The GAAPweb blog

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…

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.

The future of the FSA

The future of the Financial Services Authority (FSA) has been hanging in the balance ever since the Conservatives announced plans to scrap the financial regulator last year.

But under our new coalition government, these plans have been put on the backburner. So where does the FSA’s future lie?

The FSA has built its reputation on raising standards, setting benchmarks and clamping down on malpractices within the industry. For over a decade the FSA has prided itself on its accountability and transparency.

Currently, the new government’s key agenda is also concerned with transparency, particularly when it comes to expenses, salaries and spending.

Consequently, and in line with the Freedom of Information Act, the FSA has been making headlines with its own finances.

It has been revealed that at least 200 members of FSA staff earn between £100,000 and £199,999 a year, and 15 take home upwards of £200,000 – compared to the more modest salary of Prime Minister David Cameron’s £142,500. However, we are talking about comparing private and public sector wages. It’s no great surprise that they differ greatly.

In addition, £16 million was spent last year on consultants (mainly the Big 4), and despite under-spending its 2009 budget, this year’s budget has been increased by 10% to £454.7 million.

On the surface, this is a vast budget. However, the FSA is the solitary regulatory body for the entire financial services sector. To think that it requires anything less than significant funding would be naïve.

According to its website, “The FSA is a private company limited by guarantee, and funded by fees paid by those it regulates.” Just to reiterate that point: the FSA is a private company. It is an non-governmental body – a quango – that is paid by those it regulates to add accountability. I would suggest that as a private business, the FSA are undeniably successful (just look again at those enviable salaries and budgets).

The FSA are not government. They have always been a transparent organisation. And as long as the FSA remains a private organisation, the salaries and budgets will stay high.

Last year’s banking crisis proves that the financial service sector is in no position to self-regulate, so clearly the FSA will be around for some time yet.

It will be interesting to see how Cameron, Clegg et al approach reforming quangos, and how the FSA will be affected, if at all.

Applying for a job on GAAPweb? It just got easier…

I’m not going to lie, most days it feel pretty good to be a part of a well-respected brand like GAAPweb. We have been operating for twelve years, and in that time we’ve gone from strength to strength: steadily expanding on our loyal candidate base; consistently generating visits from an experienced, qualified audience (of whom over sixty per-cent hold a professional qualification); and recently settling into our new home in Canary Wharf.

This kind of success can occasionally lead to complacency, so it’s a good thing that we’re not sitting back on our laurels.

Last month we released market-leading integration technology that facilitates a whole new kind of application process.

If you’re an accounting or finance professional looking to apply for a job you found on GAAPweb, you will now be given the opportunity to apply using your LinkedIn profile.

For those of you who might not be au fait with social networking, LinkedIn is the world’s largest business networking site, with 65 million members and a new person joining every second. You can create a ‘profile’: a kind of professional online CV that allows you to list your qualifications and experience, link to your professional website and blog, display recommendations from colleagues, and show how well-connected you are within your industry.

So, the next time you apply for a job on GAAPweb, you will be prompted to use our new ‘dynamic job application’ feature. You will simply need to enter your LinkedIn login details and GAAPweb will securely access your profile. This information will automatically be compiled into a CV and attached to your application.

This saves you time from uploading one or multiple Word document attachments of your CV, and also means that you don’t have to mess around with formatting.

It most certainly feels good to be leading the pack; no other jobsite offers this kind of functionality. But don’t worry, we’re not becoming complacent – the team are always looking at new ways to enhance your experience. If you’ve already had a go at using our LinkedIn feature, let us know what you think by leaving your comments below.

The Budget 2010: The devil’s in the detail

Everyone, it seems, has an opinion on the ‘old’ New Labour’s plans to tighten the UK’s purse strings in this year's Budget. Were they tough enough? Have all the deficits been covered, or have new ones been created?

Here are the key points of interest:

• First-time home buyers will no longer have to pay stamp duty on properties up to the value of £250,000 in 2010-2011.
• Fuel duty up by 3p – staggered between April 2010 and January 2011.
• Cider duty is to rise 10% above inflation.
• Alcohol and tobacco duties to rise by roughly 2% year on year.
• Capital Gains Tax to remain at 18%.
• Everyone in the UK will be guaranteed access to a basic bank account.
• State-subsidised banks to provide a £2.5 billion package for small businesses to boost skills and innovation.
• Civil servants will be relocated away from London to save expensive city costs.
• The budget deficit for the 2009-2010 financial year is £11 billion less than originally forecast.
• The economy contracted 6% during the recession.
• The government is investigating scrapping the retirement age.

