40 2GM Thursday January 13 2022 | the times
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Britcoin ‘threat to stability’
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exacerbated during periods of econo-
mic stress as people seek to replace
bank deposits with CBDCs, which may
be perceived as safer,” it said.
It also warned about privacy issues,
saying that to guard against large-scale
criminal activity there would have to be
safeguards against anonymous trans-
actions. That could expose the govern-
ment and the Bank to accusations of
using the new currency as “an instru-
ment of state surveillance”. Also the
centralised digital ledger needed could
become “a target for attack from hostile
states and non-state actors”.
The committee identified some
potential advantages of a “Britcoin”,
such as it being a spur to innovation andcompetition in the payments system.
For example, in theory a digital pound
could be set to be spent by a deadline or
on particular products or services. A
CBDC could help to make cross-border
payments quicker and cheaper. A
pared-back currency available for
financial institutions only might also
address some of the difficulties.
However, Lord Forsyth concluded:
“We took evidence from a variety of
witnesses and none were able to give us
a compelling reason why the UK
needed a CBDC. It seems to present a
lot of risk for very little reward.”
More than 90 central banks are ex-
ploring the potential of CBCDs. Seven
nations, including the Bahamas and Ni-
geria, have launched digital currencies.Behind the story
I
t’s hard to say who
has discomfited the
world’s central
bankers more —
Xi Jinping or Mark
Zuckerberg (Patrick
Hosking writes).
The Chinese president
is charging ahead with
plans for a central bank
digital currency. The
Winter Olympic Games
in Beijing next month are
expected to be used as a
platform to showcase the
People’s Bank of China’s
innovative digital yuan,
accessed through its
eCNY wallet. Meanwhile,the Facebook chief has
raised the spectre of a
private sector digital
currency, or “stablecoin”,
that could challenge the
existing order and change
the way the world thinks
about money. Talk about
Facebook’s “libra”, now
renamed “diem”, has
quietened in recent
months, but the perceived
threat remains.
It was the possibility of
a widely used currency
outside its control that
likely spurred Beijing
into action. Losing
control of the money
supply is unthinkable for
authorities in anycountry, let alone a one-
party state.
Doing nothing makes
other central banks look
complacent, Luddite
dinosaurs about to be
made irrelevant by new
technology. Having lost
control of inflation in
some parts of the world,
the duty to do a good job
of overseeing the world’s
financial plumbing is
even more important.
At least 90 central
banks, including the
Bank of England, are
rushing to explore digital
currencies of various
sorts, most pegged to
their traditionalcurrencies. These are
very different from
privately promoted
cryptocurrencies such as
bitcoin. Yet, as the Lords’
economic affairs
committee points out, the
benefits seem to be
outweighed by potential
risks. It believes everyone
is getting so carried away
with the whizzy
technology that they’ve
forgotten whether there
is a problem to solve.
As for the likes of
Zuckerberg and diem,
the better option may be
to regulate them
rigorously, not try to out-
compete them.A former junior employee at KPMG
accused of fabricating documents
during an inspection of the firm’s audit
of Carillion has cited his position as a
25-year-old unqualified accountant of
minority ethnicity to explain why he
failed to challenge instructions from
more senior colleagues.
Pratik Paw was based at KPMG’s
Birmingham office when he worked on
the audit of Carillion’s financial
accounts for 2016. He is one of six
former KPMG employees, including
the partner responsible for signing off
Carillion’s accounts, accused by the
Financial Reporting Council of con-
spiring to create false documents to
mislead inspectors at the annual spot-
checks of big audits.
A year after the FRC’s inspection of
Junior KPMG employee failed to
challenge Carillion amendments
the audit, the construction outsourcer
collapsed with £7 billion of liabilities,
costing 3,000 staff their jobs and affect-
ing 75,000 people in its supply chain.
The tribunal was shown an email
from Alistair Wright, group senior
manager on the Carillion audit, asking
Paw during the inspection to paste ad-
ditional text into documents created at
the time of the audit using similar for-
matting. The documents were updated
to show minutes of meetings with audi-
tors of Carillion’s overseas subsidiaries
after concerns about the existence of
such minutes were raised by inspectors.
