Now is the time to keep the City on the hook

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The Observer astutely observed the moves in the City to claim it’s “business as usual” this weekend.

In its editorial it said:

It is astonishing and alarming in equal measure how quickly the memory of last October has faded in the City. The whole banking system came within hours of collapse. State intervention saved the day and any subsequent recovery is underpinned by government authority. Finance was put on a democratic leash. At least, it should have been. But already the political will to reshape the economy has flagged.

There is a danger now that the impetus for radical reform will be lost and that, with a few cosmetic changes, Britain's economy will come out of this recession looking much as it did before, only smaller and with far more people alienated, unemployed and angry.

This is true. The Observer also highlighted the latest report by the Financial Reporting Council (FRC), covered here last week:

The FRC is asking the financial industry whether subsidiaries should be required to file audited accounts with full disclosures. "Is a more simplified reporting regime more appropriate? Would it be desirable to eliminate the UK requirement to prepare, have audited, and file wholly-owned subsidiary accounts in the case of a parent company guarantee?" it asks.

Critics point out that it was a subsidiary of Northern Rock, Granite, that contained the liabilities that led to the collapse of the bank: Granite owned £49bn of mortgages that were sold by Northern Rock and moved offshore to the tax haven of Jersey. Likewise, a series of banks crashed last year because their subsidiaries loaded up on asset-backed securities that plummeted in value.

Richard Murphy, an influential forensic accountant, said: "We have seen how subsidiaries have led parent companies into liquidation. HMRC and the public should have a right to get high quality audited information on every company. If this goes through, it will mean complex financial transactions will become harder to detect, so tax avoidance will increase."

The pieces are of course, connected. The Big 4 firms of accountants, and their agents at the FRC, UK Accounting Standards Board, the International Accounting Standards Board and elsewhere are very clearly driven by the agenda of making as little information be available as possible and at the same time ensuring maximum reallocation of wealth from the poorest in the communities of the world to the wealthiest – who are their clients.

As such we should see them for exactly what they are: political players. When they argue, as they do, that politics should be kept out of accounting standards what they’re actually asking for is that their politics have free reign.

When they say that organisations such as the EU should not supervise them what they mean is that they want licence to ensure that data is not available to ensure tax is paid.

Think about it for one minute: not auditing the subsidiaries of multinational corporations would be a dream for them: every opportunity they want for transfer pricing abuse and no need to sign off a single internal transaction within a group giving rise to that group as being true and fair.

That is what the Big 4 want.

It will cost lives. I know they know this. And they will do it anyway.

It is necessary to expose this.

As I said at Compass on Saturday: we need a new agenda for tax. Demanding reform of accounting is part of this agenda. we have to know where the tax base is, and right now the Big 4 and their friends want to deny us this information.

There is a moral judgement to be made about their actions: they are wrong. And wrong in that sense which makes clear that this wrong is a harm; a harm to society, a harm to real people, a harm to the economic system which they seek to undermine in pursuit of the greed of a few, a harm to the world at large.

That is why we need to keep the City on the hook.