Accountants and Assets Offshore (Hansard, 17 January 1996)

The Minister of State, Department of Social Security (Lord Mack ay of Ardbrecknish)
My Lords, Her Majesty's Government will consider whether to continue to deal with an accountancy firm which moves its assets offshore if and when the partners decide to embark on such a course of action and make detailed proposals available for consideration.

§ Lord Haskel
My Lords, as the Government must be one of the largest clients of those firms, have the firms consulted the Government so that we can be assured that in the event of rightful claims the taxpayers' compensation will be met?

§ Lord Mackay of Ardbrecknish
My Lords, as I indicated in my original reply, those firms have not consulted the Government. However, if they were to make that move, and we were then to consider employing one of those firms, we should look carefully at the terms of registration in Jersey.
It has to be said that media reports suggest that Jersey is to introduce a limited liability partnership law which, subject to parliamentary and UK Privy Council approval, would come into effect by the end of 1996. United Kingdom audit firms could then register as limited liability partnerships in Jersey. However, we ought to wait to see the print on anything that occurs before we come to a judgment.

Lord Bruce of Donington
My Lords, in declaring a possible personal interest as a practising chartered accountant, perhaps I may ask the noble Lord whether his replies are in any way conditioned by the fact that the Government may be seeking advice on where to put their funds in the light of the forthcoming defeat at the general election?

§ Lord Mackay of Ardbrecknish
My Lords, the latter part of the noble Lord's question represents an amazing amount of conjecture coming, as it does, from such a serious person as an accountant. However, I was relieved that he was not telling me that he was intending to remove himself to Jersey because that would deprive me of many interesting jousts at this Dispatch Box.

Viscount St. Davids
My Lords, will my noble friend please explain this? As the Government do considerable business with companies that have limited liability, why should they have any problem doing business with firms that have unlimited liability but whose assets are beyond the reach of recompense for UK taxpayers?

§ Lord Mackay of Ardbrecknish
My Lords, if in the future any of the companies decides to register in Jersey, we would have to examine the terms on which the registration was made. There are other options for the companies: they could establish limited companies rather than partnerships to perform the audits. The Companies Act 1989 permits limited companies to undertake audits of other limited companies. Indeed, one accountancy firm has already taken advantage of that provision. However, reaction to that course of action from other accountancy firms appears to be mixed.

§ Lord Monkswell
My Lords, the Minister mentioned that legal changes in Jersey were subject to Privy Council approval. Can he advise the House whether such Privy Council approval is automatic and also whether there would be an opportunity for this House and the other place to debate such matters before they are approved by the Privy Council?

§ Lord Mackay of Ardbrecknish
My Lords, not being a member of Her Majesty's Privy Council, I am in some difficulty in answering the noble Lord's question. If he will forgive me, I shall have to write to him.

§ Lord Eatwell
My Lords, will the Government agree that the privilege of operating an accountancy business within the United Kingdom carries with it the responsibility of providing appropriate compensation in the case of unsatisfactory service?

§ Lord Mackay of Ardbrecknish
My Lords, I believe that the existence of the possibility of a firm being sued by its client is a factor that we ought to retain. It concentrates the firm's mind on ensuring that it gets the job right and that it is well done. If and when we come to examine possible changes, we will have to take into account the general good; not just the position of accountancy firms but also that of any other firm involved on the other side of the fence—that is the client.

§ Lord Boyd-Carpenter
My Lords, my noble friend did not answer the question as to whether the issue would be debatable. Surely any such issue must be debatable, if this House wishes to debate it.

§ Lord Mackay of Ardbrecknish
My Lords, my noble friend is quite right. However, I was asked a specific question about the Privy Council and this House debating proposals to change the law in Jersey. As I said to the noble Lord, Lord Monkswell, I am afraid that I shall have to take advice on that.