THE IMPORTANCE OF THE WHOLE OF GOVERNMENT ACCOUNTING (WGA)
PUBLICITY
This Whole of Government Accounting (WGA) 2009/10 has been over ten years in gestation and is a considerable achievement and, although there was
o coverage on the day by the media;
o previous coverage when the unaudited version was published in July;
o a hearing by the House of Commons' Public Accounts Committee on 5th December 2011;
o reference in the OBR's statement accompanying George Osborne's Autumn statement,
it would be fair to say that WGA has not been taken much notice of since then.
A similar situation occurred in the US following the first presentation of the Financial Report of the United States' Government in 1997 - these were not true accounts, unlike WGA, but were more like a statement of liabilities. However, in the last few years this annual report is now frequently mentioned in the US.
I believe the Treasury team - after speaking to them - think the same evolution will happen here. WGA will become important.
There are hundreds of analysts employed by investment funds, pension funds and financial institutions who analyse the accounts of quoted companies when published.
Yet the publication of WGA has not received such analysis and, indeed, much of the coverage was simply rewriting of the accompanying press release.
However, the House of Commons' Public Accounts Committee did ask some pertinent questions and published a reasonable report on 30th January 2012.
The WGA referred to 2009/10 and is, of course, not 'news' but it is striking how little coverage it received compared with the obsessive analysis of the latest GDP figures (themselves pretty suspect).
HISTORY
In 1834, the Houses of Parliament burnt down. The cause was the uncontrolled burning of wooden tally sticks which had been used until some years before to keep records of government financial transactions. This form of government accounting was virtually prehistoric. However, the system of British government accounting which succeeded it was, itself, hundreds of years behind modern accounting used in commerce. It can be correctly described as pre-medieval.
Prior to 2000, the British government and many other countries operated a pre-medieval cash accounting system. Accrual accounting was gradually introduced in the last ten years and modernization has culminated in the publication of the WGA - proper accounts.
The EU changed over from cash accounting in 2005.
The old system was pre-medieval because the foundation of modern accounts was laid out in 1494 by Fra. Luca Pacioli, friend and co-author with Leonardo da Vinci of a book on mathematics and drawing (Divina Proportione). Pacioli's work, entitled in short, Summa Arithmetica, was one of the first books to be printed. It was a codified analysis of what he said was already the double entry system of Venetian accounting. Subsequently accounting based on Pacioli spread throughout the world and became legally compulsory for commercial and other entities in the nineteenth century.
However, governments continued to operate a system of cash accounts without double entry which was indeed pre-medieval.
THE PRINCIPLES OF WGA
The existing systems, before WGA, made it difficult for anyone, including Parliament, to be able to obtain a full over view of the scale and scope of the public sector finances.
The system of Parliamentary votes was confusing and opaque in the extreme. No proper system of recording assets and liabilities existed.
This WGA was intended to ‘improve accountability to Parliament and to the taxpayer’ and allow ‘benchmarking and comparisons’ between different financial years, allow proper financial management and allow international comparisons.
So, does the WGA matter and why are they different and, in part, superior to the existing National Accounts?
POLICY
There are some major policy issues raised by the WGA and by the evidence given at the Treasury Committee hearings in December by Sir Nicholas Macpherson and the Treasury Team.
o The WGA deficit is much larger than the National Accounts' deficit - which is, in truth, really the 'net addition to public debt'.
o Liquidity. The government has very few liquid assets. They range between 0.5 and 4.0 per cent of liabilities. This leads it very exposed to sudden market crisis.
o Mobilisation. While all the liabilities on the WGA balance sheet will eventually have to be paid out in cash, most of the assets listed are effectively unsaleable. Thus the mobilisable assets are few - over, say, the next ten years - except for the equity and loan stakes in the banks possibly totalling £150 billion out of £1200 billion of assets.
o It is worth reflecting how the WGA show the government's financial condition is quite different from either an investment company or a trading company. Its assets effectively produce no income. This is a different position from a sovereign wealth fund, which does generate income.
