ACCA Comments on the Comprehensive Spending Review

Offering an overview of yesterday’s Comprehensive Spending Review (CSR), three of the Association of Chartered Certified Accountants‘ (ACCA) experts offer comment on tax, small business and public sector impacts.

Chas Roy-Chowdhury, head of taxation at ACCA says:

“Aside from the arguments over whether cuts are the right way to go, the most important thing now is that the cuts are done efficiently. If the cuts hinder the functioning of government, then that can only be a bad thing.”

Commenting on tax issues, Chas Roy-Chowdhury says:

“Cutting HMRC’s budget isn’t good news. HMRC is already struggling on its current resources; remember the tax over/underpayment debacle earlier this autumn? The Treasury is placing a lot of store on closing the tax gap and although £900 million pounds more on combating tax evasion and fraud is a way forward, the test will come with how HMRC’s day to day activities can cope with what is effectively a 15% budget cut.”

Speaking about the bank levy, Chas Roy-Chowdhury adds:

“The levy may be appropriate currently, but the UK must stay globally competitive and not drive these businesses offshore. We need to keep our finger on the global pulse taking this forward and keep it under review.”

Gillian Fawcett, ACCA’s head of public sector says:

“Effectiveness, efficiency, and economy will be the key questions to ask about this afternoon’s cuts. Responsible budget cuts aren’t just about slashing arbitrary percentages from budgets, but rather looking at the actual effect those cuts have. If the Spending Review doesn’t seriously address value for money, its credibility will be in trouble.”

“Linked to the value for money issue is the impact of the cuts on fairness. Who will take the most pain: the most well off, or the least well off?”

Manos Schizas, SME Policy Adviser at ACCA says of the SME sector impact:

“Cuts to local government expenditure will have a knock-on effect for SMEs. The central Government procurement market represents about £26.6bn of business for UK SMEs. The Local Government procurement market represents another £34.2bn.”

“At the local government level, SMEs get about 59% of the procurement spend, while at central government level this falls to 16%. This means that, for every £1 of procurement cuts overall, SMEs will lose about 27p. But for every £1 of spending that is centralised, the SME sector could lose even more. Despite the rhetoric, spending cuts inevitably mean centralisation – it’s almost impossible to avoid this – so you can see why I’m worried. If George Osborne can find a way to get more procurement power to the local level, while achieving efficiencies and cost-savings, I’ll be very impressed. But that’s not how things generally work.”

Manos Schizas concludes:

“Cutting or centralising procurement budgets, especially in local government, could put many billions worth of procurement money out of reach of SMEs. This money came with almost no credit risk and was usually paid very quickly, thus improving cashflow conditions from the ground up. No amount of pill-sweeteners can make up for that.”

Gillian Fawcett, head of public sector at ACCA concludes ACCA’s response by saying she is concerned about the scrutiny of these cuts:

“It is vital for Parliament and its Select Committees to scrutinise these cuts after today’s Spending Review to ensure that they’re not detrimental to service provision for the most vulnerable.”

Ms Fawcett also adds that Quangos cuts could be counter-productive:

“Many of the Quangos scrapped by the Government are actually very tiny and their demise won’t make a perceptible impact on the deficit. Besides, rather than saving money, the scrapping of many of the Quangos will end up costing the Government money in the short-term.”

“Work will have to be picked up by other branches of government, so costs won’t disappear, while redundancy and pension payments will ensure that there will be no short-term saving whatsoever. The Audit Commission will cost £300m to wind-up for example; taking into account all the other Quangos that are going, the Government will find themselves facing a hefty bill.”

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