ICAEW welcomes the publication of the Whole of Government Accounts for 2018-19, the UK Government’s annual financial report for the year ended 31 March 2019.
Whole of government accounts 2018-19
On 21 July 2020, the UK Government published its 10th Whole of Government Accounts (WGA). The WGA provides a comprehensive financial report on the UK public sector for the 2018-19 financial year:
It is disappointing that it has taken in excess of a fifteen months for the WGA to be produced, significantly longer than the two to three months taken to prepare the annual reports of comparable private sector organisations or the six to nine months that might be reasonably possible given the structure and reporting timescales applicable to public sector bodies in the UK in non-pandemic years.
Despite the lack of timeliness, the WGA continues to be one of the most important documents that the Government will produce this year – providing a comprehensive picture of the public finances that is not available elsewhere.
With total assets of £2.1tn, liabilities of £4.6tn and and net liabilities of £2.5tn, the WGA provides a sobering picture of the difficult position that the public finances were in even before the coronavirus pandemic. The need for a long-term fiscal strategy to put the public finances on a sustainable path is more important than ever.
Highlights
- Revenue £796bn - up £32bn
- Expenditures on public services excluding interest £820bn – up £48bn
- Interest and other expenditure £76bn – down £26bn
- Loss before discount rate change £100bn – £9bn lower than last year
- Discount rate change £102bn credit – vs £94bn charge last year
- Accounting surplus of £2bn – vs restated accounting loss of £203bn last year
- Total assets £2.1tn – up £85bn
- Total liabilities £4.6tn – down £24bn
- Net liabilities £2.5tn – down £109bn
(an increase of £100bn in overall net liabilities before being offset by revaluations and other movements of £107bn and the discount rate change of £102bn)
- Contingent liabilities disclosed of £84bn
- Remote contingent liabilities disclosed of £297bn
- True and fair audit opinion, subject to several audit qualifications and two matters of emphasis
Audit qualifications
The Comptroller & Auditor-General has issued a ‘true and fair’ audit opinion on the financial statements, however he has qualified his opinion with respect to the following matters:
- Not all government-controlled entities have been included within the WGA, most significantly The Royal Bank of Scotland (RBS), where the government currently owns a controlling stake.
- There are significant inconsistencies between central and local government accounting policies, principally relating to the valuation of infrastructure assets, such as the local road network (valued by local authorities at depreciated historical cost rather than the depreciated replacement cost approach adopted by central government).
- The Ministry of Defence does not fully account for assets it leases through outsourced contracts, the absence of sufficient evidence for valuation placed on the academy schools’ estate by the Department of Education, and the level of fraud and error in the Department of Work and Pensions and HM Revenue and Customers.
- Numbers used for academy schools are for the year ended 31 August 2018, instead of the year ended 31 March 2019 numbers reported for the rest of the public sector.
There are also two matters of emphasis highlighted in the audit report:
- The inherent uncertainties in valuing nuclear decommissioning obligations, which could be significantly higher or lower than the £152bn liability included in provisions.
- The difficulties in evaluating the disclosed value for the Hinckley Point C contract for difference.
Summary Whole of Government Accounts 2018-19
Revenue and expenditure | £bn |
Balance sheet | £bn |
---|---|---|---|
Revenue | 796 |
Total assets |
2,099 |
Expenditure |
(896) |
Total liabilities |
(4,555) |
Loss before discount rate change | (100) | Net liabilities |
(2,456) |
Discount rate change | 102 | ||
Accounting surplus for the year |
2 |
||
Cash flows |
£bn | Net change in financial position |
£bn |
Operating cash inflow |
69 | Accounting surplus for the year |
2 |
Investing cash outflow |
(42) |
Fixed asset revaluations |
50 |
Interest and similar outflows |
(48) |
Pension revaluations |
71 |
Financing cash inflow |
32 | Financial revaluations and other movements |
(14) |
Increase in cash balances |
10 | Reduction in net liabilities |
109 |
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ICAEW's analysis
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