PUBLIC AFFAIRS AND MEDIA RELATIONS BLOG - Veena Hudson

UK general election 2010: climate change

The pressure on the mainstream parties in the run up to the UK's 2010 election will be to talk about public spending cuts. Other key issues such as Afghanistan, Europe and the financial crisis are also likely to take centre stage. Climate change, however, may well take a back seat, especially as climate change scepticism is beginning to rise according to Nobel Peace Prize winner, Dr Rajendra Pachauri, chair of the Intergovernmental Panel on Climate Change.

A ConservativeHome survey, for example, showed that 76% of Conservative members believe people's energy bills will be a bigger political issue at the general election than climate change.

All of the top 10 Conservative bloggers either doubt or dismiss the scientific consensus that climate change is caused by human activity, according to a survey of the top Conservative thinkers on the web.

All 10 bloggers, including MPs, MEPS and key Tory thinkers, reject or question the view that climate change is caused by humans, and many disagree with their leader that addressing it should be an urgent policy priority if they win power. The views undermine Conservative Party leader David Cameron's focus on environmental issues and may be a problem for the Party in the run up to the election.

And what of the Labour Party? During its term in office, the Labour Party has introduced the Climate Change Act, the Climate Change Levy which is having a significant impact on energy efficiency in business, and the Renewables Obligation which provides an incentive for investment in renewable energy sources. However, many ask whether they have done enough, and incidents such as the attack by the Energy Secretary, Ed Miliband, on climate change 'saboteurs' may reflect real fear in government that both public and political will to tackle climate change are slipping away.
 
Australia’s recent voting down of climate change laws, and the disappointing end to the Copenhagen summit with its low-ambition outcome, seem to show that this is not just a UK phenomenon.
 
This election represents a real opportunity for all of the UK political parties to adopt strong policies to tackle environmental problems. Whether they will do so, however, remains to be seen.

Narrative reporting – purpose and future

The financial crisis has seen the issue of corporate reporting rise up business and media agendas. Unfortunately, this interest is not reflected within the reports themselves, which can often be lengthy, unwieldy and sometimes indecipherable.

Over recent years, there has been a particular growth in types of voluntary and narrative reporting, and many large companies now produce elaborate, lengthy and detailed annual reports with narrative sections the size and weight of phone books often extending to hundreds of pages.

One of the questions frequently raised but not well answered in considering this growth is the actual usefulness of this surfeit of narrative in annual reports. Who reads it, is the information useful and is it material to fund allocation decisions made by investors? And if not, what are the implications for preparers of annual reports?

ACCA's report Narrative Reporting: Analysts' Perceptions of its Value and Relevance found that analysts are dismissive of anything other than directly value-relevant numerical data. However, the belief that no narrative reporting is capable of informing, amending or challenging a financial forecast is a curious one.

Narrative reporting, which can include such disclosure narratives as, among other things, the chairman's statement, chief executive's review, social and environmental reports, and risk disclosures, refers to contextual and non-financial information reported alongside financial information in order to provide a more thorough understanding of a company's direction, strategic and market positions, performance and future prospects. It therefore contains useful and extremely important information.

However, there are steps that can and should be taken to make the reports more accessible and relevant. These could include:

• the usefulness, relevance and material use of the reports to the investment community should be considered at every point
• narrative reports need to be streamlined to contain the most helpful and pertinent information rather than every scrap of information available
• the reports should be written in plain English so that they are easily understandable to the reader
• XBRL (eXtensible Business Reporting Language) offers a technological means of tagging keywords and data-mining to find relevant information quickly and could be used to reduce the length of some of the reports.

The greatest area of difficulty for companies when producing narrative reports can often be the disclosure of forward-looking information, but this is in some cases the most useful material. Companies should try to include this as much as possible

Good narrative reporting is a means by which companies can achieve effective, transparent and open communication with their shareholders. ACCA feels that this is an important issue and will be contributing to the debate on how to instigate better global narrative reporting practices.

