For the last ten years or so the government has been moving towards a normal commercial basis of management. Under various names, such as resource accounting or accruals accounting, a tremendous amount of work has been done to get individual departmental systems changed. And soon we will get the consolidated version – the so-called whole of government accounts.
It has been an enormous undertaking and all of those involved deserve congratulations. The previous public sector system of cash accounting and inflexible budgets was inefficient and often actually incentivised waste. But why should we care?
The government takes and spends about half of our national income. Important to all our lives then. The consolidated accounts will tell us where it gets the money from and what it spends it on. And in a format many of us will be able to understand. A big advance for democracy.
The subsequent trickle effect will be much more important. Government processes are set on the basis of doing the right thing and arse covering – the main aim is to be re-elected. Keeping things simple is not a major priority. But the complexity of government is a major source of waste and a major cause of our tax burden.
As people come to understand how the government spends our money there will be greater and persistent pressure to achieve efficiencies. Over time we can expect decision-making inside government to improve as it will become essentially the normal commercial decision-making process.
We could well see more accountants moving between the public and private sectors, and we can reasonably confidently expect better decisions, more rationalisation and lower costs. The benefit in this can be enormous.
Of course, all this will take a very long time – probably decades. But as that great democrat chairman Mao said ‘the journey of 1,000 miles starts with the first step’.
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