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However, I hope that the House will appreciate why we cannot accept this amendment. We are dealing with an emergency position. As I sought to emphasise this morning, the emergency position is different even from that of Rolls-Royce. Rolls-Royce involved the expenditure of a considerable sum of public money to buy out the company. We should not pretend that the situation at Rolls-Royce was trivial. Although it involved a one-clause Bill, it was a mightily significant asset. But we are dealing here with confidence in the financial institutions of this country and with confidence, potentially, in one institution. The issue is all about—
Lord Forsyth of Drumlean: My Lords, I apologise for interrupting the Minister, but how can he describe a situation where it has taken the Government five months to make up their mind as an emergency? If you waited five months for an ambulance it could not be described as an emergency. What is the crisis? What is the emergency? The shares have been suspended. The Minister has still not answered the question that was asked repeatedly at Second Reading. What is the emergency? What is the urgency? Will he explain why he is using terms such as “emergency”? I cannot see any immediate emergency.
Lord Davies of Oldham: My Lords, we are not talking just about the immediate position; we are talking about the way in which the Act—if this Bill becomes an Act—will operate in any future circumstances.
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6.15 pm
Of course we recognise that the Delegated Powers Committee had a substantial argument, and we recognise the Northern Ireland precedent. No one will underestimate the importance of the emergencies and the provisions that were necessary in response to the Northern Ireland situation. But I ask the House—I must have great confidence in being able to appeal to such knowledgeable Conservative Members with regard to the City and City finance—to recognise that the Bill is about emergency in a particular industry and with regard to a certain kind of way in which the emergency would manifest itself; namely, potentially, in the loss of depositors’ confidence.
If noble Lords opposite are saying, “The procedure we envisage is one in which Parliament will in due course validate this position, and that individuals only have to recognise that this emergency will be resolved, that the Government are taking action, and that both Houses may well eventually endorse the required order”, all I would say in response is that that is scarcely conducive to action by those who have anxieties. It is scarcely conducive to their acting with confidence. I recognise the pressure that the Government are under. It is very rare indeed for the Government to argue against a case put by the Delegated Powers Committee, and I cannot pretend that I undertake the task with the greatest enthusiasm. I have great respect for the committee, as do we all. I know how much it means to this House and to Members of the other place. However, that is the circumstance for a particular industry that requires particular consideration. I therefore hope that the noble Lord will recognise why I am asking him to withdraw his amendment.
Lord Hunt of Wirral: I rise to respond fortified in the knowledge that, as I understand from an authoritative source, the title of the Bill as originally drafted was the Banking (Emergency Provisions) Bill. However, officials decided that it could not be called the Banking (Emergency Provisions) Bill because there was no emergency. If that is the case, I think that the Minister has already conceded.
I always enjoy being in opposition to the Minister because, as I said before, you can tell when he does not believe the case he has been asked to put. His voice rises, the volume increases and the party politics leap out at all of us as he seeks to justify what he has been asked to say. It was a marvellous speech for the noble Lord, who of course was previously Chief Whip; it is the sort of speech that every Chief Whip would love, because it was arguing with passion. But the Minister was quixotically chivalrous, if I may say so, in tilting at the windmills posed to him by my noble friend Lord Trimble, who set out a spectre which he quite rightly sought to tilt at. We are dealing
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The noble Lord, Lord Goodhart, who undertakes this vitally important task with the committee, has set out that there have been other occasions, but I do not think that I have ever seen—I am talking only from my memory and not his—such a strong report so clearly rejected by the Government as this has been. That sets an unfortunate precedent. I must say in defence of the Minister that he did say that he found it a very uncomfortable position to be in, to be arguing that we should ignore some of those provisions.
I am very grateful to my noble friend Lord Forsyth, who once again reminded us of the context in all this. The noble Lord, Lord Desai, said, “But we passed the terrorism provisions in 36 hours”. I have only two things to say. First, this is not about guns, bullets and terrorism. Secondly, I do not think that the legislation to which he refers can be held up as a shining example of the best legislation in the circumstances. It would have been far better to have had more detailed scrutiny. That is the great thing about this House. We take things really seriously and go through legislation line by line. We are not being given that opportunity on this occasion.
I say to the noble Lord, Lord Newby, that I recognise his argument. However, I think that my noble friend Lord Trimble countered it. Of course we currently have limited powers on statutory instruments, but it is not necessarily the amendment or the refusal to accept a statutory instrument that is important—it is the opportunity of debate so that the issues can be brought out and considered carefully. I thank my noble friend Lord Onslow for the point he raised.
In summary, this is a sad day for parliamentary democracy. I do not think that we in this place have been treated with the respect that we deserve. This is legislation being rushed through. It is not an emergency. We should have had more time to consider it carefully. The Minister’s rejection of these amendments is probably a classic example of what I am trying to put across. If he had more time, these are just the sort of amendments that he would want to accept. But he said “No”, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Bill read a third time, and passed, and returned to the Commons with amendments.
