Professional Qualifications Bill [HL]

Lord Palmer of Childs Hill Excerpts

2nd reading
Tuesday 25th May 2021 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, in a debate on professional qualifications, I need to declare that I am yet another fellow of the Institute of Chartered Accountants in England and Wales, although long retired from general practice. I compliment the noble Lord, Lord Bilimoria, and the noble Baroness, Lady Noakes, on their very interesting comments. I hope that, during the passage of the Bill, we can develop those comments, as I think there is room for co-operation on amendments. The noble Baroness said that this is not a Conservative Bill; I think there will be a number of noble Lords who would like to deny parentage of it as presently drafted.

First, I maintain that the professional and business sector provides high-value and good-value jobs. The UK is a major exporter in this sector, as sadly we are no longer the industrial giant of past years. I well remember being delighted, as a partner in a professional firm of chartered accountants, on the fairly rare occasions when a new client actually manufactured anything—most were pushing pieces of paper around from one place to another.

What are the priorities on the recognition of professional qualifications? It must be a flexible approach. I see this as giving UK professional bodies autonomy and flexibility over who they admit as members and on what terms. An authoritarian Government are not needed.

The noble Lord, Lord Sikka, was less than complimentary about the accountancy profession. I did not really recognise his description of what is happening; every profession has things about which some of its members say, “I wish some members of my profession did not do that—or they should not.” The noble Lord spoke about audit; there are a lot of conversations within the accountancy profession about audits and who should do them, and about the fact that large company audits are the province of a very small group of firms. I know that professional bodies are very interested in this, although it is outside the scope of this legislation.

The role of the UK Government is actively to promote professional mobility and recognition by striking recognition agreements with other Governments, particularly our major trading partners and—after the unnecessary Brexit—EU member states. UK professional bodies, without interference from the Government, should be free to recognise incoming professionals where they—not the Government—deem the level, scope and content of their qualification to be equivalent. But they should not be obliged to provide a bridging aptitude test where they do not reach that equivalent.

The experience of my professional body is that there will be times when the UK Government’s involvement will be necessary for agreements between UK and non-UK professional bodies, as happens. Reluctantly, I note that government involvement might be needed, as a recognition agreement may need approval by that profession’s regulator. For accountancy, as has been mentioned, this is the Financial Reporting Council, which controls access to UK audit rights.

As we move beyond Second Reading, we need to consider conflicting forces in any approach to recognition agreements. We will want to be seen as open for business with the EU, despite Brexit, and open to the rest of the world, thus replacing what has been lost by exiting the single market.

However, there will be professional concern to recognise only those who have met all legal requirements. Audit, as has been mentioned, is a relevant case. I am informed that many overseas professional institutes want deals that include UK audit rights, but to date only two non-EU qualifications have ever been accepted by the Financial Reporting Council, both of which are no longer available to new students.

Of course, there are multiple professional bodies. I understand that, for instance, the Engineering Council—mentioned by other noble Lords—has been involved, with other professional regulators, in round-table talks with BEIS. Clearly, the issues will vary by profession: chartered accountants are not dentists, and dentists are not accountants. The requirements will be different, and very often known by the professional bodies and not so much by government departments. I get the impression that some UK professional bodies have been more involved with the Government than others, but with a basic requirement that the Bill covers both inbound and outbound professional qualifications.

The Bill has powers to amend primary legislation with secondary legislation; on Clauses 5 and 6, the Library briefing states that it expects a “large number”—that is an understatement—of amendments to a wide range of Acts. It has been argued that it seems “prudent” to take a power rather than to capture all the amendments in the Bill. Others might well say that it smacks of a half-baked pudding. It suggests we will get a number of SIs which will need careful parliamentary scrutiny. Indeed, the memorandum available this morning from BEIS has an overview of the Bill in sections: the first is to “revoke”, the second to “introduce”, the next to “enable”, the next to “maintain”, the next to “create”—then there is another “create”, another “create” and another “facilitate”. That is only the tip of the iceberg of the statutory instruments that will be needed in the course of this Bill. We have an albatross here, which the Government do not seem to be dealing with.

On grandfathering, the briefing also reports that the Government have said that revocation of the 2015 regulations will not affect the status of qualifications already recognised and that applications could be completed. Can the Minister say whether there could be a discrepancy in qualifications after a certain date if that procedure takes place?

