HC Deb 19 May 1933 vol 278 cc676-719

The following Amendments stood upon the Order Paper:

In page 2, line 11, after the word "appointed," to insert the words: Provided nevertheless that where a person, being a member of a registered society of accountants, is, at the date of the passing of this Act, holding the office of elective auditor, he shall be deemed to be qualified for appointment if the council of the borough thinks fit."—[Sir J. Ganzoni.]

In line 39, leave out the words "burgess in," and insert instead thereof the words: local government elector for."—[Mr. Petherick.]

In Schedule, page 3, line 16, leave out from the word "he," to the end of line 24, and insert instead thereof the words: being a member of an incorporated body of accountants, is at the date of appointment publicly and efficiently carrying on the business of an accountant."—[Mr. Hartland.]

Leave out from the word "of," to the end of line 24, and insert instead thereof the words: a body of accountants established by charter or under the provisions of an Act of Parliament."—[Mr. Lyons.]

In line 23, after the word "of," to insert the word: Certified."—[Mr. Petherick.]

In line 24, at the end to insert the words: The British Association of Accountants and Auditors, Limited."—[Sir G. Hurst.]

In line 24, at the end, to insert the words: The Institution of Certified Public Accountants."—[Sir J. Ganzoni.]

12.15 p.m.


I beg to move, in page 2, line 11, after the word "appointed," to insert the words: Provided nevertheless that where a person, being a member of a registered society of accountants, is, at the date of the passing of this Act, holding the office of elective auditor, he shall be deemed to be qualified for appointment if the council of the borough thinks fit. Before I make my speech, which will be brief, may I ask you, Mr. Speaker, whether, in moving this Amendment, I may also address myself to my other more or less alternative Amendment to the Schedule, and whether the discussion may cover the Amendments in the names of other hon. Members?


I do not know whether it will be for the convenience of the House, but it appears to me that all the Amendments on the Order Paper, with the exception of the second one— in page 2, line 39, to leave out the words, "burgess in," and to insert instead thereof the words "local government elector for"—deal more or less with the general subject and enlarge the scope of the Schedule. Therefore, I think that if we have a general discussion on the hon. Member's Amendment, hon. Members can move subsequent Amendments and divide on them without further discussion if they wish to do so.


The Amendment I am moving is designed to save the occupation and the livelihood of a certain number of professional men throughout the country who are properly qualified by examination, and who have been carrying out their job for some years past to the complete satisfaction of their employers, who elect them in the first instance and re-elect them. As I am the first to have the privilege of saying anything on the Bill in this House, apart from the Committee upstairs, perhaps I may be permitted, in a sentence or two, to say what the Bill does. It is a permissive Bill in that borough councils may adopt it or refrain from doing so, but it is not permissive in its effect, because if they do adopt it, it lays down two alternative ways in which they shall —not "may"—in future fill the post of borough auditor. The first Sub-section, with which I am not concerned in my Amendment, says that borough councils in future, if this Bill becomes an Act, instead of having their accounts and the accounts of their officers audited by borough auditors, in accordance with the Municipal Corporations Act, 1882, which means what we call an elective auditor, shall have them audited by a district auditor, who is appointed officially, and is not their own official, or solely their own official. Subsection (2), to which I am moving an Amendment, gives the alternative way. It says: the accounts of the corporation and the accounts of the borough treasurer and other officers of the corporation shall, instead of being audited by borough auditors as aforesaid, be audited by one or more auditors appointed in accordance with the schedule to this Act, and the provisions of that schedule shall have effect with respect to the qualifications, powers and duties of any auditor so appointed. I propose, by this Amendment, to add a proviso: Provided nevertheless that where a person, being a member of a registered society of accountants, is, at the date of the passing of this Act, holding the office of elective auditor, he shall be deemed to be qualified for appointment if the council of the borough thinks fit. As far as this Bill has been designed by the hon. Member for Penryn and Falmouth (Mr. Petherick) to enable borough councils, who may, in some cases, have, or had at some time, elective auditors with no qualifications of any sort or kind—it may be a tinker, tailor, or anybody else elected for reasons good or bad, and where perhaps, those corporations have become more intelligent or awakened to the fact that there is some suspicion of malpractice, or perhaps not that vigilance of audit there should be, and they wish to get rid of such an auditor—I think that, as far as that is concerned, it is an excellent Bill. But this House wants to preserve its reputation for not working an injustice when trying to do good. The Schedule to the Bill, to which I have an Amendment later, enumerates some seven societies who are made sacred by being brought within the purview of the Bill. As a matter of fact, there were only four prior to the Committee stage. Unlike the ten little nigger boys, they have not diminished but increased in numbers from four to seven.

It is rather extraordinary that among the increased number are the Society of Accountants in Edinburgh, the Institute of Accountants and Actuaries in Glasgow and the Society of Accountants in Aberdeen. Yet this Bill in Clause 3 says that the Act shall not extend to Scotland,. It is said that hard cases make bad law, but surely every Member of this House, even the promoter and the Parliamentary Secretary to the Ministry, will regard as a little extraordinary that the hard case I am going to cite as an example, because I happen to know all about it. I do not suggest that the law should be altered because of one hard case, but here is a gentleman who is to be debarred in future from being chosen by his own council in the town where he lives, having done his job satisfactorily for 16 years, and is doing it to-day. He has been elected to other local appointments, and also to audit the Road Fund licences under the Ministry of Transport. He is to be regarded, if this Bill passes unamended, as being unfit for his job, and yet professional gentlemen, whose qualifications come from Aberdeen, Edinburgh and Glasgow, are put into this Bill as men who may be quite properly appointed in future.

To show the kind of hard case that may occur, I may say that the man of whom I am thinking is not without qualifications. He is not a cobbler, or anything like that, or even an intelligent, experienced tradesman in the town. He is an accountant, a member of a society which has been established for 30 years, but is not included in the sacred list in the Schedule. It is now the third senior society in the country. Entry is by examination. It has a good number of examiners, and a high standard of examination and only about 50 per cent. pass it. A large percentage of its members hold public appointments of this kind. Furthermore, it has a higher percentage than at least one of the societies now admitted to the Schedule.

I believe that hon. Members are really taking some notice of the injustice that may be worked by a part of this Bill. It has always been the practice of this House to try to preserve the interest and the livelihood of a man actually in occupation of an appointment. Going back before my time, although I am no chicken, it will be recalled that a man was allowed to act as chief engineer on a ship at sea, although uncertificated. The most recent example is that of the dental mechanics under a recent Bill, who, if they had been doing their work for a certain specified number of years were allowed to practise dentistry, and are doing so. Those particular individuals were allowed to go on for the rest of their working life. It is a practice recognised, I think, by any body of Englishmen and Englishwomen as being only fair, right and proper, and that is all I am asking the House to try to preserve on this occasion. I think that my first Amendment is the most fair and reasonable way of doing what is wanted, but, alternatively, I seek to include in the Schedule the society of which I have already spoken.

The first two societies mentioned in the Schedule are well known to everyone, and then we have the three Scottish societies, which are doubtless excellent societies, but which, I suppose, are included because a professional gentleman qualified by membership of one of these Scottish societies may happen to be a partner in an English firm. Then there are two decidedly smaller societies, which have recently succeeded in getting themselves recognised by Committees of this House. I submit that it is just, either to allow a man like the one I have described to continue to be elected by the body which has elected him so far, or, if not, to include in the Schedule a perfectly proper, decent, recognised public society whose members are only admitted by examination. There is no risk of creating any vested interest by so doing.

12.26 p.m.


I beg to second the Amendment.

In Committee, at the request of my hon. Friend, I moved an Amendment in the same form as his present Amendment to the Schedule. I did so because he had no opportunity of doing it himself, and I read to the Committee a letter as an example of the injustice that might conceivably arise. I appreciate the difficulty of the promoters of the Bill and of the Ministry. They want to be assured that people who are not really satisfactory are not included in the Schedule, and it may be—I do not know—that some societies, while they have at present a high standard, may include among their members a number of people admitted in the past who are not of the requisite standard. As a result of my action in the Committee, a representative of the body which has been referred to came to see me, and I think that subsequently some communication was addressed to the Ministry of Health. Whatever may happen to-day, I must say that this society took a very sporting attitude. They said that, if the pressing of this Amendment would imperil the Bill, they did not want it pressed. I said that in any event the fact that they had taken that attitude ought to be stated in the House, and accordingly I now mention it. I do not think I need add anything to what has been said by my hon. Friend, who has explained the position admirably.

12.28 p.m.


In rising to move the Amendment which stands in the names of two of my hon. Friends and myself, I count myself rather fortunate to have been preceded by the hon. Member for Ipswich (Sir J. Ganzoni)—


The hon. Member cannot move his Amendment now. My suggestion was that those hon. Members who had Amendments on the Paper to this effect should speak on the first Amendment. The hon. Member's Amendment cannot be moved until this one has been disposed of.


I take it that I can speak to my Amendment, and include some of my own observations, in supporting the Amendment of my hon. Friend?




