21 months later, my blog has had almost quarter of a million hits so people are definitely reading it. Yet, despite this, the number of comments posted has been less than I would like.

I hope that new technology will play a role in helping address that. Earlier this year, the Institute launched the ICAEW Online Network or ion. Several parts of the Institute, including members in the South West, our Charities Special Interest Group and the very successful IT Counts community, have been trying ion out and have given it some great feedback.

So I’m moving my blog over to the ion platform to take advantage of some of its features. It will be easier for you to post comments directly, to vote on my posts and to see which are the most (and least) popular.

You can find its new home at www.ion.icaew.com/moorgateplace. If you view the blog through an RSS feed reader, you will need to update the URLs to point to the new site – you will find more details when you click through to the new site.

And of course, I hope that you will let me know what you think…..

Attendance is by Ministerial invitation only, so it was great to know that the Scottish Government not only recognises the importance of ICAEW members to the Scottish economy but also wants to hear their views.

Keith Proudfoot, the Institute’s Regional Director for Scotland, joined others from FTSE 100 companies, business support agencies, Institute of Directors, CBI, Scottish Chamber of Commerce, Skills and sector representatives, individual trade unions and the Scottish TUC as well as representatives from universities.

The main break-out discussion for the Forum this time was on the skills gap with Keith in the Financial Services group. He told those present that, as our business confidence monitor was predicting, businesses in Scotland plan to severely cut back investment in staff training over the coming 12 months, that the Institute’s Continuous Professional Development framework is seen by finance professionals as a benefit not an imposition and that there are great opportunities for ACAs.

This is reflected in the growing ICAEW membership in Scotland – confirming that the global reach of our qualification is being recognised in a country which, as the Enterprise survey demonstrated, has a greater engagement with overseas trading partners than other parts of the UK.

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Mark outlined the Conservative Party's vision for business, which includes reducing unnecessary regulations and simplifying the business tax regime.  These are laudable aims, which were well received by the business people in the audience.

On Tuesday, I made a speech on the global economy to over 80 people alongside Shadow Business Secretary, Alan Duncan, at a fringe meeting hosted by the Reform think tank.  The situation was moving so quickly that I had to rewrite much of the speech during the day to reflect the fast unfolding economic landscape.

The important point that I made to the senior Conservative politicians I met last week is that, whatever tax rates are imposed on business, policymakers should consult professional bodies on the structure of the system to avoid the unintended consequences that often accompany unexpected changes.

I was pleased to meet up with Mark Hoban MP, ICAEW member and shadow financial secretary to the treasury.  Mark chairs the Associate Parliamentary Group on Business, Finance and Accountancy, which the Institute supports.  In this role he has shown real leadership in getting business and parliament talking to each other.

Later, I contributed to a discussion over dinner with the Tax Payers’ Alliance and Policy Exchange think tank on the priorities for a first term Conservative administration, should they be elected.  Our President, David Furst, PwC’s Peter Wyman and senior Tax Faculty members Francesca Lagerberg and Chris Sanger, joined senior members of the Conservative front bench to discuss the principles of a good tax system.

By the close of the conference on Wednesday a new recovery package had been agreed by the US Senate.  It highlighted to me that party conferences really are a bubble.  David Cameron was reported as saying that people would not be interested in his conference with all the activity in global markets happening outside.  For my part, I found it a fascinating and useful glimpse into the thinking of the main Opposition party - I feel we filled important information gaps on some key business issues at a time when the economy is centre stage.

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I recently wrote a blog about the Plain English Campaign when I said we need clarity in our audit rules.

Our profession as a whole could benefit from greater clarity and simpler language. One area which does call out for improvement are the information packs produced by Finance departments. Many information packs are a misnomer. They don’t inform. They’re ignored or misunderstood by Board colleagues and don’t get results. And often, the accountants that produce them aren’t sure why or aren’t too sure what to do instead.

Of course, there are Finance departments whose information packs are the pride of the department and the envy of the rest of the organisation. They do exist. As a profession we should strive to ensure all information packs are like that. If we achieve this, it would seriously enhance the standing of the Finance function in the Boardroom, both as individuals and as a profession.

If you’re interested in finding out more, you can check out Jon’s website

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Comments

The message I took to Manchester was that Government and industry must continue to work in partnership to tackle the big issues we are currently facing and the profession stands ready to play its part: in rebuilding confidence in financial structures, in restoring trust in the tax system and in supporting financial systems in the developing world. 

I met the Chief Secretary to the Treasury, Yvette Cooper, to discuss tackling child poverty - we have built a strong alliance on this issue with Kate Green, chief executive of the Child Poverty Action Group, who argues that tax policy is a critical part of the equation in reducing inequality.

I also took part in a roundtable discussion with the minister for the profession, Gareth Thomas, who doubles up as an international development minister.  We discussed the role chartered accountants can play in the developing world to help local accountancy bodies, regulators and governments to build the financial infrastructure to support economic growth.

Our discussions with Treasury Select Committee members were dominated by the credit crunch and the need to resist kneejerk regulatory changes at a time of great uncertainty.

