Recommendation 4

The Treasury has improved long-term liability disclosures, but further work is needed to clearly convey their insights and relevance to readers. The WGA includes several large and complex liabilities, which the Committee has previously noted are difficult for readers to understand and whose values change significantly due to changes in the discount rate. The three largest liabilities include: • Nuclear Decommissioning provision: Decreased by £19.1 billion from £126.0 billion in 2022–23 to £106.9 billion in 2023–24. • Clinical Negligence provision: As of 31 March 2024, the Department of Health and Social Care (DHSC) reported clinical negligence provisions totalling £58.2 billion, a decrease from £69.3 billion at 31 March 2023. • Pension liabilities: net pension liabilities have decreased from £2,639.1 billion in 2021–22 to £1,311.9 billion at 31 March 2024. Discount rates are used to calculate the present value of future cash flows, reflecting how much a future obligation is worth today, and are closely linked to interest rates, gilt yields, and inflation. Under International Financial Reporting Standards (IFRS), HM Treasury correctly applies a real discount rate (adjusted for inflation) to value long-term obligations. However, the Committee has previously urged HM Treasury to present both discounted and undiscounted values for all major liabilities to improve transparency and accessibility for readers. We strongly believe these 5 figures should be comparable year-on-year so that it is possible to see what action is being taken by the Government to reduce these liabilities. In 2023–24 HMT produced discounted and undiscounted values for the nuclear decommissioning provision balance only. There is therefore no reason why they should not produce it for all other long-term liabilities. recommendation a. In addition to the discounted values required under IFRS, Treasury should disclose undiscounted values for: i) Nuclear Decommissioning provision, ii) Clinical Negligence