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“to the extent necessary for an understanding of the development, performance or position of the company’s business”.
Again, that seems perfectly sensible from the point of view of investors and not over-burdensome from the point of view of quoted companies. Indeed, according to the Association of British Insurers all FTSE 100 companies were reporting at some level on social, ethical and environmental issues as long ago as 2003. British companies are leading the way.
What is happening with voluntary reporting is good news. The business review will improve things by making companies that currently report nothing report something. Even greater levels of corporate disclosure will be commonplace in the next few years, through the voluntary actions of companies that increasingly recognise—as the Minister said earlier—the business benefits of openness and transparency.
Companies I talk to broadly welcome the business review, as it gives them flexibility to refer to their social and environmental actions in their own way and in a way that is relevant to their business. However, there is just one small spanner in the works of the business review: the Government’s decision to table last Monday a new amendment on the subject. It is not as though they have not already tinkered enough with corporate reporting provisions. First, they consulted on an operating and financial review and then regulated for it. Then, last November, the Chancellor scrapped it without telling the Department of Trade and Industry. Nine weeks later, he U-turned again and agreed to consult on it again. Finally, in March, the Government formally scrapped it.
Let us be clear: indecision on that issue helps no one and achieves nothing. Many British companies already lead the world in corporate social responsibility. They want to act decently and to be seen to be doing the right thing; yet, without consultation and without so much as a courtesy phone call, the Government slipped in amendment No. 821 at the last possible moment. The effect of the amendment will be significant and wide-ranging. Again, the proposed wording is broad, vague and unclear. Of course, the Government’s programme motion for Report ensured that Members did not even get a chance to debate it.
Mr. Gummer:
I wonder whether my hon. Friend would note that it is not only indecision on the part of the Government that has caused the problem. The Government got almost every major company in Britain all teed up for the OFR. Then, once they had spent the money and got themselves prepared, it was thrown over by the whim of the Chancellor. Now, at
the last moment, we have something else. Even those of us who are enthusiastic about greater reporting and transparency and an emphasis on corporate social responsibility have to say that to include a provision such as this, which is quite unknown in its effect, makes the whole thing worse. That is particularly true given that it has been included only to get the Chancellor off a hook—a hook that he put himself on and ought to stay on.
Alan Duncan: My right hon. Friend is absolutely right. The Government’s conduct made the grand old Duke of York look like a hero. It is unacceptable for the Government to make such a change at this stage and without consultation. As he suggested, the provision is clearly designed by Ministers to keep a few of their own Back Benchers quiet. That is not the right way to make good law. Ministers should know that without successful and thriving businesses in this country, there would be no jobs, no tax receipts and therefore no money for the critical public services that we all want to see. They should know that creating vague, vexatious and burdensome regulation for political reasons is bad for the country and the reputation of politicians.
I said on Second Reading that we broadly support the Bill and that it is pleasing that we have to disagree with only a handful of its many clauses. Despite the areas that I have just laid out, where I believe that the Government have got things wrong, I still believe what I said earlier. In fact, I think that we now agree on more areas of the Bill, because the Government, to be fair, have listened to the reasoned arguments of Conservative Members on a number of key issues. I welcome the fact—and express appropriate gratitude—that Ministers have recognised that in a Bill this large, it was not possible to get everything right the first time. By the process of listening to suggestions and arguments from both sides of the House, the Bill has been much improved. I am grateful to the Government for accepting some of our arguments and not being obdurate on everything just because we are the Opposition. We are, after all, here to make good law for the one country that we all represent.
I am not claiming that Conservatives have a monopoly on wisdom in the House, but on this matter, just as on synthetic phonics, tax in relation to soldiers in combat, integration in faith schools and many other issues, the Government have come round to our way of thinking. They accepted our arguments on the value of company secretaries. They listened to our calls for consolidation of the Bill with the Companies Act 1985. The Conservatives even changed the name of the Bill. The Solicitor-General was good enough to vote with us on that and I am grateful for that support.