I am pleased that our engagement was so well received.  Some old contacts were fostered, and some new relationships were started.  The economy is centre stage at the moment and it is important that the Institute engages with policymakers in all parties - a dialogue based on trust and a confidence in the expertise that we provide.

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In recent years, the Lib Dems have been the font of many interesting policy proposals. As Vince Cable, Lib Dem Shadow Chancellor said at one of our fringe meetings, ideas put forward by the Lib Dems at their conferences have a habit of reappearing at Labour and Conservative party gatherings twelve months later.

Tax has been very much the topic for the Lib Dems in Bournemouth - from proposals to cut taxes for low earners to new policies on how to tackle tax avoidance. Francesca Lagerberg, chair of the Tax Faculty’s technical committee spoke on the subject of “How to make tax fair” alongside Kate Green of the Child Poverty Action Group and Vince Cable. It was standing room only which gives you some idea of the importance and engagement of conference delegates on this subject.

Our policy breakfast on “Building a competitive and sustainable European economy: British business and the 2009 Euro-elections” was an opportunity for me to talk about the issues we believe will be important for business in the forthcoming European elections with some of the Lib Dems senior Europeans.

As one said, its great to see a body that represents business in the UK engaging in this way.

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It’s worth watching, especially if you’ve ever visited Chartered Accountants’ Hall, as I’m sure you will discover something about the building, its history and its architecture that you didn’t know.

You can watch the programme here, with the section on Chartered Accountants’ Hall about 30 minutes into the programme.

And of course, if you’re in London on Saturday, there will be regular tours of the building between 9am and 12.45pm. 

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My own view is that, post-Enron, the incremental changes that were introduced in terms of regulatory oversight and corporate governance reform are generally holding up well - while it is probably little comfort to Northern Rock shareholders - 12 months into the credit crunch the list of UK corporate casualties has been limited.

A useful reminder of current requirements here One important contribution here is a recent consultation paper, issued by the Financial Reporting Council (FRC) on Going Concern (www.frc.org.uk/press/pub1683.html)

The Listings Rules require public companies to include a statement in their annual reports on going concern – that the company has the capacity to continue its operations for the foreseeable future and has neither the intention nor the need to liquidate or limit its activities.

Historically Company Directors have had to declare one of three positions:

• That they have a reasonable expectation that the company will continue in operational existence for the foreseeable future

• That they have identified factors which cast doubt on the ability of the company to continue in operational existence for the foreseeable future

• That they consider that the company is unlikely to continue in operational existence for the foreseeable future.

The FRC is proposing the inclusion of a fourth provision, reflecting the requirements of IFRS:

• That they have identified material uncertainties that may cast significant doubt about the ability of the company to continue as a going concern.

Investors need a clear understanding of the ongoing health of the companies in which they invest. One question is whether a fourth provision clarifies or confuses here, whether perhaps the second of the three current provisions should just be aligned better with IFRS.

The Institute is working on a formal response to these proposals which we will publish in due course. In the meantime I would urge all members with an interest in this area to read the consultation document and give due consideration to this important issue.

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This shift in the audit market represents both a challenge and an opportunity for the profession, raising a number of strategic as well as practical issues which we need to be addressed.  

Is there a future for audit?

My own view is yes.  People and organisations need high quality financial information that they can rely upon in order to make business decisions.

The audit provides an independent validation which helps underpin investor confidence maintaining stability in markets. Moreover you only need to look at what happens on those rare occasions where audits go wrong to see just how important a role they play. The impact is felt by everybody – auditors, investors, boards and management. 

At the same time I think we need to be realistic about the future landscape – I doubt very much whether we have seen the last statutory hike in the audit threshold. The profession will need to respond which could mean smaller firms that have historically focused in this area, either having to consolidate or leave the audit market altogether.

At the other end of the spectrum the drive towards commonly accepted international accounting standards (IASs) remains an important driver – to be able to compare company performance across different markets will bring huge dividends provided local difference can also be meaningfully captured. 

We also know from research we have undertaken amongst UK and US fund managers that the audit continues to play a key role in investment decisions.

What I think we are seeing is a one way ratchet where the absolute number of audits will shrink over time while the premium attached to an audit will increase in parallel with this trend.

At our recent Council Conference these issues were debated at length and we are now implementing a number of work streams intended to help the profession respond to the challenges ahead.  For example, at the smaller end of the market the assurance product we have been developing - an alternative to the statutory audit for those companies who fall below the threshold but still want meaningful verification of their numbers - has real potential. 

It should also provide those firms considering whether to remain in audit with a viable alternate means of income. 

The challenge for the Institute is to help members navigate through the changing landscape while ensuring that the role of an audit continues to be regarded as pivotal across the listed company sector as well as larger private companies. Are the scenarios above, ones that members recognise?

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Information available for specific countries includes regulatory updates, economic forecasts, industry reports, labour market reports, ‘doing business in …’ guides and tax data.

Having seen the depth of the material available, I can tell you that whether you are looking for a profile of the Chinese gas utilities industry, monthly summaries of the political and economic risks in India, guidance on tax planning in Singapore, articles on corporate governance in Brazil, or Russian anti-money laundering information, you will find it there.

