Having published the Whole of Government Accounts for the first time last year, George Osborne should be bold and refer to these figures in his Budget rather than the traditional numbers from the National Accounts
Speculation about the content of next week’s Budget is reaching fever pitch. Money may be in short supply, but helpful advice to Chancellor George Osborne has never been more in fashion.
As the mid-term of this Parliament approaches, the consensus seems to be that the coalition government’s fortunes are approaching a key test. A well received Budget may enable it to move forward very positively, perhaps creating a platform for one or both partners to prosper in the next General Election. A botched performance, on the other hand, may signal a decisive shift of momentum to the Opposition.
Many of the headlines are likely to focus on the measures the Chancellor announces to further stimulate the economy. Given a continued resolve to stick to Plan A, prioritising deficit and debt reduction, his room for manoeuvre appears to be very limited. Nevertheless, between the rock and the hard place, he will no doubt be straining every sinew to encourage greater confidence and a return to stronger growth.
Increasingly, however, Budgets are less about headlines and more about detail. That’s where we discover (sometimes to our horror) which levers the government is pulling hardest and what it is really seeking to achieve.
I shall be drilling down to a key area of professional interest: some of the numbers that shape the Chancellor’s (and the Office for Budget Responsibility’s) analysis and provide the platform for decision making. Will they continue to be drawn from the traditional source, the National Accounts, or will we begin to see the first references to a new source, the Whole of Government Accounts (WGA)?
The latter – reporting the consolidated financial position for the year ended 31 March, 2010 – were published for the first time in November 2011, following a ten-year gestation. It was worth the wait, however.
The differences between the National Accounts – based on the European System of National and Regional Accounts (ESA 95) – and WGA (based on International Financial Reporting Standards adapted for the public sector) are illuminating to put it mildly.
For example, a 2009/10 deficit of £107bn under the former translates to a deficit of £165bn under the latter. Even more strikingly (sit down before you read on!), Public Sector Net Debt of £760bn under the National Accounts expands to Net Liabilities totalling £1,212bn under WGA. That’s 85% of GDP or approximately £19,500 per head of population.
The government deserves credit for publishing WGA. But we now need to see evidence that the better information which it delivers is being used by the Chancellor and the Treasury to manage the public finances and fiscal policy more effectively.
The Budget provides a great opportunity for the Chancellor personally to set the tone from the top and signal that government is in the business of using the best information at its disposal to inform the best decisions it can muster.
Steve Freer is the chief executive of CIPFA
