Whistleblowing

Jim Shannon Excerpts

Wednesday 3rd July 2019 Commons Chamber

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to speak in this debate and to follow the hon. Member for Oxford East (Anneliese Dodds). I congratulate the right hon. Member for North Norfolk (Norman Lamb), who set the scene, and I thank the hon. Members for Stirling (Stephen Kerr) and for Thirsk and Malton (Kevin Hollinrake) for making such valuable contributions, as others have previously and will afterwards. The members of the all-party group have been engaging on this subject and are to be congratulated on sustaining their interest and on their efforts today.

Like the hon. Member for Oxford East, I would not be happy to make known all the cases I have been involved in over the years, because of the individuals and organisations in Northern Ireland that were involved. I know of cases involving the health service, the council, sometimes the police and sometimes other organisations, but I shall not go into any of the details, because that would inhibit the people who came to me. I am always clear about the confidentiality of those conversations.

I wish to dwell on one case, because it has dragged on for so long. When I describe the case, the hon. Member for Thirsk and Malton will know it and the person involved, because he is indirectly involved in the case or has knowledge of the person. First, though, let me say that a review of the 20-year-old PIDA is welcome and necessary to ensure that the UK remains the best place in the world to do business. Piecemeal reforms, often as a result of individuals bringing claims, have extended the scope of who is protected, but unfortunately there remain gaps and inconsistencies. The Government recently committed to ensure that workers’ rights keep pace with those in the EU, whatever the Brexit outcome. This is an opportunity to reiterate the commitment to ensure that worker protection does not fall behind in the coming years.

I feel that I can say all that for a few reasons. In my constituency, I had a constituent who was engaged in what was at the time the longest-running employment tribunal case. It ran from 2007 to 2012 and involved 50-plus tribunal days. It was an absolute endurance test for my constituent and led to his substantive mental health problems and a complete physical and emotional breakdown. My parliamentary aide and I supported the employment tribunal process for some 18 months while he recovered. We helped that gentleman and his family. Sometimes, we need to be aware not only of the impact on the individual who does the whistleblowing, but the financial, emotional and mental impact on the family, too. It is clear that what that gentleman went through was horrendous.

In the end, the employment tribunal found that my constituent had made 12 protected disclosures involving going concern matters for the UK company and intangible asset valuations that could not be justified. Does that sound familiar? We had Carillion and BHS in 2018 and 2019. If people learned their lesson, wouldn’t that be great? But people do not learn their lesson, because these things seem to happen over and over again, as has been explained here today.

I make that point because, during those 18 months, my constituent and I engaged in occasion with the FRC on an investigation into his disclosures. The investigations by the FRC and the Institute of Chartered Accountants in England and Wales were lamentable. In fact, in response to the Business, Energy and Industrial Strategy Committee audit inquiry, the FRC’s chief executive officer recently refused to disclose what whistleblowing investigations had been undertaken in the last 10 years.

In 2011 and 2012, the predecessor of the Department for Business, Energy and Industrial Strategy had a consultation on the Sharman inquiry on going concern, which started in late 2011, to which I made an extensive contribution.

The 30-plus responses have all been removed from the FRC website. Eight years on, we have another BEIS/FRC consultation on going concern. Will this accounting profession ever get things right? Concurrently, in November 2011, the then Department issued a consultation on the reform of the FRC.

In December 2010, the FSA and PwC conducted an independent inquiry into the Royal Bank of Scotland. Their press release stated:

“The issues we investigated do not warrant us taking any enforcement action, either against the firm or against individuals.”

How disappointing. It continued:

“The FSA cannot publish the content of the RBS review as information gathered from the bank during the course of the review remains confidential under the Financial Services and Markets Act 2000.”

Last month, eight years later, we had a further report from the FSA’s successor, the Financial Conduct Authority. Disappointingly, it essentially concluded the same.

[Stephen Kerr]

The hon. Gentleman mentioned the FCA and the FRC. With the change that is now coming to the FRC, we have an opportunity to break away from the pattern of performance in the past. We have an opportunity to disconnect from that past. Does he agree that it is vital that, whatever replaces the FRC, it is not continuity FRC?

[Jim Shannon]

Yes, I absolutely agree. I do not think that anybody in the House today, or probably outside it, disagrees with what he has said. Continuity would not be what we want; it is change that we want, and the quicker, the better.

