So, the Coalition is to kill off child trust funds. I won't miss them. They were, as I've documented before, a profoundly silly dollop of woolly socialist thinking.

Already, the industry is lining up to complain about their abolition. But they would say that, wouldn't they? They were used to being able to charge fat fees on assets ponied up by the government. Small wonder they're crying at the tap being turned off.

The sums of money involved - £250 for most kids and £500 for the poorest at birth, repeated at age 7, is too trivial to worry about once management fees and inflation have run their course. It therefore was largely a vehicle for better off grandparents to pass money on to their grandchildren and avoid a bit of inheritance tax in the process. My own child's CTF, thanks to grandparents' generosity and my simply awesome investment skills, as well as an addiction to low-cost share-based investment, is worth about £5,000 and should be worth a lot more than that at 18. But that's likely to be one of the largest CTFs around. Most will be only good for a few beers, which is probably where it will be spent anyway.

The fund industry should do their utmost to encourage parents to continue investing, even though the government won't be topping up. In return, government could make it easier for people to invest. For starters, it would be a good idea to allow children to invest in ISAs and roll the existing CTF funds into ISAs, to broaden the range of products available and the amount of money that can be invested in them, subject to a 'no withdrawals' rule for under 18s. This would also fix a current unfairness in the system whereby eight year old children have no CTF and can never get one.

The death of child trust funds is also a positive signal for the country. It shows that the Coalition is prepared to do what it takes to solve the budget crisis, even shelve a popular project like child trust funds, which was one of the favourite projects of Gordon Brown and his tired administration.

Filed under: Economics, Politics with tags child trust funds, deficit, gordon brown, savings
2948No Comments »http%3A%2F%2Fwww.fcablog.org.uk%2F2010%2F05%2Fgood-riddance-to-child-trust-funds%2FGood+riddance+to+child+trust+funds2010-05-25+10%3A50%3A42Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D2948

Pathways is a scheme offered by the ICAEW to allow members of other bodies to obtain ICAEW membership without having to do lots of exams. Instead, you prepare a detailed summary of experience, which is assessed instead. Once you're admitted as a member of the ICAEW, you can them drop membership of the other body.

Pathways was fantastically irritating for other accounting bodies, who bleated in protest when it was introduced. Even Accountancy Age couldn't resist a sly dig, pointing out that, actually, rather a lot of people were failing to make the grade.

Also there's a feeling that current members don't really like it either. Although applicants have to have been a full member of another accounting body for five years post-qualification, there's still a scepticism that Pathways is somehow an 'easy' route to the ACA, one that's somehow simpler than studying for, sitting and passing three years of examinations.

However, strategically, it's a masterstroke. Feeding off the perception that all UK accountants really aspire to ICAEW membership, it should in time permit the ICAEW to decapitate the cream of its rivals' crops and make them its own. And it should alleviate somewhat the difficulty of signing up vast numbers of student ACAs. Of course, only time will tell.

Filed under: Institutes with tags icaew, membership, pathways
2940No Comments »http%3A%2F%2Fwww.fcablog.org.uk%2F2010%2F05%2Fbecoming-an-icaew-member-via-pathways%2FBecoming+an+ICAEW+member+via+Pathways2010-05-25+09%3A30%3A41Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D2940

Those clever people over at Deloitte's iasplus.com website have published the 2010 edition of IFRSs in your pocket.

This slimline edition of just 132 pages provides summaries of every international standard currently in force in language that can be understood by a non-specialist. This is no easy task, given the complexity of some of the standards. Incredibly, it manages to boil IAS 39, Financial Instruments: Recognition and Measurement, into just a few pages. Where applicable, it provides links to other Deloitte publications.

This publication is a real goldmine. In addition to the summary standards, it provides a list of all IASB board members, with biographies, IASB staff, a chronology of the development of international standards, a summary of the current status of IFRSs in different countries around the world, and a heads-up on upcoming developments.

