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.