By Richard Johnstone | 11 April 2013
The Public Accounts Committee has urged the Treasury to increase the use of Whole of Government Accounts in Whitehall to improve value for money.
After examining the accounts, which combine statements from 1,500 public sector bodies to give a picture of the government’s total finances, MPs said they were not yet ‘a meaningful tool’ for managing the public finances.
The accounts for the 2010/11 financial year, published in October 2012, showed the public sector had an annual deficit of £94.4bn, down £68.3bn from 2009/10 due to public sector pension reforms. The WGA also showed the government had net liabilities of £1,193.4bn at the end of 2010/11, similar to the figure of £1,212bn the previous year.
Future obligations for 706 Private Finance Initiative contracts are estimated at £144.6bn, while £17.5bn is earmarked for clinical negligence claims and £60.9bn for the cost of nuclear decommissioning.
Although the government has highlighted the potential for the WGA to help in managing the public finances more effectively, MPs said it did not have a clear plan to do so.
The Treasury must ensure action is taken throughout Whitehall when the WGA highlights key financial risks and pressures for the nation, MPs said. This should include an examination of what the committee called the ‘spiralling cost of clinical negligence’.
PAC chair Margaret Hodge said the WGA, which has now been published for two financial years, was currently ‘more of an elaborate accounting exercise than a meaningful tool for helping government manage the public finances more effectively’.
Departments must be made aware of what the headline figures mean for them, with the accounts considered regularly by all departmental management boards, she added.
‘The WGA should be used to identify the nation’s key financial risks, such as the spiralling cost of clinical negligence, £17.5bn in the accounts, and set out how they are being managed.
‘It should also be used to help government make better spending choices by highlighting the financial consequences of past decisions, such as the £144.6bn currently owed under PFI schemes and the estimated £60.9bn cost of nuclear decommissioning. And it should allow us to track the government’s performance in key areas such as tackling fraud and error, which costs the taxpayer some £21.2bn a year.’
MPs also urged the Treasury to speed up publication of the accounts. It took 19 months to publish the 2010/11 WGA and they were subsequently qualified by the auditor general.
Hodge said this undermined the WGA’s usefulness. ‘Treasury needs a clear plan for improving the timeliness, quality and completeness of the WGA, and how it will use this document to support the management of the nation’s finances.’
Responding to the report, CIPFA said that there was a need for a clear plan to continue to improve the WGA so that they could be used more effectively to support decision-making.
Chief executive Steve Freer said: ‘The primary and most urgent challenges are to address current audit qualifications and to achieve more timely publication.
‘The UK has made a significant investment through WGA which positions it at the forefront of good practice in government reporting internationally. We now need to reap the dividend of that investment by ensuring that information from WGA is used for decision-making and to inform public understanding and debate about the health of the public finances.
‘In practice, use of information from WGA for these purposes is likely to develop gradually over time. It would be tremendously helpful if the Treasury itself made a point of using information from WGA in economic statements.’
Responding to the report, a Treasury spokeswoman said the Whole of Government Accounts ‘provide a comprehensive picture of the public finances and enhance the UK’s fiscal credibility’.
She added: ‘When compared to what was in place before, they are a giant leap forward in terms of fiscal transparency.
‘The WGA are, however, only one part of the government’s public spending framework. That framework is undoubtedly succeeding - our public spending plans are on track and we have reduced the deficit by a third.’