What’s more, the majority of this content is free and instantly accessible to members online.  Knowing what this material can cost from my own experience, I think this is a really valuable resource for members.  But let me know what you think.

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Comments

The topic of how the Institute communicates with its members, was raised often at member meetings in the course of 2007. I felt it was important to get an independent audit on what was working well and where there was scope for improvement. We worked with an external agency, Reputation Inc to undertake the research and presented the findings at our Council conference earlier this month.

More than 7% of the Institute’s membership (approximately 9,200 individuals) contributed to the research - well above average for this type of exercise. The response rate included 200 phone interviews with members without email addresses, 50 in-depth interviews with online respondents and focus groups conducted with a number of member and student groups.

The results show that overall the Institute is generally seen as communicating well with the quality of content perceived to be of high to very high quality; a solid foundation on which to build.

Key findings included:

• The Institute is trusted by its members

• We are seen as communicating well: 6 in 10 members feel that the Institute communicates either well or very well

• The quality of information is generally perceived to be high: nearly 8 out of every 10 members feel that the quality of information is high to very high.

• Members feel that the right amount of information is getting through to them, there is generally not a sense of overload

• Accountancy Magazine, newsletters and faculty communications are working particularly well (F&M, Tax and IT faculties leading the way).

The results highlight a few potential areas of improvement:

• A majority have infrequent contact with the Institute

• Communications can appear uncoordinated

• Only a minority use the website more than once a month

• Better accessibility, navigation and search functions are the key recommendations for improvement of the site.

All of these issues will be addressed in the action plan, currently being developed, including more coordination of member communications, making better use of technology and introducing a set of consistent corporate messages.

If in the mean time you would like more information on the research findings please contact Matthew Ball, Head of Corporate Communications on

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Comments

How do you manage to read a mere 60% score on communications as good news? That's not much more than half, so you should certainly not feel justified in doing nothing to improve it.

Of course auditors fully expect to be held accountable and liable for their own mistakes. But the danger with the old regime has always been that in the absence of anyone else to sue when a company fails, the auditor by default becomes the subject of unlimited litigation. Should one of the major accountancy firms fail as a result, the consequences would be dire – not just for the firm itself but for the global capital markets.

Government has recognised the risk this poses to the UK economy – which is why in a white paper in March 2005, it accepted the need to move away from unlimited liability for auditors, and introduced the necessary legislation in the 2006 Companies Act to permit companies, with shareholder approval, to enter into LLA’s with their auditors.

The challenge now is to get these LLAs in place, something that can be done by the passing of a resolution at a company’s annual general meeting. Investors have said that they would support appropriate resolutions and legal advice suggests that there is no impediment to doing so. That there is enlightened shareholder interest here is a view that has the support of the CBI.

Of course, this isn’t just an issue for the listed companies – it is something that companies of all shapes and sizes should act upon. With the guidance now in place, there is no reason why company directors, audit committees and investors shouldn’t now take that final step, putting in place the solution which all have agreed is in the best interests of the global economy, the audit profession and shareholders.

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Comments

The partner responsible for the audit shold be identified, in addition to the signature in the firm name. This would place the final responsibility on an identified individual.

Mr Philip Peapell 

There are similar efforts underway in the audit world through Clarity – a project to clarify the shades of grey that exist in auditing standards and turning them into clear statements that say an auditor must do something or may do something. All of us would agree that standards were becoming too difficult to fathom. The clarity project will deliver improved audit quality if we all apply them in the right spirit.

There is a price of course – clarified standards are of course clearer, some are shorter but overall, have 1.6 times the number of mandatory requirements than existing standards.

The questions now are when will the clarified standards be ready and when can they be introduced.

The standard setters need to finish the new standards by the end of the year to give the firms and consortia have sufficient time to implement them well. It's not only about helping to ensure that there will be real improvements in audit quality but also about keeping audit cost increases.

As a famous author once said: “If I had more time, I would write you a shorter letter.” If there isn’t enough time to implement the new standards, there is a risk of rushed and lengthy additions to existing work programmes and the 'box ticking' count. Making sure there is sufficient time would help practitioners cope better with the changes. More practical guidance on compliance could be developed and documentation prepared for SME auditors.

The original aim for introduction was for 2010 year ends and that’s certainly a date that the IAASB have gone for and the APB has implied. But the EU appears to be dragging its feet and this date could slip. As much as we need clarified standards, we need clarity from all on the timing and an end to the uncertainty that currently exists.

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To help answer this, we’ve just published our Practice Society Brochure – a guide to what is on offer to practice members. It shows how the Institute’s products and services can help in running practices more effectively, developing staff and addressing some of the needs of the modern day chartered accountant. Essentially, it contains many tips to help make day-to-day working life that little bit easier.

As a membership body, our role is to ensure that we are providing you with the advice and support that you need throughout your professional career. Indeed, before I was employed by the Institute, I was as guilty as others of not appreciating the resources and services that the Institute offered. I’m now a convert though of course I would say that.

So do take the opportunity to reacquaint yourselves with what the Institute has to offer. And, as always do let me know what you think.

