It's difficult to get excited about the statement of accounts. Most people regard it as a historical document which is of little relevance in the real world. That is probably fair comment as, in the past, accounts have not really reflected true economic reality. But that is now changing, and the consequences could be far reaching. It started some years ago with FRS17 – the disclosure of pension liabilities on the balance sheet. Overnight, companies and public bodies saw their net worth reduced dramatically, prompting wholesale changes to pension arrangements for millions of employees. It also prompted complaints from local taxpayers when they saw their equity wiped out by pension deficits. This year, local authorities' accounts will be in a new format, as they become more compliant with international standards. The main change will be to highlight the impact of depreciation of assets. For many councils, it will become clear that their assets are losing value. We are not investing sufficiently on maintenance and renewal. Surrey will show a deficit for the year of more than £65M on its income and expenditure account. We are living off the past, and the current level of service provision cannot be maintained unless we invest more. Next year, there will be another big change. PFI deals, many of which do not appear on anyone's balance sheet will be shown on the Government's and a council's balance sheets. And this will show an even more uncomfortable truth. Not only are we living off the past, we have also mortgaged the future. What the accounts will really expose is that the baby-boomer generation is having it all ways. Our parents paid for current public services and our children will pay for our pensions. All we will leave them with is a load of unaffordable PFI contracts. Or maybe someone will actually read the accounts and the penny will drop. Phil Walker is director of finance at Surrey CC