On behalf of those for whom I am speaking, I would emphasize the fact that no one—not even the promoter of the Bill—is more keen than they are in the desire that some Measure of this kind should be enacted, that the net should be drawn as tightly as possible, and that any audit under the Bill should be as nearly perfect as possible. On the other hand, however, they feel that the promoter of the Bill has, perhaps, taken the easiest line of approach by specifying in the Schedule the names of certain incorporated bodies, which are undoubtedly in the main above suspicion, but I suggest that, as has been already mentioned by the Mover of this Amendment and by the hon. Member for South Croydon (Mr. H. Williams), there are other bodies who are equally deserving of consideration in such a case, and their omission from the Schedule, while it may not exactly deprive them of a livelihood or put them to pecuniary disadvantage, will be prejudicial to their business.

Our Amendment does not tend to loosen or widen the meshes of the net. It stipulates, in the first place, that a person, to be eligible under the Act, must be a member of an incorporated body of accountants. Most of these incorporated bodies of accountants, whether they are admitted to incorporation as a result of examination or not, have certain specified rules, and there is no doubt that often their rules are more stringent than those of the bigger bodies. Moreover, they are not satisfied that every present member of the Institute of Chartered Accountants, for instance, has entered by examination. There may be very few who have not, but there are some, and a still greater number of the Incorporated Society of Accountants are there without examination. Therefore, the essence of the claim is a claim to respectability and ability.

It is contended that the rules of certain other societies are just as good from that point of view as those of the larger societies; and it is considered that, in taking the line of easiest approach, as the promoter has done, supported, I am afraid, by my colleague from Norwich, the Parliamentary Secretary to the Ministry of Health, they are inflicting, possibly, grave injustice on hundreds, and perhaps thousands, of men who at present are earning a very respectable and decent livelihood and employing other people as practising firms of accountants. Many of these firms have been founded by men who before the War intended to enter the profession of accountancy. They went to the War, and, coming back older, the prospect of five years' articles, and also a certain expenditure of money, was beyond them. They had a certain gratuity from the Army, they started business on their own account, and many of them to-day have built up firms which are known in their own areas to be above reproach and to be perfectly competent accountants of integrity.

Our Amendment also stipulates that they must be at the time of appointment publicly and efficiently carrying on the business of an accountant. That stipulation is of considerable importance. We know that there are many chartered and incorporated accountants, and members of the other societies mentioned in the Schedule, who are not practising as accountants at all; indeed, possibly, a Majority of the members of these larger societies are not practising as accountants to-day. Some of them are employed as accountants in offices, many of them are managing cinemas and music halls, and some may even be managing greyhound tracks, but certainly they are not practising accountants, and are far less eligible for enrolment in the Schedule than are the members of these incorporated bodies for whom we speak, who must be, at the time of appointment, actually publicly and efficiently carrying on the business of an accountant in the town or borough where they are known and where their ability to take the position of a public auditor should be, and probably would be, unquestioned.

I am afraid the Bill will go through as it is. At first I thought it was a private Member's Bill, but when the forces of the National Government are, as I suspect, behind it we feel that we have not much chance of doing other than make a request which may or may not be granted and, in the latter event, of registering our protest. I would, therefore, request whoever is really going to be responsible for the final shape of the Measure, if they cannot or will not accept our Amendment, to remove all possible injustice by allowing any such firms as those I have mentioned, who wish to qualify for the position, to appear before the Local Legislation Committee and, if passed by that body, to be added to this list or, failing that, remembering that there is shortly to come before the House a comprehensive Measure in connection with local government, in which presumably this question will form a small part, could we have an assurance that, when that time comes, these people for whom we speak will get a fair chance with others of having every facility that is open to their profession and that nothing that is enacted in this Bill will prejudice their case when they make such a request to the House. I ask the Parliamentary Secretary and the promoter of the Bill at least to give this last alternative sympathetic consideration. You will not be widening the net and you will not be allowing any trespass upon the provisions which you wish to embody in the Bill. You will be removing an injustice and laying down a prospect of legislation which, while doing justice, will ensure a perfect audit.

12.37 p.m.


My hon. Friend who introduced the Bill indicated that he was trying to provide a useful, if modest, Measure of reform. I think all of us who support it realise that it is going to be a real reform in local administration. The system that prevails in the manner in which these officers are chosen and the work that is given them to do in reference to local authorities has become really nonsensical and the time is long overdue when the alteration indicated by the Bill should be brought into force to make really effective the checking of the finances which are now so heavy in large local authorities.

It is our intention to ask the Government and those responsible for the Bill to take away a limitation in the Schedule. The object of the Amendment in my name would have been to delete each one of the very worthy institutions mentioned in the Schedule and to allow the appointment of any member of a body of accountants established by charter or under the provisions of an Act of Parliament. For the first time in history, as I understand the Schedule, it seeks to limit the work and the functions of an accountant. It will have the effect of making a close corporation for all those persons who might otherwise be eligible for this special work. May I call attention to difficulties which have been found by representative bodies in the past in dealing with accountants and in considering whether there should be any limitations imposed upon those who desire to become accountants. In 1930 a Departmental Committee was appointed by the Board of Trade to consider the question of the registration of accountants. In one of their recommendations they said: Reference has been made in paragraph 10 to the definition of 'accountant' under the Income Tax Act, 1918, and other enactments relating to taxation. This definition is very wide in terms, but it has not given rise to any difficulty so far as Income Tax authorities are concerned. I have looked carefully at that definition, which is worthy of consideration in considering how far this Schedule, important as the Bill is, may come into conflict with ordinary accepted definitions. The definition given by Section 137 (2,c) of the Income Tax Act is as follows: In this sub-section 'accountant' means a person who has been admitted a member of an incorporated society of accountants. That is a well accepted definition, and I have drawn my Amendment to allow any person who is a member of such an association to be an accountant acceptable for this purpose.

Another paragraph of the report of the Departmental Committee, which was established in February, 1930, refers the House to Section 32. One of the practical difficulties in the way of establishing a register is to define 'accountancy.' A number of definitions have been placed before the Committee none of which satisfactorily covers the whole field. The difficulties which that Committee found and so unhesitatingly expressed, after a great deal of material and evidence had been brought before them, are present just as much to them, and cannot be met by the promoters of the Bill nearly as well as they can be met by that Committee.


As the hon. and learned Gentleman is anxious, according to what he is bringing forward, to maintain the status of his definition of accountancy as the one which should operate, may I assume also that the accountant who comes under his designation will only be able to employ those who have the same status?


Can my hon. and learned Friend say what body of accountants, in addition to those set out in the Schedule, would be included as a result of his Amendment?


In reply to what was said by the hon. Gentleman as to whether, if my Amendment were accepted, an accountant would have to employ somebody of equal status as himself, as far as I know there is no restriction upon a chartered accountant in regard to the qualification of the person he employs and which he, as a chartered accountant, with all his authority, would certify. In his own interest, and realising the weight which is paid to any certificate which he gives under his signature, he could generally, I think, be relied upon to employ competent, straightforward and efficient persons to do such clerical work as would have to be done, so that he could inspect their work with such check as he thought necessary in order to give the certificate which he would have to give as a chartered accountant.


Is it not the practice in business and in municipalities that the qualified man—the chartered accountant—takes responsibility for all the work done, that it is his duty to employ efficient clerks to do the detailed work under his charge, and that, as far as the accounts ultimately are concerned, he is responsible for everything which is done by his agents?


I am obliged to my hon. Friend for his interruption, as it states accurately the established practice. Chartered accountants, or any of the established accountants who sign a certificate, have to take complete legal responsibility for the certificate they give. If in any way they have been lax or inefficient in allowing bad workmen to produce material which they themselves sign as correct, it is their responsibility, and the authority which has been aggrieved may look to them for redress. I think that that covers the point made by my hon. Friend, because it means that anybody who was given the same power under the Act as a chartered accountant will have under the Schedule as it stands, the whole of the legal effects and the whole of the legal constitution placed upon him, as would a chartered accountant were a chartered accountant responsible.

I desire to draw the attention of the House to the following point. It is essential—and neither of the previous speakers have attempted to controvert it—that the local authority, the funds of the local authority, and the ratepayers who contribute those funds should be adequately safeguarded. There can be no doubt about that. One realises and appreciates the point of my hon. Friend the Member for Westhoughton (Mr. Rhys Davies). He and I did not see eye to eye on this principle in reference to another Bill some time ago, but the present Bill, at any rate, adopts that principle. The local authority may adopt it or not as they choose, and, if they do so it is only right in the interests of the ratepayers who have to provide the funds of the local authority, that they should have men of ability, efficiency and character employed as accountants to keep a check on those funds. I hope that it will not be taken that I am trying to cast any reflection at all upon the members of the respective bodies named in the Schedule of the Bill. Their standing and responsibility are above any question But I say that there are other people who could do the work just as well, efficiently and effectively in the interests I have indicated as the persons belonging to the societies mentioned in the Schedule. If the Schedule is accepted as it stands, it is bound to have the effect of causing injustice to somebody here and there, and I am sure that those who are responsible for the Bill do not wish to cause injustice. In view of the report which has been made, and the difficulties obviously expressed to those charged with the special duty, if possible, of overcoming them, I invite the House, and the Parliamentary Secretary to the Ministry of Health to say that they accept the position as they find it and will not seek to make the limitation which they find so difficult to do.

