The Government’s high level of debt leaves little room for manoeuvre in public spending. The as yet unknown costs of Brexit place a further limit on the Government’s ability to react to further economic shocks. As the Government looks to reduce borrowing and debt to meet its fiscal targets, decisions affecting the public finances will need to be sufficiently visible to Parliament and the public. The UK Debt Management Office’s and National Savings & Investments’ ability to respond to any financial crises and possible need to increase borrowing levels significantly may be more difficult in the future; because of the increasing exposure to rising inflation and the eventual unwinding of the Bank of England’s quantitative easing programme.
The Whole of Government Accounts (WGA) provides us with a clearer picture of all public sector finances than ever before. It is particularly useful in highlighting future liabilities such as pension costs. We are encouraged by the improvements that the Treasury has made to the WGA, but its value remains limited by the delays to publication and the lack of information in key areas. We welcome the steps that the Treasury is taking to strengthen the understanding and management of the Government balance sheet but, to have a lasting effect, the Treasury will need to embed best practice in routine decision-making across government to ensure we are both harnessing the assets and managing down the risks from our increasing liabilities in the longer-term.
There is still work to be done to ensure that the WGA is a useful and useable document for Parliament and ultimately the individual citizen and taxpayer.
25 January 2018