The Government saw the error of their ways on what was the original part 31, which created a monstrous new kind of super statutory instrument. They have come to agree in part with my hon. Friend the Member for Huntingdon on the issue of the home addresses of directors and, in part, with our position on access to the register of members. Following arguments from my colleagues in another place, nominee shareholders will have a greater opportunity to participate actively in the
companies that they own. Our arguments to reduce the numbers of forms have been accepted, as well as our arguments on a host of technical issues, for which practitioners have been grateful. Small and charitable companies will benefit from our work on audit rules for such companies.
I express our profound gratitude to Ministers for the positive way in which they have dealt with those improvements to the Bill. I add my special gratitude—echoing the Minister—to Department of Trade and Industry officials, the Clerks of the House and all the Officers of the House for the mammoth undertaking that has probably dominated their lives for the past six months or so. I hope that they have managed to get some sleep in the course of their hard work.
I will conclude with a few remarks about the progress of the Bill. I understand—no one has questioned this—that this is the biggest Bill in parliamentary history. It had more than 1,260 clauses when it left Committee and more clauses have been added since. We have considered many hundreds of amendments. The Government have tabled more than 600 in the past fortnight. Some of them are what the Minister would have described, if she had just found the word, as consequential amendments—amendments that follow naturally, out of logic, from amendments that have been made earlier. Inasmuch as many of the amendments are consequential, we accept that they do not necessarily need debate—if they are genuinely consequential. However, this has not been a satisfactory way for the House to make law. Hundreds of new clauses—ones that do matter and are not merely consequential—have never been debated at all; some because they were uncontentious, many because of the iniquity of the programme motion, and yet more because they were tabled only at the end of the Committee stage and time was not given on Report to correct that misdemeanour.
Yesterday, my hon. Friend the Member for Reigate raised a point of order because for reasons that I have outlined we wished to vote against Government amendment No. 821. Madam Deputy Speaker ruled, quite rightly and understandably, that if we were to vote against those two lines of text, we would be obliged to vote against several pages of perfectly sensible amendments as well. It is a pity that our processes do not allow us to press distinctive amendments to a Division.
We have kept a tally of what has not been debated. In Committee, 419 Government new clauses were not debated. On Report, 33 out of 52 subject areas that were selected by Mr. Speaker were not debated, along with 177 Government amendments, seven Government new clauses and one Government new schedule. I have been given a useful crib sheet saying that I can add to that 123 Government amendments, two new clauses and two new schedules—and, no doubt, a partridge in a pear tree.
I hope that the Government will learn from the experience of this Bill. By bringing forward more clearly directed legislation that is better consulted on in advance, and without tabling surprise amendments at the last possible minute, the Government can help to ensure that the House delivers better legislation, and they will thus trouble our courts less with questions of interpretation.
By and large, the Bill is welcome and good. However, I am certain that we will have to revisit elements of it in the not-too-distant future. Sooner than we would wish, it will be tested in the courts, and subsequent legislation will be required to tidy it up.
4.52 pm
David Howarth: Company law is part of the hidden wiring of the economy. Immense problems are caused if it goes wrong, but no one notices if it goes right. The limited liability company was one of the great inventions of the 19th century. In many ways, it was more important than the technological inventions of that century. However, like all inventions and advances, it brings its own problems. The corporate form helps to channel investment into specific areas, but it also brings its inherent problems, which are classically problems for creditors. The corporate form helps new enterprises to get off the ground by separating an enterprise’s assets from the personal assets of the entrepreneur, but it also provides a vehicle for the concentration of economic power and a type of organisation in which responsibility is diffuse. The fundamental principle of company law for the past 150 years—I hope that it is maintained in the Bill—has been that people should be allowed to use the tool of the corporate form as they wish, unless there is a public interest that overrides that power.
We welcome the underlying themes of the Bill, especially the deregulatory and “Think small first” themes. However, we remain convinced of the need for regulation in specific areas not only to restrain harmful behaviour, but—this was the theme of our contribution to the debate on the OFR and the business review—to help the creation of new markets and forms of market. However, we fully accept that the Bill is an attempt to strike the same balance that has faced Parliament for 150 years in new economic and social circumstances.
