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Long-term Expenditure

Volume 455: debated on Friday 26 January 2007

To ask the Chancellor of the Exchequer (1) what accounting convention is used for expressing the costs of long-term public expenditure over periods of (a) 20, (b) 30 and (c) 50 years; (110976)

(2) if he will give examples of where his Department uses cash costs for long-term expenditure over 30 or more years.

The Government’s long-term public finance report provides a comprehensive analysis of socio-economic and demographic trends and their potential impact on the public finances over a 50-year period. Spending projections model the demand for public spending based on population structures in future years. Expenditure is projected to occur at the point at which the economic impact is deemed to arise, not at the point of cash flows. The report is based on an accruals measure and is consistent with the way in which outturn information on public spending is presented in the national accounts.

To ask Chancellor of the Exchequer if he will give examples of where his Department uses net-present value costings for public expenditure forecasts over 30 or more years. (110979)

Under reforms to the public spending framework introduced in 2000 the UK Government have a statutory obligation to report liabilities in the same way as private companies and the accounts of public sector bodies are subject to independent audit.

Where the public sector has a liability that meets the conditions of FRS12 then the value of that liability, calculated as the discounted value of future cash flows, is shown on the relevant public sector body’s balance sheet.

Examples of long-term liabilities accounted for in this way include public sector pensions and the costs of nuclear decommissioning.