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4.52 pm
Mr. Austin Mitchell (Great Grimsby): I beg to move, That the clause be read a Second time.
Mr. Deputy Speaker (Mr. Michael Lord): With this it will be convenient to discuss the following: New clause 4--Report of regulatory infractions and censures--
' .--Limited liability partnerships trading outside the United Kingdom shall report to the registrar all infractions of regulatory rules and all censures by regulators in other jurisdictions.'.
New clause 7--Disclosure of emoluments--
' .--Any limited liability partnership in which the amount of profit before member remuneration and profit share exceeds £200,000 shall publish details of director emoluments comparable in detail to those required of companies by Schedule 6 to the Companies Act 1985.'.
New clause 8--Statement of assets, etc.--
' . Each limited liability partnership shall, when filing annual accounts with the registrar, submit a statement showing--
(a) the value of the net assets of each partner; and
(b) whether any partner is at that time involved in litigation.'.
Amendment No. 19, in clause 6, page 3, line 35, at end insert--
'(2A) A statement of the scope of authority to act of each member shall be lodged with the registrar, displayed in all partnership offices and made available to clients.'.
Amendment No. 24, in clause 9, page 5, line 7, after "days", insert--
'giving full details of the address, financial and property interests and other trading activities of new designated members, and, in the case of those ceasing to be designated members, the reasons why they are leaving'.
Mr. Mitchell: Let me make it clear, as I did on Second Reading, that I do not like the Bill in any way. Essentially, it gives a dodgy, dirty deal to fat-cat accountancy practices, and that should not be the responsibility of the Labour party and a Labour Government. I find the speed with which the deal is being done even more reprehensible, when we are not making any special
concessions to trade unions or friends of the party. Indeed, many of our party's friends in local government, education and the union movement are being treated as the enemy within, while we are giving a dirty deal to accountancy houses.The big accountancy houses have been pushing for this Bill, and have gone to extreme lengths to get it. The process was begun by the Conservative Government, and while it is perfectly right for a Labour Government to pursue that process, it is not right to introduce the Bill at this speed and this early in the legislative programme without countervailing concessions.
As a prelude to the long list of amendments that I shall move, I say to the House that I am resentful of the way in which my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) and I have been treated. We wanted to be on the Standing Committee, but we were not, and it would have been appropriate to have argued all this out in Committee rather than on the Floor of the House, when another, welcome Bill follows and we are under great pressure to shut up. I do not think that things should be done like that. The Hansard Society is to have a committee on the scrutiny of legislation, and I shall write a case study in which the Bill is an example of how not to scrutinise legislation. Instead of giving you my paranoia, Mr. Deputy Speaker, I shall deal with the new clause.
The general principle behind all the new clauses and amendments that I have tabled is consumer protection and ensuring that more information can be made available to the consumers of audit and insolvency services and all the other services that accountancy houses provide, because the Bill will protect accountants from the consequences of their own failure. If they carry out a bad audit--which often comes to light only when a firm fails--because they are so busy selling other services to the firm that they neglect or dilute the audit, they should be accountable in full for the consequences. If an insolvency is protracted, which does not serve the interests of the creditors because the insolvency practitioner owes no duty of care to them, they should also be accountable in full.
We are making a concession to the big accountancy houses without introducing any effective, independent regulation of accountancy and insolvency firms. We promised in our business manifesto that we would have full, independent regulation. We are not fulfilling that commitment; via so-called independent regulation, we are, classically, merely adding yet another layer to the existing chaos of regulation. There are eight regulators for 1,800 practitioners in insolvency. That is absolutely ludicrous, yet we are adding another layer above those eight. We are not providing independent regulation.
Mr. Michael Fabricant (Lichfield): I was listening to the hon. Gentleman's argument with great interest, but I left the Chamber briefly to find out how he voted on Second Reading. Of course he did not vote because there was no Division. I wonder whether he is against the principle of the Bill. I shall ask him a hypothetical question: if there had been a Division, would he have voted against the Bill?
Mr. Mitchell: Probably I would have voted against the Bill on Second Reading, but there was no Division.
How would I have pursued the Bill's aims? As I said in my introductory remarks, during which the hon. Gentleman left to find out information that was obvious
to everyone else, it was right to pursue the Bill's aims because the Conservative Government--our predecessors--had started to develop such legislation. I am a Fabian in such matters. Festina lente is the slogan.Let us make progress with the Bill while introducing corresponding concessions to protect consumer interests and a corresponding framework of legislation to ensure that those accountancy firms that opt to become limited liability partnerships are accountable. That is the essence of my argument. Protection for consumers means providing a duty of care, which I shall attempt to do under later amendments, and reversing the Caparo judgment.
The basic principle behind all the amendments and new clauses that I have tabled, especially in this group, is that there should be maximum publication and recording of the available information because partnerships are inherently secretive organisations. There can be many variations of partnership and individual agreements.
Mr. John Burnett (Torridge and West Devon): What makes a partnership more secretive than a sole trader?
Mr. Mitchell: I am not comparing partnerships with sole traders. We are talking about bigger organisations than sole traders. The accountancy houses were allowed to set up as limited companies under the Companies Act 1989, but only one accountancy house did so. Why? First, there are tax disadvantages in becoming a limited company. Secondly, there are publicity disadvantages; they have to disclose more information. They do not want to disclose. They are secretive, powerful organisations.
I want more disclosure. I want more light; it is as simple as that. The consumer has a right to know. People who might be affected by the business or insolvency of limited liability partnerships have a right to know what their strengths and weaknesses are, so they should be subject to exactly the same disclosures as a public limited company, as was provided for in the Companies Act.
5 pm
Another consideration behind the amendments, particularly this group of amendments, is the need to avoid fraud and tax fiddles. It is possible for all kinds of dodgy organisations to register as limited liability partnerships. The words "dodgy organisations" bring to mind Yorkshire Water, now the Kelda Group. It is attempting to perpetrate what must be a deceit upon its shareholders: a process of so-called mutualisation to pass on assets that do not yield much profit to the shareholders. It will then offer itself as a management company to run the assets for a fee.
That must be a monstrous deceit of the consumer. One of my later amendments seeks to preclude it all together, saying that publicly regulated utilities should not have such a facility. I mention that in passing because the main problem is the use of those organisations to reduce the tax burden and to perpetrate fraud and tax fiddles. The transfer to limited liability status gives rise to that.
I am glad that the Minister, in his many answers to my many questions, communicated that fact. I have also written to the Chancellor of the Exchequer about the matter. Rightly, the tax regulation differences between partnerships and limited companies is now being reviewed. They should be aligned as closely as possible.
Why are we pushing for the legislation to be implemented before that review has been completed? People need to know what the tax benefits or disadvantages may be. In my view, there could be disadvantages--or there should be--in transferring, so I do not want the legislation to be implemented before the tax review has ended.
Mr. Fabricant: The hon. Gentleman is presenting a powerful argument as to why he opposes the principle of the Bill. I understand where he is coming from, but I am a little confused in one respect. He said in answer to my earlier question that, had there been a Division, he probably would have voted against Second Reading. He makes it clear that he is against the principle of the Bill. Why, then, did he not call for a Division on Second Reading, so that he could vote?
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