A paper published today proposes the two ‘quangos’ which are responsible for the regulating the accounting profession (FRC) and the UK listing authority (FSA).  The Treasury is  looking to reform the financial regulations in the UK. 

The paper released by the government said “the merging of the FRC with the UK’s listing authority would have the benefit of bringing the UKLA’s regulation of primary market activity alongside FRC functions relating to company report, auditing and corporate governance,”

The Treasury paper said:

“The Government believes that, within the proposed new regulatory architecture, there is a strong case for a powerful companies regulator established with responsibilities for regulating corporate governance corporate information and its disclosure, and the stewardship of companies by institutional shareholders.”

The current Business secretary, Vincent Cable would be responsible for the new regulator as it would be part of the department for business.   He express concerns in regards to the “restricted number of big audit firms” and the freedom of the market. 

The document released by the treasury is titled:  A New Approach to Financial Regulation.   It calls for enormous change to financial regulations.  It criticises the current system in saying:

“Perhaps the obvious failing of the UK system, however, is the fact that no single institution has the responsibility, authority or power to monitor the system as a whole, identify potentially destabilising trends and respond to them with concerted action.”

 

The consulting paper advocated the creation of a Financial Policy Committee (FPC) and be part of the Bank of England to supervise financial stability of the UK.  The FPC would have a Prudential Regulatory Authority (PRA) and  an Independent Consumer Protection and Market Authority (CPMA). 

Source:  Accountancy Age

What does this tell us?

1. Firstly I believe it is an indication of how big the business start up industry is.
2. Secondly, it says something about the internet, and how important it is for the consulting industry.

What reasons might support these assumptions?

In the UK over 5,000 businesses start up each week, and in the UK in many areas there is government funding and business support for business plans.

If you are thinking of starting a business, I suggest that you enlist the help of a professional business adviser e.g. iff you were starting up a Guest House on the East Coact, you might do well to search for a Business adviser leisure industry

An area that may have gained is the new car market. Take away a few grand for the scrappage scheme then another 2.5% on the balance can make the difference between affordable and too expensive. But on new years day, we all be faced with an increase or will we?

Looking through many shopping sites for Chistmas I noticed all prices still ending in 99p. Considering most prices tended to end with the 99p anyway before the VAT reduction, I find it hard to see when we actually got the extra 2.5% back for anything. The reality is more like businesses just charged the same and gained a bit more into the bargain. So it is very likley that the consumer will not lose out for the VAT increase but business mat suffer.

Even business services are unlikely to be affected returning to the motor trade take business car lease as an example. Business car lease may cost more as a monthly payment, but as VAT is refundable and business lease falls into that bracket depending on CO2 emmissions, the executive owner will be no worse off. In fact it is hard to understand if the benefits of the lower VAT rate actually covers the costs of outting this into practice. Take accountants, or pricing within the retail sectop, it cost money to report takings and purchases in a different tax code.

So on January 1st will we see prices rise? I think there is a good chance we will, including those who did not reduce prices when it was reduced. More money to the accountants.

Alan Greenspan – BBC\’s Love of Money season

Have we learned the lessons of too much dependence on the US for growth? Have we learned what was flawed in our human nature – insufficient governance?

]]> http://www.13thmaninbusiness.com/have-we-learned-the-lessons-of-too-much-dependence-on-the-us-for-growth/feed/ 0 http://www.13thmaninbusiness.com/the-financial-decisions-we-make/ http://www.13thmaninbusiness.com/the-financial-decisions-we-make/#comments Sat, 02 May 2009 13:33:22 +0000 admin http://www.13thmaninbusiness.com/?p=46 Julian Rowe, Business Correspondent, Business Service Finder, reflects upon analysis by economist, Dan Ariely, in his interview with the BBC World Service concerning Predictable irrationality (regarding money).
Regarding money, Ariely suggests we make repeatable, predictable mistakes – the recording of his interview is still available on the BBC World Service website.
Ariely is a behavioural analyst, concerning himself with ‘Behavioural economics’ i.e. Human irrationality and money. Ariely quotes Greenspan, in front of Congress, who is alleged to have said, “Oops I made a mistake”. Ariely points out that this shows ‘irrationality’ is not just confined to the lower eschelons of society i.e. we at the bottom of the heap.

The main reason for the mistakes we all make with money, Ariely argues, is because it is actually a very hard subject to master. Everytime one spends something, e.g. a cup of coffee, one should really ask oneself “what I am giving up in the future” in order to enjoy this cup of coffee now? What will I not be able to do in the future? In reality, as Ariely points out, it is this concept, or thought, that is actually very complex. For example, if I buy this now I may not be able to go to a movie in ten years or buy this book in fifteen years time is a very challenging decision. Because of this challenge, we often resort to “simplified juristics” (i.e. reasoning) or simple ‘rules of thumb’.
One of these (rules of thumb) is ‘relative comparison’ – i.e. how much does this cost compared to something else. The fact that something is on discount today as opposed to yesterday, why is it such a big deal, Ariely asks?  It is because we don’t know how much something is worth, so we compare it to what it used to cost. In the same way we compare our salary to other peoples’ because we have very little way to evaluate it.
What can we do or how should we learn to stop getting ourselves into this kind of (financial) mess?
In the current downturn, many people are trying to cut back on expenses, realising that the financial future may not be quite so bright as it was. The big question is “How does one cut down”?
People always look at ‘discrepancy spending’ i.e. not buying a coffee or a sandwich – the expenses they can physically see coming out of their wallet or purses. However Ariely argues that most people do not pay attention to the expenditure – things directly deducted from our bank accounts or credit card i.e. whatever is on one’s automatic payment schedule. So we sometimes cut the wrong things, i.e. the things that have a direct impact on our pleasure, and not much on expenditure and ignoring things hidden which might greatly reduce expenditure yet hardly impact on our pleasure.

Ariely states that regardless of most people’s financial astuteness the odds are that people will make the wrong cuts. One reason for this is that often we are very bad at predicting what our life might look like in the future – The change in circumstances. When we look to the future we think it will be terrible. It turns out to be so in the short term but then it is quite manageable.

For business owners financial decisions are better made with a business finance consultant specialist, and a good online resource in the UK is Business Support Finder.

All specialists are accredited, offering current liability cover which in this case would be Professional Indemnity Insurance for financial specilaists.