I’ve just taken my sons to school and one of the other fathers on school run duty said, rather excitedly “Vince is back”.
He referred of course to Vince Cable’s speech to be given today in which he’s expected to say that "murky" corporate practices threaten UK firms and "capitalism kills competition".
He’s right of course. It’s blatantly obviously true. Except to the CBI whose accusation that he’s using “emotional language” wouild be so much more credible if they did not believe in a fantasy version of what markets deliver.
But what I’m really keen to hear is Vince’s response to the challenge form the CBI who want to “to hear his ideas for an alternative."
It exists, of course.
It’s a market based on transparency and effective regulation to counter the trend that one LibDem aide described as “Capitalism left to its own devices just creates monopolies which work against the interests of consumers and inflict severe damage on the wider economy."
Transparency exists when the following information is readily available to all who might need it to appraise transactions they or others might undertake or have undertaken with another natural or legal person:
1. Who that other person is;
2. Where the person is;
3. What right the person has to enter into a transaction;
4. What capacity the person has to enter into a transaction;
And with regard to entities that are not natural persons:
5. What the nature of the entity is;
6. On whose behalf the entity is managed;
7. Who manages the entity;
8. What transactions the entity has entered into;
9. Where it has entered into those transactions;
10. Who has actually benefited from the transactions;
11. Whether all obligations arising from the transactions have been properly fulfilled.
Only when these questions can be answered on timely basis and at low or no cost by anyone who wishes to make enquiry does financial transparency exist.
Regulation, of tax havens, to ensure country-by-country reporting, to ensure full information on all companies and trusts, to prevent monopoly, to ensure all tax is paid, and so much more creates a level playing field to deliver this transparency and a fair market.
That’s the alternative.
I wonder if Vince will go for it?
Or go?
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Let’s hope he’s back, Richard. Two points to add. First, I note that it didn’t take long for those of the CBI’s ilk to start slinging the cheap old ‘Marxist’ insult around, as they do anytime someone of standing suggests there might be things we could do to make capitalism more equitable. Second, I wonder what/if there’ll be a counter speech from a Tory minister at their conference. Now that will create an interesting dynamic within the government.
@Ivan Horrocks
Insults come easily
Especially when you have no clue what they mean
Might I add to your list of transparency criteria?
“Who that person is being advised by in relation to the transaction (tax/legal/governance) and how much they are being paid for doing so.”
Is the suggestion that if I run a company I have to disclose (to the world?) full details of all the transactions I enter into? Or is it only certain types of transactions you are suggesting should be disclosed?
Vince for PM!
The PSG agree with your every word and only when those 11 questions (and the 12th submitted by Deeply Depressed) are unequivocally answered does true financial transparency exist.
That tax havens remain free from proper regulation is an outrage.
@Marc Daniels
No, of course not
But I would like full accounts on a country-by-country reporting basis compliant with accounting standards for all companies, irrespective of size on public records and think it a quite reasonable request that they provide them
@Howard
Hang on……
Richard, thanks – so for what kinds of transactions will a company need to answer your various questions? I am not an accountant, but most seem to fall outside standard the reporting requirements I’ve seen.
@Marc Daniels
I think I’m describing what a reasonably competent person should be able to determine from a set of accounts, albeit in aggregate and sometimes by deduction
What do you think they show?
Take something simple like the purchase of land – the accounts would not normally show the price of any particular piece of land (on an individual level), where the transaction was entered into, or indeed any details of the particular transaction (because, as you say, they would be shown in aggregate). But this means that if Tesco (or whoever) actually purchased the land via a Jersey SPV in order to avoid capital gains tax and SDLT then the accounts would be most unlikely to reveal that. I had thought you were proposing that such transactions had to be disclosed; but this begs the question of where you draw the line, and that’s the point that interests me.
@Marc Daniels
A good question – I agree
And I agree, more research is needed into it – and I / we are doing it
But without publicly accessible accounts at all and without country-by-country reporting then the question is irrelevant
So surely you agree the transparency I request is critical?
Country-by-country reporting strikes me as a good idea, but I don’t believe transparency of individual transactions (if that’s what you’re suggesting) would be workable. There is a problem with granularity; we also need to recognise that individuals and companies have a right to keep key commercial contracts confidential. I’m certainly open to persuasion if you can spell out more of what you mean.
@Marc Daniels
We’re not asking for individual transaction data
Accounts have to be a proxy – there must be a compromise on what is viable
That provides sufficient privacy
I do not agree companies can avoid disclosure at accounts level though – disclosure is the price of limited liability
Individuals do not need to disclose as they have unlimited liability
I’m still a little confused. I’m not disputing that there should be disclosure at accounts level. But if you’re not asking for disclosure at individual transaction level, how can you answer questions 8-11 ?
@Marc Daniels
Within sufficient reason accounts should disclose those facts
Not precisely
But sufficiently
Especially when combined with proper share registers
And country-by-country reporting
And adequate directors reports on record
So that does mean changing UK GAAP/IAS to require some disclosure at individual transaction level?
@Marc Daniels
I am baffled
I am not asking for transaction details
I never have
And nor do I need it to satisfy those objectives
Accounts should give me sufficient insight into them
But ye – of courser I am asking for reform in GAAP – I campaign for it
It’s part of country-by-country reporting