Examination of Witnesses (Question Numbers
119-139)
MS JIL
MATHESON, National Statistician
and MR JOE
GRICE, Chief Economist, Office
for National Statistics, and PROFESSOR
GEOFFREY WHITTINGTON,
University of Cambridge, examined.
20 OCTOBER 2009
Q119 Chairman: Ms Matheson, Mr Grice and
Professor Whittington, welcome. If I can please ask you to speak
reasonably slowly and clearly that will be helpful both for the
webcast and for the shorthand writer. I do not know whether any
of you would like to make an opening statement or whether you
would like to move straight into questions.
Ms Matheson: Maybe I can just say a few words,
thank you. I just wanted to say thank you for the opportunity
to explain and discuss the statistical treatment of PFI projects
both in the national accounts and in other official statistics.
A key part of what we do is to follow international standards
governing statistical accounts—the UN system of national
accounts and the European system of accounts—and we have
got a legal basis for compliance with those. Statistical guidance
and accounting guidance has, up until now, been similar in the
relevant respects, so we have been able to use the audited accounts
of public bodies to use in the national accounts. The introduction
of the new International Financial Reporting Standards this year
may have some impact but public bodies are still being required
to produce accounts on the old basis as well, so we can continue
to fulfil our legal obligations. Finally, of course, our obligations
go beyond that, and we are conscious of the need to meet public
needs for transparency of statistical information. So we have
work under way looking at the presentation of additional information—for
example, on public sector liabilities. It is a complex area but
we are publishing and have already published a series of articles
to help us and our users understand the issues, and we would be
very happy to try and explain that today.
Q120 Chairman: Just before we move on
to the accounting and statistics side, can I ask you one general
question, which is to ask you what you see as the defining characteristics
of private finance projects?
Ms Matheson: Can I start, just from the statistical
point of view, because that is what I can talk about? Following
the international standards that I referred to, it is about risk,
and the assessment of where the risk lies. Is it with the public
sector or the private sector partner in the arrangement? The European
system of accounts and the international standards are quite clear
about that. So, as far as we are concerned, we take the audited
accounts which themselves have assessed where risk lies. Where
the bulk of the risk is judged by the professional accountants
to be in the public sector then they are on the public sector
balance sheet; where it is in the private sector then they are
not. So that is the defining characteristic in terms of how we,
as statisticians, interpret the accounting rules.
Q121 Lord Eatwell: I would just like
to follow up from that. What I did not understand from the memorandum
you sent us, also indeed from what you have just said, is the
relationship between what you think would be an appropriate accounting
standard and the accounting standard which is being imposed upon
you by others. Your memorandum consisted entirely of referring
to other accounting institutions—to the IFRS standards,
and so on and so forth—it did not say at all whether you
thought they were satisfactory (if you like, fit for purpose)
for the UK assessment of risk in PFI projects. I wonder if you
could comment on that.
Ms Matheson: I will start and then perhaps I
can ask my colleague to add on to that. I think it depends on
what is the purpose. If you think about our purpose with national
accounts, then we are looking at the economy as a whole, and the
important (and, I mentioned that we have a legal obligation) obligation
as well is to make sure that what we do is consistent with the
treatment of other countries. So the international standards are
important in that they are the ones that we stick by, but they
are important because they are an important way of looking at
the economy across countries.
Q122 Lord Eatwell: I can see that if
everybody wants to get their national income accounting straight
then they will get the national income accounting straight, but
we are trying to understand the value to the public purse of these
procedures. We all know, for example, in the national accounts,
if you employ a housekeeper it is part of the GDP and if you marry
her and do not pay her it is not part of the GDP. We all know
that. So if we are looking at social welfare, the national accounts
are not representing social welfare in those terms. If you are
interested in social welfare we would not look to the national
accounts. So I think that this international comparison is a complete
red herring; the issue is: are these accounting procedures appropriate
for us to understand the welfare contribution to the UK of these
particular projects?
Ms Matheson: Let me, in one sentence, reply,
and then I will hand it on. As I said, it depends on what the
purpose is, and the assessment of value for money or any of those
other considerations are not considerations for me or for the
Statistics Office; that is not what we are here to do; that is
a matter for the NAO or for others. What we do have a responsibility
to do is be transparent about what we are measuring and how we
are measuring it.
