Tuesday 26 January 2016
Business, Innovation and Skills
Small Companies Audit Exemption Thresholds
My noble Friend the Parliamentary Under-Secretary of State for Business, Innovation and Skills (Baroness Neville-Rolfe) has today made the following statement.
The Government have carefully considered responses to questions posed on the audit exemption threshold in the Government’s discussion paper on the implementation of the Audit Directive (2014/56/EU) and the Audit Regulation (Regulation 537/2014). Some stakeholders argued that amending the audit exemption threshold increases the risk of poor financial reporting and that the thresholds should be maintained at the previous level or raised to some intermediate level lower than the thresholds now used to determine a “small company” for financial reporting purposes. Others argued for the thresholds rising to the maximum permitted, quoting the erosion of the value of the audit exemption thresholds due to inflationary effects and the need to avoid imposing avoidable regulation on small companies. Moreover removing the link between the thresholds for eligibility for the small company regime and those for the audit exemption would introduce unnecessary complexity into company law and cause confusion for users.
The Government have concluded that, as now, all companies should continue to be able to have an audit. Companies will not however be required to have an audit for the financial years commencing on or after 1 January 2016 if at their balance sheet date they satisfy at least two of the three following criteria, in general for two consecutive financial years:
Turnover ≤ £10.2 million
Balance sheet total ≤ £ 5.1 million
Number of employees ≤ 50
and they are not otherwise excluded from accessing the audit exemption, for example due to the nature of their business.
Audit and auditors will continue to have an important role in supporting small businesses to achieve their ambitions and grow; and in providing assurance to owners and lenders about a company’s performance. Although it is estimated that raising the audit exemption thresholds will bring a further 7,400 companies within scope of the exemption, on current practice the Government anticipate that 4,400 will choose to continue to have an external audit. Of the 3,000 companies expected additionally to take up the exemption, some will seek alternative routes to ensure that the company’s systems are robust; for example, through assurance reviews or increased oversight of accounts preparation.
In view of the news expressed by stakeholders the Government will keep the changes in the audit exemption thresholds under review. We will respond quickly should evidence emerge that further action is required to ensure that the UK continues to have a world-class financial reporting and assurance framework which meets the needs of users and regulators.
Control of UK Companies: Transparency
My noble Friend the Parliamentary Under-Secretary of State for Business, Innovation and Skills has today made the following statement.
On Monday the 25 January, I laid before Parliament draft regulations in connection with Part 21A Companies Act 2006. These establish the public register of information about people with significant control (PSC) over UK companies and limited liability partnerships (LLPs). This is an important step in providing much greater transparency about who owns UK companies and LLPs. This will boost trust in UK businesses, and reduce the risk of UK companies and LLPs being used for corrupt purposes.
The Government appreciate that transparency is usually in the public interest, as it is useful to know with whom one is doing business and helps deter and identify where corporate entities are being used for criminal activities.
The Government recognise that in certain rare circumstances publication of PSC information could put individuals at serious risk of violence or intimidation.
The draft regulations therefore provide for applications to be made to withhold the personal information of PSCs from public disclosure. In such cases the information must still be provided, and the fact that the information exists but is protected, will be made public. This is set out in more detail in Section 790ZG and regulations 33-45 of the draft Companies (Register of People with Significant Control) Regulations 2016.
Section 790J also enables the Secretary of State to make general exemptions to the new requirements. The Secretary of State has not granted any such exemptions, and would only be prepared to grant exemptions in very limited circumstances. These circumstances would be that the exemption is in the interests of national security; the economic wellbeing of the UK, or in the support of the prevention or detection of serious crime.
An exemption would also only be granted if the Secretary of State received satisfactory assurances on other matters like the company or LLP was not being run for personal benefit of any individual and that the exemption was necessary for the person seeking it to achieve their lawful objectives. I do not propose to comment further on whether I have received any such requests or whether I have granted them.
