Conclusion 5

The impact of discount rate changes is obscuring the ability to identify meaningful trends in large public sector financial liabilities within the WGA. The discount rate is the rate of return used to discount future cash flows when calculating a liability’s present value. The WGA includes several large liabilities which are heavily impacted by changes in the discount rate. For example, the provision in WGA for future decommissioning of nuclear facilities decreased by £126.2 billion from £273.1 billion in 2021–22 to £146.9 billion in 2022–23, with the discount rate decreasing the provision by £131.8 billion. But the forecast cost to the taxpayer actually increased by £11.7 billion in the year 2022–23 and has increased again by a further £10.3 billion in 2023–24. We looked at this further as part of the Committee’s visit to Sellafield in February and will are due to hold our subsequent evidence session at the end of March. The net public sector pension liability also reduced from £2,639 billion at the end of 6 2021–22, to £1,415 at 31 March 2023 due to changes in underlying actuarial assumptions, including the changes to the discount rate. However, it is not possible to separately see the impact of the discount rate from other actuarial assumptions (such as life expectancy of future retirees) that change each year, and real changes in cash flows are obscured. recommendation a. The Treasury should include additional information within the 2023–24 WGA to demonstrate the undiscounted position of significant liabilities and provide trend analysis and narrative to explain the changes to these discounted figures over time. This narrative should include information on how the Treasury and Departments are actively managing these liabilities. b. The Treasury should also increase disclosure on actuarial assumptions other than the discount rate and how they impact government liabilities.