§ 5.48 p.m.
§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)
My Lords, with the leave of the House I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Trade and Industry. The Statement is as follows:
"I should like to make a Statement about the report of the Co-ordinating Group on Audit and Accounting Issues and the report of the Review of the Regulatory Regime of the Accountancy Profession which my right honourable friend the Chancellor and I are publishing today. Copies of both reports have been placed in the Library.
"Last year the collapse of Enron, WorldCom and Andersens in the United States appalled investors all over the world. Millions of people saw their savings and pensions collapse.
"As I told the House last year,'audit and accountancy standards in Britain are different from those in the United States: different and, as is now widely acknowledged, in some respects better'.So there was no need for the UK to rush into a Hewitt/Brown equivalent of the Sarbanes/Oxley Bill. But equally it would have been folly to sit back and say, 'It couldn't happen here'.
"Structures, standards and regulations can never be a complete defence against individuals determined to do wrong, nor can they wholly protect us against a culture of corporate greed and loose ethics. But we owe it to savers, investors and employees, as well as to all the honest business people whose reputation has been tarnished by these scandals, to ensure that our defences are as robust as they sensibly can be.
"The reforms I am announcing today, along with those proposed last week by Derek Higgs and Sir Robert Smith will raise standards of corporate governance—I should emphasise that the reforms essentially cover only listed companies—strengthen our accountancy and audit professions, and provide for a more effective system of regulating the profession. Together, they make up a complete package of reforms—comprehensive and mutually reinforcing.
"First, I address the issue of boardrooms. Following Derek Higgs's proposals, the combined code on corporate governance will be strengthened to provide that at least halfthe board (as well as the chairman) should be independent—as should all members of the audit and remuneration committees, and a majority of the nomination committee; the definition of an independent director should be strengthened and clarified; the separation of roles of chairman and chief executive should be reinforced; and new descriptions should be given of the respective roles of the board, the chairman and non-executives."Mr Higgs's report showed a startling picture of the way top level appointments are handled, with over half of directors being appointed through 1175 personal contacts and friendships. I welcome his proposals to promote meritocracy through an open, fair and rigorous appointments process. As part of the follow-up, a group led by Laura Tyson of London Business School will look at ways of bringing candidates from the non-commercial sector to greater prominence—including women—and will report to me in May.
"In revising the combined code, the Financial Reporting Council will also implement the recommendations of Sir Robert Smith's group that the audit committee should consist entirely of independent members, with at least one having relevant financial experience; monitor the auditor's performance, especially on independence and objectivity; and develop and implement policy on the purchase of non-audit services from the auditor, with reference to tough new ethical guidance.
"Following well established practice, listed companies will be required either to comply with these provisions or to explain to their shareholders why they are not doing so.
"The second aspect of our reforms concerns tougher measures to underpin auditor independence. Following the recommendations of the co-ordinating group, I can announce that, as well as an enhanced role for audit committees and a tightening up of the provision of non-audit services by auditors, the professional bodies have already changed their regulations so that the lead audit partner has to be rotated within five years; partners and senior employees of audit firms will not be able to take up employment with a company they audit within two years of leaving their audit firm; and most of the UK's large audit firms have already agreed to publish an annual report, provide management and financial information, and reveal levels of dependency on single clients, including how the firm handles conflicts of interest and interdependence issues. I believe that that third aspect will work on a voluntary basis. If not, we will make such disclosures a condition of auditing listed companies.
"I am also calling for the standards and ethical guidance for auditors on the provision of non-audit services to be toughened up further.
"We will also strengthen enforcement of accounting standards. At the moment, the Financial Reporting Review Panel only steps in if particular concerns are raised with it. But the co-ordinating group recommends, and we agree, that enforcement of these standards must be proactive. From now on, the Financial Services Authority will help the Financial Reporting Review Panel on enforcement—particularly in identifying the high-risk cases which most merit investigation. The FSA and panel will need to agree as soon as possible a memorandum of understanding to clarify their precise roles and responsibilities.
"These measures will be underpinned by the third element of our reforms—more effective regulation of the professions. The Financial Reporting Council will assume the functions of the Accountancy 1176 Foundation. This will create a unified, independent UK regulator with three clear roles: setting accounting and audit standards; proactively enforcing and monitoring them; and overseeing the self-regulatory professional bodies.
"The Financial Reporting Council, under Sir Bryan Nicholson, has developed an excellent reputation. The Accountancy Foundation, chaired by Lord Borrie, has also done valuable work, for which I thank it. The new combined body will build on these achievements.
