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The era of the Facebook faux pas is over

Six years after the launch of the social networking giant, has the job-seeking public finally caught on to the fact that employers check the social networking pages of their potential hires?

Over the past year, only 0.01% of candidates whose CVs impressed potential employers failed to secure job opportunities due to questionable social networking profiles. This compares to 0.1% in 2006.

Six years ago, we saw the first social-networking slip-ups from candidates. They rose to a crescendo in 2006 when the use of sites like Facebook exploded in popularity – but people still hadn’t figured out quite how sensitive some of their information could be. Fortunately, the job market at the time meant a lot of candidates who made these mistakes got away with it. Although employers deal with Facebook faux pas more harshly now, most people have wised up. The era of the recruitment Facebook faux pas is effectively over.

This year, only 3 out of 24,000 candidates whose CVs impressed future employers made a Facebook faux pas. This compares to 23 out of 24,000 in 2006, when the Facebook faux pas hit its peak. 

Most finance and accountancy professionals on the job market are now aware of the dangers posed by social networking websites. They know photographs that cast them in an unprofessional light should be made private – or deleted altogether. They know that derogatory comments about their existing boss won’t go down well with their next employer. But less obvious things – such as poor writing, spelling and grammar – can also raise red flags over a candidate’s name. Once an employer has clocked something dodgy on a profile, they have to decide if they are willing to take a chance or not. In a candidate-rich market such as this, the answer is usually ‘not’.

Effectively, the Facebook check has become the equivalent of a first interview. Once a potential employer has seen your CV, the next stage is to check the net.

Yet Facebook doesn’t always have to be detrimental in recruitment situations. Used correctly, Facebook can highlight qualities or interests that might not come up in a job interview.  As people seem to be learning, it’s about building a personal brand, not destroying it.

Facebook is a very effective way of keeping in touch with family and friends. Used correctly, it can also give a future employer a more ‘rounded view’ of who you are.  But used incorrectly – i.e. not having the right privacy settings – well, you can insert your own inappropriate nightmare scenario here.

In late 2009, an American investment bank in London turned down an excellent candidate after checking his Facebook profile. His potential employer saw he’d joined a number of ‘inappropriate’ groups.  As a result, he didn’t make it through for a second interview.

Although the era of the Facebook faux pas appears to be over, it may only be temporary. Facebook’s privacy settings are ever changing; finance and accountancy candidates need to keep a close watch on what material is made public.


Dave Way is the Managing Director for Marks Sattin and has worked with accounting and finance recruiter for over ten years. He has recruited for many of the company’s largest clients, including Air Products, MTV Europe and Discovery Channel.

The real cost of a degree

At the risk of showing my age, I very much remember the days when students who went to university would get a grant (I wish I was one of them). Yes, that’s right: all students got some money, although the amount depended on your family’s financial circumstances. Then came the days of student fees and student loans (just my luck). Today, most students leave university with a large debt to their name.

The Higher Education Act 2004 outlined that a university could charge fees of up to £3,000 per annum, variable from course to course, and varied with inflation by the government. Currently, this stands at £3,290 for 2010/11 academic year. This means that students now take out two loans: one for fees and another for maintenance (accommodation, food etc). This amount can range from about £3,500 to £6,000 per year. Researchers asked 2,000 students from 139 university campuses in England how much debt they had amassed (including credit card, bank debts and tuition fees) and the average was £5,293.

The amount owed is repayable based on income; a graduate pays 9% of their gross income over a £15,000 threshold. The interest is linked to the retail price index (RPI), and any loans outstanding after 25 years can be written off.
  
Having gone though this system, I remember how many friends really struggled to pay for food and other basics after paying for accommodation and fees. Many started part-time work, and this was fine when jobs were available. However, over the past two years, the number of students getting into financial difficulty has increased, with many wishing to work but with no jobs available. The amount of summer jobs available has reduced and consequently, part-time work for students has become much more competitive

Now we have a new coalition government with new ideas. Unfortunately, it is also a cash-strapped government looking for new ways to fund the debts it finds itself in. Vince Cable, the Business Secretary, is considering replacing the Income-Contingent Repayment (ICR) as described above with a new Graduate Tax Scheme.

