Whitehall Monitor. No. 23: Whole of Government Accounts (Assets and Liabilities) June 2013

Transcription

1 Whitehall Monitor No. 23: Whole of Government Accounts (Assets and Liabilities) June 2013 David Bull and Petr Bouchal Promoting the efficiency and effectiveness of government in the UK

2 Institute for Government The Whole of Government Accounts June 2013 I think the whole of Government accounts is incredibly powerful because [it allows spending teams to help departments think about] not only how [the department] is living with its current spending review efficiency savings, but how it feels about the next five or 10 years of potential financial risk. - Sharon White, Accounting Officer for the Whole of Government Accounts, PAC hearing on WGA (11 March 2013) The Whole of Government Accounts (WGA) consolidates the financial statements for the whole of the public sector of Great Britain and Northern Ireland and presents them according to International Financial Reporting Standards (IFRS). It includes information on the Government s revenue, expenditure, assets and liabilities. 1 Summary The vast majority of government assets are in infrastructure assets, buildings and dwellings. The Government s pensions liability ( billion, 2010/11) and its borrowing and financing ( billion, 2010/11) are its most significant liabilities. Provisions for clinical negligence and nuclear decommissioning are some of the government s fastest growing liabilities. 2 1 Assets are defined as those resources controlled by government from which future revenue can be generated. Liabilities are obligations on government arising from past transactions or events. Each is further divided into current and non-current. Non-current assets are those that will be used continuously and repeatedly for more than one year. Non-current liabilities are those for which the obligation falls after more than one year. 2 Provisions are the amounts set aside for costs that will have to be met at some point in the future. These are therefore estimated costs and subject to change over time. 2

3 Institute for Government The Whole of Government Accounts June 2013 Assets and Liabilities 3 Statement of Financial Position ( bn) ( bn) Assets Liabilities (2476.8) (2421.1) Net Liability (1227.9) (1193.4) Source: WGA , Consolidated Statement of Financial Position, pp Assets 4 Composition Property, plant and equipment makes up 710 billion (57.8%) of the Government s assets (Figure 1). Property plant and equipment is primarily composed of infrastructure assets ( billion), buildings ( billion) and dwellings ( 85.6 billion). 5 Figure 1: The Government s total assets ( billion) 6 Other financial assets, All other assets, Trade and other receivables, Property, plant and equipment, See Annex, Figure 4 4 See Annex, Figures 5 and 8 5 The student loans book is included amongst Other Financial Assets, and totalled 29.6 billion. 6 All other assets have been grouped here for simplicity. In the original WGA document these are composed of: Equity investments in public sector banks ( 56.5bn), Intangible assets ( 34.3 bn), Cash and cash equivalents ( 22.5bn), Inventories ( 12.0bn), Investment properties ( 12.4bn), Gold holdings ( 9.0bn), Assets held for sale ( 1.9bn) 3

4 Institute for Government The Whole of Government Accounts June 2013 The majority of government assets are non-current assets (Figure 5), meaning that they will be used continuously and repeatedly for periods greater than one year. 7 Significant changes In contrast to other areas of the WGA, assets do not show any stand-out changes between the reporting periods. The largest change in Government assets was a decrease of 23 billion in other financial assets (Figure 8). This was driven by a sharp decline in Government deposits with banks. Liabilities 8 Composition Government liabilities are dominated by the public sector pensions liability ( billion) and Government financing and borrowing ( billion). Together these account for 77.14% of Government s total (current & non-current) liabilities. 9 Figure 2: The Government s total liabilities ( billion) Net pension liability Government financing and borrowing Other financial liabilities Provisions for liabilities and charges Trade and other payables Liabilities Non-current Current 7 Whole of Government Accounts , p See Annex, Figures 4 and 6 9 For a breakdown of these categories, see Figure 7. 4

5 Institute for Government The Whole of Government Accounts June 2013 Significant changes Despite their considerable size, the net pensions liability and government financing and borrowing also showed very large proportional changes between the reporting periods. Government financing and borrowing increased by 16.2%, whilst the net pensions liability (owing to the change from RPI to CPI) decreased by 15.4% (Figure 8). Net Liability The Government s net liabilities decreased by 34.5 billion (2.8%) between 31 March 2010 and 31 March 2011 (Figure 3). The majority of this decrease is accounted for by the significant reduction in the pensions liability (discussed above). Figure 3: Net Liabilities according to the WGA for 2009/10 and 2010/11 ( billion) Net Liability, Liabilities, Net Liability, Liabilities, Assets Assets, / /11 Next Steps The next edition of the Whole of Government Accounts will be published in the near future. At this point, The Whitehall Monitor will publish a new bulletin that seeks to analyse trends in light of the data that we already hold. The Whitehall Monitor Annual Report (set for publication in July) will take a closer look at the implications of these insights. The WGA draws attention to the vast assets and liabilities that are under the Government s control. Our report will seek to determine the extent to which these are being effectively managed and controlled. 5

6 Liabilities Assets Institute for Government The Whole of Government Accounts June 2013 Annex Figure 4: Total assets and liabilities by sub-type for the financial year ( billion) Property, plant and equipment Other financial assets Trade and other receivables Equity investments in public sector banks Intangible assets Cash and cash equivalents Investment properties Inventories Gold holdings Assets held for sale Net pension liability Government financing and borrowing Other financial liabilities Trade and other payables Provisions for liabilities and charges

7 Assets Institute for Government The Whole of Government Accounts June 2013 Figure 5: Current and non-current assets by type for the financial year ( billion) Property, plant and equipment Other financial assets Trade and other receivables Equity investments in public sector banks Intangible assets Cash and cash equivalents Investment properties Inventories Gold holdings Assets held for sale Assets held for sale Gold holdings Inventories Investment properties Cash and cash equivalents Assets Intangible assets Equity investments in public sector banks Trade and other receivables Other financial assets Property, plant and equipment Non-current Current

8 Liabilities Institute for Government The Whole of Government Accounts June 2013 Figure 6: Current and non-current liabilities by type for the financial year ( billion) Net pension liability Government financing and borrowing Other financial liabilities Trade and other payables Provisions for liabilities and charges Liabilities Provisions for liabilities and Government financing and Trade and other payables Other financial liabilities charges borrowing Net pension liability Non-current Current

9 Institute for Government The Whole of Government Accounts June 2013 Figure 7: Breakdown of the Government's largest liabilities for the year ending 31 March 2011 ( billion) Treasury bills, 63.6 National Savings & Investment products, 98.9 Other unfunded, 9.1 Fire, 19.8 Other funded, 19.9 Local government, 57.1 Police, 93.8 Armed Forces, Civil Service, Gilt edged securities, Teachers, NHS, Government financing and borrowing Liabilities Net pension liability Source: IfG analysis of WGA , Note 24, p.153, and Note 27.4, p

10 Assets Liabilities Institute for Government The Whole of Government Accounts June 2013 Figure 8: Absolute changes in the Government's assets and liabilities between 31 March 2010 and 31 March 2011 ( billion) Trade and other payables Provisions for liabilities and charges Other financial liabilities Net pension liability Government financing and borrowing Trade and other receivables Property, plant and equipment Other financial assets Investment properties Inventories Intangible assets Gold holdings Equity investments in public sector banks Cash and cash equivalents Assets held for sale Source: IfG analysis of WGA , Consolidated Statement of Financial Position, pp