The Minister of Health has before him now all kinds of material and evidence of the way local authorities have their audits made. The people who are carrying on business as accountants to-day and are dealing with those matters for local authorities without complaint will find themselves excluded from doing the work which they are now doing if the Bill becomes law without any alteration to the Schedule. I hope that those persons who are doing their work so well will not automatically be excluded under the Bill. A gentleman living in Edinburgh and a gentleman living in Aberdeen may be very capable accountants, but they will be no better fitted to investigate or check the accounts of a local authority, say, in an industrial city in England, than many persons who have lived in the district for years and have spent the whole of their business careers in the locality, and not in Scotland, in dealing with the matters which come under the purview of the local authority from day to day, and who are members of one of the other societies. There will be a complete check, if the Amendment which I have indicated is accepted, because the only person who will then be qualified will be the person who is a member of a body of accountants established by Charter, or within the provisions of an Act of Parliament. The Act of Parliament which creates such a body will provide for the qualifications, respectability, straightforwardness and experience of an accountant before a man is admitted to membership. I have gone very carefully into the particulars of the requirements of some of these societies now outside the Schedule, and I have found that they impose a very strict inquiry before a man is allowed to be admitted.


The Amendment which the hon. and learned Gentleman is to move is very important. Will he be good enough, therefore, to tell the House how many of the societies mentioned in the Schedule would be included if his Amendment were carried?


When the hon. Gentleman speaks of accountants under the provisions of an Act of Parliament, does he include any body of accountants who may register themselves as a limited company under the Companies Act?


I have gone into the matter with some little care. The institutions mentioned in the Schedule as it stands will, I think, all be included in the scope of my Amendment. There would not be one of them excluded, as I understand it. In reply to the question put by the hon. Member for Darlington (Mr. Peat) there are four others that are at the present time under the purview of my Amendments, but before the hon. Member accepts that statement as being conclusive perhaps he will confer with me over the books which will give the reference with more particularity. They would be within the scope of my Amendment. In each of those four institutions there has to be a qualification by experience, by examination and by character.


That was not exactly the question I asked. My question was more general. Would a body of accountants who registered themselves as a limited company under the Companies Acts be able to come in under the Amendment? There would be no definite limit in the number of people who could do it.


I find a little difficulty, without notice, in dealing with that question, but the risk that the hon. Member suggests is one that might be easily guarded against. It would be easy to prevent any organisation of mushroom growth coming in. The point might be dealt with in this way, by allowing the Schedule to extend to all those already in existence and giving the particular safeguard that my hon. Friend thinks is necessary to prevent any organisation springing up over-night. There are many estimable members of the two organisations set out in the Bill, the Institute of Chartered Accountants and the Society of Incorporated Accountants and Auditors who are performing their work with very great skill, and who themselves came in without the examination and restrictions which exist to-day in those two bodies. Although those two bodies have closed their doors, they have allowed in the so-called unqualified people whom the Schedule would shut out, notwithstanding the excellent work they have done and are doing. That point was emphasised by the hon. Baronet when he asked the House to remember what happened in the case of the Dentists' Act two or three years ago. In that case there was no attempt to drive out of business those who were then in business. They had to satisfy the authority set up by this House as to their qualification, experience and character, and after satisfying the authority on those three points they were allowed into the society, and the door against others was closed.

I would ask the House to take the view I have indicated and to impress upon the Minister of Health that the injustice to which I have referred was never intended when the Bill was framed. Those who have already spoken join with me in giving the Bill the strongest support. We see in it a reform which is long overdue. Those of us who have seen gross mismanagement in connection with local authorities realise the need for the Bill in the interests of ratepayers all over the country, and we welcome it; but we do hope that in doing the good which this Bill aims to do on behalf of the com-munty, which I am sure the Bill will accomplish, they will take such action as to remove an injustice which I am sure, through no intention on the part of the promo tors of the Bill, and through no intention on the part of the Government, will be entailed if the Bill passes into law as it now stands, without the alteration in the Schedule which I have indicated.

Some doubt has been expressed whether this has ceased to be a private Member's Bill and has become a Government Measure. If it has become a Government Measure I assume that the Department concerned will take what steps it can, either here or shortly afterwards, to see that the injustice referred to does not occur. On behalf of many persons who are now performing work with great satisfaction I invite the House to accept the view that I have indicated, and not only to safeguard the local authorities and the ratepayers but to safeguard the persons in question against the possibility of unfair discrimination. Therefore I hope that the Amendment which stands in my name will be accepted. So far as I can trace the Statutes, the Income Tax Act of 1918 is the most involved and most expressive of all Acts of Parliament dealing with matters of national finance, and the Government of that day I have no doubt considered this matter with that same care and that same precision which was exercised by the Committeee to which I have referred, when they looked into the question of the closed door as regards accountants. There is a definition in that Act of an accountant, and as far as I can discover from research there has been no alteration of that definition at any time Since then. There is no other Act of Parliament which I can find dealing with this topic which has Since altered the status or definition of an accountant which was so clearly established in the Income Tax Act of 1918. It would be wrong in an Act of Parliament not primarily interfering with the position of accountants but seeking to abolish an anomaly in the present system of public audit to come into conflict with established authority and to inflict an injustice on many persons whilst bringing about a great reform which we all welcome.

1.3 p.m.


The Amendment of the hon. and learned Member is one which I think we ought to support, and when it goes to a Division I hope the House will agree to it. I have risen mainly to say that I do not take the view that is probably taken by most hon. Members that the audit of accounts is merely a matter of the figures in the accounts. An auditor has many other duties in these days than merely seeing that the figures are added up properly or that a particular expenditure is as set out. The district auditors of the Ministry of Health to a very large extent control policy, and there is just as much argument that an auditor should be a member of the legal profession as there is that he should be one trained in figures. The fact has been established, and I believe established beyond any doubt, so far as the Metropolis is concerned, that the district auditors have never of their own volition brought any case of corruption either to the notice of the ratepayers or of the Minister of Health. They have brought cases of over-expenditure in the matter of the relief of individuals, but on the question of pure and simple corruption the cases of which I have any cognisance during the very long period that I have been in local government have always been brought to the notice of the auditor by some body of ratepayers, or some individual ratepayer, or by the authority itself. I ask the House not to draw too tight the circle from which auditors may be drawn. We should not allow ourselves to be swayed too much by the sort of professional attitude of mind which the Bill rather enshrines.

We are to-day living in different conditions to any that have previously obtained. Local authorities have to carry out no end of administrative work which affects the lives of people in many ways, and a man who takes a broad-minded view of life is able to carry out this work as well as anybody. Here am I, if I was dealt with according to the law I should have been in prison the whole of my life. We built a school and tar-paved the ground to save the children carrying the mud into the homes. We put, tiles on the walls in order to save whitewashing and painting. Our local opponents went to the auditor and said, "What extravagance," and we were surcharged about £150,000, which, of course, we still owe, and shall go on owing. Does anyone suggest that you want a chartered accountant to arrive at such a decision. The gentleman who came to that decision was an auditor, not only a chartered accountant but a lawyer into the bargain. The fact that you have a professioNaily trained mind on the subject is not a guarantee that you will not have professioNaily trained nonsense. I hope we shall put in the Amendment of the hon. and learned Member. I am aware that chartered accountants are wonderful jugglers of figures, but when it comes to deciding whether tiles are better than painted walls I think I am as capable of judging that as the most learned chartered accountant in the world.

As to corruption, I repeat that there never has been a case in the Metropolis where an auditor has discovered of his own volition that someone was doing the ratepayers. All the cases which have come before the courts during the recent years have been cases in which some body of ratepayers has called attention to a particular expenditure, or cases in which the authority itself has called attention or some individual member of the authorities. I want to emphasise the point that it is not so much a question of a person having a trained mind for dealing with figures, but that you want a person with a broad comprehensive knowledge of what local government really means. Let him be a person who can add up figures, but also a person who has some acquaintance with the lives of people generally. For these reasons I shall support the rather wider proposals which have been brought forward.

1.9 p.m.


Before dealing with the Amendment which has been submitted to the House I should like to thank the right hon. Member for Bow and Bromley (Mr. Lansbury) for his complimentary remarks in regard to chartered accountants in general. He says that if a man knows something about bricks and mortar he can probably safeguard the interests of local authorities, although he may not know much about finance.


I did not say that.


That was the inference.


I hope the hon. Member will not judge me on inferences.


I do not want to misinterpret the right hon. Gentleman, he is obviously too Sincere for that. I was trying to make this point that, in the higher branches of accountancy the House may rest assured that we do not pride ourselves on being purely what I may describe as first-class tickers. We go through our examinations and through a long and testing experience, getting a very definite understanding of commercial law, and from the nature of their work accountants have a fair knowledge of industries in which their clients may be engaged. Hon. Members who have supported the Amendment have said that the particular societies they had in mind were very anxious that the qualifications of those engaged in the audit of municipal corporations should be kept to the highest possible standard. We of course accept that, but the Amendment in the name of the hon. Member for Ipswich (Sir J. Ganzoni) seems to me to be rather unnecessary. Municipal corporations who now have an elective auditor whom they respect and upon whom they can rely, can under the Bill continue to engage him in his present capacity. They are not forced to give him up and take on a professional auditor. They are at liberty to continue to employ this estimable gentleman and, therefore, I cannot see why the first Amendment has been moved. All we say in the Bill is, that if they make up their minds to give up the elective auditor and not to have a district auditor they can take on a professional man.


