The National Audit Office (NAO) has today published its report on the Whole of Government Accounts (the WGA).1
HM Treasury prepares the WGA, which provides the most complete and accurate picture of the financial performance and position of the UK public sector. It captures the accounts of over 8,000 public sector bodies and sets out what the government receives, pays, owns and owes. The WGA reports total government expenditure for the year ended 31 March 2018 of around £815 billion.
Having independently audited the financial statements for the year ended 31 March 2018, the Comptroller & Auditor General (C&AG) has concluded that the WGA gives a true and fair view of the state of the WGA affairs and expenditure, although he has again qualified his opinion on specific areas in the accounts.
While Government is improving the financial information that forms the WGA, further progress is necessary. HM Treasury will need to carry out significant work with other government bodies to make further improvements, in particular the Ministry of Defence and the Department for Education. The qualifications to his opinion in these areas are likely to remain in place until at least the WGA for the year ended 31 March 2020.
The Treasury has responded to previous concerns from the Committee of Public Accounts about the time it takes to publish the accounts, doing so quicker and earlier this year. The Treasury is also making progress to encourage wider use of WGA in informing decisions, but more needs to be done to embed the WGA as part of government’s routine financial management.
The WGA shows that the value of government’s long-term liabilities continues to rise and risks to their affordability will need to be managed effectively. For example, net public sector pension liabilities are £1,865 billion, the equivalent to over £68,000 per UK household and 92% of GDP. While the government has put in place new controls around contingent liabilities and is undertaking pension reforms, these reforms are subject to challenge and cost increases.
The Treasury has used the WGA to inform its balance sheet review which aims to improve the return on assets and reduce the cost of liabilities. Government’s policy is to sell assets where there is no policy reason to hold them and the sale represents value for money for the taxpayer. The NAO has highlighted the risk that assets are sold for short-term gain, without considering the long-term impact. The Treasury’s introduction of disclosure guidance for government to improve transparency over asset sales to Parliament from April 2019 is welcome.
The NAO and the Committee of Public Accounts have highlighted increasing pressure on public sector finances in areas such as health, local government and defence. The WGA provides an opportunity for the Treasury to reflect on, and demonstrate to the public and Parliament, how it is managing the most significant risks to the public finances, including the impact of leaving the EU.
In continuing to improve the WGA, the NAO recommends the Treasury must: be more transparent about which elements of the production process it can control and which it cannot; provide more detail on government spending; explain the sensitivity of asset values to changes in assumptions; and consider using the WGA to report on government’s management of significant financial risks, including the impact its balance sheet review has had.