Time for citizens to take back control, scientists say
In an open letter published today, leading scientists say ministers and Government advisers are exaggerating the threat from COVID-19 and that all restrictions must be lifted on June 21 – the final date in Boris Johnson’s roadmap out of lockdown. They argue that with data showing vaccines reduce the risk of death by 98% and hospitalisations by more than 80%, COVID-19 is being turned into a mild disease in Britain. The letter’s 22 signatories include Professors Carl Heneghan and Sunetra Gupta from Oxford University, Emeritus Professor Hugh Pennington from the University of Aberdeen and Professor Robert Dingwall from Nottingham Trent University. “We are being told, simultaneously, that we have successful vaccines and that major restrictions on everyday life must continue indefinitely. Both propositions cannot be true,” the scientists write. They add: “Mandatory face coverings, physical distancing and mass community testing should cease no later than 21 June along with other controls and impositions. All consideration of immunity documentation should cease.”
“It is time to free up businesses and people to start really building back our economy and the nations health.”
TAX NEWS – WEEKEND TO 25TH APRIL 2021
Investors in uproar over Biden’s proposed capital gains tax rise
Investors have lashed out at Joe Biden’s plans to double capital gains tax with Scott Minerd at Guggenheim Partners declaring the plans “insanity” while Anthony Scaramucci, founder of SkyBridge Capital, believes the proposals would “have deleterious effects on job creation and wage growth for middle-class workers.” Stocks fell following the announcement and cryptos such as Bitcoin and Ether fell sharply. Although the plans will face stiff opposition in Congress, fund managers warn that investors could dump “momentum” stocks as they seek to crystallise gains ahead of a tax hike. Alasdair McKinnon, manager of the Scottish Investment Trust, said the impact of Biden’s proposals would be felt across America’s stock market. “New capital gains taxes are unhelpful to all asset prices,” he said.
The Express reports on plans touted by the European Commission to harmonise tax rates across the bloc for tobacco products. Pieter Cleppe, a research fellow with the Brussels-based Property Rights Alliance, said in a paper that the Commission is exploring ways to do this without EU Treaty change, “using health concerns as a pretext to obtain more power.”
HMRC deadline extension creates state pension headache
HMRC has warned that small business owners and those with ‘side hustles’ could miss out on state pension benefits if they filed their tax return after January this year.
Conservatives should fight an international tax stitch-up
Hamish McRae asserts in the Mail on Sunday that if Joe Biden gets his tax hikes though Congress other countries would have cover for introducing similar measures too. The new administration wants to tax capital gains as income, raise corporation tax and introduce a global minimum tax rate. McRae says following the extreme pandemic spending by governments, raising taxes on the wealthy is logical and fair and hard to argue against. The Observer’s business leader lauds Biden’s move believing the tax hikes and trillions in stimulus are intended to tackle “deep-rooted inequalities” and that the UK Government should use Washington’s move to inspire its own plans to build back better. But Daniel Hannon contends in the Sunday Telegraph that plans for international tax harmonisation, with legal threats against those who resist, “would mark the birth of a high-tax cartel, and the rate would surely rise”. Socialists have long resented the fact that exorbitant taxes redistribute people rather than wealth, but without international competition this inconvenience would end, he says, as would the right of poor nation states to try and improve their lot through tax cuts. Ultimately, Hannan adds, low taxes improve revenue, employment and economic activity – all things needed to repair shattered post-pandemic public finances, but this seems to have been forgotten by Conservatives in the UK.
The Observer, Page: 56 The Mail on Sunday, Page: 122 The Sunday Telegraph, Page: 20
HMRC sends 18,500 fines to wrong address
HMRC has sent 18,500 fines to the wrong address with a software error said to be to blame for the fiasco, the Sunday Times reports. Accountants have reported finding demands for multiple taxpayers when opening envelops addressed to another taxpayer, with private codes and other reference numbers included in the correspondence. “This is an absolutely astonishing blunder,” said George Bull from RSM. “HMRC makes much of relying on self-employed workers getting their tax bills right, but appears incapable of managing its own data.” In a letter to the Association of Taxation Technicians (ATT), HMRC said: “We sincerely apologise and recognise that this is not in line with our Charter standards. We take all aspects of protecting data very seriously so there has been a lot of activity to understand this incident and mitigate future risks.” HMRC said it had taken urgent action to ensure the data breach did not happen again: “If any agents receive any correspondence for incorrect clients, we would ask that they return them to HMRC.”
