Treasury under fire as 'spend now, pay later' tactic stores up a £200bn tax bill for the next generation

Watchdog concerned by 'staggering' figures as Government reveals its long-term bills

Andrew Grice
Tuesday 07 February 2012 01:00
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Taxpayers face a £200bn ticking timebomb from long-term spending commitments that have not been properly costed, the Government's own spending watchdog warns today.

The Commons Public Accounts Committee criticised the Treasury for not keeping a grip on the "staggering numbers" involved in "spend now, pay later" projects which are a storing up massive bills for future generations.

In a report, the all-party group of MPs warned that the bills would include £131.5bn on the private finance initiative (PFI) such as hospital and school building – four times more than the assets secured by the deals; £56.7bn for decommissioning nuclear power stations; and £15.7bn for outstanding claims for medical negligence.

The MPs expressed concern that the Treasury was "surprised" to learn that £10.9bn of unpaid tax had been written off by HM Revenue & Customs in a year. They also said the Treasury had only "poor quality" information supplied by the fast-growing network of academy schools, which accounted for £1.2bn of government spending in 2009-10 and held assets of £2.2bn."Five academies submitted no information, and apparently were not sanctioned for their failure to do so," said the committee.

Treasury officials insist the costs will have no impact on George Osborne's plans to cut the public deficit because they have already been factored in. Margaret Hodge, the committee's Labour chairman, welcomed the Treasury's decision to disclose the long-term bills for the first time. But she said it was still not giving "a true and fair view of the UK's financial position" because spending on Royal Bank of Scotland, Lloyds Banking Group and Network Rail were left out of the Government's accounts.

Ms Hodge said: "The challenge is to improve the accuracy and extend the coverage so that there is proper transparency over the Government's spending commitments over time – not just in the [three-year] spending review period. Government must then use the information to make better decisions and we will be able to judge them more effectively on value for money."

The MPs expressed concern that some areas of future spending fluctuated wildly because the way they are calculated changed.

There is "continuing instability" over the £1,132bn liability for public sector pensions, which rose by £300bn in one year because of a new estimate of the value of future money.

"We were surprised to find that the Treasury did not have a grip on trends in some key areas of risk or plans for managing them," said the report. "Claims for clinical negligence outstanding at 31 March 2010 could cost taxpayers £15.7bn, or 15 per cent of the Government's total provision for future expenses arising from events that have happened in the past."

THE LIABILITIES

£131.5bn: PFI bill for schools and hospitals

£56.7bn: Decomissioning nuclear power plants

£15.7bn: Outstanding medical negligence claims

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