UK accounts “not fit for purpose”

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by Dave Taylor

Human beings take 9 months from conception to create a new arrival, perfect in every way.  France, Australia and the USA manage to produce a reasonable set of accounts for their countries in less than that time.

Then there’s the UK

After 22 months, the Treasury managed to produce a set of data  that MPs have slammed as being inconsistent with normal accounting practice, partial in its selection of which data to include, making inconsistent use of discount rates, using poor quality and out of date data, having insufficient analysis of risks, and demonstrating poor control over the decisions of spending teams.

That’s a pretty damning judgement on a gestation period long enough to produce the “elephant in the room” that UK assets and liabilities will be over the next few years, in the independence debate.

Those used to the work of Audit Scotland, which audits all of the public sector, and Scottish Governments which produce a balanced budget every year, may be staggered by the incompetence shown in ensuring best value for the taxpayer pound in England.  Or perhaps not.

Academies and Free Schools in England are funded directly by the Department of Education in Whitehall, which thankfully has no remit in Scotland.  It would be reasonable to assume that Whitehall would have a mechanism for ensuring that the money was being spent appropriately.  MPs agreed.  As their report says:

“Academies accounted for £1.2 billion of government spending during 2009-10 and £2.2 billion of assets at 31 March 2010.  The information they provided to Treasury for the WGA was of insufficient quality.  Five Academies submitted no information, and apparently were not sanctioned for their failure to do so.  We have previously emphasised the need for stronger accountability systems at local level, and would have expected Treasury, as Finance Ministry, to have given clear guidance to prevent such problems occurring.”

The Treasury’s grasp of reality seems loose at best.

£10.9 billion of unpaid tax was written off at 31 March 2010.  The Treasury “showed surprise” at the size of that figure, but “thought” the position had improved.  They didn’t know.

Claims for clinical negligence in NHS England, outstanding at 31 March 2010, could cost taxpayers £15.7 billion.  This figure represents 15% of the government’s total provision for future expenses arising from events that have happened in the past.  The Treasury didn’t know that claims had increased by 31% in 2010-11, nor that NHS England had no plans to reduce, or even plan for, these liabilities.

The future costs of decommissioning existing nuclear facilities have to be planned for as liabilities of the UK.  The Treasury thought that over the past two or three years the nuclear provision had remained broadly the same.  In fact, the estimated cost of decommissioning the NDA civil nuclear sites had increased by 9% since March 2010, from £43.1 billion to £47.1 billion.  What’s a measly £4 billion in the clubs of Whitehall?

Perhaps most worrying of all is the Public Accounts Committee limited comment on the quality of the MoD accounts, even though they considered their poor quality “serious enough” to call into question the value of the UK’s Accounts.

Let’s leave the last word to the Treasury’s Director of Financial Management and Reporting, Ken Beeton.  Consider the complacency with which he speaks when he was questioned by Public Finance website.

Mr Beeton thinks that these accounts “have the potential to be the permanent basis on which government manages itself and its balance sheet … This is a big step forward in terms of how the government does its business.  We’ll aim over the next two or three months to have a picture of what’s happening in government departments and what they think their progress is towards those goals.”

And these are the people who seek to cast doubt on the Scottish government’s assessment of the Scottish economy.