Professional Qualifications Bill [HL]

Lord Palmer of Childs Hill Excerpts

Committee stage
Wednesday 9th June 2021 Lords Chamber

[The Deputy Chairman of Committees (Lord Alderdice) (LD)]

I call the noble Lord, Lord Palmer of Childs Hill.

[Lord Palmer of Childs Hill (LD)]

My Lords, I am rising rather surprised. We have heard my noble friend Lord Fox elegantly put the reasons why the Bill needs to be slightly tidied up, if nothing else. The amendments in this group do all they can to allow overseas qualifications to be treated as acceptable in the UK. The amendment in my name seeks to deal with a situation where the qualifications and experience are held to fall short; the Bill does not talk about what happens then. In many spheres, what happens is that there is some bridging measure to bring the applicant up to the required standard.

Amendment 12 in my name seeks to give the regulator relief from bringing the applicant up to the required standard if this would involve unreasonable cost, time and be a resource burden on the regulator. My noble friend Lord Fox said that the regulator will be independent. We must not add the cost of providing bridging training if people do not come up to standard.

As has been said, this is a skeleton Bill. We need to make it clear on whom the duty falls to provide the additional training or experience to bring it up to standard. The Bill does not say, but it must not be down to the independent regulator.

[The Deputy Chairman of Committees (Lord Alderdice) (LD)]

I now invite the noble Baroness, Lady Noakes, to make her intervention.

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[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, I am very pleased to move Amendment 14, which would require the Secretary of State, the Scottish and Welsh Ministers, and the Northern Ireland department to consult when preparing regulations under Clause 1. A number of noble Lords have said that it is important that the UK Government consult the devolved Administrations. It is equally important that the devolved Administrations themselves consult the bodies affected. Sometimes they are quite good at that; sometimes not. It is therefore important that we make it clear that this is a requirement. At Second Reading, the noble and learned Lord, Lord Hope, pointed out the need for consultation by the appropriate national authorities when preparing regulations. Both the Law Society and I agree strongly with those comments, and on the need for consultation on draft regulations under the Bill. As colleagues have said on a number of other occasions, this is a very important and wide-ranging measure which affects a considerable number of professions—160 as stated in the Explanatory Notes and as other noble Lords have said earlier.

Government across the UK does not possess the in-depth knowledge that would enable it to legislate unless it has such pre-legislative consultation. The Minister said that he would

“anticipate that determining whether professions meet this condition would require extensive close working”.—[Official Report, 25/5/21; col. 974.]

BEIS has made it clear in its engagement with stakeholders such as the Law Society of Scotland that it agrees that it is important for the Government to engage extensively with a range of interested parties before legislating. BEIS may argue that it is already well established that Governments need to consult before making secondary legislation, including through the government consultation principles of 2018, so there is no need to legislate for this. That may be so, but I am not so sure. In a number of recent Acts, the Government have nevertheless expressly legislated for consultation duties such as these.

We certainly agree that aspects of the Bill will require close working between the Government and a range of interested parties, including the professions. However, “close working” does not necessarily include statutory consultation. We also know that legislation has a particular way of concentrating Ministers’ minds in a way which published guidelines do not. That may be why legislation as diverse as the Fire and Rescue Services Act 2004 and the United Kingdom Internal Market Act 2020 have provisions which oblige the Secretary of State to consult before making orders or regulations. That statutory duty to consult is vital; it puts pressure on Ministers much more effectively than any guidelines. I therefore hope that the Government will seriously consider this amendment. I beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, I apologise that what I am going to say has nothing to do with devolved Administrations, because the Bill obviously affects them greatly. The Bill is a law of unintended consequences. It has been described as having been written on the back of an envelope; that envelope has got a lot of writing all over it by now. Amendment 52, to which I have attached my name, is about how many organisations have not realised, and still do not realise, the impact of the Bill. They think: “Professional qualifications; that does not really worry us”. Many noble Lords have had consultations with large organisations, chartered organisations and the like, all of which have given us their opinion. Some have given us their opinion twice because they have changed it. However, small and medium-sized enterprises have not been consulted at all. They have probably not even known that this Bill exists and how it is going to affect them—how it is going to impact on the qualifications of their workforce and whether they are going to have problems with their workforce. When I talk about small and medium-sized enterprises, I mean those with one to 50 employees. If they have problems recruiting now, how will it be afterwards?

