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Mr. Deputy Speaker: Order. I urge the hon. Member for Great Grimsby (Mr. Mitchell) not to be seduced into a Second Reading debate.
Mr. Mitchell: Thank you for warning me, Mr. Deputy Speaker. I was not going to follow the hon. Member for Lichfield (Mr. Fabricant) down the path of his ignorance of parliamentary procedure and the role of amendments on Report--the stage of the Bill's proceedings in which I am participating.
Mr. Fabricant: On a point of order, Mr. Deputy Speaker. I wonder whether you could explain something to me and for the benefit of the House: am I not right that someone can call for a Division if he is a Member of the House?
Mr. Deputy Speaker: That has nothing to do with the matter that is before the House.
Mr. Mitchell: Thank you, Mr. Deputy Speaker. The hon. Member for Lichfield should not raise silly, querulous points during my speech. He would have done better to use his position on the Committee to raise some serious points there, instead of fighting to extend the vested interests and privileges of the big accountancy houses. That was the essence of what he was doing on the Standing Committee, which had only one Division, and in which Opposition Members promoted those vested interests. It is a little nitpicking, to say the least, of him to raise those points with me, having failed to fulfil his own responsibilities on the Standing Committee. However, I do not intend to follow that argument.
I was saying that the measure should not be implemented until the review of the tax status of partnerships and companies is completed; only then should it come into effect. I wish to raise many points and to warn off the hon. Member for Lichfield, who has interjected three times in an attempt to prolong my speech and who does not seem able to count, either. I point out that this argument is, in essence, about the consumer and about the soul of the Labour party and the Labour Government.
Conservative Members had their opportunity in Standing Committee and earlier to represent the views of the vested interests, and they did that very articulately. Indeed, Liberal Members, who are now engaged in hasty consultation at the last minute, also did that. It was a shame on Second Reading to hear the Liberal spokesman
speaking for professional vested interests when the only effective opposition in the House of Lords came from Liberal Democrats and particularly from Lord Phillips of Sudbury who appears on the Jimmy Young show.
Mr. Deputy Speaker: Order. The hon. Gentleman is again distracting the House from the new clause that he is supposed to be moving. Will he please address his remarks to new clause 2 and to the other new clauses and amendments that we are legitimately discussing?
Mr. Mitchell: I am grateful to you, Mr. Deputy Speaker, for bringing me back to the path of virtue.
Mr. Burnett: Will the hon. Gentleman give way?
Mr. Mitchell: I will not give way on this point, because I think I can anticipate the hon. Gentleman's objection. It will lead me down a path along which I do not want to go.
On new clause 2, Ministers said that limited liability partnerships would be treated as companies. In fact--and this is the purpose of the new clause--they have been treated more leniently. When a company prepares its accounts, it must indicate its contingent liabilities under accounting standard SS18, which accounts for contingencies. It is right that companies should do that, because anyone to whom a company owes money or supplies services will want to know its liabilities. To decide on the financial standing of a company, people need to know its contingent liabilities. That protects creditors and suppliers and it provides information to the public.
It is important to bring LLPs into line with companies, because partnerships have few assets. All the assets of a company are in its name, and creditors can try to get hold of them if it becomes insolvent. That is not so with a partnership, which tends to have few assets and the case has to be pursued against the negligent partner. I hope to come to the issue of how people will decide who is the negligent partner and how he will be designated, because such information should be available. However, creditors find that much less is up for grabs in a partnership than it is in a company. The two entities should be aligned with each other. Initially, we were told that they would be, but that has not occurred. New clause 2 would achieve that aim.
New clause 4 is about compliance with foreign rules. That is important. In the United States, the Securities and Exchange Commission--which is the most effective independent regulator in the world and the type of body that we should have in this country--is making a concerted attempt to force differentiation in the big accountancy houses between the audit arm and the service arm. If the audit arm sells services to its audit clients, that dilutes the effectiveness of the audit by making the firm more compliant to the wishes of the directors selling the services. That creates an undesirable vested interest if we are to have effective and independent audits. That shows the importance of complying with foreign rules. Such an attempt is being made in the United States, and it will come to fruition. Already, the SEC, which is not satisfied with professional self-regulation as it exists in the United States, has produced a scathing report on PricewaterhouseCoopers.
The interesting finding from the SEC inquiry was the amount of negligence that exists. In two years, there were 8,000 violations of basic principles of accountancy and audit, particularly partners and employees of PricewaterhouseCoopers holding shares in companies that were being audited by PricewaterhouseCoopers. Eight thousand violations! The report stated that there were
- serious structural and cultural problems
Mr. Deputy Speaker: Order. May I gently remind the hon. Gentleman that he has tabled new clause 3, which deals with the United States, the Securities and Exchange Commission and so on? I am happy for him to pursue his argument now, as long as he does not repeat it when he comes to new clause 3.
Mr. Mitchell: The matter is better dealt with now, Mr. Deputy Speaker. I shall mention it only briefly later.
That inquiry has extended to other firms, and there is a concerted attempt to prise the audit arms apart. We should be inquiring in the same way. In my view, the big accountancy houses are far too friendly with Government. I saw in The Observer on Sunday that since the election, PricewaterhouseCoopers, Ernst and Young, and Pannell Kerr Foster had all donated staff to the Treasury to draw up tax legislation. We do not have panels of criminals coming in to advise the Home Office on the criminal law or police methods, but in the case that I mentioned, the interested parties are being brought in to advise Government.
Mr. Stuart Bell (Middlesbrough): On a point of order, Mr. Deputy Speaker. Although my hon. Friend is perfectly right to put his case, is he entitled to say that the largest and most reputable accountancy firms in our country are criminals?
Mr. Mitchell: If my hon. Friend had listened--
Mr. Deputy Speaker: Order. The hon. Gentleman's remarks are not a matter for the Chair. They are a matter for the hon. Gentleman.
Mr. Mitchell: If my hon. Friend had listened, he would know that I said that we did not get criminals in to advise the Home Office, and that it was ill advised to get interested parties in to advise the Treasury on tax law. The analogy is there. I am aware of my hon. Friend's interest in those accountancy houses. The point is valid, because the question will always be asked whether we are soft-pedalling on the need to regulate those bodies because of the services provided to Government.
Mr. Stephen O'Brien (Eddisbury): I have been listening with care to what the hon. Gentleman has been saying. It seems to be a rant against a particular firm, which does not necessarily do the House any credit. Would the hon. Gentleman be prepared to repeat what he has been saying outside the House, without the cloak of parliamentary privilege?
Mr. Mitchell: What a ridiculous question. If the hon. Gentleman had said that he had listened with interest,
I would have been overjoyed. If he is listening with a police notebook in his hand, the point is fatuous in the extreme. I have quoted the SEC's report on one particular company and the facts about the firms advising the Treasury. That is all that I have done. That is repeatable inside or outside the House. It is a matter of public record. I am sorry that we have to come down to such silly, nit-picking points in objection to the argument that large blocks of power need to be controlled and regulated, which is the responsibility of government.5.15 pm
Mr. Burnett: I understand what the hon. Gentleman is saying. Does he believe that the Government should impose on the Institute of Chartered Accountants in England and Wales more stringent rules with which it can govern the affairs of its members?
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