Professor Whittington: Could I make an observation,
please? I did not want to make an initial statement but the initial
statement did actually say something that I believe to be incorrect
(I am sure it was a mistake, not deliberate), namely, that this
balancing of risks that is done by the internationally accepted
methods of national accounting is not the same as the current
UK standard FRS 5 and the application note to that or even the
Treasury's guidance to that, which has widely been interpreted
as allowing everything to go off balance sheet but was not intended,
I hope, for that purpose. The big thing that gets missed out of
the assessment of risks under FRS 5, and is included by the national
accounts and was alluded to by the local authority representative
just now, is construction risk. Obviously, we all know—anybody
who has dealt with builders knows—that construction is a
horrible process to go through. Construction contracts carry enormous
risk, but that risk occurs irrespective of whether I buy an asset
or whether I lease it or whether I get it under a PFI contract.
That is something that happens before the asset is created. Once
the asset is created, as an accountant within current accounting
standards, I have to ask myself: "Should that asset which
has now been created be on the balance sheet?" In other words,
who do all the subsequent risks and rewards (or however I care
to evaluate it) lie with? Do I sit in this position that an owner
of the asset sits in, or am I really just renting it from a provider
of services? That has to be done once the construction is over.
I think the potential conflict with national accounts (the ECOFIN
system) lies in the fact that they only identify three areas of
risk, much narrower than FRS 5, and one of those areas is construction
risk. That means that most PFI contracts will say: "Well,
the construction risk lies with the constructor because the price
is usually fixed under contract"; hence it is off balance-sheet.
Under FRS 5 that would not happen. That is a serious problem now
because we have a new international interpretation, IFRIC 12,
which has been adopted by the Treasury and is going to be used
in resource accounting. IFRIC 12 is based on control but I think
we can bypass that—control of risk and rewards are not so
different as you might think, but I do not want to get into technicalities—and
IFRIC 12 will bring on to the balance sheet a lot of things, it
is widely believed. However, these things will not be brought
on to the balance sheet by the internationally accepted method
of doing national accounts. Not only does that apply to the national
accounts but I understand the Treasury is applying this same standard
to budgetary procedures by departments, so that for budgetary
purposes they will be leaving things off balance sheet and for
ex-post accounting they will bring them on balance sheet,
which I find quite extraordinary. So there is a conflict between
the way national accounts are done, and the way business accounts
are done and the way they are being interpreted by the Treasury
for the accounts of departments. This is not the fault of the
national statistical office but it is a matter of government policy;
I guess it has to do with international agreements on borrowing
requirements, and so on. It is, nevertheless, a practical problem.
Q123 Chairman: Is this a conflict which
can or has to be resolved, or is it a paradox you just have to
live with?
Professor Whittington: We get back to the issue
Lord Eatwell was discussing before, of what all this is for. I
believe, because I like to think accounting is useful, that accounting
is telling us what our obligations are when it is recording liabilities.
I was very struck by the discussion you have just had with the
local authorities which indicated that a PFI contract binds future
generations. In fact, because of the fact that it suppresses what
economists call "real options" it actually, in some
way, is more burdensome than a conventional purchase of an asset.
The fact that future generations, or future taxpayers, are bound—hence
the scope for allocating revenue in the future is constrained—is
a very important thing that people should know; they should know
how much they have borrowed, how much the Government is in debt—in
the economic sense as well as in the legal or technical sense.
I do think that is very important information from a policy point
of view and an ex-post appraisal point of view. It gets
suppressed if we do not put these things on balance sheet.
Q124 Lord Levene of Portsoken: Just on
the basis of what Professor Whittington said, if I heard you correctly,
you said the same risk was there whether the building was bought
or leased. Surely, it depends on who is doing the buying and leasing,
because if the Government or a local authority buys a building
they are at risk throughout the process, but if they are leasing
it it is the owner/contractor who is going to do the leasing who
is at risk, and the local authority or the Government only has
a problem once they have taken it on. Is that not right?
Professor Whittington: I was thinking of a long-term
lease. I was thinking in terms of finance leases; in short-term
leases or rental, clearly, the landlord is responsible. The longer
the lease, usually, as you know, the more responsibility the tenant
takes on. If I have a 999-year lease, then it is pretty well mine.
I understand that one of the Cambridge colleges is actually owned
by an Oxford college (or, at least, the ground is) but it is 999
years so nobody talks about that and they repair their premises
as if they own it.
