Christie Malry's own double-entry
Posted by Christie Malry on May 11, 2011 at 8:52 am
After last night's catastrophic performance from accountant Edward Hunter, I rang ICAEW first thing this morning to check which body he belongs to.
Yep, he's one of ours. This is a bit of a setback in my crusade to portray chartered accountants as hip, modern and relevant. But, as they say, you've got to roll with the punches.
Posted by Christie Malry on February 17, 2011 at 12:40 pm
One of the stranger parts of today's Today programme was the business section. There was a geezer plugging his book about gambling, in which he documents how to make a living out of placing bets on things. He had had several notable successes, including tipping Spain to win the football world cup.
One of the more unpleasant parts of his interview was where he referred to what he called a "facespitter" bet. This is a win that's so large that you can go up to your boss and spit in his face. You'll lose your job, for sure, but can live off your winnings instead.
I found it rather alarming when he described how large a facespitter bet would be. £40,000. Even allowing for the fact that gambling winnings don't attract income tax (although, see below), this is a pitifully small amount of money. If used to buy a flat rate annuity, perhaps a silly thing to do in today's inflationary climate, it would generate £2,000 a year, or about £40 a week. Is that worth losing your job for?
Or perhaps he imagines he'll need a lot of facespitters in his lifetime. It's hardly a comfortable existence.
I save the old fashioned way, in shares, and I know precisely how much more I need to save before I can spit in my boss's face, not that I ever would. As of now, it's another £268,000. That's a lot of money, but it's broadly achievable. And a great deal more honest than some shyster exploiting people's financial illiteracy and claiming you can get by on less.
Oh, and I believe (would welcome confirmation from a tax expert) that HMRC will treat otherwise tax exempt income as taxable if it becomes your trade. So, gambling income ordinarily isn't taxed, but will be at the point at which you become a professional gambler. You were warned!
Written on my Android mobile phone. Article may be edited later.
Posted by Christie Malry on November 26, 2010 at 1:51 pm
Labour leader Ed Miliband was on the Today programme this morning, in a mid length interview with grizzler-in-chief, John Humphrys. And it was a real stinker. Even the party faithful are struggling to maintain a smile in the face of his lack of vision, monodrone delivery and hapless inability to grasp even his own policies (inasmuch as he actually has any). The CiF brigade similarly found little to like. Most ire so far has focused on his refusal to define who he means by the term "squeezed middle".
But there was a far worse howler in there. Humphrys asked about the 50% tax rate, over which Miliband had slapped down his own Shadow Chancellor about whether it should be permanent. Miliband thought it should be permanent because it would help to bring down the deficit and because, for people earning a lot, a marginal rate of 50% was fair. He then said that 60% would not be fair.
Danger, Will Robinson! The 50% rate only applies to those earning over £150,000 per year. Those earning between £100,000 and £150,000 pay a marginal rate, thanks to National Insurance and withdrawal of the personal allowance, of 61%. There are even worse marginal rates at lower levels of income thanks to the impact of benefits withdrawal.
If a marginal tax rate of 60% is unfair for someone earning £150,000, how can Miliband explain the former Labour government, of which he was part, presiding over the introduction of a marginal rate of 61% on those earning much less (even accepting that it's still a lot of money). And why dither for so long over the effective marginal rates for benefit claimants?
Answers, Ed? He'd better be quick; after today's miserable performance, the vultures in his own party will be circling.
Written on my Android mobile phone. Article may be edited later.
Posted by Christie Malry on November 15, 2010 at 8:46 am
Radio 4's Today programme reported this morning that the UK's major banking institutions are meeting to discuss whether they can, as a group, reduce their bonuses to employees. They don't dare act solo, lest key performers leave. But they remain under major pressure from MPs and wider society to act responsibly, given the support given to the sector.
But imagine a different meeting had taken place. One in which they had conspired to raise prices. Obviously, this would have been illegal - a clear example of Adam Smith's prediction about meetings between rivals turning to ways to rip off their customers. So why is it acceptable to conspire to reduce the financial benefits to one stakeholder group, but not another?
