The most recent Comment from Accountancy Age

On the money with Damian Wild

Damian Wild — 2008-10-02T17:59:00.000Z

Damian Wild, Accountancy Age, Thursday 2 October 2008 at 17:59:00

Simon Walker has had a busy September, attending each of the major political parties’ annual conferences and sitting on platforms with the likes of City minister Kitty Ussher, Commons Treasury committee chairman John McFall and the Conservative and Liberal Democrat shadow Treasury chief secretaries, Philip Hammond and Jeremy Brown

The chief executive of the British Private Equity and Venture Capital Association is now gearing for the launch of a manifesto for venture capital which will seek to put ‘encouraging enterprise at the core of the economic agenda for each of the major parties’.

Walker promises a warts and all assessment. Is this the same BVCA? I hear you ask.

You’ll remember how, just 12 months ago, private equity bosses were dragged before the House of Commons.

Walker’s predecessor, Peter Linthwaite, came under fire from MPs on McFall’s committee for presenting what they said was ‘the most obstructive piece of evidence we’ve been given for a long time’.

Afterwards BVCA chairman Wol Kolade admitted they had been kippered. ‘You ask me whether things could have gone worse?’ he said to one journalist. ‘I’d reply by saying, could things have gone any better?’

Just as the BVCA has seen almost 100% staff turnover in the last 12 months, the economic situation Walker is dealing with could hardly be more different to the climate of little more than a year ago.

Walker is clearly not risking a return to those days of private equity hostility and you’d be right to argue it’s

the credit crunch that has rendered that impossible. Nevertheless he appears intent on presenting a very different side to his industry.

Damian Wild is editor in chief of Accountancy Age and blogs at accountancymatters.accoutnancyage.com

This week's blogs

Martin Williams and Carol Barrie — 2008-09-11T16:06:00.000Z

Martin Williams and Carol Barrie, Accountancy Age, Thursday 11 September 2008 at 16:06:00

Alistair Darling could do with a bit of the Olympic spirit according to this week's bloggers

Revenue encourages online filing but what about security concerns?

Information in written answers to Parliamentary questions has shown that security breaches at HM Revenue and Customs (HMRC) have increased significantly since the data discs scandal.

The figures show that since October 2007 there have been 1,993 security breaches in all.

Clearly we cannot, as a nation, ignore the substantial benefits that computerisation can bring, nor can we blame government for trying to encourage taxpayers to submit more and more information to them on line and so saving costs for our benefit.

For example, tax returns for 2007/08 have to be submitted by 31 January 2009 if they are submitted electronically. Paper returns have to be in by 31 October 2008.

Can we blame those taxpayers who, concerned about security, insist that, despite the tighter deadline, they are unwilling to submit their returns, disclosing highly confidential information, online?

HMRC need to do more to convince tax payers that their information will be just as secure when submitted electronically.

Carol Barrie

blogs.birminghampost.net

A drink from the Olympian cup, Darling?

I guess like most Britons, I was surprised to wake up last Saturday to the news that the chancellor of the exchequer believes we’re facing the worst economic crisis for sixty years. Actually, the more I’ve thought about it, the more my surprise has turned to annoyance.

Instead of Mr Darling locking himself away with a Guardian journalist in a remote island croft to talk down the country and the government’s poor communication skills, perhaps his time would have been better spent holed up with fellow Scot and multi-gold medalist at the Beijing cycling track Chris Hoy.

A few days ago, Team GB did the very un-British thing of going out to Beijing, confidently talking about winning precious metal and being proud of their achievements when they succeeded.

How refreshing it all was for a nation that is used to being the plucky loser.

I think Mr Darling could do with a drink from the Olympian cup, stop talking our chances down and get on instead with coming up with some answers to beat the credit crisis, kickstart the housing market, and start focusing on winning.