The stamp duty issue is definitely the headliner. In theory, the deficit will be paid for by a 5% stamp duty increase on properties worth more than £1 million. However, is this enough to plug that hole? It has been suggested not.

Scrapping stamp duty for first-time buyers is estimated to cost the Treasury £230 million in 2010-2011 and £290 million in 2011-2012. Increasing the rate on £1 million plus properties will raise an estimated £90 million in 2010-2011 and £70 million in 2011-2012. Despite these figures not adding up, at least it will get the housing market moving again, rejuvenating other areas of the economy.

Already dubbed by the media as the ‘Robin Hood Budget’, is it really ethical to transfer wealth from the rich to the poor, or should Mr Darling have made the banks assume greater accountability for their role in the state of the economy?

Certainly, by forcing banks to lend to small businesses and offer basic bank accounts to everyone, the government is asserting its authority.

All of the measures outlined show that the government has a very clear agenda on the redistribution of wealth. But are these measures too broad? Are deficits really being tackled head-on?

As a financial professional, are you disappointed by the lack of detail on deficit, or do you think the Budget breathes much-needed life into the economy? Leave your comments below.

Didn't get a chance to catch the speech in full? Have a look at my Wordle below.


Source: HM Treasury

So, you want to work for a ‘Superbrand’

Companies that carry the titles Big 4, blue chip, FTSE or more recently ‘Superbrand’; aren’t these just different words for the same thing?

And how are such labels acquired? Scale? Delivery? World domination? Or is it just simply a measurement of annual turnover and profit?

The exact criteria remain a bit of an enigma. The Business Superbrands survey defines a ‘Superbrand’ as follows:

“A Business Superbrand has established the finest reputation in its field. It offers customers significant emotional and/or tangible advantages over its competitors, which customers want and recognise.”

With the ranking of PricewaterhouseCoopers (PwC) as one of 2010’s top ten Business Superbrands last month (in addition to its Big 4 status), what does it actually mean to work for such a company?

The most obvious (but still valid) answer is the weight it adds to your CV. Prestigious companies attract fierce competition, so if you manage to get offered a job, you’re likely to be the top of the candidate pack.

However, don’t miss out on smaller businesses just because they don’t pack the same ‘celebrity’ punch. There are plenty of opportunities at smaller accountancy firms and SMEs. You’re likely to encounter a greater variety of work and the opportunity to get to know people rather than masses of faceless names and email addresses.

Equally, you can dip a toe into other facets of business by working as an accountant for a company rather than a practice. Read about more career options on the GAAPweb blog.

Whether or not you decide to actively pursue a career with a prestigious company, you should always keep your options open. After all, a ‘Superbrand’ organisation is only as good as its employees.

Predicting our financial future

There’s no denying it: 2009 has been a difficult year for finance and accounting professionals.

This year, we’ve watched the banking crisis unfold on a global scale. Nowhere has remained immune; even Dubai has had to curb the spending of its monopoly money. But as countries including Germany, France, China and even the US start to show strong signs of recovery, it’s only natural for us to wonder: is it the UK’s turn next?

Another common theme this year has been the UK’s changeable financial forecast. We’ve heard varying stories about the state of business, employment and housing markets and whether or not we’re bouncing back to economic health or plummeting further into debt.

On a local level, CFOs everywhere are making predictions for what 2010 holds for their company. If anything, I think this year has taught us to expect the unexpected. I’d hazard a guess that the term ‘cautious optimism’ is flying around boardrooms everywhere.

Most of us are putting our faith in the latest industry news, with positive predictions for both accountancy graduates and Financial Directors.

As a very wise man once said (and I’ll take the liberty to paraphrase), it’s probably not the beginning of the end of the UK’s financial rollercoaster ride, merely the end of the beginning. At least we’re all better prepared for what next year will bring.

January is a great opportunity to start afresh and bring your ideas to a new role. From all of us here at GAAPweb, we’d like to wish everyone a Merry Christmas and a prosperous New Year.