Does it not occur to the hon. Member that an enlightened borough must in practice adopt the provisions of this Bill. As trustees of the public money they must take steps not to incur any unnecessary expenses in the matter of elections; no matter what has been the case in the past.


If they are enlightened boroughs then the Bill is going to give them further enlightenment. If they have been enlightened in the past they can go on being what they consider to be enlightened boroughs in the future. Dealing with the third Amendment, I find that that Amendment, together with the Amendment of the hon. and learned Member for Leicester East (Mr. Lyons), is dangerous in so far as it is very vague. In both Amendments the term "incorporated" is used. What is an incorporated body of accountants? It seems to me that that would refer to any body of accountants who incorporated themselves. Two or three of my hon. Friends and myself could go out of this House and we could form ourselves into a limited company, and then come back, and under the terms of this Amendment we should be eligible to carry out the professional audit of a large corporation like that of Birmingham or Manchester. It is inconceivable that the House can accept an Amendment which is so broad.


In the absence of the hon. and learned Member for Leicester East (Mr. Lyons) I would mention that he said that the present tense should apply, and no one could go outside to form such an incorporated society as the hon. Member suggests. The hon. Member, being the competent man he is, would never think of doing that sort of thing.


I do not want to speak at length, but I must deal with the point mentioned by the hon. Member, which is not in accordance with what the hon. Member for Leicester East said in answer to my question. He said that the Amendment certainly would apply to anyone who went outside and joined others to be incorporated under one of the Companies Acts, but that he could not conceive of any circumstance—mark the vagueness— which would make it possible for incompetent people to get together and to form themselves into such a society or body and get a job of this kind. But we have to accept the Amendment as it is in all its vagueness'. The last two Amendments on the Paper deal with specific" societies which wish to have their names added to the Schedule. As the House knows, the societies whose names are mentioned, except in so far as they come from Scotland, are those societies which have proved themselves before the Local Legislation Committee. That Committee is in charge of Bills of this kind brought forward by local authorities, and the Committee has had a long line of very competent chairmen. Let me quote the remarks of the present Chairman. He said: He could not accept the qualification of a body which had not proved itself, after due inquiry, to have sufficient qualifications to audit the accounts of a local authority. If the societies which are mentioned in the Schedule are the only ones which have proved themselves, before this very important Committee, to be fitted by their qualifications to audit the accounts of a local authority, we may very safely leave the matter where it is. Reference has been made to the Income Tax Acts and the attempt made in those Acts to define what an accountant is. As the definition stands it is apparently competent for anyone to certify Income Tax accounts for an Inspector of Taxes. I do not think that the House for a moment could confuse the type of work necessary to put together a statement of accounts for the local shopkeeper, the butcher, baker or candlestick maker, for the purpose of submission to an Inspector of Taxes (who is in a position to ask as many questions as he likes and usually does ask them) and carrying out the most intricate audit of one of the great municipal corporations. I submit that that was not a fair argument to use. What we have to do is to try to select to the best of our ability, to draw a line—and the drawing of lines is always difficult. The Schedule attached to the Bill gives us a sound criterion to go on. We want to find out who are really competent. It is not a matter of being snobbish or attempting to draw a ring round a certain number of associations. It is a matter of common sense and of accepting some form of well-known classification.

I would like to meet the point which was made against some of the older members of the oldest societies, that is to say, the Chartered Society and the Incorporated Society. If I remember rightly, it was said that some of the members of these societies had obtained their positions without passing any examination. That is true in a number of cases. If I may be personal, I would say that my father became a member of the Institute of Chartered Accountants without passing an examination. But he is 81 now and when he got in it was at the commencement. Many others of similar age at the same time got into these old societies because they were the pioneers. They could not very well set examinations for themselves. But the point w as made that these gentlemen, having become members of their Societies, took unto themselves other undesirables. Of course that is strictly against the facts of the case, because no chartered accountant, no member of the Institute, is allowed to practise as a chartered accountant with anyone who is not a chartered accountant. At the present moment I do not think there are one per cent., or a half per cent., or even a half of one-half per cent. of members of the Institute who have not passed their examinations, and those examinations are not a matter to be taken lightly.

One hon. Member said to-day that this Bill is supported by the Government. I understand that if one mentions the fact that a Bill brought forward on a Friday has Government support, nearly everyone immediately votes against it. I hope that that will not be the case to-day. I appeal to the House very Sincerely to give the Bill support, whether the; Government support it or not. I think it is an excellent Bill, and that if left in its present form it will perform a very useful function.

1.24 p.m.


I must confess that I am in a quandary as to what I shall do if this Amendment; is forced to a division. I wish that the hon. Gentleman who moved the Amendment were in his place, because I want; to put some questions to him. I notice that there are in the House a number of gentlemen who know very much more about auditing and accountancy than I do. I ought, however, to have prefaced that remark by saying that it is too commonly assumed that because we are Labour Members we do not know anything about finance and accountancy. Some of us are not quite as ignorant as that. I do not quite understand the meaning of the Amendment: a body of accountants established by charter or under the provisions of an Act of Parliament. I interrupted the hon. Member in whose name this Amendment stands as to whether, if the Amendment were carried, the societies in this list would still be included. The hon. Member for Darlington (Mr. Peat) shakes his head. We ought to know definitely before we vote what are the societies that are "established by charter or under the provisions of an Act of Parliament." Do I take it that the Institute of Chartered Accountants in England and Wales is included?




The hon. Gentleman the Member for Gateshead (Mr. Magnay) I understand knows something about accountancy and his view is that they would be included if the Amendment were carried, but perhaps the promoter of the Bill will be able to enlighten us more definitely on these points. Then there is the Society of Incorporated Accountants and Auditors. I have the impression that the Institute of Chartered Accountants was the first society of its kind in the country and, if I may say so as a layman, it has always given me the impression of being the superior organisation of the lot. There are hon. Members I know who will challenge that statement but I do not think they are entitled to challenge me when I say that that is the impression which I have gained. We have to ask ourselves, first, are these two organisations to be included if this Amendment is carried? I think probably those two would be included.

1.28 p.m.


May I intervene to say that I hope the hon. Gentleman will be able to persuade his friends upon this matter. I understand that his Leader has expressed a determination to vote for one of these Amendments, and I believe that if the Amendment of the hon. And "learned Member for East Leicester (Mr. Lyons) is carried in its present form, the Society of Incorporated Accountants and Auditors would automatically be excluded. I believe the same remark would apply to the Society of Accountants in Edinburgh. I am not sure as to the Institute of Accountants and Actuaries in Glasgow but I rather think they would come into the same category and also the Society of Accountants in Aberdeen. My hon. Friend always stands up for his own nationality and surely he will forgive me for saying that if not a Parliamentary representative of Aberdeen I come from an Aberdeenshire family and as such would not willingly desire that result.



Perhaps it will be for the convenience of the House if I state just what the position is in regard to the3e Amendments. My hon. Friend is quite right in saying that if this Amendment means the present tense and does not apply to the future at all, the Society of Incorporated Accountants and Auditors would be excluded. If this comprehensive Amendment is passed in its present form it means that any number of persons in the future could incorporate themselves and register themselves under the Companies Act and that would bring them under the provisions of the Measure. Then of course anyone could do that—my hon. Friend and I could do it—whereas if it is limited, these important bodies are excluded.



Mr. DEPUTY-SPEAKER (Captain Bourne)

I must remind hon. Members that we are not now sitting in Committee, and we cannot carry on a Debate with these constant interruptions.



I am glad of your protection, Captain Bourne, but the Parliamentary Secretary has cleared the atmosphere a great deal by his statement. In principle, I want the auditors who are to operate under this Measure to be efficient and competent men but I would not like to vote for an Amendment which would exclude competent men simply because they had not yet been admitted to the right type of society. I am glad to see that the hon. Member for East Leicester (Mr. Lyons) is now in his place. When he began his speech I was inclined to vote for his Amendment but if I am correctly informed that it is an excluding Amendment, then I shall be compelled to vote against it.


I should like to know by whom my hon. Friend has been informed that my Amendment is an excluding Amendment?


I have been so informed on the best authority namely that of the Parliamentary Secretary to the Ministry of Health. He has informed us definitely that the Society of Incorporated Accountants and Auditors would be excluded if the hon. Member's Amendment were carried.




We cannot have these constant interruptions.


No, the hon. and learned Member must not irritate me in that way.


On a point of Order. May I be allowed to say that I entirely dissent from what has been suggested?


The fact that the hon. and learned Member dissents does not make his point of view correct and I must on this occasion adhere to what the National Government say on the subject. I do not believe all they say, but I think they are correct on this point. The Parliamentary Secretary suggested that if the hon. Member's Amendment were carried he and I—I want the House to note that—could set up a company of auditors and accountants without any qualification whatever and that we could be elected as auditors to a great municipality. That is about the most monstrous suggestion I have ever heard. I was beginning to wonder whether the hon. Gentleman's suggestion that he and I could do such a thing was a sort of indication that we should form a company. I understand the Parliamentary Secretary is quite competent to audit the policy of any municipality. If the Leader of the Opposition were here now I believe I should be compelled to cross swords with him on this Bill. After all this is a private Member's Bill, and every Member is entitled to express his own view upon it, and I am giving my own personal opinions.