Martin Williams, MD Graydon

riskybusiness.accountancyage.com

Tories must simply get real

Alex Hawkes — 2008-07-24T19:19:00.000Z

Alex Hawkes, Accountancy Age, Thursday 24 July 2008 at 19:19:00

I haven’t really known what to make of the Tories’ plans on tax simplification

Tax complexity is one of those tricky topics that I think nobody really knows how to solve, and I suspect there are good reasons for cynicism about the whole project.

The plans are two-fold an Office of Tax Simplification to monitor tax policies and a joint parliamentary committee on tax matters.

Of the two, I like the second far more. MPs are, to put it mildly, very ill-briefed on tax frequently. To ask them to scrutinise the finance bill is hopeless, and a joint committee, comprising the much more experienced members of the House of Lords as well as those from the commons, would add to the intelligence of the debate.

An Office of Tax Simplification is less attractive. More bureaucrats do not create less bureaucracy, surely a principle the Tories exists to promote.

Like a corporate social responsibility department within a multi-national, it will only exist to be paid lip-service to. Real simplicity, like real CSR, comes from the top; in the case of tax, from clear thinking and a desire and political will to embrace radical solutions.

Take the example of the debate over multi-nationals leaving the UK. It has been hampered by complex arguments over whether we should lower the corporate tax rate, or just hammer the big companies with fiercely complicated rules about overseas subsidiaries. I doubt either would work.

In fact, the most elegant solution, rarely discussed, came from Deloitte. It suggested a low tax rate for mobile income, recognising that some things can be taxed and some can’t.

The Tories should aim for similar realism on all aspects of tax. By doing so, they may get somewhere towards a simpler and better tax system.

Alex Hawkes is news editor of Accountancy Age

Adjustment not meltdown

Dennis Turner, HSBC — 2008-07-24T19:16:00.000Z

Dennis Turner, HSBC, Accountancy Age, Thursday 24 July 2008 at 19:16:00

Nobody can doubt that the long-awaited slowdown has finally arrived.

After several months of a sliding housing market, retailers are now claiming that high street sales are wilting, the 'credit crunch' seems to be affecting more and more households and businesses, while key opinion surveys in manufacturing, services and construction all predict contractions in activity.

As if this were not enough, policymakers have virtually no room for manoeuvre. The chancellor, already spent and borrowed up to the limits of his Golden Rule, cannot relax fiscal policy while the Monetary Policy Committee is constrained from cutting interest rates by a jump in inflation, sparked largely by imported oil and food.

Yet in the Treasury’s monthly survey of forecasts, none of the 44 independent organisations surveyed in June expects a technical recession this year, and only one predicts negative growth in 2009. The median GDP growth rates for this year and next are 1.7% and 1.6% respectively.

However tough it might feel, and however uncertain the outlook, what we are experiencing is a correction not a collapse, an adjustment rather than a meltdown.

On reading even the quality press, the uninformed could be persuaded this is the end of civilisation. But an economy that has recorded 63 con-secutive quarters of positive growth, has more people in a job than at any time in its entire history, has unemployment at levels last seen more than 30 years ago, and where interest rates and inflation are still historically low, is not about to fall off the edge of a cliff.

The fundamentals of the economy are sound, certainly more so than in 1974, 1979 or 1989, when output growth stalled and then fell. Inflation at times exceeded 25%, interest rates topped 15% and unemployment touched three million.

In some ways, the recent boom was based on shaky foundations, an excess of consumption and borrowing by both public and private sectors. Getting the rebalancing of the economy right will take time and to look for the quick fix now will only create problems further out; the classic boom-bust formula.

We have to accept slower growth and pressure on living standards for a year or two. Raising the stakes with overblown rhetoric will not help.