Scott Allen, the barrister defending
Paw, said that the junior employee, in
trying to explain his mindset when he
was involved in amending documents
and without challenging the instruc-
tions, said that he was not yet qualified
as an accountant and had received no
training from KPMG on handling auditquality inspections. Paw was in a junior
position in a “very hierarchical struc-
ture and atmosphere” and “points to his
minority ethnicity within that hier-
archy”, Allen said.
In his defence, Paw, who denies
wrongdoing, has cited “the trust he
placed in his seniors, which is an essen-
tial part of his training in the hierarchy”,
his barrister said. Paw was “very busy”
with work for clients, in addition to
tasks related to the audit quality in-
spection when he was asked to amend
documents urgently.
Allen said that there were examples
where Paw had challenged senior col-
leagues, but explained the context of
why he did not spot the “necessity of a
challenge” the email from Wright.
Paw is due to give evidence at the
tribunal, which began on Monday and
is scheduled to run for five weeks.
Peter Meehan, 60, the partner res-ponsible for the audit, has claimed he
was “let down” by junior colleagues and
could not have been involved in creat-
ing false documents to show records of
minutes because on the afternoon of a
key meeting he was delivering a car to
his brother and was shopping with his
wife, the tribunal heard on Tuesday.
KPMG has claimed that all former
employees who are respondents in the
tribunal had been made aware that
documents provided to the regulator’s
inspectors must be provided “without
addition or alteration”.
Jon Holt, chief executive, said in a
statement on Monday: “I very much
regret that individuals involved in this
case failed to act properly or to call out
the inappropriate behaviour of others,
and I am saddened that some relatively
junior former members of staff are
facing very serious regulatory sanction
at an early point in their careers.”Louisa Clarence-Smith
Chief Business Correspondent
Carillion collapsed after its accounts were audited by KPMG, six of whose former employees are accused of conspiring to create false documents to mislead inspectors
High energy
prices will
be the norm
‘for two years’
Gas prices are likely to stay high for up
to two years, the boss of Britain’s biggest
energy supplier has warned.
Chris O’Shea, chief executive of
Centrica, the owner of British Gas, said
that there was “no reason to think
energy prices will come down any
soon” and there was little that Britain
could do to change this as it was “part of
a global market”.
High wholesale gas rates are threat-
ening to drive up the domestic energy
price cap by a record 50 per cent to
£2,000 a year from April. Prices rose
during 2021 amid a global supply short-
age that has left Europe and Asia com-
peting for scarce cargoes of liquefied
natural gas. They hit all-time highs
before Christmas and are still at about
four times the historical average.
O’Shea told the BBC: “The market
suggests that high prices will be here for
the next eighteen months to two years.”Countries turning off coal-fired power
stations was increasing demand for gas,
but there was not “an abundance... you
can just turn on quickly”, he said, add-
ing that there was little that Britain
could do to alter wholesale prices. “We
bring gas in from the US, from Norway,
from Europe, from Qatar, from other
places ... We are part of a global
market.”
Stephen Fitzpatrick, boss of Ovo,
Britain’s third biggest supplier, told the
BBC that it was “easy to imagine a world
where energy prices stay high for a long
time”, with markets implying only that
“energy prices will come back down
again a little bit in 2023”.
6 EDF has announced a further delay
to its nuclear reactor project in France
as it prepares to install the same design
at power plants in Britain at Hinkley
Point C in Somerset and Sizewell C in
Suffolk. The French group said that
fuel-loading at its Flamanville 3 project
in western France would be done six
months later than previously planned,
adding €300 million to the project’s
cost, which now stands at €12.7 billion.Emily Gosden Energy EditorDANIEL SORABJI/AFP/GETTY IMAGESRishi Sunak must double April’s
3.1 per cent increase in benefits to
protect low-income households from
the “cost of living crunch”, a think
tank has warned. The Institute of
Fiscal Studies said “the poorest are
heading for a 3 per cent cut in their
living standards” as inflation is
likely to stand at 6 per cent by then.