The Sunday Times, Business, Page: 12
CORPORATE NEWS – WEEKEND TO 25TH APRIL 2021
Stanlow refinery reaches with HMRC
Essar Oil, which controls the Stanlow oil refinery in north west England, has struck a deal with HMRC on its tax liability. The refinery produces a sixth of the country’s petrol and diesel and has now been thrown a £400m lifeline by the taxman amid fears it could collapse. Industry sources confirmed the “time to pay” deal reached with HMRC has removed the risk of insolvency. International travel restrictions have reduced demand while poor margins for refining alongside market volatility caused operating losses for the company.
Fundraising experts warn that charities will inevitably have to ration their services after the pandemic left them struggling for cash. Some small operations are suspending services leaving others to pick up the slack. The Sunday Telegraph notes that between April 2020 and February, the Charity Commission saw a 25% increase in concerns being raised by auditors over reports and accounts. The main issue reported was insolvency or financial difficulties.
Tate & Lyle auctions off primary products division
Tate & Lyle has been working with Deloitte for some time to figure out the best way to spin off its primary products division, with Apollo Global Management and Cerberus among the interested parties. City sources say a £1.2bn auction for the division is now underway.
Small firms suffer cashflow woes just as support is withdrawn
The Sunday Times talks to small business owners who, after being devastated by the pandemic, face paying back Covid loans before their cashflow has been repaired. One businessman said: “The speed at which the Government thinks you’re able to start hurling money back at them is crazy.” Craig Beaumont, chief of external affairs at the Federation of Small Businesses said the issue was common, adding: “The Government should be throwing everything it’s got at getting businesses across this ‘unlock’ phase and into the recovery, to avoid businesses falling at the final hurdle because of lack of cashflow.” But Steve Russell, head of restructuring services at PwC, says VAT deferrals, the furlough scheme and emergency loans are “not gifts. They are support schemes that need to be unwound.”
PERSONAL FINANCE NEWS – WEEKEND TO 25TH APRIL 2021
Families increasingly using deed of variation
Irwin Mitchell solicitor Sarah Paton says there has been an uplift of families changing the wills of elderly parents after they pass to help younger generations hit hard by the pandemic. “A deed of variation can be used to give a fixed sum or a proportion of the estate directly to the grandchildren of the deceased instead of the children,” she explains. Mike Hodges, partner at Saffery Champness, points out that families often decide it is better to wait until after the death to work together to rejig the will, to save the loved one distress. Using a deed of variation can also reduce inheritance tax liabilities by shifting assets directly to a younger person’s estate.
The Mail on Sunday
PENSIONS NEWS – WEEKEND TO 25TH APRIL 2021
Drop in pension income more startling than expected
With the closure of final salary pension schemes looming, Lane, Clark & Peacock believes the drop in pension income is going to be more startling than first thought. Its research suggests that the average man retiring this year will have an annual income of £14,634 and a woman £10,042, including state pensions. But by 2045, a man retiring would have an income of £12,460, and a woman £10,797, in today’s money. Female income improves because more are expected to be able to claim full state pensions. Public sector workers will suffer less because many will still have defined benefit pensions. Steve Webb, a former pensions minister and partner at LCP, commented: “For years, salary-related pensions from private sector jobs have supported the incomes of the newly retired, and men in particular. But these pensions are disappearing much more rapidly than we thought. And new-style workplace pensions are not being built up quickly enough to take up the slack.”
The Sunday Times warns that more needs to be done to close the pensions gender gap and promote equal pay in retirement. The paper reports that research from the Prospect union has found that the gap for pensions stands at 40.3%, more than double the gender salary gap of 15.5% reported by the ONS. The SNP MP Patricia Gibson said it was unacceptable that all types of pension inherently discriminate against women. It is noted that last week, Guy Opperman, the Pensions Minister, said there was a “clear passion” for making women better off in older age.
The Sunday Times
PROPERTY NEWS – WEEKEND TO 25TH APRIL 2021
Tax deadline leads to frenzied market
House prices have rocketed over the course of the stamp duty holiday and there is a buying frenzy as the deadline looms, reports the Sunday Times. Figures from HMRC show almost 191,000 homes were sold in March – the highest number in a single month since July 2004. But the savings from the Chancellor’s tax cut have long since been cancelled out by property price rises, the paper’s Carol Lewis claims.