"After wide consultation, the DTI's review team recommend, and again I agree:
"First, the Auditing Practices Board should take over from the professional bodies responsibility for setting standards for independence, objectivity and integrity. Oversight of other ethical standards will become the responsibility of a new professional oversight board. The Ethics Standard Boa rd will be wound up in due course. I have greatly appreciated the work which its chairman, Christopher Jonas, and his colleagues have done to take forward the ethical agenda and to provide the basis for the new board's work;
"Secondly, a new independent inspection unit, located within the FRC, should take over from the professional bodies responsibility for monitoring audits of listed companies, major charities and pension funds, and;
"Thirdly, the long delayed Investigation and Discipline Board should come into operation quickly to provide a truly independent forum for hearing significant public interest disciplinary cases.
"It is vital for the new structure to have clarity of accountability and responsibility, together with the appropriate powers, to operate effectively in the public interest. There is a strong case for statutory underpinning to make the new body work. We will consider that further and report our conclusions to the House.
"The proposals that I have outlined today are substantial and mean significant changes to the way companies and their auditors carry out their work. This package must be implemented as quickly as possible. Changes to the regulatory structure will be taken forward immediately. The DTI will lead an implementation steering group on which Sir Bryan Nicholson, Lord Borrie and Peter Wyman, president of the ICAEW, have kindly agreed to serve.
"An FRC with enhanced responsibilities will require more investment. The Government will pay their share of core running costs, but I also expect companies from the profession to contribute. It is in all our interests to make these changes work—and it is fair that we all pay for the improvements. Changes to the combined code arising from the Higgs and Smith reports will be made in the early summer once the FRC has consulted on the precise wording. All these measures will be taken forward alongside the 1177 Government's longstanding programme of company law reform, following last year's White Paper.
"These proposals are not a response to short-term market movements. They are about strengthening the foundations of our capital markets for the long term. I want in particular to thank Derek Higgs and Sir Robert and his group for their excellent reports, as well as all those who participated in the coordinating group under the joint chairmanship of my honourable friends the Minister for Competition and Consumer Affairs and the Financial Secretary to the Treasury. I also want to pay tribute to the officials who so swiftly took forward the review of the regulatory regime.
"The overall package is tough where that is needed, but measured and proportionate throughout. It will ensure that our corporate governance structures remain among the best in the world—for the benefit of the millions of pensioners, savers and businesses that depend on them".
§ 5.57 p.m.
§ Lord Hodgson of Astley Abbotts
My Lords, I am grateful to the Minister for repeating the Statement made in another place. Bearing the public matter in mind, I begin by declaring an interest as a non-executive or independent director of two listed companies and a mutual building society.
On these Benches, we welcome measures designed to reduce the possibilities of fraudulent activity. Trust is a vital ingredient in financial markets, giving confidence to those who wish to save, especially over the long term. However, it is a bit rich for the Government to claim that the proposals are not a reaction to short-term market movements, for that is precisely what they are, and the Government are being disingenuous to pretend otherwise.
We welcome the Government's attempts to try to avoid a one-size-fits-all approach to corporate governance by applying the new standards to what the Statement describes as "essentially only…listed companies". However, it would be helpful if the Minister can explain what is meant by the word -essentially". It is potentially a weasel word. Either they apply to listed companies exclusively, or they do not. Secondly, do the new standards apply to AIM listed companies, which are listed on the alternative investment market? Thirdly, do they apply to foreign companies listed on the London Stock Exchange? If so, how will they be enforced? If not, how will potential investors in those companies be aware of the greater risk that they are running?
Finally, are the Government aware of the huge range of listed companies—multi-billion, multinational companies at one end of the spectrum and the £50 million capitalised local engineering company at the other? For the latter to have over half its board made up of independent directors will be quite a challenge. Could thought be given—or has it 1178 been given—to focusing the new rules so that they fall most heavily on larger companies, say those listed in the FTSE 100 or the FTSE 250 index?
As I say, these new rules are the by-product of fraudulent activity but we must always be careful to distinguish between fraud and risk. Too often people are inclined to view fraud as their risk that went wrong. In the previous debate mention was made of the importance to UK plc of design. But UK plc also needs risk takers. Risk takers need freedom to manage and a competitive base from which to run their businesses. The new rules will undoubtedly represent another regulatory and cost burden. We understand why they are being introduced but will the Government undertake a study of the cumulative effect of the increasing regulatory burden on UK businesses' world competitive position?
