Saturday 19 May 2018 / 4:50 PM Economy / John McDonnell

There’ll be no more Carillion scandals on Labour’s watch – John McDonnell MP

Labour launches review to “crackdown” on poor practise in auditing and accountancy industry

McDonnell: “There’ll be no more Carillion scandals on Labour’s watch”

The Shadow Chancellor will announce in a speech, at Labour’s “State of the Economy” Conference in central London today, the commissioning of an independent review of the entire corporate auditing and accounting regime in the UK.

The review will be led by Professor Prem Sikka, who is the Professor of Accounting and Finance at the University of Sheffield.

The review promises a “crackdown” on current practises in the industry as highlighted this week by the joint parliamentary committee inquiry into the Carillion scandal.

The review will consider for example whether regulatory bodies should be merged, abolished or restructured; and it will also consider what penalties or fines should be imposed in future.

John McDonnell MP, Labour’s Shadow Chancellor, will say:

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“This week the parliamentary report on the collapse of Carillion has once again highlighted the catastrophic failure and inadequacy of our regulatory system.

The accounting and the pensions regulators have once more failed to do their jobs.

Yet again, accountants and auditors seem to operate with impunity whilst lining their pockets.

The lack of openness, transparency and accountability means nobody ever seems to be punished for their transgressions.

We have seen it all before. We still await proper investigation of the accounting and auditing shortcomings which led to the banking crash ten years ago.

Despite attempts to suppress it, the Financial Conduct Authority was eventually forced to release their full report on how RBS treated small businesses.

Meanwhile the National Crime Agency estimates that more than £90bn is laundered through the UK each year.

Our regulatory system is simply not fit for purpose.

The financial sector alone has at least 29 overlapping regulators, including the Faculty Office of the Archbishop of Canterbury. Some professions are self-regulated.

This regulatory maze creates enormous opportunities for waste, duplication, obfuscation and buck-passing.

It does not protect consumers or promote confidence.

We need a complete overhaul of the entire regulatory framework for finance and business, to promote openness, transparency, accountability and – yes, where necessary – to impose appropriate punishments.

There will be no more Carillion scandals on Labour’s watch.

That is why it is essential that we have a crackdown on poor practises in the accounting and auditing industry.

Under the next Labour government the big six firms will not be allowed to continue to act like a cartel that prevents new market entrants or drive down standards. Otherwise it will further infect the rest of our economy and business community.

So I have asked Professor Prem Sikka (Professor of Accounting and Finance at the University of Sheffield) to examine our regulatory system and bring forward proposals for reform to reinvigorate it.

My aim is to bring forward reform proposals to the Labour Party Conference, the party’s policy making body, in September.”