In principle, the idea behind the Graduate Tax Scheme is that those who earn more pay more for university. In a speech to universities, Vince Cable said: “It surely can’t be right that a teacher or care worker or research scientist is expected to pay the same graduate contribution as a top commercial lawyer or surgeon or City analyst whose graduate premium is so much bigger”.

When I think about it, that is exactly what we do in the real world. The more we earn, the more tax we pay. I believe that slowly we will start to see more students go abroad for higher education; the danger that follows is that they will not return. We will slowly see a shortage of skilled labour that will only push the cost up for these professions: a simple case of supply and demand.

However invaluable education is, the fact remains: if it’s not affordable at the outset then we will lose those with so much potential but who are worried about how they can cope with debt. For those who do take the journey, isn't the government just putting more pressure on those who have so much pressure on them already?

So, what would a Graduate Tax Scheme mean for the next generation of accountants?

I believe that many more students will look to go straight into accountancy immediately after leaving school. The three main accountancy bodies (ACA, ACCA and CIMA) provide options for school leavers. The advantage is clear, you can earn at the same time as studying and if you get lucky, you could even be sponsored by a company.

The reason that more students don’t do that now is because university is a life experience. Additionally, if you have an accountancy-relevant degree, you get many exceptions from the above accountancy bodies therefore reducing time to pass exams.

However, if the cost of going to university goes up two-fold, would you bother? In my opinion, the majority will still go through university but over time the percentage of those who give university a miss will increase.

It would be a shame if student miss out on university life due to costs. Let’s hope the findings of a review by Lord Browne of Madingley, BP’s former chairman, result in an outcome that allows students to experience university life without accruing crippling debts.


Mehul Patel graduated in Actuarial Science from University of Kent before qualifying as a Management Accountant. As the Financial Controller of Trinity Mirror Digital Recruitment Ltd, part of Trinity Mirror plc, Mehul has the responsibly of budgets, forecasting and helping the business and the board find ways to continue expanding.

How to adopt a risk-based approach

Few money laundering cases have been as high profile as the prosecution of Manuel Noriega. The former dictator of Panama was found guilty, and subsequently jailed last month, for laundering £1.9m during his time in power.

All competent accountants would proceed with caution if Mr Noriega were to knock on their door. As a politically exposed person (PEP) with a series of negative news articles available for the world to see on Google, it’s obvious that no firms’ risk appetite would (or indeed should) be that high. However, when your client is not a former dictator with a criminal record, spotting where the risks lie can be difficult. Therefore it’s vital that accountants ensure that they use a risk-based approach to establish whether they should be doing business with their clients.

Accountants working in practice have experienced an increase over the years in rules for scrupulous anti-money laundering (AML) systems and reporting requirements. Those working in the sector must be aware of legislation such as the Proceeds of Crime Act 2002 (POCA) and the Money Laundering Regulations 2007. These acts introduced important changes to accountants’ responsibilities, including potential criminal liability for failures in systems that allow money laundering to occur. These regulations force accountants to report any suspicious activities to the Serious Organised Crime Agency (SOCA), or face stiff penalties and even the prospect of going to prison.

The Association of Accounting Technicians (AAT) has an anti-money laundering regime that supervises its self-employed members for compliance in that area. As a supervisor, the AAT monitors compliance and offers practical advice, as well as providing guidance and training. The aim of this is to support members in achieving compliance under regulations. Because money laundering is rarely as obvious as the Noriega case, accountants must demonstrate rigorous practice in managing this area of work in order to avoid falling foul of the POCA.  

AAT’s guidance recommends that members:

• Have a written AML policy in place and available for all to see;
• Undertake a risk assessment of all activity within the firm to identify high risk practice areas that are vulnerable to the threat of money laundering;
• Ensure they know their clients by being meticulous at the start of the business relationship and continue monitoring on a regular basis to identify any relevant changes to risk profile;
• Report to SOCA as soon as practicable if they have a suspicion that a client may be laundering money.

Accountants are likely to face scenarios such as the introduction of unusual (high value) transactions outside the client’s normal risk profile. They could also find difficulties in identifying and verifying the beneficial ownership of corporate entities.

