| Previous Section | Index | Home Page |
Mr. Sutcliffe: My hon. Friend raises another important point on regulation. In an earlier debate, I tried to tease out from the Opposition which employment regulations they were against. That is a continual challenge that we put to the Opposition, who talk glibly about red tape but never tell us which regulations they want to get rid off.
Mr. Gardiner: That is absolutely correct. I look at all these dreadful regulations and red tape brought in by the Government and then I look at their effect. Their effect has been that we now have a national minimum wage for the first time, at £4.85.
Madam Deputy Speaker: Order. I think that we are wandering a little outside the scope of the debate.
Mr. Gardiner: I will observe your gentle caution, Madam Deputy Speaker, and return to the theme of our debate, because you are absolutely right.
The White Paper's proposals were far from perfect and it made it clear that they were a preliminary draft, designed to aid discussion rather than to give a
conclusive view on the best legislative approach. The main changes from the White Paper proposals to the Bill are these. First, the OFR will always have to include information on the company's impact on the environment and on any communities in which the company operates. That is in clause 1(3)(d). Secondly, there is a power for the Secretary of State to make rules by negative resolution, although the purpose of such rules is not clear. That is in clause 1(9) and (10). Thirdly, the wording on employment, environment, social and community issues has been changed, I presume in an attempt to make it broader, although the effect is again uncertain. That is in clause 3(2)(c) to (e). Finally, the Bill would apply equally to private and public companies, whereas the White Paper proposed higher thresholds for private companies. I believe that the Government are in any case likely to propose different coverage in the draft regulations now being prepared.
Mr. Sutcliffe: My hon. Friend's speech is so excellent that I shall take the opportunity now, rather than mentioning this later, to announce that the draft regulations will be ready after Easter. The delay with the OFR has been raised with us before, but the draft regulations will be launched after Easter.
Mr. Gardiner: I am delighted to have that assurance from the Minister, and I know that my hon. Friend the Member for Rugby and Kenilworth will be as delighted as I am to hear that that is the case. We feel that the delay has been unacceptable, and it is good to know that there will be progress in very short order. We welcome the fact that the Government are going to publish their draft regulations in the near future.
The OFR will improve corporate governance by increasing transparency and accountability. It will provide better and more relevant information on businesses for shareholders and will enable investors to make better decisions, thus improving confidence in financial markets.
Andy King: I am extremely grateful to my hon. Friend for his excellent contribution to this excellent debate. I am also grateful to my hon. Friend the Minister for announcing that the Government will issue the draft regulations after Easter. My hon. Friend the Member for Brent, North (Mr. Gardiner) has teased out a few differences between what was in the White Paper and what is in the Bill. The Bill is not set in stone, and the whole point of producing it has been to get the debate going. I believe that we have gone a long way in that respect. We want to get the Bill into Committee so that we can put it into shape and adjust it as necessary. That is why I would be delighted dutifully to amend certain aspects of it in Committee.
Mr. Gardiner: I am sure that the Minister will have heard that offer from my hon. Friend. I pay tribute to him, because he has introduced his Bill in a most distinguished manner. He has argued his case with passion but also with the great reasonableness that the
whole House recognises characterises him as a Member. He has put forward a strong case, and whether or not the Bill ultimately goes into Committee—I wish it a fair wind in that respect—I am sure that he will take great comfort from the fact that he has brought it to public attention. The Minister might not be able to accept it publicly, but my hon. Friend the Member for Rugby and Kenilworth has pressed the Government's heels on this matter, and he will be delighted when that bears fruit after such a short time in the publication of the draft regulations.One of the main benefits of the OFR is that directors will need to identify and report on all factors that are key to the past, present and particularly future performance of their business. It is not intended to replicate or replace the social and environmental reports that many companies already publish. It is not the place for general reporting on environmental and social factors for the public interest. However, it will include disclosures on such factors where they are material to an understanding of the business, and it will be for the directors to decide what is material.
The Government have set up a working group, which will shortly publish guidance, and I am sure that the draft regulations will be significantly different from the White Paper and the Bill, partly in order to implement aspects of the EU modernisation directive of 2003, and partly to reflect developments in policy in the light of responses to the White Paper and further work, including technical improvement of the drafting. The intention is to publish a consultation document, including the draft regulations, as soon as possible.
What does the Bill propose on directors' duties? It reproduces part of the Government's draft statutory statement of directors' duties, but with one significant amendment.
Mr. Sutcliffe: Would my hon. Friend care to refer to consultation with organisations such as Business in the Community? We talk about regulation and red tape, but much good work is done in consultation with Business in the Community.
Mr. Gardiner: Of course, consultation with business is absolutely vital. We need business to be able to feed into legislation that concerns it. When its interests are to be materially affected, it is right to consult it at every stage, and I welcome the discussions that have already taken place.
The amendment to directors' duties is to impose a responsibility on them to take all reasonable steps to minimise negative social, environmental and economic impacts, while at the same time requiring them to act in a way that is most likely to promote the success of the company for the benefit of its members.
I believe that the Bill will create best value in companies. It tells them to look beyond the financial bottom line to the community bottom line. It says that they should not only maximise profit for shareholders, vital though that is, but consider how they are creating value in the community that they serve. A dry Bill alone cannot do that—it has to be at the forefront of directors' minds. I look forward to the day when Government, working with industry, can achieve that.
2.9 pm
Gregory Barker (Bexhill and Battle) (Con): I congratulate the hon. Member for Rugby and Kenilworth (Andy King) on securing this welcome debate. I am only sorry that it is being held at the expense of my own Genetically Modified Organisms Bill, but I guess that, as this is my Dispatch Box debut, from adversity springs opportunity.
As we have heard, the Bill would provide for the production and publication of annual reports on the social, environmental and economic impacts and performance of companies and Government Departments. As someone who is interested in the whole green agenda, I am very pleased to be able to respond to this debate.
I should like to begin by making it clear that I am well aware of the need to be concerned about the harmful impact that some corporate activities can have on the environment and on local communities. All of us who want to promote sustainability would welcome greater transparency and better practice. However, at the same time I believe that the main priority of business and its most important contribution to society is the creation of wealth and jobs and the provision of goods and services. Winning orders and contracts might sound mundane, but it is central to the success of our economy.
It is clear that a balance must be found. I have been struck by the wide consensus that exists in respect of this issue, which is indeed about finding the right balance. The Bill's aims are not in dispute, but there is a genuine debate about whether they should be pursued by encouraging and nurturing best practice, or through regulation. Corporate social responsibility is important, but we must also recognise the primary necessity of encouraging wealth creation, for it is only through wealth creation that we can fund all the improvements in public services that our constituents rightly demand.
Social responsibility can indeed aid productivity and enhance a company's reputation among consumers. Britain has a pretty good record in this regard; indeed, the best performing companies on the stock market are often those at the forefront of best practice. Yet initiatives such as this can also inhibit commercial success. Policy makers have two options: the first is to impose legal requirements that businesses must meet—the Government are very good at that—and the second is to promote a voluntary approach, outlining the responsibilities that businesses should accept in the interests of all shareholders and all stakeholders. The choice is the classic one between carrot and stick.
It is my instinct and that of my party to be very vigilant in respect of any measure that might increase regulatory burden. I know that the hon. Member for Brent, North (Mr. Gardiner), who spoke extensively, is very relaxed about increasing regulation, but we Conservatives do not share his laid-back attitude to the ever-rising burden of red tape on business.
| Next Section
| Index | Home Page |