Q125 Lord MacGregor of Pulham Market:
I think, like others, I may be having some difficulty in getting
back on track! Can I ask the question which I hope will help do
that. Could you elaborate more to justify having liabilities treated
differently in the departmental resource funds and the Treasury
national balance sheets, and indicate more of the consequences
of that?
Mr Grice: I think a lot of this comes back to
what are the purposes for which these accounts are used. I can
imagine it would be safest, I suppose, if there was one set of
accounts which will give you the answer to everything. So far
as we are concerned, we have at least three objectives, as Jil
mentioned at the outset. One is we do have international obligations
to compile national accounts according to international conventions.
The overriding convention existing on national accounts is voluntary,
the United Nations System of National Accounts, but the European
System of Accounts, which is essentially derived from that, is
a statutory obligation; it is an obligation in European regulation
and those procedures we have to abide by in order to produce gross
domestic product figures and other national accounting information
according to the European standard. For that purpose, the information
provided by, essentially, as I understand it, UK generally accepted
accounting practice (which is largely on which the resource accounts
are based) is appropriate for making those calculations. We believe
it is appropriate and so, too, do the European authorities. A
second purpose is actually to produce the public finance figures
where, again, we have legal requirements under European regulation
in connection with the Stability and Growth Pact and the Excessive
Deficit procedures. Again, for that purpose the resource estimates
that the Treasury produces and uses in its budgeting, we have
access to and, essentially, take on board, is appropriate. We
believe that and, again, so do the European authorities. Then
again, this is not the only purpose; this is not the only information
one would want to look at in analysing these kinds of situations,
and while it is certainly not our job as the statistics office
to make assessments of value for money in PFI deals, or anything
of this kind, it is our job, we see, to produce a range of information
about public finances in general which will indicate the transparency
and enable such judgments to be made. In that connection, it may
be the IFRS, the new accounting standard, is something we need
to look at, and indeed we have started to do that. I am not sure
that is a direct answer to your question but that is the position
we are at, at the moment.
Q126 Chairman: We are talking about IFRIC
12 or IFRS thing, which is what we are about. Would it be a practical
problem for the ONS to, as it were, sum what is on the various
local authorities and other government departments IFRIC 12 data
to produce a separate national figure? Not to supplant the European
approach but as a supplement to see it from a different view.
Would that be a problem?
Ms Matheson: I do not think it would be a problem.
What we would need to do is be very clear about what it was that
it was measuring and what part of the overall picture is that
about. Again, our role, as you say, is to aggregate and we do
that based on audited accounts; we are not responsible for the
standards against which those are audited. So if there was some
great user demand for us to do that and if those data were available
and audited, then adding them up—
Q127 Chairman:—would be a fairly
simple thing. I am sorry to be simplistic but let me push it a
bit further. If it was analogous to a business and that business
had a whole string of subsidiary companies, which may be local
authorities or government departments or whatever it is, then
in summing the consolidated accounts of that business you take
all the subsidiaries and you add them all up and you would know
what you had got, at the end of the day, because the two would
be the same. Here we have an anomaly whereby, at the moment, the
sum, which we do not know, of the equivalent of the subsidiaries
in the public sector does not match what should be the consolidated
accounts at national level. All right, you are caught by different
standards—and we understand why that has happened—but
I would have thought that it might shed a little bit more light
if, in addition to the European approach, you actually summed
what we have got in our various national subsidiaries. Am I being
too simple? Perhaps I should ask an accountant. Professor Whittington,
does that make any sense?
Professor Whittington: It makes sense to me
but I am not a national accountant. I was over-awed by being here
with two of them.
Ms Matheson: It would not be a national account
is the point.
Q128 Chairman: Absolutely, but it might
shed some light on national liabilities.
Mr Grice: We are very open to the idea that
national accounts are not the only information that is useful
in this area. Indeed we did, over the summer, publish a series
of papers on ways in which more transparency and wider information
about the public finances might be produced. In that light, I
would certainly regard the proposal as being one which merits
further examination, but we would have to look at the feasibility,
exactly what it measured, and so on.
Q129 Lord MacGregor of Pulham Market:
That is actually what I meant by the consequences in my question.
You described the situation from your point of view, which I think
most of the general public do not understand at all, but there
is a widespread concern, for example, in terms of national liabilities
and national debt, that some of the PFI projects and other things
are not appearing in the national debt figures and that this is,
somehow or other, because of the way in which the statistics are
drawn up. I wonder if you could comment on that.