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This week I have met with William Sargent, Executive Chair of the Better Regulation Executive (BRE) and his staff, who are responsible for reducing unnecessary regulatory burden and cost across Government.  We support much of what the BRE has done recently, particularly on redesigning the IA form, making it simpler and clearer in setting out the full regulatory cost of a policy. 

IAs are not perfect and the quality of many departmental IAs leave a lot to be desired, but they are a good attempt at improving regulation in the UK and we will support the BRE in their efforts to improve the process to make sure that the costs and benefits of policy always add up.

View more information on IAs or Impact Assessments

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Our research is supported by the conversations I have had with members across the country. At the end of last year, the view was that the credit crunch was largely contained to the City of London, the financial services and property sectors.

Now, I hear of orders being delayed, payment terms being extended, capital becoming increasingly difficult to find and companies taking active steps to prepare for harder times ahead.

In my briefing with our economic consultants, I asked if there was any good news. Their answer was two-fold. Firstly, that they felt the UK would escape a recession and that the economy would show some, albeit it marginal growth, in the short term. Secondly, that we don’t have high inflation and unemployment is low – two of the factors that contributed to the economic downturn of the 70s.

Our business confidence monitor is a snapshot of how people feel towards the economy at the moment they’re asked. Their response is influenced by many different factors.

But one thing we have found is that the business confidence monitor does closely track UK GDP. As such, it is an indicator worth studying – one that both the Bank of England and the Treasury have said that they find helpful.

View the business confidence monitor in full

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Over the  next few days, members will  also  be receiving the papers for our annual and special general meetings on 3 June 2008. But unlike previous years, the vast majority won’t receive a hard copy of the annual review. In keeping with most large public companies, members were asked if they wanted to opt-in to receive a  paper copy . Those who didn’t can view the web version.

The annual review has a dedicated section of the website where you can click through to the sections you’re interested in and also also watch a webcast interview with me, discussing our achievements in 2007. I would love to know what you think so please do let me have any feedback.

I do sense a new desire from Government to get this right and learn from past mistakes. As I’ve written in the past, much of the backtracking on capital gains tax, non-doms and now the 10p rate could have so easily been avoided had there been proper consultation with bodies such as the ICAEW.

We are willing and able to give impartial, non-partisan advice on the consequences, intended and unintended of proposed changes to the tax system.

The removal of the 10p band combined with a reduction in the basic rate of income tax from 22p to 20p was positioned in the same way as the CGT reforms as a step to simplify the tax system. Simplification is something we fully support.

Yet subsequent modifications to the proposals have served only to introduce further complexity. Real simplification can only happen if there is a proper, well thought through, clearly defined and articulated strategy implemented over a number of years.

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So this year, what would I do if I was chancellor? Other than the standard inflationary increases for thresholds and duties, I would do very little that changes the tax system. Of course, I would listen to the ICAEW’s recommendations on simplification and think how I can start consulting on these in the medium term.

The one area where I would focus is on competitiveness, and in particular the City of London. Six months ago, the City was riding high. The prevailing message was that it was better for companies to list in London than New York. Now that has disappeared. A colleague of mine, just returned from Malaysia told me that the perception from south-east Asia is that the UK has become business unfriendly over the past few months - and whether that is right or wrong in reality, it is the perception that counts. People I talk to are openly questioning whether or not they should be based in London or should move themselves and their corporate headquarters to more favourable climes.

Wednesday’s budget will be the only chance the Chancellor has to reverse this – to leave it will be too late.

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Comments

As chief executives from around the world began to talk about the challenges facing the profession I was struck by how many mentioned audit.

Just to share some of the themes with you - in emerging economies, audits are being conducted against a backdrop which is very different from that in which mature economies operate.

When an opinion is expressed, should the reader be aware of this and not assume in the absence of any specific comment that it is similar no matter what market the audit was carried out in?

For these economies, there is also a strong sense that ISA's are too complicated, that smaller firms just can't cope and that audits will only be carried out by firms with scale.

Compare this to the mature economies and I include the UK in this group, where there is evidence of a decline in the number of audit firms. This is down to several factors including, regulation, consolidation and a diminishing reward for the service.

In the last ten years we have seen the number of registered audit firms with the ICAEW fall by half. I think that the next ten years may see further reshaping of the market as more and more firms do not include audit as a business service.

To date I have been a lone voice in raising my concerns about the future of audit and what the profession needs to do to adapt to this, Now the CCAB in the UK have agreed to share data on this from which we can then draw our own conclusions. What do you think?

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HMRC has come a long way since the dark days of the early part of this decade when its online filing systems went down with an alarming regularity. The consequent loss of trust and confidence were a real set back to the Government’s ambitions for more tax payers to file online.

Only by properly stress testing systems and ensuring that they were fit for purpose – the so called Carter principle - was HMRC able to work to restore this trust. This is a long and slow process and HMRC cannot afford too many problems along the way, so the latest incident is a serious setback.

HMRC needs to come clean very quickly as to what want wrong. It also needs to be explicit in what it will do to prevent such another failure. However, computer systems do sometimes fall over in spite of taking all reasonable precautions, so HMRC also needs to have a ‘Plan B’ in place to cover for such an eventuality.

