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Whole of Government Accounts explained
Gillian Fawcett outlines why the Whole of Government Accounts are so important
As accountants, we know that assets and liabilities are just as important as income and expenditure when it comes to medium-term and long-term financial planning. Why then, you might ask, when the Chancellor stands up to give the Budget do we only hear about taxes and spending? That, unfortunately, is because central government, unlike any other sector, still relies on blunt statistical measures to forecast the future. The government too often looks to economists to do accountants’ work.
There is, however, a glimmer of hope. At the end of May the government published the Whole of Government Accounts (WGA). Its sixth publication, it remains the world’s only comprehensive set of accounts for the entire public sector. It’s a credit to the government that they have taken this important step towards applying the financial rigour of professional accountancy to state finances. But more needs to be done in improving the usability by a range of stakeholders to support better policy decision making.
A quick glance at the WGA proves uncomfortable reading. You would never hear them trumpeted in a Budget statement. For example, the public sector pension liability has continued to grow at a staggering rate, rising from £961 billion in 2010/11 to £1.5 trillion in 2014/15. It seems that government policies are failing to provide a check and a balance on the growing pensions debt. There is too much focus on addressing the short-term financial situation and not enough on addressing the ‘wicked issues’ that have the potential to store up significant trouble for the future.
Another area of concern is around the liabilities for clinical negligence claims against the NHS. Although the overall liability did not change significantly over the year, contingent liabilities for claims did rise by £2 billion to £14 billion over a six-year period. Again, this suggests that problems are being shifted into the future. Sadly, this is a pattern is repeated across the public sector, it’s a problem that we, as a profession must challenge before it’s too late.
As the only accountancy body in the world to specialise in public sector finances, CIPFA is relentless in championing better financial management in government. Our members play an active role in raising and addressing these issues that affect the lives of so many people on a daily basis. But business too needs stable social and economic environments that cannot be delivered without proper accounting at a national level.
A failure to use accrual information in fiscal and budgetary decision-making is leading to poor decisions, misallocation of resources and enhanced fiscal risk. Accountants, whether public or private sector, understand the perils of short-termism. I hope you will all take the time to have a look through the WGA and help raise the profile of this document, which must be the foundation for this country’s financial planning in future.
• Gillian Fawcett, Head of CIPFA’s Governments Faculty
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