Towards the end of last year, HM Treasury gave evidence to the Public Accounts Committee (PAC) on the level of government borrowing and the Whole of Government Accounts (WGA). Whilst the transcript of the oral evidence is rather lengthy, the PAC published a report at the end of January which is an interesting read. Please click here to access the report.
Some of the key points made in the PAC report on government borrowing and WGA are:
- Government’s annual spending has exceeded its income for the last 15 years.
- UK government debt remains too high relative to economic performance, potentially reducing the government’s capacity to respond to future shocks and uncertainty.
- The Government recognises that productivity growth over the last few years has been disappointing. It has now increased the amount it expects to borrow by £55 billion between 2018−19 and 2021−22.
- Index-linked gilts now make up 34% of the gilt portfolio, increasing the exposure to inflation risk, which could raise the cost of borrowing considerably. Interest on debt cost government £222 billion in the period 2009−10 to 2015−16.
- The value of WGA remains limited due to delays in publication and lack of information in key areas. The Treasury published WGA 2015−16 in July 2017, 16 months after the financial year end.
The report covers further interesting topics such as Brexit and quantitative easing, which I have not highlighted in this blog. The discussions show that HM Treasury is aware of the potential risks of having large debt (relative to income). The current overarching aim is for deficit reduction to increase UK's resilience to unforeseen economic shocks but this could easily change . . .
If you have any views on the points made, please leave a comment. I would love to hear from you.