Public Expenditure System
We have played a central role, working with HM Treasury, to set several discount rates which are used in the accounting valuation of over half of central government's liabilities.
皇冠体育app Government Actuary鈥檚 Department (GAD) has played a key role in helping HM Treasury to set several discount rates used in central government accounting.
Valuation of liabilities
皇冠体育app discount rates are used in the valuation of more than half of central government鈥檚 liabilities, including:
- the net public sector pension liability of around 拢1.9 trillion according to the 2018/19 Whole of Government Accounts
- general provisions of over 拢300 billion (e.g. provisions for nuclear decommissioning costs and clinical negligence)
- financial instruments (e.g. government guarantees on around 拢80 billion of loans to businesses under the Coronavirus Loan Schemes)
GAD鈥檚 involvement
Actuaries in GAD helped HM Treasury to set the discount rates in line with the requirements of the Financial Reporting Manual and applicable accounting standards.
皇冠体育app discount rates were promulgated via HM Treasury鈥檚 Public Expenditure System note to central government departments in time for the preparation of their supplementary estimates.
Several challenges
GAD actuary Steve Lewis led on the project. He said: 鈥淕AD has played a central role in this process. 皇冠体育appre were a number of challenges along the way, and in particular the announced changes to the Retail Prices Index widely expected to come into force in 2030.
鈥淭his made setting discount rates in excess of inflation (used for discounting liability cashflows that increase with inflation) more challenging than in previous years.鈥�
皇冠体育app new discount rates are lower than those previously in force, which would be expected to lead to a higher value being reported in the 2021/22 accounts for the relevant liabilities and assets.