As the Bill seems to have been created on the hop, without thinking too much about some of the detail, we now come to trying to mop up a Bill which has not been terribly well thought out in the beginning. We have to look at how to rectify that after the Bill becomes an Act. My Amendment 52 is about the Government committing to there being a report back within 12 months of the Act being passed, particularly in relation to small and medium-sized enterprises. By then, they will have realised the impact of the Bill on the staff they have, do not have, and might have. They might then feel that they can contribute. At that stage, one year hence, perhaps we can put the then Act into a better format. At the moment, it certainly does not seem to have been thought out properly from beginning to end.

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to follow the noble Lord, Lord Palmer, who has tabled a very useful amendment, Amendment 52, to which I was pleased to attach my name. I will speak chiefly to Amendment 55 in my name, but I will also look at the whole range of Amendments 52 to 55, which are all on variations of forms of reports. It might be useful for us to consider whether we can bring this together for Report. There is clearly a desire, coming from a number of different directions, to see a reporting and scrutiny mechanism for the Bill.

I will, however, briefly comment on and commend Amendment 19 in the name of the noble Baroness, Lady Hayter, which refers to consulting consumer interests. That is particularly interesting when we look back to the comments of the noble Lord, Lord Sikka, at Second Reading, and the concerns about the way in which many of our professional services are failing to meet the needs both of those using them and of broader society. There is something useful in the suggestion from the noble Baroness that would be interesting to take forward.

I will now address Amendments 52 to 55, on the issue of reporting back. There has been great discussion in this Committee about the complexity of the Bill, the difficulty of fully understanding its impacts and, indeed, the fact that, with its range of Henry VIII powers, much of the detail will come in later regulation of which we have very limited or no democratic oversight.

Professional Qualifications Bill [HL]

Lord Palmer of Childs Hill Excerpts

Committee stage
Monday 14th June 2021 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, I am a co-signatory to Amendment 34. In fact, I put the same one in because its source is the Institute of Chartered Accountants in England and Wales, of which I have been a fellow for 50-odd years. I view that as an interest, I suppose.

As has been stated by noble Lords, the amendment gives greater discretion over which foreign auditors and foreign audit qualifications are accepted in the UK. The noble Baroness, Lady Blake, explained why this was and why it was needed. It allows the regulator to apply its professional judgment; this amendment states that clearly.

In 2020, the big four UK accountancy firms performed the audits of 96 of the 100 companies in the FTSE index—this is very much a closed shop. The dominance of the big four audit firms has long been a matter of concern, and their record on big company failures has not been impressive. Various professional bodies have been looking at this matter for some time in relation to companies such as Carillion, Thomas Cook and BHS—one could go on about this.

As mentioned by the noble Baroness, Lady Blake, in March this year the Business Secretary launched a major overhaul of audit. We did not hear too much about it after its launch. The amendment that we put forward today is to allow the regulator greater discretion, if it is needed, as a step to unleash competition in the audit market. As I said, when the big firms’ audits are controlled by the big four accountancy firms, something really needs to happen.

We are promised a new audit profession, overseen by a new regulator, with the aim of driving up standards and quality—this was referred to by previous speakers. This amendment will assist in the aim of requiring large companies to use smaller challenger firms to conduct part of the audit. In the debate on the previous amendment, the Minister spoke about giving empowerment to regulators. This amendment attempts to give those regulators that empowerment to do what they think is right rather than something that is written down in black and white.

The noble Baroness, Lady Noakes, talked about flexibility, which is relevant to this very technical amendment—there was a laugh in relation to this being accountants talking about more accountants. But this is important, because the proper audits of companies are how this country runs, and it has not been running too well on the big companies side. I spent the first seven years of my career at a firm called Peat Marwick Mitchell, which is now KPMG, and audit has changed radically since then. There is too much looking at systems and not at whether those accounts and balance sheets—snapshots of a company’s position on a particular date—are true. Clearly, in companies such as the ones that I have mentioned, this is not the case.

This is a very technical amendment that had its genesis in the largest professional accountancy body in the UK. I hope the Minister will consider accepting it.

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Moved by

[Lord Palmer of Childs Hill]

37: Clause 5, page 4, line 14, at end insert—
“(3) Nothing in this section affects individuals whose qualifications were recognised by virtue of the European Union (Recognition of Professional Qualifications) Regulations 2015 before subsection (1) comes into force.”Member’s explanatory statement
This amendment makes it explicit that qualifications recognised before the EU regulations were revoked are not affected.