Companies (Late Filing Penalties) and Limited Liability Partnerships (Filing Periods and Late Filing Penalties) Regulations 2008
6.22 pm
The Parliamentary Under-Secretary of State, Department for Business, Enterprise and Regulatory Reform (Baroness Vadera) rose to move, That the draft regulations laid before the House on 17 December 2007 be approved.
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The noble Baroness said: My Lords, this debate and those that will follow relate to our implementation of the Companies Act 2006. I begin by paying tribute to the Opposition for the constructive way in which they approached discussions in the House on that Bill and for their stamina and endurance in seeing it through to Royal Assent. We are especially grateful to the noble Lord, Lord Hodgson, the noble Baroness, Lady Noakes, and the noble Lords, Lord Sharman and Lord Razzall—some of whom are not sitting in their places—for their contributions, which benefited the legislation.
These regulations relate to the regime of civil penalties for companies and limited liability partnerships that deliver their accounts after the due date. The purpose of the regulations is to provide transparency for customers, suppliers and other stakeholders by ensuring that the UK has a complete public register of company accounts. Until the register was introduced in 1992, only 60 per cent of companies filed on time. The figure is now 84 per cent. The penalties in the regime have not changed since 1992 and have, therefore, reduced in real terms. In the past three years, we have started to see a small decline in the number of companies filing on time. So far, there has been a reduction of only half a percentage point, but in a register of more than 2 million companies that represents an extra 10,000 companies filing late each year. The purpose of the regulations is to reverse that trend. The regulations are based on the principles of the Hampton and Macrory reports on risk-based and proportionate enforcement. They focus on those who do not comply, rather than on those who do.
First, the regulations increase the basic £100 penalty to £150, reflecting inflation since 1992. Secondly, the penalties will increase in real terms for any company that files more than one month late, from £100 to £375. For a company filing just over three months late, a £250 penalty becomes £750. Thirdly, they target repeat offenders. A company that files late twice consecutively will pay double the penalty.
The draft regulations provide for the first of the changes to come into force on 1 February 2009. In the interests of simplicity, they will apply to all accounts filed after that date, whether under the Companies Act 2006 or under the transitional regime for accounts prepared under the Companies Act 1985. The repeat offender provision will apply only where both sets of late-filed accounts were filed under the 2006 Act. In practice, most companies will not be at risk of a double penalty before February 2011. That is the earliest time when a private company with a normal 12-month financial year will be able to file late twice.
In addition, the regulations align the penalty regime for limited liability partnerships with the regime for limited companies, as is the case now. Finally, they reduce the statutory filing deadline for limited liability partnerships from 10 months after the year end to nine. Again, that will apply the same rules to limited liability partnerships as will apply to private companies under the 2006 Act. The regulations follow a consultation process that concluded that, on balance, the proposal as it stands is right. I commend the regulations to the House and I beg to move.
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Moved, That the draft regulations laid before the House on 17 December 2007 be approved. 6th Report from the Joint Committee on Statutory Instruments.—(Baroness Vadera.)
Lord Sharman: My Lords, I will not delay your Lordships long on a day when matters of significant moment have been debated. By and large, these measures are very welcome. There is a clear need to update the fines and penalties for late filing and it is absolutely right that the arrangements should apply to limited liability partnerships in the same way as they applied to limited liability companies. I was reminded that in 1999 I made my maiden speech in this House on the Second Reading of the Limited Liability Partnerships Bill. I am pleased to see that the Companies Act 2006—the noble Baroness referred to our deliberations on it, which were lengthy, I might add—has ensured that this sorely needed form of business enterprise is being widely adopted. The regulations will make them fully on a par with limited liability companies. We support the regulations.
Baroness Vadera: My Lords, I am grateful to the noble Lord. I know that the penalty regime has been controversial for some, so I am grateful for his support. We will be assisting all companies to file on time by developing electronic filing of accounts.
On Question, Motion agreed to.
Statutory Auditors (Delegation of Functions etc.) Order 2008
6.27 pm
The Parliamentary Under-Secretary of State, Department for Business, Enterprise and Regulatory Reform (Baroness Vadera) rose to move, That the draft order laid before the House on 17 December 2007 be approved.
The noble Baroness said: My Lords, the order will renew the delegation of powers to regulate auditors from the Secretary of State to the Professional Oversight Board of the Financial Reporting Council. It replaces the 2005 order under which powers are currently delegated to the Professional Oversight Board. That order was made under the Companies Act 1989. The regulation of audit was reformed between 2002 and 2005 in response to corporate scandals such as Enron. Both the 2005 delegation order and the 2006 EU audit directive require independent oversight of the professional accountancy bodies' regulation of auditors. Some adjustments to the existing UK audit regime are needed to comply with the audit directive and a new delegation order is needed to reflect those changes. It is also required to reflect changes in the corporate structure at the Financial Reporting Council.
