.


Will the noble Earl give a universal register?


No, not a universal register. I should say that would be a mistake more from the Irish and Scottish point of view than from the English.


Is it not possible to avoid the necessity for a Division? The noble Earl in charge of the Bill gives his undertaking that there shall be absolute equality between the different parts of the United Kingdom. Moreover, the Bill is to be referred to a Joint Committee. Would it not be as well to read the Bill a second time so that the matter should be inquired into?


Apart from any other reason, the great question is whether it can be done under the Bill.


I am anxious to fall in with any suggestion coming from the noble and learned Lord on the Woolsack, but I honestly do not think the Bill can be so amended as to make it satisfactory. That is my only reason for pressing my Amendment to a Division.

On question, whether the word proposed to be left out shall stand part of the Motion?

Their Lordships divided:—Contents, 14. Not-contents 14.

Loreburn, L. (L. Chancellor.) Ashbourne, L. Lawrence, L.
Colebrooke, L. [Teller.] O'Hagan, L.
Beauchamp, E. (L. Steward.) Eversley, L. Pentland, L.
Carrington, E. Hamilton of Dalzell, L. Shute, L. (V. Barrington.)
Chichester, E. [Teller.] Haversham, L. Welby, L.
Salisbury, M. Atkinson, L. Clonbrock, L.
Bowes, L. (E. Strathmore and Kinghorn.) Killanin, L.
Camperdown, E. Leith of Fyvie, L. [Teller.]
Mayo, E. Clifford of Chudleigh, L. Newlands, L.
Morton, E. Clinton, L. Saltoun, L. [Teller.]
Westmeath, E.

and the debate thereon adjourned until the next sitting of the House.

Further debate on said Motion adjourned accordingly to Monday next.