The Inventor Of Country By Country Reporting Denies It

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This is almost three times before the cock crows stuff. Richard Murphy is, as he’ll insist to anyone who stands still long enough to be told, the inventor of country by country reporting. This is the idea that we should not consider a company to be the one single group. Instead we must pick it apart and look at each of the individual pieces separately. This is the only way for us to be able to work out what is actually happening. Consolidated accounts just aren’t enough he insists. We need the details of each and every part and piece.

This then runs into a problem with another one of Richard Murphy’s fixations. Which is that the quantitative easing holding of gilts by the Bank of England isn’t really debt. Government issues the gilts, the BoE buys them, the BoE is owned by the government, that’s not debt. Because we must consolidate in order to gain the true picture.

You are correct, this is not clear thinking. Indeed some might call it entirely contradictory, even the believing in two opposite things before breakfast. But it is what is believed.

Here he is on the gilts:

The UK government’s own accounts show that QE cancels government debt

Down in the comments some start to mutter than perhaps these details of who and what matter.

Andrew says:
July 22 2020 at 9:45 am
Presumably the Whole of Government Accounts are consolidated, so there is a setting off and stripping out of debts owed and receivables due within the group, rather than just adding them up line by line?

The QE debt exists in formal legal sense – the “parent” (the state) has issued a debt instrument representing a liability, and that debt instrument is held as an asset by its “subsidiary” (the QE company owned by the Bank of England, which is owned by the state). I expect the sole company accounts of the subsidiary shows it holding gilts as an asset, for example. And “sole company” accounts for the “parent” would show it owing a liability, but also holding an asset in the form of its interest in its subsidiaries. Both the asset and the liability disappear on consolidation, but it doesn’t mean they don’t exist. Unless you think wholly owned subsidiaries also don’t exist as separate legal entities.

It all becomes a bit circular when you consider who gave the subsidiary the funds it needed to acquire its asset …

Reply
Richard Murphy says:
July 22 2020 at 11:05 am
Actually, the reason why we do consolidated accounts is precisely because we did not think subsidiaries have substance, they are merely form

And the substance is the debt does not exist

I am not interested in legal form: I am only interested in substance and the debt ha been cancelled

And yet country by country reporting insists upon undoing the consolidation and considering form not substance.

Trevor says:
July 22 2020 at 11:41 am
Richard,

Definitions are important here and explain some of the confusion. General government is a combination of central and local government but excludes public corporations most importantly the Bank of England. Whole of government is general government plus public corporations

It is logical that central government debt would be lower than general government debt. In a time of huge QE it is also logical that general government debt would be higher than whole of government debt (which would consolidate out the debt owned by the BoE).

The accounts have been written very sloppily. Lack of consistency of one debt measure or appropriate explanation of the differences. But 1.70 which refers to general government debt does not contradict 1.66 which refers to central government debt. And neither directly contradict any whole of government debt measure.

Reply
Richard Murphy says:
July 22 2020 at 11:57 am
In accounting terms there is one figure – and that is for the entity being reported on

This is not just bad accounting in that case, it’s wrong

No economic logic can overcome that

I’d call it false accounting – and utterly unacceptable

Is it possible that he’ll deny his own invented accounting three times before the cock crows?

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Amusing, but I’m not convinced that the fact that Murphy does holistic analysis of one issue obliges him to do holistic analysis of all other issues or he is a betrayer.