To be fair to the BBC, they did observe that the meeting might be deemed illegal under competition law. And also that the Treasury might be distinctly unamused. Hardly surprising, given that half of all bonuses belongs to them. The proposed cut in bonuses neatly offsets the proposed banking levy.
You'll remember, if you read Worstall's blog (and you should), you'll know that corporate benefits are shared between stakeholders and that tax increases tend to be borne most heavily by employees. Doesn't this rather prove it?
Written on my Android mobile phone. Article may be edited later.
Posted by Christie Malry on November 5, 2010 at 9:11 am
As of 0001 5 November 2010 I am on strike in protest at the BBC's theft of our pensions.
So says Paul Mason, the desperately talented Economics Editor at Newsnight. Yet, despite being rightly proud of having such an influential blog, I'm afraid that this time he's talking quite squarely out of his arse.
Look up 'theft' in a dictionary. A typical definition might be "the wrongful taking and carrying away of the personal goods or property of another". A key feature of theft is that, after it's happened, you have less than you had before.
The BBC pensions reorganisation isn't theft. The accrued pensions rights of employees are completely unaffected by the proposals, as indeed they have to be, by law. What is being 'stolen' is the expectation that the pension scheme that has existed in the past will exist in perpetuity. And that's clearly an unrealistic expectation. Conditions change. Successful organisations must respond to those changes. Where the government has made it clear that there will be no licence fee increase for six years, it would be commercial suicide to allow the pension scheme to continue unreformed when the liability is still spiralling upwards.
So I'm surprised and disappointed by Paul's comment. Yet, I'm also angry about it. Because I'm one of the millions of private sector pensions savers that actually have seen our pensions stolen. Most of us have defined contribution schemes, in which we own a pot of money that is invested on our behalf, and from which we buy an annuity when we retire. Our schemes have high charges, which eat into the value of our pots, reducing their value by thousands of pounds. We suffered appallingly when Gordon Brown removed the ability for pension schemes to reclaim the tax credit on dividends in 1997. We have borne all the costs of annuity rates plummeting over the last 20 years. And, on top of all of this, we now face the prospect of our pensions being downgraded to the paltry contribution rates provided in the NEST pensions regime.
Not one of these costs is borne by public sector defined benefit schemes, such as the one enjoyed by Paul. Instead, the costs get added to the employer's bill for running the scheme, which means it ultimately gets passed to licence fee payers. So he has some gall to complain about his loss of future accruals when the rest of the country has suffered so much more already.
Posted by Christie Malry on November 1, 2010 at 9:42 am
There was a curious slot on the Today programme on Friday which saw Tim Montgomerie and Polly Toynbee discuss whether it's right for the Conservatives to be vilified so strongly in the press. Is it right to describe their housing benefit proposals as 'social cleansing', for instance? [answer: hell, no].
Strangest of all was Toynbee's statement about benefits. She said that it's okay to offer benefits to new claimants on a less generous basis so long as you don't reduce the generosity of the benefits made to any current claimant. This would appear to encapsulate Toynbee's idea of fairness, in that you look after people who need looking after.
But there's a very dark side to Toynbee's creed. She's basically saying that she wants a very unfair system. One that sucks taxpayers money up irrespective of whether it is to fulfil the poor's needs. One that is happy to pay people who might need the money much less in order that those who don't need the money can continue to enjoy their benefits. What she describes is almost the complete opposite of what a well-designed benefits system is supposed to do.
Yet this puffed-up bearded crone has the temerity to lecture private sector workers on how they need to pay more tax to support her vision and that anyone who supports the party best placed to fix this mess is 'nasty'.
So says the woman who likened coalition policy to the 'final solution'. Is there nobody at The Guardian who reads her wretched articles and suggests that she might wish to make one or two minor corrections?
