Who signed these accounts off?
I’m always amazed by those stories that emerge from time-to-time which include lines such as: “the pop star trusted Mr X implicitly and had no idea that he was funding X’s luxurious lifestyle. Mr X stole more than £5 million before an observant maid queried how he could possibly afford a Ferrari 400GT on an annual salary of £45,000.”
Then there’s the eye-popping tales of internal shenanigans within leading financial operations. These tend to be reported in more sober terms.
“The bank has now closed the division, known jokily by its staff as ‘DFS’, or the department for speculation, which lost £700 million trading with Russians it believed were government officials. It transpired that they were almost certainly gangsters.”
You get the drift.
I’ve been a company director for most of the past quarter century, during which reporting requirements to HMRC and Companies House have become more, not less, stringent. Properly audited accounts are a must for most businesses assuming they want to expand and borrow money or put themselves up for sale. In other words, having a professional overseer, usually an accountant, checking up on business activities and making sure the books balance, is essential for even the smallest firms.
Yet it would seem that this important rule of thumb doesn’t always apply to pop stars with lots of ready cash or sloppily-run trading departments in some investment banks. Nor, it would seem, is balancing the books top of the ‘To Do’ list at the Treasury. Astonishing though this may seem, it’s true.
You see, it transpires that the last government was rather economical with the truth when it came to calculating the UK deficit. According to the IMF, who took a look at the level of Britain’s 2007 public borrowings after tax receipts ( a fairly straight forward sum, I would imagine), the true extent of the nation’s indebtedness was £38 billion higher than previously stated.
Had the figures been £38 out, it might have been acceptable, but £38 billion beggars belief. Who was signing these accounts off?
It means that while senior figures in the last government have continued to claim that Britain was not running what is known as a ‘structural deficit’ prior to the onset of the credit crunch, the opposite is true according to the IMF. The extent of this structural deficit was, the Treasury now admits, a staggering £73 billion.
Naturally, no-one is taking the blame; no-one has resigned. It’s business as usual at the jolly Westminster club, but the affair is an absolute scandal and its implications will affect us all.
Annoyingly, it presents Chancellor George Osborne with the perfect excuse to abandon his so-called ‘golden rule’, namely that public sector debt will be falling by 2015.
Mr Osborne will, of course, give the Opposition both barrels when he blames our economic stagnation on a situation he inherited, ie one which turned out to be much worse than anyone in the previous administration admitted.
That will come in his Autumn Statement in December (a month I always associate with Winter for some old-fashioned reason), probably at the same time that he announces an extension to his austerity programme.
Absolutely no good can come of this – for businesses, investors or employees, though I fancy politicians will continue to do well. I just hope that a team of accountants can explain every penny of government expenditure since 2007 before the electorate begins to wonder whether a very sizeable financial crime is taking place at the heart of the legislature.
posted on 29 October 2012 12:46 byPJS