I shall not go through all the areas of the Bill that the hon. Member for Rutland and Melton (Alan Duncan) mentioned. The Bill is far too long and complex for me even to attempt a summary of pros and cons at this stage, but I shall mention one aspect that he covered: directors’ duties. Our view is that the reform contained in clause 173 is a useful development. The Minister called it historic. I am not sure that it is historic, but it is an important advance. It has the effect of protecting directors who wish to follow corporate social and environmental responsibility to a greater degree than fund managers might like. It encourages a responsible attitude towards the environment and social matters, and taking a long-term view.
There are worries that the clause mandates that approach in a way that would be restrictive for directors and difficult for them to deal with. We do not believe that that is the case. We believe that the reform is well balanced, but there are problems with the directors’ duties area of the Bill. The hon. Gentleman mentioned that there was insufficient time to debate certain parts of the Bill. I draw the Government’s attention to one aspect of the directors’ duties, a chapter which I fear may produce difficulties in the future. I hope that they pay some attention to it.
I refer to clause 171, which we were due to debate yesterday, but it was in one of the groups that fell. The
problem in the clause is that the Government have not fully made up their mind what the relationship is between the duties as they stand in the Bill and the law as it was before the Bill. It should have been possible to be clearer about which aspects of the Bill are reforms and are new, and therefore take precedence, and which areas are consolidations and codifications of existing law, in which case the previous law is highly relevant.
There might be a political problem for the Government in doing that. The hon. Gentleman mentioned the difficulty of having to say slightly different things to different audiences. The cost of not being entirely clear about what is reform and what is codification will be litigation. I hope that the Government will bear that in mind in future consideration of these issues.
The other matter to which I draw the attention of the House has been mentioned several times—the business review. As the right hon. Member for Suffolk, Coastal (Mr. Gummer) said, the history of this part of company law is somewhat chequered and includes an extraordinary double reversal in the past couple of years, with the Chancellor of the Exchequer looking for a symbolic gesture to show his commitment to deregulation and big business, then a subtle reversal, with the position in the Bill being halfway back to where we started, but not quite, in our view, far enough.
The problems in the Bill are, first, that the coverage of the review is not broad enough. The question is, not broad enough for what? Our view all along has been that one of the purposes of the review is to help ethical investors and ethical consumers, rather than just to help members of the company—shareholders for the time being—hold directors to account for what the company is doing at present. For us, the fact that only listed companies are covered is a problem. We think that ethical investors, and especially ethical consumers, have an interest in more companies than those that are listed.
Perhaps a bigger problem—it is the biggest problem with the state of the business review as it leaves the House—is to do with auditing. That is, I think, the single issue that motivated the Chancellor to remove the original operating and financial review. Ministers frequently refer to the cost of auditing the business review—previously the OFR—but the auditing requirement is central to the utility of the review, for creating and helping to develop markets for ethical consumption and investment. Only reliable information will help to create those new markets. We accept that that process will bring a cost to business, but we believe that the offsetting benefit of developing ethical investment and consumption far outweighs that cost.
The Bill will leave the House in a somewhat rough state—especially for a Bill that will have gone through its Third Reading in its second Chamber. Consideration has sometimes been very rushed—at times it has been close to shambolic. However, we all must accept responsibility for that, because I fear that the origin of the problems to do with the consideration of the Bill lies in the decision to use it as a consolidation measure, and not just as a reform measure. There is evidence in all parts of the
House—there are fingerprints and traces everywhere—of all parties having been involved in that decision.
If it had been recognised all along that the intention was to go for consolidation, we might have started our consideration of the Bill at a different time of year and have thought about having a carry-over provision for it. We did not do that. Consolidation and codification is, indeed, a good thing, as the Minister said: having a Bill that covers as much of company law as possible in one place is a good thing. However, if we had thought about this matter better in advance, we might either have started earlier, or have done the reform first and the consolidation second at greater leisure. Nevertheless, speaking as someone who attended almost every Committee sitting and almost every debate on Report, I certainly do not want to start again at this stage, so I have no intention of opposing the Bill on Third Reading.