Will the Minister also clarify the chain of command in the new structure? We have, as I understand it, the Financial Reporting Council, which will take over the Accountancy Foundation. We have a new professional oversight board taking over the Ethics Standards Board. We have a proposed independent inspection unit and a new investigation and discipline board. We have an implementation steering group and a financial reporting and review board. Circling over all that we have the Financial Services Authority, the Department of Trade and Industry and, last but not least, Professor Laura Tyson. How will we ensure that there is no duplication of effort and of cost?
It is very welcome that the Statement repeats the importance of separating the roles of chairman and chief executive. In those circumstances it is an even greater shame that the Government do not follow their own precepts and that it took enormous pressure in your Lordships' House to persuade them to split the roles of the chairman and chief executive of the Office of Fair Trading in the Enterprise Bill. I invite the Minister to take this opportunity to announce that the Government will forthwith split the roles of chairman and chief executive of the Financial Services Authority, particularly given the FSA's important role in enforcing the new proposals announced today.
Finally, it goes without saying that we on these Benches find any form of fraud unacceptable. Fraud enables the greedy to prey upon the weak and the unsophisticated. We therefore give a broad welcome to the proposals. But before more legislation is put on the statute book, if legislation is required, we need to have an informed public debate as to how effective the detailed proposals will be in the real world.
§ 6.3 p.m.
§ Lord Razzall
My Lords, I join the noble Lord, Lord Hodgson, in thanking the Minister for repeating the Statement made in another place. It seems to me that your Lordships' House is exactly the place where detailed comments on such a Statement can be made. The noble Lord, Lord Hodgson, mentioned some important issues. I look forward to hearing the Minister's response, particularly with regard to the FSA, without wishing to intrude on past private grief.
1179 As the Minister rightly said, the Statement brings together three reports raising different issues that are relevant to corporate governance in the UK. First, I refer to the Higgs proposals on conduct in boardrooms and the way in which listed companies should conduct themselves. It is not for me to respond to the noble Lord, Lord Hodgson, but it is fair to say that the Derek Higgs report makes clear that he proposes applying the most onerous requirements on the leading 350 listed companies. There is a section in the report in which he recognises that the smaller listed companies will not be able to comply—certainly not immediately—with the more onerous requirements. I believe that the Minister with his business experience would be the first to agree that the Higgs report is at the very soft end of what might have emerged in relation to corporate governance. I am sure that some of the Minister's noble friends, who are not present today but are often present at Question Time, will consider that the Higgs proposals do not go as far as they would wish.
The noble Lord, Lord Hodgson, made an important point with regard to small listed companies. I refer to a fundamental concern—I hope that the Minister will give his views on the matter—namely, from where will the people come to provide the non-executive directors that the Higgs report requires? Looking around your Lordships' House I see a number of noble Lords and noble Baronesses who sit on boards of directors as non-executive directors. Given the current state of liability, I am not sure that any of them would readily take on a new post as a non-executive director. We are not talking here about people who are effectively seconded from major companies to sit on those boards. Although the Higgs report wishes to increase vastly the pool of non-executive directors its recommendations will restrict the number of executive directors who can take up non-executive appointments in other companies. I should welcome hearing the Minister's comments, not only his comments as a Minister but also those arising from his own practical business experience, in regard to where all these non-executive directors will come from.
I believe that the noble Lord, Lord Hodgson, indicated that the essence of the Higgs recommendations is that this matter should not be a case of "one-size-fits-all". I cannot let the moment pass without commenting that Mr Higgs himself sits on the board of direct ors of British Land but has so far been unable to persuade the chairman and chief executive to stand down from one of those positions. That situation is rather ironic. I believe that a similar irony arose in the Greenbury report that was issued years ago.
I turn to the recommendations regarding the accountancy profession. I believe that those measures are at the soft end of recommendations compared with some ideas that have been floated. For example, there is no recommendation that there should be any form of statutory split between audit and non-audit work. Noble Lords who follow these matters are well aware that that is a major issue both in Europe and in the UK. I should also welcome hearing the Minister's 1180 views on whether the trend towards separation of audit and non-audit work will continue and whether the Government will support that.
What views does the Minister hold on an idea that my noble friend Lord Sharman has floated on a number of occasions as former chairman of KPMG; that is, that the National Audit Office should be allowed to compete in the private sector for big company audits? We believe that the National Audit Office would be keen to do that and that it could develop a degree of audit expertise which would be outside that of the big four which dominate the FTSE 100 companies. In the case of the National Audit Office there would obviously not be the problem of wanting to compete for non-audit work.
