Thursday 23 September 2010

Banking on statistics

Last week at the invitation of Barclays Bank I had the opportunity over breakfast to listen to the thoughts of Chris Piper, who is the Bank of England Agent  for Central Southern England. His role, along with his colleagues from the other eleven regions, is to provide the anecdotal evidence to support (or not as the case maybe) the statistical evidence that it gathers.

It was an off the record briefing so I can’t divulge all that he said. However one thing that struck me when he was taking us through the various statistics and forecasts that the Bank produce (and that are freely available on its website) was how dependent the whole direction of policy seemed to be on the completeness and the accuracy of such information.

This worries me somewhat given my past experience of filling out such forms for one of my then employer’s subsidiaries as a very junior accountant. The form I received requested various bits of data concerning the economic output of the company, and came with a stern reminder that this was compulsory under the Statistics Of Trade Act 1947 (which remains the act in force regarding the collection of data for government purposes to this day).

Given this company had specialised in doing projects in Iran under the Shah, and that these returns were being prepared in the late eighties, you can understand why the economic activity that was being reported was somewhat minimal. Even though I consistently reflected this, the returns kept on coming, and threat of non compliance remained.

I am not saying that today’s statistics are not prepared to the highest professional standards, as they clearly are, or that companies and individuals provide deliberately misleading data. It is just that in the battle between fallible human input and sophisticated mathematical processes the former will always win.

Therefore it is not surprising that in the area of crystal ball gazing, the Bank of England are probably as in the dark as the rest of us, in spite of the wealth of data at its disposal. That is why it needs to keep its ear closely to the ground, and why the work of Chris and his colleagues throughout the country is vital in ensuring that policy reflects what is necessary rather than what the numbers say.

Wednesday 15 September 2010

Tax means never having to say you are sorry

It is a testament to the sad accountant that I am that the Wayne Rooney story which caught my eye this weekend related not to his attempts to rebuild his marriage after his recently reported indiscretions, but to the fact that he and a number of Premiership footballers and clubs are being chased for as much as £200million in tax over payments in respect of “image rights”.

This was probably due to the fact that HMRC is once again in the news for the wrong reasons, which were not helped by HMRC’s Permanent Secretary, Dave Hartnett’s less than fulsome apology for the coding errors that have led to millions of people dreading a pre Christmas envelop telling them of the extra tax that they will have to pay.

I will leave it to others to blog on the continuing failure of public officials to understand when they are in the wrong and apologise accordingly. What the PAYE fiasco once again shows is that the current tax system is still struggling to cope with demands placed upon it by the growing development of enterprise Britain.

The one job, one employer, one life scenario that PAYE was designed to cope with has been in steady decline for much of this millennium, and it will no doubt be dealt a further blow with the demise of hundreds of thousands of public sector jobs. Second jobs, pension payments whilst continuing to work longer, one off consultancy assignments and portfolio careers are becoming increasing common, and in due course will become the norm.

This will require an HMRC that is dedicated to helping people get it right rather than one that works on the presumption that they have got it wrong. Sadly, in spite of the claims that their new computer systems will ultimately deliver this, the current signs are not promising.

Targeting the small percentage of taxpayers who can afford to have imaginative tax reduction schemes devised for them for investigation is something that the 80:20 rule would suggest was a sensible mix of resource and yield. This is grown up territory, and those who play in it are more than able to look after themselves.

For the rest of us who do our best to comply, and trust in the authorities to at least make a stab at getting it right, it is going to take a significant improvement in performance by HMRC if Dave Hartnett and his successors are not to be constantly practising their use of the ‘S’ word.