Posted by Christie Malry on September 13, 2010 at 11:35 am
Ritchie witters on about the Last Night of the Proms. Personally, while I love the Proms generally, you'd have to either kidnap me or bribe me with considerable amounts of untraceable money to convince me to even as much as watch it on TV. Life's too short to watch the tired jingoistic crap that passes for much of the second half.
Still, whatever floats your boat, I guess. But Ritchie's plain wrong on two points:
First – how much we owe to the BBC – and its public funding. What chance Sky would have ever created something so good?
Err, if you weren't so busy watching nationalistic music on tv, you might have noticed that many of the most critically acclaimed shows in recent years - The Sopranos, The Wire, and Mad Men - were all created by private companies. OK, so these aren't classical music concert series, but it's a stretch to give the BBC all the credit for the success of the Proms. There is a market for classical music; although, ,if anything, it's crowded out by public sector activity.
And not everything the BBC does is great. Far from it.
Third – how incongruous the singing of ‘Land of hope and glory’ was.
That’s not what we live in. The ConDems have reduced us to a land of fear. Bankers to a land of shame.
‘Land of fear and shame’ it is then.
What a sorry state we’ve reached.
But there are ways out. Thankfully. And that’s what this blog is, in no small part about these days. Recreating hope when the ConDems have sought to eliminate all cause for it.
No, now we've shed 13 years of disastrous Labour rule, we finally do have hope. Hope that we can see our great country put back on the right track, more fiscally responsible, more confident, more sustainable and happier. That can only be achieved with a balanced budget with much lower costs and lower taxation.
Tax and spend simply doesn't work. And with the government turning their back on the failed Labour experiment, we have a chance of Britain becoming Great again.
Posted by Christie Malry on August 24, 2010 at 11:14 am
On Monday morning, the Today programme carried a jovial interview with Michael O'Higgins, Chairman of the Audit Commission, the body that seeks to ensure that local authorities and some bits of the NHS are getting value for money and which is about to be axed by the Conservatives. Why? Well, because Eric Pickles, the man who ate all the pies (probably at our expense) and who was booed by an angry Question Time crowd for claiming that he had to have a second home a mere 37 miles from London, doesn't like them. He wasn't available to explain himself, so he sent Bob Neill, Parliamentary Under Secretary of State at the Department of Communities and Local Government, to do his dirty work.
Neill made a total hash of it. Even Ritchie thought he was talking complete nonsense. His argument was that the Audit Commission spends lots on bagels and pot plants and that it's outrageous that those costs have to be absorbed by the public sector when paying for audit contracts. So he supports outsourcing audits to the private sector, who - incidentally - also tend to pay for food when having clients to visit at lunch times and have pot plants in their offices. So, in exactly the same way, they will absorb the costs of those expenses into the fees they charge. His inability to grasp this fundamental point while floundering around trying to criticise the Commission made him sound as stupid and out of touch as many Labour ministers did in Labour's last term. Quite an achievement.
His coup-de-grace, though, was to suggest that the Audit Commission might be floated off as a mutual organisation. Er, Bob. We already have a great deal of mutual organisations operating in the audit market. Each of the Big Four firms is owned by its partners. Did he even get a briefing prior to the interview?
Posted by Christie Malry on March 29, 2010 at 9:48 pm
Vince Cable won on honesty and obvious integrity, especially when refusing to give commitments.
OK Ritchie, what sort of honesty did you have in mind?
Perhaps this sort?
The long overdue unravelling of “economic-guru” Vince Cable couldn’t have come at a more awkward time for the brazen soothsayer. On the morning of the C4 News debate he has been forced to issue a humiliating apology directly to the Treasury permanent secretary Sir Nicholas McPherson after claiming the had been in unprecedented talks with him and he was ready to serve
Are you sure your judgement hasn't gone a bit wonky?
More Vince Cable honesty and integrity, courtesy of Andrew Neil:
Posted by Christie Malry on March 21, 2010 at 10:48 pm
The final episode of this series looked at fraud. This recognises that accounting, as well as being a force for good can also be used in bad ways.