Has the ex-pat dream dissolved?

Leaving your home country for a job opportunity abroad is not a decision to be made lightly. Will the job and the company be all that you expect? What about the people and the place? If, however, you’ve been offered a position in a country perceived as one of the most prosperous in the world, it softens the decision-making process somewhat.

Over the past decade, Dubai has established itself as the crowning jewel in the Middle East’s crown, with some of the most opulent property developments and exciting job opportunities going.

However, this past week Dubai’s debt problems were made public as its shares plunged in the FTSE 100, highlighting the fragility of its once stable finances.

Most significantly, construction company Dubai World has accrued debts to the tune of £36 billion and is having to be rescued by Deloitte.

Dubai World – the company behind the manmade islands Palm Jumeirah and ‘The World’ – is state-owned, although the government is currently trying to distance itself from the company’s debts.

Apart from causing shockwaves around global financial markets, I can’t help but think about those British ex-pats out there at the moment. Is the bubble really bursting? Is a one-way trip back to the UK on the cards? The phrase ‘job security’ has always been a bit of a paradox during a recession, but it’s only really now that Dubai ex-pats are beginning to feel their collars tighten and their ‘secure’ positions slipping away.

The embers of this recession have settled far and wide, and anyone who thinks that their country is recession-proof or if this downturn hasn’t been global, is truly mistaken.

If you are considering accepting a role abroad, remember to exercise due diligence. No job is secure; the last thing you want is to arrive in a new country only to find that your job, or worse, the company is no longer there.

Pay now, avoid debt later

Personal debt. National debt. Upcoming ghost-of-Christmas-future debt. Gen Y is almost completely unfamiliar to the concept of a debt-free society, and I’m pretty sure this will perpetrate for generations to come unless something drastically changes.

Everyone seems to have an opinion on who got us here and who’s responsible for getting us out. The latest establishment offering their (somewhat more than) two-cents’ worth is the National Institute for Economic and Social Research (NIESR), whose recent report predicted that income tax might have to be increased by 7p if the UK’s economy is to stand a chance at full revival.

The report stated: “The UK faces a structural budget deficit of 6 per cent of GDP. The build-up of government debt, which may reach 93 per cent of GDP by 2015, will leave a burden for our descendants.”

A rise in income tax has never been a particularly popular option historically (particularly around election time), and it’s unlikely to be now. Nobody likes the thought of more money deducted from their payslip each month without any tangible proof of where it’s going.

Even the BBC’s highest earners are setting up their own companies to avoid paying hefty taxes on their burgeoning salaries as they take on ‘freelance engagements’. I’m not condoning this, but I do think it’s representative of the general public’s view towards income tax: if there’s a legal way we can pay less of it, we’ll take it.

So putting income tax up? Yes, it might help to alleviate national debt and result in fewer years of suffering for future generations. Will it be popular now? Er, no.

Banks on board … but is it a bonus?

The decidedly chillier onslaught of October brings with it the somewhat warmer news that, at last, five of the UK’s largest banks are setting the standard by agreeing to rein in excessive bonus payouts.

Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered have signed up to the proposals, following pressure from Chancellor Alistair Darling and suggested reforms at the G20 meeting in Pittsburgh.

The Financial Services Authority (FSA) has been keen on remuneration reforms for some time, but with five key banks on board, surely it’s only a matter of time before the others follow suit. I’m just not holding my breath that any of this will happen before Christmas.

Neither, it seems, are bankers, who are monumentally unconcerned that it will affect this year’s payouts, but who agreed that pay needed to come down. Opinion in the city is still divided as to whether these reforms will have any real impact.

Unsurprisingly, the Treasury is yet to persuade Goldman Sachs and JP Morgan to cap bonuses. And since the FSA’s planned code of practice for January 2010 is not compulsory, it could still be quite some time before we see a balanced and unified bonus culture on a national, let alone a global scale. The only logical way forward from here is compulsory legislation that holds all banks and other financial institutions to accountability.

It’s impossible to say whether or not financial stability really can be achieved through these measures. However, with the backing of the banks and cooperation from financial institutions at all levels, it’s one more step in the right direction … or at least it will be from 2010.

Don’t let any of this put you off pursuing a financial career; you’re still like to earn a healthy living, just without the wild compensation that was once available.