Today MP are debating the Fiscal Responsibility Bill. This new law requires Government to halve the deficit in four years. We welcome a firm political commitment on this. To maintain the UK’s credit rating, Parliament needs to send a signal to the markets that we are serious about repairing our public finances. Yet the Bill misses a valuable opportunity to make public spending more transparent.
One way the Government could do this is to provide clear financial information. To pay back our debts, we need to know how much we owe. The Government has nearly completed a project which should give us transparent, audited information about Whitehall expenditure, bringing liabilities like PFI and public sector pensions onto the balance sheet. This project, known as Whole of Government Accounts (WGA), needs cross-party backing to succeed, and the Fiscal Responsibility Bill is a great opportunity to demonstrate this.
Beyond merely setting targets, the Government needs to be more detailed in its commitment to ‘fiscal responsibility’, building a sustainable system for better reporting and management of public finances. This will send a credible message to the markets that Britain can manage its money and remains creditworthy. The Bill requires the Treasury to report to Parliament on whether it is meeting its targets on deficit reduction. We think it should also have to report progress in implementing much-needed programmes like WGA. Reliable financial information, and the discipline that transparency provides, will help us get the public finances back on track.
As the debate approaches, the ICAEW has been briefing MPs on our analysis of the new legislation. If you’re interested, take a look at our parliamentary briefing on the Fiscal Responsibility Bill.