An overhaul of City boardroom practices to prevent US-style accounting scandals has been welcomed by MPs.

Patricia Hewitt announced in the Commons a "complete and comprehensive" plan to tighten accountancy standards and shake-up City boardrooms in the wake of the collapse of Enron and WorldCom.

"This overall package is tough where that is needed. But measured and proportionate throughout," she told MPs.

"It will ensure that our corporate governance structures remain amongst the best in the world - for the good of the millions of pensioners, savers and businesses that depend on them."

The trade and industry secretary backed last week's Higgs report which urged a tougher code of conduct for listed companies.

New standards will ensure that half of board members and the company chairman are independent and will reinforce the separation of roles of chairman and chief executive.

The guidelines will aim to ensure that company audit committees consist entirely of non-executive directors and should ensure the independence and objectivity of the auditor.

Measures include a major review of the "big four" auditors and a new body to perform spot checks on company accounts.

An 11-month review by both Hewitt's department and the Treasury has decided to stop short of the laws introduced in America, which were deemed too restrictive.

Hewitt will seek to end the conflict of interest in firms that offer companies taxation, valuation, litigation and IT services as well as audit work.

A new unified and independent UK watchdog for accountancy and auditing firms is to be created.

And the Financial Services Authority will be given new responsibilities to identify for investigation companies with "high risk" accounting standards.

New voluntary rules will bar for two years partners and senior employees of audit firms from taking jobs with companies they audit.

"It is vital for the new structure to have clarity of accountability and responsibility, together with the appropriate powers, to operate effectively in the public interest. There is a strong case for statutory underpinning to make the new body work. We will consider that further and report our conclusions to the House," Hewitt said.

The announcement comes on the day one of the country's biggest unions accused the government and major accountancy firms of "stitching up" PFI deals.

Unison called for a review into what it claimed was a revolving door relationship between the "big four" accountancy firms and the government.

Its report found 45 cases where the main accountancy firms acted as financial advisers to public authorities while also acting as auditors to at least one company bidding for the project.

Unison voiced concern that Hewitt's reforms will only affect private companies and draw a veil over public sector deals.

General secretary Dave Prentis warned that the public sector was at significant risk from the conflicts of interest involving the firms, investment banks, facilities management companies and property developers.

"The government says it has nothing to hide. But report after report is casting doubt on PFI, including the government's own watchdog, the Audit Commission," he said.

"How much longer can this country tolerate a situation where PFI and PPP put public sector workers' jobs, working conditions and pensions at risk while the same accountancy firms, investment banks, facilities management companies and property developers get richer at their expense?"