Therefore,
o While the Statement of Financial Condition is quite accurate in accounting terms, deducting the assets from the liabilities to come to a net balance sheet figure of ‘Total Liabilities to be funded by future revenues’ understates the future burden on the taxpayer because of the unsaleability of most assets.
o State pensions (and healthcare) are not included in WGA. Macpherson said ‘we could ... stick in several trillion pounds of Liabilities for the cost of the future state pension.'
o Analysis of the capital fixed assets shows the government is not actually adding to assets - the only increase is from revaluation. Despite enormous taxation of £582 billion, and despite population increases of 0.8 per cent in 2009/10 (470,000 people), the government is actually a decapitalisation machine.
o There has been a major deterioration in the quality of the government's balance sheet in recent years - not new knowledge!
o Sir Nicholas Macpherson also said 'In principle you could produce accounts for the whole of the UK, private and public sector.'
This is a very long-term possibility but it would produce a balance sheet for the whole of the UK and, by dividing by population and worker, would reveal the net worth or liabilities per capita.
THE DEFICIT
The ‘deficit’ commonly referred to in Parliament and the media is, in fact, the annual increase in the public sector net debt. This is called the ‘deficit’ in the National Accounts system.
For 2009-10, this National Accounts deficit was £156 billion, being £107 billion current deficit plus net capital expenditure, after depreciation, of £49 billion. It is basically a cash deficit.
The WGA deficit was £165 billion for current spending. This compares with the National Accounts’ current deficit of £107 billion.
The major difference between the WGA deficit and the ‘deficit’ in the National Accounts was the increase in public service pension debit of £52 billion. (Note: this does not include the increase in the public service pension liability of £286.8 billion, due to actuarial revaluations based on different interest rates which were correctly excluded from the WGA current deficit.)
There are two caveats about the current deficit. One is the Provision Expense. Unusually, this was a credit of £17.0 billion. The details show that this was due to the credit of £25 billion from a provision entered in the Balance sheet for the accounts year to 31st March 2009 for the Asset Protection Scheme. This is no longer required but it is incorrect to credit it to the Statement of Revenue and Expenditure. There will be no such credit in the following year.
Accordingly, the Provision expenses should be a debit of £8 billion and the current deficit should be increased to £190 billion.
The second point to be noted is that net capital expenditure in the National Accounts was £49 billion. Off this, £16 billion was entered as an expense in the WGA because it related to grants to private and other non-taxpayer owned entities.
Therefore, the correct comparison is as follows:
2009/10
National Accounts WGA
Deficit Deficit
Current 107 165
Provisions written back - 25
107 190
Net capital spending 49 33
Total current deficit plus total net capital spending 156 223
LIQUIDITY
The liquid position of the government is very low to support total liabilities of £2419 billion.
Cash and gold holdings total £15.4 billion while ‘Other Financial Assets’ total £100.2 billion. This total of £100.2 billion includes the UK’s IMF Quotas SDRs and loans and deposits to banks of £63.0 billion. Not all of these, and certainly not the IMF quotas, are highly liquid.
The liquid position of a sovereign government able to issue its own loan instruments may not be critical. However, it is worth contrasting with countries which have sovereign wealth funds which are realizable assets, although not often very liquid, which can be mobilized outside the tax levying or debt issuing activities of a government. In extreme conditions, debt issuing may become difficult or onerous and taxation increases may be impossible. Other liquid resources would be more prudent.
REVALUATION RESERVE
This totals £218.6 billion. Essentially this is the counterpart entry of writing up the value of non-current assets from historic cost to ‘depreciated replacement cost’ – the method used in WGA and in general by government and the National Accounts to value government assets.
While perfectly justified by the rules of International Financial Reporting Standards (IFRS), writing up assets is not a traditional accounting practice.
OLD AGE PENSIONS
The liability for state old age pensions already accrued is not included in WGA.
In his evidence, Sir Nicholas Macpherson said,
‘It is also quite frankly, slightly strange – although I totally understand why accounting practice only results in us consolidating the public service pension element of pensions in our liabilities. Actually when I look at the cost of ageing, the thing that worries me most is the cost of the state pension. Okay, you haven’t got quite such a contractual obligation in paying a state pension. Successive governments have occasionally changed the uprating formula, but they haven’t changed it much. We could, although we would be qualified no doubt by my friend Amyas (the Auditor General) if we did, stick in several trillion pounds of liabilities for the cost of the future state pension.’
NATIONAL ACCOUNTS
Sir Nicholas Macpherson:
‘These are Whole of Government Accounts, but in principle you could produce accounts for the whole of the UK, private and public sector. Critical to me is that everybody has to be somewhere.’
IFRS
The IFRS and the use of International Accounting Standards (IAS) have meant the abandonment of the traditional principle of prudence and its replacement by the principle of fair value when accounting for assets and liabilities.