Former subpostmasters cleared over accounting scandal
Almost 40 former subpostmasters who were convicted of theft, fraud and false accounting because of the Post Office’s defective Horizon accounting system have finally had their names cleared by the Court of Appeal. The Horizon system, developed by Fujitsu, was first rolled out in 1999 but from an early stage it appeared to have significant bugs that could cause the system to misreport. Horizon-based evidence was used by the Post Office to successfully prosecute 736 people. Lord Justice Holroyde said the Post Office “knew there were serious issues about the reliability of Horizon” and had a “clear duty to investigate” the system’s defects. But the Post Office “consistently asserted that Horizon was robust and reliable”, and “effectively steamrolled over any subpostmaster who sought to challenge its accuracy”, the judge added. In all, 39 of the 42 appeals were allowed on the grounds that the prosecutions were “an affront to the public conscience.” Lawyers for the group said they would be seeking compensation and an urgent criminal investigation into the actions of those at the Post Office.
Talent hunt kicks off as London firms launch hiring sprees
Financial services, legal, PR and construction companies across London are ramping up hiring with recruiters reporting a 349% jump in banking jobs advertised. But tech is driving job creation with KPMG’s quarterly tech monitor revealing that in the three months to March, UK tech sector firms hired staff at the fastest pace seen since the second quarter of 2019. Robert Walters’ UK managing director, Chris Poole, said: “March was incredibly busy for us. It almost felt like a line in the sand – it was incredibly busy across all sectors. Technology has been busy all the way through, but there has been a lot of pent-up demand within legal, within accountancy, within financial services. Even manufacturing, procurement, supply chain – it has been across the board.”
FINANCIAL SERVICES NEWS – WEEKEND TO 25TH APRIL 2021
Equivalence or no equivalence, London will stay financial services leader
KPMG ’s head of Financial Services Karim Haji has said if the UK and the EU fail to agree a deal on equivalence it won’t be the end of the world. Although it would “make life easier”, it was not mandatory for a successful financial services sector. “If you take a step back, the UK has been one of the leaders in financial services regulation and infrastructure, it’s one of the key innovators in the space as well, and one of the leaders in the world, and that’s why the UK has been successful in exporting financial services – that isn’t changing as a result of Brexit,” he continued. Mr Haji’s comments come after EU commissioner Mairead McGuinness said there was no pressure to reach agreement with the UK on financial services.
City AM Daily Express
ECONOMY NEWS – WEEKEND TO 25TH APRIL 2021
UK economy rebounds with demand surging
Private sector activity grew at the fastest rate since November 2013 in April, hitting a reading of 60, according to IHS Markit’s purchasing managers’ index (PMI). This is up from 56.4 in the previous month and above the 58.2 forecast by economists. Service sector business activity rose from 56.3 to 60.1, while manufacturing output was up from 56.6 to 59.1. Chris Williamson, chief business economist at IHS Markit, said: “Companies are reporting a surge in demand for both goods and services as the economy opens up from lockdowns and the encouraging vaccine rollout adds to a brighter outlook.” Looking forward, Williamson added: “Business activity should continue to grow strongly in May and June as virus restrictions are eased further, setting the scene for a bumper second quarter for the economy.”
Data from the ONS show retail sales in Great Britain rose 5.4% in March compared with the previous month – a much stronger reading than the 1.5% forecast by economists. Sales of clothes was particularly strong rising by more than 17% while the easing of travel restrictions towards the end of the month led to an 11% increase in fuel sales. Howard Archer, chief economic advisor to the EY ITEM Club, said: “It does appear that many people were intent on having an enjoyable Easter break and this likely lifted retail sales later in the month.” Also commenting, Lisa Hooker, consumer markets leader at PwC, said: “Much though these figures will give cheer to the whole sector, retailers will be hoping that these positive signs translate into a sustained return to the physical stores as they reopen across the UK over the course of April. The real test of whether pent-up demand can be turned into actual sales w ill come with next month’s figures.”