The case of Noriega demonstrates the important role accountants play in the wider anti-money laundering agenda to prevent this type of criminal activity. Their role cannot be underestimated and it is AAT’s responsibility to guide them in the right direction.


Tania Hayes has been Conduct & Compliance Manager at the AAT for 18 months. She oversees conduct and compliance issues, the disciplinary process, professional ethics guidance and is the Money Laundering Reporting Officer for the association.

Business tax changes following the Emergency Budget

There is no doubt that following the Emergency Budget on 22nd June, most people are feeling financially worse off. But for the small business sector there are some silver linings, albeit temporary in some cases. Here are a few of the main business tax changes:

National Insurance Contributions

An unexpected measure announced in the Budget – taking effect from Budget Day – is the new relief from Employers’ National Insurance Contributions. This is for new business start-ups, based outside of the ‘Greater South East’ region. Relief will be available for the first ten new employees, for their first year’s employment in the new business. The relief will be capped at £5,000 per employee, giving maximum relief of £50,000. This scheme is intended to run for three years until 2013-14. Full details of the scheme will not be available until September 2010.

Capital Gains

One expected change is the increase in the rate for Capital Gains Tax (CGT). It was anticipated that the rate would be closer to the top rates of Income Tax, but it was actually increased to 28% where an individual’s combined taxable income and capital gains exceeds the £37,400 Basic Rate Limit for income tax. The 28% rate will only be applied to the excess gains, so taxable gains falling within the BR Limit will still be subject to the 18% rate.

Another change to the CGT rules is the increase to the lifetime limit for Entrepreneurs’ Relief.

For gains arising after 22 June the lifetime limit is raised to cover gains on business-related assets up to £5m. Gains made prior to the Budget will be covered by the previous limit of £2m. Any gains covered by ER are charged to CGT at 10%.

Corporate Tax

The rate of Corporation Tax for small companies (where profits do not exceed £300,000) will be reduced from 21% to 20% from 1 April 2011. Further annual rate cuts will reduce the main rate to 24% from 1 April 2014. These rate cuts are introduced as part of a general review of the CT scheme that will be undertaken over the next few years.

One likely outcome of this review is that some existing reliefs will be removed – partly to fund these reductions in the headline rates.

Capital Allowances

An example of the sorts of changes that might be made to tax reliefs is the proposed amendments to the Plant and Machinery Capital Allowances rules. These alterations will be effective from April 2012. The two rates of Writing Down Allowances will be reduced from 20% per year to 18% and from 10% per year to 8%.

VAT

The standard rate of VAT will rise to 20% from 17.5% with effect from 4 January 2011 – allowing the Christmas and New Year sales to go ahead at the lower rate. The rise will have a knock-on effect to the special rates for those using the VAT Flat Rate Scheme. Financial accountants are on-hand to offer firms expert advice and guidance on how the Budget specifically affects them and other financial issues. By working closely with accounts, small firms can ensure that their costs are kept to a minimum.



David Woodgate is chief executive of the IFA and a barrister by training. Before joining the IFA he was chief executive of the Institute of Administrative Management and held senior management positions in the City with organisations including Royal Bank of Scotland and NatWest.

Onwards and upwards

One question I find myself often asked as a recruitment consultant for the accountancy industry is: “Where will the industry be in 6 months?”. It’s impossible to judge; however, the Alexander Lloyd job index for Q2 – an industry benchmark of job flow – is pointing towards a more positive future for both candidates and clients in the accountancy industry, in both permanent and interim fields.

Taking a hit

In January 2009, senior finance professionals were taking a hit, with companies having to resort to redundancies and stripping down their teams to the bare bones. The months between January and June 2009 showed a severe drop in job flow, with March 2009 performing at 37% under the average. There was no marked improvement and pick up of vacancies until the later summer months. July’s improvement of 8% job flow suggested a confidence in the emerging market, and jobs continued to roll in with only a small decrease over the Christmas period, which was to be expected. Too much turkey equated to a lot less work.

Onwards and upwards

The New Year brought a fresh start, and with it some positive signs of recovery to vacancy flow, with the Q1 Job Index report noting a 113% increase in vacancies registered with the accountancy team’s consultants. The market had picked up and showed real signs of recovery, especially in the mid-level interim and permanent recruitment markets. Fortuitously, this increase has continued.