This has been most noticeable in the accounts of the financial sector. The prudence principle was the basic accounting principle and was based on historic cost. Assets were valued at the lesser of cost or market value but WGA values assets at market value. Market value is not an objective value; it arises from subjective assessment and can vary widely.
False wealth effects and write ups of assets mean extra risks taken and capital contraction can take place as is indeed happening in the 2009/10 accounts.
DEPRECIATION AND VALUATION OF ASSETS
The valuations and depreciation provisions of the main non-current assets, being property, plant and equipment valued at ‘depreciated replacement cost’ of £708 billion is hard to follow. This is partly because of the constant uprating of values under the IFRS system, and partly because, for example, NHS assets are included at net figures.
These two factors explain why the depreciation rates appear very low, between one per cent and three per cent on most asset values. The cumulative depreciation is only 20 per cent. The inadequacy of using IFRS rather than historic cost is illustrated by the high level of impairments which are unforeseen depreciation and which actually exceed the total of planned depreciation in 2009/10.
Net asset values (less depreciation) rose by £5.6 billion but revaluation increased net asset values by £8.7 billion.
Therefore, actual net investment, excluding revaluations, fell by £3.1 billion. This would be the effect under the Generally Accepted Accounting Principles (GAAP) historic cost system which means that the government was decapitalising.
As population increased by 0.8 per cent in the year, decapitalisation per capita was greater.
In discussions with the Treasury team, it was not possible to reconcile the capital expenditure shown in the National Accounts with the capital expenditure shown in WGA. The National Accounts state there was government gross investment, less asset sales of £68.9 billion, while the WGA showing the equivalent figures, totals £37.2 billion (plus possibly £5.8 billion in intangible assets). Additionally, £16 billion were recorded as capital grants to outside bodies. No doubt much of this was spent in the UK but the grants also related to the EU, EU approved objectives, international development and so on. The Treasury team says that £5 billion was also recorded in the National Accounts as payments to the public sector banks. This is an opaque area of government accounting. The former Chancellor’s Golden Rule was that over the economic cycle, the Government will only borrow to invest. Plainly this is no longer the case.
ASSETS, LIABILITIES AND IMMIGRATION AND EMIGRATION
These figures raise interesting questions about immigration and emigration.
In short, it is this. Do emigrants realise that, by emigration, they are shedding their share of British government liabilities? Similarly, do immigrants realise that they are immediately becoming responsible for a share of the British government’s liabilities incurred because of past events?
THE TECHNICAL POINTS OF WGA
1) When the first of a series, such as WGA, is published this inevitably is less full of information than later years’ publications because:
- There are no comparative figures for previous years;
- The accounts must have some starting point. In this case there is the balance sheet at 1st April 2009 but there is no breakdown or analysis of these figures so the starting point is itself, by nature, open to some questioning.
2) The audit report is qualified in some areas although I do not believe this is a major matter.
3) The accounts are drawn up on IAS (International Accounting Standards) of the IFRS [International Financial Reporting Standards] system rather than GAAP [Generally Accepted Accounting Principles]. GAAP is the traditional historic cost accounting system and is still used by local authorities’ accounts incorporated into the WGA.
The major difference between IFRS and GAAP is the use of mark to market (to be precise, ‘depreciated replacement cost basis’ in WGA) in IFRS to value assets. This tends to lead to ‘write ups’ of assets in WGA.
4) Consolidated Accounts. WGA are the consolidated accounts of all government entities.
Consolidated accounts first appeared in the US around 1910 and the UK around 1925.
Generally speaking, consolidated accounts flourished in the post-WWI era but they have defects. Consolidating assets in different jurisdictions and currencies may give a false impression as assets/liabilities’ values may not match in different jurisdictions or currencies.
These defects are not generally relevant to the UK’s WGA because it is all in one jurisdiction and one currency but it does assume, for example, that all local authorities’ assets and liabilities are inter-changeable while, in the past, (and in the present!) they were legally particular to one authority.
Tellingly, Sir Nicholas Macpherson justified the exclusion of universities from WGA because their ownership was private – quite correctly.
5) Boundaries: The UK government’s WGA is much wider than the WGA of any other country. Not all are happy with this. The WGA of France, US, Canada Australia, NZ do not include health services or local authorities or the states in the USA.
The UK includes entities that ‘exercise functions of a public nature’ or that are ‘substantially funded from public money’. This is not satisfactory. The correct criterion should be entities in the ownership of the government or whose liabilities the government guarantees.
