In practice, addressing this issue would require the introduction of separate reporting of PPP transactions for accounting and statistical purposes. This is the approach being adopted by the UK, which has applied the principles of IPSAS ED 43 for public sector accounting purposes since 2009. The UK now reports separately the:
• Accounting treatment of PPPs, based on a "control" test; and
• Statistical treatment of PPPs, based on a "risk and reward" test.
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 PPPs. 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 PPPs. 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 PPP expenditure. Resource Accounts are audited by the National Audit Offce and set out how Departments have used the resources granted by Parliament. They will follow IFRS focus on control to determine the treatment of PPP. Source: House of Lord, Private Finance Projects and Off-Balance Debt, Volume II Evidence, 2010, available at http://www.publications.parliament.uk/pa/ld200910/ldselect/ldeconaf/63/63ii.pdf |
There are, however, certain disadvantages with this approach, as for example:
• The costs (or resource consequences) of "double reporting";
• Politically, this approach may appear difficult to justify, leading to suggestions that the true cost of future government liabilities is being, in some way, hidden.
For these reasons, Germany has opted for a single reporting notwithstanding the negative impact on debt and deficit generated by the substantial over-reporting.