Legislation on audit and corporate governance reform is finally on the agenda as the new Labour government delivers its first King’s speech.

Also included among the 40 bills outlined in the speech were measures to improve pensions, strengthen data protection and encourage more data use, regulation to protect UK businesses and supply chains from cyber crime, more resources for skills and apprenticeships, and changes to workers rights.

While the King’s speech did not deliver any great surprises, it does indicate a flurry of activity from the government in the coming weeks, having delivered the seventh longest King’s speech by word count since the end of the Second World War.

The Draft Audit Reform and Corporate Governance Bill will seek to replace the FRC with ARGA as the statutory regulator, enabling the extension of Public Interest Entity (PIE) status, remove rules on smaller PIEs, create new powers to investigate and sanction company directors for reporting and audit failures, and a new regime to oversee the audit market, protecting against conflicts of interest at audit firms.

ICAEW has welcomed the inclusion of audit and corporate governance reform in the King’s speech and will be briefing both the government and His Majesty’s Opposition to ensure that the legislation is proportionate

“Establishing the new statutory regulator – the Audit, Reporting and Governance Authority – and providing it with powers to take effective enforcement action against directors of UK public interest entities, is a crucial part of these reforms,” says ICAEW CEO Alan Vallance. “We look forward to seeing a package of measures which, taken together, will make Britain the best place in the world to invest and to start, run and grow a business."

Economy: data, green energy and fiscal responsibility

Other economic measures include the Budget Responsibility Bill, which will require any significant tax and spending commitments by governments to be subject to an independent assessment by the Office for Budget Responsibility (OBR).

The Skills England Bill will look to develop a picture of national and local skills needs, identify which training should be able to access the Growth and Skills Levy (this will be subject to consultation). 

The bill to establish Great British Energy outlines how the new, publicly-owned energy company will operate. It will have a remit to develop, own and operate assets through public-private investment. It will have an £8.3bn capitalisation over the next Parliament, to stake in renewable energy projects and supply chains. It will also be heavily involved in clean energy production, distribution, storage and supply.

“The speech demonstrates the new government’s recognition that a transition to net zero and leaving no one behind is core to our future economic prosperity and its commitment to this is to be welcomed,” says Richard Spencer, ICAEW’s Director, Sustainability.

Data was another economic cornerstone for the King’s speech, with a bill to establish digital verification services that support the creation and adoption of digital identity products and services around activities such as house moves, pre-employment checks and age-restricted goods and services. Smart data schemes to allow the secure sharing of customer data, on request, with authorised third parties.

It would also reform the Information Commissioner’s Office (ICO), with a CEO, board and chair, and stronger powers. This will be paired with targeted reforms to data laws that lack clarity and impede the development and deployment of new technologies. Standards for digital identities and privacy, security and inclusion will also be part of the bill.

Alongside this are strengthened measures around cyber security. The Cyber Security and Resilience Bill will expand the remit of regulation to protect digital services and supply chains. Regulators would have powers to ensure the implementation of essential cyber safety measures, such as the power to proactively investigate potential vulnerabilities. Potential cost recovery mechanisms could provide resources to regulators to facilitate this.

Finance: bank recapitalisation, pensions and the National Wealth fund

The Bank Resolution (Recapitalisation) BIll will set out plans to expand the statutory function of the Financial Services Compensation Scheme requiring it to provide funds to the Bank of England to support the resolution of a failing bank and recovering funds by charging levies on the banking sector, as in arrangements for funding depositor pay outs in insolvency.

The national wealth fund, using state funds to support investment in new and growing green industries as we transition to net zero, will deploy funding through the UK Infrastructure Bank. While there are some questions over the detail, it should help with the UK’s international competitiveness.

The Pension Schemes Bill was one of the few unexpected measures in the King’s speech, outlining an aim to increase the average amount in a defined contribution pension scheme of £11,000 or higher. It seeks to:

• Automatically bring together an individual’s deferred small pots.
• Introduce a standardised test for delivering value for trust based defined contribution schemes.
• Require pension schemes to offer retirement products.
• Consolidate the defined benefit market through commercial superfunds.
• Reaffirm the Pensions Ombudsman as a competent court.
• Extend the definition of ‘terminal illness’ for the Special Rules for End of Life.

New non-financial reporting requirements

The draft Equality (Race and Disability) Bill outlines plans to introduce mandatory ethnicity and disability pay reporting for larger employers (250+ employees) to help close the ethnicity and disability pay gaps, mirroring the approach to tackling the gender pay gap. There are questions over how this might work, and whether it might further clutter up the annual report, running counter to any desire to simplify legislative reporting frameworks.

Promising, but details required

Many of the measures outlined in the King’s speech raise questions that can only be answered with the detail contained in the bills themselves. But the King’s speech sets out a roadmap for the coming months, with much to be – cautiously – welcomed.