The right hon. Gentleman the Leader of the Opposition made the statement that because Government auditors are entitled to determine policy, he hardly thought qualifications and competency for auditing and accountancy mattered very much, but however competent a man may be in auditing the policy of a municipality, he would be a very poor auditor indeed unless, to start with, he know something about accountancy. I am afraid that a goodly number of per- sons in this country have never yet understood the importance of accountancy. If the accounts of firms and individuals in this country had teen properly kept and audited, we should not have had the tragedies in the law courts that have been reported in the Press during the last few years. The other day we actually passed a Bill compelling every solicitor to keep separate banking accounts for himself and for his clients. That meant, in fact, that Parliament had come to the conclusion that the solicitors of this country, although learned in the law, had not the remotest conception of how to keep their own accounts properly. I say, therefore, that I am not going to vote for an Amendment which means that people who are competent to audit will be excluded.


indicated dissent.


The hon. Member for East Leicester shakes his head, but I must point out to him that there are hon. Members here, such as the hon. Members for Eccles (Mr. Potter) and Faversham (Mr. Maitland) who are, I believe, well versed in accountancy and know as much about it as the hon. Member knows about the law; and I pay my tribute to him by saying that that is a great deal. They say—and they ought to know—that the Amendment proposed by the hon. Member is an excluding Amendment.

We have dealt with this Bill before, and we have included societies of reputation. We have brought in the society from Aberdeen, and that is saying a lot. I have only one objection to bringing Scotsmen into this Bill. I am sure that, proportionately, there are more Scotsmen in good posts as accountants and auditors in England than there are Englishman in Scotland. I have therefore some hesitation in voting for the inclusion of the Aberdeen and Glasgow societies. I ought to add, of course, that that is nothing new, because, proportionately, there are more Welsh politicians in England than there are English politicians in Wales. That is because of the quality of the goods,, and the English people know a good thing when they see it.

To come back to the doubts that I entertain as to what we on this side should do, I am rather inclined to advise my hon. Friends—they do not take my advice on issues like this very often—to vote against the Amendment and to let us have the list as already stipulated. There is one thing in favour of this list, after all, as against the Amendment. Every member of every one of these societies will know exactly where he stands, whereas if you put in the words of the Amendment, and say a body of accountants established by charter or under the provisions of an Act of Parliament, there is not one of them who will know whether the society of which he is a member falls within that category. I appeal to the House to vote against the Amendment.

1.39 p.m.


The Leader of the Opposition said he would support the Amendment, although it was somewhat wide. It is just because it is so wide that I hope the House will not accept it. As the Parliamentary Secretary to the Ministry of Health has pointed out, if it were passed, one of the oldest societies in the Kingdom would be ruled out. But it is because of those who would be included that I think the House should turn down the Amendment. It would be perfectly competent, as has been pointed out, for any body of people to form themselves into a limited company and enrol anyone whom they wished as a member; and may I point out that one of those bodies which, in a later Amendment, is suggested for inclusion is only a small body, a company limited by guarantee, with some 300 or 400 members? I believe there are many members in that company who are well qualified to do the work, but might I also point out that the qualifications for membership in that company are very slight? In order to be an associate, a man need have been serving as an accountant for only six years, and although the executive council may require him to pass an examination, on the other hand it may not. If that company wishes to grow, which presumably it does, would this not be an excellent opportunity for it to enrol in its ranks everyone who wished to call himself an accountant and to become eligible as a borough auditor under this Bill? You would have all the artisans, miners, and others who are at present elective auditors at once applying for enrolment in that company, and I think it would be quite natural for the company to say, "We want to grow; we want to be a big body. Come along. You have been in some degree practising as an accountant."

The hon. Member for Ipswich (Sir J. Ganzoni) referred to the case of a man who had been a borough auditor for 15 years, and he said that that man, out of sympathy, should be allowed to continue; but if there should be sympathy for that man, why should there not be sympathy for others who are also exercising the functions of borough auditor? In my own town we have a miner. Would anyone say that a miner is a person fitted to be the auditor of complicated accounts? We have a town council which is just on the verge as to whether it shall go Socialist or continue moderate. Would not sympathy be extended to that accountant, so that he could continue? The same argument would obtain in many other parts of the country, I am sure.

This Bill is put forward in order that we may get men who are well trained in the profession of auditing and accountancy to do this very responsible work. The list is quite a long one. One of them is a limited company, but it has been in existence for some 25 years and has a large membership, and there is no doubt that it is more exacting in its requirements as to examinations than some companies which have been more recently formed. The prospect of the enrolment of anyone as an accountant is extremely dangerous, and I trust the House will turn down all these Amendments the object of which is to extend the Schedule which is attached to the Bill.

1.40 p.m.


I rise to support the Amendment, and also to say something with regard to the Amendment on the Paper in the name of the hon. and learned Member for Moss Side (Sir G. Hurst) and myself, to include in the Schedule the British Association of Accountants and Auditors, Limited. I have to apologise for his absence to-day. He expected to be here and would, of course, have done a great deal better than I can hope to do, but he is engaged at the Privy Council and cannot be here. It is some weeks Since I put down my Amendment, and as I feel very strongly on the matter, I was not proposing to speak on this Bill at all, because it affects my bread and butter and a little marmalade as well, and my very living. I do not think that it is nice of any Member of Parliament to speak regarding the business or profession which he follows and by which he makes his living. I have, however, the example of friends of mine, who are chartered accountants, who have spoken to-day, so that I can speak with a good face looking everyone straight in the eye and without any apology. By the Amendment which is down in the name of the hon. and learned Member for Moss Side and myself we have sought to include the British Association of Accountants and Auditors, Limited. This Association was formed ten years ago for precisely the same reasons as bodies which are named in the Schedule. It has been said in the discussion to-day that the various institutes and incorporated societies were started in the same way as the society for which I am speaking was formed at Manchester. It has 179 fellows and associates who are in public practice, and 111 who are practising accountants as managing clerks, chief clerks and senior audit clerks and audit clerks. It has altogether 406 members engaged in the profession of accountancy.

I can compare those figures with the membership of the London Association of Accountants Limited, which is one of the bodies mentioned in the Schedule. It has been said that such bodies as the one for which I am speaking are not eligible to be included in the Schedule, and one is compelled by sheer self-defence to say certain things which must be said to justify my Amendment. In the evidence before the Board of Trade Committee, which sat under the presidency of Viscount Goschen, statistics were given showing that in 1929 the membership of the London Association numbered 2,894, and that 60 per cent. of them had passed the examination. Therefore, 1,057 had not passed the examination. It is not therefore in their mouths to complain about other bodies and to profess that they are competent to come within the four corners of this Bill when they have such a large number of their members in precisely the same position as members in our Association. I have here the year book of the Association of Accountants, which sets out its objects and aims. These are, shortly, to promote, or to join any other bodies of accountants in promoting, any Act of Parliament in the interest of the accountancy profession; to provide for a better definition and protection of the profession and for the supply of thoroughly qualified accountants; to protect and promote the mutual interests of members. Every care has been taken to see that these objects have not been abused. We have had a 1,000 applications and have refused 600.

Another reason for the Association is the existence of Section 137 of the Income Tax Act of 1918, which states that no person shall be qualified to be appointed unless he has been admitted a member of an incorporated society of accountants. One of the conditions of membership of our Association is that a man must have been a senior clerk or in practice for ten years, and character and ability are taken into consideration. It was in order to come within that Section of the Income Tax Act that, out of sheer self-defence, we had to incorporate the Association. The object was not to countenance any ill-practices or to make ourselves a body that could not be justified; it was formed out of sheer self-defence. I was sent for to give evidence before the Board of Trade Committee, and I sat for an hour to be questioned. For an hour I had to give reasons for the faith that was in me, and it was no easy job. The report of the Committee was decisive. After ten days hEarlng of all sorts and conditions of accountants, chartered accountants and others, Chambers of Commerce, and members of corporations, the Committee came to a unanimous decision, namely: We can only conclude on the evidence before us that for the most part the general public is not influenced or misled by the fact that an individual describes himself as an accountant but bases its selection of an accountant principally on personal knowledge or local reputation. It has been said more than once this morning that any three or four people might form themselves into a society and come within the four corners of the Amendment proposed by the hon. and learned Member for East Leicester (Mr. Lyons), and one would think that, having formed it, that is all that one would require to do to get the business. Surely we must give credit to the corporations to have some common sense and some choice in the matter. All other things being equal, who is likely to get the job of auditor of a corporation? Would he be a chartered accountant, or a member of the Incorporated Society, or a member of one of the smaller bodies like the one about which I am speaking. In almost every case the chartered accountant or the incorporated accountant will get it. It is not my purpose to disparage the prestige of those old societies. No one can do that but the members of the societies themselves. They have had unfortunate happenings within their membership, and some of the most ghastly cases we have had have been connected with members of these old bodies.