If these issues are not addressed, one more failure of this nature could set the online filing project back several years. HMRC needs to learn the lessons from this latest problem and the Carter principle must be applied ruthlessly to ensure that systems are fit for purpose and thoroughly stress tested so that they don’t fall down unexpectedly, particularly on such a crucial day as 31 January.

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The conversation I had on the train to Davos is one such example, but first I need to put the journey in context. I arrived at Zurich airport knowing that the connection time was very tight. By the time I had got through passport control, collected my bag and walked out of customs, I had seven minutes to get to the railway station (next to the airport), buy a ticket and then get on a train.

I got to the ticket booth pretty quickly when another passenger who had also got off the plane arrived behind me and asked if I was going to Davos and could I get him a ticket as well to save time.

We managed to catch the train and introduced ourselves. He is an economic professor from Oxford who is a leading authority on Africa and developing nations. He has also recently written a best selling book entitled the bottom billion, which is self explanatory.

That day he had been speaking on a world service program on which he proffered the view that the answer to the economic plight of developing economies could be stronger accounting and legal professions. As you might imagine, the conversation developed from there...........

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Comments

There was an interesting audience comprising staff of the firms, investors, management of major clients, regulators, academics and a few of the professional bodies including the ICAEW. The theme of the meeting was the "principles" debate – but the strange and encouraging outcome was that there was no debate.

With this audience at least, the debate is over. Principles are preferred to rules and we now need to work out as a profession how to make that happen. I should make the point that the largest part of the audience was from the US, not known historically as the home of principle-based accounting.

As an Institute, this is policy matter we have been vocal about since the corporate problems in the US of 2002. At the time you may remember that Peter Wyman, then ICAEW President was one of the few people willing to put his head above the parapet and promote the benefits of a principles-based system.

The debate at this meeting was around how you begin to replace rule books and red lines with judgement. Panellists and members of the audience wondered how auditors would apply judgement to circumstances when there may be several different and valid approaches. What would happen if the regulators interpretation and judgement was different? Was there enough latitude in the system to accommodate several "right" answers?

One of the regulators on a panel was very passionate about other people using the term second guessing. The regulators don't make guesses and presumably the auditors don't make guesses in the first place, I think that he has a point.

Depending on when you qualified as a Chartered Accountant, you may not think that this is a big issue. Let me say that if you have operated in an environment where there is a rule book which states that one number is right but another is wrong yet your judgement tells you different, then this will represent quite a change.

In another of the panels it was amusing to hear David Tweedie state that he always enjoyed visiting a former colony of the UK to do missionary work, even if most of the country is now converted.

From my perspective I consider that this shifting tide is very welcome. In my view, we were facing a real danger that our profession would become rules and compliance dominated and find it increasingly difficult to attract the brightest and the best, who frankly wanted careers where they could use their brains and not just tick boxes.

A career as a Chartered Accountant based on using professional judgement gives us a chance to maintain our position as a valid training option for the most talented individuals. The war is not over, but at least the battle appears to be going our way.

The Chancellor should, in the words of the Daily Telegraph, seize the olive branch offered by the Institute now and defer any changes until 2009. I appreciate that this will cause short term financial issues for those who have already made preparations for the new regime.

However, the Chancellor needs to consider the wider consequences. By delaying the start date, he will have sufficient time to properly consult on his proposals and any changes he wants to make. Only by doing so can he ensure that the implications, intended and otherwise, are properly discussed.

Businesses and individuals need to have time to plan and understand the new regime. There are now just over two months to the new tax year – not very long when you consider the initial proposals were unveiled in October 2007 – which doesn’t leave businesses and individuals who will be affected by the proposals very long to decide what to do.

By failing to tell us what he’s going to do, the Chancellor is inviting criticism from the business community that he either does not understand the needs of business or, of greater concern, doesn’t care. I’m sure neither is the case, but the longer he leaves it, the more people will think it is.

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This review confirmed much of what the accountancy profession has been telling HMRC and the Treasury in recent months.  The story has already been written about an organisation that, as a result of efficiency cuts, has lost some of its more experienced staff and is struggling to deliver a quality, frontline service.

So if the data loss was the lowest point in HMRC’s short history, let the capability review be the catalyst for the process of turning the organisation around. It is in all of our interests – government, the profession and of course HMRC itself – that we work together to solve the problems. We want to play a constructive role in ensuring the service is resourced effectively and is able to do the job it needs to efficiently and effectively.

The short term aim has to be to restore confidence in HMRC, something which has been badly damaged by the data loss episode. Openness and transparency in terms of dealing with the long term issues will be the keys to achieving this.

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Comments

Most people I speak to, members and non-members alike, can’t understand this. After all, solicitors are all protected so why not accountants. The people who have the power to protect the title aren’t in this camp. Government has argued in the past that to protect the term ‘accountant’ would be anti-competitive. They argue that it could force those ‘unqualified’ accountants who provide a competent and efficient service to their clients out of business and that it could restrict choice for businesses as to who they work with for accountancy services, particularly those in the SME sector.

