Putting the wrongs to right

By the same token, government should not be able to choose its own accounting principles. For example, it is accepted practice for the government to decide whether or not it should recognise liabilities. This is wrong.

So is the government’s ability to change the definition of public spending at will. In April shadow chancellor Michael Portillo set up a Shadow National Accounts Commission: a series of distinguished experts in the field of public accounting.

Chaired by Sir Bryan Carsberg, the SNAC’s remit was to examine how a future government could introduce independent and transparent criteria for the presentation of the UK’s public finances. The report was published this week, and its recommendations will form the core of our future policy.

The establishment of an independent National Accounts Committee will be one of the first acts of a new Tory government. The NAC will remove the discretion from the government to distort the national accounts in ways that it deems politically advantageous.

As well as pension liabilities, a subject for the NAC’s attention will be the status of projects under the Private Finance Initiative and Public-Private Partnerships. The NAC will also take a close look at the way the current government regards benefits such as the working family tax credit rather than social security payments.

The NAC will also provide a dose of long-termism by spelling out the financial implications of policy decisions.

Under the current government, the need for such transparency is increasingly obvious. The national accounts are year-by-year falling into disrepute.

Of course, the chancellor would still have total flexibility in policy making, but would have to take account of the commentary provided by the NAC, in a way that previous chancellors have not.

It would be a brave chancellor who consistently failed to consider the advice he was given. Especially if he then turned out to be wrong.

Oliver Letwin is shadow chief secretary in the Conservative Treasury.