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.
Read the full report
Notes for editors
- The WGA consolidates the accounts of over 8,000 bodies across the public sector to produce an accounts-based picture of the UK’s public finances. It is the only set of audited, consolidated accounts in the world that includes the financial performance and position of both central and local government. It includes public corporations such as the Bank of England, but does not include independent public sector organisations such as Parliament, the Crown Estate or the National Audit Office.
- As at March 2018, provisions and quantifiable contingent liabilities are valued at £615.1 billion. Clinical negligence claims stood at £78.4 billion as at 31 March 2018.
- The WGA shows that total expenditure on public services across the year increased by £54.1 billion from £760.7 billion in 2016-17 to £814.8bn. This increase was partly offset by an increase in tax revenues of £33.5 billion to £661.6 billion and an increase in other revenue by £6.6 billion to £99.3 billion. This means that net expenditure on public services (income less expenditure) increased by £14.0 billion to £53.9 billion.
- The government’s net liabilities (the shortfall between assets and liabilities) increased from £2,420.7 billion to £2,565.4 billion during the year, which is mainly due to increases in provisions of £100.3 billion and other financial liabilities of £60.6 billion. Government borrowing increased by £58.4 billion to £1,347.4 billion, and the total cost of financing this debt during the year rose by £5.0 billion from £31.8 billion in 2016-17 to £36.8 billion in 2017-18.
- The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services. Our work led to audited savings of £741 million in 2017. Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.