Posted by: Brian Clarke | March 5, 2012

Spend to save

Politics is no part of this blog. What follows applies to good governance generally.

People like me look on with despair when governments try to save money without first doing their homework. What is the point of saving (ie cutting) £1 in one area, if it means having to spend £2 in another area? The Spectator, for example, has pointed out that cutting legal aid can be a false economy.

Of course, as an accountant I have a potential vested interest; people like me are needed if The Powers That Be want to find where the real savings can be made, or what the real costs are of a particular course of action.

Another example: a lot of elderly patients are blocking hospital beds because there is nowhere suitable to discharge them to. In other words, the NHS is bearing social costs which should be really be taken out of the Social Services budget. But the Social Services budget is stretched … (you can fill in the rest).

Even more to the point, the cost of an NHS bed must be greater than the cost of a Social Services bed, so keeping someone in an NHS bed, when they could be discharged, costs the government as a whole more. But then governments are very bad at thinking globally.

I can’t help thinking the solution here is a lot simpler. If the NHS could charge Social Services for each day one of their beds is blocked, Social Services would soon change. But then this would be the market in action, and the government doesn’t like that sort of thing … wait a minute, it says it likes that sort of thing. Well, does it or doesn’t it?

As they say in Freakonomics, incentives are everything.

 

 

Posted by: Brian Clarke | February 27, 2012

Incentives

They’re all around us. They’re the answer to so much.

Why did that person or organisation do that thing? There is a reason; it might be monetary or it might be something else. But it’s there, even if you have to dig for it.

On the way to the facts, look for the incentives.

Glen Whitman nailed it in respect of economics, and economics reaches into all our lives:

‘For every subject, there are really only two things you really need to know. Everything else is the application of those two things, or just not important.”

“Oh,” I said. “Okay, here are the Two Things about economics. One: Incentives matter. Two: There’s no such thing as a free lunch.” ‘

Posted by: Brian Clarke | October 5, 2011

Gathering Cats in May

In professional life, it’s so important to get your facts right, because any conclusions you come to and advice you give depend on them. Home Secretaries also need to bear this in mind.

 

Posted by: Brian Clarke | May 13, 2011

Financial incentives

The news today set me thinking.

Network Rail are fined £3.3m for safety / maintenance failings which led to the Potters Bar rail crash in 2002. The fault lay with its predecessor Railtrack, which was set up with perverse incentives built into its systems. By cutting costs, its senior management could add to their bonuses, even if safety suffered. Railtrack said of course that safety was its number one priority, but they didn’t walk the walk; the financial incentives involved were too powerful.

For years, schools and examining bodies have insisted that the standard of students passing GCSE and A Levels has been going up, but at the same time employers and universities have complained that increasingly young people coming to them have been less and less up to standard in basic literacy, mathematics, knowledge of science and so on. This basic difference of view refuses to go away. Again, there are financial incentives at the root of it. Because of the use of league tables, head teachers can benefit from good exam results in their schools, by justifying higher pay for themselves. So everything gets skewed towards the exam results, rather than to the quality of the education. If the government thought instead in terms of the various incentives, when setting up the system, we would be in a better place.

Posted by: Brian Clarke | February 12, 2011

Health matters

There’s a piece in the paper today about health and the facts. The Coalition want to cut (sorry: reform) the NHS, and you might or might not be in support of that.

But isn’t your opinion much more valid if it’s based on the facts, rather than on a very selective reading of the facts?

 

Posted by: Brian Clarke | January 16, 2011

Bankers’ bonuses

This is a little off the topic of this blog, but worth a comment.

An awful lot is being said right now about bankers’ bonuses and how iniquitous they are. I’m sure the bankers are laughing into their drinks on this, because concentrating on the bonuses misses the point. How was the money earned to pay the bonuses? Was anything added to the sum of the national income by the bankers’ activities, or are the “profits” of the banks merely balanced out by the losses suffered elsewhere by you, me, the pension funds and whoever?

There is absolutely no clarity on this. A few relevant facts would help the debate along a lot.

 

Posted by: Brian Clarke | December 12, 2010

Don’t give up

There is an inspiring story in the paper today. It says a lot about the need to gather the facts, and hang in there.

Some people need help in gathering the facts and making sense of them – others need help.

 

 

Posted by: Brian Clarke | November 17, 2010

The nuts and bolts of the job

I have come across an interesting (and disturbing) post by a New Zealand Chartered Accountant. In it, he points up the lack of fundamental accounting knowledge among those accountants in some larger organisations, who really ought to know more about their subject.

When I was training, I was taught that a basic test of an accountant was to ask “In a particular situation, where exactly would you put the debit, and where do you put the credit?” Plenty don’t really know; they let the software do the work, and end up not knowing if the software has made a mistake, or if they have.

I had a personal illustration of this in my final year of training. I was doing some work at an organisation, which had an auditor in from what is now one of the Big 4. A qualified Chartered Accountant with Manager status, and he had to ask my advice about the bookkeeping…

The ledgers of a business hold the basic facts about that business. If you don’t know and understand what is in them, you don’t have a proper basis for opinions. And if you don’t have a proper basis for opinions, why are you offering any?

Posted by: Brian Clarke | November 5, 2010

Vodafone

Vodafone have been in the news lately, but perhaps not the tabloids. It seems they did some tax planning, and profits have been tucked away in Luxembourg. It all saves £6bn or so in tax.

The most complete reporting on this that I’ve seen so far has been in Private Eye. There are still crucial facts missing from the reporting of the case, so we can’t make up our own minds about it just yet. But in essence what HM Revenue & Customs and Vodafone seem to have done is arrive at some kind of compromise deal. But HMRC aren’t authorised to do deals like that … Mohammed al-Fayed found that out a few years ago.

And £6bn would help a lot with the national deficit. There are some relevant facts still to come out on this.

But meanwhile people have been marching and picketing. It’s not often that tax has that effect on people. This could have a messy ending.

Posted by: Brian Clarke | November 5, 2010

Opening remarks

The aim of this blog – at least at the moment – is to riff on about facts (or “the facts”). They’re central to my work, and there is a benefit in respecting them. People don’t always see eye to eye with me on that, but that’s OK – it’s a diverse world, and anyway that disagreement helps me make a living.

I was thinking of calling this blog “The facts, man, only the facts”, and that’s where the fun starts immediately. Dragnet was mainly before my time, but I remember it vaguely. Sgt Joe Friday and his laconic voice. Trouble is, the famous phrase is “The facts, ma’am, only the facts” and as far as I can see he never actually said either of those things. You can see the problem, I hope. Even facts can seem slippery.

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