Monday, 18 November 2013

DYSFUNCTIONAL UK GOVERNMENT: CONSPIRACY OR COCK-UP ? DOES IT CARE?

Chancellor George Osborne in November 2013 says in talking up the recovery prospects that “the biggest risk…….was to give into popular policies that would damage domestic businesses and the UK’s economic competitiveness”. Quite right, but not with continued  populist political short-termism trumping sound professional management for the longer term.

1 Conspiracy ?: why has government not observed the purposes, norms, concepts, principles and standards of accountability practice ? Three ‘authorities’ asked have not denied that this as a ‘secret’ Machiavellian tenet of political science ie that the masses should be kept in the dark as much as possible. Until proven otherwise professed “transparency”, being  passive,  is a lie. And, “Government’s view of its own operations remains clouded” Efficiency and Reform Board member with cost and management accounting in mind.

2 Cock-up ?: BIG-time - By 2010 the UK public sector debt had risen in two years from £580bn to £820bn (+ 40%) and is “now” (31/3/12) £1,190bn ( +another 45%) and still rising. And big-time -  repeated operational failures such as during the implementation of the universal credit welfare reform.

3 The European context first: Euro-stress ?: One only needs to read The Lost Continent by Gavin Hewitt to realise how government negligence cripples the eurozone arrangements with dire consequences for peoples. See below.

4 In the UK we now have clear evidence: The Treasury has allowed governing politicians to work on the basis that future taxation is  certain and therefore to be disregarded.  See below.  The consequence – behaviour  for which Bernie Madoff is in prison -  now dangerously goes on to assume certainty of debt finance. Such negligence grows ‘character weakness’ on top of debt: in resource management, lax banking, inefficient processes, and so on. In populist terms emotive “cuts” submerge the language of governance.

5 These conclusions, which naturally follow HAS GOVERNMENT A BRAIN ? and WHO WILL MEND UK GOVERNMENT ? follow sight of the transcript of the Public Accounts Committee meeting with Treasury mandarins and others on 21st October to receive answers to questions on the Whole of Government Accounts 2011-12 (WGAs). Some utterances by Sir Nicholas Macpherson, Permanent Secretary, are:

“For many years, members of this Committee have criticised, first the accumulation of public pension liabilities and, secondly, the accumulation of PFI debt. The benefit of WGAs is that those liabilities are squarely on our balance sheets.”  “The WGA is helping to inform the treasury’s approach (traditionally “national accounts” – basically revenue and spending - statistical) to the public finances and is a response to Parliament’s, in my view, wholly legitimate concern that a whole lot of activities were off balance sheet.”

Two sets of accounts… “The reality is that national accounts are an economist’s concept and the Whole of Government Accounts are an  accountant’s view of the world. Both are right in their own terms. Why does the Chancellor primarily focus on the national accounts when he stands up and delivers his annual Budget ? Mainly because all the big international institutions – the IMF, OECD and so on – are run by economists rather than accountants, …” WGAs ….focus on long-term liabilities…” “what accountants don’t take into account is the fact that the state has power to tax its citizens, so we don’t discount future revenue flows to set against the very big pension liabilities”.

6 There are also some 20 major topics from the WGA questioned for answer by the attending civil servants. It is striking  that without proper accounts there would be no PAC questions. Yet the newness of and approach to WGA is incredible if one realises that they are meant to be exactly the same in consolidated format and purpose as has been the norm in corporate life for generations. It is  striking too that the PAC, by default, is exercising the role and responsibility which elsewhere would be that of management in a way Parliament is not capable of. And surely the PAC is duplicating an auditor’s role ? There is also the further implication,  never mentioned, that consolidation of the whole defines the subsidiary role of all public activities – which rather spoils all the heated political ‘localism’ and ‘centralism’ arguments which are so unproductively wasteful of energy.

7 The role of debt finance is growing alongside that of taxation to fund increasingly interventionist electorate-pleasing programmes. With that comes the need to refinance old debt and service the total.  Excessive reliance on debt finance has undermined democracy, with government finance increasingly determined by repayment schedules  rather than electoral cycles. Creditors are not concerned with how money is spent, only debt security. This lies at the heart of the euro crisis of coherence and violent antipathy of Greek, and Spanish populations towards the arguably better managed Germans. It has  actually caused such depression and punishing austerity but so far without popular admission that the fault is  domestic. Treaty-based debt ceilings (expressed relative to GDP) are toothless.

8 Extracted from Gavin Hewitt’s The lost Continent pp55-68 et seq.

“During the Greek election campaign in 2009 the socialist candidate, George Papandreou tried to unearth the true state of the economy. He didn’t start to find out until later. On the day before polling the outgoing government sent an official document to the European Commission which lied about the deficit..”It was not keeping proper accounts”.

It emerged that pension funds had no money to pay the October pensions. State hospitals had not been paying their bills (e6bn). “Paying tax was almost a lifestyle choice”. “Bogus welfare claims on fake medical certificates. “millions of euros were wasted on retirement payments to long-dead pensioners”. And much more…

In 2010 Andreas Georgiou returned from the IMF to run the National Statistical Institute: “records were adjusted to suit the demands of politicians”. He found no documentation for hundreds of entities that were already classified as part of general government. “ Very importantly, a number of state-controlled bodies, like the Greek National tourism organisation and national and radio and television network were not included on the books of the government as they should have been”. A major enterprise also left out was the Hellenic Railways, which was experiencing heavy losses. NOW READ THE Comptroller & Auditor general’s qualifications of the UK Whole of Government Accounts ! And in the context of ONS statistics versus WGAs…… read  Network Rail for Hellenic Railways !

9 Growing debt burdens drifted into with the associated recessions, a vicious circle,  have provided the huge jolt required.  Political leaders realise the dreadful truth when saying things about long term austerity. But where is the reform of governance ? The solutions are to hand if not definable in political language. With political short-termism having democratic benefits there can still be transformation. As an aside at PAC Q89 chair Margaret Hodge said:” “I think the Committee would always stand behind the treasury if it was tougher, as we always say, as a Finance Ministry, rather than just dishing out the money”.


10 Why must we The People be governed by people always eager to legislate, regulate and obfuscate, but not to lead by example ? Please may we now have BETTER GOVERNMENT ‘moving on’ from the military and imperial, to the professional ? Perhaps Her Majesty could ‘have a word’.

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