Select committee inquiry

Government borrowing and whole of government accounts inquiry

Closed

Public Accounts Committee · Opened 3 November 2017 · Closed 3 November 2017

What the inquiry looked at

“Since the financial crisis of 2008, government debt and borrowing has increased at a faster rate. Although a recent National Audit Office report found that the Government has borrowed at a relatively low cost, questions still remain about managing the public finances over the years ahead. In 2015–16, debts from government borrowing were £1,261 billion, roughly £47,000 for each household in the UK. Since 2009-10, borrowing has increased by 61% and the Government has paid out £222 billion in interest. The Government borrows money by issuing bonds through the Debt Management Office (DMO), and by encouraging savers to invest in National Savings and Investments (NS&I). However, changes in government policy, paired with risks and uncertainty about government income and spending, have led to DMO being asked to raise an extra £21 billion over the last quarter of 2016–17. The proportion of government bonds linked to indexes has risen to 34% in 2017 from 24% in 2009—and the Office for Budget Responsibility predict that a 1% increase in inflation could increase these index-linked debts by £26 billion. Although Treasury has begun to improve how it analyses risks associated with debts, this work is in its early stages. With potential uncertainty coming from EU departure and the winding down of quantitative easing, it will be important that Treasury monitors potential problems and strengthens forecasting. The Public Accounts Committee will ask officials from HM Treasury, DMO and NS&I how they are managing risks associated with government borrowing, and what they are doing to make sure they can better forecast the government’s borrowing needs. The Committee will also ask about the overall health of the government’s balance sheet—the Whole of Government Accounts.”

The committee's words, from the inquiry page on parliament.uk ↗.

What it found

In the committee's words, from the summary of 16th Report - Government borrowing and the Whole of Government Accounts ↗

The Government’s high level of debt leaves little room for manoeuvre in public spending.

The as yet unknown costs of Brexit place a further limit on the Government’s ability to react to further economic shocks. As the Government looks to reduce borrowing and debt to meet its fiscal targets, decisions affecting the public finances will need to be sufficiently visible to Parliament and the public. The UK Debt Management Office’s and National Savings & Investments’ ability to respond to any financial crises and possible need to increase borrowing levels significantly may be more difficult in the future; because of the increasing exposure to rising inflation and the eventual unwinding of the Bank of England’s quantitative easing programme.

The Whole of Government Accounts (WGA) provides us with a clearer picture of all public sector finances than ever before. It is particularly useful in highlighting future liabilities such as pension costs. We are encouraged by the improvements that the Treasury has made to the WGA, but its value remains limited by the delays to publication and the lack of information in key areas. We welcome the steps that the Treasury is taking to strengthen the understanding and management of the Government balance sheet but, to have a lasting effect, the Treasury will need to embed best practice in routine decision-making across government to ensure we are both harnessing the assets and managing down the risks from our increasing liabilities in the longer-term.

There is still work to be done to ensure that the WGA is a useful and useable document for Parliament and ultimately the individual citizen and taxpayer.

What the government said

No government response is linked to this report.

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How the inquiry ran

Each dot is a dated item listed on this page, from the inquiry's opening on 3 November 2017 to 26 January 2018.

Oral evidence 29 Nov 2017
Report 26 Jan 2018
Correspondence 3 Jan 2018
Nov 20172018Jan 2018

What it recommended

The committee's recommendations are not listed here yet. Read them in 16th Report - Government borrowing and the Whole of Government Accounts ↗ on parliament.uk.