However, there is a glimmer of light at the end of this particular tunnel. The challenge which the Department for Business, Enterprise and Regulator Reform have set the accountancy bodies in the UK is demonstrate that the case for protecting the title is in the public, not the professions’ interest. If we can, it will listen.

So how can you help? In short, with evidence! The Consultative Committee of Accounting Bodies, the umbrella organisation for the six accountancy bodies that make up the UK profession, is undertaking a research project to get the views of individual members. If you’re one of those who are contacted by email, please take part and complete the online questionnaire.

I would also like to hear about examples of where you’ve been called in to solve a situation created as a result of a client first going to an unqualified accountant. Please email your experiences to me at chief.executive@icaew.com.

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Yet, as I said on the Today programme the following day, it is finding it increasingly difficult to carry out its duties. The Gershon review and subsequent rounds of Comprehensive Spending Reviews have meant that it is on track to lose almost 25% of its staff. No business organisation could suffer such drastic loss of headcount without an impact on its business – why should the public sector be any different?

HMRC is a frontline service which businesses and individuals have to deal with on a daily basis. It needs to be resourced as such. Yes, I have no doubt that savings can be made through the increased adoption of technology and more efficient working practices – and we will continue to be supportive of such savings.

We have a good working relationship with HMRC. Its new acting chairman, Dave Hartnett has been quick to start addressing the service level issues that we’ve been raising with him directly over recent months.

What needs to happen now is that Dave Hartnett needs to be given the full support of Government, together with the resource he needs, to tackle the problems that the loss of the two CDs have brought to the fore. We will play a constructive part in helping him to do so.

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Comments

Is this not an opportunity to lobby for members of recognised accounting bodies to be the only persons able to decscribe and hold themselves out as 'accountants'.  We are an extension of the tax collection industry after all.

Mr Daniel Gricks

Last week alone, we announced that we were starting to train the ACA in the gulf, we hosted a dinner and conference in Hong Kong and, on Friday, we unveiled the Chinese translation of our IFRS learning materials.

I myself travelled to the Hong Kong event. It was my third visit and once again, I was impressed by its dynamism and vibrancy which hits you as soon as you get off the train from the airport. Doing these events and talking to some of the delegates is not just a great reminder of the esteem in which our qualification is held internationally. It also brings home what a real opportunity the Institute has in embracing our new strategy.

If last week is anything to go by, we’re beginning to really take advantage of those opportunities. And I’m sure, we will see more weeks like it in the future.

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Whether it was really aimed at private equity investors or not, the fact remains that this reform will affect far more people, for example entrepreneurs, family-owned businesses, employees who participate in Save as You Earn schemes – all will find that some of the tax benefits they received from investing in businesses for the long term will be lost.

To justify this as a move towards simplification of the tax system is all well and good. Indeed, as a professional accountancy body, tax simplification is something that we have been calling for many years – but there is a price to be paid for a radical tax simplification that will throw up some winners and rather more losers.

The price of simplification needs to be reasonable one. For business to have trust and confidence in the tax system, there is a need for prior consultation of proposed simplification reforms, coupled with the need for certainty and for the reasonable expectations of taxpayers to be respected.

There is a real danger that the way in which these changes to CGT have been proposed, and the short notice given before they are implemented, will only serve to undermine trust and confidence even further.

What is important is that this proposal doesn’t result in a stand-off between Government and business. That’s why we are going to look in detail at the implications of the Chancellor’s proposals. Who will be affected and how? Only then will we be in a position to say to Government if this is the most effective way to achieve their policy goals.

We fully support tax simplification, but there is a balance to be struck and it is essential that any tax simplification is only undertaken with full consultation and reasonable transitional rules.

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It is really disappointing that, after years of lobbying by our tax faculty and others, the first major tax simplification ‘result’ is the 18% flat rate which will hit our business-owning clients.  Simplification in the field of CGT is well overdue, as the taper relief rules were so ill thought through, and are a classic example of why tax changes should be properly consulted on before being brought in.  To charge 18% instead of 10% and to axe the indexation relief on the retiring small businessman, when he is already disappointed at the loss of pension arsing from a previous stealth tax, is a double blow. 

The ICAEW was hosting a fringe meeting on tax policy with the Reform think tank and we were fortunate that the discussion took place after George Osborne's speech, which made tax the hottest topic of the week.

We had about fifty attendees and
it was remarkable that around half of them wanted to ask questions, so much so that we ran out of time.

Francesca Lagerberg, formerly Chair of the Tax Faculty, together with Phillip Hammond who is the Shadow Chief Secretary to the Treasury were able to deal with the questions raised very satisfactorily.

Following the fringe meeting the Institute hosted a small private dinner attended by four shadow ministers which was very useful in respect of building links and discussing ideas in a confidential enviroment.

Attending the three main party conferences has required a significant amount of time and effort and, while the payback is not immediately apparent, I do see this as a valuable investment which helps us to build our profile and add value to public policy discussions. 

Building relations with policymakers is something that we need to continually work at to get the changes we need to improve the environment for UK business.

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I spoke at one of the fringe debates that was organised by the Fabians. The topic of this breakfast debate was skills and was well attended including two ministers, a couple of MPs and number executives from business, the public sector, trade unions, lobbyists and voluntary bodies.