Previous editions are available in a variety of other languages, including Polish, Hungarian, Russian, Portuguese French, German, Spanish, Finnish and Turkish, here. I expect they'll get round to translating the 2010 edition before too long. Very highly recommended indeed.

Filed under: Accounting with tags deloitte, iasb, iasplus, ifrs
2950No Comments »http%3A%2F%2Fwww.fcablog.org.uk%2F2010%2F05%2F2010-edition-of-deloittes-ifrss-in-your-pocket-published%2F2010+edition+of+Deloitte%27s+%22IFRSs+in+your+pocket%22+published2010-05-24+18%3A54%3A20Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D2950

The UK's Professional Oversight Board (POB) has beaten up the accountancy bodies over their supervision of non-audit work. POB was worried about the expectations gap created by what the bodies say they do on their websites as opposed to what they actually do in practice. The non-audit services in question are non-regulated work, so it's not unreasonable for the bodies to do less. But POB made some pretty alarming findings. One body, despite stating that every member in practice will eventually receive a monitoring visit, doesn't have the resources to visit non-regulated members. So it doesn't do it. Another of the bodies outsources its work to another professional body, despite giving the impression it does it itself.

POB also suggested that the bodies make it very clear that their monitoring visits only look at process, not technical quality of the underlying work. And, given the importance of ethics to buyers of non-regulated accountancy services, it advises that the bodies undertake a review of compliance with ethical procedures as part of their monitoring visit.

Currently, only complaints that cannot be dealt with satisfactorily by the firm itself get referred up to the professional body. POB thinks this isn't good enough, and has recommended that the professional bodies obtain a sample of internally-handled complaints from their firms so they can check they've been dealt with fairly and properly.

POB's report is, on the whole, fairly measured. It will make some uncomfortable reading for the professional bodies, who might have felt that, despite the events of the last few years, they've – to use Paul Boyle's ill-judged turn of phrase – “had a good crisis”. POB's report will have reminded them that there's simply no room for complacency.

Filed under: Auditing, Institutes, Regulation with tags frc, non audit services, paul boyle, pob
2926No Comments »http%3A%2F%2Fwww.fcablog.org.uk%2F2010%2F05%2Fprofessional-oversight-boards-report-on-non-regulated-services%2FProfessional+Oversight+Board%27s+report+on+non-regulated+services2010-05-24+10%3A08%3A30Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D2926

GMHuman forwards me the following interesting question:

RT @mattrcb: Seriously who would pay £70k to hear Gordon Brown speak? http://j.mp/aKNiQo << rich massochists

From National Statistics we learn that the national debt in 1997 was approximately £350bn and that by 2010 it had risen to about £850bn, an increase of £500bn in 13 years.

This works out at £38bn a year, or £73,000 a minute.

That's right, as a result of Gordon Brown we have increased our debt by £73,000 for every minute of his wretched rule as Chancellor and PM.

I trust that the quoted after-dinner speaking fee is for rather more than sixty seconds. He owes us.

Filed under: Other blogs, Politics with tags deficit, gordon brown, labour, twitter
29332 Comments »http%3A%2F%2Fwww.fcablog.org.uk%2F2010%2F05%2Fpaying-gordon-brown-70k-a-speech%2FPaying+Gordon+Brown+%C2%A370k+a+speech2010-05-23+19%3A01%3A44Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D2933

So, the coalition is in business.

They've announced a bonfire of bad Labour legislation. First to go is home information packs (HIPs). HIPs were the ill-conceived project thrust upon an unwilling public by Ruth 'Strewth' Kelly, who will forever be known as that almost-bearded lass with the man-voice who shagged David Miliband, or if you're feeling more charitable, the face that launched a thousand HIPs.

And what a stinker they were. A particularly stupid bit of European legislation requires house sales to include an energy certificate; this in itself would be daft enough. But Labour went further and gold-plated the legislation, making it much more expensive, even though vendors and buyers didn't seem to want the information contained in HIPs. Even worse, although they were notionally paid for by the vendor, buyers often had no choice but to pay the cost on their behalf. And they didn't even justify properly why gold-plating was necessary.

