First degree merger: the ICAEW and CIPFA vote

Back in the late 1960s, as the hippy revolution lost its fizz and the Beatles
began to get on each others nerves, all six accounting bodies attempted to merge
into three chartered institutes – England and Wales, Scotland and Ireland, but
talks broke down.

Twenty years on in July 1990, with hippies and The Beatles replaced by ravers
and The Stone Roses, accountants tried to get together again, and failed. That
time, it was a narrower alliance. Nevertheless CIPFA and the ICAEW’s attempt to
merge did not get enough support. By September, ICAS had also backed out of a
deal to join forces with the ICAEW.

In the mid-1990s, as britpop bands Blur and Oasis battled it out, it was
CIMA’s turn to join the fray, with ICAEW members again voting down a merger.

A decade on, here we are again. There are just three weeks left until ICAEW
and CIPFA members find out whether the latest attempts to merge – or
‘consolidate’ if you read the official material – will join the other failures
in the annals of accountancy merger history.

‘Why do we come back to this?’ asks CIPFA chief executive Steve Freer.
‘Because having six bodies is not the right approach. No other country organises
the profession in such a competitive and unjoined-up way.’

So far the process, which began in July 2004 with CIMA also on board
(reservations among the management accountants’ council ensured a vote did not
even reach its membership), has seen old grievances given a fresh airing.

The ICAEW has always found it difficult to convince members that ‘mergers
make you stronger’. Many members, particularly those of a certain age, fear any
tie-up will weaken the value of their hard-earned passport.

Members in practice, in particular within small firms, argue that the merger
plans do not cater for their needs, and by bringing another institute on board,
they argue that the ICAEW’s qualification becomes ‘diluted’.

Several ICAEW members, including long-time complainants like Jeff Wooller,
Bruce Lawson and Ken Frost, have been extremely vocal in their opposition to the
plans.

The flip side of that coin is that ICAEW members who might be seen as more
receptive to change, such as those working within industry, are often distanced
from the goings on at Moorgate Place, and express little interest in the outcome
of mergers and the like.

But Anstee insists that he has heard no ‘cogent’ arguments against the merger
plans in the 15 months since they were announced. ‘There’s no credibility behind
Bruce’s claims,’ Anstee says with visible agitation.

‘If he had a cogent objection, whatever it may be, we’re not watering down
the qualifications. We’re very determined that a modern institute should have
membership rights that are different to qualification,’ he argues. You can be a
member of a single body, he adds, that offers distinct but equivalent
qualifications.

As to the charge of ignoring their memberships, both men argue that they have
altered the plans following consultation. Many of these have been undertaken to
deal with another member concern – that the institute will struggle to deal with
varying requirements of members in practice, business, public sector and those
based internationally.

So how do you create an institute with 140,000 members – of which just 14,000
will be CIPFA qualifieds – with so many different needs? The main alteration to
initial plans is the introduction of advisory boards.

These will provide members who are averse to getting engaged with council and
attending meetings, with a method of voicing their opinions and views through
the board.

Arguments about ‘diluting qualifications’ will be answered, Anstee and Freer
believe, if the new institute gains a bigger voice. ‘We’ll see an institute take
on public policy and business issues – something we’ve not been able to deal
with in the past,’ says Anstee.

And creating a larger and more powerful band of accountants, with more clout
among public and private industries, makes sense. But isn’t that what the
Consultative Committee of Accountancy Bodies, the umbrella body for the six
existing professional bodies, is there for?

In the real world, this has not necessarily been the case, argues Anstee. He
thinks that the CCAB works in certain areas, but the individual bodies are all
competitors. ‘That’s why we need one single voice,’ he says.

If the CCAB does agree on one issue, it’s that a merged ICAEW/CIPFA opinion
will hold more sway. More importantly, when consensus cannot be found within the
body, then the merged institute will have a more powerful and influential voice
externally.

It’s a thorny issue, which led ICAS chief executive Des Hudson to write in
Accountancy Age earlier this year, that the CCAB is the ‘appropriate vehicle for
co-operation’ among accountancy bodies.

‘With the proper level of support from the profession’s representative
bodies, the CCAB’s effectiveness can only be enhanced,’ Hudson said.

The Scottish institute’s hackles have also been raised significantly over the
potential name for the merged body: The Institute of Chartered Accountants.

The choice of name is subject to Privy Council approval. But former ICAS
president Ian Robertson has called the choice ‘too broad and inaccurate’.

More recently, the Australian and Indian chartered institutes have protested
against the moniker. The New Zealand institute is expected to formally voice its
opposition shortly. ‘The name choice is not a point that members should focus
on,’ says Anstee.

‘We’ve heard some objections, we have to listen to views and see whether or
not we can find some accommodation. The name issue should not cloud voting.’

‘It’s a subject of great fascination among some,’ acknowledges Freer.

In truth they are underplaying an issue that could lead to bad-feeling at
best and, at worst, an unpleasant legal battle. Whispers have also circulated
that council members have been gagged from discussing their individual
views in public.
Both men deny the accusation, though Anstee admits that, while there have been
colourful discussions among council members, once council has taken a decision
‘to remain on the council you should respect the decision’.

