The next five years won’t all be about stability and certainty
To call the result of last week’s election a surprise barely does it justice. Hardly a day has gone by over the past two years without a new poll being released, and those who predicted the result correctly were few and far between.
As it turned out, the Conservatives secured a majority that, while small, gives the party enough seats to govern alone for the first time in almost 20 years. Whether you voted Tory or not, there is now more clarity about what the next five years will hold for the UK.
In ACCA’s first quarter Global Economic Conditions Survey, our members cited uncertainty over who would form the next government as the biggest risk to the UK recovery. Judging by the reaction from business on Friday morning, that feeling is shared by UK plc.
Immediately after the result, sterling surged and the FTSE 250 reached an all-time high. Bookmaker Ladbrokes leapt 9 per cent, as did estate agencies Countrywide and Foxtons. It was estimated that UK business grew by £50bn within hours of a Conservative majority becoming certain, without anyone lifting a finger.
It appears that five years of a Conservative majority government, and the perception of stability that comes with it, will be good for the economy – or at least business thinks it will be.
EVERY PENNY COUNTS
So what can we expect for the economy, and for the accountancy profession which underpins it, over the life of this Parliament?
Accountancy is at the heart of every organisation, no matter how large or small, and no matter which sector. As a result, over the next five years, some professional accountants will face testing times under the plans outlined in the Conservative manifesto.
For those in the public sector, the next five years are likely to be even tougher than the previous five. Most economists agree that, if the government is to meet its aim of a balanced budget by 2020, cuts to the public sector are likely to be deeper and faster than in the previous five years. Added to that, most local authorities have long since exhausted any surplus they built up under the Brown and Blair years, meaning cuts can be expected across the board.
The economic tribulations we have seen across the world over the last decade mean that every finance professional is now used to working under great pressure when it comes to delivering value for money from every contract and every service.
The onus will be on the finance function to use this experience and make every penny count.
FAIL TO PLAN, PLAN TO FAIL
Continuing with the theme of uncertainty, the worst thing for those working in the public sector is not knowing their budgets and not being able to plan. With that in mind, it is vital that the chancellor sets out exactly where and when cuts are likely to take place as soon as possible. The old cliché of “fail to plan, plan to fail” is never more apt than when dealing with budgets, and failure is clearly not an option for those financing our healthcare, education and defence systems.
It should be noted that the Conservatives were the only major party not to pledge to protect education funding. However, the government has promised to open up more work experience and apprenticeships, including rolling out more degree-level apprenticeships.
ACCA has always supported open access to the profession and, if this pledge helps further this, we will be fully supportive. Access to accountancy should be based solely on ability and not on resources to pay for higher education.
Apprenticeships are a vital route into professional careers for many, and the more professional-level apprenticeships there are in place, the more respected this route will become.
Fittingly, this week we entered into a historic partnership with the University of London to deliver the world’s first Masters qualification in Professional Accountancy. This ground-breaking agreement links the vocational and academic pathways through education in the first truly integrated qualification of its kind.
I am particularly delighted that this agreement allows us to offer a Masters with one of the most prestigious universities in the world via an online, flexible platform, and at a significantly reduced cost compared to traditional means of study. It is vital that education is accessible to everyone, no matter their background, and I am proud to say that, with the help of the University of London, we can now extend this right up to Masters award level.
Budgeting to provide public services is one thing, but delivering a sustained economic recovery could be an even more complex issue. The Conservatives claimed to have created almost 2m new jobs in the last Parliament, but doubters countered that a large number of those were from people choosing to go self-employed. The jury is out on whether this was a result of limited access to more traditional forms of employment or because the coalition had created an environment where starting a business was easier and more profitable. In either case, the commitment from the Conservatives to create another 2m jobs by 2020 is to be commended, even if it is perhaps a little ambitious.
It is no secret to anyone in business, be they self-employed or running a large multinational, that we have one of the most complicated tax systems in the western world.
Combined with the fact that, like all public bodies, HMRC has its own resourcing issues to deal with, this complexity reduces its ability to deal with aggressive tax avoidance and has a knock-on effect on the whole economy.
Five years of government provides an opportunity to embark on a long-term, large scale project to redefine tax in our country so it better reflects the twenty-first century economy. If the Conservatives really are the party of business, there is no greater legacy than a fit-for-purpose tax system that is the envy of the world, rather than a laughing stock.
While talking politics, it would be remiss of me not to mention the elephant in the room – the EU referendum. Clearly, any vote on our future membership of the EU holds significant implications for both our profession and the UK economy in general.
While the benefits, and indeed pitfalls, of EU membership are open to debate, it is clear that much of twenty-first century accountancy, and modern business in general, operates across borders. ACCA has members and students across the world, and free movement of goods and services is of great benefit to the global economy and UK businesses.
It is important that, in the run up to the referendum, the debate does not only focus on the negative aspects of the EU, such as the costs of membership and the perceived impact of mass immigration from member states. It is crucial that our ability to trade freely across the whole continent is not impacted.
It is clearly the consensus of the business community that a majority government will provide stability. However, the Conservatives only hold a small majority and, as John Major found in 1992, maintaining such a slim advantage for the life of a Parliament, especially with the prospect of a long running debate over Europe – a divisive issue for the Tories like no other – can be fraught with difficulty.