Do It Yourself

After the televised debate last night between the would-be chancellors in the next parliament it is clear that all parties are committed to cutting public expenditure. The current rate of government spending is, after all, unsustainable. Whether they are reluctant to publish detailed plans for fear of losing votes amongst those who will inevitably lose their jobs or whether, as we suspect, they simply don't know where they can save the vast sums needed to balance the books, none of the parties is giving us much detail as to where those cuts will fall.
One unfortunate area of public spending, however, already knows that its budget has been slashed, the further education sector. Long considered to be the 'Cinderella' of the education system, the further education colleges are expecting a £200 million cut this year. We are inclined to agree with the Assistant Chief Executive of the Association of Colleges, Julian Gravatt, who says, "We are calling on the Chancellor to help protect these courses and the students they serve. We know that the Treasury is under significant pressure to further curtail public spending but cutting courses that are so essential to our recovery is a false economy." We are not hopeful that the cuts will be reversed, though.
The remedy according to the Department for Business Innovation and Skills is to 'cut funding to lower priority courses' and 'to aim for the largest simplification of the skills landscape for many years'. That way, apparently, colleges will be able to deliver more worthwhile training for less money. In the process the DBIS is hoping that more vocational training will be paid for by the students themselves and their employers. It is easy to see how this might be more efficient but we cannot imagine that it will lead to more skills training.
For most adults what the government is effectively saying is that you should 'do it yourself' when it comes to training for work. Perhaps this is a reflection of the fact that there are good courses available from training providers such as the Accounting & Bookkeeping College like our course for the Institute of Certified Bookkeepers' Certificate.

A debt to the past

At the Accounting & Bookkeeping College we are delighted to learn that some effort is being made to preserve Bletchley Park, not a million miles away from here. Culture Secretary Ben Bradshaw has announced £250,000 funding for Bletchley Park museum.

The work of Alan Turing and others at Bletchley Park helped bring computers into the modern world and is rightly celebrated. Computers have transformed our lives, not least in the field of bookkeeping and accounts so that we no longer live in a world of Bob Cratchits scratching figures into soul-destroying ledgers. Now that the hard labour has been relieved anyone can maintain good business accounts as long as they have learned the skill of double-entry bookkeeping.

The wartime devotion of the staff at Bletchley Park was dedicated to the field of codes and ciphers. As computers and the Internet have become such an important part of our lives encryption has been a vital enabling technology. As long as you don't present your username and password details to anyone else you can safely buy, sell and do all your banking on the Internet. Many businesses rely mainly or entirely on online sales that would not be possible otherwise.

So lets not forget that we owe a real debt to the war effort at Bletchley Park both technologically and financially.

Budget Miracle

Alistair Darling's budget on Wednesday was extraordinary and deserves great praise. In one remarkable sentence he said that he had 'no further announcements on VAT, on income tax, or National Insurance rates.' I wonder when we will next hear a budget statement as bold as that?

Apart from an increase in duty on cider, the tax change that has attracted the most attention is the revised threshold for stamp duty for first time buyers of property. There is an explanation of all the complexities of the 'Stamp Duty Land Tax', as it is properly called, on the HM Revenue & Customs website. The Conservatives are busy right now looking for the 'devil in the detail' of this budget. I think, though, that the flaw in this particular tax is staring us in the face. Let's go back to how stamp duty is described by HMRC, 'Stamp Duty Land Tax (SDLT) is generally payable on the purchase or transfer of property or land'. Why is it the purchaser who has to pay this tax? Why not the seller? I am not well enough informed to have the answer but I do believe that our economic recovery, rather than the Chancellor's political objectives, would be better served by a switch from purchaser to seller.

Let me explain. There is an obvious difference between property owners when they come to sell and first-time buyers. The owners already have a valuable asset and, in most cases, a part of the value of that property will have come about through house price inflation. First-time buyers, on the other hand, only have their cash deposit. That deposit is the key to entering the property market and, for many people, it is painfully difficult to amass enough savings especially when banks are prudently demanding much larger deposits as security for their mortgages. Stamp Duty comes directly out of those scarce cash resources of the buyer. The same tax payable by the seller rather than the buyer would bring as much revenue in to the Exchequer but would allow our young people more readily to reach the 'first rung'. There might be other unforeseen and unintended consequences of such a change but I think that one possibility would be that banks and building societies would be less inclined to re-possess properties because, in effect, it would be the lender that ended up with the bill for stamp duty.

You can learn about how taxes work, if not why, with a course from the Accounting and Bookkeeping College.

The buck starts here

There was something rotten in the Anglo Irish Bank otherwise it wouldn't have made a £3.7bn loss in the six months to March 2009. When large organisations fail it is reasonable to say that the responsibility ultimately, if not directly, lies with the chief executive: the buck stops here, in other words. In the case of the Anglo Irish Bank, however, it may well be more the case that the responsibility for its extraordinary banking failure starts at the top rather than ends there.

Sean FitzPatrick resigned as chairman of the bank in December 2008. He has apparently admitted concealing millions of euros of personal loans that he and others received from the bank. Last week Mr FitzPatrick told the bank he could not repay 70m euros. Those losses are a tiny fraction of the bank's total result but they came about from very much the same cause which was that Anglo Irish was lending to borrowers, in this case the bank's chairman, who then gambled the bank's money on the explosive bubble in the Irish property market. Concealing the loans was dishonest but lending to property speculators was just extremely bad banking. If I was an Anglo Irish shareholder, which now includes every citizen of the Republic of Ireland, I would want this particularly unsuccessful banker to pay with a pound of his flesh.

As if this wasn't bad enough the BBC report further alleges the recording of a huge loan from another bank as a customer deposit. As an accountant this to me was the greatest crime of all. Sean FitzPatrick and his staff believed, or at least hoped, that their lending would be profitable. When they deliberately misrepresented a transaction in the books, on the other hand, they destroyed the credibility of those accounts altogether and all subsequent dealings with the bank were based on a lie. And, make no mistake, company accounts may be written in a language that not everyone understands but the difference between truth and a lie an be as clear in bookkeeping as it is in any other form of communication.

Learn how to maintain accounts that are truthful and accurate with an online course from the Accounting and Bookkeeping College.