JOHN McDONNELL urged a crackdown on poor practices in the accounting and auditing industry at the weekend, pledging that “there will be no more Carillion scandals on Labour’s watch.”
At Labour’s State of the Economy conference on Saturday, Mr McDonnell announced that the party had commissioned an independent review of Britain’s corporate auditing and accounting regime.
The shadow chancellor said Carillion’s demise had “once again highlighted the catastrophic failure and inadequacy of our regulatory system,” adding that “the accounting and the pensions regulators have once more failed to do their jobs.”
He said the review, which will be led by Professor Prem Sikka from the University of Sheffield, would consider whether regulatory bodies should be merged, abolished or restructured and what penalties or fines should be imposed in future.
Mr McDonnell said: “Yet again, accountants and auditors seem to operate with impunity while lining their pockets.
“The lack of openness, transparency and accountability means nobody ever seems to be punished for their transgressions.
“We have seen it all before. We still await proper investigation of the accounting and auditing shortcomings which led to the banking crash 10 years ago.
“Our regulatory system is simply not fit for purpose.”
He pointed out that there were 29 regulatory bodies responsible for the financial sector, including the Faculty Office of the Archbishop of Canterbury, while some professions were self-regulated, amounting to a “regulatory maze.”
Mr McDonnell said the system had created “enormous opportunities for waste, duplication, obfuscation and buck-passing” and, ultimately, failed to protect consumers or promote confidence.
He added: “We need a complete overhaul of the entire regulatory framework for finance and business, to promote openness, transparency, accountability and, where necessary, to impose appropriate punishments.
“There will be no more Carillion scandals on Labour’s watch. That is why it is essential that we have a crackdown on poor practices in the accounting and auditing industry.
“Under the next Labour government, the ‘big four’ firms will not be allowed to continue to act like a cartel that prevents new market entrants or drive down standards.”
Mr McDonnell told the conference that he planned to bring reform proposals forward at the Labour conference in September.
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