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Companies Bill [Lords]

The House has a brief opportunity this afternoon to consider how to deal with certain remarkable financial institutions that we have developed, which have huge market power and huge global reach, namely the big four accountancy firms. We have the opportunity to consider the domination they have over the auditing of all our great companies, for which they have an effective monopoly among themselves, and also the influence that they have over government. Some estimates suggest that, since 1997, the Government have spent almost £2.5 billion on commissioning consultancy and advice from the big four accountancy firms. Many Members are concerned with issues such as the new localism. It would be a very bold councillor indeed who would gainsay it, if an officer produced some advice that had been endorsed by the local branch of one of the big four accountancy firms. The point made by the hon. Member for Putney (Justine Greening) emphasised the global reach of those companies. KPMG is said to have 140,000 partners worldwide. The internal organisation of these companies is far from clear, as our colleagues in the United States found when they attempted to investigate BCCI. They chased one of the big four accountancy firms across the globe, only to end up at an office in Bermuda with which no one had information-sharing agreements and no more could be said or done. The hon. Member for Cambridge (David Howarth) clearly set out to the House the very limited legal remedies that apply and can be brought against such massive financial institutions, even were it not the case that some of the very biggest law firms in the City of London have already made it clear that they would not contemplate any kind of legal action against the big four accountancy firms. To deal with that situation, the Government have proposed the very blunt instrument that is the reason for the Conservative amendments. Here, I have some words of comfort for the hon. Member for Putney. It is almost inconceivable that there are any circumstances in which the powers set out in the Bill will be used. When in government, her party introduced the crime of insider dealing, which was on our statute book for nearly 20 years. I invite the Foss and Harbottle tendency among us to tell me whether there was ever a successful criminal prosecution for insider dealing under that legislation. No, there was not. We can effectively dismiss the possibility that the situation that the hon. Lady is inviting us to discuss would ever arise. What public prosecutor would be bold enough to bring a criminal case against a big accountancy firm, in the light of the Chancellor’s very clear statement yesterday that he will resist—I doubt whether he will be successful—the importation of Sarbanes-Oxley. Following the outcome of the so-called ““Plumber”” case in the Financial Services Authority, the number of such cases that any agency will bring will be very limited indeed. That is why we should not seek this blunt instrument of criminality in order to create a cultural change in behaviour. Any 18th century squire would have been able to tell this House that there is no prospect of a hanging party changing its behaviour unless it actually hangs someone. No one is going to be ““hanged””, so the prospects of changing behaviour do not exist. The hon. Member for Putney said that it would be entirely wrong to separate audit from non-audit services. In 1982, a Conservative Government introduced just such a requirement into the auditing of local government, and it has worked very successfully for 25 years. In April, the public company accountancy oversight board introduced a requirement for the complete separation of tax advice from the auditing of companies. In due course, that will be introduced into our own rules through the Auditing Practices Board. Nothing is more certain, because for the big firms, there has to be consistency between us and the United States. How much more sensible to introduce our own arrangements, rather than passively importing into this country requirements and regulations from the United States. If, by chance, one of the big firms was required to tell a company what each one of its 140,000 partners across the world might or might not have done, what a very important discipline that might be. What clarity that might bring to the internal organisation of these big firms, and how helpful it would be to the members of the company and to the wider world.