A working group containing some of the most senior members of the profession
has urged the Treasury to include billions of pounds of extra debt on its
balance sheet, after one of the most rigorous assessments of PFI accounting to
The report, which is unanimous in its opinion, is understood to have
highlighted grave problems in the way in which the Treasury records its private
finance transactions, many of which are not shown on its balance sheet and
therefore misrepresent the government’s debt.
Last year the Treasury tasked the
Reporting Advisory Board to look into a range of assumptions used in
complying with Treasury accounting standards. Members include Martin Sinclair,
NAO assistant auditor general, Ian Mackintosh, ASB chairman, and Jeff Tomlinson,
head of accounting at the Department of Health, as well as other private sector
A report from the FRAB working group, thought to have been handed to the
Treasury, revolves around a piece of Treasury accounting guidance – Technical
The working group say the guidance has led to ambiguity and inconsistency in
accounting assumptions, sources said.
When compared with private sector standards, the Treasury’s rules lead to
underestimations of government debt as departments seek to downplay their
liabilities. The working group made the recommendations after going through a
series of theoretical exercises involving models of real examples taken from
departments such as the cash-strapped National Health Service and the Home
The board met Treasury representatives on Monday to discuss the findings. ‘No
decision has been made yet. If the guidance is to be removed, it would be a
ministerial decision. But the group will probably now go back to find the best
way of making the transition seamless. The accounting ought not to get in the w
ay of business,’ a source familiar with government thinking said.
Any move to increase government debt could be politically embarrassing for
chancellor Gordon Brown, putting in danger a golden rule that debt should not
exceed 40% of GDP.
Chris Frayne of the Institute for Fiscal Studies said: ‘It may be that a
large reclassification would lead to an amendment of how the sustainable
investment rule is assessed.’
The Treasury said this week that the report had not been delivered yet. ‘The
Treasury will consider any recommendations made by the FRAB following the FRAB’s
discussion on the working group’s final report,’ a Treasury spokesman said.
Legislation on the NICs changes to be brought forward in the autumn following publication of 'the full effects of the changes to Class 2 and Class 4' in the summer
The SME community voices concern about the chancellor's measures in the Spring Budget
Following chancellor Philip Hammond’s Spring Budget speech, we explore the key takeaways for businesses and individuals
One of the bigger announcements of the final Spring Budget is the raising of Class 4 NICs for the self-employed