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.

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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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Someone Sent a Promised Land

In the press this week, was a report that the DVLA thinks that they have lost £200m in road tax revenues since introducing the new disc-free tax system.  It caught my eye because, about a year ago, the Chancellor announced how they will now do away with paper tax returns and replace them with an online tax account.  Many of us wondered at the time how the IT would work.

In the 1970’s (I know I don’t look old enough) I recall how we all thought computers would do away with almost all mundane work, and we would live lives of leisure, and only do the work that humans must do.  It was a Promised Land, delivered by second class post via Royal Mail (like most government mail), it seems.  Is Government trapped in a 1970’s time bubble, desperately doomed to failure, yet hoping to save costs by computerising our lives?  Or does government have a long term strategy?

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In, Out, Any Way the Wind Blows

The_European_Parliament.jpg

You may be expecting some wisdom on how to vote on the EU Referendum.  If I had any to offer, I might be tempted, but I do not propose to advise you on something I do not understand.  I have been itching to write something on the subject, fond as I am of my own verbosity, but quickly realised that the EU Referendum is a roll of the dice.  So I decide to make some observations, and if those observations inform your choice, I apologise, for they have not yet informed mine.

In talking to people on the subject I notice that the Decidedly Inners appear to look with a plaintiff disbelief that anyone could possibly think otherwise than to remain.  It is almost a religious fervour.  Those, on the other hand, who are less sure, tend to look shyly as they tell of a secret immoral desire to vote to leave.  A guilty apologetic pleasure exists among the not-Quite Decidedly Outers, as if theirs is a perversion, an irresistible, anti-establishment mischief.  And this led me to think about the Referendum itself.   For there is sheer dishonesty in the whole process, setting Big-Endians against Little-Endians, as if either actually knew which was right and which was wrong.

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Legislation, legislation, legislation

In case you have ever worried that Parliament does not do very much, take a look at the volume of legislation that afflicts us these days.  If you wonder why your best friend requires a copy of your passport before he will sit and drink a glass of wine with you, or why your partner will not let you eat your dinner until you have identified yourself with your postcode, the first line of your address and your date of birth, look to legislation.  Legislation was once the reluctant last choice for dealing with any issue, now the phrase “there ought to be a law against…” has been taken to heart by our leaders.

I remember reading that someone had worked out that in the ten years from 1997 to 2007, there were more new laws introduced by Parliament than had been introduced in the entire century from 1897 to 1997.  Perhaps that does depend on what you mean by a “new law”, but the point is quite clear.  In 1997, my books of tax legislation took up less than half the shelf space than they do today.

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