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Company Law Reform Bill [Lords]

It is almost impossible to follow the hon. Member for Great Grimsby (Mr. Mitchell), who is the authentic voice of Labour. He expressed his party’s real view of companies—not the view that is generally expressed—which is entirely false and unacceptable. I declare an interest as a company director and as the chairman of a company that helps major businesses to discharge their corporate social responsibility. The hon. Gentleman described a world that does not exist, as companies do not behave like that and auditors could not behave as he suggested. That does not mean that all companies are perfect or that auditors are delightful—some of them are not—but we ought to live in the real world. The Government sometimes fail in the detail of what they try to do in the real world. I want to agree with the Trade Justice Movement, but its proposals are wide of the mark. I do not wish to suggest that its members are not good-hearted or that they do not want to do the right thing, but—and I am embarrassed to admit that I agree with the right hon. Member for Cardiff, South and Penarth (Alun Michael), which I rarely manage to do—they have chosen the wrong vehicle to achieve their ends. People who care about trade justice—no one would suggest that I do not—must remember that it is extremely important to get the facts right and achieve the correct mechanisms to avoid the reverse effect. I am sorry that we cannot go along with all the Trade Justice Movement’s proposals, but I hope that we can find a way of incorporating in the Bill those that are applicable. The large majority of its proposals can be examined on another occasion. We should look at what can be done, and at what the Government have failed to do. I have some sympathy with Trade and Industry Ministers, who have been sidelined by the Chancellor’s discussions of the issues. Yesterday, he made a speech that took one’s breath away, in which he talked about globalisation as though it were wholly beneficial. The way in which he discussed globalisation, which is a fact of life, not a good or a bad thing, was intolerable to anyone who genuinely understands the way in which it affects poor communities throughout the world. If I were a member of the Trade Justice Movement, I would be very cross if I thought that there was a chance that he would run the country, because he entirely lacked sensitivity to the issues about which most Conservatives feel strongly. I hope that every member of the Labour party will read the Chancellor’s speech to the CBI yesterday, because if that is what he believes, I do not think that many of them will vote to make him leader of the Labour party. If they do so, they have not read the speech, which expressed a view of capitalism that has long been out of fashion, except among the neo-Conservatives of the United States of America. I heard the tones of Mr. Perle in every sentence of that speech, and there is little one can say that is ruder. Embarrassingly, for the second time, I must agree with the right hon. Member for Cardiff, South and Penarth, who said that we are all shareholders now. That is true: we have shares or pensions based on shares, but we also live in a country where the effects of share prices and the efficacy of company performance change our lives for better or worse. We are all shareholders—I prefer that word to ““stakeholders””, which is a self-defining word. I can claim to be a stakeholder in anything, and I may, or may not, have grounds for that claim. The people who matter are shareholders, and that means everyone, because we are all shareholders. In those circumstances, we must look carefully at the Bill. As shareholders, we require the information necessary to make a proper judgment about the companies in which we have shares, which is why we have a raft of financial regulation, some of which is improved and made clearer and less onerous by the Bill. I welcome those provisions. Curiously, the Government have not taken the opportunity, as the hon. Member for Kingston and Surbiton (Mr. Davey) pointed out, to reintroduce the operating and financial review. There is a simple explanation for that. When the OFR was introduced, Conservative Members and others were concerned that it would be onerous and difficult to implement. I did not share that attitude, but it was widespread and reasonable. After five or six years, however, it became clear that the OFR was not onerous or difficult—companies generally found it perfectly possible to implement and almost all of them were ready to do so, particularly after the work done by the Accounting Standards Board, which the hon. Member for Cheltenham (Martin Horwood) mentioned. Suddenly, out of the blue, in incredible circumstances, the Chancellor of the Exchequer announced to the CBI that he would ban or abolish the OFR as a deregulatory measure. I cannot vouch for the accuracy of the story about how he reached that position, but Friends of the Earth is usually accurate in its understanding of such matters. Many members of the Government were only too ready to tell Friends of the Earth precisely what happened, so furious were they about the manipulation of Government systems. Interestingly, a representative of Hermes initiated the event—what a pity that the civil servant concerned did not talk to Henderson or another fund manager, who would have said that it is not a matter of deregulation but of obfuscation. Without the OFR, an increasing number of investors and investment funds that look at corporate social responsibility and the way in which people deal with non-financial risk as an important guide to investment are in a difficult position. The OFR was not a matter of over-regulation, as it provided the transparency necessary for their work. It was therefore bad luck that that civil servant should have been friendly with someone from Hermes, as he ought to have known other representatives. He shall remain unnamed, because I blame not him but the man who took him seriously, and chose to act without talking to anyone else. That brings me to the key issue in relation to the OFR—the fact that the Chancellor of the Exchequer appears never to talk to anyone else. For example, the OFR is supposed to be of interest not only to the Department of Trade and Industry, but to that famous Department, the Department for Environment, Food and Rural Affairs. DEFRA is supposed to be responsible for the environment. I spend a great deal of time arguing that the environment should not have been shoved off in a corner with animals and trees. Much as I like animals and trees, the environment is the central issue for the entire Government. When the Prime Minister took office, he said that he would put sustainability at the heart of his Government. Instead of that, he shoved it to one side, in a Department that no one seems to listen to at all, certainly not the Chancellor of the Exchequer. What was he doing, abolishing a matter that was fundamentally an environmental issue, without a word to the then Secretary of State for Environment, Food and Rural Affairs, now the Foreign Secretary? A word or two with her might, I should have thought, at least have been a courtesy. She is an intelligent and, I think, thoroughly nice lady. Why did he so dislike her that he did not think a word was necessary? I can understand why the Chancellor of the Exchequer did not have a word with the Department of Trade and Industry: he could not remember who was the current holder of the office of Secretary of State. So soon do they change that I imagine it is difficult to keep up, and the telephone directory is not always up to date. No doubt that was the reason for it. But he did not talk to any of the people involved, and threw out what most people had seen as a valuable and proportionate way of bringing to the heart of businesses what the best businesses are already doing—issuing a statement that enables their shareholders to see whether they appreciate the real risks of the business. In that respect I find the Government difficult to understand. No one is asking for the OFR to be brought back as an incubus on business. We are asking for it to be reinstated because it is an extremely important mechanism—I referred to my declaration of interest—for the management of a business. If one does not understand one’s non-financial risks, one does not understand one’s risks. Many non-financial risks are more important than direct financial risks. If one has a large area of contaminated land, if one has concerns about the viability of the business because of inherited costs that are not financially accounted for, one is conducting the business without revealing sufficiently to those who own the business the terms of their ownership.