Professor Whittington: I will comment on it,
if you like, because they are reluctant. Can I just briefly comment
because I think what you said is exactly correct? I can understand
the international standards for national accounts but I think
they are behind the times, as it were. Accounting has moved on
a lot in the last 30 years and the way people do business has;
complex contracts with PFIs have emerged and they are a bit behind
the game, if you like, and that is why they have not thought it
out and they have got construction risk in there and missing lots
of others out. It also, of course, suits, no doubt, many national
governments that they do their national income accounts that way
because they are under a bit of pressure from borrowing. People
use these very naive numbers—Public Sector Borrowing Requirements
and things. So, naturally, I imagine, there is a reluctance by
many governments to change this system. Then, of course, we have
the question: should the UK change and then be blamed for borrowing
more than anybody else, when it is purely an illusion? I think
there is a serious problem. That is as an outside observer.
Q130 Lord MacGregor of Pulham Market:
You mean an illusion that we are borrowing more than anybody or
an illusion that if we changed the system our figures would look
larger than they actually are compared to others?
Professor Whittington: The illusion is not in
absolute terms. If you mean: "Are they telling the truth?"
I would say they are telling the truth if they did proper accounting,
as I put it. They are not telling the relative truth, and countries
and currencies are often measured in relative terms. If they have
all got this little bit of buffer called the PFI there and we
make ours hang out as if it is borrowing and the others do not,
it makes the UK look worse than it ought, and is not doing the
country a favour—I can see that. That is a problem of the
emerging practice on national accounting. In the future, I think,
there is a great deal of hope because international standards
are developing very rapidly; IFRIC 12 comes from the private sector
International Standards Board, there is a Public Sector International
Standards Board as well which has been working on IFRIC 12-type
interpretations for government, and I am sure that these bodies,
eventually, will persuade international organisations like the
World Bank and the IMF, that are backing them. I think practice
will improve in the future. At the moment we have an anomaly because
they are catching up.
Ms Matheson: There is a dialogue between the
two anyway; so these things do take time to evolve—that
is certainly true. On your first point about transparency, of
course, as we have said, the national accounts are the national
accounts, and we are interested in improving transparency outside
the national accounts framework to help public understanding of
the nature of public debt or other aspects. So that is absolutely
consistent with the direction that we are going. It is just not
easy to do, and I am never sure that we are quite going to be
in a position very quickly to get to the point where the public
do understand all the complexities of this. That is the challenge.
Q131 Lord Best: Improving public understanding—and
mine too, I think—does get pretty difficult. I guess that
governments of all persuasions are going to want to try to find
ways in the future of spending money that does not show up in
the national debt. If the basis really comes down to where the
risk lies, my question is about how you determine the risk transfer
between the public body and a private company, or a special purpose
vehicle. Let us try this from a kind of public perception and
understanding of these things. At one level we now know from the
collapse of the banks that the government has to pick up the bill
at the end of the day; the risk, ultimately, with these organisations
that are too large to fail, and so on, rests with government.
We have not transferred risk even in the banking system out of
the hands of government, at the end of the day. If things go bust,
government picks up the bill. In the world of PFI, of course,
the school, if it is half-built, if the PFI company goes out of
business and this whole thing falls apart, the public sector has
to pick up the bill. It falls back on the taxpayer—local
or national taxpayer—because we need the public services.
To say that the risk is transferred to a private sector body,
at one level, must be a bit of an illusion, to use Professor Whittington's
words. Is it that the medium-sized risks are transferred allowing
a change of definition that governments will grasp if they can?
The medium term risk—not that the contractor goes bust but
simply that it costs a lot more than they expected and they have
to take the hit; it is the small-scale things that go wrong which
do fall to the private sector organisation, the contractor, to
pick up the pieces because that is what the contract says, even
though the big risks do, ultimately, still remain a public sector
activity with the public sector. Have I mystified you even with
the question?
Ms Matheson: You are right in the sense that,
of course, ultimately, where is risk, and that is one of the issues
about how do you define and decide the point at which risk becomes
a liability and at what point should it be included in whatever
accounting standard. That is one of the real measurement difficulties
with any system that you have. I am not quite sure what the question
is that that leads to.
Q132 Lord Best: Let me put the formal
question here, about the transfer of risk between a public body
and a private company. How do you set about determining the risk
transfer between the two, the public body and the private company,
or special purpose vehicle?
Ms Matheson: The short answer is we do not;
that risk is the risk as it appears in the audited accounts. So,
as statisticians, we do not do that.
