Do consultations improve the knowledge of Government

Posted on July 26, 2018 by Jeremy Frost

I must admit that my experience in dealing with Government inspired tenders and consultation documents is not positive and like many a film I try to establish the underlying story.

The latest consultation on Strengthening Corporate Governance in Pre-Insolvency Situations is a very dry document; yes, I have read it all and would suggest it to be mistitled. What it should be is “How do we Reduce the Government Contributions to Pension Deficits without Investing any more in Enforcement and Investigation?”

Many of the questions are very difficult to answer constructively and, I would suggest show a rather misguided, if not ignorant view of the world. Even in the light of the recent Carillion case it ignores the fundamentals. Businesses in financial difficulties have few transferable assets and the risk associated with becoming involved leads to high costs, a position deemed reasonable by the courts.

Rant over. There are some parts of the consultation which, if worked on might provide some value. Investigation into Directors of dissolved companies is a great idea. HMRC already have access to the information necessary to allow the miscreants to be brought to account.

But what about employees who have no entitlements to the redundancy funds in these situations? I can’t see why that should not be addressed.

The concept that we must encourage our pension fund managers to look at long term investments seems quite bizarre. Shouldn’t they be doing this already? Would it not be better to encourage some form of Professional Qualification that dealt with all elements of best practice, not just those that benefitted the Government coffers?

I have one final point, only really acknowledged in passing; that being the balance between Entrepreneurship, conflicts of interest and the value placed on capital.

Every time you add layers of regulation the costs of compliance increase, stifle Entrepreneurship and make conflicts of interest more difficult to manage. The value placed on capital also diminishes. Perhaps because those drafting the consultation have so little knowledge of the three key areas, they don’t value Entrepreneurship and capital and spend their whole time trying to find conflicts of interest.

Whilst we continue to underplay the value of third party capital and overplay the value of Government we are damaging the role of business and its ability to generate the value we need and pay the taxes we all rely on.