Limited horizons

Accountants are disappointed by moves to reform the law on liability, says Roger Trapp

These are nervous times for Britain's accountants. Almost to a man and a woman, they are constantly scanning the political horizon for signals relating to the issue that has gradually consumed them over recent years.

That jumpiness was clearly demonstrated last week when Ian Lang, President of the Board of Trade, made a long-awaited announcement to the effect that his department would introduce legislation to lift the effective bar on limited liability partnerships in the UK "at the earliest opportunity".

This is not exactly what the profession had in mind. For a start, it does not appear that any proposals will appear before the spring, when - if a poll has not already been forced upon the Government - election fever will be gripping the country.

Second, this announcement deals only with the tip of the iceberg. Limited liability partnerships merely prevent individual partners being wiped out personally by a claim being brought against a negligent colleague. Accountants have their hearts set on reform of the law of joint and several liability, under which a defendant in a civil suit can be held totally responsible for a plaintiff's loss, even if only marginally at fault.

In recent months they have won many organisations over to their cause. Just a few hours before Mr Lang's answer to a parliamentary question, the Confederation of British Industry joined nearly 20 other employers' organisations and professional bodies in writing to remind the DTI that they had made comments on the issue much earlier in the year, and now expected some action.

But this is just more evidence of the profession's edginess. While the rest of the business community is keen to assess what will happen in a general sense if any of the various permutations comes to pass once the general election is finally fought, one senses that the accountancy profession is really only concerned about what it will mean for auditors' liability. This is not just evidence of how spending too much time looking at figures can warp the brain. It also reflects the degree to which the issue dominates accountants' lives.

The liability debate hangs over just above everything they do - from carrying out audits to discussing future regulation and any extension of the auditor's role. If senior partners are to believed, it is even intruding on recruitment of graduates and retention of partners.

But it is also fair to say that the whole affair demonstrates the extent to which accountants - if they do not all manage to live up to the Monty Python image - are different from the rest of us. Just as in the past they have, thanks to the wonders of financial engineering, made debts into assets, and performed other tricks, they now appear to be convincing themselves that professional liability is a crucial issue in the world at large. One that - like education, the health service and family values - John Major and Tony Blair should have firm views on.

Accordingly, they have been grasping at straws. Last year at this time there was the imminent report of the Law Commission study of the joint and several principle. (Not only did this come up with the "wrong answer", but Professor Andrew Burrows, chairman of the group that carried out the work, last week made a speech in which he reiterated his faith in the notion.) Then there was the intervention of Michael Heseltine, the Deputy Prime Minister, reportedly on the grounds that lack of reform of this area threatened Britain's competitive position, and that the City was alarmed at the prospect of big firms responding to Jersey's plans to help them out by allowing limited liability partnerships. (Though this development spawned the idea that a positive announcement would be made in the summer, it did not in fact happen until last week, and turned out to be a "damp squib".)

In yet further evidence of the profession's fear of upsetting a delicate situation, nobody really condemned this half-way house. Instead, insiders contented themselves with comments of the "it's a step in the right direction" variety, and looked ahead again. Apparently, there may be another announcement later in the month about what Graham Ward, the Price Waterhouse partner in charge of the Institute of Chartered Accountants' lobbying effort, calls "the real issue".

But perhaps the true reason behind the lack of progress lies in the failure to entice the lawyer fraternity aboard the reform bandwagon. As Mr Ward points out, this failure could be put down to the perception that "a litigious environment is good for lawyers" - until they are on the wrong end of a suit.

On the other hand, the absence of cries of complaint from a group that is not renowned for keeping its own counsel might be interpreted as evidence that the problem is not as bad as it is said to be.

Whatever the explanation, a government that is hard-pressed to get reform of building societies and competition law on to its agenda is unlikely to see much public appeal in tackling an issue that is barely understood within Britain's boardrooms, let alone outside them. So senior partners of large firms could yet be spending more time than they had bargained on flying between Britain and Jersey

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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