Effect of the changes to the accounts on the Parliamentary control of expenditure

3.32 We expect that whilst nearly all PFI projects will be on the balance sheet in a Department's Accounts, the liabilities will not be recorded in its spend against budget. This creates a disjuncture between the budgeting controls over public expenditure and the way that Departmental expenditure is reported to Parliament.

3.33 There are already discrepancies between resource budgeting and resource accounting. The Prime Minister announced a commitment on 3 July 2007 to bring planning, Parliamentary approval and reporting of public spending on to a more consistent basis.56 The National Audit Office is working closely with the Treasury on this Alignment Project.

3.34 The effects of the recent changes differ for each of the different Parliamentary controls over expenditure:

(a) National Accounts are an integrated set of economic accounts covering the whole of the economy produced by the Office for National Statistics. They are used to determine fiscal performance. They are based on ESA 95 and use the balance of risk to determine the treatment of PFIs.

(b) Departmental budgets are set by Treasury and used to control public spending. They mostly follow the treatment in the National Accounts and thus use ESA 95's approach to PFI.

(c) Supply Estimates. The House of Commons agrees the individual budgets and spending limits of each department annually (and revisions to them through supplementary estimates). At the moment estimates are closely aligned to the Financial Reporting treatment. The Alignment Project aims to align estimates with budgets to improve control over public spending. Thus from 2011-12 it is expected that estimates will be based on the ESA 95 approach to determining PFI expenditure.

(d) Resource Accounts are audited by the National Audit Office and set out how Departments have used the resources granted by Parliament. They will follow IFRS focus on control to determine the treatment of PFI.

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56 Governance of Britain (CM 7170), Secretary of State for Justice and Lord Chancellor (July 2007).