Source · Select Committees · Public Accounts Committee
Recommendation 26
26
Accepted
Discount rate volatility hinders clear understanding of WGA Net Liabilities for ordinary readers.
Recommendation
We challenged the Treasury over the difficulty that an ordinary reader would have understand the actual movement in large liabilities from year to year.58 Written evidence received from Professor David Heald also noted that the recent volatility of the discount rate used in the valuation of assets and liabilities had made changes in WGA Net Liabilities difficult to interpret.59 51 Q 3 52 Q 4 53 WGA 2022–23 pp68–69 54 Nuclear Decommissioning Authority Annual Report and Accounts 2022–23 p143; Ministry of Defence Annual Report and Accounts 2022–23 p163 55 Nuclear Decommissioning Authority Annual Report and Accounts 2023–24 p149; Ministry of Defence Annual Report and Accounts 2023–24 p156 56 WGA 2022–23 p241 57 Q 68; WGA 2022–23 pp241–242 58 Q 14 59 WGA0002 16 The Treasury acknowledged that discount rates dominate movements in these liabilities, and that reductions in the discounted valuation of the liabilities do not themselves mean that actual future payments, for example to pensioners or for nuclear decommissioning, are reduced. The Treasury commented that the discounted values were of some use. But it also acknowledged that it could do more in the performance report to show future undiscounted liabilities, and that it was right to want to complement existing information to make it more meaningful to the reader.60
Government Response Summary
The government accepted the recommendation, committing to publishing undiscounted data and long-term trend analysis in the 2023-24 WGA performance report by July 2025, and reviewing linkages to streamline content.
Government Response
Accepted
HM Government
Accepted
5.1 The government agrees with the Committee’s recommendation. Target implementation date: July 2025 5.2 One of the important principles of WGA is that it summarises and presents information already in the public domain. It is correct that departmental accounts should be the first place where information relevant to departmental finances are published, with WGA acting as an opportunity to aggregate, summarise and analyse trends. Where undiscounted data is available it will be published in the WGA performance report. 5.3 The 2023-24 WGA performance report will include long term trend analysis of significant assets and liabilities. Where possible updates on how government seeks to manage liabilities will be provided. Linkages between discount rate information in different parts of the Performance Report and Accounting Notes will be reviewed in the 2023-24 WGA to streamline the content. 5.4 Accounting standards require disclosure of significant assumptions and sensitivities as part of the notes to the financial statements. These include sensitivity analysis for other key assumptions: rate of increase in pensions, rate of increase in salaries or life expectancy in retirement.