The fact that a man is a member of one of these old bodies does not certify that he is first cousin to the Archangel Gabriel. It does not mean that he is a man of absolute probity. Any man can slip from grace, and there have been unfortunate cases of friends of mine who have slipped from probity and been expelled with ignominy from their public positions and from membership of these societies. Membership of any society is not a guarantee of probity. We say that it is not within the provInce of this House to inflict hardship upon members of any profession who for years have carried on to public satisfaction the work which they have undertaken to do. The Report says further: If the practice of the profession of accountancy is restricted to those who comply with that high standard, considerable hardship will ensue in more than one direction. On the evidence before us we are unanimously of the opinion that it is not desirable to restrict the practice of the profession of accountancy to persons whose names would be inscribed in a register by law. That is what this Bill does—restricts those who are making their livelihood now in the way they have done for years past. I am sorry to say that grave hardship has been inflicted upon many members of our association. I have a letter from a man who has been in the accountancy profession for 20 odd years. His partner was a chartered accountant. Two or three years ago his chartered accountant partner died. This man had been doing work for a municipal corporation for 20 years, boy and man, quite competently, and after his partner's death his certificate was accepted by the corporation. They could do nothing else. They knew no one else. They never saw anyone else doing the work. Yet this man, because he was not a chartered accountant had ipso facto to retire from the position of auditor to that corporation. The vacancy was advertised, and someone else was put in (his place, although the council knew that for 20 years he had been quite competent to do the job and could continue to do it. That is a hardship which we say to the House—and I could not appeal to a fairer jury than the Members of this House— ought not to fall upon any honourable member of a profession, such as that man had shown himself to be.

There is another point which I am compelled to make though I did not intend to put it forward. Some members, I suppose in their ignorance of the profession of accountancy, have said things derogatory of the small associations. In this House this morning I have met two men, members of my association, who have chartered accountants and members of the Incorporated Society working for them. I myself have had chartered accountants come to me for employment— smart, brilliant young chaps. I would be a chartered accountant if I could be. I have taken care that my son is one. It was not possible for me to become a chartered accountant 44 years ago, when I went to work at five bob a week as the eldest son of four of a family of a working man. It has been a long hard row to harrow: a very stiff, hard climb. I appreciate the status and the prestige of chartered accountants, but if it is possible for a newspaper reporter to become Solicitor-General and to sit on that Front Bench, if it is possible for a newspaper reporter to become Judge of the High Court, the head of the justices of this land at the present moment, it ought to be possible to have post-graduate courses in this profession, so that a man who was competent and adaptable in his profession should have all the possibilities open to him.

Many of the men for whom I am speaking have 20 or 30 years' experience, and yet we are proposing to make this work a monopoly. I know who is behind this. The Treasury. Who are the Treasury? They are my servants. I am the predominant partner. [An HON. MEMBER: "Hitler"]. The Members of this House determine the policy of this nation, and I will never agree to anyone sitting in any office in Whitehall dictating to me or to the other Members of this House what policy we shall follow. The Treasury must come to heel. We will determine the policy. I will prove my case quite conclusively from this very Bill. In Clause 1 it says: The accounts of the corporation and the accounts of the borough treasurer and other officers of the corporation shall instead of being audited by borough auditors in accordance with the Municipal Corporations Act, 1882, be audited by district auditors. Now who are district auditors? Are they chartered accountants? Not they. Members of any body scheduled to this Bill? Not they. But is there a more competent body than these district auditors? Does anyone with any experience of municipal life know of a better class of men, more highly trained, more competent, more sound in finance than these district auditors.? Not one of them, so far as I know, and I have verified this from the Treasury officials under the gallery, is required to be a chartered accountant or a member of any of these bodies. They are competent to do the work, however, because they are men who are trained in the work and have gained their knowledge by hard experience and by evening class studies, as mine was—by that and by getting the confidence of companies. I have had better men than myself working for me. I have a chartered accountant and two incorporated accountants working for me, far smarter men than I am in figures, but the people want to see me. It is a case of personality, it is a question of trust, of the word of the man, of the character of the man. That comes first—character; then ability, and-then there is the grace which completes the whole structure.

I suggest that the very fact that district auditors are not expected to be chartered accountants or members of any of these other bodies has dished the whole case against the Amendment so excellently put forward by the hon. Member for East Leicester (Mr. Lyons). I dare the Front Bench to leave this question to the free vote of the House, as they ought to do. We have had far too much of private Members' Bills being supported on the quiet by the Govern- ment Whips. If it is a private Member's Bill, let it be a private Member's Bill, and let the Treasury Bench do what they ought to do—keep the ring and see fair play. That is all that; they are entitled to do. Let the free vote of the free Members judge of the facts with that sense of fair play which is always dominant in this House. Let them say what they are going to do, and with that free vote I will, on behalf of my friends, be quite content.

2.5 p.m.


The hon. Member who has just sat down has been banging with extreme ferocity against an open door. He should know that this is a private Member's Bill and that the Government Whips have nothing to do with it. The private Member has to organise support in favour of his own Bill. The hon. Member need not feel worried on that score. The discussion has ranged over a very wide field this afternoon, and we have had many speeches, both in support of and against the Amendment. The enthusiasm in favour of certain of the Amendments was rather lukewarm, but I do not think that hon. Members who have spoken in favour of the Amendment which is before the House have in any way proved their case. It is obvious that it is impossible to pass a Bill through Parliament without unless someone somewhere in the country is occasioned some small hardship. I defy anybody to think of some Measure that does not cause some small hardship. It is possible for an hon. Member to say that if the Houses of Parliament passed an Act bringing about the millennium that would not cause hardship, but I rather think, in that case, that the gentleman who writes "What the Stars Foretell" in the "Sunday Express" would be out of a job, because there would be nothing to foretell. I think the same applies to this Bill.

I should like to discuss these Amendments one by one. The first was moved by the hon Baronet the Member for Ipswich (Sir J. Ganzoni). It is perfectly clear what that Amendment means. It is designed to allow the existing elective auditors, if a borough adopts a professional audit, to remain auditors for their borough. I should like to remind the hon. Baronet and the House that there is nothing to prevent that borough from remaining on the elective audit system, and re-electing accountants who have given good service for a very long time. If those accountants have worked for that borough for a very considerable period and given complete satisfaction, presumably the council of the borough will con-tinue to employ them, and will simply remain under the elective system of audit. That seems quite obvious. On the other hand, if they are not satisfied, or if they wish for a change, they will either adopt the district audit system, or the system of professional audit as provided for in this Bill.

Surely it is only right to leave it to the boroughs to decide whether they do or do not wish to adopt the professional audit. Under this Bill, which is purely permissive, the boroughs can continue to go on with the elective system as before, they can adopt the district audit, or they can adopt the professional audit. The Amendment to which the hon. Baronet has put his name reads: Provided nevertheless that where a person, being a member of a registered society of accountants, is, at the date of the passing of this Act, holding the office of elective auditor. I do not know quite what the hon. Baronet means by the word "registered," because there is no register of societies of chartered accountants. Some of them have been incorporated under the Companies Act and one of them has received a Royal Charter. Suppose that this sort of thing were to happen. Suppose the hon. Member for Ipswich and myself had been acting as elective auditors in a borough for some years, and that we had been warned that this Bill was likely to be passed into law. We might between ourselves, as has been pointed out this afternoon, decide to form a society, and if we complied with company law we should be incorporated, and we should become a society within the meaning of this Clause.

What is the next step? We immediately say to the borough: "You can have a professional audit now, if you like. We have no objection. We are your elective auditors, and you can appoint us, the newly incorporated society, as your auditors, and we shall be professional." Naturally, being a society consisting of two or three people, we should take a very high-sounding title like the Incorporated Association of Certified Audit Accountants. "What happens then? We are professional auditors, and we have achieved sanction from a certain borough whose accounts we audit. Then we could immediately go to the Registrar of Friendly Societies and say to him:" The important borough of Hitlerbury, or whatever it may be, has adopted us as professional accountants. Surely there is no reason whatever to prevent you also giving us a job as professional accountants to the building societies, or provident societies of various kinds. "My hon. Friend and myself, apart from natural acumen, business ability and charm of manner, have nothing particular to recommend us as qualified chartered accountants.

We should then, if this Amendment were adopted, be in the happy position of being able to be qualified. Nobody could say us nay, we being borough auditors of an important borough, and we should be perfectly qualified to be the auditors for building societies. We could go to the Colonial Office when there was a question of an appointment of a district auditor for the district of Borrio Boola Gha. We could apply for that very onerous position, on the grounds again that we had been recognised as accountants for a very important English borough. That is the kind of thing that may happen if this Amendment goes through. I admit that I have put an extreme case, but it is a possibility.

The hon. Member for Norwich (Mr. Hartland) has an Amendment which is of a similar nature. He is asking that the elective auditors who are at present in the employment of a borough as elective auditors, whatever their qualifications may be, provided that they are Members of some sort of society and, are publicly and efficiently carrying on the business of accountants, may be considered adequate professional auditors. I would like, with the leave of the House, to read part of that Amendment in the name of the hon. Member for Norwich: a member of an incorporated body of accountants, is at the date of appointment publicly and efficiently carrying on the business of an accountant. I do not know what the expression "publicly" means. In the words of the Road and Rail Traffic Bill, it would mean that the gentleman in question was plying for hire or reward. In that case I should imagine, if it were a lorry, that he would get an "A" licence. As it is, I suppose that the expression "publicly is simply intended to mean that he is known to be publicly carrying on the work. It is an extremely wide term. You have only to put up a brass plate, and you are publicly carrying on business. You may have only the job of auditing the accounts of one borough, and you are publicly carrying on business. Then as to the word "efficiently" who is to decide whether a man is carrying on the business of accountancy efficiently or not? An Amendment of that kind so widely phrased cannot possibly be accepted. The same remark applies to that Amendment as to some of the other Amendments, that it has the very unfortunate effect of very much widening the scope of the Bill.

