Chancellor ditches OFR requirements

Speaking at the CBI conference in London, the Chancellor announced that the Government was to ditch the Operating and Financial Review (OFR) requirements, as part of its drive towards "better regulation".

The Government had previously claimed that the OFR would "strengthen corporate Britain and boost confidence in UK business". The reporting regulations aimed to ensure that directors provided shareholders with key information on a company's objectives, strategy, past performance and future prospects.

They also covered issues such as a company's policy towards its employees, customers and suppliers as well as environmental and social impacts. The OFR requirements would have come into force from April next year.

Mr Brown told the CBI conference today that the rules were being abolished before they even got off the ground, amid concern about the so-called "gold plating" of European regulation.

Economic interests

He told delegates: "Best practice is of course for companies to report on social and environmental strategies relevant to their business. But I understand the concerns about the extra administrative cost of the gold plated regulatory requirement that from April next year all quoted companies must publish an operating and financial review.

"So we will abolish this requirement and reduce the burdens placed upon you - the first of a series of regulatory requirements which by working together we can abolish in the interests of the British economy."

However, chief executive of Chartered Institute of Management Accountants, Charles Tilley, said the OFR was "incredibly valuable" to investors and shareholders.

"The drive to reduce the burden of red tape on business is a laudable one, but we believe wholeheartedly in the value of the OFR," he said. "Confusing the OFR with a reduction in bureaucracy risks losing the benefits it will deliver to all stakeholders, particularly shareholders. That would be the wrong step and a fundamentally bad one."

'Cavalier approach'

Union leaders were equally unimpressed by the move. TUC general secretary Brendan Barber said: "It has been presented as a help to business but the real losers from this are the shareholders who actually own Britain's businesses who will now receive less information."

The Institute of Directors (IoD) welcomed the decision, but was highly critical of the timing of the announcement.

Patricia Peter, head of corporate governance at the IoD, said: "We are a strong advocate of reducing the regulatory burden on business, and have consistently asked the Government not to gold-plate EU regulations.

"However the OFR pre-dates the EU Modernisation Directive, and its scope, complexity and impact is to a large extent the product of the review of UK company law established by this Government. The IoD recommended that once the Modernisation Directive was agreed the OFR requirements should have been limited to that scope.

"Making the U-turn now, however welcome, when affected companies will have spent a large amount of time, effort and money - in some cases many millions of pounds - to enable them to meet the requirements of the OFR, demonstrates a cavalier and ill-thought through approach to regulation and its impact."