Covid response pushes UK borrowing to highest since second world war
Figures from the ONS show UK government borrowing hit £303.1bn in the year ending in March, a jump of £246.1bn on the previous year when the figure was only £57.1bn. The coronavirus pandemic has driven the UK’s total accumulated public debt to £2.14trn, or 97.7% of GDP, the highest level since the early 1960s. As a percentage of national output, borrowing in the year between April 2020 and March 2021 stood at 14.5% – the highest since the financial year ending in March 1946. KPMG senior economist Michal Stelmach said rising debt was a consequence of shielding the economy from COVID-19.
The deputy governor of the Bank of England predicts “very rapid growth at least over the next couple of quarters” as Britons spend cash accumulated during the pandemic and save less of their forthcoming income. Ben Broadbent is more bullish than most of his Monetary Policy Committee colleagues on whether people will spend their savings but he warns that the year ahead is likely to be bumpy regarding inflation with multiple shifts in demand and supply.
Chancellor set to turn to taxes to balance the books
The Chancellor is considering raising taxes in his March budget as he looks to restore public finances that have taken a hit from the coronavirus pandemic. Harry Brennan in the Telegraph says much depends on the state of the pandemic, suggesting that whether taxes increase sooner rather than later will depend on the success of the vaccination programme and if lockdown measures can be eased. He highlights tax reform that Rishi Sunak could turn to, including a property tax that would replace council tax and stamp duty; higher rates and lower reliefs on capital gains tax; a one-off 5% wealth tax; and a 2% increase in corporation tax.
The Daily Telegraph, Money, Page: 1
No delay for IR35 reforms
Changes designed to stop workers hiding their pay from the taxman will go ahead as planned, despite calls for IR35 reforms designed to tackle disguised employment to be postponed for a second time as they will create extra work and costs. HMRC believes off payroll workers should be treated as full-time employees and as of April 6, medium and large businesses will be responsible for setting the tax status of contractors they hire, mirroring a system that has been in place in the public sector since 2017. The Treasury expects the change to raise £3bn by 2024.
The Daily Telegraph, Money, Page: 1
Pensions can cut IHT and income tax
The Telegraph’s Jessica Beard says savers passing down their wealth could make 90% tax savings and cut their inheritance tax bill by “funnelling money into a family member’s pension.” She says doing so is one of the most efficient ways of reducing an estate for IHT purposes “and comes with the added boost of income tax relief”.
The Government is drawing up plans for a double tax raid on tech firms and online retailers that have profited from the Covid crisis, according to leaked emails seen by the Sunday Times. Treasury officials will meet with business leaders this month to discuss how an online sales tax would work while the Downing Street policy unit is also working up proposals for an “excessive profits tax” on companies that have seen profits surge as a result of the crisis. Neither tax rise is expected in the March 3 budget, but sources tell the paper the increases could form a centrepiece of efforts to cut Britain’s debts this autumn.
The shadow chancellor, Anneliese Dodds, has urged the Chancellor not to increase taxes in his March Budget because the economy is too fragile to withstand such a move. Ms Dodds instead called for tax cuts for businesses hit hardest by the pandemic, such as an extension to the business rates holiday and the reduced VAT rate for hospitality businesses. In an interview with the Sunday Telegraph Ms Dodds did however suggest that Labour might support a one-off tax raid on internet giants that have made billions during the pandemic.
The Sunday Telegraph, Page: 2
Budget tax ideas
The Sunday Times cites EY’s Chris Sanger in a piece reflecting on possible tax rises in the upcoming Budget. Sanger thinks a rise in corporation tax from 19% to 20% is the kind of thing the Chancellor could comfortably get away with. He also suggests an online sales tax that would hurt companies with bricks and mortar stores, which also trade online, less than those that are online only. Elsewhere, Johnny Leavesley, the chairman of the Midlands Industrial Council, calls on Rishi Sunak to merge NICs with Income Tax and remove it completely from the first £12,500 of salary as a boost to ordinary workers and small businesses.
The Sunday Times, Page: 9 The Sunday Telegraph, Page: 2
Close EU tax loopholes and earn extra £15bn, UK urged
Tax consultant Bob Lyddon, the founder of Lyddon Consulting Services, is urging Boris Johnson to scrap rules permitting companies to take advantage of low tax jurisdictions such as Ireland or Luxembourg while setting up subsidiaries in the UK where the majority of their business is done. If loopholes in the EU’s Freedom of Incorporation rules were closed the UK could reap £15bn more a year in taxes.
