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I manage CIPFA Finance Advisory Networks and I am a very experienced accountant,manager, facilitator, trainer and presenter with a very wide experience of local authority and not for profit finance, accounting,management and leadership.

Sunday 29 May 2011

Intervention -- Can it be justified?

The arrest of Ratko Mladic takes eveyone back to some of the darkest parts of late 20th century European history and the Balkan wars of the 1990's. In July 1995 in the town of Srebrenica, some 8,500 muslims were massacred by Bosnian Serb forces under the noses of a United Nations peacekeeping force of some 700 Dutch marines and a lack of action and will by the West European governments including Britain and France. The pangs of guilt at this inaction have echoes in today's approaches to intervention in Libya.
 
Srebrenica - Could we have done more?

When the residents of Misrata were threatened with death by Colonel Gadaffi's forces,there were fears on the Western side that a lack of intervention in the Libyan conflict could have lead to massacres on the same scale as Srebrenica in the past. This explains the intervention in Libya but the prospects for success here are problematical and we could be in for a very long haul. When might such an intervention justified?

It must be emphasisied that although there is a general abhorrence of war,in some cases it can be justifed on the following grounds, rooted in the teachings of the catholic theologian St.Thomas Aquinas and also in the work of muslim scholars.

The Catechism of the Catholic Church, in paragraph 2309, lists four strict conditions for "legitimate defense by military force":
  • the damage inflicted by the aggressor on the nation or community of nations must be lasting, grave, and certain;
  • all other means of putting an end to it must have been shown to be impractical or ineffective;
  • there must be serious prospects of success;
  • the use of arms must not produce evils and disorders graver than the evil to be eliminated. The power as well as the precision of modern means of destruction weighs very heavily in evaluating this condition.
Interestingly, these guidelines do not specifically mention civil war which we do have in Libya, however they do provide a very useful guideline to this position. In the case of Libya I am not sure that all these tests were properly assessed by the West but the echoes of Srebrenica probably dictated the course of events.If there is intervention in Libya, then why not in Syria,whose people in may ways are suffering much more than the Libyan rebels? Presumably the Western powers have decided that the prospects of a successful intervention in Libya are greater than in Syria. Therefore, a particular intervention in a specific situation might be justified on several grounds but may be abandoned on the grounds that the prospects of a morally good intervention being successful are too remote to carry it out. Therefore we can only do good if we think we can pull it off? In the final analysis this is more of a pragmatic approach rather than an ethical one. Perhaps we can only intervene when we have a good chance of making a difference.

We were in a position to make a diference in Srebrenica,less so in Syria. Where might this lead in terms of other "just" interventions in the future?




Thursday 26 May 2011

Squeezing the Middle -- When might it end?



Not keeping up with the Jones's
The Independent Resolution foundation has just published a report which argues that millions of low to middle income earners will face years of declining living standards even when the economy does eventually pick up in 3 to 5 years time. Certain jobs it argues, which were skilled before, will be replaced by advancing technology and that will cause problems for future employability. Times are tough, but not for everyone, higher earners appear to be taking a larger share for themselves even as the economy bounces along the bottom in terms of growth.

In future years,social policy will not only need to tackle the problems of the poorest but also the problems of those who although not considering themselves as poor, have been dragged into higher tax rates which were originally destined for the very richest in society. It is all about that magic word incentives -- what incentives will the squeezed middle have in the years to come -- they probably will not be linked to monetary gain and the other incentives,apart from cash,will become a bit wearing after a while..

The other issue apart from incentives is one of aspiration,people thinking they should be somewhere better or different than where they currently are. Will the diminishing ability of people to achieve their sought after places in society cause future political problems? The demonstrations in Spain, where youth unemployment is circa 40% are a testament to what might happen in the future, if young people are not given a chance to shine.

We need to find a way of ensuring that a greater element of society will be able to share in the gain of increasing prosperity - though there won't be too much of that in the years to come.

A guide to their report can be found at:

http://www.resolutionfoundation.org/publications/squeezed-britain-low-middle-earners-audit-2010/

everyone always wants their children to do better than they have done in society. For future years this may not be the case, perhaps some aspirations will need to be abandoned?

Monday 23 May 2011

The Big Society - What is it?


The Big Society- Does he get it?

The Tories in opposition and also now in government have had the Big Society as a main plank of their social and economic policy. Citizens will participate fully in society by contributing their time and effort for free to run services and help each other.In a recent speech David Cameron stated that this is not "add on" but a central part of what the government wishes to achieve. HM Treasury's Green book on option\project appraisal will be revised to include the "social value" of projects as well as their economic return. Quite how "social value" will be measured is still a bit unclear, I remember from my university days examining cost benefit analysis of large public sector schemes,the analysis was far from value free and it really did depend on how you defined and measured costs and benefits to determine whether a project was socially justifiable. I suspect the same will apply here. Having strong and socially responsible communities is extremely desirable,but realistically,in the light of the most severe public spending cuts since the end of WW2, how easy will that be to achieve? Many third sector organisations depend, to a large degree,on public sector funding,therefore it is difficult to estimate how many of them or indeed how many professionals, will take over local services under the localism agenda. There is a danger that under the open public services agenda large non local organisations will take over these services with little local responsibility unless such moves are restricted by any forthcoming legislation.

