Draft Financial Reporting Council (Miscellaneous Provisions) Order 2021

Lucy Powell Excerpts

Wednesday 10th March 2021 General Committees

[Lucy Powell (Manchester Central) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship for the first time, Sir Charles, and to be back in Parliament with my SI buddy, the Minister. We seem to do a double act on these things.

As hon. Members know, the Financial Reporting Council is an independent regulator responsible for regulating auditors, accountants, and actuaries and setting the UK’s corporate governance and stewardship code. However, as Sir John Kingman’s review in December 2018 made clear, it was an institution that “leaked and creaked” and required fundamental reform. As the Minister said, its days are now numbered, and it is to be replaced by a new Audit, Reporting and Governance Authority, but it appears that the Government are dithering on this, given that Ministers have promised us year after year that audit reform will be introduced. We now hear that it will happen in early 2021, although that looks questionable too.  Does the Minister know when we can expect audit reform for sure and the replacement of the FRC with the new authority? Will it mean more than just changing the letterhead? 

The order imposes specific duties on the FRC related to freedom of information, the regulators’ code and the public sector equality duty. The role of the FRC has developed over time, and in 2017 the then Department for Business, Energy and Industrial Strategy concluded that the FRC’s work should comply with all the relevant public body guidelines. In 2018, the Government commissioned an independent review, which recommended that the regulator should be subject to the FOI Act.

A couple of years ago, the FRC voluntarily adopted compliance with the codes, so this statutory instrument will not fundamentally change the FRC’s approach. Although it is welcome that compliance is to be put on a statutory footing, I wonder why it is happening now, when we are about to disband the organisation and replace it with a new one. Why could not we have passed the SI, which is fairly straightforward, two or three years ago?

We support the changes, but we wonder why they are being made now and when we can expect the proposals for the new Audit, Reporting and Governance Authority to come forward.