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Company Law Reform Bill [Lords]

The hon. Gentleman has read the same report by War on Want as me. We have a great deal of evidence of the inconsistency between what companies say and the reality on the ground. If clause 399 strengthened the business review so that it became an OFR it would achieve a climate of transparency. It is inconsistent to exclude from most of clause 399 unquoted companies. In the Democratic Republic of the Congo, many companies reported by the UN were unquoted, so we cannot work on the assumption that transparency is required only for listed companies. I accept that we cannot include small companies, but it would be appropriate for some medium-sized companies to report on such issues. Recently, The Times reported that companies that follow good practices often believe that they are isolated and unsupported by Government. I shall not try to quote from that lengthy article but, companies frequently express frustration that there is not a level playing field on ethical practice. A company may decide to pursue good environmental, social and community practice, but it is frustrated that its competitors do not do so. Here we are discussing a tool which creates that level playing field. If there is anything that is ultimately good business, it is the creation of a level playing field so that competition exists on fair terms, not on unacceptable terms. There has been a general assumption that the reason why the OFR was abandoned in favour of the much lighter touch––the much paler business review––is that widespread objections were raised by the corporate UK. I find that contradicted by the experiences and conversations that I have had. I was a member of the Treasury Committee last December when we took evidence from a number of people on the impact of OFRs and their views on the abandonment of OFRs. I shall quote some of those. F&C, one of Britain’s biggest fund managers, said that it was disappointed that the OFR had been swept away. Anita Skipper, head of governance at Morley, which invests £148 billion on behalf of Norwich Union policyholders, said:"““We were surprised and disappointed. The OFR would have given companies the opportunity to educate, explain and persuade.””" The head of the Chartered Institute of Management Accountants said:"““We think this is fundamentally a bad decision.””" There is quote after quote from relevant bodies. I had the opportunity to take evidence from Mr. John Whiting of PricewaterhouseCoopers. One might say that, as an accountant, he has an interest in a reporting standard or OFR, but he is a gentleman to whom hon. Members in all parts of the House have turned for good advice over the years. When I asked him what he thought of OFRs, he said:"““I think in general we saw the Operating and Financial Review as a good way forward. It promoted more openness, there were more general statements about what was going on and we supported it. It seemed to be a way forward in terms of just generally encouraging more openness and more transparency.””" When I asked him:"““Much benefit from scrapping it?””," his answer was:"““I do not immediately see it. I think one could think of other things that people would rather see scrapped.””" Was it not simply a case of sod’s law? The Chancellor wanted to do something to improve his credentials as a pro-business, anti-regulation Chancellor, and he snatched the one piece of regulation which, on the whole, business supported and the non-business community supported, for which the costs had already been sunk because of the work done by the accounting community and most major companies to put in place reporting mechanisms and procedures, and for which the additional cost would not be high because it was moving companies in the direction in which they already felt they ought to be going. In conclusion, there is an old adage in which I strongly believe: what you measure, you manage. The operating and financial review gave an assured, properly audited standard-based mechanism for displaying environmental, social and community impacts in narrative form rather than in financial ratio terms, but accurate, recognisable and measurable in its narrative. It would have led to management of those aspects. By adopting a light touch in the form of business review, we have abandoned it. I hope the Government will take the opportunity of the remaining stages of the Bill to go back to their initial sound concept.