To be appointed as a statutory auditor of a UK company, an individual auditor or a firm must be a member of a recognised supervisory body and be subject to the rules of that body. The recognised supervisory bodies are the accountancy organisations recognised by the Professional Oversight Board. An
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Under the delegation order, the Professional Oversight Board also has the power to make regulations on the register of auditors, on audit qualifications and on information to be made public by auditors, known as transparency. As a result of the audit directive, the Professional Oversight Board will also be responsible for co-operation with the European economic area and third-country audit regulators, as well as for the registration and regulation of third-country auditors. The delegation order will also have the effect of making the Professional Oversight Board subject to the Freedom of Information Act. The board is currently consulting on its draft publication scheme. There has been a full consultation on this order and no concerns have been raised. I commend the order to the House and I beg to move.
Moved, That the draft order laid before the House on 17 December 2007 be approved. 6th Report from the Joint Committee on Statutory Instruments.—(Baroness Vadera.)
Lord Sharman: My Lords, again I will not delay your Lordships long. The order, which brings into effect a regime of regulation for the conduct of statutory audits and their auditors, has been debated widely and has been the subject of much consultation. It is very welcome that this replaces the old regime of self-regulation, which had many faults. The initial indications are that this regime will work well—it has certainly worked better than what we had before. I am grateful that the Minister mentioned the Freedom of Information Act, because it was as a result of an amendment to the Companies Bill in 2006, tabled by the noble Baroness, Lady Noakes, and me, that this regime is now subject to the Freedom of Information Act. I look forward to seeing how that will apply. We support the order.
Baroness Vadera: My Lords, again I am grateful to the noble Lord, Lord Sharman.
On Question, Motion agreed to.
Companies (Trading Disclosures) Regulations 2008
6.31 pm
The Parliamentary Under-Secretary of State, Department for Business, Enterprise and Regulatory Reform (Baroness Vadera) rose to move, That the draft regulations laid before the House on 17 December 2007 be approved.
The noble Baroness said: My Lords, the Companies (Trading Disclosures) Regulations 2008 ensure that anyone doing business with a company, or who has a complaint against a company, can easily discover its legal identity. The registered name of the company is sufficient for anyone to access the information that a company is required to make public by filing at Companies House. The regulations require that the registered name be included in all forms of business communication
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Every name on the registrar’s index of company names is unique. For a UK company, its name is all that is needed for anyone to find information about it on the public record. However, other jurisdictions could also have companies with the same name. The regulations therefore require the place of registration and the registration number, together with the address of the company’s registered office, to appear in business letters, order forms and websites.
These regulations replace requirements that are currently under both the Companies Act 1985 and the Business Names Act 1985, and the corresponding Northern Ireland legislation. Companies that carry on business under a name other than their registered name are also subject to the Business Names Act 1985. At present, these companies have to comply with both sets of requirements. The companies that have the double set of requirements include many of our largest companies, as well as small companies, particularly retailers. By replacing these two sets of requirements with a single set of regulations, it has been possible to reduce the total burden on those companies that are subject to both. I commend these regulations to the House and I beg to move.
Moved, That the draft regulations laid before the House on 17 December 2007 be approved. 6th Report from the Joint Committee on Statutory Instruments.—(Baroness Vadera.)
On Question, Motion agreed to.
Baroness Royall of Blaisdon: My Lords, I beg to move that the House do adjourn during pleasure to await the return of the Banking (Special Provisions) Bill from the Commons. The time that the sitting will resume will be advertised on the Annunciators.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 6.34 to 10.15 pm.]
Banking (Special Provisions) Bill
Lord Davies of Oldham: My Lords, I beg to move that the Commons reasons be now considered.
Moved accordingly, and, on Question, Motion agreed to.
commons ReasonsLord Davies of Oldham: My Lords, I beg to move Motion A, that this House do not insist on its Amendment No. 1, to which the Commons have disagreed for their Reason 1A. I will of course speak to the other two amendments in the group.
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The first amendment revolves around audit. We have already confirmed our intention that Northern Rock should be subject to the requirements of the Companies Acts 1985 and 2006. This will mean that the company’s annual report and accounts must be independently audited by a professional firm and filed with the Registrar of Companies for public access.
It may be helpful if I set out once again, and I hope for the last time with regard to this measure, how we propose to apply these requirements to Northern Rock’s 2007 accounts. Once the shares have been transferred, the board will confirm the appointment of the company’s independent auditors, who will then complete the audit of the accounts. The board will also review and approve them. The accounts will then be published at the latest by the end of March. I will of course ensure that a copy is placed in the Library of the House.
I contend that these are far more appropriate arrangements than any alternative proposed, for the reasons that I gave earlier today and which have been agreed subsequently by the other place. In particular, it will be recognised that the Bank of England is not well qualified to take on the responsibility for auditing large and complex financial institutions. It is, to state the obvious, a central bank, not an auditing firm. Its expertise lies elsewhere. Independent professional auditing firms with experience of the City are far better placed to provide the necessary expertise and scrutiny. These arguments were also persuasive in the Commons and have led to this Motion.
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