As some will have noticed, it is not quite normal service on the blog this week. I admit I am taking a quiet week to think about a range of issues and as such am paying less attention to current events.
A small part of this my be reaction to losing Hector last week - some sleep was lost in his final days and I need to catch up. During this week I have also to do the parental taxi service run for a son returning early to prepare materials for university freshers week. And then there is also quite simply a lot to think about.
Over the last couple of weeks I have technically started my work at both Sheffield (one day a week) and Copenhagen Business School via the Corporate Accountability Network, where I will also be working a day a week for four years on sustainable cost accounting. New work on the Green New Deal is also under way. Add these together and there is a lot of groundwork to lay.
I am aware that accounting is not the topic that turns on most people on this blog. I actually think that a shame since almost no decisions are made without data and one of the recurring themes of the work that I will be doing is that we do not have information fit for decision making purposes now, whether that relates to corporate risk, climate change, tax or the obligations of a company to society at large.
The first five of a series of publications on this theme were written over the summer and are now being edited. If all goes to plan these Briefings - which have a focus on audit reform but which will address many issues in accounting as well - will be somewhat greater in number than that and will appear this autumn in anticipation of the government producing its proposals on this issue so that those who want to critique them have an alternative perspective to consider.
New work on hollowed out firms is also under way, including early work on academic papers on the accounting dimensions of this issue and how it can be that companies are able to pay out more in dividends than they earn without their auditors apparently expressing concern.
And in the meantime discussions on sustainable cost accounting suggest that it is being noticed. The awareness that the sustainability reporting being proposed at COP 26 will fall far short of real need is increasing as investors realise that knowing how much carbon a company produces does not indicate how the problem will be solved, or what the cost of doing so might be. Despite this the government seems wedded to this approach that will fall so far short of investor needs, and those of society. I am being encouraged to write an alternative accounting standard on this issue and that is requiring some thought.
Add on to that the work that is being planned to take forward ideas on funding the Green New Deal and I can more than entertain myself for week or so without obsessing about the failings of the UK government, legion as they might be. But I will be back on that theme soon.
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Some aspects of accounting can be non-dull. I am thinking of sectoral balances accounting invented by some German chap whose name escapes me but which was significantly modified and rendered understandable by Wynne Godley, and which seems to be a non-trivial adjunct to MMT. Graphics seem to work as a way into numerically based topics.
I have a Twitter thread on sectoral balances that I must finish…..
There was an interesting discussion on the BBC World Service radio (1 am GMT) last night where they were talking about the amount of “greenwash” that goes on in the corporate/multicorporate sector. Most of these big companies apparently only pay lip service to attain zero carbon by 2050 or whatever and the figures they give for emission reduction are puny compared with their total budgets. Also, so-called offsets for tree planting, etc are ofter illusory and future hopes, not action now. They also made the important point that “investment” in so-called green companies or companies aspiring to this is not a new investment in emissions reduction but just the buying of shares in existing companies so that people are conned into thinking they are adding to or improving climate change and also this false impression lifts the price of the shares so people are literally wasting their money on false promises.
Every single word of that is true based on the evidence I am seeing
Richard, in your consideration of information not fit for decision making purposes, what about Government accounting, in particular UK Gov and the devolved governments? The absence of reliable base data from multiple sources (intra-UK trading, exports, taxes etc) and the deliberate obfuscation to further political aims (what is a realistic figure for the National Debt, why can’t we get a single realistic and reliable figure for inflation, how does GERS continue to exist when its uselessness has been so frequently demonstrated etc?), all of these factors feed into or impinge on government accounting across the UK, so my hunch is that little or nothing published in this field can be relied upon. If that hunch is correct, what can be done to improve matters? After all, the data currently produced can have significant influence on exchange rates, which in turn have global implications politically and economically.
I must confess my own ignorance of Government accounting (I never got the chance to audit a country in my career), so any light you can shed on this esoteric topic would be much appreciated and you’ll be guaranteed a rapt audience of at least one!
Ken – I will get to it, but have been writing and thinking for far too long today
Apologies
Too much government accounting is based on cash book accounting and too much treasury management has been about managing cash rather than the economic welfare of the country.
It treats the Budget as a holy relic that requires worship and reverence and the decision making process has become a pork barrel where people argue about who gets what, first .This process has become corrupted , overinfluenced by lobbying , political donations, the right wing media and politicians intent on getting re-elected above all other considerations.
Better accounting has a role to play but will be insufficient alone.
As for Hollowed-out companies this is a financial strategy made profitable by the rules established making it easy for individuals and companies to evade tax, maintain secrecy and dump social and environmental costs onto others. It would be easy to design rules that made secrecy impossible , prevented taxes being evaded and required companies that wanted to trade in the UK to be responsible in meeting social costs of operating in the UK. But this is seemingly politically impossible , for now.
Roger
Hollowed out forms have nothing to do with tax per se and all to do with abuse of accounting and auditing rules IMO
Richard