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March 19, 2012

Whole of Government Accounts – There Aren’t Any, Batman!

Posted by Andy Wynne

The stated objective of UK’s Whole of Government Accounts (WGA) was to provide consolidated financial statements covering the entire public sector, encompassing central government, local authorities, public corporations and all other bodies that exercise public functions or are funded entirely or substantially by public money (HM Treasury 2011, 49). The consolidated financial statements were expected to provide a measure of the financial health of the entire public sector in the UK. The publication of the UK’s first audited WGA at the end of November and their consideration by the Public Accounts Committee in early December provides an opportunity to consider what has actually been achieved, at what cost, and whether there are more efficient alternatives to meeting these objectives.


The UK WGA are indeed more comprehensive than those for other governments that have attempted a similar exercise (Australia, Canada, France, New Zealand and USA), as they include sub-national governments.  However, despite consolidating around 1,500 organizations, the WGA still exclude more than 1,800 more. The entities not covered include:

  1. The nationalized banks, for example, Northern Rock plc, which was held by the government for over four years, other major banks that are still being held, and the UK central bank, the Bank of England. At the balance sheet date, these banks had estimated gross assets of £2,862 billion and gross liabilities of £2,721 billion.
  2. Bodies not responsible to the government, for example, Parliament, the National Audit Office (and regional audit bodies) and the Crown Estate.
  3. Nearly 100 bodies considered too small to be consolidated.
  4. Public universities (130 in England), colleges of further education (400) and social housing bodies (1200 housing associations in England).
  5. Network Rail and other public owned rail companies.

Reliability and Comparability

The two main indicators, most commonly used to measure the health of public sector finance in the UK, are the public sector net debt and the public sector current deficit. The Office for National Statistics (ONS) publishes these figures every month within three weeks of the month end. These estimates are based on the statistical standards set out in the European System of National and Regional Accounts 1995 (ESA 95). The figures are directly comparable with those produced by other European governments. On 22 April 2010 the ONS published the following estimates as of March 31, 2010:

(i) Public sector net debt - £771.6 billion (later revised down by 1.5% to £760 billion)

(ii) Current deficit - £107.6 billion (later revised down by a little more than 0.5% to £107 billion).

The WGA (published around 20 months after the end of the year) produced alternative figures for these two key matrices. In place of the public sector net debt (£760 billion) a figure of net liabilities is provided in the Whole of Government Accounts of £1,212 billion.  This difference is a result of adding a net public service pensions liability of £1,132billion (and other liabilities of £135bn) and subtracting other assets of £815 billion. In place of a current deficit (£107 billion) the WGA provide a total net deficit of £165 billion. To make this more confusing, the figure for net public service pensions (civil service pension liabilities) increased by £330 billion during the year, largely reflecting a decrease in the rate at which the future payments are discounted from 3.2% to 1.8% (this rate has subsequently increased back to 2.7% reversing most of these changes). This illustrates the impact small changes in the underlying assumptions can produce on the final numbers. The commentary to WGA admits that, “A number of key assumptions were used to calculate public service pension liabilities. These include the rate of increase in salaries and pensions indexation as well as the discount rate. As with all long-term economic projections, these assumptions are inherently subject to significant uncertainty. The value of the public service pension liability is very sensitive to changes in these assumptions (Page 20)”.

The credibility of the WGA is further reduced as the accounts were qualified on five significant bases and the HM Treasury expects them “to be qualified for some time to come”.  Similarly, the consolidated accounts of the US Government are still qualified every year after 13 years since their introduction, as are those of the French Government (after four years).

Despite the above problems the production of Whole of Government Accounts was a huge exercise and will require further extensive work in the years to come.  But at least some of the key information could have been provided more easily by a direct exercise. As the commentary on Whole of Government Accounts says about the change in the pension liability, “Much of the information behind this increase has already been made available through publications by the major public service pension schemes (page 11)”.


In an earlier post on this blog, Richard Hughes declared that the publication of the Whole of Government Accounts “represents a major milestone in UK fiscal reporting and public sector accounting practice in general”. Whether this turns out to be the case will depend on significant improvements to the scope and reliability of the UK Whole of Government Accounts, and a significant number of other countries following this path to enable the information to be comparable internationally.

HM Treasury declared that “The aim of WGA is to enable Parliament and the public to understand and scrutinise how taxpayers’ money is spent (Page 8)”. Given the omission of so many organizations that are considered by the public to be public funded, the complexities of the exercise, and the uncertainties surrounding the key public finance indicators the WGA provide, it is not clear that this aim is likely to be achieved any time soon. Perhaps in these times of financial constraint, the £1.5 million the Treasury estimates it spent on the exercise would have been better spent on other priorities.


HM Treasury (2011) Whole of Government Accounts - Year ended 31 March 2010, November, HC 1601


Office for National Statistics (2010) Public Sector Finances March 2010, 22 April 2010


Public Accounts Committee (2011) Whole of Government Accounts, oral evidence, Monday 5 December 2011


Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.


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Thank you Andy for this very interesting and documented post. Your last question is particularly relevant in developing countries, where the cost of some financial reforms actually exceeds the national resources.

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