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’.
