So:
The huge cost to the taxpayer of Labour’s commitment to the private finance initiative since it came to power a decade ago is revealed by the Treasury in a report by MPs published today. It shows that Gordon Brown has committed future governments to pay back £170bn by 2032 to banks, investors and private entrepreneurs for more than 800 schemes for new hospitals, schools and prisons.
Does this number currently appear in the public accounts as a future liability? If not, why not? And will it be put into them in future?
2 responses so far ↓
1 andrew // Nov 27, 2007 at 12:54 pm
Future commitments are a ‘disclose only’ item. They’re not really ‘liabilities’ in the accounting sense of the word, because the events which will cause you to be liable for the money haven’t all occurred yet. Also the state doesn’t receive the benefit of the hospitals, schools, etc. until a future period.
Incidentally, they use a variant of this argument to (incorrectly, in my view) keep ALL future state pension liabilities off the books. So, even though you can get a little statement from NICO telling you how much state pension you will get in future, that isn’t recognised as a liability in the Govt books. Even if you’re due to retire tomorrow and have ‘earned’ that pension through your lifetime contributions. Why? Because, in theory, they could change the law to strip you of your entitlement. So they recognise nothing at all until the day you retire, then they start booking it as an expense on an annual basis.
Meantime, companies must match the cost of employee pensions against the periods in which those employees work!
2 The Great Simpleton // Nov 27, 2007 at 7:14 pm
This sounds like its straight out of the Enron school of accounting.
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