I turn to the alteration of the position of the regulators. I draw noble Lords' attention to the sentence on page 7 of the Statement which states:There is a strong case for statutory underpinning to make the new body work".I hope that the Minister will comment further on that sentence. I should have thought that what the words,There is a strong case for statutory underpinning to make the new body work",actually mean is, subject to negotiation to get it into the Queen's Speech, there will be statutory underpinning to make the new body work. I hope that the Minister will develop that point.
In conclusion, I take up the sentence where the Government say that the proposals are substantial andmean significant changes to the way companies and their auditors carry out their work".I would consider that as going a little far. These proposals will only mean what the quotation stares if the voluntary provisions recommended here are actually complied with by companies and auditors. Is the Minister prepared to be drawn on what action the Government will take if it transpires that many of these recommendations are not adopted in practice by companies and auditors? In those circumstances do the Government propose to legislate?
§ 6.10 p.m
§ Lord Sainsbury of Turville
My Lords, I shall deal first with the point made by the noble Lord, Lord Hodgson. He said that these measures were a response to short-term market movements. Given that they have spent a long period in gestation., I do not believe that we can say that they are such a response. It can be fairly said that they were a response to events which took place in America. It seems to me wholly right that where we have that situation in America, which was outlined at the beginning of the Statement., action should be taken because of it. If we had not taken action, I believe that the noble Lord would have said with some justification that we were in danger of being complacent. I do not believe that that is the same as making a response to short-term market movements.
As regards to whom it applies, we very carefully said that it applied to "essentially" listed companies. That was not the use of a weasel word, but to be strictly accurate about the situation. It is a whole package of 1181 proposals. The Co-ordinating Group on Accounting and Audit alone has 27 recommendations. What we mean by "essentially" is that the vast majority apply only to listed companies; for example, a measure such as a pro-active enforcement of accounting standards will apply beyond purely listed companies and in fact to some large private companies. It was for that reason that we did not want to say misleadingly that all the measures applied only to listed companies.
We have not taken the view that one size fits all. In many cases we are saying that there will be a model and that companies, through the listing agreement, will either have to go along with that or explain to the market why that is not being done. It will be the market's judgment on the matter. That is the wholly appropriate way to proceed.
I do not believe that there is a great deal of extra regulatory burden although some of those burdens may be different because they require people to do different things. That is not the same as increasing the regulatory burden.
As regards the new bodies, there is equally a reduction in their numbers. For the new arrangements for the Financial Reporting Council it can be fairly said, having looked at the pages where the Accountancy Foundation is set out, that we are simplifying and probably cutting down the number of bodies involved.
The noble Lord, Lord Razzall, asked where the non-executive directors are to come from. There are substantial sources from which people can come. The Laura Tyson taskforce will look at how we can increase the number coming from outside the corporate world. Within it there are executive directors of other companies where it is regarded as good for their development that they should be non-executive directors of other companies. That source could be drawn on much more in future.
As regards the separation of audit and non-audit work, the co-ordinating group considered various approaches to the problem of auditing independence. I believe that an outright ban would be the most extreme response. The co-ordinating group recommends against it and we very much agree. The UK approach is based on key principles and safeguards, not on lists of banned activities. If no adequate safeguards can be implemented then the auditor must not carry out the work. But the thrust of the matter is that each situation must be judged on its merits against the overall standards. That is why the role of the audit committee is so crucial.
As regards the statutory underpinning of the Financial Reporting Council, the noble Lord is right. We shall consult on that as to exactly which parts of that council should be underpinned statutorily. We do not believe that it is necessary that all its activities should be. There are some quite fine judgments involved in that. We shall consult on it and return to the House on the matter.
1182 As I said at the beginning, a great deal depends on voluntary action in some cases, but in many others it is underpinned by the fact that a listing agreement will require companies to explain why they do not take the necessary action. In that event there will be a market judgment and in others there will be new statutory underpinning. I believe that the total package gets the balance right in terms of taking firm action, but proportionately.
§ Lord Hodgson of Astley Abbotts
My Lords, do these measures apply to AIM companies and what is the position of foreign companies listed on the London Stock Exchange? I do not believe I had a response to those two matters.
§ Lord Sainsbury of Turville
My Lords, may I come back to the noble Lord on those matters? As I said, there are very many issues here which apply in different ways. I shall write to the noble Lord.
§ 6.15 p.m.