My hon. Friend the Member for Norwich said, would it not be possible for a society such he mentioned to make out its case before the Local Legislation Committee in the future as in the past? Of course the functions of the Local Legislation Committee as regards audit, if this Bill becomes law, will cease to exist, and consequently you could not put a case to them. Another point my hon. Friend made was this: Could not the Government—of course, I cannot say anything about that—when introducing a Bill for the codification of local government law, give some guarantee that the position of those societies which are now excluded from this Bill would be safeguarded, or, at any rate, not prejudiced? It seems to me that the Government could not possibly give such a guarantee. No doubt the Parliamentary Secretary will have something to say about that. It is obvious that they could not give a guarantee, because many Members on the Committee might take different views, and when the Bill becomes law, what will be the outcome of it, as Mr. Pepys used to say, "God knows!"

There are one or two other Amendments which are somewhat more specific, but before coming to the specific cases, I should like to mention the Amendment so ably put forward by my hon. and learned Friend the Member for East Leicester (Mr. Lyons). If I may say so with all respect, though I had very little time to examine the Amendment, because I think it was only handed in last night, I am rather inclined to think that my hon. Friend has not had very much more time to make it out than I have had to examine it. It is really very remarkable. He wishes to make the audit of boroughs available to a body of accountants established by charter or under" the provisions of an Act of Parliament. Unless I am very much mistaken, the only body of accountants who would be allowed to audit the accounts of any borough if that Amendment were accepted, would be the first society I have mentioned in the Bill, which is the Institute of Chartered Accountants in England and Wales. I dare say he has good grounds for banning the other societies, but I entirely fail to see how he can make out his case. Perhaps after the Debate is over he will explain to me how he came to these very remarkable conclusions.

The attitude of Parliament on the question of including or excluding certain societies has been very clear for many years. It has always taken up the line that you must be extremely strict as to what societies you allow to audit the accounts of local authorities, and it has been the practice to put such eases for consideration by the Local Legislation Committee. There was a case not so very long ago, in 1914, and another case quite recently, in which the Chairman of the Local Legislation Committee, on the question of a Corporation Bill, said that the Committee would not be prepared to give absolutely unlimited power to any corporation which has an audit by any person they selected, that there must be a standard of some sort, and in that case the Committee did not see their way to accede to the request of the petitioners.

The two societies at the head of the list in the Schedule were selected for the auditing of public accounts as long ago as 1889, and afterwards, in the course of years, various other societies petitioned, and in all cases they were refused admission until the year 1930, when the London Association of Accountants was admitted, and later the Corporation of Accountants. In each case they had to make out their case with extraordinary care, and prove that their qualifications were of a very high standard. There was another case brought forward by the hon. Member for Ipswich who wished to include the Institution of Certified Public Accountants, and I gave a promise to my hon. Friend the hon. Member for South Croydon (Mr. H. Williams) that I would look into the case. Again, the Central Association was considered by the Local Legislation Committee in 1928, and in summing up the evidence which had been produced before the Committee on the Gloucester Corporation Bill, the then Chairman, Sir Lynden Macassey, K.C., said it was obvious that the society was not a fit and proper society for the purpose in question.


Did I understand the hon. Gentleman to say that that was the then Chairman.


The claims of the Central Association were very carefully considered by the Local Legislation Com-mitte in 1928, and rejected, and Sir Lynden Macassey. K.C., summed up as I have said. I am not quite sure whether he was the Chairman.


The point I wanted to make was that he was, of course, a distinguished leader of the Parliamentary Bar.


I was rather under the impression that he was Chairman. If I was mistaken, I withdraw. Anyhow, the case, after it had been heard and summed up, was turned down by the Local Legislation Committee.

In conclusion, I would point out that all these Amendments tend to the same end, namely, to weaken the Bill. In my opinion, the Bill as it stands is very strong, and it ought to be strong. If boroughs are to be given the option of a professional audit, every care should be taken that that professional audit is the soundest possible, and that only the very best societies are admitted. Those societies which are on the Schedule have already made out their case before the Local Legislation Committee of the House of Commons, which I think we shall all admit is a very respectable and careful body. The other societies which it is proposed to admit have not made out such a case. I am sorry that I cannot accept the Amendments which have been put down by various hon. Members. That is not through obstinacy: it is not because, as has been suggested, I am told not to do so by the Ministry of Health; I have really carefully examined the situation inside out for two or three months, and have come to the conclusion that if loopholes are allowed for the admission to the Schedule of societies which have not the very highest qualifications, and have made out no case before the Local Legislation Committee, it would undoubtedly weaken a Bill which I think is, in the opinion of most Members of the House, an extremely useful measure of reform.

2.27 p.m.


The House is much indebted to the hon. Member for Penryn and Falmouth (Mr. Petherick) for the very illuminating speech which he has just delivered, and in which he has cleared up many points which required clEarlng up. In view of his exhaustive observations, I do not propose to say very much, but I want to refer to one or two points. The Amendment of the hon. Member for Ipswich (Sir J. Ganzoni) is only of a temporary character, in order to 'safeguard the position of those who hold the office of elective auditors at the time of the passing of the Act. I do not know what the position of an elective auditor is in other parts of the country, but in the borough of Walsall, which I have the honour to represent, we have, under the Municipal Corporations Act, two elective auditors. In accordance with a decision of the Council many years ago, they do not receive any salary, and for many years it has been very difficult indeed to fill these positions. The Corporation has had to press into its service for this purpose men who were not qualified in any way for auditing, but simply did it in order to oblige the Corporation. They went through the accounts in a rough way, put their names to them, and that was the end of it. I am bound to say that in the last year or two there has been a slight difference, but the men appointed are not by any means qualified for auditing, and, therefore, it seems to me rather extraordinary that we should be asked to consider this Amendment. I hope the House will take the advice of the hon. Member for Penryn and Falmouth, and will reject the Amendment.

With regard to the Amendment of the hon. Member for Norwich (Mr. Hartland), I do not like the qualification: being a member of an incorporated body of accountants, is at the date of appointment publicly and efficiently carrying on the business of an accountant. We have heard a great deal about the desire to open the door as much as possible, but this Amendment shuts the door, because it compels a man who is appointed to be actually working as an accountant. I think that that is a mistake. There are many men fully qualified for this work who may not at the moment be practising as accountants, although they have all the qualifications of an accountant, and, therefore, I think that this Amendment also should be negatived. I cannot say anything about the other Amendments. I am all in favour of widening the Clause consistently with the inclusion of only competent men who really know their job and can be relied upon to carry out the work. I hope the House will take the advice that has been given on this matter by the hon. Member for Penryn and Falmouth.

2.31 p.m.


Several questions have been put about the attitude of the Government to this Bill, and perhaps the House will allow me to say shortly what that attitude is. This is a private Member's Bill, and the House is, of course, at liberty to amend or reject it as it likes, but it affects, not only my own Department, but also the Treasury and the Board of Trade, and, before the House takes any vote, I hope I shall be allowed on behalf of my Department to say that, if the Bill is altered in certain directions, any interest that we may have in it will be entirely changed. Of course, as I have said, the House can amend or reject the Bill as it likes, but everyone who votes should know that the alteration of the Bill on the lines suggested by some of my hon. Friends will, in our view, change the Bill from a very useful little Measure into one that has elements of danger in it.

The object of the Bill, as was stated by the hon. Member for Penryn and Falmouth (Mr. Petherick), is to improve the whole status of municipal accounting, and I should like to congratulate him on the way in which he has sponsored the Bill. He has been very reasonable. He accepted several Amendments in Committee, but I hope he will not. accept any more. After all, everyone here is agreed that the object of the Bill is a good one. I think everyone agrees that the elective method of auditing is a bad method, and the Bill simply says that, if any borough is dissatisfied with the present system of audit, it can either adopt district audit or go in for a professional audit, but, if it takes a professional audit, it should be quite sure that its auditors are appointed from some society that has been recognised by long tradition and examination, and whose status is beyond question.

Parliament has always taken the line, I think wisely, that questions of status must be left to the Local Legislation Committee. We cannot, in this debating Chamber, hear counsel arguing this way and that. The only body that has been able to do that is the Local Legislation Committee, who have, as my hon. Friend has pointed out, been able to hear these societies, and, if it has been satisfied that their examinations were of a sufficiently high standard, to admit them. That does not mean that a society which is not on the list is a disreputable society. We all know that there are men of considerable ability outside the societies in the Schedule. It does mean, however, that the status of all the societies in the Schedule has been very carefully weighed, examined and approved, and, as far as the Ministry of Health is concerned, we can recommend any local authority to appoint as professional auditor anyone belonging to any of the bodies whose names appear in the Schedule.