Within the accountancy market, the amount of permanent vacancies registered in 2010 has increased without exception on the 2009 figures. On the interim side, the June 2010 figures are the highest in the 18-month period from January 2009. There was a slight increase during the end of the financial year towards March/April, once again suggesting that businesses are more eager to spend during this period.
 
The May and June 2010 level of jobs registered have been the highest in 18 months for both interim and permanent accountancy roles.

With 2010 showing an unequivocal improvement on the previous year, it might be time to finally breathe a sigh of relief. The statistics of the report show a respectable increase in the number of vacancies registered, and point to a positive progression in the recruitment market following the negative impact of the economic downturn of the past two years.

Other financial recruitment companies are also experiencing a welcome rise in jobs needing to be filled, indicating that the industry is evidently experiencing growth again after a hard two years. With many businesses having had to close their doors and make redundancies, this news will come as a great relief to the many great candidates in the market. We are looking forward to Q3 and Q4 proving us right.



John Richardson joined Alexander Lloyd in 2003, and currently leads the Accountancy & Finance and Pensions & Benefits divisions. He is a Senior Manager within the organisation and specialises in the recruitment of qualified level Financial Directors and Controllers for both blue chip and SME clients, and also recruits niche roles such as tax/treasury, corporate finance and audit.

Graduate tax: remedy, reform or rebrand?

This month, the Secretary of State for Business, Innovation and Skills, Vince Cable, suggested a graduate tax as a 'fairer' replacement for tuition fees in higher education. All the Labour leadership candidates - with the exception of David Miliband - have expressed support for this idea, as has the National Union of Students; the leading universities, meanwhile, have opposed it. This Observation examines whether the rationale for such a policy and the practical implications of it have been fully considered.

As Dr Cable acknowledges, the current system of income-contingent loan repayments already constitutes an implicit graduate tax. Students face a notional stock of debt upon graduation, reflecting the total fee and maintenance loans taken out over their degree. However, this debt merely determines the amount of time that a graduate will spend making repayments. The actual repayments depend only on income, being equal to 9% of earnings above £15,000 for a maximum of 25 years following graduation. After this point, any remaining debt is written off.

The system is already progressive, insofar as lower-earning graduates: (i) make smaller monthly repayments (both in cash terms and as a proportion of their income); (ii) benefit more from a subsidised interest rate; and (iii) are more likely to have some of their debt written off.

A graduate tax in its purest form is simply a variant of this with an infinite loan and without a debt write-off point. Whereas a current graduate's repayments stop at some point, their payments under a pure graduate tax would not, creating the possibility for high-earning graduates to pay substantially more over their working life than what it cost to educate them. We understand that a time limit is has been considered as a central feature of the policy, which would mitigate this issue - and, in so doing, come closer to the present repayment schedule -but it would still be possible for the highest-earning graduates to pay back significantly more than the cost of their degree.

At the other end of the spectrum, it may be possible for lower-earning graduates to pay less over their career than they do now, making the spread of contributions more progressive than under the current system. However, the greater progressivity comes with the risk of inducing unintended behaviour, such studying abroad - and thereby avoiding liability for the tax - if the fees abroad are less than the net present value of a student's expected future graduate tax bill. An incentive could also be created for students to work abroad after university, in order to avoid paying the tax.

Part of the Business Secretary's aim in mooting the idea of a graduate tax is to increase the contribution to higher education provided by graduates while reducing the contribution from general taxation. But if cuts are made, it is unlikely that the revenue from a graduate tax would fill the hole quickly. If high-earning graduates respond to the above incentives, the loss of tax revenue would have negative implications for the public finances - particularly as these individuals would be relied upon to effectively subsidise lower-earning graduates. Also, behavioural responses notwithstanding, any revenue from the tax would arrive in Treasury coffers at a slow rate, and a question then arises over how universities are to be funded in the interim.

