However a former Treasury adviser has accused the government of hiding the full extent of public debt by using controversial accounting rules to take £32.5bn off the books.
An astonishing 87 per cent of private finance initiative deals – under which the taxpayer pays private firms to build and run hospitals, roads or school premises – have not been properly accounted for on the government’s books, the research reveals.
In a controversial move, the government is using a new, internationally recognised and much fairer IFRS set of accounting rules in its internal forecasts – but still using the old system when publishing the national accounts and calculating national debt figures released to the public.
The existence of this two-tier system was slammed last night by the report’s author, professor David Heald of the University of Aberdeen, who until July was a member of the Financial Reporting Advisory Board (FRAB), which advises the government on its accounting procedures.
The external accounts are produced according to the Eurostat system of accounting, required as a measure of collating figures released to the Office of National Statistics (ONS). But Heald attacked these rules as “incredibly lax”, adding: “The government is hiding behind weak accounting rules and pretending the debt is not as high as it genuinely is.”
Philip Hammond, the shadow chief secretary to the Treasury, also hit out at the government, saying: “Only a day after we discovered the Prime Minister misled the country about his plans for spending cuts, we find out the government is trying to hide £32bn of debt off the balance sheet. Labour is taking the public for fools.” (Link )
It seems we’re now at an economic turning point in the UK. If the economy improves from here on the government’s forecasts will be accurate but if the figures keep getting worse it will be apparent to everyone that they’ve completely lost control – at which point expect a stock market and sterling crisis.
(In fact speaking of sterling – it needs watching. The last few days have seen it looking rather unhealthy.)