Government mounts offensive in support of Higgs

The Government will today accuse companies that have rubbished Derek Higgs' review of Britain's boardrooms of being too complacent about the risk of an Enron or WorldCom style scandal happening in the UK.

Ruth Kelly, Economic Secretary to the Treasury, will make it clear Mr Higgs' review enjoys the full support of the Government. The move follows growing criticism of his proposals from prominent business figures and bodies such as the Confederation of British Industry.

Some leading industrialists, such as Pilkington's Sir Nigel Rudd, have labelled certain Higgs proposals as "absolutely barmy" and earlier this week it emerged that 82 per cent of FTSE 100 chairmen think Mr Higgs' suggestion to elevate the role of the senior non-executive director would undermine them.

Speaking at the annual conference of the National Association of Pension Funds, Ms Kelly is expected to say: "We welcomed Higgs in full when the report was published earlier this year, which was based on thorough analysis and considered recommendations. That remains the Government's view."

She will also emphasise that the Higgs review, which will be added to the Combined Code in July, should be more palatable for companies than the approach of the US, which has adopted a slew of complex new corporate rules under the Sarbanes-Oxley Act.

Ms Kelly will tell the conference that the Higgs review is a "robust way forward" that, if accepted by the City, will "enable us to avoid the need for clumsy legislative intervention".

The three-day NAPF conference in Edinburgh is set to be the forum for heated debate on the Higgs review. Mr Higgs, who will defend his work in person tomorrow, has also rounded on his critics. He said many of their concerns were down to the fact that they had not read his report. "I meet people who haven't read it but are still inclined to comment, which doesn't always help the process," Mr Higgs said.

Mr Higgs, who was asked to consider ways to boost the role of non-executive directors, also pointed out he consulted widely in the City and among industrialists. "The consultation was very extensive, and included the CBI. To suggest there was not enough consultation is at odds with reality," he said.

It is also the Government's view that companies had a chance to have their say with Mr Higgs during the eight months he took to compile his proposals. The Treasury and the Department of Trade and Industry are now keen for Mr Higgs' proposals to be added in full to the Combined Code.

However, the Financial Reporting Council, which is in charge of the Code, is expected to water down the language in certain areas, such as requiring an independent non-executive director to replace the chairman as the head of key committees.

Mr Higgs, addressing one of the biggest concerns of business, that his proposals to beef up the role of the senior non-executive director could undermine the role of the chairman, said: "That is only likely to be a symptom of something, if there is already something wrong, not a cause."

He took a robust stance on his directorships, which includes British Land. The property company violates Mr Higgs' views, and that of the existing Code of corporate governance, because John Ritblat is both chairman and chief executive.

"The role of chairman and chief executive of the company were combined before I joined the board, so I did so with my eyes open. Without the remotest feeling of embarrassment I stand by that judgement," Mr Higgs said.