The Labour party has launched a review of all financial sector regulators, in a bid to stop future Carillion scandals.
In a speech during the weekend (19 May), shadow chancellor John McDonnell said “the accounting and the pensions regulators have once more failed to do their jobs”.
Last week (May 16), the Work & Pensions and the Business, Energy & Industrial Strategy (BEIS) committees published their joint report on the collapse of Carillion, which concluded that The Pensions Regulator (TPR) made "hollow threats" and "failed in all its objectives" during its engagement with the collapsed contractor.
The Labour party has now commissioned an independent review of the 29 financial services regulators in the UK, which will be led by Prem Sikka, professor of accounting and finance at University of Sheffield.
The goal is to present the review’s conclusions in September at the Labour Party Conference.
The review will consider for example whether regulatory bodies should be merged, abolished or restructured; and it will also consider what penalties or fines should be imposed in future.
Mr McDonnell said: “Yet again, accountants and auditors seem to operate with impunity whilst lining their pockets.
“The lack of openness, transparency and accountability means nobody ever seems to be punished for their transgressions.”
He added that the entire regulatory framework for finance and business needs “a complete overhaul,” to “promote openness, transparency, accountability and – yes, where necessary – to impose appropriate punishments”.
He said: “There will be no more Carillion scandals on Labour’s watch.”
Carillion had 13 final defined benefit (DB) in the UK with more than 28,500 members, and an aggregate deficit for PPF purposes of around £800m.
It is expected that 11 of these plans will ultimately end up in the pensions lifeboat, with the vaste majority of these already in assessment at the Pension Protection Fund (PPF).
After unsuccessful talks with its lenders and the UK government, Carillion made an application on 15 January to the High Court for compulsory liquidation.
In the report, MPs said TPR’s problem won't be solved only with new powers, and the watchdog needs a "cultural change in an organisation where a tentative and apologetic approach is ingrained".
The committees also recommended the government to refer the statutory audit market to the Competition and Markets Authority (CMA).
During the inquiry, it was revealed that the Big Four financial services firms - KPMG, EY, PwC and Deloitte – earned £7m a year from Carillion.
The terms of reference of that review should explicitly include consideration of both breaking up the Big Four into more audit firms, and detaching audit arms from those providing other professional services, the MPs said.
maria.espadinha@ft.com