Introducing an alternative system of funding may be politically expedient, but it raises additional issues. Tuition fees provide a transparent source of income which follows the individual, giving universities an incentive to attract and retain students. Under a graduate tax, it is not clear how allocations to individual institutions would be determined, and whether this incentive would remain. There would also be no obvious, transparent way of allowing contributions to vary according to the university attended or course studied. Furthermore, fees enable students to make judgements about the effectiveness or value for money that universities offer; under a graduate tax, this not possible.

Finally, the tax would replace fee loans only - maintenance loans would continue to be repaid under the current arrangements. While this seems more sensible than using a graduate tax as the only method of repayment, operating two separate repayment systems in parallel would increase the complexity of a funding regime that is already poorly understood.

A graduate tax is the latest in a series of options under consideration by the Browne Review as it explores ways to reform university funding. Alternative possible measures include increasing tuition fees, introducing a real interest rate on student loans or tweaking some other aspects of the current funding system. An IFS Commentary, Future arrangements for funding higher education, published earlier this year, has considered such options in detail, examining their likely effects on graduates and the public finances.


Haroon Chowdry, Lorraine Dearden and Gill Wyness


Haroon Chowdry joined the IFS in 2005 and works in the Education, Employment and Evaluation sector.

Lorraine Dearden is a Research Fellow in the Education, Employment and Evaluation Sector at the IFS and is also Professor of Economics and Social Statistics at the Institute of Education, University London (IOE).

Gill Wyness is a research economist in the the education, employment and evaluation research sector at IFS.

Graduates could pay dearly for higher education

Government opinion has been divided by Vince Cable’s plans to replace Income-Contingent Repayment (ICR) of tuition fees with a new graduate tax scheme. The Secretary of State for Business, Innovation and Skills, has proposed that students should pay back their debts depending on how much they go on to earn.

So, a graduate who goes on to become a Big 4 accountant pays back more than a graduate who becomes a social worker, for example. This scheme has been defended by the Lib Dems and the majority of Labour, but has met significant opposition from the Conservatives and universities, who are concerned that the Treasury would get richer while higher education gets poorer.

I believe this redistribution of debt to be flawed for the following reasons:


If it ain’t broke…
The current system is already beneficial for lower-earning graduates. It requires 9% of earnings above £15,000 for a maximum of 25 years following graduation. So, if you are a graduate earning under £15,000 per annum, or if your debt is not paid back after 25 years, it’s written off. So lower-earning graduates make smaller monthly repayments, receive subsidised interest rates, and are more likely to have their debts written off.

Infinite debt
A graduate tax would not incorporate this write-off point, leaving all graduates in infinite debt, with more interest to pay for a longer period of time. Equally, higher-earning graduates earning the same as non-graduates would have to pay higher tax rates, and could even end up paying back more than the cost of their degree. Hardly a great incentive to go to university.

An unfair price to pay
Most graduates take at least five years to achieve their optimum salary (immediate high-pay structure professions notwithstanding). They could have paid off most of their debts in this time, only to be stung with higher taxes when they start making more money. Why should high-earning graduates be penalised with this tax, rather than being allowed to pay back the money they owe at an interest rate that reflects an average graduate salary?

Jump ship
There’s a clear incentive to study abroad (or even work abroad after graduating) to avoid liability of payment.


Graduate tax won’t plug the public spending deficits It won’t account for maintenance loans. It will make universities accountable to the Treasury, breaking the perceived connection between students and universities, and raising questions over the subordination of universities to the state. But more importantly, it won’t benefit graduates.

I eagerly await the next repayment option from the Independent Review of Higher Education Funding and Student Finance…

It's not easy being green: raising the share of environmental taxes in total receipts

The Coalition agreement reiterated the Conservative's manifesto pledge to "increase the proportion of tax revenue accounted for by environmental taxes". Past experience suggests that this is easier said than done. On coming to power in 1997, the previous Labour Government indicated a general ambition to shift taxation from 'goods' such as income to 'bads' such as pollution. Despite this, our Election Briefing Note showed that between 1997 and 2009 revenues from environmental taxes fell sharply as a share of total receipts.

In an earlier observation, we pointed out that in the absence of any significant increases in environmental taxes, their share of total tax revenue was likely to fall still further. This is for two main reasons. Firstly, as the economy recovers, growth in non-environmental revenues such as VAT, income tax and corporation tax is likely to outpace growth in environmental revenues such as fuel duty. Secondly, to the extent that environmental taxes encourage people to consume less of the taxed goods like energy and vehicle fuel, revenues will tend to be eroded over time.

