UK Politics

Government accounts show 'gobsmacking' costs

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Media captionMargaret Hodge said the figures were staggering and it was important to make them public

Estimates showing £10.9bn in unpaid tax was written off and medical negligence could cost £15.7bn are "gobsmacking", says the Commons spending watchdog.

The public accounts committee has published its verdict on the new Whole of Government Accounts (WGA).

The report also predicts the long-term costs of decommissioning nuclear power stations could hit £56.7bn while public sector pensions could cost £1,132bn.

Ministers said it was the world's most ambitious set of public accounts.

The figures are a set of financial records for the entire UK public sector, from 1 April 2009 to 31 March 2010 - under the previous Labour government - based on commercial accounting principles.

They are intended to show what the government owns, owes, spends and receives.

The public accounts committee criticised the Treasury for providing figures that were "too dated", because of the 20 months it took to get them published, and complained that some major costs were omitted such as the publicly-owned banks and Network Rail.

But its chairman, Labour's Margaret Hodge, told the BBC: "This is the first time they have been published and I think we should welcome that."

The WGA included estimates for costs decades into the future, "and that's why we've got some really gob smacking figures", she told the BBC.

'Volatility' in rates

Her committee's report flags up the £10.9bn tax figure - which the WGA figures published in November say is an estimate which also reflects the cost of legal proceedings against taxpayers - and says the Treasury "showed surprise" at the amount.

It also says the Treasury "had no knowledge of recent trends in clinical negligence claims or whether plans were in place to reduce the estimated £15.7bn cost to taxpayers of meeting these claims".

The WGA also shows the bulk of liabilities expected from "previous activities" - 56% - was the cost of decommissioning the UK's nuclear power stations, which over time is predicted to cost £56.7bn. The net liability of public sector pensions is predicted to be £1,132bn.

But MPs on the committee pointed out that calculating such long-term costs in today's money was imprecise - because of "inconsistency" and "volatility" in the rates used to calculate the present value of future money.

For example, different rates were used to calculate the pensions and nuclear costs and the rate used to calculate pensions changed during 2009-10 - which in itself increased the total by £300bn.

The committee welcomed the potential for helping the government to identify the risks it "needs to manage".

'Generally poor'

But evidence given by officials during hearings had suggested their understanding of some aspects was "poor".

"The Treasury should use the WGA specifically to identify key risks to public funds and ensure bodies included in the WGA can demonstrate that they are addressing them effectively."

The report added: "We were surprised to find that the Treasury did not have a grip on trends in some key areas of risk or plans for managing them."

And Mrs Hodge said the Treasury had "departed from accounting standards by leaving out of the accounts such bodies as Network Rail and the publicly owned banks" - which led to the accounts being qualified by the National Audit Office.

The MPs' report also raised concerns about the quality of data, saying the financial information provided by academies - which in 2009-10 accounted for £1.2bn of government spending - had been "generally poor".

A Treasury spokesman said: "The government welcomes the public accounts committee's recognition that the publication of the Whole of Government Accounts represents a 'major step forward in improving transparency and accountability'.

"This is the most ambitious public sector account prepared anywhere in the world. No other country has sought to fully consolidate all public sector bodies, including the local government sector, in one statement of accounts.

"We will build on this first publication and are working hard to remove any qualifications."

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