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Companies Bill [Lords]

I rise to support the speech made by my hon. Friend the Member for Newcastle upon Tyne, Central (Jim Cousins) and to put the case for the amendments. We are trying to enforce liability, particularly against the big firms. The auditor has responsibilities and it is not reasonable that liability should be limited in any way. We are saying that there is a principle here that applies in no other field—that is, when a product, which is what an audit is, fails or is not fit for use, there should be no redress against the producer of that product. If that applied in relation to baked beans or Coca-Cola, consumer protection legislation would be reduced to farce. Why should the big four—the species that we are told is in danger of extinction—have protection from their own failures, which, effectively, is what limitation of liability is? This has a long history, and I have been surprised by some of the concessions made by my Government. I was involved in a Companies Bill in the 1980s, under a Conservative Government. The audit firms came to us to say that they were threatened because they had deep pockets, poor creatures—the more money they have, the more threatened they feel. Those companies were exposed to law suits against them, most of which came from other members of the big four. The audit arms were being pursued by the insolvency arms, so it was fairly incestuous, as my hon. Friend the Member for Newcastle upon Tyne, Central pointed out. They came quaking in fear and said, ““We want our liability limited.”” How did they want it limiting? They said, ““We should be able to set up as limited companies, rather than as partnerships.”” So the Bill was changed as a result of representations from the chartered institute and the big audit firms. They were given the right to set up as limited companies, but they did not use it, because they had moved on to another stage—upping their demands. They produced a demand for limited liability partnerships, but the Conservative Government wisely refused to grant it. Those firms then bought legislation in Jersey and promised the Jersey legislature, which is not a paragon of virtue, that they would provide the legislation, which they did. It cost more than a million quid and was written by the big accountancy firms here. The legislation passed through the States of Jersey, but the promised flock of dark-suited immigrants who would come to Jersey to set up accountancy businesses to benefit from limited liability partnership did not arrive. Nobody came. Those firms then turned to our Government, who, having told us that there was no time to introduce the independent regulation of accountancy and audit as in the United States, which is the only way forward, decided that there was time to limit liability of partnerships. That came in, over our protests. The only concession that we gained came about because the Minister was desperate to go to Norway that particular night. If we had continued to talk here, his journey would have been threatened, so he gave us the concession that the proposal would not come into force immediately and that there would be consideration of the exact effects. We achieved a minor victory, but here we are again. The argument is specious. We are, effectively, providing limitation of liability, but the amendments would stop either any such agreement or any form of cap. Those big, secretive firms have never produced evidence that there is a huge threat against them or that huge damages would be awarded against them. Only two cases from the 1960s to the 1980s were cited earlier, as I recall, and in the 1990s the big four auditing firms were spending just 2.6 per cent. of their income to meet liability costs. What I have to spend on insurance—house, car and personal—amounts to far more than 2.6 per cent.