Brexit White Paper: Just a Spring Clean for the May Queen?

The_European_Parliament.jpg

Today, 2nd February, the government released its White Paper, following the Article 50 triggering Bill passing through the House of Commons. It is called “The United Kingdom’s exit from and the new partnership with the European Union”. I am sure there will be a suitable acronym in due course.

Press and pundits eagerly awaited the document which, in 76 pages including smiling photographs said, what Mrs May has always said, and little more: Brexit means Brexit. I read it, being a sad man who is interested in these sorts of things, and found it to be a helpful summary of the issues that will need to be addressed, with little to say how they will be addressed or why anyone should play ball with us, except that we are really good for everyone else so why would you not let us have our cake and eat it?

It does list 12 principles for the negotiation, most of which represent a statement of the bleedin’ obvious. For example, the concluding principle is “Delivering a smooth, orderly exit from the EU”; you will be shocked to hear that the government was not seeking utter chaos.

The Paper effectively tells us that the government intends to ensure that on the day we leave the EU, everything will be exactly as it is now, and then the government will pick off the bits it does not like. It reminded me of the sculptor who said he takes a piece of stone and chips away all the bits that don’t look like the subject of his art. It is a fine idea but I cannot truly imagine the EU letting us walk out the door with the only agreed change being that we can change what we like.

The paper states clearly that the government will be transparent, on the one hand, while, on the other, necessarily play its cards close to its chest. It has certainly done so in the Paper. I don’t necessarily say it is a bad thing either, but 76 pages full of words that tell us that the government will negotiate the best deal it can? Hardly a worthwhile exercise.

We can applaud the government’s intentions, but, as an adviser to businesses, I focused on sections 7 and 8. The first of these, concerning workers’ rights, merely said that ours are higher than the EU’s anyway, so there is nothing to consider. They even slipped in a reminder that they want worker representation on Boards for listed companies.

Section 8 is informative. It presents an interesting impact summary across many industrial sectors, but was merely a statement of how great the UK is.  It is true that the UK is very strong, but that gives us far more to lose than the EU. The paper even points out that we have implemented or over-implemented every Directive and Regulation from the EU, making us perfect trading partners.

If ever there has been a document which stretched the boundaries of saying nothing in as many words as possible, it was this.  The 12 Principles are aspirations, Utopian stairways to heaven perhaps, and that is great, and the detail behind the 12 Principles is little more than advertising puff.  It is intended to make us feel better and to explain why we ought to be able to negotiate a good deal.

The Paper – if its facts are correct – should make a negotiator feel strong. But it does not suggest how the team might deal with irrational intransigence arising from a desire to give us a good kicking as punishment for leaving the club.  The EU Project is one of faith. What the UK has done is to potentially damage the EU, and there are those in the EU who want revenge and do not care about the price.

Every statement in the Paper is one that says the UK will try to do a deal which is good for everyone.  Each statement, a bit like Mrs May’s speech to the Republicans, was carefully balanced with opposites so that in the end it meant nothing: The USA has a right to protect its borders, but it must allow immigration; The world must not rely on trade with China, but should definitely trade with China, and so on.

I do hope our negotiators are successful and I wish them luck. I don’t think this Paper will help much.

Press Regulation – Good, bad or dangerous?

The Press is being very careful at present to ensure that we all see very clearly how valuable its investigative and reporting activities are. They have a point, because if current proposals are adopted, it will be impossible for a newspaper to defend itself in court, so all we will ever read in a newspaper is how lovely everything is. Dictators and despots may approve, but no-one in their right mind would make a person who wins a defamation case pay the costs of the loser.

The Press is not a body of angels. They sometimes manipulate, and behave very badly, for sure, and Self-Regulation is important. The Press also needs to understand that they have been the key architects of the destruction of every other profession, having drawn the public into a belief that government regulation is a good thing. Some may say they have it coming, but that would be short sighted. I would not wish to see them hoist with their petard, as their freedom is too important.

Most professions are already regulated directly or indirectly by government. The results have not been glorious. I thought I might illustrate the point by considering how regulation of the accounting profession has achieved its objectives. Perhaps we can learn something. This is a potted history based more on personal recollection than detailed historical study. The events I describe are therefore seen from my perspective and others may well interpret them differently.

Regulation of accountancy came to the fore around 1975 with “The Corporate Report”, a massively important piece of academic research that concluded many things, not least that:

  • accounts of companies were (at the time) inconsistent year on year, and from one company to another;
  • few users of accounts had a proper understanding of their meaning.

Its authors considered who used financial reports and why, and proposed that a more formalised framework was needed. The profession, fearing government intervention and determined to maintain its high standards, started to regulate itself by setting standard accounting practices and principles. Professional committees produced a body of accounting rules called Statements of Standard Accounting Practice (“SSAP”). Understanding improved and there was greater consistency and comparability between company reports.

However, regulation begets regulation, and the lines between professional judgement and government policy can become blurred. Just as doctors and dentists are restricted in deciding what they do for patients but must follow rules determined by government regulators (“NICE”, for example), so government policy moved in on accountancy. It was politically necessary to harmonise our accounting practice with the EU. A series of major corporate failures during the 1980’s (DeLorean, BCCS and Polly Peck come to mind, but there were others) were blamed on accountants. Sensationalist and often ill-informed media reporting created a misconception that an audit report was a total “clean bill of health”.

Rather than clarify this expectations gap, the profession self-flagellated, and Government seized the opportunity to gradually introduce its own regulations. In 1981 a benign Companies Act, the first since 1948, introduced an accounting framework with standardised formats for accounts. In 1985, Company Law was consolidated into a single Act, and in 1989 for the first time, Accounting Standards carried the full force of statute – it was now the law that accounts should comply with Accounting Standards.

