Thank you, Ms Fovargue—I always find the pronunciation difficult. That is my fault, not that of the spelling. I do not have a lot to say, other than to compliment my hon. Friend the Member for Salford and Eccles (Rebecca Long Bailey) on her speech. To be frank, I am here to listen to the Minister’s report on progress to date.
I believe that in 2018-19, my hon. Friend was involved in work with Lord Prem Sikka on the development of a report on regulatory structures and standards overall. Having identified that my hon. Friend had obtained this debate, I looked back to her work with Prem Sikka on that regulatory regime. To be frank, I am looking forward to the Minister’s response, because it seems not an awful lot has moved on.
That report came out of Carillion and a number of other cases. The hon. Member for Strangford (Jim Shannon) made the point that a number of companies went into insolvency and left behind large-scale debts, large numbers of workers laid off and contracts not fulfilled. In Liverpool, the collapse of Carillion meant that a hospital would not be built in the required timescale, causing considerable distress at the time.
Prem Sikka produced a comprehensive report. So that people are aware of Prem Sikka’s background, he is a professor of accountancy. He became an adviser to Select Committees and Government about 30 years ago and went on to advise on the appalling Bank of Credit and Commerce International banking scandal. He demonstrated his expertise and as a result was regularly called to advise Select Committees when different issues arose. He then set up a group of lawyers and accountants to examine and explore corporate abuse. They published a book about 10 years ago, if I remember rightly, and I brought together his group to take advice on where we went from here. That is how the connection was made. When Carillion happened and we desperately needed someone to advise us—he was already advising Select Committees—he came on to advise us.
What was startling about Prem Sikka’s report was his description of a maze of regulatory bodies—the chaos of the regulatory bodies. They all had a particular role to play, but none of them played the role effectively, and those who had committed what I think were economic and financial crimes during that period walked away without any loss to themselves. The report identified extraordinary and bizarre issues. Among the financial sector regulators, he identified 41—I think he gave up after No. 41—different agencies involved in financial regulation, which bizarrely included the Faculty Office of the Archbishop of Canterbury, which had a notarial professional role.
All of those bodies failed to address the real issue, which was inadequate supervision and accountability in the operation of the individual companies, particularly with regard to insolvency, where the audit companies seemed to be asleep at the wheel, particularly with regard to Carillion. The audit companies consistently produced audits that could be described as not just inaccurate, but almost deceptive in the way that they portrayed the state of the company, which allowed it to keep operating and employing contractors and so on while knowing that there was an issue. Prem Sikka went on to look at the role of the audit companies in advising companies and selling them products on tax avoidance as well. That is why he argued that there needed to be a reform of audit, possibly introducing a form of public audit into the sector.
On the insolvency role, Prem Sikka has consistently argued that there are no supervisory committees for the companies, as there are in the German economic system, where representatives supervise the decision making of companies. There are representatives in the workforce, as well as the recipients of particular services, or the consumers. Because we had no supervisory committees, companies became reckless in their endeavours. We had almost a moral hazard developing because a large number of the companies were often able to walk away from the liabilities that they had incurred.
One issue that Prem Sikka raised in his report was the offloading of pensions. We saw that with Carillion and elsewhere, when pensions were offloaded on to the public and the taxpayer had to step in to protect the rights of the workers who held pensions with those companies. Yet again, no one seemed to be held liable for the way in which they had either deliberately or recklessly put the companies into a situation where they were offloading their responsibilities.
I am particularly critical of the Financial Conduct Authority. I have said this publicly in debates before. I was critical of the FCA during the period in which Andrew Bailey was its chief executive. Before he was appointed Governor of the Bank of England, I urged the Chancellor of the Exchequer to delay his appointment because we were awaiting a number of reports of scandals with regard to investment bodies that should have been properly investigated by the FCA. What was generally identified, by not just me but other commentators, was that the FCA under his directorship was consistently asleep at the wheel on a number of individual instances.
Going back to Prem’s report, what he was identifying was a huge panoply of regulators, all of which seemed to be failing. Secondly, a large number of them were subject to corporate capture by the very sectors that they were meant to be regulating. As the hon. Member for Strangford said, the small people lost out badly as a result of that. They always lost out, and the people responsible often gained. As yet, I have not seen radical proposals from the Government to address that.
Prem Sikka did two reports. One was on the regulatory architecture of the financial sector overall, and the other was on audit. He put forward the establishment of an overall business commission, which brought together the various regulatory bodies under one structure. That included supervisory committees that would enable all stakeholders to be involved in the development of regulatory rules and the implementation of regulation much more effectively. That would at least be more open and transparent than the existing system.
I hope that the Minister will tell us, but I cannot see what has changed between now and back in 2018-19 when Carillion and other scandals were happening. I fear that those vulnerabilities still exist because we have not seen the radical reform that is needed. We need to integrate the whole process of regulation and to make it more independent, open and transparent. I hope the Minister will tell us that is the direction of Government.
We have had reports on this particular issue for a long time; I think the Cooke report was in the 1960s. It brought forward proposals but never really established independent regulation and handed it back to the industry itself. There has been a long history of corporate capture when it comes to financial regulation over successive Governments; I am not particularly blaming this one. The basic questions asked by my hon. Friend the Member for Salford and Eccles could provide us with more clarity on the Government’s sense of direction on some of these issues.
I feel there needs to be a sense of urgency about action. I understand why the Government want to consult thoroughly, but consultation is beginning to result in delay as far as I can see. Vulnerabilities still exist; we will be back here again, maybe in six or 12 months’ time, with yet another scandal, asking why action was not taken and why redress was not available to people who suffered as a result.