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[Lord Palmer of Childs Hill (LD)]

My Lords, this provision is often described as a “grandfather” clause or policy, or “grandfathering”, although those words are not in the amendment. It is a provision by which an old rule continues to apply to certain existing situations, while a new rule will apply to all further cases. Those exempt from the new rules are said to have grandfather rights, or acquired rights, or to have been “grandfathered”—there is a big use of the word “grandfather”.

The virtue of the provision is that it keeps the expertise which exists in all these professions. Surely this must be very close to Members of your Lordships’ House; if we have any reason for existing, it is that one would not want to lose the expertise of this House. In very simple terms, that is what this amendment seeks to do.

The amendment is simple. It makes it explicit—the Minister may well say it is already there, but it is not explicit—that the qualifications recognised before the EU regulations were revoked are not affected. This simply makes it clear. I hope the Minister might accept it as a clarification in the Bill. I beg to move.

[Baroness Fraser of Craigmaddie (Con)]

My Lords, I rather hope that the Minister will—to use the word of the Bill—assuage my fears that these amendments are not required. If noble Lords will bear with me, I must say I really struggled to understand, when reading these amendments and looking at the Bill, how it could possibly be that we would put any barriers, hurdles or anything in the way of people whose qualifications have been recognised under previous EU regulations. It is really concerning to me.

To turn to my regulator of choice, the Health and Care Professions Council registered 551 new registrants from the EEA and Switzerland last year—the year of Covid—and 951 the year before. That is around 22% and 26%, respectively, of the total number of new registrants each year. It would be a tragedy if there were any barriers to those who have been registered as fit to practice and they were not able to do so.

Let us not kid ourselves that it is a simple path to registration for professionals from the EEA and Switzerland even with the previous EU regulations in place. These professionals have already experienced uncertainty in their status due to the UK’s exit from the EU. Hopefully, most will have applied for settled status, but let us, as I say, not put any more barriers in their way. Even a whiff that their qualifications might no longer be recognised or that they may have to go through other processes could be enough to send these valued people back to their own countries.

I am also not clear whether it is proposed that there will be a transitional period between the existing and the proposed routes to registration for overseas registrants. If so, can further light be shone on this? I plead that any transition from one system to the other is as smooth and painless for professionals and regulators as possible. I look forward to being assuaged.

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[Lord Grimstone of Boscobel (Con)]

My Lords, these are both important questions which affect the rights of individuals, and so I will write to noble Lords on these matters to be crystal clear with my answers.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank all noble Lords for their contributions to this debate, which has been incredibly helpful. I particularly thank the noble Baroness, Lady Fraser of Craigmaddie, for introducing words like “whiff”, “processes” and “painless”. That is the whole point: this should be painless rather than putting things in people’s way. I thank the noble Lord, Lord Hunt of Kings Heath, who has noticed the similarity between expertise in the House of Lords and keeping the expertise in qualifications. I thank the noble Baroness, Lady McIntosh of Pickering, for her comments about making people welcome, and I thank the noble Baroness, Lady Finlay, for saying the same.

Professional Qualifications Bill [HL]

Lord Palmer of Childs Hill Excerpts

Committee stage
Tuesday 22nd June 2021 Lords Chamber

Moved by

[Lord Palmer of Childs Hill]

61: Clause 16, page 12, line 40, at end insert “, or a chartered accountancy profession (see subsection (3A)(a)).”
Member’s explanatory statement
See explanatory statement for the amendment in the name of Lord Palmer of Childs Hill to page 13, line 19.

[Lord Palmer of Childs Hill (LD)]

My Lords, it is my great pleasure to speak here in the graveyard spot on this Bill to the amendments in my name. I thank the Minister for his letter of 20 June concerning the professions and regulators to which this Bill applies. It would have been a bit more helpful to have had it earlier.

It seems that BEIS has recognised the point I made in my amendments that the ICAEW and other accountancy professional bodies are in the scope of the Professional Qualifications Bill, owing to their role as recognised supervisory bodies for the purposes of statutory audit, insolvency, probate and administration of oaths. This has been referred to by many noble Lords from around the Chamber during the course of this Bill. As this addresses the point made in my amendments regarding the rationale for including the ICAEW, of which I am a member, in the scope of the legislation, I hope that the Minister will acknowledge when he replies that it helped to review the actual impact of the Bill, as his letter helped me in making this speech.

