Tony Blair's Spokesman Briefing June 27th
LOBBY BRIEFING: 11.30AM THURSDAY 27 JUNE 2002
The PMOS said that Jack Straw had updated Cabinet on foreign affairs issues. In relation to India and Pakistan, he had pointed out that travel advice had been eased but was still strong. He said that the tension across the Line of Control had lessened due in large part to the diplomatic pressure applied by the international community, and that it was important for this to be maintained. He indicated that Geoff Hoon would be visiting the region next week. Foreign ministers from other Governments would also do the same in the weeks to come. Asked to clarify the Foreign Office's latest travel advice to India and Pakistan, the PMOS said that travel advice to those in the region had been downgraded slightly earlier this week and directed journalists to the FCO for details.
The PMOS said that Mr Straw had taken the opportunity to brief Ministers on President Bush's speech on the Middle East. He had also updated colleagues on the Conclusions from the European Council, pointing to the agreements which had been reached on asylum and immigration, as well as Council reform. On Gibraltar, he had said that he and his Spanish counterpart, Josep Pique, had agreed at an informal dinner last night to hold a formal Brussels Process meeting on Friday 12 July in Madrid.
The PMOS said that the Chancellor had updated Cabinet on recent developments in world stock markets. He had said that while the regime for regulating financial services had been strengthened since 1997 - for example, there was a Standing Committee on financial stability with the Financial Services Act - there was no room for complacency. That was why he and Patricia Hewitt had set up a special group in February, including senior figures in the accounting and auditing profession, to consider the potential lessons for the UK from the Enron affair. He had confirmed that the remit of that group had been widened to look, as a matter of urgency, at the potential lessons from WorldCom as well. That group would provide an interim report within the next month. The PMOS listed the member of the group: Ruth Kelly (Financial Secretary to the Treasury), Melanie Johnson (Minister for Competition, Consumers and Markets, DTI), Sir John Bourn (Comptroller and Auditor General), Michael Foot (Managing Director, Financial Services Authority), Mary Keegan (Chairman, Accountancy Standards Board), Professor Ian Percy (ex-Chairman, Accounts Commission for Scotland, Rosemary Radcliffe (Complaints Commissioner, Financial Services Authority and former Chief Economist PriceWaterhouseCoopers).
The PMOS said that Patricia Hewitt had told the Cabinet that we believed our audit rules were better than those in some other parts of the world. Nevertheless, the findings of the interim report would obviously be looked at very carefully. She had also pointed out that the DTI and Treasury had commissioned a joint review into the role of non-executive directors, which was being carried out by Derek Higgs.
Questioned as to whether Ms Hewitt had stated explicitly that the UK had a better auditing system than the US, the PMOS said that as the Prime Minister had pointed out yesterday, the revelations about WorldCom did not automatically mean that corporate governance everywhere was of poor quality. Obviously that was not the case. Ms Hewitt had been underlining the point that some of the measures we had put in place through the Financial Services Act, for example, meant that we were in a better position in relation to corporate governance than other countries. However, that was not to draw any straight comparisons with any particular country. The point was that it was important for us to remain vigilant and not be complacent. That was why we had set up the two reviews to examine whether there was anything else we could do to tighten the existing regime.
Asked whether Ms Hewitt or Downing Street believed that a WorldCom-type scandal could happen in the UK, the PMOS said that no one had a crystal ball which they could use to look into the future and answer that question. What we could do, however, was to ensure that the regime in this country was as tight and as effective as it could be. It was important to have proper rules for auditing and accounting and the institutional framework that we had put in place ensured that such a financial scandal was as remote a possibility as it could be. Asked whether the regulations and measures we had put in place would prevent such a thing happening here, the PMOS said he would be accused of glibness were he to answer the question with a 'yes' or 'no'. The honest answer was that no one knew. We recognised that the US had seen corporate problems with companies like Enron and WorldCom. Equally, it was true we had not had such scandals here. However, as the Chancellor had underlined today, it was important for us not to be complacent. That was why we would look carefully at the conclusion of the interim report and the joint DTI/Treasury review. Pressed further, the PMOS said that the Government, the City, the FSA, the regulators and accountants all needed to understand the importance of putting in place standards and measures that were as robust as possible.
Put to him that further regulation would mean more red tape - which organisations like the CBI had been campaigning against, the PMOS said that the committee had not yet reported back on its investigations and he was reluctant to pr-empt what they might or might not say. The industry's watchdogs were all bound in to this. Anything that could be done to ensure the protection of investor confidence was in the interests of business as a whole. There was always a balance to be struck in imposing necessary regulation. We would argue that we had achieved the right balance, although others could take a different view.