Dennis Turner is chief economist at HSBC

The simple fact is, change is difficult

Damian Wild — 2008-07-17T17:26:00.000Z

Damian Wild, Accountancy Age, Thursday 17 July 2008 at 17:26:00

Can business life be simplified? The Tories think so. Auditors agree. And the FRC is with them too. It’s turning into a summer of simplification. Or at least a summer of good intentions

Last week shadow chancellor George Osborne unveiled Conservative plans to simplify the UK tax system. Publishing the recommendations of the Howe Group Report into Tax Simplification, a policy group led by former Tory chancellor Lord Howe, Osborne proposed a new independent Office of Tax Simplification modelled on the National Audit Office.

Elsewhere, the Auditing Practices Board’s Clarity project on auditing standards is gathering momentum.

Meanwhile, as director of corporate reporting Ian Wright tells AccountancyAgeTV this week, the Financial Reporting Council’s Complexity Advisory Panel will seek to identify the areas that bring more cost than reward to UK plc and ‘address the risk that these requirements, and related influential guidance, are contributing to the increasing complexity of corporate reports without making them more useful or understandable’.

As Wright acknowledges, easing the complexity of financial reporting is like turning round a super tanker. Simplifying tax and the audit regime are no easier tasks.

And there’s the rub. Even if all these projects deliver guidance and commitments to change, they have to be applied and accepted. There also needs to be tolerance by regulators. And perhaps more than anything in the current economic climate, there needs to be an acceptance by government and by the public that risk cannot be regulated away. And that may just be wishful thinking.

comment@accountancyage.com

MPs' expenses: one rule for them…

David Jetuah — 2008-07-10T17:04:00.000Z

David Jetuah, Accountancy Age, Thursday 10 July 2008 at 17:04:00

Shock horror - MPs have baulked at having their expenses put under the audit spotlight

I’m all for the democratic process, but this simply wouldn’t be allowed in practice or the private sector.

It’s a bit like letting accounting firms decide whether cases should be referred to the JDS. How many do you think would be subject of water cooler gossip if that was the case?

It also denies some auditors a lucrative job which could have raked in up to £500,000 if MPs had gone for the full-fat option of the probe.

When they’re not too busy dishing out the largest consultancy jobs to the Big Four, government likes to give the chasing pack a shot as well, Grant Thornton are helping the Tories on PAYE and Tenon are in the middle of a three-year audit contract with the National Audit Office, which could possibly be extended for another couple of years after that.

Talking of the NAO, the watchdog – itself no stranger to a bit of expenses controversy – did warn that the process would be substantial, intrusive and costly but seeing as the bill for this works out at between 0.1 and 0.3% of MPs expenses tab its looked like pretty good value.

But ruling that their expenses won’t come under the audit microscope won’t do much to convince the public that Westminster isn’t just one big gravy train.

But it’s not all bad for the profession. Earlier this week, the Lib Dems were the first to break ranks and say that they were talking to the ICAEW about the institute auditing party members’ expenses.

The institute is set to meet with the party’s chief whip in

the next few weeks to discuss the issue, an ICAEW spokesman said.

David Jetuah is a reporter on Accountancy Age

Olympian task for contracts

Clive Lewis — 2008-06-19T10:51:00.000Z

Clive Lewis, Accountancy Age, Thursday 19 June 2008 at 10:51:00

The long and painful process to win government work

For many years, smaller practices and their SME clients have wanted a slice of the action when it came to government contracts both locally and centrally.

The Department for Business Enterprise and Regulatory Reform recently published a new enterprise strategy. This included an initiative to open up the public procurement market to all types of business, particularly SMEs. It aims to give them the facility to search, be alerted to and view open contract opportunities, including research and development, across the public sector.

London 2012 is a perfect example of the potential contracts that could be won and which could have a major impact on smaller firms, especially in the capital. Yet again the abundance of red tape, which we know SMEs already face on a daily basis, could put many off.

After registering basic company information, a business profile must then be completed, which involves answering a series of questions.

This profile is automatically tested against a number of minimum standards such as health and safety. If these requirements are not met the company is automatically referred to tailored business support to help them improve their performance, provided by Business Link.

So far more than 2,000 businesses have automatically been referred to Business Link highlighting the strict criteria which needs to be met, and that it is not as simple as it sounds.

