Public Limited Companies (Financial Regulation)

Part of the debate – in Westminster Hall at 3:37 pm on 13th March 2003.

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Photo of David Ruffley David Ruffley Conservative, Bury St Edmunds 3:37 pm, 13th March 2003

There is a certain amount of truth in what the hon. Gentleman says. We agree that the quality of non-executive directors in corporate Britain should be improved. I see from research done by Deloitte and Touche that if Higgs's proposal that half of each board should be non-executives were applied to the top 350 FTSE companies, 500 new non-executives would be needed quickly. Like the hon. Member for Bexleyheath and Crayford, I should have thought that there were enough clever, financially literate and tough-minded men and women in the country to fill those posts. However, it is not clear that those people exist or want to come forward. I agree that chumminess and cosiness in boardrooms does not help public confidence.

The Committee's inquiry into split capital trusts demonstrated that there was a great deal not only of cross-share holding but of cross-directorship holding. We wait with interest to learn whether any impropriety arose as a result of the arrangements for people to sit on several boards of split capital investment trust companies, but the hon. Gentleman makes a fair point.

I wonder, however, whether Higgs goes far enough in addressing the problem of the quality of non-executive directors. I do not believe that the main proposition that Higgs puts forward—to get the dean of the London business school to trawl round the voluntary, non-corporate part of Britain—is the answer to our problems. Nor do I believe that that is likely to secure the greater confidence in the way in which companies are run that the British public needs.

I again thank you, Mr. Deputy Speaker, for your indulgence in allowing me the time to contribute to the debate, notwithstanding my delay in getting to the Chamber. I will make one point to the Minister, to which I hope that she will respond.

The piece of work undertaken by Higgs is substantial. If even half of it is implemented—I am sure that more than that will be implemented—it will have a great effect on corporate Britain. I bet my bottom dollar that the combined code, which will be modified as a result of what the Financial Reporting Council says, will be a document that says, "Comply or else" rather than "Comply or explain."

Why is that important, and why does it worry me? Every working day since 1997, 15 new pieces of red tape have been imposed on British business. As a result, management people need to be lighter on their feet, more nimble and more flexible. There should be less need for them to look over their shoulders—they should be able to make decisions unburdened by regulatory clutter. Will the Minister tell us whether, in the consultation period that remains between now and 14 April, she will give any thought to cutting back on the more prescriptive parts of Higgs? Does she believe that the remaining consultation period is long enough? The Financial Services Authority appears to believe that it should be longer.

I wonder why the consultation seems to be taking place in haste. I hope that that is not because the Treasury wants a good headline. I have the utmost respect for the Minister, and I know that she would not try to get cheap headlines and follow the principle of, "Let's show the public that we are doing something." The issue should be taken more seriously than that. Will the Minister address my concerns about the over-prescriptive nature of Higgs and the speed with which that over-prescription will be applied?