Thursday, 8 September 2016

GOVERNMENT ACCOUNTING IS NOT FIT FOR PURPOSE
Because politicians seem to prefer it that way


Running the country is not what they like doing. They want to be allowed to use pretend money, some of it tax and some borrowed, without thought for tomorrow. It is hoped that that will take care of itself because of “the economy” at least for the immediate electoral period.

The fatal flaw is summed up for the Eurozone and sterling area by an MEP in 2008 who said:

“ The chances of the EU meeting the entirely proper demands of the nine taxpayers alliances are close to zero. On Monday, we heard yet again from the Court of Auditors a catalogue of good intentions wholly unequal to stopping the misplaced flow of billions of euros. The EU has been shifting the deckchairs on this particular Titanic for years. It stays afloat largely because of public indifference to the waste of their taxes. #The concept of “shared management”, which leaves accountability in the hands of recipients of public funds, is not widely understood. Yet it is the cause of the failure of the court to sign off the accounts for the past 14 years. They never will until this is addressed.”

And reported of the IMF in 2016: failure to grasp that currency unions require treasury and political union or are vastly exposed to debt crises.

And for the UK sterling area and its devolution method cf the unforeseen accumulating Scottish deficit (£15bn in 2015-16)

Government adopts cash and borrowing orientation whereas management accounting also reflects and supports the organisation structure in which it is employed. It works with the 500 year old accruals (double entry) basis of transaction date and period without which large organisations cannot delegate/devolve authority while retaining control. Setting budgets from committed plans is part of that. Such a  financial system is not complete without a constantly updated scoreboard  reflecting upward reporting for re-direction and plan updating.

In what way do governments think they can manage otherwise ? Where is the relationship, contractual/constitutional and operational difference between any central government or currency zone and an international multi-product conglomerate ? Governments round Europe are beginning to come round to this but this issue of public finance management is seldom met in media and public discourse. All the learned political economics concentrates on “the economy” and esoteric questions of money printing and quantitive easing, both of which have bad side effects.

And "One of our interviewees (of Anthony King and Ivor Crewe in 2013-14 The Blunders of our governments p309), after a long and wide-ranging discussion, said there was one important issue we had not raised. "what was that?" we asked. "The Treasury", he replied. He blamed the Treasury for almost all of Britain's ills dating back over many decades and wondered aloud why an organisation that had presided for so long over such a poor economic performance was still held in such high esteem. The short answer may be that, at least within Whitehall it is less esteemed than feared." 


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