Missing the whole picture

3 May 13

The Public Accounts Committee wants the Treasury to increase the use of Whole of Government Accounts in Whitehall. How might this inform June’s Spending Review?

The second set of UK Whole of Government Accounts, covering the year ending March 31, 2011, was published at the end of October 2012, but received limited coverage.

In fact, WGA failed even to get a mention in the Budget 2013 documentation.

This was surprising, as these accounts provide a consolidated position for central government, including health bodies, local government and public corporations. It is a powerful tool to help understand historic UK government finances and aid decision-making with respect to the future.

It is true that the WGA is detailed, running to around 240 pages; that being published 18 months after the year ending limits its usefulness; and that we only have two years of trend information.

However, it does provide very relevant insights on matters such as government debt, asset management, liabilities, the nature of government expenditure, the boundary of government – in short, matters that are central to the government’s austerity programme.
Equally important for current austerity measures is the use of accounting principles and tools, including balance sheet position, cash flow, ratio analysis and payback period.

Several government policy areas would look different considered in the context of accounting principles, rather than economic arguments around market failure.

This point was made by the Public Accounts Committee in April. Chair Margaret Hodge said departments must be made aware of what the headline figures mean for them, with the accounts considered regularly by all departmental management boards.

With the Spending Review due on June 26, covering the period beyond April 1, 2015, there are a number of ways in which WGA might inform the process.

  1. Longer-term planning horizons, especially for contract-based public bodies, would avoid the costs associated with stop/start programmes.
  2. Year-end flexibility has rightly been removed for bodies that fail to spend their budgets but can lead to perverse outcomes when the cause is just private sector slippage
  3. Understanding the nature of government assets, and considering how they might be used more effectively if there is surplus capacity, helps re-imagine how value might be realised beyond a straightforward disposal
  4. Recognising that although postponing spending can save money, it can also be a cost if the project is a ‘spend to save’ one. Energy efficiency projects are a case in point
  5. Many ‘spend to save’ projects cut across departmental boundaries, in particular some of the early intervention ideas associated with outcome-based contracting and social impact investment. The use of some form of pooled budget/project-based ledger that runs across departments would be useful in promoting these types of projects
  6. Finally, there is continued interest in new delivery models, such as GoCos (government-owned, contractor-operated companies), joint ventures and mutuals. These provide opportunities for public bodies that are already very commercial to unlock more value and potentially leverage private investment.

Accelerating the WGA process (particularly with just a one-year Spending Review) will require significant work and investment – but it will be worthwhile.

  • Mark Williams

    Mark Williams, a member of the CIPFA Governments Board and Southeast Regional Council

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