§ Lord Sheldon
My Lords, I am not a director now, but I have been in the past. I am concerned about the role of non-executive directors. Some years ago a Permanent Secretary at the Department of Trade, having retired, was offered a non-executive directorship at one of the largest of the listed companies in this country. Nothing happened and he wondered why. He was told that the chairman had said that he would not have him because he would ask too many awkward questions.
When someone as competent as that— and he was an outstanding Permanent Secretary—receives that kind of reaction, it makes one worry about the kind of situation he was likely to have entered into. There is a need to strengthen the independence of a number of the non-executive directors. I would welcome that.
The legislation is obviously going to be very complex. Can my noble friend say anything about that?
§ Lord Sainsbury of Turville
My Lords, the independence of non-executive directors is a very important question. In order to protect my back, I take it absolutely sine qua non that a Permanent Secretary would be an excellent addition to any board. That is obviously unarguable. The Higgs report is about giving a much stronger position to the non-executive directors and much clearer independence. But in answer to the noble Lord's question, it is also a process by which they are chosen not on the whim of a chairman but through due process, which will widen the selection and make it more transparent.
§ Lord Williamson of Horton
My Lords, I declare an interest as a hard-working, non-executive independent director of Whitbread PLC and a member of its audit committee for a long time.
While I very much welcome what the Minister has said about non-audit services provided by audit firms, we need to be extremely careful about it. I agree with 1183 the noble Lord, Lord Razzall, that the proof of the pudding is in the eating because it is a voluntary system although it underpins the listing requirements. We need to give a lot of attention to this matter.
Does the Minister agree that with the many reports which we have had on governance, including the Higgs report, we have to be careful not to get ourselves into a position where we believe that every recommendation is automatically right. Some of the recommendations can be legitimately challenged on grounds of efficiency and how business should be conducted. For example, should a senior non-executive member of a board be appointed so that he can have further contact with shareholders? There are other ways to do that, and it is important not to get ourselves into the position of thinking that everything in a report must be adopted automatically. Some things can be done better in other ways.
§ Lord Sainsbury of Turville
My Lords, if the noble Baroness would like to answer the question, I am more than happy for her to do so. She is probably more qualified.
Much of the Statement meshes together. As important as distinctions between audit and non-audit work are, that question is in the context of the Smith report and its strengthening of the audit committee. The committee will have the say on the matter. That its independence has been greatly strengthened by the Smith report is very relevant.
We did not say that we would accept every recommendation of the Higgs report, but we looked at it carefully. It is an excellent report. We are impressed with the recommendations and will take them forward.
§ Baroness Noakes
My Lords, I apologise for jumping the gun. My eagerness on the subject overcame me. I declare a couple of interests as a non-executive director of listed companies, a member of audit committees and a member of the Institute of Chartered Accountants, although fortunately no longer an office holder.
I start by asking the Minister about costs. The Statement says that there will need to be more investment in the new regulatory arrangements and that the Government will pay their share. However, it is silent on how much those costs will be and how much the Government are prepared to contribute. I assume that they have not signed a blank cheque on that. Will he give us some more information?
Related to that is the impact of all the changes on audit costs. Is the Minister aware that audit firms in the US are talking about audit costs rising a minimum of 25 per cent, and often much more, to deal with the equivalent regulatory changes there? Do we think that there will be a similar impact on costs in particular? Have the Government thought about the impact of costs not on the larger plcs, but at the smaller end of the scale, which is the engine room of growth?
1184 Finally, will the Minister say what the Government have achieved, if anything, in ameliorating the impact of Sarbanes/Oxley on dual-listed companies that have their main listing in this country?
§ Lord Sainsbury of Turville
My Lords, I cannot say much more about the costs of the Financial Reporting Council, including the foundation of functions. Clearly, we will try to proceed in the most cost-effective way, and the FRC will consult contributors, the Government, industry and the profession on firm budgetary estimates of its running costs. We think that the FRC's core annual running costs should be broadly shared by the Government, business and the profession, with two exceptions. The cost of cases heard by the investigation and discipline board should fall to the professional bodies concerned, and the cost of inspection by the independent audit inspection unit should be met by the audit firms. In both cases, that reflects the current position.
In terms of the impact on audit costs, one needs to keep a firm view on the end objective of the whole process, which is to make certain that company accounts are trusted by investors of all kinds. If that does not take place, we are in a serious situation in terms of the functioning of the capital markets. If that involves some extra expenditure but leads to trust in accounts, that would be money well spent.