There is no doubt that the initiative is welcomed, but before embarking on this it may be worth practices advising smaller clients that it could be a long and painful process.

The saying, ‘If at first you don’t succeed’ should also apply, as many will have to go though the process a few times. Whether they will be prepared to do this, given the time constraints and red tape they already face for no guaranteed ‘win’ at the end, is questionable. A lot will depend on how important they view the potential business that could be at the end of the line.

We are interested in hearing your views on tendering for public sector work.

Clive Lewis, is head of SME issues at the ICAEW

On the money with Gavin Hinks

Gavin Hinks — 2008-05-29T17:44:00.000Z

Gavin Hinks, Accountancy Age, Thursday 29 May 2008 at 17:44:00

I winced when I read last week that David Ross, chartered accountant and co-founder of Carphone Warehouse, has been chosen to be the eyes and ears of London mayor Boris Johnson on Locog, the Olympics organising committee

The reason? Once again a politician has decided a businessman is needed to make a public sector project work.

I find that assumption puzzling. Business is about value, but also profit. The ‘p’ word doesn’t enter into the equation of the Olympics. So why a businessman?

There’s no doubt that projects such as the Olympics need financial control but the business side?

It’s not entirely a parallel, but when Gordon Brown appointed David Varney, a former BT executive, to sort out HMRC, few considered it an overriding success.

And how do you measure success? In business it’s pretty clear cut, but to estimate a storming games? While some business metrics might be useful, others won’t apply at all.

Then there’s the values a businessmen brings to the party. Risk taking and speedy decision making. You could argue that the public sector may dawdle with decisions, but it is spending public money. And in this case vast sums of it.

As a London council tax payer I’m not sure I want a particularly risky approach to the Olympics. Frankly, rather than say his man was in place to ensure a ‘lasting legacy’, I wish Boris had said he’s there to exercise the same kind of grip over the budget as Steve Redgrave does over his oars.

Then there’s Ross’s background mobile phones. Wouldn’t it be better to have someone who knew something about staging big events?

I can only assume Boris thinks the London public will be reassured by this appointment. I should be backing the accountant but can’t help feeling my judgement needs to be firmly reserved.

PFI: a lack of initiative

Jon Sibson — 2008-03-27T00:00:00.000Z

Jon Sibson, Accountancy Age, Thursday 27 March 2008 at 00:00:00

The government's private finance initiative is hanging in the balance

The government’s move to adopt IFRS from 2009/10 has generated speculation about the future of the private finance initiative. If the accounting imperative to structure projects as off-balance sheet PFI schemes disappears, will PFI dry up? And if it does, does this matter?

Going forward, the case for using PFI will turn on its merits as a procurement method. So this is a good moment to ask what benefits private finance has actually brought? In other words, how important is the F in PFI?

PFI has made a difference to the implementation of large, asset-intensive projects, and the role of private finance within PFI has been a big part of that.

In particular, the role of debt has exerted beneficial discipline on public and private sector alike at the front end of projects.

Equity investment has helped the integration, as well as providing an incentive for sustained good performance and shielding the public sector from a significant part of the ‘pain’, in the very few cases where projects have defaulted.

In principle, some benefits of private finance could be brought about by reforms to project control disciplines and through other non-PFI contractual mechanisms.

But while it is too early to reach firm conclusions on new initiatives, it is not easy to see how they could match the disciplines arising from externally provided finance.

There are ways of improving PFI, some of which will become easier to develop now that accounting classification is becoming a non-issue.

In particular, there are ways of reducing the costs of externally-provided senior debt, though these will need to be calibrated so as not to weaken its disciplinary influence.

At face value the private sector cost of capital is higher than the government’s cost of debt, so governments are under pressure to push down the private sector’s cost of finance. Taken to the extreme, this could lead to attempts to erode altogether the (apparent) cost premium through wider use of conventional procurement or through government guarantees of private finance.

