The next instalment of HM Treasury’s groundbreaking Whole of Government Accounts is likely to be rejected by the National Audit Office because of unaudited data from councils, MPs have been told.
Treasury permanent secretary James Bowler told members of parliament’s Public Accounts Committee yesterday that the department fully expects the watchdog to “disclaim” the 2024-25 WGA because of data quality concerns.
It will be the third year in a row that the WGA has failed to secure NAO sign-off , with the crisis in local authority audit chiefly to blame.
The WGA brings together spending data for more than 10,000 public bodies, and the 2023-24 accounts, which were published in July this year, added up to in excess of £1.076tn in public expenditure. HM Treasury's 2023-24 WGA was the 15th year the dataset has been published in what is understood to be an internationally groundbreaking exercise to express the totality of public expendture.
However, the quality of the data was impacted by the fact that 201 local government entities – 167 of them local authorities in England – failed to submit any data at all for the 2023-24 WGA. A further 224 local authorities in England submitted unaudited data. Across the whole of the UK the figure was 249.
Speaking at Thursday’s Public Accounts Committee session, Bowler agreed the situation was “unsatisfactory”.
He said that data sweeps conducted by HM Treasury indicated that there would be 145 public sector entities with missing data for 2024-25's WGA, which is due to be published next summer.
“It’s coming down, but it’s still too much,” Bowler told MPs.
He added: “Our expectation for 2024-25's Whole of Government Accounts is that [the] disclaimed status will unfortunately continue. We want to be very open with the committee about our expectations here.”
Bowler said there was a “trade-off between timeliness and quality” and that the Treasury was “choosing timeliness” and opting to use data that is available from councils rather than waiting for that data to be audited. He said 98% of local authorities had submitted draft accounts for 2024-25.
The audit crisis among English councils stems from the coalition government’s decision to scrap the Audit Commission more than a decade ago. Within weeks of taking office last year the Starmer government set out a recovery plan aimed at clearing backlogs by 2028.
Will Garton, director general for local government, growth and communities at the Ministry of Housing, Communities and Local Government told yesterday’s session that the department maintained the “aspiration” to have no disclaimed or qualified local-authority accounts by 2027-28.
But he acknowledged that it was a “hugely ambitious” aspiration.
“What the auditors are telling us is just that the complexity and the scale and the size of the situation is greater than they had envisaged,” he said.
Garton was unable to give an estimate for the number of local authorities that will publish fully-audited 2024-25 accounts that are not disclaimed.
PAC member Clive Betts asked Garton whether he believed plans to reorganise local government in 21 areas of England that currently have a two-tier system with both county and district authorities would "complicate” the issue of outstanding audits.
Garton admitted that the local-government reorganisation proposals would “add a degree of complexity”, but maintained that it was a situation that “could be managed”.
“With the exception of Surrey, our objective is to complete reorganisation by 2028,” Garton said. “In the two-tier system, accounts should be done in the normal way, up to and including 2027-28. From 2028-29 we’d expect a single consolidated set of accounts.”
Local government reorganisation in Surrey is due to take place from 1 April 2027, when the county council and 11 districts and boroughs will be reorganised into two unitary authorities.
One of the authorities that is set to disappear is Woking Borough Council, which in 2023 issued a Section 114 declaration acknowledging that it was unable to balance its books. Property debts in excess of £2bn stemming from two large-scale development projects are the root cause of its problems.
Elsewhere in Surrey, MHCLG has also sent commissioners into Spelthorne Borough Council after debts of more than £1bn were identified.