The SEC is showing a welcome sensitivity to foreign concerns and to some issues arising from Sarbanes/ Oxley on corporate governance, non-audit services and rotation of audit partners, in response to the pressure from the UK and the European Commission. We pointed out that sometimes the regulations do not turn out well, and there is sensitivity to some of those issues.
Lord Carlile of Berriew
My Lords, I apologise to the Minister for missing the first moments of his Statement.
Bearing in mind that the curse of many disciplinary tribunals is delay, does the Minister support the hope and expectation that the investigation and discipline board will be expected to create protocols that enable it to act quickly? Also, does he support the hope that it will have interlocutory powers and, where there are criminal investigations—such as by the Serious Fraud Office, which can be long delayed—disciplinary proceedings will not necessarily have to await the conclusion of criminal investigations?
§ Lord Sainsbury of Turville
My Lords, if I may say so, that is slightly jumping the gun in terms of where we have got to on the process. All the points that the noble Lord has made are in principle highly desirable but, in terms of where we have got to, I would jump the gun if I assured the House that all that would definitely take place.
§ Lord Naseby
My Lords, I declare an interest as a non-executive director of three companies—one listed, one mutual and one large private company.
1185 The Minister made no mention of mutuals, at least two of which, Standard Life and Nationwide, would probably fall into the FTSE 100 if they were listed. Would the proposals affect the mutual sector as well? The Minister mentioned large charities. Is there a definition of a large charity?
My third question relates to Europe. None of us should ignore the fact that as we sit on our varying boards we not only have to cope with the FSA and its continuing consultation documents but increasingly have to take into view what is happening in Europe. Can we have confidence that Her Majesty's Government will not produce recommendations that then have to be amended two years on because of data or instructions coming out of Europe that we should have known about already?
§ Lord Sainsbury of Turville
My Lords, on the first question I would have to say what I said originally. What we have been talking about is an enormous and substantial package of proposals. They apply in different ways to different kinds of organisation. I cannot give a simple answer for mutuals or anything else without going through all the proposals and saying how they would impact on them.
So far as international standards are concerned, a lot of work is now taking place to make it certain that UK accounting standards are brought in line with international standards. In the world in which we live, that is clearly of increasing importance.
§ Baroness Howe of Idlicote
My Lords, would the Minister say a little more about the range of expertise that may be available for non-executive directorships? I speak as one who has held no more than three at any one time. That is presumably within the remit of the Higgs report. It was commented that there would be a serious dearth of suitable candidates. Not even thinking of the vast number of suitably qualified women who could do the job, what about the range of academics, lawyers and heads of Civil Service departments? Surely a huge range of suitably qualified people could help to make up the 50 per cent suggested by Derek Higgs.
§ Lord Sainsbury of Turville
My Lords, I refer to what the Secretary of State said in the Statement, which was that Professor Laura Tyson of the London Business School would look at ways to bring candidates from the non-commercial sector to greater prominence, including women, and would report in May. That is on the basis that the Secretary of State and I have considerable confidence that an enormous pool of talent is waiting to be drawn on.
§ Lord Brooke of Sutton Mandeville
My Lords, I declare an interest as an audit client for 18 years, as a tax client for 40 years with Arthur Andersen and as a continuing tax client of its successor, Deloitte & Touche Private Clients. The first tax partner who looked after my affairs, who is now sadly dead, always prefaced complicated ideas by saying that I would 1186 have already considered and rejected the suggestion that he was about to make but he thought it was worth a second look. Leaving aside the over-kindness of the preface that I have mentioned, can the Minister enlarge on the answer that he gave to my noble friend Lady Noakes about how the understanding of these matters among the amateur investing public can be improved, so that after recent events they do not unnecessarily shun the Stock Exchange?
§ Lord Sainsbury of Turville
My Lords, that is an extremely difficult question. To convey to the average investor the range of regulations that already exist and the further action that we are taking would be a considerable task. I hope that as these measures are put into place, the average investor will increasingly become aware of the action that is being taken and will realise that we are in no way complacent about the situation, despite the fact that in comparison with the United States, we have had comparatively few incidents of serious mis-statements of company accounts.
§ Lord Naseby
My Lords, I asked the Minister three questions, the third of which was: what was the definition of a large charity? That was mentioned in the Statement that he repeated. Is there such a definition?
§ Lord Sainsbury of Turville
My Lords, I do not believe that there is such a definition. We were simply pointing out that large charities—without specifying what they were—would come into that same category.