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7.15 pm

Jackie Ballard: I expected the Minister to be courteous and helpful, as he usually is, and I shall be equally courteous and helpful: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 2

Activities liable to control under the Act

Jackie Ballard: I beg to move amendment No. 11, in page 27, line 8, leave out--

'purposes of any accountancy practice'

and insert--

'sole purposes of accountancy activities'.

Mr. Deputy Speaker (Mr. Michael Lord): With this it will be convenient to discuss amendment No. 12, in page 28, line 9, leave out--

'purposes of any accountancy practice'

and insert--

'sole purposes of accountancy activities.'.

Jackie Ballard: I suspect that we may not get through these amendments as speedily as we got through amendment No. 10. They raise genuine concerns, and have been the subject of debate in Committee and subsequently. The issue was originally raised in the other place.

The Minister and others will be well acquainted with the arguments that have already been rehearsed. They arise because many accountancy firms have branched out into security consultancy work. In Committee, my hon. Friend the Member for Southwark, North and Bermondsey (Mr. Hughes) drew attention to a Financial Times article that described five big accountancy firms as the top players in the intelligence industry. It seems sensible, if such firms engage in the same activities as others in the security industry, to make them subject to the same licensing regimes. The accountancy firms argue that that is not necessary because they are licensed by the Institute of Chartered Accountants and other bodies, but those bodies were not established to regulate security consulting investigations, or the security activities of accountancy firms.

I accept that employees of accountancy firms who are not members of such bodies, but who engage in licensable conduct, will require licences. Our amendment seeks to limit the exemption to what is purely accountancy work, and tries to ensure that accountants who branch out into the security industry fall within the licensing regime if they deliberately engage in activities that are otherwise covered by the Bill.

My hon. Friend the Member for Southwark, North and Bermondsey withdrew his amendment in Committee, because the Minister said that he recognised the seriousness of the issue and would examine it again.

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My hon. Friend asked me to pass on his gratitude to the Minister for arranging the meeting that they had this morning.

I stress that the issue for professional security firms is not one of cost compliance; they are happy to be regulated, but they want a level playing field. I look forward to hearing the Minister's further thoughts.

Mr. Hawkins: The hon. Member for Taunton (Jackie Ballard) rightly said that we had discussed these issues in some details in Committee. Moreover, they were raised in amendments proposed by my noble Friend Lord Cope in another place, accepted by the Minister's noble Friends, and introducing some protection for leading accountancy firms.

In Committee, we sought to introduce amendments giving similar protection to those working for law firms. Even at the end of the Committee stage, there was continuing concern among accountants. I have had a submission from the Institute of Chartered Accountants in England and Wales suggesting that even the amendments that were tabled by my noble Friend Lord Cope--which now form part of the Bill and which the hon. Lady is seeking to water down--do not go far enough. Therefore, as the Institute of Chartered Accountants is saying that it requires more protection for those who are not chartered members of the institute--they may be students or part-time employees--and that the Bill should go further, and as the hon. Member for Taunton is saying that the Bill goes too far, perhaps we have reached a happy medium, thanks to my noble Friend Lord Cope.

Nevertheless, the hon. Member for Taunton has raised an important issue which will no doubt continue to be considered carefully by the members of the new authority. I look forward to hearing the Minister's confirmation that he will again be prepared to instruct his officials to send the members of the authority information about this debate and our debates in Committee, so that these important matters can be kept under review. I see the Minister helpfully nodding.

As with any new authority, we shall not know for certain how the provisions operate until the authority is up and running. Further revision of secondary legislation or the introduction of fresh primary legislation may be necessary to adapt the regime in the light of experience. The way in which law firms or chartered accountants are covered in future clearly will be a matter of continuing scrutiny by the authority and by the new, incoming Conservative Government who will replace the current Labour Government.

As I said, these are important issues. It is important that the hon. Member for Taunton has raised them again, enabling us to debate them briefly on Report. I shall listen with interest to the Minister's reply.

Mr. Charles Clarke: This is an important issue, and it is difficult to find the right way of addressing it. As the hon. Members for Taunton (Jackie Ballard) and for Surrey Heath (Mr. Hawkins) both said, the position of accountants and their employees has been discussed at length in our earlier debates and in the other place. The Bill is targeted on selected providers of private security services; the intention has not been to target it on accountants in general. We also recognise that big accountancy firms have diversified into spheres in which they undertake designated services as defined in the Bill, particularly private investigations and security consultancy.