UK general election 2010: health

David Cameron has unveiled the first draft of his party's election manifesto – the section on the NHS.

Saying that he represents 'the party of the NHS', Cameron used the document to set out 20 health policies.

The two key ideas he outlined were a pledge to direct more health spending to poorer areas to tackle the growing gap in life expectancy between the wealthier and less well off, and a new maternity service that would link up local hospitals, doctors, charities, voluntary groups and maternity consultants to share information, expertise and services.

The first of these represents a significant policy change for the Conservatives, whose 2005 manifesto carried the pledge to subsidise those who chose to have their treatment in private hospitals.

The government is also doing its best to woo the health sector – or at least to keep it on-side. Although, according to the Chancellor, from 2011 3.9m public sector workers will have their pay increases capped at 1%, health spending itself will be safe.

The Chancellor used December's Pre-Budget Report to promise that, on public spending after 2011, 'frontline services' including health would rise the same rate as inflation once the NHS's current settlement with the Treasury runs out at the end of 2010-11.

Critics point out that this figure only covers 95% of NHS spending and is far less than the 7% increases that the health service has got used to over the past decade. At the same time, trends show that the NHS will see increasing demand as people live longer. This will mean that an inflation rise will very quickly begin to feel like a cut. Furthermore, the definition of 'frontline' is a nebulous one.

Matching this, Cameron has also pledged that spending on the NHS will at least rise in line with inflation from 2011-14 if the Conservatives win the next election. Admitting that the rise in the health budget would be very small when compared with recent years, he added that spending alone cannot protect the NHS; it will need an intensification of reforms.

The problem a government of either colour will face is how it will pay for these commitments. Recent analysis by the King's Fund and the Institute for Fiscal Studies outlined that a 1% real increase in funding for the next three years for the NHS would mean real cuts of over 12% in all other spending departments. It seems that both parties will need to set out more detail on this issue.

Whichever party forms the government after the next election, it will inherit an NHS facing the toughest financial challenge in its history.

Asia in 2010

As the curtains rise on 2010, all indicators are pointing to a gradual emergence this year from the global financial crisis. But this is far from being a dead cert, and many are keeping a particularly close eye on Asia.

The most sensitive issue is the relationship between the US and China, the two most important countries in the world in terms of political influence. Indeed, 2010 is likely to see China overtake Japan as the world's second-largest economy, and Goldman Sachs is predicting that China's GDP will surpass that of the US by 2027.

The main issue of contention is the weakness of the yuan. Washington views Beijing's refusal to allow the yuan to appreciate as a protectionist policy that is damaging the US recovery. China, on the other hand, knows that allowing the yuan to rise too quickly will make its exports more expensive and threaten its own economic recovery and is refusing to buckle to pressure from the US.

Secondly, an issue which the West may feel threatened by – on 1 January, China and six other south-east Asian countries brought in the biggest free trade area in the world, when the Association of South East Asian Nations, or Asean-6, finally came into existence. With a total of nearly two billion people in Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand, along with China, Asean-6's stated aim is to eliminate tariffs between its members on most traded goods.

Elsewhere in Asia, there are a number of possible events that could cause a sudden depreciation in the region's risk profile. These include uncertainties relating to political succession in Thailand and North Korea. In Thailand, which has bitterly polarised political divisions, King Bhumibol Adulyadej has been in hospital since September. Any worsening of his condition is likely to see a negative reaction in the markets. Many analysts expect instability to get even worse after his reign ends - giving Thai markets another rough ride.

Similarly, in North Korea, where the economy is in dire straits, leader, Kim Jong-il is ill. Having recovered from a stroke and kidney disease, he is now suffering from chronic laryngitis and has to rest every second day. If he does not recover, this could cause serious regional instability, with tremors that will be felt in South Korea, Japan and beyond, especially if his death were to lead to regime change or other unexpected events, which might cause markets to panic.

Asia is the continent to watch in 2010 for a variety of reasons.