Called to account, or why auditors are less economic than rubber plants
My tax accountant worked out that he was subsidising auditors and rubber plants. He was a partner in a firm whose offices were full of them, so he set up on his own without either, thus cutting his costs and his fees, and has never looked back. His old firm has still to do the arithmetic. It is one of the big four (there used to be five, until Arthur Andersen missed a trick with Enron) who audit almost every major company's accounts, Every so often the crops get rotated but back come the familiar turnips and swedes. Now Hermes and Morley, two of the few firms of investment managers capable of independent thought, say that auditing is a complex monopoly and want the Department of Trade and Industry to open it up to competition. Easier said than done, for who would want it? The work gets heavier and heavier, it scarcely pays, and one error can be fatal, as Andersen found. The big four use it as a loss leader for selling other services, like tax advice. Only the customers can change this: the shareholders, that is. The auditors report to them and not to the directors. Every year they must vote to approve the auditors' appointment and to pay them. In practice, they let it go through on the nod, and watch the accounts become as fat and readable as telephone directories, in response to the code-bound demands of institutional investors who just want more fodder for their box-checkers. Simpler and clearer accounts would serve shareholders better, be more economic and bring the competitors in. Hermes and Morley should ask for them and, while they wait, they should go for the rubber plants.
Stand easy
Tony Blair and Lord Marshall of Ubiquity must have felt as confident as the Italian army advancing towards Nice in 1940. To take us into the euro, they had launched Britain in Europe, with the usual boardroom brasshats in support, and the Financial Times standing ready to publish communiqués, and limitless funding, so what was to stop them? Only some improvised resistance movement called Business for Sterling, conjured up by Rodney Leach, whose day job was to infuse intellectual rigour into the strategic processes of Jardine Matheson. That rigour certainly helped win the skirmishes; the euro's allies have fallen back to regroup, any referendum must be years away. and Business for Sterling is keeping a war-book but has told its campaigners to stand easy. The history of 1940 may not be Mr Blair's strong suit, but it could teach him the danger of betting the farm on what looked like a certainty.
Trust in me
My friend Philip Chappell. the father of personal pensions, worked for Morgan Grenfell until he was asked to move on for speaking his mind and upsetting the clients. So he became director-general of the Association of Investment Trust Companies and spoke his mind some more. Daniel Godfrey, who runs the AITC now, risks upsetting his members as he looks back on their most dismal patch since 1868, when these trusts were invented. Some of these companies made a good thing out of split-capital trusts, which became worthless in dozens. Some are said to have formed daisy-chains, investing in each others' trusts to keep the money flowing. Some are still dragging their feet, refusing even to contribute to the AITC's hardship fund. Mr Godfrey has told them that they should know better, and that investors were deceived. Philip Chappell might have said that the association must set proper standards and enforce them, or move over and let others do it. The word 'trust', so he would have added, should mean what it says.
Going cheep
Canary Wharf is up for sale again. Five years ago, when it was floated, I said that I would just as soon it sank, and those who bought the shares must now agree. As a lethargic auction nears its end, they have still lost a quarter of their money, and we as taxpayers have lost more. Elsewhere in this week's Spectator (on page 37) Damien McCrystal gives us a tour of the project, whose charms have decreased since we learned that tower blocks in financial centres are vulnerable. I doubt whether the banks would have put so many of their eggs in such a basket now. They were lured there by tax breaks, still with us and reckoned to have totted up to £2 billion. On top of that goes the money spent in support of a commercial development which became a pet project of governments. It failed on all three tests of property — location, location and location — so it needed a toy railway, and the most expensive road (in pounds per inch) in Europe, and an upgrade of the toy and an extension of the Tube. Put all that in at £1 billion or more, and add, if you like, the money lost when, not so long ago, Canary Wharf went bust. Its banks took a haircut and its unsecured creditors were left with a mere 15p in the pound. There is still time to tow it out to sea and sink it.
Last post
A smoochy letter from Mark Thomson, the Post Office's director of sales and customer service, tells me that he plans to abolish the day's second delivery. Since, where I live, it has long been extinct, I shall not miss it now, but what he really plans to abolish is the first delivery: 'Customers will receive all their post for the day by around lunchtime.' Customers who leave their homes in the morning and want, as the Duke of Wellington wanted, to do the business of the day in the day can now forget it. Mr Thomson's next letter will not get to me until the day after tomorrow. Don't bother to write, Mark.
Le patron dort ici
The Clerkenwell Road must be going up in the world, if Giles Shepard is involved with the planning and development of a 150bedroom hotel there. He is moving on from the Ritz, which he has run with panache for eight years. On arriving, he slept his way round the bedrooms: 'You'd have had to be an orang-outang to turn the light out. Noone tells you these things.' Le patron dort ici. Through his kindness, I was able to promise favourable rates for readers who were thinking of selling their houses in Wandsworth, repaying their mortgages and moving in. There are times when the deal looks a good one. Book your suite in the Clerkenwell now.
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