National Budget Deficit Massaged Downwards

The annual deficit is definitely being reduced, but perhaps not as fast as the official figures suggest.

The UK Government uses cash accounting, which fails to differentiate between cash raised from the sale of assets such as the formerly state owned Royal Mail and cash raised from repeatable cash generating operations such as corporation and income taxes.  This is an incentive to raise cash in any way possible but does not encourage sensible behaviours.

Equally cash accounting encourages the postponement, at any cost, of cash payments to later accounting years.  This is because only actual cash paid out hits the National Income and Expenditure Account; the equivalent of the P&L.  Commitments to make future payments are generally only recorded in the National Balance Sheet, with the cash payments only going through the Income and Expenditure Account in the year in which they are actually paid.

Leave a Reply

Your email address will not be published.