Q133 Chairman: Perhaps we can address
it to Professor Whittington.
Professor Whittington: I will try and answer
that, if you like. Under the FRS 5 approach, which is the one
that has historically been used in the UK and is widely used abroad
as well—Australia and New Zealand and other places—you,
first of all, as I said, would strip out the construction risk,
to start with, because somebody bears that anyway, in creating
an asset. The PFI contract is for the use of the asset for a service
once the asset is constructed. You would also look at the end
of the contract and look at who gets the asset at the end, because
that is usually very informative with PFI contracts; they are
often for less than the life of the useful asset, despite the
discussion we had earlier. If it reverts to the government then,
of course, the government is bearing the residual value risk that
is stated at the end. You would then analyse in detail and make
a judgment on the terms of the contract itself. Of course, we
talk about PFI—one of the difficulties is there are so many
different contracts with so many different terms; who covers what
risk within a contract; do you give a fixed price, do you have
a variable price; do you have toll roads, do you have shadow tolls—it
goes on forever. You have to analyse the contract and make a judgment.
That is where, I am afraid, FRS 5 really was let down or let itself
down because these interpretations done by people who have incentives
to keep things off balance sheet, inevitably, lead to things going
off balance sheet. It is unfortunate that is the way it is. That
is why the new IFRS approach is becoming predominant because that
emphasises control rather than risk, although, in fact, as I hinted
earlier, it is another way of expressing it, because the risk
transfer was never solely what FRS 5 was about. What we were trying
to do on the ASB in those distant days when we concocted FRS 5
was to deal with off balance sheet financing by private companies.
That is often done by what are called "auto pilot vehicles"
which run themselves, so there is not any control; they run themselves,
so you cannot look at control and you have to say: "Well,
whoever, at the end, gets the variable returns must surely be
the person in control", because unless they are very stupid
they will have put something in place, even if it is not visible,
that makes sure they can avoid the worst happening if possible.
So that is why FRS 5 was there. There was always an element in
it of: "Well, who gets the benefit? Who controls or manages
the thing?" The IFRS view of control is that it has two wings;
one is power, which we normally think of as the power to direct
in some way—the power to determine the public sector service:
the quality, the price—but the other is that the power has
to be directed for the benefit of the person exercising power.
In the case of government, obviously, that means they have to
be able to direct it towards their ends, and that, if you like,
is a risk or rewards approach because you are saying: "Who
gets the benefits; who bears the risk, in the end, of service?"
So the two approaches are not so different, but the way IFRIC
12 has been drawn up, the rather stark way it is drawn up, puts
people on notice that there is really, almost, a rebuttable presumption
that things are on balance sheet, and I think that probably counteracts
the temptations leading to poor judgment.
Q134 Lord Griffiths of Fforestfach: My
Lord Chairman, I wonder if I can ask Mr Grice a question, because
I have only been involved in one major PFI contract, which is
the outsourcing of property services to the DHSS, then the Department
of Employment, now the DWPP—a 20-year contract—when
we, in winning the tender, took on tremendous risk, namely, that
we had thousands of properties, some of which the Department said:
"We will never want to get out of"; some of which they
said: "We want to get out of now" and some of which
they said: "We may want to get out of". For those properties
we took the risk that if they got out we would be able to re-let
them on terms which were reasonable, and we took on other risks.
My understanding was that when this was set up the Treasury, in
agreeing to a PFI project, said: "One of the key criteria
for something to be a PFI project" (regardless of accounting,
for a minute) "was that there has to be a material transfer
of risk from the public body to the private body. Is my understanding
correct?
Mr Grice: It is a little while ago since I was
directly involved with PFI schemes, but the basic proposition
was that the risks should be borne by the party best placed to
bear the risk—that would be the way to get the maximum welfare
for the country. That, I presume, is still the underlying presumption.
We use the accountancy rules simply to give us a judgment based
on the professional accountant's judgment, rather than our own,
as to whether that risk transfer has taken place or not. That
determines the position that we reach.
Q135 Lord Griffiths of Fforestfach: Can
I ask you: is the professional accountant the best person to give
you that judgment?
Mr Grice: The professional accountants, we will
expect, will be the people who will go through and analyse where
the risks were borne and how the mechanism had applied. I think
we would not feel that we could add value, as statisticians certainly,
in second-guessing in all 800 schemes, or whatever. There is one
other point in this discussion, if I might, and that is, really,
to put these numbers in context. The figures that we have are
that there are approximately 800 or so PFI/PPP schemes in being,
and the capital value is something of the order of £64 billion.
