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Finance Bill

My hon. Friend makes an important point. That is part of the challenge. The case has not been made, which is why people outside are perplexed about the need for the measure. I have touched on materiality and talked about normal accounting systems. "Tax accounting arrangements" is a vague term. Is it simply the processes? Is it the technology or the people involved? What does "appropriate" mean? These are details that we need to take into account. The measure's impact assessment raises some questions. The Government say:""We forecast an improvement in Exchequer receipts of £140 million over 4 years."" So, it would be quite helpful—perhaps before we reach schedule 46—if the Government were to produce an estimate of how the forecast was reached and what they expect to emerge as a consequence of their focusing responsibility on an individual. The impact assessment also highlights the Sarbanes-Oxley Act, which I touched on earlier. The assessment says:""This measure draws on the US 2002 Sarbanes-Oxley Act which put obligations on senior officers of US corporations to certify amongst other things that: they have established and are monitoring certain internal controls, and they have disclosed any material weaknesses in those controls to the company auditors."" That rang alarm bells in my mind, because the Act had a big impact on business in the United States and created some concern about whether the mooted takeover of the London stock exchange by the New York stock exchange would introduce extra-territorial regulation—whether Sarbanes-Oxley would apply here in the UK. The issue reminded me of a debate that I had with the current Secretary of State for Children, Schools and Families when he was the Economic Secretary to the Treasury. On that occasion, we debated the Investment, Exchanges and Clearings Houses Bill, which was introduced as an attempt to avoid imposing extra-territoriality on UK businesses, triggered by concerns about the impact of Sarbanes-Oxley. I am therefore rather surprised that the Government have used that legislation to pray in aid this measure, because, at the time, the right hon. Gentleman, referring to a conversation with Christopher Cox, the then chairman of the US Securities and Exchange Commission, and Hank Paulson, the then US Treasury Secretary, said:""I think that they both share my analysis of the current dangers of the Sarbanes-Oxley regime, which is that the way in which it has been implemented is both burdensome and insufficiently risk-based and that therefore it does not achieve the initial intention."—[Official Report, 28 November 2006; Vol. 453, c. 1039.]" I should have thought that somebody in the Treasury might have remembered that exchange when drawing up the regulatory impact assessment, because they then could have said that perhaps Sarbanes-Oxley was not the best precedent to cite. Indeed, I should have thought that the Chancellor might have remembered the precedent, because, in a 2007 speech to the Institute of Chartered Accountants, he discussed the reforms that were being introduced in the UK and compared them with the US, saying:""During a visit to the US last year, I was struck by the extent to which the approach taken by Sarbanes-Oxley—overly burdensome and prescriptive rules—was now seen as the wrong response."" I do not know whether the Financial Secretary shared the contents of the impact assessment with the Chancellor. If so, the Chancellor might then have remembered that he was quite sceptical about the benefits of Sarbanes-Oxley and the prescriptive rules that it imposed. Of course, the issue goes right to the top, because even the Prime Minister recognised the implications. He said:""I was under the same pressure as US legislators to impose blanket proscriptions such as Sarbanes-Oxley. I resisted"—" a great dividing line in politics, there—""in favour of maintaining a flexible principles-based approach. We will allow nothing to undermine that commitment."" The Government have argued before that measures inspired by Sarbanes-Oxley are overly burdensome and prescriptive, but the measure before us rings alarm bells: the Treasury has not learned the mistakes of Sarbanes-Oxley and seeks to impose its rules and approach to tax accounting. Interestingly, Deloitte and Touche, when commenting on Sarbanes-Oxley, also queries its relevance, saying that it is""questionable how relevant the Sarbanes-Oxley experience should be here as the US legislation was developed specifically in relation to financial reporting and so arguably does not extend to tax return preparation process."" Sarbanes-Oxley led to the significant deterioration in the relative competitiveness of the US when compared with other jurisdictions, but the Bill's regulatory impact assessment says that""it"—" the measure—""has no impact on competition"" and costs are "negligible". The Government could not have reached that conclusion without having consulted industry first, but they did not, so they are not in a good position to make that statement. Again, we return to the issue of consultation. The Government must understand the true cost to business. I am sure that Messrs. Sarbanes and Oxley, at the time of their Bill's passage through Congress, said, "Oh, don't worry, it will have no impact upon competition, it won't involve additional costs on business;" that they were quite breezy about it, in the same way that the Financial Secretary is quite breezy about it in the impact assessment that he has signed off; and that, only when it was too late, did they realise that it had a cost and an impact on the US's competitive position. I just counsel caution. The Treasury has rather rushed into the initiative, and it is not clear who its author is. I do not get the impression that HMRC has embraced it as warmly as it would if the initiative had been one of its own; and I do not know whether it was a follow-up to the G20 summit, whereby someone said, "Something must be done," or a response to the TUC's campaign on the tax gap—a political, knee-jerk reaction in the same way that Sarbanes-Oxley was to problems in the United States. It is not clear who is the father of this great idea.