This Whole of Government Accounting (WGA) 2009/10 has been over ten years in gestation and is a considerable achievement and, although there was
o coverage on the day by the media;
o previous coverage when the unaudited version was published in July;
o a hearing by the House of Commons' Public Accounts Committee on 5th December 2011;
o reference in the OBR's statement accompanying George Osborne's Autumn statement,
it would be fair to say that WGA has not been taken much notice of since then.
A similar situation occurred in the US following the first presentation of the Financial Report of the United States' Government in 1997 - these were not true accounts, unlike WGA, but were more like a statement of liabilities. However, in the last few years this annual report is now frequently mentioned in the US.
I believe the Treasury team - after speaking to them - think the same evolution will happen here. WGA will become important.
There are hundreds of analysts employed by investment funds, pension funds and financial institutions who analyse the accounts of quoted companies when published.
Yet the publication of WGA has not received such analysis and, indeed, much of the coverage was simply rewriting of the accompanying press release.
However, the House of Commons' Public Accounts Committee did ask some pertinent questions and published a reasonable report on 30th January 2012.
The WGA referred to 2009/10 and is, of course, not 'news' but it is striking how little coverage it received compared with the obsessive analysis of the latest GDP figures (themselves pretty suspect).
HISTORY
In 1834, the Houses of Parliament burnt down. The cause was the uncontrolled burning of wooden tally sticks which had been used until some years before to keep records of government financial transactions. This form of government accounting was virtually prehistoric. However, the system of British government accounting which succeeded it was, itself, hundreds of years behind modern accounting used in commerce. It can be correctly described as pre-medieval.
Prior to 2000, the British government and many other countries operated a pre-medieval cash accounting system. Accrual accounting was gradually introduced in the last ten years and modernization has culminated in the publication of the WGA - proper accounts.
The EU changed over from cash accounting in 2005.
The old system was pre-medieval because the foundation of modern accounts was laid out in 1494 by Fra. Luca Pacioli, friend and co-author with Leonardo da Vinci of a book on mathematics and drawing (Divina Proportione). Pacioli's work, entitled in short, Summa Arithmetica, was one of the first books to be printed. It was a codified analysis of what he said was already the double entry system of Venetian accounting. Subsequently accounting based on Pacioli spread throughout the world and became legally compulsory for commercial and other entities in the nineteenth century.
However, governments continued to operate a system of cash accounts without double entry which was indeed pre-medieval.
THE PRINCIPLES OF WGA
The existing systems, before WGA, made it difficult for anyone, including Parliament, to be able to obtain a full over view of the scale and scope of the public sector finances.
The system of Parliamentary votes was confusing and opaque in the extreme. No proper system of recording assets and liabilities existed.
This WGA was intended to ‘improve accountability to Parliament and to the taxpayer’ and allow ‘benchmarking and comparisons’ between different financial years, allow proper financial management and allow international comparisons.
So, does the WGA matter and why are they different and, in part, superior to the existing National Accounts?
POLICY
There are some major policy issues raised by the WGA and by the evidence given at the Treasury Committee hearings in December by Sir Nicholas Macpherson and the Treasury Team.
o The WGA deficit is much larger than the National Accounts' deficit - which is, in truth, really the 'net addition to public debt'.
o Liquidity. The government has very few liquid assets. They range between 0.5 and 4.0 per cent of liabilities. This leads it very exposed to sudden market crisis.
o Mobilisation. While all the liabilities on the WGA balance sheet will eventually have to be paid out in cash, most of the assets listed are effectively unsaleable. Thus the mobilisable assets are few - over, say, the next ten years - except for the equity and loan stakes in the banks possibly totalling £150 billion out of £1200 billion of assets.
o It is worth reflecting how the WGA show the government's financial condition is quite different from either an investment company or a trading company. Its assets effectively produce no income. This is a different position from a sovereign wealth fund, which does generate income.
Therefore,
o While the Statement of Financial Condition is quite accurate in accounting terms, deducting the assets from the liabilities to come to a net balance sheet figure of ‘Total Liabilities to be funded by future revenues’ understates the future burden on the taxpayer because of the unsaleability of most assets.
o State pensions (and healthcare) are not included in WGA. Macpherson said ‘we could ... stick in several trillion pounds of Liabilities for the cost of the future state pension.'
o Analysis of the capital fixed assets shows the government is not actually adding to assets - the only increase is from revaluation. Despite enormous taxation of £582 billion, and despite population increases of 0.8 per cent in 2009/10 (470,000 people), the government is actually a decapitalisation machine.
o There has been a major deterioration in the quality of the government's balance sheet in recent years - not new knowledge!
o Sir Nicholas Macpherson also said 'In principle you could produce accounts for the whole of the UK, private and public sector.'
