McDonnell promises to smash ‘cartel’ of accountancy giants
Labour has pledged to smash Britain's accountancy firm "cartel" and today demanded a "complete overhaul" of the way company finances are policed.
Shadow chancellor John McDonnell attacked larger audit firms, which "operate with impunity whilst lining their pockets".
Speaking at a Labour conference in London this afternoon, McDonnell launched a review of both the accountancy sector and its regulators to identify how to crack down on "transgressions".
The strong words came after a parliamentary inquiry released its findings into the spectacular collapse of contracting and outsourcing giant Carillion. MPs did not pull their punches and delivered a scathing verdict on regulators, former company directors and the government. Meanwhile, it called for the Big Four accountancy firms – Deloitte, PwC, KPMG and EY – to be broken up.
Although some of the firms revealed this week they have contingency plans in place for such a break-up, sector leaders have urged caution. Michael Izza, the chief executive of the Institute of Chartered Accountants in England and Wales wrote: "Breaking up the Big Four would create additional smaller firms, but there is no guarantee that these would want to take on big audits."
Read more: Learning from Carillion? MP inquiries must shed more light than heat
Catastrophic failure
But McDonnell said today: "The parliamentary report on the collapse of Carillion has once again highlighted the catastrophic failure and inadequacy of our regulatory system.
There will be no more Carillion scandals on Labours watch.
McDonnell accused accountants and regulators of failing to do their jobs, claiming there had been no "proper investigation" into the role they played in the financial crisis.
"The lack of openness, transparency and accountability means nobody ever seems to be punished for their transgressions," he said.
University of Sheffield accounting professor Prem Sikka will spearhead Labour's review of the regulatory system, delivering proposals McDonnell plans to put to Labour's September party conference.
McDonnell said: "It is essential that we have a crackdown on poor practises in the accounting and auditing industry.
Under the next Labour government the big six firms will not be allowed to continue to act like a cartel that prevents new market entrants or drive down standards. Otherwise, it will further infect the rest of our economy and business community.
Read more: Carillions demise shines a light on an auditor expectation gulf
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