Companies Act 1989 (Delegation) Order 2005

I thank the Minister for explaining the order so clearly and the reasoning behind it. Before going any further, I, like him, must declare an interest as a Fellow of the Institute of Chartered Accountants in England and Wales. I congratulate the Minister on his pension arrangements. It is understood that the review of the regulatory regime of the accounting profession found no evidence that the UK’s existing regulatory system was seriously flawed. While we agree that it is important, after several high profile corporate scandals, that public confidence in the impartiality and effectiveness of auditors and in the whole audit process is maintained, we would be grateful for the Minister’s assurance that this is not simply change for change’s sake. Concerns have been raised in certain other areas and I should like to highlight the following. First, as regards costs, it is acknowledged in Annex A to the Explanatory Memorandum that there may be additional costs to those audit firms which fall within the scope of the new independent monitoring arrangements. The fact that these are unlikely to be substantial in comparison to the turnover of those audit firms is not of itself particularly comforting. As the Minister will know, a comparatively small impact on turnover can wipe out a business’s profit. In these days of the global economy, there is less and less scope for businesses to absorb increases in costs and these are, accordingly, passed on to the client companies and thence, in this case, to the very shareholders in those listed companies we are seeking to protect, many of them small shareholders holding their shares through ISAs and pensions. The next concern is that statutory control could lead to a more bureaucratic and costly system. The third concern is that the outcome of the order might be to reduce the number of firms which would be likely to engage in audit work, which would in turn impact adversely on users of the services of those firms. The final concern to which I refer noble Lords has been voiced to me by the Institute of Chartered Accountants in England and Wales—the effect of the order should not undermine the strength and powers of, and public confidence in, the several professional bodies in this country. Their contribution to the regulation of UK Plc is built on professional knowledge and expertise, and the close relationship between them and the statutory authorities has worked well for many years and there is, we believe, no evidence that that has changed for the worse. I mention those concerns not as a reason for withholding support for the order, but because would be important for the Professional Oversight Board for Accountancy to prove that such fears were unfounded. I am sure that the Government have carefully considered those points, among others. On that understanding, we will not oppose the order.