This would, however, be to forget the hard-learned lessons of the past, and to revert to thinking that (apparently) cheaper is better.

The challenge for the public sector is to allocate risks optimally and then run procurement programmes and negotiate individual deals, so the private sector receives an appropriate but not excessive reward.

Jon Sibson is a partner in the public/private advisory practice, PricewaterhouseCoopers LLP

The heat is off - but not for long

Alex Hawkes — 2008-03-27T00:00:00.000Z

Alex Hawkes, Accountancy Age, Thursday 27 March 2008 at 00:00:00

The Budget didn’t do wonders for the government’s poll ratings, but the Treasury and HM Revenue & Customs may at least reflect that the heat is, at last, no longer on them

The government is unpopular because the economy is in the doldrums, not for its tax policy, as previously. The non-dom heat is off, the CGT row is over. A boring budget has been successfully delivered.

This, though, is a dangerous time for the government’s tax policy chiefs. With the finance bill due to be published today, there are still some important technical issues to be ironed out. A few things stand out.

The details of the residence and domicile review will be pored over by advisers and lawyers. Not necessarily to advise their clients whether to leave or not, but amid the threat of far greater damage to the UK economy.

There is a suggestion that the UK’s wealth managers might be prevented from managing non-dom money, on the basis that having a UK investment manager means they have ‘remitted’ their offshore income. This would do immense damage to the private client wealth management industry, a not inconsiderable part of City work.

On top of that, the taxman is hoping to take vast new powers to enforce tax rules.

While it is important to support HMRC in its attempts to stamp out frauds, the taxman does need to know that this debate has gone too far in one direction.

When the revenue and Customs & Excise merged, spokespeople pooh-poohed the idea that this would see the world of direct tax become more brutal and hard-hitting.

That is exactly what has happened, and the promised taxpayers’ charter has yet to materialise.

The taxman is taking a lot it has to give a little too.

Budget 2008: sunnier climates expected

Anne Redston — 2008-03-20T00:00:00.000Z

Anne Redston, Accountancy Age, Thursday 20 March 2008 at 00:00:00

Wednesday's Budget indicates a positive wind of change

I spend every Budget Day in the same way. Initially, I’ll focus on the headline items, and then comb the footnotes, hunting for the red tape hidden in the nooks and crannies.

This time, however, my digging found something different: a pruning back of onerous provisions. Here are some examples: plant and machinery pools worth £1,000 or less can now be written off in a single year; the de minimis threshold for non-domiciled individuals was doubled to £2,000; a new relief for trivial pensions has been announced and there are to be simpler procedures for ISA and Child Trust Fund administrators.

Business Note 35 even announced that certain anti-avoidance clauses will be eliminated because they are ‘obsolete’, contradicting the belief that anti-avoidance rules are left to wither on the tax vine, so people can puzzle over their purpose, and worry lest innocent planning is accidentally damaged.

Another welcome surprise was the deferral of income shifting. If enacted, these rules would have obliged family businesses to justify how profits were distributed, a time-consuming process.

In short, these two short pages of legislation would have created a riot of red tape. The Treasury’s willingness to listen to our comments, and then to defer the decision, is a further indicator of a changed approach.

But experience of many Budgets has made me cynical. What about the consultation papers lurking among the supplementary documents section of the HMRC site? But instead of badly targeted avoidance provisions, there’s a low-key discussion document entitled ‘simplification review: tax calculations and returns for smaller companies’.

This Budget also delivered huge changes to the tax system: a radical reshaping of the familiar capital allowances regime, root and branch reform of capital gains and the taxation of non-doms and a shake-up of the penalty provisions. It is in these major reforms that the real meat of this Budget is to be found.

But as well as these substantive changes, already much commented on by practitioners, this Budget had something different, a new flavour. The prunings, the willingness to listen, the openness to regulatory reduction these may be but straws in the wind, but it is a wind which is blowing in the right direction.

