Five Years of the UK’s Long-Term Public Finance Report: Has it Made Any Difference?

Wright

2019

Abacus

Whatever the final charge on the UK for leaving the EU, the money itself is relatively marginal to the former's public finances. However, this charge is politically sensitive and financially aggravating during one of the longest periods of fiscal austerity in the UK's history. The ways in which leaving is conceptualized have implications for any continuing financial obligations that must be managed within the context of fiscal austerity and political uncertainty. Yet, leaving the EU is a unique transaction: it is not analogous, for example, to a divorce settlement, the leaving of a club, the termination of a commercial contract, the leaving of a treaty-based international organization, or secession from a state. Analyzing the formulation of the charge in terms of the four modes of government accounting-financial reporting, statistical accounting, budgeting, and fiscal sustainability projections-enhances its fiscal transparency. It evidences not only the weakness and inconsistency of the UK's negotiating position but also the dominance in EU thinking of the short-term budgetary calculations of the 2014-20 Multiannual Financial Framework over its long-term sustainability without a large net contributor. The final amount paid by the UK will depend on the resolution of competing perspectives as well as on liabilities and contingent liabilities associated with the increasingly complex EU financial architecture.

Section: Four Modes Of Government Accountingmentioning

confidence: 99%

The UK's Exit Charge from the EU: Insights from Modes of Accounting

Wright

2019

Abacus

“…A significant contribution of the early UK Treasury work on fiscal sustainability modelling (Eich 2008) was its schematic presentation of the relationship between modes of government accounting. The financial reporting accrual-based balance sheet recognizes 'future liabilities from past activities'.…”

Section: Four Modes Of Government Accountingmentioning

confidence: 99%

Accounting for government guarantees: perspectives on fiscal transparency from four modes of accounting

Accounting and Business Research

Hodges

2018

Government guarantees are increasingly important as a policy instrument in public infrastructure investment and to assist the banking and financial sectors following the global financial crisis. This paper analyses how different modes of accounting characterize such guarantees in the contexts of public sector financial reporting, statistical accounting, budgeting and long-term fiscal projections. Guarantees are difficult to specify for accounting treatment and consistent conceptualization of liabilities. These difficulties make it attractive for governments to treat obligations as off-budget and off-balance sheet contingent liabilities, rather than recognize them in financial statements and statistical accounts. Miller and Power's territorializing, mediating, adjudicating and subjectivizing roles of accounting are utilized to analyse the reporting of UK government guarantees. Provisioning for guarantees is complex in financial reporting statements and often absent in national accounts, a deficiency which Eurostat has attempted to address by devising the concept of standardized guarantees and by securing more disclosure of contingent liabilities. There is potential for future research especially where there is greater mediation between the four modes of government accounting.

“…The first public manifestation of this Treasury work was the Long‐term Public Finance Report (Treasury, 2002c), published for the first time alongside Pre‐Budget Report 2002 (Treasury, 2002b). An expanded explanation of the thinking behind the projections appeared in the 2003 Report (Treasury, 2003) and is further elaborated by Eich (2008), who led these developments when working in the Treasury.…”

Section: : the Uk Conception Of Wgamentioning

confidence: 99%

The Macro‐Fiscal Role of the U.K. Whole of Government Account

Georgiou²

2011

Abacus

The U.K. Whole of Government Account (WGA) has been conceived by the Treasury as having a macro‐fiscal role. This WGA is about fiscal transparency at the aggregate level, rather than at a more disaggregated level with regard to public sector decision makers at tiers of government, each with their own chain of accountability. This paper analyses the U.K. conception of the WGA, examining its theoretical background and evolution since the 1995 decision to convert central government accounting from cash to accruals. The definition of the area of consolidation is governed by statute, the declared intention being to align as far as possible with the national accounts definitions that provide the basis for fiscal aggregates, thereby overriding IAS 27. Net liabilities per WGA is mapped in this paper to macro‐fiscal aggregates, including public sector net debt (the U.K. preferred measure), general government gross debt (the EU preferred measure) and public sector net worth (national accounts). Conceptually, the WGA measure is situated between net debt (against which only liquid assets are netted) and the long‐term cash projections developed by the Treasury. Insights are provided into the damage inflicted on U.K. public finances by a period of over‐optimism about fiscal performance and the economy's heavy exposure to the global financial crisis. Fiscal retrenchment in all countries can have a substantial illusory component, as proposals may reduce some measures of deficit and debt at the expense of the public sector balance sheet, to which the WGA draws attention. These measures may include: privatizing state assets; neglecting existing public sector assets; cutting public sector capital expenditure; substituting public–private partnerships for conventional procurement; and posting bills to the future. The U.K. WGA may also institutionalize some protection against accounting arbitrage that distorts policy choices and fiscal reporting. Well‐documented reconciliations between figures derived from national accounts and from IFRS‐based financial reporting are therefore imperative for fiscal transparency.