Of those, under the rules which Professor Whittington has doubts
about but which, nevertheless, are the ones we use for national
accounting purposes and public finance purposes, approximately
£25 billion or so are actually on balance sheet under those
rules. As it happens, some of the larger schemes which would not
be caught by those rules—London Underground schemes—are
ones where we judge, in any case, that the PFI counterpart is
part of the public sector because of the control. Again, that
leaves us, when we take that into account, with something of the
order of £5 or £7 billion of schemes at issue. Now,
£5 or £7 billion is, obviously, a large amount of money,
but that compares with the public sector net debt (and we published
a new figure this morning), and that was £825 billion. So
the amounts we are talking about here, in relation to the overall
public finance, are not negligible, of course, but they are actually
not that large in relation to the totals of the public finances
that we are talking about.
Chairman: Material, but only just.
Q136 Lord Tugendhat: This is a very technical
discussion and I must say I am having some difficulty in following
a great deal of it. I would like to ask one of the simpler questions
on this list, and that is how does the UK treatment of these liabilities
compare with elsewhere in the world? I do not mean in Europe because
that point has already arisen, but looking beyond Europe but within
the OECD area.
Ms Matheson: They, too, follow the system of
national accounts—the UN system of national accounts that
the European system is based on. So although the UN system is
voluntary, the expectation is that that is what countries will
follow.
Q137 Lord MacGregor of Pulham Market:
Can I just go back to Mr Grice's figures, in that supplementary
point you made? You told us where £32 billion were, and the
overall figure was £64 billion. The gap between the two,
the other £32 billion, how is that accounted for?
Mr Grice: On my figures something in the region
of £25 billion would be accounted for—that is actually
on balance sheet of the total—and something of the order
of £18 or £20 billion would be accounted for by the
London Underground schemes, and it is the rest which is really
at issue.
Lord MacGregor of Pulham Market: Thirty-six, but
not £5-£7 billion.
Chairman: Twenty billion. If you could give us a
little note on that, that would help.
Q138 Baroness Hamwee: I am very relieved
by what Lord Tugendhat confessed, because I feel much the same!
This, I think, is a political question rather than a statistical
one. If liabilities appear on the national balance sheet as a
matter of fact, depending on how each is treated but regardless
of how much risk is transferred, is there a risk of missing important
information?
Ms Matheson: Again, I think I have to go back
and say it depends on the purpose and what is the information
that you are trying to establish.
Q139 Baroness Hamwee: Let me put it a
different way. Is there a difficulty in interpretation, then?
I can absolutely follow what you are saying about it depends on
the purpose, but are we in a situation where we are making life
difficult for ourselves in producing information which does not
facilitate analysis and interpretation?
Ms Matheson: Again, I will ask Joe to come in
but I refer back; there are the national accounts and we discussed
the national accounts framework and what we are obliged to do.
There is additional information in order to be able to understand
public debt, and I think this falls into: "What is the additional
information that the public needs in order to have transparency
about what is actually happening", which is an important
principle. There are real difficulties in measuring, interpreting,
understanding and classifying what the range of information should
be, but that is why we have been looking to see what additional
information ought to be made available and could, practically,
be made available. We have talked just about the PFI schemes,
and 800 schemes—a lot of them very, very complex—each
of them having their own separate arrangements, so just understanding
what is happening there is a mammoth undertaking. Going beyond
that, the difficulties of interpreting do not disappear just because
you have something on balance sheet or off balance sheet.
Professor Whittington: That is a very good question
you put, really, because people do tend to take numbers in accounts
rather literally and they are usually first estimates that lead
to further analysis. Just think of all the credit crisis, bad
debts and the way people split them up into tranches and say they
have different qualities, when you add them all up they show a
total of liabilities. That is superficial, in a sense, but it
is a start. People crave simplicity; they have got to start with
something they can get their minds round, but it is certainly
true that you do need to dig deeper into accounts. The problem
there is (I have no doubt the national statisticians find the
same problem) that if you do lots of notes people say: "You
know, this is far too complicated—look how fat the accounts
are". Unfortunately, that is the truth; the truth is complicated.
So they are doing their best, their honest best, to give you a
start.
Baroness Hamwee: I was not suggesting otherwise!
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