The Chancellor has this morning announced that Andrew Bailey has been appointed as the next chief executive of the Financial Conduct Authority.
Andrew will succeed Tracey McDermott, interim CEO, and bring his extensive skills and experience of regulation to ensure that the UK financial services sector is the best regulated in the world.
The Chancellor has also announced the appointments of Bradley Fried, Baroness Hogg, Ruth Kelly and Tom Wright as non-executive directors.
These appointments are being made by HM Treasury under, and in accordance with, the Financial Services and Markets Act 2000 as amended.
Communities and Local Government
Fire and Rescue Authorities: Funding for Pension Redress Payments
In May 2015, the pensions ombudsman issued his final determination in a case brought by a retired Scottish firefighter against the Government Actuary’s Department. This found that the Government Actuary’s Department failed to review the factors used in the calculation of the firefighter’s lump sum pension payment at the appropriate time, and that this amounted to maladministration. The Government determined that the principles of this ruling should be applied to other affected individuals across the UK, including around 6,000 retired firefighters in England.
Ministerial responsibility for fire and rescue policy transferred to the Home Office on 5 January 2016. The Permanent Secretary at the Department for Communities and Local Government remains the accounting officer for fire budgets until 31 March 2016, and budgets remain with the Department for Communities and Local Government until then. From 1 April 2016 remaining responsibilities for fire budgets and administrative responsibilities will transfer to the Home Office.
Parliamentary approval for additional capital of £94 million will be sought in a supplementary estimate for the Department for Communities and Local Government. Pending that approval, urgent expenditure estimated at £94 million will be met by repayable cash advances from the Contingencies Fund.
Emergency Services: Closer Working
Efficient and effective emergency services are essential to keeping our communities safe. Closer working between the police, fire and rescue and NHS ambulance services can improve the way they serve communities, protect the public and provide value for money for taxpayers.
The Government are committed to supporting collaborative and innovative blue light working, and have invested over £80 million in such projects. While there are good examples of joint working in some local areas, there is much more to be done before collaborative working becomes the norm. For example, there could be savings to be made from greater sharing of premises, back offices, IT and procurement systems, which can release valuable resources to the frontline.
I have worked closely with the Secretary of State for Communities and Local Government and the Secretary of State for Health to develop a range of proposals to enable closer working between the emergency services and to provide for stronger local accountability. On 11 September 2015, we published a joint consultation paper setting out our proposals and seeking views on how best to implement them. The consultation ended on 23 October 2015. Over 300 responses were received from national, local and regional organisations, police forces, police and crime commissioners, fire and rescue authorities, local councils, ambulance trusts, front-line practitioners, associations and other interested groups and individuals. We would like to thank all those who gave their time to respond and contribute to the consultation process.
Today, we have published the Government’s response to the consultation, which summarises the comments we received and sets out how we intend to proceed.
Having carefully considered all the consultation responses, we intend to legislate to:
introduce a high-level duty to collaborate on all three emergency services, to improve efficiency or effectiveness;
enable police and crime commissioners to take on the functions and duties of fire and rescue authorities, where a local case is made;
further enable police and crime commissioners to create a single employer for police and fire staff where they take on the responsibilities of their local fire and rescue service, and where a local case is made;
in areas where a police and crime commissioner has not become responsible for fire and rescue, enabling them to have representation on their local fire and rescue authority with voting rights, where the fire and rescue authority agrees; and
abolish the London Fire and Emergency Planning Authority and give the Mayor of London direct responsibility for the fire and rescue service in London.
The intention is that these measures will ensure collaboration is widespread and ambitious across the country.
Bringing police and fire together locally under the leadership of a PCC will provide greater direct accountability for the public and will accelerate local collaboration. This does not mean a takeover of the fire service by the police. The important distinction between operational policing and firefighting will be maintained, with the current law that prevents a full-time police officer from being a firefighter remaining in place, and with no intention to give firefighters the power of arrest.
