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Ernst & Young faces legal action over Lehman's collapse

Accounting giant being sued for allegedly falsifying the books of doomed investment bank Lehman Brot

Accounting firm Ernst & Young could face legal action for allegedly falsifying the books of investment bank Lehman Brothers, beforethe latter's collapse.

New York attorney general Andrew Cuomo is reportedly preparing to sue the auditor this week for "window dressing" the company's accounts, concealing its ill health.

Analysts say the case would set a precedent for initiating legal proceedings against a prominent accounting group over its role in the financial crisis of 2008.

The attorney general's office has been looking into the part that Ernst & Young played in Lehman's acquisition of repurchase agreements to beef up the bank's accounts.

This follows a report into Lehman's bankruptcy, issued nine months ago, which was severely critical of Ernst & Young. According to the report, the auditor did not contest the "materially misleading" reports filed by the management.

The civil lawsuit is a part of bigger enquiry into whether banking institutions deceived investors by using accounting tactics to temporarily cover up the large amounts of debt in their accounts.

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.