For the third consecutive year, ICAEW is contributing to the Institute of Fiscal Studies’ Green Budget, which is being launched at Guildhall today. The publication provides an assessment of fiscal issues likely to be addressed in Philip Hammond’s first Budget next month.
Our chapters in the 2017 publication examine the Whole of Government Accounts (WGA) and the Government’s debt and financing strategy.
Whole of Government Accounts
Our first chapter provides an analysis of the Government’s liabilities through the lens of WGA. The WGA are a world-leading development in public sector financial reporting, but progress is needed to reduce the 14 months taken to produce them. A better commentary and more timely preparation would improve their effectiveness as a tool to support good public financial management.
To put things into perspective, debt as recorded in the WGA is now equivalent to £130,000 per household – as opposed to £70,000 recorded in the National Accounts, which is the figure most often quoted. In order to restore trust in Government, and to give taxpayers a clear picture of how much liability the Government has assumed on their behalf, it’s important that more emphasis be placed on the WGA.
Our second chapter focuses on the Government’s debt funding strategy and the need to refinance a substantial proportion of existing debt. The government needs to raise £646 billion from external investors over the next five years, £11 billion more than the amount raised over the last five years. This is despite £293 billion less being needed to fund fiscal deficit. It will need to be raised in a period of political and economic uncertainty – but continued access to debt markets is essential to continue to deliver UK spending plans.
The last debt management strategy was published in 1995, prior to events such as the global financial crisis and Brexit. We recommend that Government update this strategy to ensure it is fit for purpose.
This year’s publication comes at a crucial time for the public finances, given the new fiscal targets and direction that were set out in the Autumn Statement a few months ago. I hope that it continues to inform good decision-making, and that it will offer some much-needed perspective for policymakers as well as the wider public in these uncertain times.