I thank all those involved in discussions on the Bill, especially my hon. Friend the Member for Solihull (Lorely Burt), who supported me throughout in Committee and on Report, and my hon. Friend the Member for Cheadle (Mark Hunter), who also attended the Committee. I also thank the Liberal Democrat team in the House of Lords, who brought to discussions an extraordinary depth of experience of business. I pay tribute to the hon. Member for Huntingdon (Mr. Djanogly)—unfortunately, he is not present—who displayed an extraordinary degree of persistence and accuracy in his attempt to get to the technical heart of a great number of questions. I also thank the other members of the official Opposition Front-Bench team for their courtesy and good humour throughout the Bill’s extraordinary progress.
However, I thank most of all the ministerial team, and especially the Minister for Industry and the Regions, who has had to pick up, and learn to master, an extraordinarily complex and difficult brief in a very short period. Those of us who have dealt for a long time with company law—in my case, a quarter of my life, and I spent 10 years teaching the subject at university—have been very impressed by what a quick and accurate learner of this area of law she has shown herself to be. The rest of the ministerial team are more legally experienced, but they have shown themselves to be able to adapt quickly and well to a new area of law.
I should also like to thank the Bill team and the civil service for the very helpful way in which they dealt with Opposition Members. It is perhaps unusual at a national level—it is rather less unusual in local politics—for there to be a good relationship between the civil service and Opposition politicians. That has been genuinely helpful in our effort to make genuine progress in getting legislation through this House.
At one stage in the past couple of days, the hon. Member for Huntingdon said to me that he wanted to be involved in this Bill because, for a lawyer, it is a once-in-a-generation opportunity. That is true. Company law reform of this sort comes through Parliament very rarely, but I have to say that I expect we now both hope that it is a once-in-a-lifetime experience.
5.5 pm
Mrs. Jacqui Lait (Beckenham) (Con): It is with some trepidation that I contribute to the debate, after all the hard work that so many people have clearly done over so many months on such technical legislation. However, there is one issue about which I remain concerned: information about shareholders and directors. I tried to discuss it on Tuesday evening, but—as with many of the amendments that were tabled, and as my hon. Friend the Member for Rutland and Melton (Alan Duncan) explained—that subject was not reached.
My principal concern, which stems from my involvement in this area for more than 25 years, is people and companies that undertake scientific research that involves the use of animals. I know that the Government have considered, and will be consulting on, ways of making it more difficult for information on such people and companies to be accessible to those of malign intent. I hope that the consultation will proceed apace and that innocent people whose lives are made a misery, who suffer mental breakdowns, whose marriages break down, whose children are terrorised, whose property is vandalised and whose companies are brought to the brink of bankruptcy through the malign efforts of animal rights terrorists can be afforded some protection from their names and addresses being known.
I have constituents who have been targeted in that way, and many of my friends have been broken by the attentions of animal rights terrorists. I hope that the Government will proceed with great speed and firmness to ensure that while information on a company and its members and shareholders can be made available, it is not available to those who wish to do them harm. As I said, I hope that the consultation will proceed apace and that the Government will quickly come up with serious measures to deal with this issue.
This is a new development, and it is particularly important to me because I understand that the name of the company that is allegedly building the primate laboratory in Oxford is well known to animal rights terrorists. That company—if it is that company—is also likely to be involved in building Olympic provision. If the animal rights terrorists, having obtained such information, behave in the same way toward the Olympics and everybody involved in it—that includes all the athletes, trainers and suppliers worldwide—we can only tremble at the prospect of what could happen to our Olympic games. That is the seriousness of the situation, and it is the reason why I have risen, with trepidation, to intervene at this very late stage to implore Ministers to ensure that there is no way that those people can ever gain access to any of that information.
5.10 pm
Mr. Mike Weir (Angus) (SNP): I want to make a few brief points at the end of the debate. The length of the Bill has been commented on, and it is the biggest ever to go through the House. When I was a student—more years ago than I care to remember—I used to carry many legal volumes. I think that modern law students and lawyers must be thankful for the invention of the CD-ROM.
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