Andrew Berkeley
Richard Tye
Neil Wilson
First published 26th December 2020. This version published 21st February 2021
An Accounting Model of the UK Exchequer 2nd edition
In this timely study, the authors investigate the structure and function of the UK’s public financial institutions, in groundbreaking depth and scope. Drawing on historical sources from the birth of the modern sterling economy, testimonies from government departments, official documentation, and parliamentary abstracts, the study forensically disassembles the components of the UK’s government finances, debunking ideology and half-truths along the way.
The authors expose the myth of Bank of England “independence”, and illustrate the central, driving role of HM Treasury in the UK financial system and the primacy of Parliament in determining spending and resourcing in the UK.
The study describes in detail how the financial operations of the UK Government work, and the accounts and structure of the UK Exchequer, including its relationship with the devolved UK administrations.
Supported with references from forgotten or little-known sources and extensive appendices detailing the history of the UK financial system, this important work destroys the myths and obfuscation of governments, economists and the financial services sector that has allowed decades of needless austerity to wreak social and political devastation in the UK and beyond.
As such, this is an overdue exposé that has implications beyond the field of economic literature and challenges the basis of UK economic policy since the 1980s.
The authors’ comment on the February 2021 edition:
It’s been over a month now since we published the first version of our working study into the functions and operations of the UK Exchequer and in that time we’ve had some useful feedback from various people about the structure of the study and what else would be helpful to include. This feedback has been extremely valuable in guiding our thinking and we’d like to offer thanks to all of those who have responded. And so, after beavering away at the keyboards, we have published a revised and updated edition including many of the things you’ve asked for.
It’s probably worth mentioning that this study is designed to be a reference text for people to cite and link to. It describes what this particular helicopter is and how it works, not how to fly it or how to train people to fly it. In particular it does not address what feats it could achieve in the hands of a competent pilot, rather than somebody who still believes they are driving a bus. Those narratives are for others to create in the future.
In this edition we’ve altered the way we have modelled the Government Banking Service. It’s become increasingly clear that it operates less like a passive accounts department and more like an internal agency bank. Therefore, we have made it a first class entity within the model and that has simplified and clarified many of the processes. In particular, it is far more obvious how internal Exchequer credits end up as sterling, as payments are transmitted and cleared via the banking system, resulting finally in a credit to a payee’s bank account. This has resulted in the biggest change – the Paymaster Exchequer Supply Account moving to the Banking Service and the return of the Paymaster Drawing Account at the Bank of England as the correspondent account. It is between these two accounts that the magic happens, as it has in much the same way for over 180 years. The Paymaster process has just been automated, not eliminated.
We have updated and expanded the description of the accounting conventions used within the study so that the treatment of concepts such as Equity are clear. Government accounting follows standard corporate accounting closely, but not precisely. In particular, it doesn’t like to account for income, preferring to run everything as capital funding via a ‘general fund’ that is the record of supply to each department. The central funds, the Consolidated Fund and the National Loans Fund for example, tend to operate on the same principle. If your background is corporate finance then be careful of the accent change. Just as there is a difference between the Spanish spoken in Mexico City and Madrid, a similar difference applies in the accounting. It’s the same language, but some of the meanings are quite different.
We’ve lengthened the introduction to provide a fuller description to the reader of the direction of travel within the study. The appendices have also been extensively updated and expanded. The details of the capital and funding of the Bank of England over the centuries has been refined and extended. We have a new appendix detailing the historical event known as the “Stop of the Exchequer” and how that episode covers the period when the personal debt of an individual sovereign morphed into what we would today call National Debt, and another that puts the model balance sheets in the context of the published accounts, showing how they are derived in detail.
We hope that you find this new and updated edition useful and that it answers the questions you had from the previous version. But if not, then let us know and we’ll look at adding it in.
For any queries or to provide comments, please contact the authors