CM: This was, in my view, a very shoddy and badly put together episode. I will be responding to the issues raised in order to give the balance this episode failed to provide. In the meantime, I have summarised the episode verbatim below.
We have had in the last decade or so some spectacular and notorious frauds. In some cases, there were complex and exotic accounting devices used to mask the scale of the fraud. Only this last week, we have seen reference to Lehmans and their "accounting gimmicks" and questions have been raised of their auditors, Ernst & Young, who may have failed to question their disclosures.
Jenkins interviewed Steve Priddy, Technical Director at the ACCA [CM: I wonder where Helen Brand was, eh]. Were the auditors to blame? Unsurprisingly, Priddy didn't want to comment on the detail. There might be some culpability, but he wouldn't know one way or the other. Jenkins had another go - company auditors are paid millions to do their job, but what did they do in this case? Priddy explained about the audit process. Auditors do some tests to allow them to form a view on truth and fairness, but we must remember that banks are complicated. Even directors don't always understand all transactions, which makes it hard for auditors to stay one step ahead. Meantime, the Lehmans investigations will surely continue.
This is not the first time auditors have got the blame. Enron is the recent case we all remember best. Anne Loft (Lund University, Sweden) said that their auditors, Arthur Andersen, had gotten too close to the company. It was advising companies like Enron how to set up connected companies in which they could hide liabilities while also doing the audit. There were also many former Andersen employees working at Enron.
Prem Sikka is a long-standing critic of the profession. He sees auditors as a weak link in corporate governance. A major flaw is that these big firms both do audits and also advise companies on how to bypass rules and regs and how to flatter their financial statements. They could check these things but have incentives not to do it properly. It's like a game of russian roulette. In his opinion, the recent banking crisis "vindicates" his point of view. He gave a further example: even after Northern Rock had been nationalised, audit firms were still giving clean audit reports to banks. This ought to have been a wake-up call to them.
David Cooper (University of Alberta) suggested that the profession has a short-sighted view of the public interest. Auditors really do try to be independent. But auditors and accountants are brought up with a view that what's good for business is good for society.
After Enron, Andersen collapsed, leaving just the Big 4. Sikka provided some statistics to explain the size of the Big 4. Overall combined turnover is $90bn a year, which would make them a very significant country. They operate all over the world, selling lots of other services.
Cooper also bemoaned how little we know about how they operate. They portray themselves as uber-rational and efficient but they can't live up to this. They sell the model to clients but don't live it themselves. And they promote transparency/accountability but don't disclose much themselves - they don't themselves provide audited financial statements.
Sikka added that even where they do publish accounts (e.g. because they operate through a limited liability partnership) they're very unhelpful. Also, at a company's AGM you are given the chance to appoint the auditor, but are never given any information to help you decide. For example - have they been sued? Have their partners gone to jail? etc... The Big 4 sell the idea of league tables, but there aren't any for performance of accountancy firms.
By contrast, Anne Loft thought it was more or less moving in the right direction. The International Federation of Accountants, which represents most of the major bodies and which sets international auditing standards has a public interest oversight board to watch over it and maintain the public interest.
Prem Sikka thinks more radical action is needed. He advocates a properly designated independent regulator to deliver what the public expects - to open audit firms up to scrutiny. With there now being more liability concessions for firms, it makes it more difficult to sue them. He believes we will see more and more scandals.
Priddy disagrees. The global consensus is that it's not a good idea to have a central regulator; self-regulation is the perceived wisdom. Jenkins asked him if firms are transparent enough. Priddy replied that it's a road we're all on. Firms are evolving. In the UK there are now regular inspections from the national regulator and its inspections are placed in the public domain.
David Cooper said that the information that other users need are still a work in progress. What is the sort of information that corporations might be providing to the general public to help them to hold organisations to account? These are ethical issues. Whose side is the accountant on? We must remain optimistic that we can get beyond obscure information and see what's really there.
