GOVERNMENT IS ACCUSED OF HIDING DEBT
A FORMER Treasury adviser has accused the government of hiding the full extent of the public debt crisis by using controversial accounting rules to squirrel £32.5bn of spending off its books.
An astonishing 87 per cent of private finance initiative deals – under which the taxpayer pays private firms to build and run hospitals, roads or school premises – have not been properly accounted for on the government’s books, the research reveals.
In a controversial move, the government is using a new, internationally recognised and much fairer IFRS set ofaccounting rules in its internal forecasts – but still using the old system when publishing the national accounts and calculating national debt figures released to the public.
The existence of this two-tier system was slammed last night by the report’s author, professor David Heald of the University of Aberdeen, who until July was a member of the Financial Reporting Advisory Board (FRAB), which advises the government on its accounting procedures.
The external accounts are produced according to the Eurostat system of accounting, required as a measure of collating figures released to the Office of National Statistics (ONS). But Heald attacked these rules as “incredibly lax”, adding: “The government is hiding behind weak accounting rules and pretending the debt is not as high as it genuinely is.”
Philip Hammond, the shadow chief secretary to the Treasury, also hit out at the government, saying: “Only a day after we discovered the Prime Minister misled the country about his plans for spending cuts, we find out the government is trying to hide £32bn of debt off the balance sheet. Labour is taking the public for fools.”
The revelations that the government is still keeping tens of billions of pounds off its balance sheet also angered those in the City who have been lambasted by Gordon Brown for a lack of transparency in company accounts in the wake of the financial crisis.
“It is no good for banks to have to clean up their act when it comes to transparency if the government fails to do so and keeps its liabilities hidden,” said Corin Taylor, senior policy adviser at the Institute of Directors.
Many of the procedures used by the government closely resemble the special investment vehicles used by banks and financial engineers to hide toxic debt, many accountants have long argued.
A Treasury spokesman said last night it was the responsibility of the ONS to clarify which accounting figures it wished to make publicly available.