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Stevens, Lewis

Stewart, Andy (Sherwood)

Stradling Thomas, Sir John

Summerson, Hugo

Taylor, John M (Solihull)

Thompson, D. (Calder Valley)

Thompson, Patrick (Norwich N)

Thorne, Neil

Thurnham, Peter

Townsend, Cyril D. (B'heath)

Tracey, Richard

Twinn, Dr Ian

Waddington, Rt Hon David

Wakeham, Rt Hon John

Wallace, James

Walters, Sir Dennis

Ward, John

Wardle, Charles (Bexhill)

Watts, John

Wheeler, John

Widdecombe, Ann

Wiggin, Jerry

Winterton, Mrs Ann

Winterton, Nicholas

Wolfson, Mark

Wood, Timothy

Tellers for the Ayes :

Mr. Greg Knight and

Mr. Michael Fallon.

NOES

Ashton, Joe

Barnes, Harry (Derbyshire NE)

Barron, Kevin

Campbell, Ron (Blyth Valley)

Campbell-Savours, D. N.

Clwyd, Mrs Ann

Corbyn, Jeremy

Cousins, Jim

Cox, Tom

Cryer, Bob

Cummings, John

Cunliffe, Lawrence

Davies, Rt Hon Denzil (Llanelli)

Ewing, Mrs Margaret (Moray)

Fatchett, Derek

Flynn, Paul

Galloway, George

Gilbert, Rt Hon Dr John

Golding, Mrs Llin

Hardy, Peter

Haynes, Frank

Hinchliffe, David

Hughes, John (Coventry NE)

Jones, Barry (Alyn & Deeside)

Lofthouse, Geoffrey

McCartney, Ian

Mahon, Mrs Alice

Meale, Alan

Michael, Alun

Michie, Bill (Sheffield Heeley)

Parry, Robert

Patchett, Terry

Pike, Peter L.

Powell, Ray (Ogmore)

Primarolo, Dawn

Skinner, Dennis

Spearing, Nigel

Steinberg, Gerry

Vaz, Keith

Wall, Pat

Welsh, Andrew (Angus E)

Williams, Rt Hon Alan

Tellers for the Noes :

Mr. Michael Welsh and

Mr. George J. Buckley.

Question accordingly agreed to.

Schedule 1

Form and Content of Company Accounts

Mr. Redwood : I beg to move amendment No. 10, in page 200, line 28, leave out from beginning to end of line 31.

Mr. Speaker : With this it will be convenient to discuss Government amendments Nos. 31 and 258.

Mr. Redwood : These amendments concern the Dearing report on the making of accounting standards. The House might like to know that, earlier today, in answer to a question from my hon. Friend the Member for Pembroke (Mr. Bennett) I announced that Sir Ronald Dearing has accepted an invitation to become chairman designate of the Financial Reporting Council- - [Interruption.] There are some hon. Members who would like to hear this announcement.

Sir Ronald's initial task will be to negotiate with interested parties so that the new arrangements for making and enforcing accounting standards are in place by next summer. Once the body is established, it is the intention of my right hon. Friend the Secretary of State for Trade and Industry, acting jointly with the Governor of the Bank of England, to appoint Sir Ronald formally-- [Interruption.]

Mr. Speaker : Would those hon. Members who are below the Gangway and do not want to participate in this debate please leave the Chamber quietly?

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Mr. Redwood : I shall make that last sentence available to the House again. Once the body is established, it is the intention of my right hon. Friend the Secretary of State for Trade and Industry, acting jointly with the Governor of the Bank of England, to appoint Sir Ronald Dearing formally as chairman of the council.

Clear unambiguous accounting standards, effectively enforced, are essential to the good workings of a market economy. The report of the committee chaired by Sir Ronald has been widely welcomed as identifying the way to enhance the authority and general acceptability of accounting standards. I can think of nobody better qualified to carry through the important task of setting up the new arrangements. I am delighted that Sir Ronald has agreed to undertake that role. I have always been most impressed by the work that he has done in his various jobs.

Mr. Skinner : We should get this matter straight because we have had a lot of trouble about Alan Walters. We should be sure about where this fella stands before going any further. Will he support the Department of Trade and Industry? Will he support the Chancellor of the Exchequer or will he support the Prime Minister? Is he "one of us?" Have all those questions been answered in the positive, because if not, the Tory Government will have a lot of trouble with him. I am not worried about that and, frankly, I should like the Government to appoint somebody who would cause them a bit of trouble. However, I should like an explanation. Where does this man stand politically?

Mr. Redwood : Sir Ronald will defend the public interest as he did as a civil servant and subsequently as chairman of the Post Office. He has a fine record of public service and this job is not connected in any way with the party political dogfight in the way in which the hon. Gentleman has tried to suggest.

Amendment No. 10 changes the way in which the Bill gives effect to one of the central recommendations of the Dearing report--that directors should state in their accounts whether those accounts have been drawn up in accordance with applicable accounting standards. It implements the Committee's wish that any company departing from accounting standards should give reason why. It does not, however, also require the financial effects to be shown, as that is tantamount to saying that companies can never deviate from accounting standards narrowly defined.

Anyone concerned about the accounting practices is free to question the company at the AGM before which the accounts are laid. The Financial Reporting Council will have a duty to stop departures from accounting standards becoming a scandal. It will also be the responsibility of auditors to draw attention to any departure which causes the accounts not to give a true and fair view.

There are other reasons why the Bill in its present form is not acceptable on this point. We have argued consistently in relation to Dearing that it is important that at the end of the day standards are not given legal effect. The strength of accounting standards is that they offer a more flexible system of rules than statute can provide. We believe that a requirement to show financial effects would result in standards increasingly written and interpreted as a piece of statute law--with greater emphasis on meeting the letter rather than the spirit. Whilst we all want standards to have authority--indeed, the whole thrust of

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the Dearing proposals has that end in view-- I do not believe that the way to do this is to encourage greater legalism. This could all too easily shift the emphasis of accounting away from the objective of producing true and fair accounts.

The related amendment, No. 31, simply ensures that the equivalent provision for banking and insurance companies is in step.

Mr. Campbell-Savours : The Minister said that anyone has the right to question the accounting arrangements and standards of a company at its annual general meeting. Will the Minister turn his attention to the case of Mr. George and Mrs. Liz Davies, the husband and wife team who were ousted from the board of Next, the high street retailer, last December? At the annual general meeting of that company, the chairman refused to tell his shareholders about the golden handshake that was being paid to those two people, despite being pressed to do so by the shareholders. Indeed, a resolution calling for the sacking of the directors was tabled. What is the Minister's view of that case? What is the position on such a case as a result of the appointment of this gentleman who will obviously be setting new standards? Would the board of that company have been required to declare how much those two people were being paid as part of their golden handshake? What would happen now?

Mr. Redwood : We shall have to let Sir Ronald set up his Financial Reporting Council and review and establish the accounting standards that he wants. Then I would be able to answer the question whether any new provision with which he might come forward would have a bearing on that case--were history to repeat itself, which is extremely unlikely.

Amendment No. 258 would delete clause 198 from the Bill. Clause 198 was inserted in Committee--

Mr. Campbell-Savours : Will the Minister give way?

Mr. Redwood : No, I have answered the question.

Mr. Campbell-Savours rose --

Mr. Speaker : Order. The Minister is not giving way.

Mr. Campbell-Savours rose --

Mr. Speaker : Order. The Minister is not giving way.

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