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An income of £659 billion. Spending of £734 billion. Liabilities over £2 trillion. A £152 billion deficit. The Whole of Government Accounts (WGA) is the truly big picture of government finances: the net financial position of 6,000 public organisations – the entire public sector. There is no more complete record of what the government spends, […]


Summing the parts of the whole (of government accounts)

Posted on May 31, 2016 by

Whole of Government AccountsAn income of £659 billion. Spending of £734 billion. Liabilities over £2 trillion. A £152 billion deficit. The Whole of Government Accounts (WGA) is the truly big picture of government finances: the net financial position of 6,000 public organisations – the entire public sector. There is no more complete record of what the government spends, receives, owns and owes. Dig into the details and you can uncover crucial indications of the long-term financial health of the country.

Decisions about how to spend taxpayers’ money and best use limited public resources are based on information. Information comes from insightful financial reports, which come in turn from accurate accounts. That’s what the WGA provides. It was a world first when it first came out, five years ago – and it remains international best practice.

So what is it?

The WGA treats the whole of the UK government (including health bodies, local government and public corporations) as single entity and accounts for it in line with International Financial Reporting Standards, which are used for private sector organisations’ accounts. This means the WGA shows the balances and transactions that the UK government has had with non-UK-government organisations and doesn’t include transactions and balances between government organisations.

Given its scale and complexity it’s not surprising that the 2014-15 WGA has taken 14 months to be compiled and released by HM Treasury. And to help you find your way through its scale and complexity, we have provided interactive access to the data on our Snapshot of UK finances page.

Key public finance sourcesThe WGA draws on the same sources as the main tools for assessing the health of the UK public finances, the Budget, National Accounts (Public Sector Net Debt and the budget deficit), Office for Budget Responsibility forecasts and departmental financial statements – each are produced independently or subject to the assurance of independent evaluation. But the WGA’s consolidated picture across government is not available anywhere else. For example, it includes what the Public Sector Net Debt excludes:

  • the government’s investment portfolio, such as the substantial investments in Royal Bank of Scotland (RBS) and Lloyds Bank;
  • all of the infrastructure assets that are so important to productivity in the economy;
  • public sector pensions; and
  • the provisions that record both the government’s obligations to clean up the environmental problems that arise from the energy sector and legal challenges resulting from clinical negligence or taxes.

GA figuresThis is why the WGA gives a different perspective on the nature and extent of the public asset base, liabilities and the totality of government’s spend and income.

Digging into its details shows why the WGA is uniquely valuable. It reveals issues that will affect the public finances in the future and are hugely important for decision making. For example:

Taxes: Tax income went up over the year from £556 billion to £567 billion. But look at notes 24 and 31.2 and you’ll find provisions for legal disputes up by £1.8 billion and contingent liabilities up by £6.4 billion to £35.6 billion. If, as is implied by the numbers, there’s a 30% pay-out against contingencies, then the overall impact of tax receipts and challenges on the public finances could net out to a different picture than the headline increase.

Public sector pensions: The WGA is the only place you can find the figure for the total liability for public sector pensions. It is truly enormous: £1.373 trillion. And that excludes the £86.6 billion of annual state pension payments, which is a benefit, not a liability. It’s true that this contractual liability will be funded by taxpayers over decades, but – to put it into perspective – it’s £199 billion more than the external government debt, which is £1.174 trillion.

Government investments: The WGA is also the only place you can find the full scale of the government’s investment portfolio: £365.5 billion. That’s 30% of the external government debt. This includes investments in RBS, Lloyds Bank, UK Asset Resolution (which holds the residual nationalised banks) and student loans. These are substantial investments, but they don’t feature in the statistical measures of debt. Their visibility in the WGA is important, therefore, for ensuring that their management is appropriate and that sell or hold decisions are made in the interests of the long term public finances.
WGA interactive data
So why, you may wonder, don’t you hear about the WGA the way every aspect of the budget is pored over? It’s complex, long (over 200 pages) and it’s simply not been the data that the UK – or other countries – have typically used to assess and manage the country’s financial health.

The latter is beginning to change. The International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD), among others, are increasingly viewing accruals accounting (transactions and financial activities recorded and reported when they occur, regardless of when cash is paid or received) to be a way to avoid the manipulation of economic statistics and poor financial management which contributed to the recent financial crisis and resultant economic downturns. Consolidated financial information is likely to follow the introduction of accruals based systems.

So the UK has a financial system based on internationally-recognised best practice and audited in line with international standards. We have an independent statistical framework, and a budgetary framework that is subject to independent verification. These mustn’t be taken for granted. The great value of these systems in establishing and maintaining public trust and in minimising corruption was set out in the official communique from the recent anti-corruption summit in the UK.

There are problems with the WGA, it is produced too slowly and the Comptroller and Auditor General’s audit opinion – C&AG report on the WGA – is qualified on four counts. Nevertheless, the WGA plays a key role in maintaining the integrity of the UK public finance system and confidence that the system is functioning in the best interests of taxpayers who fund the activities of government.

I urge you to read the summary, at least, and to judge for yourself the nature of the information that it provides and its value. Or have a play with the WGA and source figures on our Snapshot of UK finances page (illustrated above). Please contact us if you would like to discuss any implications from the WGA.
Nick Bateson

About the author: Nick Bateson is the NAO’s Director responsible for work for HM Treasury and related public bodies. He’s been a Director since 2011, and led NAO work for the Department of Transport related audits until 2013, including leading VfM studies and internal strategic development work on major projects. Nick first joined the NAO in 2002 and is a qualified accountant and holds an Executive MBA from Imperial College Business School.


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4 responses to “Summing the parts of the whole (of government accounts)”

  1. Sameen says:

    Thank you for producing this. It’s a mammoth undertaking. In time, it will be made more accessible for people to understand. I hope you can open source the day and analysis

    • Nick Bateson says:

      Thank you for your comment, Sameen. We hope you find our ‘Snapshot of UK Finances‘ page an accessible way to explore the Whole of Government Accounts. I would welcome your comments on the data and analysis on this page. Nick.

  2. Andy Mackie says:

    Nick – The links to Snapshot seem to be taking me back to another page on the NAO website at present.

    • Administrator says:

      Many thanks for alerting us to this, Andy – an update to the page upset the link, but it should be fixed now. Administrator.

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