Brief changes in law like this can be very helpful for academics, who can look at life before, during and after regulatory changes for evidence to help inform future regulation. Perhaps some clever academic can use HIPs to tell us something about tax incidence?

Filed under: Politics, Regulation with tags european union, home information packs, ruth kelly
29111 Comment »http%3A%2F%2Fwww.fcablog.org.uk%2F2010%2F05%2Fgoodbye-to-hips%2FGoodbye+to+HIPs2010-05-21+11%3A03%3A05Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D2911

I've created a short page that provides some links to help you become a chartered accountant.

You can find it on the right hand menu, or here.

Filed under: Institutes, Site admin with tags icaew, jobs, meta, training contract
2904No Comments »http%3A%2F%2Fwww.fcablog.org.uk%2F2010%2F05%2Fhow-to-become-a-chartered-accountant-with-the-icaew%2FHow+to+become+a+chartered+accountant+with+the+ICAEW2010-05-21+08%3A59%3A24Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D2904

So, inflation has been announced at 3.7%, absolutely miles above the level at which the Governor of the Bank of England must write to the Chancellor and explain himself. The RPI, which more closely tracks the sorts of things we spend our money on is up by even more, to 5.3% - the highest it's been for 18 years.

Inflation is an anathema to accountants, unless you're Richard Murphy, and the less said about him the better. Basically, inflation doesn't sit kindly with the double entry book-keeping system. It acts as a distortion to the assets and liabilities controlled by the organisation. And the same forces can have really pernicious effects on individuals.

So, what is inflation? Inflation is where money gradually loses its value over time. However, this rather begs the question as to what is money. My view is that money is a measure at a point in time of performance against the things people value. In the good old days, we didn't need money. People bartered with each other, and in the small society of a village, there was no need for a third party measure to hold people's performance to account. Both laziness and hard work were easy to spot and could be punished/rewarded accordingly. Yet, as our boundaries grow beyond the village, money becomes more useful.

A £1 coin is a way of measuring what I have done at a point in time. And conversely, a £1 debt is an obligation on me to do something in the future.

In an inflationary environment, debt lets you cheat. You borrow some money, use it to pay off your present obligation, then complete your performance at some point in the future. So long as your future earnings exceed your debt plus interest, you're quids in. In this world, people who borrowed get rewarded.

And think for a moment of responsible people. Their reserved wealth gets eroded by the inflation. It also means that your historical performance, which you exchanged for money, is now valued less by society because the money you received for it is now worth less.

Left-wingers generally love this. They see it as encouraging the transfer or wealth between generations. But they are wrong. There's no need to encourage the transfer of wealth between generations - death already accomplishes this perfectly well. Sensing their own mortality, people tend to bequeath or donate their money. Or spend it. Similarly, it's reasonable to expect the younger generation to work - as we worked - to earn the right to replace us in society.

There will always be a period where people are economically inactive. For most of us, there's a period at the start of our lives and another period at the end of our lives. An inflationary environment means people must save much more to insulate themselves against the risk of capital erosion in retirement. It's unfair, given that we as a society want the elderly to be able to retire with dignity. Where retirement used to be short, a bit of inflation might have been okay. But now many people are retired for 20-30 years, over which time the value of their fixed income pensions can fall by almost two-thirds. Twenty years ago, a pint of beer was £1.40. Now it costs almost £3.50. That sort of inflation is hard to protect against.

Unfortunately, inflation is irresistible to governments, as it allows them to reward the reckless many at the expense of the prudent few. And it isn't immediately obvious to the prudent that they have been ripped off until much later. But it's still unfair. A low inflation economy would be one that values the old as much as the young, the past as much as the future. Our present course encourages over-consumption today, because we can't be sure that our wealth won't be devalued tomorrow.

