Despair as consultation on OFR descends into farce

Negotiations urgently arranged to discuss the government’s reform of the operating and financial review are set to backfire after senior figures from the profession warned all confidence had been lost in the government’s consultation process.

The Department of Trade and Industry announced last week it was expanding its discussion on the replacement business review, allowing respondents to argue against the move to abandon mandatory OFRs, following a legal challenge by Friends of the Earth.

But the situation has been described as a ‘farce’ by some and, while talks with the government on the matter continue, few within accountancy now expect the expanded consultation to produce a change of heart.

An influential Big Four partner said that the profession now had ‘absolutely zero confidence’ in the government’s consultation process. ‘They are expanding the consultation, but have no intention of changing the policy. They are simply extending the period in which they will not listen to what we have to say. It is a shambles.’

‘They have extended the consultation period merely to buy off Friends of the Earth,’ said another key representative. ‘All they are doing is giving a political answer to some inconvenience that came their way. The way it was done was not clever and it wasn’t thought through.’

The move to review the OFR’s scrapping signalled an end to legal action by the environmental group, which had accused trade and industry secretary Alan Johnson and chancellor Gordon Brown of acting unlawfully when scrapping the OFR. The government has agreed to pay the group’s legal costs.

Phil Michaels, legal adviser for Friends of the Earth, said he was ‘delighted’ with the result, but shared some of the profession’s concerns.

‘We really hope that the government’s behaviour hasn’t put stakeholders off contributing to the consultation,’ he said. ‘We hope they realise how important this is.’

A DTI spokeswoman moved to allay these concerns, saying the consultation was ‘full and open’, and that the latest views and evidence would be considered.

Some observers remain hopeful that the government will be encouraged to make changes. Nigel Sleigh-Johnson, head of financial reporting at the ICAEW, said: ‘There may be room to make significant changes to business legislation.’

Gerald Russell, senior partner at Ernst & Young, who also called the situation a ‘farce’, said: ‘If we can use the consultation period to get something sensible back on the rails, in the interest of good quality reporting, then that will be a good thing. If on the other hand we don’t, then it is just wasted time.’