It seemed that, sitting in sack-cloth and ashes and seeking to rebuild trust, the profession worked with government to create a new regulatory framework: Financial Reporting Standards. These were supposed to be better, somehow, than what had gone before, and more relevant to the new transactions of the late 20th century. They also moved us, sometimes, closer to international standards.

The question that many asked was, would a set of accounts give a true and fair view because they comply with Standards, or as well as complying? Others were less kind. Did this now mean that previous accounts under the old Standards did not give a true and fair view? It did not matter because the Regulators became stronger too and non-compliance was not an option.

The legislative framework marched on. Companies could be small, medium or large, listed or unlisted, and that may determine the accounting rules followed, with a new, cut-down set of standards for small companies (Financial Reporting Standard for Smaller Entities), if they preferred it. Many companies could choose between Financial Reporting Standards and International Financial Reporting Standards (“IFRS”) (which are completely different).

Then, in the last couple of years, the wholly new Standard (“FRS102”) replaced all the old FRS’s and SSAP’s, but not IFRS, with a further choice for some of “IFRS-Light”. Oh.. and then there are accounts for Micro-Entities (FRS105).

Confused? You cannot be confused, surely? Regulation is there to remove confusion.

The main objectives (as above) of Regulation were to ensure there is a framework for accounting that is intelligible, universally understood, and comparable both between companies and over time. The resultant accounting standards may well be academically wonderful, but it is hard to tell because they are written with such a degree of jargon as to render them unintelligible to anyone outside of the profession (and to many in it). Comparison over time or between entities has become nearly impossible.  But Regulation has achieved a different consistency: that between government policy and accounting policies.

Milton said we should beware something “fair seeming good” (Paradise Lost). We must keep government away from regulating the Press.

The Lunatics are on the Grass

 

“The lunatics are in my hall
“The papers hold their folded faces to the floor
“And every day, the paper-boy brings more” (Pink Floyd, Brain Damage)

More than forty years after Pink Floyd released “Dark Side of the Moon”, the lunacy continues and only the faces in the photos have changed.  Each day, I read the newspapers with increasing concern.  Is it old age?  Or am I right to be so stunned that I struggle to find the coherent thread that links the stories? And so I decided to explore that link.

Continue reading “The Lunatics are on the Grass”

Who’s Who in the Office

This week, The Times reported under the headline “American psycho on the path to power“, a study by the University of Oxford assessing the extent to which characters  were psychopaths.  Allocating a score of up to 28 in each of 8 characteristics, the Psychopathic Personality Inventory determined that Republican Presidential Candidate, Donald Trump, is more psychopathic than Hitler, Napoleon and Nero.

I recall management training courses characterising certain people in the workplace, which I thought worth summarising here.  There have been many authoritative studies around work-personalities. This is not one of them, and it is intended to amuse.
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Survey: Has the Brexit Vote Affected You?

UPDATE: The survey below has now closed.  We are really grateful to those who took part and we will be conducting further research in due course.  Please do check back to take part in future surveys.  Our report is available here.

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First there was a vote.  A little more than a week later, we have no political authority in the country and Her Majesty must be thinking something like, “Well that’s a great 90th birthday present guys – I really could do without having to wade in and take control at my time of life” (I am sure the Royal thoughts are more eloquently put).  Apart from Parliament self-destructing, vast numbers of petition signing people threatening to hold their breath till they turn blue, and the leaders of the European Countries getting severe indigestion and threatening handbags at dawn, nothing has actually happened yet. Surely it is not news that half the UK doesn’t like being in the EU, and half does?

Never the less, based on this startling revelation, the banks have downgraded the UK’s credit, Sterling has sunk and rumours abound about the next knee jerk.  In the meantime, Mr Osborne may be thinking of making the UK a corporate tax haven, something we would all welcome?  Some question how on earth government can allow a fractional majority of the votes cast and less than 50% of the voting population to force a change as momentous as our removal from the EU. This is the same government, I think, that has said that, to go on strike in a key industry, a union should have a 60% majority?

We have now heard anecdotally that some overseas businesses are reviewing or deferring decisions to invest in the UK, while others say it is business as usual, and some report increases in sales.  With all the confusion, we would like to find some clarity.  Please would you tell us a little about your experience, and how the EU Referendum is or may be affecting you, by answering a few questions on our survey page?  The survey is open to anyone, but it can only be completed once by each person.  At the end of the survey, you can optionally leave your details and we will use them to contact you with any interesting results.

It takes about three or four minutes to complete.
Continue reading “Survey: Has the Brexit Vote Affected You?”

Don’t Ask Me What I Think of EU

One of the funniest comments I heard about Brexit this morning, as we awoke to its being a reality, was in response to the question of how Brussels will react. The answer was given “they will be completely shocked”. If it is true, it tells us all we need to know. There was a referendum in the UK yesterday; it was always going to be close. This is not a shocking result, and anyone who is shocked by the outcome must surely be open to accusations of some degree of arrogance.

Politicians will disagree about the political, and economists will disagree about the economic effects.  In my previous blogs I have been clear that I do not believe we can predict what will happen in this Brexit scenario, so speculation is as good as we can get. A look back at history does tell us that humans, economies and people generally are far more resilient than we fear and no doubt we will be living in very interesting times. We should be more than cautious as pundits supply endless opinions on how Brexit will impact on business.

But what of your business and what can we learn?

Continue reading “Don’t Ask Me What I Think of EU”