Although the Coalition has not stated an explicit timetable over which the desire to increase the green tax share of total revenues should be judged, it seems that as a minimum we would expect the share to be at least as high at the end of the current Parliament (assumed to be 2014/15) as it was at end of the last one (2009/10). Using the most recent estimates for future receipts from the Office for Budget Responsibility following the June emergency Budget, green taxes are forecast to fall from 6.9% of total receipts in 2009/10 to 6.5% in 2014/15. As the chart below shows, simply to get the share in 2014/15 back to the 2009/10 estimate would require additional green tax revenues of £2.5 billion on top of the £45.8 billion forecast for 2014/15 (an increase of around 5%), assuming that those extra receipts were offset by cuts in non-environmental taxes. If the Coalition wanted to go further, perhaps raising the share of green taxes to 7.5% by 2014/15, they would need to raise an extra £6.7 billion, almost 15% more than currently forecast.




Source: Authors' calculations from OBR forecasts and historical data. Note: Bars show share of environmental taxes out of total revenue. Figures from 2009/10 are forecasts based on latest OBR data. Dashed line is 2009/10 share of 6.9%. Cash figures are the nominal amounts of additional green tax revenue needed each year from 2010/11 to maintain 2009/10 share, assuming offsetting reductions in non-environmental taxes. Environmental taxes include fuel duty, Vehicle Excise Duty, Air Passenger Duty, Landfill Tax, Climate Change Levy and Aggregates Levy. VAT charged on Fuel Duty, the Fossil Fuel Levy, Hydro Benefit and Gas Levy are not included in these figures.

This 'green tax gap' is essentially the same as was inherited from Labour based on forecasts at the time of Alistair Darling's last Budget in March. That so little has altered following George Osborne's first Budget simply reflects the lack of any new policy announcements on environmental taxes.

Given the scale of the fiscal retrenchment required over the coming years, and the pledge made in the Coalition agreement, it is perhaps surprising that the Government did not take the opportunity to spell out any firm increases in green taxes in the Budget. They did however suggest there would be a consultation on reformulating Air Passenger Duty (APD) into a charge per-plane rather than per-passenger. A similar reform was consulted on by the previous Government, but was ultimately rejected in favour of reforming the APD system. In their manifesto, the Liberal Democrats proposed to go ahead with this reform, to raise an additional £3 billion per year. If this were to happen, this would raise just more than enough (based on current forecasts) by the end of the Parliament for the Government to meet the pledge to raise the share of green taxes in total revenues, but with little margin for error.

Raising the share substantially above that which it inherited would require bolder action from the Coalition. If it wanted to raise much more revenue from the existing system of green taxes, it would be hard to do so without further increases in fuel duty over and above those already planned, since fuel duty makes up almost three-quarters of green tax receipts. Alternatives may include new taxes, perhaps on carbon emissions or congestion but as yet there is no concrete evidence that these will come soon.


Andrew Leicester and Peter Levell


Andrew Leicester is a Senior Research Economist in the Consumption Sector at the IFS. His work focuses on indirect taxation - including environmental taxes, excise duties and VAT - and other factors affecting consumer choice behaviour and expenditure decisions.

Peter Levell is a Research Economist in the Consumption and Development Sectors at the IFS. He has been a co-author of several IFS publications on environmental taxes, including work for the recent election analysing the parties' environmental proposals.

Business Barometer Survey points to high pressure for businesses

Managing cash flow, Government red tape and lack of lending facilities were highlighted as some of the main challenges faced by today’s businesses in the annual IFA Business Barometer Survey.

The Survey by the Institute of Financial Accountants (IFA), which was released on 24th June at a launch ceremony in London’s BIS Conference Centre, canvassed the opinions of IFA members; we currently have over 10,000 strong members.

Questions focused on the plight of small businesses in post-recession UK. The challenges businesses claim to be facing include:

• Attracting new business/clients;
• Finding and affording good staff;
• Rising taxes;
• HMRC bureaucracy and poor service, online and by telephone, taking up non-chargeable time;
• Competition from companies providing extremely low quotes;
• Finding lenders – banks frequently refuse reasonable lending applications.