SMEs NEWS – WEEKEND TO 7TH FEBRUARY 2021
Firms given longer to repay coronavirus loans
Rishi Sunak has announced that small firms will be granted more time to repay state-backed loans taken out to help survive the coronavirus lockdown, with the Chancellor saying the move gives companies “breathing space to get back on their feet”. The new arrangements will allow those who have utilised the Bounce Back Loan scheme to extend the length of the loan from six years to ten; make interest-only payments for six months; and pause repayments entirely for up to six months. This came as Sam Woods, chief executive of the Bank of England’s Prudential Regulation Authority, said taxpayers faced a “significant loss” from the state-backed loans, warning that as many as half will go bad.
Alcohol-free pubs and restaurants could reopen in April
UK ministers are considering allowing pubs and restaurants to reopen as soon as April if they agree not to sell alcohol. A temporary “booze ban” is being considered as part of the Government’s roadmap for lifting lockdown, which will be unveiled on Feb 22nd. The ban on alcohol would allay concerns that people are less likely to abide by restrictions after drinking. Kate Nicholls, the chief executive of UKHospitality, said: “We welcome the opportunity to have sensible and pragmatic discussions with the Government about the pace and nature of reopening.”
House prices fall as end nears for stamp duty holiday
House prices fell 0.3% between December and January, figures from Halifax show, with this the biggest monthly fall since the housing market shutdown in April. The typical home sold for £251,968 in January, a 5.4% increase on January 2020’s average but a drop of £865 compared to the previous month. The annual price growth rate fell 0.6 percentage points from the rate recorded in December, the second consecutive month of decline for year-on-year growth, which was down 2.2 percentage points from a November peak. The dip in prices comes as demand eases, with buyers seeing their chances of finalising a deal before the stamp duty holiday ends on March 31 decreasing.
Extra percentage point can wipe years of pension income
Retirees who use expensive pension providers have been warned they risk losing more than four years’ worth of retirement income unless they switch. Figures compiled for the Sunday Telegraph by LCP indicate that paying just one percentage point more in charges can wipe years of income from a pension pot. And pensioners who use “income drawdown” can be more than £70,000 poorer within 25 years on a £500,000 pension pot if they fail to switch from an expensive provider to another with average charges. Dan Mikulskis of LCP said someone who pays 2% on a £250,000 pension could save up to £35,000 by age 85 if they switched to a provider that charged 1%.
The Sunday Telegraph
EMPLOYMENT NEWS – WEEKEND TO 7TH FEBRUARY 2021
Permanent recruitment falls in January
Research conducted by KPMG and REC shows that hiring of permanent staff fell in January, with the decline driven by the latest coronavirus lockdown. The report also said the increase in infection rates saw growth in short-term vacancies weaken in most sectors. Pay trends also took a hit as recruiters reduced starting salaries and wages for temporary staff. James Stewart, vice chair at KPMG, said: “There is cause for optimism as businesses carefully monitor the vaccine rollout and look forward to the Budget next month.” “It gives the Government the opportunity to further help the recovery in jobs and revive the UK’s productivity growth”, he added.
LEGAL NEWS – WEEKEND TO 7TH FEBRUARY 2021
Lynch begins extradition battle
Autonomy co-founder Mike Lynch will this week start his fight against an extradition request, with the entrepreneur charged with 17 counts of wire and securities fraud in the US over the $11bn acquisition of Autonomy by Hewlett Packard. The US firm wrote $8.8bn off the value of the British company a year after the 2011 acquisition, attributing $5bn of that to an alleged accounting fraud. A High Court case in 2019 saw Mr Lynch deny falsifying Autonomy’s accounts, saying its auditor, Deloitte, had signed off on its treatment of hardware sales and contracts arranged through third-party resellers.
The Times, Page: 52
ECONOMY NEWS – WEEKEND TO 7TH FEBRUARY 2021
Consumers likely to hold off certain spending, says Broadbent
Ben Broadbent, the Bank of England’s deputy governor for monetary policy, says concern over coronavirus variants could hit consumer spending, deterring people from certain financial decisions when restrictions have been relaxed. He warned that sectors where people interact socially could see weaker levels of demand for goods and services, saying: “I can certainly see why people might be fearful to spend on particular things, things that expose them to the risk of infection.” Despite this, Mr Broadbent said he anticipated a strong recovery in consumer spending as coronavirus restrictions are eased, saying: “Overall spending does come back pretty strongly when you remove these caps, at least initially”. He added that while some sectors have been hit hard by lockdowns and fears over infection – such as hospitality and leisure – consumers had reallocated spending to other sectors and online re tail, helping to offset damage to the wider economy.