Concurrently, the HBOS whistleblower, my constituent Paul Moore—I have his authority to mention his name—met the then Treasury Committee Chairman, Andrew Tyrie MP, now Lord Tyrie, in February 2011. We were delighted to learn, as was subsequently published, that the Committee would look to engage independent assessors, who would report to it for some of its future investigations. That was announced and reported on the front page of the business section of The Daily Telegraph on 5 May 2011, and it was followed up in subsequent inquiries.

However, only days ago, commenting on the Government response to its excellent report on the future of audit, the Chair of the BEIS Committee, the hon. Member for Leeds West (Rachel Reeves), stated:

“The collapse of Carillion and accounting scandals at Tesco, BT and Patisserie Valerie and others have provided a painful lesson that audit isn’t working. Businesses, investors, pension-holders and the public deserve better. Urgent audit reform is needed, not yet further consultation.”

That is exactly what the hon. Member for Stirling referred to. She continued:

“The CMA and BEIS Committee’s extensive inquiries on audit proposed a range of practical recommendations to improve competition, tackle conflicts of interest and improve the culture of challenge in audit firms. Their response to our report suggests the Government is in danger of kicking vital audit reforms into the long grass.”

Then they will get lost, and we will forget about them. That should not happen. She added:

“We should not wait for the next corporate collapse. The Government needs to ignore the lobbying of vested interests in audit and set out a clear timescale for delivering on the substance of the CMA and BEIS Committee’s recommendations”.

We should listen to what the Chair of that Committee says.

Are things different in 2019 for audit and whistleblowing, compared with my experience in 2011 and 2012, when I first came into the House? No, nothing has substantially changed yet. Yet, whistleblowers regularly provide an early warning sign when things are going wrong. Often dubbed the canaries in the coalmine, they can help to avert a future scandal. They can save organisations money. One in every three serious economic crimes was highlighted by a whistleblower, according to a recent survey. That makes whistleblowing more effective than all the usual watchdogs—corporate security, internal audits and law enforcement—combined.

In addition, we need a regulator who is willing and able to listen to whistleblowers who come forward, and to protect them from retaliation. Research by Professor Kate Kenny from Queens University in Belfast shows that the cost of whistleblowing can still be very high, financially and personally—both physically and mentally. I witnessed that up close with my constituent and his family.

For a healthy economy and a reputable financial sector, we need to start supporting whistleblowers. Finance has never been more difficult to regulate because it incentivises people to chase excess profits, even at the expense of ethics and the long-term survival of an organisation. It remains acceptable—in many cases, profitable—to remain silent about wrongdoing. We need to encourage whistleblowers. What this all means is that a significant shift is needed, starting with helping employees to speak up, otherwise the financial sector and the remainder of the economy remain at risk of another crisis. In fact, we may be asked to foot the bill, just as we did with the trillion-odd pounds last time.

The Democratic Unionist party has been very active in supporting the APPG on fair business banking and victim support groups such as the SME Alliance and the CYBG Remediation Support Group in pressing Her Majesty’s Government and the banks to put in place a voluntary redress scheme for SMEs that is truly independent. Wow! Wouldn’t that be great? Such a scheme should also address the unintended consequences of light-touch regulation enabled through the Financial Services and Markets Act 2000 and the abuse of SMEs. As a banking redress process is finally beginning to take shape, will the Minister make a similar commitment to address much more effectively the “Future of Audit” report and the renewed vigour for updating our whistleblowing legislation? Like the banking redress for SMEs, these are important matters for our economy post Brexit. The original PIDA whistleblowing legislation has its genesis some 20 years ago. I will therefore appropriately finish by restating my opening comments.

A review of the 20-year-old PIDA is necessary to ensure that the UK remains the best place in the world to do business. Piecemeal reforms, often as a result of individuals bringing claims, have extended the scope of who is now protected, but there remain gaps and inconsistencies. The Government recently committed to ensuring that workers’ rights keep pace with those in the EU. This is an opportunity for the Minister to reiterate the commitment to ensure that protection of workers does not fall behind in the coming years. The Democratic Unionist party—part of the partnership with the Conservative party in government—supports that commitment with regard to updating our whistle- blowing legislation in a post-Brexit Great Britain and Northern Ireland.