Anne Redston is a visiting professor at King’s College, London and a member of the ICAEW Tax Faculty’s Technical Committee

Time for bravery, not caution

Jonathon Ford — 2008-03-20T00:00:00.000Z

Jonathon Ford, Accountancy Age, Thursday 20 March 2008 at 00:00:00

Our cautious chancellor has his head firmly buried in the sand

Time for bravery, not cautionThe global financial storm that started last summer rages on. It’s howling as hard as ever in the markets.

Yet the tempest had only a walk-on part in Alistair Darling’s first Budget, and that was purely to allow the chancellor to stress its global nature. Blame the world, not me, if things go wrong, was the message.

The overwhelming impression conveyed by the Budget was of a chancellor at the mercy of the markets simply twiddling his thumbs, hoping that the economic weather would improve.

Sadly, there is a lot of truth in the unflattering picture. Darling’s economic forecasts may or may not be over-optimistic. But even on the basis of his own arithmetic, the chancellor’s back is firmly to the wall.

The debt numbers have already been fudged by the exclusion of Northern Rock but increased borrowing will take the government to the very brink of breaching its cardinal rule of keeping debt to within a ceiling of 40% of GDP.

Meanwhile taxes are rising faster than spending taking air out of an already deflating economy. And this is probably the golden scenario. The financial sector pays nearly a third of all corporation tax receipts. Our dependence on finance is one reason the financial storm menaces Britain more than other countries.

There may be little a hemmed-in government can do to offset the effects of the storm. Darling cannot pick up any slack by cutting tax or spending more. David Cameron’s gibe about the government having failed to prepare for the worst stung precisely because it was true.

But Darling seems to be trapped in a ‘business as usual’ mentality. And this may prevent him from taking steps to mitigate the storm. Some of these steps fall outside the scope of the Budget forcing banks to recognise losses and raise additional capital if necessary to restore the supply of credit to the economy. It’s hard to know whether Darling has got to grips with this. He talked vaguely in the Budget about encouraging banks to offer long-term fixed rate mortgages. Who on earth does he think would offer such a product?

On tax, there was a poverty of ambition. Darling was right to stick to his guns on the non-doms. But his proposals certainly fail Colbert’s test of a good tax that it should remove the maximum number of feathers from the goose for the minimum of hissing.

As for a simplified tax system or indeed one that does not favour debt over equity finance (one of the root causes of the financial boom that preceded the storm) those measures will have to wait for a more courageous chancellor.

Jonathan Ford was a founding editor of Breakingviews.com

On the money

Gavin Hinks — 2008-03-14T00:00:00.000Z

Gavin Hinks, Accountancy Age, Friday 14 March 2008 at 00:00:00

Tackling a good problem for all the wrong reasons

There’s no accounting for the way people will react in a crisis. Some people have inspired moments of clarity, others… well, others don’t.

Take former US presidential hopeful Senator Elizabeth Dole. A woman of impeccable education (including Harvard Law School), Dole last week decided to throw her hat in the credit crunch ring by insisting that compliance with certain parts of the Sarbanes-Oxley act should be ‘voluntary’ for banks.

The parts she mentioned were section 404 the bit about having auditors verify that you have decent internal controls and section 302, the part that says CEOs and CFOs should certify that they have checked the internal controls. If they don’t they could go to jail.

We all know that 404 has been a pain and that administrators in the US have perhaps regretted introducing such a heavy handed piece of legislation. There have been good arguments for why 404 should be, shall we say, mediated in some way but there’s a time and a place for such arguments.

It strikes me that it is supremely naive to believe you should call for a cut in regulation for banks at a time when the judgement of those who run the banks doesn’t appear to be something they’d shout about.

And there’s a lesson in there because Dole’s argument is that 404 costs a lot for the banks, which is worsening their financial position.