This is a very long-term possibility but it would produce a balance sheet for the whole of the UK and, by dividing by population and worker, would reveal the net worth or liabilities per capita.
THE DEFICIT
The ‘deficit’ commonly referred to in Parliament and the media is, in fact, the annual increase in the public sector net debt. This is called the ‘deficit’ in the National Accounts system.
For 2009-10, this National Accounts deficit was £156 billion, being £107 billion current deficit plus net capital expenditure, after depreciation, of £49 billion. It is basically a cash deficit.
The WGA deficit was £165 billion for current spending. This compares with the National Accounts’ current deficit of £107 billion.
The major difference between the WGA deficit and the ‘deficit’ in the National Accounts was the increase in public service pension debit of £52 billion. (Note: this does not include the increase in the public service pension liability of £286.8 billion, due to actuarial revaluations based on different interest rates which were correctly excluded from the WGA current deficit.)
There are two caveats about the current deficit. One is the Provision Expense. Unusually, this was a credit of £17.0 billion. The details show that this was due to the credit of £25 billion from a provision entered in the Balance sheet for the accounts year to 31st March 2009 for the Asset Protection Scheme. This is no longer required but it is incorrect to credit it to the Statement of Revenue and Expenditure. There will be no such credit in the following year.
Accordingly, the Provision expenses should be a debit of £8 billion and the current deficit should be increased to £190 billion.
The second point to be noted is that net capital expenditure in the National Accounts was £49 billion. Off this, £16 billion was entered as an expense in the WGA because it related to grants to private and other non-taxpayer owned entities.
Therefore, the correct comparison is as follows:
2009/10
National Accounts WGA
Deficit Deficit
Current 107 165
Provisions written back - 25
107 190
Net capital spending 49 33
Total current deficit plus total net capital spending 156 223
LIQUIDITY
The liquid position of the government is very low to support total liabilities of £2419 billion.
Cash and gold holdings total £15.4 billion while ‘Other Financial Assets’ total £100.2 billion. This total of £100.2 billion includes the UK’s IMF Quotas SDRs and loans and deposits to banks of £63.0 billion. Not all of these, and certainly not the IMF quotas, are highly liquid.
The liquid position of a sovereign government able to issue its own loan instruments may not be critical. However, it is worth contrasting with countries which have sovereign wealth funds which are realizable assets, although not often very liquid, which can be mobilized outside the tax levying or debt issuing activities of a government. In extreme conditions, debt issuing may become difficult or onerous and taxation increases may be impossible. Other liquid resources would be more prudent.
REVALUATION RESERVE
This totals £218.6 billion. Essentially this is the counterpart entry of writing up the value of non-current assets from historic cost to ‘depreciated replacement cost’ – the method used in WGA and in general by government and the National Accounts to value government assets.
While perfectly justified by the rules of International Financial Reporting Standards (IFRS), writing up assets is not a traditional accounting practice.
OLD AGE PENSIONS
The liability for state old age pensions already accrued is not included in WGA.
In his evidence, Sir Nicholas Macpherson said,
‘It is also quite frankly, slightly strange – although I totally understand why accounting practice only results in us consolidating the public service pension element of pensions in our liabilities. Actually when I look at the cost of ageing, the thing that worries me most is the cost of the state pension. Okay, you haven’t got quite such a contractual obligation in paying a state pension. Successive governments have occasionally changed the uprating formula, but they haven’t changed it much. We could, although we would be qualified no doubt by my friend Amyas (the Auditor General) if we did, stick in several trillion pounds of liabilities for the cost of the future state pension.’
NATIONAL ACCOUNTS
Sir Nicholas Macpherson:
‘These are Whole of Government Accounts, but in principle you could produce accounts for the whole of the UK, private and public sector. Critical to me is that everybody has to be somewhere.’
IFRS
The IFRS and the use of International Accounting Standards (IAS) have meant the abandonment of the traditional principle of prudence and its replacement by the principle of fair value when accounting for assets and liabilities.
