Source · Select Committees · Public Accounts Committee
Recommendation 11
11
The scale of the likely increase in government borrowing to fund government’s response to COVID-19...
Conclusion
The scale of the likely increase in government borrowing to fund government’s response to COVID-19 is a significant new challenge to the Treasury’s objective to place the public finances on a sustainable footing.22 In its report on Evaluating the government balance sheet: borrowing published in November 2017, the NAO noted that the Treasury had begun to strengthen its approach to analysing the government’s balance sheet and evaluating fiscal risk, but the work at that time was at an early stage and not sufficiently embedded to provide the Treasury with a common view of risk to inform its decision- making.23
Government Response
Acknowledged
HM Government
Acknowledged
1.1 The government agrees with the Committee’s recommendation. Target implementation date: Autumn 2021 1.2 The government is committed to transparency on fiscal risks and welcomes independent scrutiny of risk exposure. Every year the Office for Budget Responsibility (OBR) publishes either a Fiscal Risks Report or a Fiscal Sustainability Report, providing comprehensive surveys of near-term fiscal risks and longer-term pressures on the public finances. Every other year the government publishes its response to the Fiscal Risks Report, setting out the action the government is taking to manage the fiscal risks identified. The OBR will publish its third Fiscal Risks Report in 2021. The International Monetary Fund (IMF) and the Organisation for Economic Cooperation and Development (OECD) have recognised the OBR Fiscal Risks Report as one of the most comprehensive of its kind. The OBR is the UK’s official economic forecaster and produces an 16 Economic and Fiscal Outlook twice a year. The OBR’s publications are the best sources for official forward- looking assessments of the fiscal position. 1.3 The Whole of Government Accounts (WGA) financial statements are, like any other audited set of accounts, a record of past financial performance, and give an assessment of the balance sheet at a defined point in time in the past. They do not include forward-looking assessments of the fiscal position or estimates of the government’s exposure to fiscal risk: applying the relevant accounting standards to government accounts does not generate that information. But the accompanying performance report gives us the opportunity to include a broader commentary, beyond the scope of the audited accounts, including summary information on the forward-looking position, drawing on information published by the OBR. In the WGA 2019- 20, the performance report will set out additional forward-looking information and commentary on the Treasury’s overall approach to managing the financial position and fiscal risk. It will include more information on the principal risks and uncertainties facing the economy and their potential implications for the WGA in future years. And it will include greater information on the profile of future cash flows from existing WGA liabilities and more information on expenditure on COVID-19, based on available published data sources including departmental data.