There's a particularly wretched editorial on inflation in the Guardian, which proclaims:

The funny thing about this situation is that a burst of higher inflation for an indebted, recession-bound economy is not that bad a thing. Adopting a higher inflation target would not only help burn away some of the UK's outstanding debt; it would also enable rates to be kept low to stimulate economic activity

I don't suppose anyone on a fixed income finds it remotely funny. The overpaid kids who wrote this garbage should be ashamed of themselves.

Filed under: Current issues, Economics with tags deficit, guardian, idiots, inflation, richard murphy
2872No Comments »http%3A%2F%2Fwww.fcablog.org.uk%2F2010%2F05%2Fthe-iniquity-of-inflation%2FThe+iniquity+of+inflation2010-05-20+10%3A15%3A09Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D2872

The Telegraph describes a new survey which sets out in stark detail the massive gap between what we expect to receive from our pensions in retirement and what we will actually receive based on our current payments.

For example, a 43-year-old on average earnings of £25,000 and saving about 6pc of salary into a pension expected to receive a retirement income of about £15,000, this year's survey found. But such savings would in fact produce an income of just £5,900 a year.

Just how anyone who is capable of earning £25,000 genuinely believes that you can generate enough capital to provide 2/3 of your pre-retirement income by saving such a tiny proportion for 20 years isn't explained. We have a massive financial literacy gap in this country and it's about time something was done to fill it. The last 13 years, in which we have regularly been promised the earth while never having to face up to the bill, haven't helped.

It's not all bad news. If our average earner increases his contributions to 19% and has a full state pension, he can see his 2/3. Otherwise he'll just have to work longer.

Filed under: Economics, Other blogs with tags financial literacy, pensions, telegraph
2895No Comments »http%3A%2F%2Fwww.fcablog.org.uk%2F2010%2F05%2Fthe-gap-between-what-we-want-from-our-pensions-and-what-we-are-willing-to-pay%2FThe+gap+between+what+we+want+from+our+pensions+and+what+we+are+willing+to+pay2010-05-20+09%3A34%3A48Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D2895

Goldfish have a pretty bad reputation as animals go. It's commonly held that goldfish have no memory at all and therefore treat every experience as if it were their first. Perhaps if you live in a plain bowl, that's a good thing. Of course, like most perceived wisdom, it's false - goldfish actually have much better memories.

Perhaps then, they might care to help out Tory backbenchers, who seem to be having a goldfish moment. They're up in arms at the very idea of increasing the rate of capital gains tax (CGT) from its current 18% to 40% or even 50%.

Do you think they've forgotten that CGT used to be set at the marginal rate of income tax? Assets that were held for more than just short-term trading qualified for taper relief, meaning that CGT could be as low as 10%. Then private equity hit. People didn't much care for billionaire private equity bosses paying only 10% tax, so Gordon Brown swept away the taper relief regime and replaced it with a flat CGT rate of 18%. As a special benefit for retiring entrepreneurs, gains on sales of businesses less than £1m still qualify for the 10% rate.

For people holding assets long term, Brown's changes were bad news - they meant an increase in tax of some 80%. Also, asset prices were no longer indexed to strip out inflation, meaning that individuals will in future pay tax in inflation gains, which seems grossly unfair. Conversely, for people who speculate, the changes were brilliant - they now paid 18% instead of perhaps as much as 40%.

There's no reason why the taper relief regime and inflation indexing couldn't be brought back. These changes would mitigate a lot of the problems of a higher tax rate. The system wouldn't be perfect, but it would be a lot better than ignoring taper relief and inflation altogether. Can't we have this debate? Or have the Tory backbenchers really forgotten how we used to do things in the past?

Filed under: Current issues, Politics, Taxation with tags capital gains tax, conservatives, gordon brown, inflation, private equity, taper relief
28891 Comment »http%3A%2F%2Fwww.fcablog.org.uk%2F2010%2F05%2Fcapital-gains-tax-and-goldfish%2FCapital+gains+tax+and+goldfish2010-05-20+09%3A08%3A47Christie+Malryhttp%3A%2F%2Fwww.fcablog.org.uk%2F%3Fp%3D2889