Draft Statutory Auditors, Third Country Auditors and International Accounting Standards (Amendment) (EU Exit) Regulations 2019

Luke Graham Excerpts

Monday 9th September 2019 General Committees

[Peter Grant (Glenrothes) (SNP)]

I am pleased to make a brief contribution. In the Chamber, several hon. Members are still paying tribute to the Speaker; shortly, there will be an application for an emergency debate to force the Government to come clean about what on earth is going on with Prorogation and much else; later, there will be another attempt to force a general election. In Westminster Hall, our colleagues are debating a petition that was possibly the quickest ever to reach more than 1 million signatures. We—the lucky few—are here talking about the Statutory Auditors, Third Country Auditors and International Accounting Standards (Amendment) (EU Exit) Regulations 2019. These regulations will not be the news headlines tonight, but perhaps they should be.

If we get this wrong—I think the Government are still getting it wrong on their second attempt—the consequences will be catastrophic for businesses, homes, jobs and the suppliers of big companies. That is why it is important for us to get it right this time. Part of the reason that we are discussing these regulations is that we did not get them right last time, because everything had to be done in such a panic-stricken rush that they were not as watertight as legislation needs to be. We should have been out of the European Union five months ago. We would have been out six months ago without a deal, if some hon. Members on the Government Benches had had their way. Even on such fundamental questions as who regulates those who regulate the conduct and misconduct of multinational businesses, however, we have still not got it right.

As the hon. Member for Sefton Central mentioned, auditors tend to be anonymous most of the time, but when we look at the causes of almost all the huge corporate failures, of which Carillion is perhaps the most recent mega-failure, there are always big questions to be asked about why the auditors did not do something and how they could not have noticed. I should mention that although I am a qualified member of the Chartered Institute of Public Finance and Accountancy, which may be why I was given the privilege of coming here this afternoon, I am not qualified to conduct statutory company audits, so I do not have an interest to declare.

As well as the questions that always come up about what the auditors were doing, the inquiry almost always concludes, although it is not inevitable, that the auditors did not break any rules at the time. We have had to completely review—realign, reset and turn inside out—the structure of the institutions that regulate statutory auditors and their profession a number of times. Try as we might, we will always struggle to keep up with the multinational chancers who look for every minor loophole in any regulation to allow their misconduct to go undetected for as long as possible—and often unpunished forever.

It is therefore important to get it right this time. The hon. Member for Sefton Central highlighted some of the concerns. When there are a lot of statutory instruments to get through, there is a danger that among some relatively minor consequential technical stuff that nobody could object to, significant changes to Government policy and to legislation are slipped in, in terms that should be brought as specific items for the whole House to consider, rather than in Committee on the upper corridors of the House of Commons on a wet Monday afternoon. I understand that quite a lot of what is in the regulations needed to be put in there, but the Committee needs to say to the Government that it cannot accept the regulations as they are.

[Luke Graham (Ochil and South Perthshire) (Con)]

I am a member of the Chartered Institute of Management Accountants. I am on the Committee and I am happy to dig into the detail, but I am not getting detail from Opposition Members, although I am hearing opposition from them. The hon. Gentleman says that there are things in the regulations to be worried about; perhaps he could outline them for us, as is the purpose of the Committee, point by point and subsection by subsection. I am happy to sit here and go through it. We have other business in the House of Commons, but as he rightly points out, this is an enormously important issue for the whole United Kingdom—it applies to the whole United Kingdom—for my constituents and for the businesses they are in. I ask him to please outline the details, so we can go through them together in a cross-party way.

[Peter Grant]

The hon. Gentleman agrees with some of the points I am making. As he helpfully points out, if Government Members were all that interested in going through the regulations in fine detail, perhaps they should have asked professionals in the various accounting and auditing institutions before the Committee. I have no doubt that Government Members will rise to speak in support of the regulations. When they do so, perhaps they will tell the Committee what could have gone disastrously wrong if they had taken the time to get the policy right on their third attempt, and asked the statutory accounting and audit bodies what the regulations would do.

--- Later in debate ---

[Kelly Tolhurst]

My right hon. and learned Friend is quite right. The hon. Member for Glenrothes has not mentioned the particular point that we have made more expressive, as the ICAEW asked us to do, in these amended regulations. That is a clear example of where we have listened to the professionals in the industry and chosen to respond to their requests as clearly as we can.

[Luke Graham]

I will perhaps try to articulate some of the points that the hon. Member for Glenrothes was trying to make. The regulations are designed to ensure that international accounting standards are still operational in the UK on EU exit day, incorporating the aspects of EU law that we are meant to incorporate. Essentially, the regulations fill in the gaps.

I ask my hon. Friend two things. First, if she does not have it with her today, will she make available the gap analysis that the Department undertook—between the IFRS, the IAS and the UK generally accepted accounting practice—to make sure that there are no gaps, and that the regulations are sufficient to satisfy all the professional bodies around the UK?

Secondly, has there been consultation with the International Accounting Standards Board, which is the governing body for IFRS? My hon. Friend is quite right to say that bodies in the UK have been consulted; it has been made explicit that the ICAEW has been consulted. It would be good to know whether the Institute of Chartered Accountants of Scotland has also been consulted, because, as a United Kingdom, we have a united internal market.

I would be quite happy to receive the answers to those questions as a follow-up, because I know that there is a lot of detail in the regulations. Opposition Members have completely failed to raise specific points that constitute a substantive opposition to this statutory instrument.

[Kelly Tolhurst]

I will happily provide my hon. Friend with any advice that we have available. I point out to hon. Members that these regulations constitute an amendment to, and an extension of, the statutory instrument that was laid before and passed by this House at the beginning of the year. They particularly focus, as I outlined in my opening speech, on aspects to do with subsidiaries. They also correct an omission of three words, which it was important to do to ensure that the regulations expressed the true intention behind the original statutory instrument.

I emphasise that as part of the Department’s role in preparing for EU exit and making sure that we are in the best possible place to leave the European Union, with or without a deal, we have engaged continuously with stakeholders. Quite rightly, as Ministers, we have challenged our officials within the Department and our stakeholders, when we have had the opportunity to do so.