It feels like the Government are rushing through this legislation without having thought through the detail of the Bill and its consequences. Noble Lords are now having to try to fix this. For the list of regulators and professions affected by this Bill to have changed so substantially while the legislation is being scrutinised by your Lordships’ House does not help give certainty on such an important and wide-ranging legislative measure.

Between this Bill’s conclusion in the House of Lords and it eventually beginning to go through the lower Chamber—and eventually when it comes to Report—it is vital that BEIS takes stock of this legislation, reviews its intended and unintended consequences, and engages with those regulators and professional bodies in scope to iron out any remaining concerns. The noble Baroness, Lady Noakes, said earlier in this debate that there needs to be a pause to the Bill. There needs to be a certain something which does not just carry on as we are now.

A remaining concern—and my last words on this—is on the need for the regulation of accountants and tax advisers. At present, anyone can set themselves up to give this service—and maybe they should. I hope that the Government will consider whether any regulation in some form is required. After all, where pig farmers go, accountants should surely follow. I beg leave to move the amendment.

[Baroness Noakes (Con)]

My Lords, the noble Lord, Lord Palmer of Childs Hill, has tabled these amendments, which I know were suggested by the Institute of Chartered Accountants in England and Wales, so I felt somewhat obligated to speak on the amendment. I know that the ICAEW is pretty keen to be included in the Bill’s scope. As the noble Lord explained, its wish has been granted to some extent, but only for certain aspects where it regulates professions. The noble Lord’s amendments would actually go considerably further by making chartered accountancy a regulated profession. Amendment 64 names the ICAEW as the “chartered accountancy regulator”, thus relegating all the other chartered accountancy bodies to also-rans. If the noble Lord was even thinking about pressing his amendment, I would strongly oppose it. I hope that my noble friend the Minister will resist it.

The inclusion of chartered accountancy is not logical. The ICAEW already enters into mutual recognition agreements, so Clauses 3 and 4 would have no relevance whatever. I cannot believe that the Government would ever make a determination under Clause 2 that there is a problem with meeting a demand for accountants’ services. There is no shortage of accountants.

The ICAEW’s rather grandiose briefing to me said that it wanted to be in the Bill so that there could be

“a debate on the role of the profession in shaping global business practice, reporting and governance”.

In other words, the ICAEW wants to be seen as important. Legislation should not be used to support the egos of anybody, let alone professional bodies.

Right at the end of his remarks, the noble Lord, Lord Palmer of Childs Hill, raised whether the provision of accountancy and tax advisory services should be regulated. That is pure protectionism and not something I would ever support, even for my own profession of accountancy. I know that the noble Lord will not press his amendments, but if he does I hope that my noble friend the Minister will strongly resist them.

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[The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)]

Before saying that there are no requests to speak after the Minister, I will just confirm this time that there are no such requests. No? Excellent—I therefore call the noble Lord, Lord Palmer of Childs Hill.

[Lord Palmer of Childs Hill (LD)]

My Lords, I am glad that the Minister understands the mood of the House, which has been very clear over the course of our proceedings on the Bill. I thank the noble Baronesses, Lady Noakes and Lady Hayter, for contributing on these amendments, which noble Lords will appreciate were put down at a very early stage of the Bill, on the basis of the Institute of Chartered Accountants in England and Wales indicating to me—but not to everybody—that it wished to be named in the Bill. The noble Baroness, Lady Noakes, quite rightly said that it is not the only accountancy body. I raised this with the ICAEW, which said that it did not at this late stage want to be seen as speaking for all the other bodies but to test the water on behalf of the accountancy profession.

Noble Lords made the point that there is no shortage of accountants, but inclusion in the Bill does not necessarily mean shortage—I am not sure whether there is a shortage of pig farmers but nevertheless they are in the Bill; therefore, there is an argument for this. The noble Baroness, Lady Hayter, quite rightly said that some accountants feel that they need to be seen in, and part of, the Bill, but they have come very to it very late. I hope that this can be ironed out.

I thank the Minister for replying positively to many of the points that concerned me and beg leave to withdraw my amendment.

Amendment 61 withdrawn.