There was a heavy focus on basic skills and the facts that a large proportion of the adult workforce have poor levels of both literacy and numeracy.

I supported the need to tackle this problem, not least because the UK economy is forecast to need just 500,000 unskilled workers by 2020 compared with the 6,000,000 employed today.

I felt that a particular contribution I made to the debate was the ongoing need for improved management and technical skills and if these are not addressed, then some of the developing businesses in the UK may not reach their potential. The minister acknowledged that this is very important to the Government.

Later on in the conference I was invited to a private dinner hosted by the Corporation of the City of London. For those who may not be aware, the Chairman of the City Policy and Resources Committee, Michael Snyder is one of our members and also Chairman of Kingston Smith.

While I can't report the detail of the dinner, the EC Commissioner, the Ministers and former Ministers present engaged in a long discussion of whether the EU/UK Government should be regulating the private equity industry.

I was also fortunate to find myself sitting at an event next to one of Gordon Brown's special advisors. He was most interested to know what were the current issues facing the ICAEW and the Accounting profession. In this context we discussed the current service levels at HMRC and the impact that this is having, particularly in the area of new VAT registrations. He said that this hasn't been on Number Ten's radar at all - it is now!

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Part of our contribution to this debate, as you would expect, is on the tax system. One of the subjects I’m raising at the conferences is what makes a good green tax. If the electorate believe that green taxes aren’t directly going to help tackle climate change but are just a new way of raising tax revenue, I fear that the willingness to take the actions required to change behaviour may disappear. Politicians need to be very careful that, in their desire to “out-green” each other, they don’t alienate the very people who could be such a powerful catalyst for change.

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As an overseas member, from California, I have been following the UK and US approaches to green accountability with interest.  The UK seems to have more practical ideas, the US is very theoretical, but both approaches seem to ignore the point that a "carbon neutral" policy is only promising to not make things any worse.  Who is addressing the point of actually improving the climate change situation?

One of the areas that it looked at closely was HMRC. Frank Haskew, head of the Tax Faculty, was one of those who gave evidence. The report (chapter 6 if you’re interested) confirms much of what you have been saying to me in recent months about the decline in service levels. The committee basically says that you can’t describe something as an efficiency saving if it results in a drop in service standards – and when the Government is talking about more ‘efficiency savings’ in HMRC as a result of the comprehensive spending review, we need to be reassured that the service will continue to meet the needs of its users..

As I’ve said before, I do believe there is a genuine desire at the highest levels of HMRC and in our profession to get the relationship back on track. The Wyman Symposium, for those of you who were able to attend, really brought this home.

The report contains a number of recommendations including the proposal to put in place independently verified monitoring – something we would welcome and which we’re prepared to play our part in delivering.

Ministers have to respond formally to the committee’s report – probably after the summer. I hope that they will.

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Of course, I wouldn’t disagree with the principles behind convergence. Far from it – the ICAEW has been one of its champions. In a global economy in which the trade barriers between countries are being dismantled, there needs to be a common means of comparing and analysing corporate performance.

But when I talk to FTSE 100 chief executives and finance directors, analysts and investors, they’re all saying that the complexity and length of IFRS statements aren’t doing this. They’re not helping the reader get a view of accounts on which to base decisions or judgements.

When confronted by a set of statements that run to several hundred pages, and in one well known case in excess of 400 pages, I would be tempted to agree. I worry that, in the desire to check all the IFRS boxes, we’ve lost sight of what we’re trying to achieve.

So what has to happen? The problems and challenges need to be acknowledged and addressed quickly. The way to do this, in my view, is to get businesses, investors, standard setters and the accountancy profession working together to think about the financial statements and how we can make them more useful to the reader. There are lots of ways to do this and I’m sure technology could have a part to play.

I don’t intend to scaremonger but unless we can draw a line in the sand and put the concerns that I’m aware of behind it, I worry that there could be a real risk to the long term success of IFRS, especially as it starts to embrace smaller businesses.

The question is -does anyone anyone else agree with this assessment? We need to know!

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Straight off, he was ready to accept that there were service issues and was willing to talk about how they can be addressed.

We discussed some of the initiatives underway within HMRC to improve things and where we can help and provide support. One topic was the Working Together programme in which HMRC are investing more resource.

Most importantly he is keen to hear from our members when things go wrong. If he has the evidence, he can do something about it.

He’s already been to some of the Tax Faculty roadshows and has asked us to set up some regional meetings where he and his senior team can hear directly about the practical difficulties you’re facing. He, together with Theresa Middleton, who has taken on responsibility for managing the relationship with agents, have also agreed to speak at our Wyman Symposium in June.

Personally, I left the meeting feeling that there was a real desire to improve matters. But I don’t think its going to be easy. Government efficiency savings mean that HMRC have lost 12,500 staff and who knows what consequences the upcoming comprehensive spending review may have. The informed comment is for a further substantial reduction in staff.

The July edition of Accountancy will have an interview with Dave Hartnett in which he talks about some of this.

