Source · Select Committees · Public Accounts Committee
Recommendation 3
3
The WGA does not provide assurance that significant risks to the UK’s financial sustainability are...
Conclusion
The WGA does not provide assurance that significant risks to the UK’s financial sustainability are well managed. A key consideration for any organisation is its financial sustainability. There are several government liabilities disclosed in the WGA that, due to their size and nature, represent significant risks to the UK finances. For example, the liabilities related to nuclear decommissioning are complex and costly, being valued at some £152.2 billion at 31 March 2019. The provisions arising from clinical negligence are now valued at £85.3 billion, with a similar level of new cases being reported every year. In future years, the government will be further exposed to liabilities arising from its response to COVID-19 that will require strategic management. Yet the WGA does not explain how the Treasury works with other departments and bodies who manage the activities underlying the liabilities to ensure that the risks to financial sustainability are well managed and that taxpayers are getting value for money. Recommendation: The Treasury should provide meaningful insight through the WGA into how it works with other government bodies to ensure risks to financial sustainability are appropriately managed.
Government Response
Acknowledged
HM Government
Acknowledged
3.1 The government agrees with the Committee’s recommendation. Target implementation date: Autumn 2021 3.2 HM Treasury works closely with other government departments to ensure that public funds are managed effectively and sustainably, with close spending control oversight of all spending and balance sheet risks, to deliver the government’s policy objectives. The government also values independent analysis and commentary on the sustainability of the public finances, particularly through the biennial publication of the OBR’s Fiscal Sustainability Report. 3.3 The Balance Sheet Review, which concluded in November 2020, aimed to strengthen control of long-term risks and the costs of liabilities, to identify opportunities to dispose of assets that no longer serve a policy purpose and improve returns on retained assets. The government has put in place a number of further actions to strengthen risk management in line with its recommendations including improving the identification and mitigation of balance sheet risks and improving capability to understand and manage balance sheet risk in a strategic way. Future WGAs will continue to report on these developments in balance sheet management and set out how they support the management of risks to financial sustainability. WGA 2019-20 will also provide more information on how the key liabilities in the account are managed, how they have evolved over time, and how value for money is achieved in discharging these obligations. It will also draw on information produced by the OBR on wider spending projections, to place the accounting liabilities in a broader context.