Well, boo hoo. But regulators should beware of being seduced by such dodgy thinking when considering how to deal with the credit crunch. There’s always a temptation to tip the wrong way in the rush to help, but the questions should always be, is this the kind of help needed and which problem needs addressing?

Dole decided to tackled a good problem for the wrong reasons. It is no surprise that she’s unlikely to get her way.

Gavin Hinks is the editor of Accountancy Age

Whitehall will be qualified: better late than never

Adrian Pulham — 2008-03-06T00:00:00.000Z

Adrian Pulham, Accountancy Age, Thursday 6 March 2008 at 00:00:00

Whitehall will be qualified, it’s just taking a while

It may come as a surprise to anyone who does not work in the finance function of a government department, that the head of that function was not, until very recently, required to hold a finance qualification.

It is difficult to imagine a FTSE 100 company employing a finance director who had not acquired a recognised finance qualification. Yet this is exactly what has been happening for a while now.

As reported in Accountancy Age, unqualified central government FDs are still handling around £45bn of public money, despite a much-publicised policy change that was meant to prevent this happening. So, how has this happened?

Let us first put the situation into context. Traditionally, bright sparks entered Whitehall straight from university, often on the back of a fine liberal education, and found any one of a number of career paths open to them. Reaching the top after following such diverse career paths, they emerged as well-rounded characters.

They had developed a broad knowledge base and finely honed insights into the complex workings of government machinery they might have missed had they sat at the same desk for twenty years. Hard-won experience of what works (and when it works) still has a lot going for it. But now the government wants professionals and specialists in many top jobs. This is difficult to argue against. Why shouldn't we have the brightest and the best qualified running our public services? It is no more than our taxes deserve.

CIPFA, Warwick Business School and the Treasury have been quietly but effectively plugging away for the last two years to meet this need. A rigorous two-year course taught by some of the best tutors in the business has recruited over 100 public sector FDs on the journey to becoming 'street legal'.

The recent National Audit Office report, which highlighted the government's failure to meet the end of 2006 deadline to get Whitehall FDs qualified, is clearly of concern though. Perhaps the deadline was always a little too ambitious or underestimated the culture change required. However, the departments identified in the report are now fully committed to the professionalisation programme.

Realistically, the whole process across Whitehall could be completed within two years. Yes, the deadline has been missed, but the good news is the matter is firmly in hand.

Adrian Pulham is education and training director at CIPFA

Here's hoping for a stunt-free budget

Alex Hawkes — 2008-03-06T00:00:00.000Z

Alex Hawkes, Accountancy Age, Thursday 6 March 2008 at 00:00:00

Whatever the chancellor announces in his first Budget next week, the profession will be looking for one thing in particular

It is hoping for a chancellor who stands up and appears to take tax seriously.

The impression given in recent years has been that tax is nothing but a political tool, a toy to drum up votes and send political signals. Think of Gordon Brown’s move before the last election to give OAPs a winter fuel handout, financed by an accounting change to oil taxation. Think also of Brown’s cut to the basic rate of income tax a move that hammered the poor to fool the better-off. Think, mainly, of the pre-Budget Report’s desperate political gestures on non-doms and inheritance tax.

Alistair Darling has been dealing with the hangover from his rash non-doms moves ever since. While a review of the non-doms rules was overdue (and the fears of mass emigration of the brightest and best are surely overdone), it was handled messily and was a hostage to fortune. The inheritance tax changes are also set to be ‘revalued’ next week, revealing that Darling’s giveaway was not all it was cracked up to be. The chancellor needs to avoid such political stunts next week. Tax is a serious issue.

Ironically, the most serious and thoughtful contribution to the British tax system Darling has made was on capital gains tax. The moves created winners and losers, but were an admirable attempt to simplify a famously complicated tax.

The chancellor has also been slated on those moves, and he may feel that seriousness on tax is overrated as a result. But he would be mistaken. A serious crisis calls for a serious Budget. Deliver one, and Darling might still salvage his stewardship of the nation’s finances.

comment@accountancyage.com