I am a person who has done his fair share of charity work and know how rewarding it can be, but it also takes up a lot of time as well. Social enterprise is part of the solution,businesses that are run at a profit offering the community valuable products and services,however the profit motive is not the overriding factor;social objectives of the business are equally important e.g. re-investing in the business itself and the local area and community,providing the community with employment, providing employment to socially marginalised and disadvantaged groups.these are also important as well.

Philip Blond in his book "Red Tory" envisaged a society where local\regional firms and institutions were strong and non-speculative community banks supported local industries\firms. Society would not be dominated by large monopolistic firms and institutions which would stifle local initiatives -- I haven't heard these ideas being considered in the Tories" vision of the Big Society. There is much more to the notion of the Big Society than we constantly hear being debated in the media. We need to take a wider view of what it does mean.

Friday 20 May 2011

Cutting Services -- Legally and Safely?

Careful before you cut?
A public authority should always remember that if it cuts its services then real people will in some way suffer from those decisions, in a significant number of ways. Finance officers sometimes only focus on the financial cuts targets they have to meet, not the human factor in the equation. Often the following questions should be asked; Does the cut in services need to be made? Who might be most affected by the cut? Has the cut been decided in a fair, rational and transparent way? Has the impact on society,especially the weakest, been mitigated as far as possible? What other alternatives have been considered to achieve the cuts target and why have they been discounted? Will this approach be equitable; that is not discriminating for or against different groups within society?

Difficult decisions need to be made but cuts are often reduced to a pure technical exercise,this is wholly wrong in my view. Birmingham City Council has recently changed its eligibility criteria for social care funding to only those who have "critical" needs, the previous policy was based on those with "substantial" needs. A recent court judgement has found Birmingham's approach to be illegal in this instance. The Council was judged not to have properly consulted on the changes with the wider community, nor did it adequately examine the impact of these changes on the weakest in society.



The lesson for us all is that even in difficult economic times we should not lose sight of examining the consequences of our actions in terms of budget reductions.

Tuesday 17 May 2011

Outsourcing Public Services -- The Answer to Our Economic ills?

The temptation to outsource servces in a recession is huge with potential savings from lower unit costs offering a huge incentive to policy makerts who need to make significant revenue savings. Whether it is computing,finance,grass cutting or waste disposal the lure of outsourcing will be difficult to resist.

What can we outsource?
Public services have had a variable press; some are very good but expensive to run whilst others offer poor customer quality and are also not as cheap to deliver as they should be. The public sector is not blameless because it has often failed to innovate in its service delivery and has frequently appeared remote from its service users. Standardised services which are not sensitive to individual need have often been delivered with little thought of the consequences for users,whose needs are not fully met.

There are exceptions to this, personal budgets in social care and the whole agenda of personalisation is a move in the right direction, where individual social care needs are more likely to be catered for. Pooled budgets in health and social care can combine the funding of different service streams to offer a better rounded public service offering to users.

The private sector can assist in this process as long as the profit  motive does not become a too dominant factor in the public service delivery equation.Outsourcing probably needs to be replaced by collaborative relationships with the private sector to jointly develop public services. The latter is a real challenge because the cautious culture of the public sector has made it difficult for public services to innovate without an external stimulus. My own experience of outsourcing has been that the private sector partner kept sending us variation orders for work we allegedly had not specified the contractor to carry out. The latter was not much fun and that picky outsourcing culture should be left behind in favour of greater collaboration.

But will it work? In these straitened times the public sector really has limited alternatives to this approach. 

Saturday 14 May 2011

Fiscal Rules -- Do they work?


Did they break the fiscal rules?

Given the severe financial pressures that many countries face including our own, there is a pressure on economies to adhere to self imposed fiscal rules. Examples of these include trying to ensure that the national budget deficit does not exceed a given percentage of a country's annual GDP or a country tries to balance its budget over a period of five years ( the approximate life of a UK parliament). These rules are usually self imposed but governments find it very difficult to stick to them. In the last Labour Government Gordon Brown instituted a "Golden Rule" where he would only borrow to invest over the life of an economic cycle. This rule was also broken when push came to shove.

In Europe,economies running deficits larger than 3% of GDP were supposed to trim their structural deficits by 0.5% of GDP per year or face fines from the European Commission, but this has never happened yet and indeed the lack of any such enforcement has probably contributed to the debt crisis Europe now faces. So is there any point having these rules if they are going to be broken?

According to an IMF study quoted in the Economist there appears to be a point to these rules:

"An IMF analysis in 2009 of 24 large fiscal adjustments since 1980 found that it helped to have formal budgetary constraints. Economies that already had rules in place slashed debt levels by nearly 30% of GDP on average. Countries that adopted new rules as part of their adjustment cut debt by 39% of GDP. Those with no rules at all managed a reduction of only 20% of GDP."