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We did respond to strong lobbying in the other place to the effect that members of recognised accountancy bodies should not be caught by the definitions on account of their professional qualifications. It was not only a matter of the self-interest of private firms, as the Serious Fraud Office and the Financial Services Authority also had concerns which were reflected in the debate in the other place.

Amendments were duly tabled and approved in the other place, but they were focused on exempting only members of defined accountancy bodies. We recognised that diversified accountancy firms have many employees who are not members of the relevant accountancy bodies but are undertaking designated activities as defined in the Bill. We fully accepted that to exempt them too would create a seriously uneven playing field. We have also accepted that doing so would mean that private investigators and security consultants describing themselves as such would be licensable, whereas employees of accountancy firms who undertake precisely the same type of consultancy would not be licensable. We have therefore resisted calls, particularly in the other place, to extend exemptions to those employees also.

Jackie Ballard: Will the Minister give way?

Mr. Clarke: I shall in a moment.

Notwithstanding the arguments made in Committee by the hon. Member for Southwark, North and Bermondsey (Mr. Hughes), the complexities of diversified accountancy businesses--although the issues are not dissimilar in relation to IT services--would result in major definitional difficulties in attempting to describe, within the framework of definitions used in the Bill, a clear distinction between accountants acting solely for the purposes of accountancy activities and those undertaking designated activities as defined.

I have some comments to make on my discussion this morning with the hon. Member for Southwark, North and Bermondsey, but shall first give way to the hon. Lady.

Jackie Ballard: The Minister's argument seems to hinge on the fact that accountants will gain an exemption because of their professional qualifications and membership of professional bodies. However, can he give any other example in which someone's membership of a body exempts him or her from regulation when performing a task that is not covered by his or her specific qualification?

Mr. Clarke: As I said, we made concessions on accountancy after hearing representations in the other place. However, as I said in relation to our earlier debate, I think that there are similarities in IT services, in relation to which not dissimilar issues arise.

This morning, following the representations of the hon. Member for Southwark, North and Bermondsey, I met him and some of the industry bodies concerned to discuss some of the concerns that have been expressed. I was glad to have the opportunity to meet--and my officials had already met--some of the individuals concerned.

I understand the concern of some in the private investigation sector that even the narrow exemption for members of recognised accountancy bodies could have

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the effect of creating, as the hon. Member for Taunton said, an uneven playing field. An important point to emphasise--it was not clear to me until this morning--is that it did not seem that the cost burden of licensing within the private investigation sector was the prime cause of an uneven playing field. As that point came across strongly this morning, I think that I should place on record my understanding of what was being said.

The concerns as expressed to me were that potential customers for investigation services might be tempted to regard accountants exempted from regulation in the Bill more favourably than regulated private investigators. It was essentially a branding-image competition point rather than a cost competition point. Although I could see that the argument had some weight, I was not wholly convinced by it. It seemed to me that potential customers for investigation services are more likely to look in the round at the depth, breadth, quality and cost of potential contractors than at the position under the Bill of senior members of the accountancy and investigations professions.

I have, however, listened to the concerns that were expressed at this morning's meeting and by the hon. Member for Southwark, North and Bermondsey. Although I cannot undertake to accept amendment No. 11, or to promise change in the Bill at this late stage, I can give an absolute undertaking to the hon. Gentleman and to the hon. Member for Taunton that the new authority will keep a very close eye on use of the various exemptions granted in the Bill.

We would positively expect the authority to make recommendations for changes if it became clear that the exemptions are operating in a manner that either distorts the level playing field in the provision of services which we are committed to establishing or allows individuals to practise in the sphere who might otherwise be reprehensible in the way in which they were operating a private security business.

I do not put my hand on my heart and say that the compromise that is before us today is defensible against criticism from any of the parties from whom criticism might come. However, in the spirit of trying to legislate in an evolving manner in this area, as we are attempting to do in the Bill, I believe that the Bill provides a perfectly acceptable way of addressing the issue. With the assurance that I have sought to give the hon. Lady--that the authority will watch the issue extremely carefully in relation to accountants and the other professions involved--I hope that she will be prepared to accept that the amendment was intended to make an advance in the sphere, and to consider withdrawing it.

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