Alongside this, the Prime Minister’s recent announcement that responsibility for fire policy has transferred from the Department for Communities and Local Government to the Home Office shows the Government’s commitment to closer collaboration between police and fire and rescue services. Bringing together responsibility for fire and police in the same Department provides the same clear leadership in central Government that our proposals on emergency services collaboration seek to deliver locally. It provides an excellent opportunity for sharing good practice to drive reform and to deliver better outcomes for the public.
These measures will apply to England only. Further details on the measures and how the consultation has informed them, are set out within the Government’s published response.
Copies of the Government’s response to the consultation will be placed in the Library of the House.
As I assured the House on 11 January, Official Report, column 573, the safety and welfare of all those in custody is vital. We treat the allegations of abuse directed towards young people at the Medway Secure Training Centre, run by G4S, with the utmost seriousness. Kent police and Medway Council’s child protection team have launched an investigation which will determine whether there is any evidence to justify criminal proceedings. The Ministry of Justice and Youth Justice Board will fully support and co-operate with their enquiries.
Following the allegations, our immediate priority has been to ensure that young people at the centre are safe. HMIP and Ofsted visited Medway STC on 11 January and their findings are published today. The Youth Justice Board, which is responsible for commissioning and oversight of the secure youth estate, has increased both its own monitoring at Medway STC and the presence of Barnardo’s, who provide an independent advocacy service at the centre. The YJB immediately stopped all placements of young people into the centre and suspended the certification of staff named in the allegations.
I believe, however, that we need to do more in order to have confidence that the STC is being run safely and that the right lessons have been learned. Today’s report by HMIP and Ofsted recommends the appointment of a commissioner to provide additional external oversight of the governance of the centre. I agree that additional external oversight is necessary and am also concerned that it draws on the broadest possible expertise.
I am therefore today appointing an independent improvement board, comprised of four members with substantial expertise in education, running secure establishments and looking after children with behavioural difficulties. This board will fulfil the same function, with the same remit, as HMIP and Ofsted’s recommendation for a commissioner. We have tasked G4S with putting an improvement plan in place, which this board will oversee.
I have appointed Dr Gary Holden as the chair of the improvement board. Dr Holden is the chief executive officer and executive principal of The Williamson Trust, a successful academy chain in Kent. This includes the outstanding Sir Joseph Williamson’s Mathematical School, located less than a mile from Medway STC. He is also a national leader of education and chair of the Teaching Schools Council. His experience as a headteacher and leader of a high-performing organisation make him ideally suited to identify the steps that should be taken to raise standards at Medway STC.
Dr Holden will be joined by: Bernard Allen, an expert in behaviour management and the use of restraint; Emily Thomas, interim governor of HM Prison Holloway and former governor of HM young offender institution Cookham Wood; and Sharon Gray OBE, an education consultant and former headteacher with experience of working with children with behavioural difficulties, including in residential settings.
The board will provide increased oversight, scrutiny and challenge of managerial arrangements, in particular in relation to the safeguarding of young people. Board members will have authority to visit any part of the site at any time, access records at Medway and interview children during their investigations. The board will report any concerns about the provision of services at Medway to me. The board’s work will assist me in determining the necessary improvements that G4S must make to restore confidence that young people are properly safeguarded at the STC.
The terms of reference for the independent improvement board are to:
investigate the safeguarding arrangements at Medway in order to inform the development and approval of the improvement plan to be produced by G4S and any steps to be taken by the Youth Justice Board (YJB) and other organisations;
oversee, challenge and support G4S in implementing their improvement plan;
report to the Secretary of State on the Board’s confidence in the capability of G4S, YJB and other organisations to meet appropriate safeguarding standards at Medway STC in the future, and the performance and monitoring arrangements required to provide assurance; and
submit any recommendations on the safeguarding of young people in custody, including the role of the YJB and other organisations, to inform practice in the wider youth custodial estate and Charlie Taylor’s review of the youth justice system.
The board will complete its work by the end of March 2016.