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I was there to speak at a conference on Environmental Responsibility that the institute was hosting with the Guanghua School of Management , Peking University  and the Centre for Environmental Education & Communications of the State Environmental Protection Administration of China, the Chinese Government agency responsible for tackling climate change.

An English professional body  playing a lead role in the debate on climate change in a country that doesn’t get the best press on the subject? That in itself is a sign of how far China has come.

The more I learn about the whole climate change issue, the more important I believe it is that we all have to start doing something now. As business leaders and advisors, our members should be the agents for change within their organisations they work with. As a profession, our contribution can also be in helping measure environmental impact, an area where the institute is currently active. 

Peking University gave details of research they had just concluded on Chinese consumers, which I found mind blowing. If everyone in China were to consume paper at the same level as US consumers, it would require the equivalent of all the forests on the earth annually to meet the demand. One of our roles is to check that research of this nature can actually stand up to scrutiny, because if it is correct it obviously can't happen

So as businesses, as professionals, as individuals, we should all be looking at our own behaviour and working out what our part in the solution could be. Yes, governments, academics and policy makers are all making progress in developing frameworks for reducing emissions and tackling the problem at a global level. But are we doing what needs to be done quickly enough?

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It’s easy to reel off a list of all the things we’ve been doing – the representations we make on accounting standards, the lobbying of government and parliament on new legislation, or indeed the regular meetings I and colleagues have with standard setters and regulators. But does it work?

If you haven’t already done so – and I have no reason to expect you would – it’s worth taking a look at Hansard, and the transcript of the committee of the whole House of Commons when it considered the Finance Bill on 30th April. The institute is referenced seven times – Helen Goodman MP (column 1253), Vince Cable MP twice (column 1255 and 1316), Theresa Villiers MP (columns 1309), Brooks Newmark MP (column 1323) and Julia Goldsworthy MP (column 1324).

The one I liked best was Vince Cable MP, the Liberal Democrats’ Shadow Chancellor, who said “The Institute of Chartered Accountants in England and Wales is a reputable organisation that has no obvious axe to grind.” A quote which I think sums up our public interest remit and the unbiased nature of our submissions.

All this was achieved thanks to the detailed work done by Tax Faculty and the institute’s public affairs team in the evidence we submitted to the Treasury select committee and the briefings they’ve provided to MPs on the budget, helped by the relationships they have built up patiently over the last couple of years.

So the answer to the question has to be yes!

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I think that we should take some comfort that HMRC are responding and recognise they need to do something about it. We should take it as a good signal that Dave Hartnett chose Fresh Start with agents as his first podcast topic in which he said "most tax agents are trying really hard to do a very good job and are very professional in their outlook".

There’s still a long way to go and over the last couple of weeks, we’ve been conducting research with members to get some hard, quantifiable evidence of the situation that will help HMRC understand more about what needs to be done. 

This will reinforce the representations  we have been making  to HMRC and  various members of the Government. One recent development is that partly as a result of our efforts, spearheaded by the Tax Faculty, the Treasury Select Committee  has said it wants to understand this area better.

Frank Haskew, the head of our  Tax  F aculty, has been invited to give evidence to the committee on Wednesday at which he will be revealing the results of our research.

More on this  in the next  few weeks .

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I'm lecturing on the Tax Faculty's roadshows this month (arranged in conjunction with CCH) and am delighted that  senior reps of HMRC are contributing as guest speakers on each occasion.  Why are they doing this?  The Tax Faculty persuaded them to attend last year's Roadshows and the HMRC reps got a roasting by our members.

From there it was on to the launch of the ICAEW foundation in Wales at St David’s Hotel overlooking the new Cardiff Bay development, and then to Crickhowell to attend one of our town group meetings. One part of the job I enjoy is meeting members, hearing first hand about the jobs they do and most importantly, the challenges they’re facing on the ground.

One key issue which emerged from my meeting in Crickhowell was the competition that our members face from unqualified accountants. This isn’t just an issue for our profession. In my view, it’s a matter of public interest. When somebody seeks professional advice from an accountant, they must be able to have confidence that the advice they receive comes from somebody who has undergone comprehensive training to achieve a respected and recognised qualification, keeps their knowledge and skills up-to-date and is a member of a professional body which monitors professional conduct. Because when it goes wrong, it’s our members who have to pick up the pieces.

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 It’s only when you look through the Red Book and the accompanying budget notes that you appreciate what the Chancellor has actually done. Go to page 508 which shows you how much it’s all going to cost and you’ll see how it all balances!

Whilst the treasury has delivered the cut in corporation tax which we asked for, the reality is that business will have to make up the cost to the exchequer through reductions in capital allowances. On income tax, the price of the 2p reduction in the basic rate is the abolition of the 10% band and the alignment of NI and high rate thresholds.

 So there’ll be winners and losers. But the real losers are those who have to implement the proposals. Changing the rules can be as much of an administrative burden for business as adding new ones.

Wading through the 190 pages of notes accompanying the budget, I’m concerned that, yet again, businesses will have to navigate their way through a new tranche of regulations.

For small businesses, the cost is as much in time as it is in money – both of which they can ill afford. This government says it wants to tackle the regulatory burden on businesses – actions speak louder than words!

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