The National Audit Office has today published its report on the Treasury’s seventh set of Whole of Government Accounts (WGA). The WGA provides the most complete and accurate picture of the financial performance and position of the UK public sector in 2015-16. The NAO report highlights that the WGA is increasingly important to the ongoing management of the public finances. The comprehensive nature of the accounts and their reach across the public sector, allows Treasury to assess financial risk and improve its overall approach to managing the government’s finances.
The WGA shows that government borrowing grew by £86.1 billion in 2015-16 and an increase in tax revenues did not offset the increase in government expenditure. Total expenditure increased from £811.9 billion in 2014-15 to £937.7 billion in 2015-16 due to an increase of £126 billion because of a change in the rate used to value future liabilities, an increase in pension scheme costs of £6.7 billion, and an increase in social security costs of £4.8 billion. Wages and salaries remained relatively stable at £149.6 billion compared with £148.5 billion in 2014-15, despite an increase in full-time equivalent staff of 27,656. However, revenues from income tax, corporation tax and national insurance contributions only grew by £34 billion to £693.9 billion which was not enough to offset the rise in expenditure.
The NAO report recognises that the Treasury has taken steps to make disclosures in the WGA more detailed and transparent, and that it has improved the presentation of the 2015-16 accounts to provide more insightful narrative information on the cross government finances. This includes more detail on the major movements in valuations of income, expenditure, assets and liabilities, which helps users to understand more about the government’s overall financial performance and position. The collection and presentation of consistent data is a significant step forward which will be important in understanding how the government is delivering its financial strategy as the new Parliamentary session evolves and the UK exits from the European Union. The report also finds, however, that there is a lack of specific detail in some key areas and warns that HM Treasury faces significant challenges in meeting its target of publishing the accounts within nine months of the year end. This delay means the WGA are not yet as useful as they could be.
While the Comptroller and Auditor General, Sir Amyas Morse, has continued to qualify his opinion on the accounts, HM Treasury has made significant progress in improving the accuracy of the financial statements. This has resulted in the removal of one qualification since last year, relating to the accuracy of the elimination of intra-government transactions, and a reduction in the scope of one of the qualifications that remains, which relates to the consistency of the valuation of infrastructure assets. The remaining qualifications relate to technical issues, including the exclusion of Royal Bank of Scotland from the accounts, and underlying accounting problems in the Ministry of Defence and Department for Education. As a result, the 2015-16 WGA is the most accurate and comprehensive reflection of what the government receives, pays, owns and owes that the Treasury has yet to produce.
The Comptroller and Auditor General recommends that the Treasury should continue to raise the profile of the WGA and embed it into routine risk monitoring for public finances, improve the quality of information contained in the WGA, remove inconsistencies in accounting approaches across government, and encourage government bodies to supply good quality data more promptly. Nevertheless, the NAO report states that, despite the information being incomplete, the WGA provides a unique standpoint for evaluating the details of government’s income and spending, and the portfolios of assets and liabilities it holds.
19 July 2017