This has been most noticeable in the accounts of the financial sector. The prudence principle was the basic accounting principle and was based on historic cost. Assets were valued at the lesser of cost or market value but WGA values assets at market value. Market value is not an objective value; it arises from subjective assessment and can vary widely.
False wealth effects and write ups of assets mean extra risks taken and capital contraction can take place as is indeed happening in the 2009/10 accounts.
DEPRECIATION AND VALUATION OF ASSETS
The valuations and depreciation provisions of the main non-current assets, being property, plant and equipment valued at ‘depreciated replacement cost’ of £708 billion is hard to follow. This is partly because of the constant uprating of values under the IFRS system, and partly because, for example, NHS assets are included at net figures.
These two factors explain why the depreciation rates appear very low, between one per cent and three per cent on most asset values. The cumulative depreciation is only 20 per cent. The inadequacy of using IFRS rather than historic cost is illustrated by the high level of impairments which are unforeseen depreciation and which actually exceed the total of planned depreciation in 2009/10.
Net asset values (less depreciation) rose by £5.6 billion but revaluation increased net asset values by £8.7 billion.
Therefore, actual net investment, excluding revaluations, fell by £3.1 billion. This would be the effect under the Generally Accepted Accounting Principles (GAAP) historic cost system which means that the government was decapitalising.
As population increased by 0.8 per cent in the year, decapitalisation per capita was greater.
In discussions with the Treasury team, it was not possible to reconcile the capital expenditure shown in the National Accounts with the capital expenditure shown in WGA. The National Accounts state there was government gross investment, less asset sales of £68.9 billion, while the WGA showing the equivalent figures, totals £37.2 billion (plus possibly £5.8 billion in intangible assets). Additionally, £16 billion were recorded as capital grants to outside bodies. No doubt much of this was spent in the UK but the grants also related to the EU, EU approved objectives, international development and so on. The Treasury team says that £5 billion was also recorded in the National Accounts as payments to the public sector banks. This is an opaque area of government accounting. The former Chancellor’s Golden Rule was that over the economic cycle, the Government will only borrow to invest. Plainly this is no longer the case.
ASSETS, LIABILITIES AND IMMIGRATION AND EMIGRATION
These figures raise interesting questions about immigration and emigration.
In short, it is this. Do emigrants realise that, by emigration, they are shedding their share of British government liabilities? Similarly, do immigrants realise that they are immediately becoming responsible for a share of the British government’s liabilities incurred because of past events?
THE TECHNICAL POINTS OF WGA
1) When the first of a series, such as WGA, is published this inevitably is less full of information than later years’ publications because:
- There are no comparative figures for previous years;
- The accounts must have some starting point. In this case there is the balance sheet at 1st April 2009 but there is no breakdown or analysis of these figures so the starting point is itself, by nature, open to some questioning.
2) The audit report is qualified in some areas although I do not believe this is a major matter.
3) The accounts are drawn up on IAS (International Accounting Standards) of the IFRS [International Financial Reporting Standards] system rather than GAAP [Generally Accepted Accounting Principles]. GAAP is the traditional historic cost accounting system and is still used by local authorities’ accounts incorporated into the WGA.
The major difference between IFRS and GAAP is the use of mark to market (to be precise, ‘depreciated replacement cost basis’ in WGA) in IFRS to value assets. This tends to lead to ‘write ups’ of assets in WGA.
4) Consolidated Accounts. WGA are the consolidated accounts of all government entities.
Consolidated accounts first appeared in the US around 1910 and the UK around 1925.
Generally speaking, consolidated accounts flourished in the post-WWI era but they have defects. Consolidating assets in different jurisdictions and currencies may give a false impression as assets/liabilities’ values may not match in different jurisdictions or currencies.
These defects are not generally relevant to the UK’s WGA because it is all in one jurisdiction and one currency but it does assume, for example, that all local authorities’ assets and liabilities are inter-changeable while, in the past, (and in the present!) they were legally particular to one authority.
Tellingly, Sir Nicholas Macpherson justified the exclusion of universities from WGA because their ownership was private – quite correctly.
5) Boundaries: The UK government’s WGA is much wider than the WGA of any other country. Not all are happy with this. The WGA of France, US, Canada Australia, NZ do not include health services or local authorities or the states in the USA.
The UK includes entities that ‘exercise functions of a public nature’ or that are ‘substantially funded from public money’. This is not satisfactory. The correct criterion should be entities in the ownership of the government or whose liabilities the government guarantees.