By the time you read this, a decision may well have been made on whether auditors will be allowed to have a cap placed on their liability. Parliament returned at the beginning of this week and a ministerial announcement from the DTI was expected shortly afterwards.
Whichever way the DTI decides to fall, you have to wonder how much influence a hastily arranged, 30-page report from the Office of Fair Trading has had on the final outcome.
Amid tales of the Treasury seeking to banish talk of a cap, it could be ‘that report’ which gave them the ammunition that had been sadly lacking.
The report certainly did few favours for the profession, and unfortunately several of the arguments the OFT presented, which were key to the report, were just plain wrong. You have to ask, if given enough time, how much checking would have been needed to find out that, in fact, the Big Four cannot get sufficient insurance cover to protect them from catastrophic claims.
The reaction to this unfortunate piece of work has been so extreme, with even the insurers backing up an outraged profession, that surely even the DTI could not ignore it. Which puts the government body in a bit of a dilemma, especially as the OFT has steadfastly stood by its conclusions.
The DTI commissioned the report, presumably to provide the backing to give the cap a green light. What it got back was less than satisfactory. It won’t be able to ignore the report, given that it asked for it in the first place, yet it must be obvious to those within the department that its arguments are fatally flawed.
And now that the Treasury has waded back in to offer its two-penneth worth (the OFT report providing the perfect excuse to do so) their is even more pressure to relent.
If the DTI has decided to allow a cap, it is doing so against the guidance of both the OFT and the Treasury. Such a move could lead to a lot of troubles within the corridors of power.
With a general election coming up in the not-too-distant future, the DTI will have been doing some tough soul searching on what exactly it has to gain from giving the cap a go ahead, against what it has to lose.