Monday, 18 November 2013


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’.

Sunday, 12 May 2013


That is the time it takes to produce the UK Whole of Government Accounts (WGAs) !

These, now in to their second year, are “a giant leap forward when compared with what was there before” and are “in the forefront internationally”. The Chief Executive of CIPFA commenting on the appalling PAC report (The redoubtable Margaret Hodge’s Public Accounts Committee) is being kind to the Treasury. WGA failed to get a mention in the budget 2013 documentation. Conventional consolidated accounts have been the norm in groups of companies since  time began. Yet the same Treasury defensively claims academic interest rather than operational integration, the true purpose.

The facts portrayed should be integral to the decision-action-feedback-decision loop which elsewhere is moving feedback inexorably in to real-time. As well as the discharge of accountability for performance their timeliness and quality is of the essence as data input to decisions for the future. For its forecasts and evaluations the OBR(Office of Budget Responsibility) depends on factual input for course correction. It was kept waiting 18 months for draft-only accounts. 4 months later still the Auditor General qualified his report. Normally the quality of forecasts depends on the analysis of variations between the  forecast to be updated and rolled forward, and ‘actuals’ fed back. ‘Actuals’ mean as just now, not in the dim and distant past since when much has changed.

It is not generally realised that there is a fundamental flaw at the heart of government management accounting and reporting. We have publicly protested at Brussels-led spending  whose accounts have still after 18 years not satisfied the court of Auditors. On 10th November 2008 Matthew Elliott for the TaxPayers Alliance joined 8 of his European counterparts in signing a published letter protesting at inaccurate and audit-failed EU Accounts over 14 years (now 18). On the day following, MEP Ashley Mote’s answering letter explained that satisfactory assurance would never be attained because of “the concept of “shared management” which leaves accountability in the hands of recipients of public funds”. This immediately suggested to the undersigned that the UK hadn’t even started on its 14 year audit failure because, put another way,  ‘governments vote funds and then walk away’. Correspondence with the Comptroller and Auditor General (NAO) confirmed this and general fears about national government financial disciplines. While good intentions and improvements were stated in reply there unexpectedly came the news that it was intended for the first time to produce Whole of Government Accounts(WGAs), followed by budgets (WGBs). Called for by Parliament in 1995 the WGAs did not arrive, incredibly, until those for 2009-10 15 years later, and then only after 22 months delay in publication.   WGBs never materialised !

It has been suggested that other countries are more advanced. That seems to mean having, but not getting beyond, such as multiple area income taxes instead of simply just one. For the UK local funding theory destroys the link between local tax and local policy spending because muddled with equalisation (redistribution through grants), confiscation and precept.  

“Walking away” sets the tone for tax and spend.  Down in local government taxpayers are disregarded and disenfranchised. Nationally it is relied on that something will turn up in the form of increased economic activity. GDP at all costs is the cry notwithstanding that that includes non-productive government activity, the black economy, even crime. The cumulative circulation of money is spoken of as an unmitigated good even to the point of destruction of it’s exchange value. It all adds up to a net accumulated deficit of £1.1tn and rising currently by more than £120bn each year. Oh, look everybody. Where did that  come from ? It came from not keeping the score properly and because grandiose politics negligently trumps thrifty forward planning and sound management.

Care is required on urgently necessary decentralisation which is currently only talked about ad nauseam in such as the H o C Constitution Committee  or the debt and deficit  will become even more threatening and unmanageable. In 2005 Sir Michael Lyons was given, face to face,  a scheme for local government funding which provided for both macro control and decentralisation. It was disregarded. As to “shared management”  MPs (The Business, Innovation and Skills Committee) criticise the government’s “hands-off” approach to monitoring the performance of LEPs (Lord Heseltine’s local Enterprise Partnerships) “despite the fact that they are being given taxpayers’ money and are responsible for key areas such as local infrastructure, planning and job creation”

Surely the archaically titled Treasury should BE the OBR;  its OTS (Office of Tax simplification) should BE integral and deploy rather more than the present 6 people; should SET THE STANDARD and BE THE EXAMPLE for the discharge of accountability and management reporting at all levels; should SET THE STANDARD for government managerial infrastructure and deployment: only now are senior Civil Servants receiving training in project management; it is 50 years out of date. Why are Ministers powerless in the face of the Manderinate ? Why is the Cabinet Office, with eg its component the Major Projects Authority,  uneasily trying to fill the vacuum ? Is it not understood from experience-based thought experiment what domestic government is supposed to be about ? It is not now about fighting and paying for wars, or running an empire (with a few District Commissioners), but professionally managing its own responsibilities in the domestic sphere where an increasingly interventionist stance requires modern industrial systems and attititudes to cope with the progressive sub-division of labour in modern society.

Note: reference has been made to “gobbledegook” in the WGAs. Over time the art of communication has been lost in ever-more legalistic and jargon-filled detailing of the accounting simplicities of book-balancing, assets and liabilities and factual disclosure. That this has continued is itself damning evidence of Treasury failure. And where is CIPFA and the NAO in all this ?