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PUBLIC SECTOR ACCOUNTING UNDER SCRUTINY

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A controversial decision by the Office of National Statistics to keep the UK government's£21bn guarantee to Networ...
A controversial decision by the Office of National Statistics to keep the UK government's£21bn guarantee to Network Rail off its balance sheet has prompted intense criticism of public sector accounting techniques, reported The Business (p2).

Analysts seeking examples of Enron-style accounting in the UK are finding it in the public rather than the private sector.

The UK Statistical Office has also agreed that Network Rail, the proposed successor to Railtrack, would be classified as a private sector organisation, though in practice it is state-controlled. Economists expect the stagnant economy and lower-than-forecast tax receipts to boost the government's budget deficit, which could violate European Union convergence rules. As a result, many analysts beleive the government wants to move public sector spending from its balance sheet by relying on public private partnerships and to change public sector accounting rules in an attempt to camouflage the true size of its deficit.

Conservative treasury spokesman Howard Flight claims to have identified contingent liabilities worth£25bn for transport alone, which do not appear on the government's books.

The government has also introduced EU accounting standards ESA95, which have made comparisons with previous governments almost impossible, said David B Smith, chief economist at Williams de Broe.

The new accounting standards also boosted nominal gross domestic product by billions of pounds by redefining numerous spending items- for instance, software in development is now treated as capital formation

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