UK Politics

Deficit reduction plan 'very challenging', warn MPs

The sign on the HM Treasury on Horse Guards Image copyright Getty Images
Image caption MPs say the government faces "a significant challenge" in delivering the next phase of deficit reduction

Government plans to further reduce the deficit are "very challenging", the Commons watchdog has warned, and it called for more details of the impact of the measures on government finances.

The Public Accounts Committee said making additional cuts to non-protected areas of spending would be "testing", and should "not be underestimated".

It has published its response to the new Whole of Government Accounts.

The Treasury said there had been "unprecedented" transparency.

The whole of government accounts (WGA) are a consolidated set of financial statements for the UK public sector, based on the accounts of some 3,800 public-sector organisations.

They are intended to show what the government owns, owes, spends and receives. It is the fourth year they have been published.

The Public Accounts Committee, made up of a cross-party group of MPs, has given its verdict on the audited accounts for 2012-13.

'Significant challenge'

The report said: "The government has currently delivered only half of its planned measures to balance public sector income and expenditure (fiscal consolidation measures).

"The experience in the delivery of consolidation measures to date, where for example the planned increases in tax revenues have not been realised, also show that the government will face a significant challenge in delivering the next phase of the consolidation."

Although the WGA was an "essential tool" for Parliamentary accountability, it did not offer Parliament "real visibility" over the delivery and impact of plans to cut the deficit, the MPs said.

The report recommended the WGA should be used to set out the impact that deficit reduction policies are having on public finances to give MPs a better idea of how the measures are working.

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Image caption Committee chairwoman Margaret Hodge says the scale of the task "should not be underestimated"

Labour chairwoman Margaret Hodge MP said: "The government has made progress in reducing the deficit, but the challenges in meeting current and future targets for eliminating the deficit look very challenging.

"The Treasury plans that, by the end of the current Parliament, some £126bn of consolidation measures will be achieved from a combination of spending cuts - some £100bn - and increased tax revenues - around £26bn.

"However, tax revenues have not been increasing as expected and, although the spending cuts are being delivered, officials are less clear where the savings have been made."

She added: "The challenge in delivering further fiscal consolidation measures during the next Parliament should not be underestimated.

"Currently some £250bn of over £700bn public expenditure (on state pensions, health, schools and overseas aid) is protected from spending cuts and tax receipts continue to be well below forecasts.

"This leaves the challenge of identifying and delivering further expenditure cuts as very testing."

'Seemingly excessive'

A Treasury spokesman said Ms Hodge's comments "are not based on the evidence presented, and are entirely outside the remit and expertise of the committee".

The spokesman added that the independent Office of Budget Responsibility (OBR) had "confirmed" the government was on course to halve the deficit in 2015.

"The level of transparency under this government has been unprecedented with the creation of the OBR to independently forecast and report on the public finances."

In its report, the committee also criticised the Treasury for failing to provide sufficient oversight in ensuring all parts of the public sector comply with its views on pay restraints.

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Image caption Chancellor George Osborne set out his future tax and spending plans and the state of the nation's finances in his Autumn Statement in December 2014.

It said the department had been slow to deal with "seemingly excessive" pay for certain roles in the education sector, such as university leaders and so-called school super heads. Although universities are not part of the public sector, they receive significant amounts of public funding, the report noted.

The MPs also called for more action to clamp down on "off payroll" salary arrangements in the wider public sector, noting that public spending watchdog the National Audit Office identified 2,214 new arrangements in 2013-14.

The audited accounts for 2012-13 were published in June 2014. Net expenditure was reported at £179bn for the year, down from the £185bn the previous year.

Net public liabilities - the difference between the government's assets and liabilities - rose from £1.3 trillion to £1.6 trillion over the period.

As assessment of total money lost through fraud and error across government is due to be included in the 2014-15 WGA, on the committee's request.

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