George Derbyshire from National Federation of Enterprise Agencies and guest speaker at our recent Business Barometer Launch said:

“There is no question that a thriving small business sector will be central to economic recovery, and the IFA and its members are uniquely well-placed to test the temperature of the sector. The findings of the Barometer Survey provides an agenda not only for the Government, but for all of us who work to support small businesses.”

IFA members were asked what their experience was of the willingness of banks to lend. Only 2.6% said they were ‘very willing’. Whereas almost 37% said they were unwilling and a resounding 25% claimed to be ‘very unwilling’.

I think the general feeling is that banks are too risk averse. They are not flexible and SMEs are finding it almost impossible to obtain credit. When banks do lend, it is always accompanied by strict personal guarantees, excessive charges, bigger deposits, and shorter loan periods.

Peter Ibbetson, Chairman of Small Business Banking at RBS and NatWest, also spoke at the recent launch event and had this to say:

“We are committed to supporting UK businesses and as part of our partnership with IFA we are launching a number of locally based workshops up and down the country. This will ensure we continue to work closely with the Institute and give its members every opportunity to discuss access to finance with our local business managers. It's this  positive approach that has helped the Bank extend £10.4 billion of new facilities and approve over 85% of credit applications to UK businesses in the first quarter of this year." 

There is, however, a strong belief that this situation could change, with 73% of IFA respondents agreeing that more could be done to improve availability of and access to credit.

Small businesses are calling for Government-backed guaranteed lending, National Insurance breaks, matching funds for businesses taking on unemployed people and supplements provided for training.

Phil Orford, Chief Executive of Forum of Private Business commented on the survey:

“Without the ability to maintain a healthy cash flow you don’t have a business at all, alongside rising taxes and the cost of complying with legislation, banks are still reluctant to make affordable credit available to many SMEs and this is a major barrier to their survival and growth.”

However, almost a third of IFA members claimed to be optimistic about the future of business, with 27% believing that ‘things will improve somewhat’ over the next 12 months. Around 26% of members thought there would probably be no change, with just under 25% expecting ‘things to get a little worse’.

As the Financial Management Professional for SMEs and with the finger on the pulse of the financial industry, the IFA is doing everything it can to help its members, most of whom are struggling following the recession.

IFA members and fellows working in SMPs (Small and Medium Practices) are particularly well placed to understand and meet the needs of SME businesses.



David Woodgate is chief executive of the IFA and a barrister by training. Before joining the IFA he was chief executive of the Institute of Administrative Management and held senior management positions in the City with organisations including Royal Bank of Scotland and NatWest.

The FSA: An update

I recently blogged about the future of the Financial Services Authority (FSA) and how the new coalition government would go about reforming quangos.

Last week, George Osborne announced that the FSA will be transformed into a new prudential authority – the Consumer Protection and Markets Authority (CPMA) – and fall under the umbrella of the Bank of England. This new agency will replace the FSA as the new regulator of all financial services firms.

There will also be a Prudential Regulatory Authority (PRA) that will be in charge of prudential regulation of financial firms including banks, building societies and insurance companies.

So, how significant are these changes?

Without a doubt, handing power back to the Bank of England places the City under greater scrutiny. The central regulator will now operate from within the square mile, casting greater illumination upon the practices there.

The FSA is effectively a private company; as a subsidiary of the Bank of England, the new CPMA will be government-owned, and therefore subject to the same treatment as other nationalised institutions. However, staff will still retain the FSA’s pay and pension scheme, and will not benefit from bank pensions.

Chief executive Hector Sants has promised to stay for the duration of the transition, although it remains to be seen whether or not there will be a position for him once the CPMA has been created.

Significantly, the government has handed sizeable power back to the Bank of England. But are the banks in any position to be regulating themselves? Moreover, do they deserve to be? Arguably not, if last year’s banking crisis is anything to go by.

Only time will tell if the change will prove to make the FSA’s power diluted or stronger, or if it is merely a cosmetic change; labelling something old with a new acronym that inherits some, if not all, of the old attributes of the FSA.