‘As it happens, we have almost overwhelming support,’ Anstee says.

We’ve had a whole series of meetings, adds Freer, ‘where they haven’t had to
take hard and fast decisions, but everybody has been given the chance to air
opinions, and address concerns’.

And more controversy: the campaign for the merger has made big noises about
the £4m cost efficiencies expected from the new institute. Yet little detail, or
calculations, have been provided to members to illustrate when and where the
savings will come from.

Anstee says the figure reached was ‘a reasonably conservative one’, but would
only add that the efficiencies would be gained through traditional methods, such
as the joining up of IT systems. The savings will be invested back into the
institute.

‘It won’t be like paying out a dividend to members. We will release resource,
and plough it back into other areas.’ He adds that ‘strict due diligence’ was
undertaken to measure the impact of the merger, and reveals that an accounting
firm was involved in the process. He declines to name it.

As for future plans, both bodies are still talking to CIMA about joining the

gang. But the problems that led to CIMA ducking out of the proposals at the end
of
2004 still remain.

CIMA, which has become a strong and respected brand, is worried about being
swallowed up in the larger body. In the words of president Roland Kaye: ‘Our
council concluded that the current proposals did not yet recognise the
distinctiveness of CIMA.’

Anstee admits:‘They want the recognition of the science of management
accounting to continue. We thought we’d found a way of doing that.’ He describes
that possible merger as ‘doable’, but the first one must be dealt with.

As for the fragility of Freer and Anstee’s roles if another merger collapses,
both deny that their jobs are on the line, or that the institutes would fall
into turmoil.
‘If we were to be busted flushes, then plan B is a bigger issue,’ says Freer.
‘We’re still two very strong organisations.’

The ICAEW has size and reputation on its side while CIPFA has obvious
attractions that outweigh its slightness, as it owns its London HQ outright, has
a national network of education and training centres, a healthy balance sheet
and an enviable reputation within government.

But ironically, both men will have to ‘interview’ again for the top job
within a new institute, along with both executive boards.

This all depends whether the plans are back by two-thirds of both sets of
voting members. Early polling is encouraging but there is still a long way to go
if the ICAEW in particular (CIPFA members are thought to be more supportive)
persuades its membership that merger is their best option.

In three weeks’ time, we’ll know whether this campaign has failed like those
before it. If that happens, it’s hard to imagine any of the current protagonists
getting a second chance in the near future. Anstee and Freer sincerely hope they
won’t need one.

FOR THE MERGER

Eric Anstee, ICAEW chief executive: ‘By being able to speak
across the whole economy, for the first time an institute will be able to take
on issues over public policy and business issues, which we haven’t been able to
do in the past.’

Steve Freer, CIPFA chief executive: ‘We’ve worked really
hard to engineer this in a sensible way, to find sensible ways forward. The
timing is right. Two brand leaders getting together feels pretty significant and
positive. Hope this is how it will be received.’

Mike Barnes, former CIPFA president: ‘CIPFA is the only
accountancy body focusing on public services. The merger is a springboard on an
international basis. If we don’t move first, then we could end up chasing the
game.’

Peter Mitchell, chairman of the Society of Professional
Accountants: ‘The historic development of several institutes and the vested
interests that have worked against their amalgamation should now be put aside as
we move towards global accountancy harmonisation.’

Peter Hensman, FCA: ‘I firmly believe that the proposed
integration of the ICAEW and CIPFA is the right first step on the road to
providing more effective and coherent support to chartered accountants and their
businesses, here in the UK and internationally as a result.’

AGAINST THE MERGER

Bruce Lawson, FCA, Montgomery Tax Services, Members Against
Consolidation: ‘We don’t want the ICAEW to become some political pressure group.
They’ve flown a kite and no-one wants to play with it.’

Robin Arculus, FCA: ‘I have no particular aversion to this
particular merger. I do, however, have many reservations about similar proposed
mergers with other accountancy bodies. To merge with CIPFA will water down
resistance to these other mergers (is this the ICAEW’s hidden agenda?) and as
such must be resisted with all our strength.’

Kamran Sekha, ACA, CPA: ‘The ICAEW wants a bigger voice, but
a bigger voice is not the same thing as one voice. Unless we can get all UK
accountancy bodies to merge, any other merger will not solve any purpose.’

Dr Jeff Wooller (ICAEW Ginger Group, not ICAEW approved):
‘The ICAEW members have already turned down this one and another attempt will do
nothing except put more egg onto the faces of ICAEW council members.’

Key dates

21 October: Deadline for return of postal ballot for CIPFA
members.

23 October: Deadline for postal, fax and online votes for
ICAEW members.

25 October: CIPFA special general meeting at 11am, The
Guildhall, London. ICAEW SGM at 11am, Chartered Accountants’ Hall, Moorgate
Place, London. Members of both institutes will be able to vote in person at the
respective meetings.
Two-thirds majority of members voting in favour is required by both institutes.

Feb 2006: Incorporation of the combined institute (subject
to member and Privy Council approval).

June 2006: First annual meeting of the combined institute.

Autumn 2006: Arrangements for election to the new council.