My honourable friend the Parliamentary Under-Secretary of State for Trade and Consumer Affairs (Gareth Thomas) has made the following Written Ministerial Statement.
The Financial Reporting Council (FRC) is the UK’s independent regulator and standard setter for accounting, auditing and the actuarial profession. The FRC’s remit was expanded in 2004 as a result of the Government’s review of audit and accounting regulation, and again in 2006 to include actuarial standards and regulation.
The Government believe the FRC has adapted well to its new responsibilities, and in particular welcome the recent changes it has made to its governance arrangements to increase its effectiveness and efficiency. The Government remain strongly supportive of the FRC. The FRC’s operating bodies continue to exercise functions delegated to them by the Secretary of State, and indeed the Secretary of State is in the process of updating the delegation of functions concerning audit regulation in line with the Companies Act 2006 and the Audit Directive.
Corporate reporting and governance in the UK are widely recognised domestically and internationally as being of a very high standard generally. The FRC’s integrated and market-led approach to regulation underpins these standards. This approach continues to receive strong support from companies, investors, the accountancy profession and other stakeholders.
For many years the Government contributed one-third of the FRC’s core operating costs for its responsibilities for accounting, auditing and corporate governance. However, this position is not consistent with the funding arrangements for other similar regulatory bodies such as the Financial Services Authority and the Pensions Regulator, or with funding for the FRC’s actuarial regulation. Nor does it sit well with the FRC’s new board, which is now composed largely of private sector rather than ministerial appointees. The Government have therefore concluded that, as a market-led regulator, the FRC should in future be funded largely by market participants.
The FRC will consult market participants on the options for new funding arrangements. In order to allow an orderly transition to stable, new, long-term funding arrangements, the Government have confirmed that they will continue to make a substantial contribution to the FRC’s costs for at least the 2008-09 financial year.