Lockdown hits retail sales
Ministers have been urged to offer a roadmap out of lockdown so retailers can plan toward their post-pandemic recovery. This came after figures revealed that retail sales fell 10.1% last month – the worst January result since records began in 2017. BDO warned that the future for non-essential retailers, which have been forced to close amid the latest lockdown, is “currently clouded with uncertainty”. The firm’s head of retail, Sophie Michael, said retailers have “the additional problem of predicting how and when consumers will return, and at what level of spending.” She added: “Providing a roadmap out of lockdown is a tall order, but one that retailers desperately need.”
Gove accused of ignoring Brexit trade warnings
The Observer reports that exports to the EU through British ports fell by 68% last month compared with January last year, with Brexit deemed the chief reason for the slump. The Road Haulage Association says it reported the figures to Michael Gove, the Cabinet Office minister at the beginning of the month but had been largely ignored. The RHA’s chief executive, Richard Burnett, asserts that ministers have repeatedly ignored warnings from industry while Richard Ballantyne, chief executive of the British Ports Association, warns that worse is to come when the UK introduces full import checks on goods from the EU on 1st July.
Bank braced for a post-Covid spending binge
Bank of England governor Andrew Bailey believes that once Covid restrictions are lifted Britons will embark on a spending spree and provided the supply side can cope with demand the public are likely to splash out with the estimated £125bn in extra savings they have accumulated since the start of the pandemic. Mr Bailey’s comments echo those of his deputy Ben Broadbent who also anticipates a strong recovery in consumer spending as coronavirus restrictions are eased, although concern over coronavirus variants could dampen demand.
REGULATION NEWS – WEEKEND TO 7TH FEBRUARY 2021
New audit watchdog delayed until 2023
Michael O’Dwyer in the Telegraph reports that reform which will see the Financial Reporting Council replaced by the Audit, Reporting and Governance Authority will not be launched until April 2023. He cites sources who say that while Business Secretary Kwasi Kwarteng has pledged to prioritise reform of the audit sector, plans “put on the back burner” by his department due to the coronavirus crisis and Brexit will not be placed before Parliament until next year. Sources say a delayed consultation on the Government’s recommendations for reforming the sector is set to run for an extended period of up to six months. Labour’s Darren Jones, chair of the Business Select Committee, says ministers should not delay “long-overdue legislation” longer than necessary, arguing that there is “industry-wide consensus on the necessity of reform in many areas and recognition by many that strengthening the reporting framework could help to deliver more robust and reliable financial reporting.” David Herbinet of Mazars said further delay was “not helpful for anyone”, while ICAEW chief executive Michael Izza said getting the new regulator up and running as soon as possible is a key part of the reform agenda. “We’d really like to see it in 2022 but it’s all a question of priorities,” he added. A Government spokesman said Mr Kwarteng “has been clear that audit reform is a priority”, adding that comprehensive proposals w ill be published shortly.
Bosses question plans to punish directors for accounting errors
A number of prominent business leaders have commented on Government plans to impose fines and bans on directors for inaccuracies in their companies’ accounts. Sir Martin Sorrell, founder of advertising firm S4 Capital, warned against a move that could “strangle initiative” at companies trying to survive the pandemic, while Pimlico Plumbers chairman Charlie Mullins warned that the policy would be “a huge disincentive to start a business.” Tim Martin, chairman of JD Wetherspoon, said increasing the burden on directors will “put the frighteners on boards” and “discourage risk-taking”. The Institute of Directors stressed that it is important policy does not “place extra and unnecessary burdens on directors”. ICAEW CEO Michael Izza said making directors personally liable “is going to really focus the mind on being a director of a public interest entity, as it should”. Matthew Fell, chief policy director at the CBI, said: “Improving the quality of audit to enhance public trust and investor confidence is paramount.”