So even if fiscal rules were sometimes broken it was,on balance, better to have them, in terms of trying to reduce debt than not having any rules at all. Perhaps we do need to try and make rules more flexible in dealing with world shocks like the Japanese Tsunami -- but not having them at all appears to be worse.

Fiscal discipline, determined by internal criteria,however imperfect, at least acts as some sort of bulwark against accelerating national debt levels.

They are certainly here to stay at least for the foreseeable future.

http://www.economist.com/node/18679299?story_id=18679299

Friday 13 May 2011

Achieving Revenue Targets in a Recession


Can we still hit our targets in a recession?

In times of recession income targets for businesses become much more difficultt to achieve, markets shrink,price competition is fiercer and forecasting of revenues and profits becomes more challenging. Past trends are no longer a reliable guide to the future as new and unheard of challenges become more visible. What do we do? Play the optimistic card and think that everything will be alright? or do we go for a doomsday scenario of making excessive expenditure cuts and losing the day? The answer is somewhere in between. Yes we do have to take a realistic view of revenues and adjust our cost base accordingly, that is the first part of the process, however the second part of the process involves looking for new revenue streams,providing products and services that people desire at the prices they want to pay. This latter process involves us looking for new ways of delivering products and services to newer markets. Perhaps moving outside our traditional market base and looking more internationally as well. Stage 1 may well be the pessimistic phase of cost and revenue adjustment but stage 2 is the more optimistic stage of revenue growth and advancement. It may well be challenging and difficult but stage 2 is the way we can claw back some of the pessimism that we encountered in stage 1. 

Are we ready for the challenge?

Tuesday 10 May 2011

Adult Social Care -- A Policy Time Bomb for the UK Public Sector

Bridging the generation gap?
In terms of looking after our old people. Adult social care will become a hugely significant public policy issue in the coming years for the UK. In 1971, nearly 7.5m people were aged 65 and over with over 1.25m people being aged 80 or over. Our population in 1971 was 56m. In 2031 it is predicted that there will be 15.25m people over 65 and 5m people over 80. how will these people be looked after? With old age there is a more significant incidence of poor health and other conditions like dementia which become more prevalent. UK Directors of social services have estimated that care for those living at home with critical needs would cost around £1.4bn annually. In the past decade spending on care services for those over 65 has risen to £9.1bn per year. People will need to fund more of their own social care as they age; will they need to sell their homes? or will they need to pay a tax on the final value of their estates? All these issues are up for consideration. Adult social care finance professionals seem to recognise these financial challenges whilst corporate finance professionals in local government much less so. It probably is not such a sexy topic as other local services.

CIPFA is organising a conference in Leeds on the 20th and 21st of July examining the perspectives on social care both for adults and children. It will cover both costing and funding approaches to what can be achieved.


As a motivational speaker, Simon Weston OBE, the Falklands veteran will be speaking on how to overcome adversity.


We do hope that you can make this conference as it will give you a real insight into the soical care agenda.

Sunday 8 May 2011

The Consequences of the May 2011 UK Local Elections and AV referendum

Nick Clegg - Not a good week for him
The poor local electoral results for the Liberal Democrats underpin the view that they are like a "human shield" for the policies of the coalition government. The Tories have escaped relatively unscathed in electoral terms from this process. The coalition was never going to be an easy ride for anyone but the liberal democrats seem to be suffering the most. Everyone expected the Tories to make cuts and now the liberal democrats are being perceived to be their partners in crime. Labour are not blameless, as they were significantly responsible for setting the economic context of the huge policy challenges the country now faces.All political parties would have had to go down the cuts road, the question is how quickly they would travel towards their destination of eliminating the budget deficit. Any cuts which will need to be implemented will have to be well thought out and not be directed against the weakest in society. There is also the point that by protecting the weakest in society those on just above average earnings should not pay a disproportionate price for protecting the weakest. Sadly the middle does appear to be being squeezed too much and this will not provide adequate incentives for society to get out of this recession.

In terms of changes to the electoral system, they are necessary as governments are frequently elected by less than 50% of those voting, however, AV is not the way forward in this particular instance as it is not that much better than the present first past the post system we now have. Thus it was comprehensively rejected by the referendum.

Where might labour figure in the future? Perhaps the new "Blue Labour" movement, which in some ways pays homage to the Big Society, could be a way forward.

Friday 6 May 2011

The Rule of Law

Is anyone beyond the law? The killing of Osama Bin Laden will be seen by many as an act of justifiable revenge. However does it reflect our society's approach to the rule of law. No matter what someone has done should they be allowed a trial? Is that not a part of natural justice for any person in our society?

There are many terrible people in the world but should they be denied a fair trial just because of what they have done? I think on balance no. If we succumb to this culture of assassination then will it be right for us to target anyone just because we do not share their views or because they have done evil deeds.

I do share the Archbishop of Canterbury's views on this that there should be unease at what happened.

We need to be a beacon to the world and set an example to those societies which are not as free as our own. This is difficult but in my view, in the long run.the most effective approach.

http://www.guardian.co.uk/world/2011/may/06/osama-bin-laden-al-qaida-revenge

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