Does that mean that if a society has not been examined by the Local Legislation Committee there would be no power whatever to extend the Schedule by adding its name? I rather think, from what has been said, that the Schedule cannot be extended.


It has been extended from time to time. I have here the programme of the International Congress on Accounting, at which I see Lord Plender is President. The sponsors of the Congress, curiously enough, or perhaps not curiously enough, are the bodies mentioned in the Schedule. Therefore, I think the hon. Member has chosen rightly. There is only one addition, an Irish Society, and the Bill does not apply to Ireland.


Does that mean that in the view of the Ministry of Health no one who is not a member of one of these bodies is fit to be accepted as an auditor?


We take the view of the Local Legislation Committee, who have examined the status of the examining body—


It is not a question of status. I am not asking whether these people are all that you say they are, but whether there is no one outside the members of these bodies fit to do the job.


That may be, but anyone can form a mushroom society. All those who have, in fact, been approved are good enough to audit the accounts of local authorities. The hon. Member for Ipswich (Sir J. Ganzoni), not for the first time, has ably pleaded the case of a constituent of his, but I am very much afraid that, if this Amend-were accepted, it would amount to this, that on the one hand Parliament says the present system of audit is inefficient and must be changed, and on the other hand, the hon. Gentleman says that if you change it you must still keep a man who is elected. You cannot have it both ways. Perhaps I shall satisfy my hon. Friend in this way. If Ipswich is satisfied with its present system of audit, obviously if they have a good man they will stick to him; I imagine that his tenure of office is perfectly safe, and one may assume that Ipswich will exercise an equitable jurisdiction in the matter. But, if you admit the principle that you can, in fact, appoint a man because he has been elected an auditor before, irrespective of his qualifications, you will bring back the dismissed rate collector, and so on, and you will be tEarlng up the whole Bill.

It is really not fair to the members of these societies if you are going to add to the schedule ad nauseam. I do not say a word about the other bodies outside, which may be very reputable bodies, but I honestly do not think it is a reasonable line to take, when people give up years of their life, pass examinations, join one of the old societies which have satisfied the Local Legislation Committee that they can audit these very compli- cated accounts, to let any man join any society without examination and then say he can audit the accounts of a local authority. That is not, as I say, a reasonable line to take and I hope the House will not take it. It does not follow that a man who is competent to look after my Income Tax is competent to audit the very complicated accounts of a local authority.

The Amendment of my hon. and learned Friend the Member for Leicester (Mr. Lyons) would rule out three societies that are mentioned in the Schedule, including the second senior society in the land while on the other hand, it would mean that he and I and the Leader of the Opposition could be practising accountants and enabled to undertake professional audit for a local authority. It really undermines the whole basis of the Bill. You must take a stand on the strongest ground that you can, and my hon. Friends have chosen a fair ground to stand on. The Bill is an honest attempt to improve auditing in the boroughs, where it needs improvement, and I hope that, in the attempt to improve it, my hon. Friend will not accept Amendments which will defeat the very object with which he has introduced the Bill.


How do you differentiate between the requirements of an auditor in Clause 1 and in Clause 2? In Clause 1 a district auditor need not be within these bodies. How comes it that under Clause 1 a district auditor is quite competent, though not a member of any of these bodies, to do the work and under Clause 2 he is not?


A man does not become a district auditor without practice. Under the Bill, if an authority does not like the district auditor, it can have a professional auditor.


Will the hon. Gentleman give an answer to the question? Is it not a fact that the district auditor need not be a member of any of those bodies, and that most of them are not?


That is so, but he has to have other qualifications.

Question put, "That those words be there inserted in the Bill."

The House divided: Ayes, 43; Noes, 109.

Division No. 183.] AYES. [2.57 p.m.
Adams, Samuel Vyvyan T. (Leeds, W.) Fuller, Captain A. G. Peto, Geoffrey K.(W'verh'pt'n, Bliston)
Agnew, Lieut.-Corn. P. G. Grattan- Doyle, Sir Nicholas Pickering, Ernest H.
Anstruther-Gray, W. J. Grimston, R. V. Potter, John
Aske, Sir Robert William Hall, Capt. W. D'Arcy (Brecon) Raikes, Henry V. A. M.
Astor, Viscountess (Plymouth, Sutton) Hamilton, Sir R.W.(Orkney & Zetl'nd) Ramsay, T. B W. (Western Isles) '
Balfour, George (Hampstead) Hanley, Dennis A. Rankin, Robert
Banks, Sir Reginald Mitchell Hannon, Patrick Joseph Henry Ratcliffe, Arthur
Barclay-Harvey, C. M. Haslam, Henry (Horncastle) Rathbone, Eleanor
Beauchamp, Sir Brograve Campbell Hornby, Frank Held, William Allan (Derby)
Beaumont, Hon. R.E.B. (Portsm'th.C.) Howitt, Dr. Alfred B. Remer, John R.
Belt, Sir Alfred L. Hudson, Capt. A. U. M.(Hackney, N.) Robinson, John Roland
Bevan, Stuart James (Holborn) Hume, Sir George Hopwood Runge, Norah Cecil
Bird, Sir Robert B.(Wolverh'pton W.) Hurd, Sir Percy Russell, R. J. (Eddlsbury)
Borodale, Viscount Hutchison, W. D. (Essex, Roml'd) Rutherford, John (Edmonton)
Briant, Frank Ker, J. Campbell Rutherford, Sir John Hugo (Liverp'l)
Brocklebank, C. E. R. Leckie, J. A. Salmon, Sir Isidore
Brown, Ernest (Leith) Leech, Dr. J. W. Salter, Dr. Altreo
Brown, Brig.-Gen.H.C.(Berks.,Newb'y) Lovat-Fraser, James Alexander Shakespeare, Geoffrey H.
Buchan-Hepburn, P. G. T. MacAndrew, Capt. J. O. (Ayr) Smith, Bracewell (Dulwich)
Caporn, Arthur Cecil McCorquodale, M. S. Somerville, Annesley A. (Windsor)
Castlereagh, Viscount McEwen, Captain J. H. F. Soper, Richard
Cazalet, Capt. v. A. (Chippenham) McKie, John Hamilton Southby, Commander Archibald R. J.
Chapman, Col. R.(Houghton-le-Spring) McLean, Major Sir Alan Spencer, Captain Richard A.
Clarry, Reginald George Macpherson, Rt. Hon. Sir Ian Stewart, William J. (Belfast, S.)
Conant, R. J. E. Macquisten, Frederick Alexander Storey, Samuel
Cooke, Douglas Margesson, Capt. Rt. Hon. H. D. R. Stuart, Lord C. Crichton-
Copeland, Ida Martin, Thomas B. Sugden, Sir Wilfrid Hart
Craddock, Sir Reginald Henry Mayhew, Lieut.-Colonel John Summersby, Charles H.
Denville, Alfred Merriman, Sir F. Boyd Thomson, Sir Frederick Charles
Duckworth, George A. V. Mills, Sir Frederick (Leyton, E.) Touche, Gordon Cosmo
Dugdale, Captain Thomas Lionel Morris-Jones, Dr. J. H. (Denbigh) Ward, Lt.-Col. Sir A. L. (Hull)
Duggan, Hubert John Murray-Phillpeon, Hylton Raiph Whiteside, Borras Noel H.
Duncan, James A. L. (Kensington, N.) Nail-Cain, Hon. Ronald Whyte, Jardine Bell
Emmott, Charles E. G. C. Nation, Brigadier-General J. J. H. Winterton, Rt. Hon. Earl
Emrys-Evans, P. V. Nicholson, Godfrey (Morpeth) Womersley, Walter James
Erskine, Lord (Weston-super-Mare) Nunn. William Wood, Sir Murdoch McKenzie (Banff)
Evans, Capt. Ernest (Welsh Univ.) Palmer, Francis Noel
Foot, Isaac (Cornwall, Bodmin) Peat, Charles U. TELLERS FOR THE AYES.—
Fremantle, Sir Francis Penny, sir George Mr. M. Beaumont and Mr. Hartland.
Attlee, Clement Richard Joel, Dudley J. Barnato Remer, John R.
Batey, Joseph John, William Ross, Ronald D.
Broadbent, Colonel John Jones, Morgan (Caerphilly) Rothschild, James A. de
Cove, William G. Lansbury, Rt. Hon. George Sandeman, Sir A. N. Stewart
Crookshank, Capt. H. C. (Gainsb'ro) Lawson, John James Smith, Tom (Normanton)
Daggar, George Lunn, William Tinker, John Joseph
Davies, Rhys John (Westhoughton) Lyons, Abraham Montagu Turton, Robert Hugh
Edwards, Charles Macdonald, Gordon (Ince) Wallhead, Richard C.
Ganzoni, Sir John McEntee, Valentine L. Williams, Edward John (Ogmore)
Grenfell, David Rees (Glamorgan) Mainwaring, William Henry Williams, Herbert G. (Croydon, S.)
Groves, Thomas E. Parkinson, John Allen Williams, Dr. John H. (Llanelly)
Hall, George H. (Merthyr Tydvil) Price, Gabriel
Hicks, Ernest George Procter, Major Henry Adam TELLERS FOR THE NOES.—
Mr. Magnay and Mr. Wise.