The Telegraph’s Tim Wallace looks at Government strategy and the impact on business, highlighting fears that plans to make directors take more responsibility may hurt firms, with Douglas McWilliams at the Centre for Economics at Business Research saying: “If I was in Government, I wouldn’t want to make businesses’ lives tougher”. Tej Parikh, chief economist at the Institute of Directors, warns of pressures firms potentially face, saying: “It is important to increase standards, but we are also looking at tax increases, and stories of capital gains tax increases, which add to the burden”. Mr Wallace cites a Government spokesperson who says strengthening the corporate governance and audit regime will “help to ensure that the UK remains a world leader in corporate transparency and advance its status as a place of the highest standards in audit.” The spokesperson added that ministers are committed to acting on recommendations stemming from three independent reviews into audit and corporate reporting.
Lucy Burton in the Telegraph reflects on proposals that would make directors responsible for inaccuracies in their companies’ accounts, likening the move to efforts to punish banks in the wake of the 2008 financial crash with the rollout of the senior managers regime in 2016. She says a debate which arose then and may resurface in discussions on the mooted audit reforms centres on whether tougher rules scare off talented executives. Rhian-Anwen Hamill, managing director of executive search and consulting firm RAH Partners, said the senior managers regime “absolutely put very good people off” in both executive and non-executive roles, while Paul Lynam, CEO of Secure Trust Bank, says regulators should not be “so scary” that only “the reckless types” take up top jobs.
A Telegraph editorial suggests that plans to make company directors personally liable for the accuracy of their financial statements “would freeze corporate Britain in its tracks”. It notes that it is against the law to publish deliberately misleading accounts and says that there have been too many corporate scandals, but says the remedy is to better enforce existing rules and to “shake up the audit market, long dominated by overly comfortable accountancy giants”. It adds that the one of the unintended consequences of imposing strict liability on directors would be a surge in demand for lawyers and internal auditors. Elsewhere, Matthew Lynn in the same paper questions the proposed reform, saying that while “there is nothing wrong with going after the auditors … this is surely the worst possible moment to saddle directors with a whole new range of responsibilities.” He says a number of scandals suggest there is a case for reforming the way firms are audited, arguing that “some auditors are just box-ticking, and don’t know what to look for.”
Kwasi Kwarteng urged to rethink plans to make company directors liable
Cabinet ministers are calling for the Business Secretary to rethink plans to make company directors personally liable for business failures, the Sunday Telegraph reports. As part of the package being proposed by Kwasi Kwarteng, the Financial Reporting Council will be replaced by the Audit, Reporting and Governance Authority, with new powers to clamp down on auditors and directors. Those directors will be held personally responsible for the accuracy of their company’s financial statements. But senior Conservatives including Iain Duncan Smith say existing regulations should be sufficient while further compliance costs were unwise as Britain heaves itself out of the coronavirus slump. Ministers meanwhile say the reforms are necessary to ensure high corporate standards. A government spokesman said: “Audit reform is a priority and we will publish comprehensive proposals shortly. Strengthening our corporate governance and audit regime will h elp to ensure that the UK remains a world leader in corporate transparency and advance its status as a place of the highest standards in audit.”
Liam Halligan contends in the Sunday Telegraph that the Government’s White Paper on audit reform proves the Big Four lobby machine is alive and well. Halligan says although the White Paper proposes the operational separation of audit and advisory work, it is a shame that it does not insist on “joint audits” of listed firms, a move proposed by the Competition and Markets Authority in 2019 and designed to break the stranglehold of the Big Four. Halligan is also concerned about moves to bring ESG into a formal audit arguing that this speaks to “an exercise in ministerial posturing”; that the new Audit, Reporting and Governance Authority will gain oversight of firms beyond those listed on the stock market, and that ARGA may be given scope to pursue directors themselves if a company’s accounts are found to be misstated. Halligan asserts that auditors “should also be on the hook for the numbers they sign-off – so incentives are aligned. Onerous new sanctions aimed only at directors – the vast majority of whom do the right thing – once again suggest the mighty Big Four audit lobby has succeeded in telling ministers what to do.” The Sunday Times Oliver Shah briefly touches on the topic, saying he welcomes news that the joint audit idea has been scrapped and that a Sarbanes-Oxley style regime holding directors to a higher standard is in.
The Sunday Telegraph, Page: 2 The Sunday Times, Page: 9
OTHER NEWS – WEEKEND TO 7TH FEBRUARY 2021
Contactless limit to rise to £100
The contactless card payment limit is set to rise to £100 from the current maximum of £45. The change, which will be made in the next Budget, was not possible while Britain was bound by EU rules, which cap payments at €50.