The Whole of Government Accounts (WGA) contains information on future fiscal liabilities that are relevant for our forecast. This box explained how we ensured that those future liabilities reported in the WGA were fully reflected in our forecasts, where those liabilities were expected to affect the public finances.
The Whole of Government Accounts (WGA) contains information on future fiscal liabilities that are relevant for our forecast. These include:
- public service pensions, where the future costs of providing pension benefits that have already been earned are treated as current costs, and charged to each year’s accounts;
- provisions for future liabilities that have resulted from past events, where the liabilities are expected to happen. The WGA information also shows the time period when the liabilities might fall due; and
- contingent liabilities, which are possible future liabilities that have resulted from past events, but which are less likely or unlikely to happen.
The Treasury will publish the 2011-12 WGA later this year, and we will report on the latest picture it shows for future liabilities in our 2013 Fiscal sustainability report (FSR). However, we already know government departments’ provisions and future liabilities at the end of 2011-12, from their published accounts. This box explains how we have ensured that those liabilities that are expected to affect the public finances in the next five years are reflected in our forecast.
For future liabilities on spending, this forecast includes the latest forecasts for net payments for public service pensions out to 2017-18. Forecasts to 2062-63 will be contained in our 2013 FSR. Most of the future payments for which departments make provisions are included within departments’ DELs. These include the largest provisions for nuclear decommissioning and clinical negligence, where the future nuclear decommissioning payments are contained within the DELs for the Department of Energy and Climate Change (DECC) and the Ministry of Defence (MOD) and where the future clinical negligence payments are contained within the DEL for the Department of Health.
Other provisions for future liabilities at 31 March 2012 include:
- HMRC provisions of £2.1 billion for legal disputes over taxes, reduced from £4.4 billion at 31 March 2011. Our forecast assumes payments of £3.6 billion over the next five years, for these existing provisions and further provisions in future years’ accounts;
- DWP provisions of £3.9 billion relating to the Financial Assistance Scheme. Payments under this scheme are contained within DWP’s DEL. Receipts of £1.4 billion under this scheme are included in our forecast of capital accounting adjustments; and
- HM Treasury provisions of £1.3 billion for the Equitable Life Payments Scheme. Our forecast assumes payments of £0.9 billion under this scheme over the next five years.
The main contingent liabilities at 31 March 2012 include:
- HM Treasury’s contingent commitments associated with financial stability interventions. Our central forecasts do not include any of these potential costs, because they are judged more likely not to be paid than to be paid. In Box 4.2 we assess the potential fiscal cost of these interventions; and
- HMRC contingent liabilities of £20 billion for reductions in petroleum revenue tax and corporation tax where losses on decommissioning oil fields are set off against these taxes, reducing current receipts. Although these future losses of revenue are classified as contingent liabilities rather than provisions in HMRC’s accounts, we include a negative effect from oil and gas revenues from decommissioning expenditure of between £0.7 billion and £1.4 billion a year over the forecast period to 2017-18.