Market leading insight for tax experts
View online issue

PAC criticises government approach to managing debt

printer Mail

According to the Public Accounts Committee, the government ‘has failed to take a strategic cross-government approach to managing that debt and getting more money paid to the exchequer’. The findings are included in the PAC’s seventh report of this parliamentary session which examined the issue of managing debt owed to central government.

Among the recommendations made, the PAC suggested that the Treasury must ensure that it produces a comprehensive and effective strategy for managing debt without further delay, and apply appropriate key performance indicators for debt management across government. The PAC also recommended that the Cabinet Office set out clearly what savings it expects both government as a whole, and individual departments and agencies, to achieve over a defined period from managing debt better.

PAC chair, Margaret Hodge, said: ‘[It is estimated that] last year the government was owed a staggering £22bn. HMRC was owed the majority of this debt (£15.1bn), while the Department for Work & Pensions and the Ministry of Justice account for nearly all of the remainder.

‘The government is owed this massive amount of money but it has failed to take a strategic, cross-government approach to managing that debt and getting more money paid to the exchequer. Instead, its treatment of debt has been characterised by neglect and periodic large write-offs. Large volumes of old debts have been allowed to build up in departments, with 61% of HMRC’s debt and 88% of DWP’s debt over 180 days old at 31 March 2013. The older the debt the more difficult it becomes to collect … Failure to minimise debt has resulted in the government’s debt balances and losses being higher than necessary, and in Government borrowing more as a consequence.

‘Debt owed to the government has reduced by around £5.5bn in the last four years. However, this is a result of reductions in HMRC’s balance – a chunk of which was from writing off or deciding not to pursue £3.5bn of tax credits debts and other debts it considers “uncollectable”. Debt has been increasing over the past six years in all departments except for HMRC.

‘In the current climate of tight public finances, that’s just not good enough, and urgent action is required,’ she added.

Issue: 1225
Categories: News