National Accounting, Government Budgeting and the Accounting Discipline

• Published date: 01 May 2000
• DOI: http://doi.org/10.1111/1468-0408.00099
• Date: 01 May 2000

NATIONAL ACCOUNTING, GOVERNMENT

BUDGETING AND THE ACCOUNTING DISCIPLINE

RowanJones *

INTRODUCTION

At national level, there are two pervasive kinds of financial reporting that are

not influenced by the accounting discipline, either in theory or in practice, but

that have an increasing influence on the discipline.

1

Thefirstoftheseisnow

commonly known as national accounting (also as national income

accounting, national economic accounting, and social accounting). The

annual set of financial statements that national accounting produces in the

UK, for example, is called United Kingdom National Accounts (Office for

National Statistics, 1997). The second kind of financial reporting is a part of

government budgeting. The annual set of financial statements that

government budgeting produces in the UK is called Financial Statement and

Budget Report (HM Treasury, 1998) and is colloquially known as the Budget.

Both kinds of accounting address and measure the same phenomena ^in

relation to the same organisations ^that the accounting discipline addresses

and measures. All three are measuring and reporting on net expense, income

and capital: they are measuring financial wealth. All three kinds of accounting

are also challenged by demands from some quarters to measure, or at least

take account of, broader aspects of well-being. Yet each is different in

fundamental ways: they have different conceptual frameworks and they have

different accounting policies, which are implemented by different institutions

of government, in different ways.

The power to produce, and the responsibility for, national accounting and

government budgeting lies with each sovereign government. In the UK, the

accounting policies for national accounting are embodied in Office for

National Statistics (1998); the accounting policies for government budgeting

are not codified but appear periodically in the budget documents themselves.

The disciplines with most direct impact on them are economics and statistics.

Financial Accounta bility & Management, 16(2), May 2000, 0267-4424

ßBlackwell Publishers Ltd. 2000, 108 Cowley Road, Oxford OX4 1JF, UK

and 350 Main Street, Malden, MA 02148, USA. 101

* The author is from the University of Birmingham. This paper is derived from a working paper

presented at Aston Business School, and at the Institute of Public Sector Accounting Research,

University of Edinburgh; it also benefited from a Comparative International Governmental

Accounting Research (CIGAR) workshop at the University of Birmingham, for which the author

gratefullyacknowledges the financial support of the Association of Chartered Certified Accountants.

The authoralso acknowledgest hein fluenceof Klaus LÏder ont his research,and the comments of the

anonymousreferee.The usual disclaimer applies.

Address for correspondence: RowanJones, Department of Accountingand Finance, University

of Birmingham, Edgbaston, Birmingham B15 2TT,UK

e-mail: R.Jones@bham.ac.uk

International agencies are also involved in the setting of the accounting

policies and, albeit to a much smaller extent, in enforcing them. For national

accounting, the United Nations for many years took the lead, although

currently joint responsibility is held with the International Monetary Fund,

the World Bank, the Organisation for Economic Co-operation and

Development, and the European Commission (United Nations et al., 1993).

For government budgeting, the International Monetary Fund (1986) takes

the lead. The accounting discipline, in the form of the International

Federation of Accountants, has recently announced its intention to be another

policy-maker for these two forms of accounting, at least peripherally (IFAC,

1998).

The relationship between government budgeting and the accounting

discipline was much closer fifty years ago than it currently is. Taking the UK

as an example, the Budget document of April 1941 was the Financial Statement

1941/42, and represented, without commentary, a series of thirteen tables,

beginning with one on central government spending for 1940/41 and ending

with one on estimated central government net spending for 1941/42 (HM

Treasury, 1940/41b). By comparison, the Budget document of March 1998

was presented as New Ambitions for Britain: Financial Statement and Budget Report

(HM Treasury, 1998), and was primarily commentary. It began:

This is a Budget to secureec onomic stability, reward work, encourage enterprise and

create a fairer society. This chapter providesan overview of the Budget: it sets outthe

short-term economicprospects and some of the key longer-term challenges facing the

UKeconomy which underlines the necessity of the new policy agenda (p. 5).

At page 120, the Budget directly addressed central government spending. It is

also worth pointing out that this is the first time in this period that a scheduled

Budget has not referred to a specific fiscal year: it simply has a date.

There was another radical change in the nature of the two Budgets. In 1998,

on that page 120, the first table was expressed in pounds; the second table was

expressed in percentages of Gross Domestic Product. In 1941, there was no

mention of GDP, nor of any other measurement of national accounting. These

changes (there were obviously others) occurred gradually over the sixty-year

period but it is clear that the budget has changed from a financial statement

that was recognisably part of the accounting discipline (if some of its

conventions were sui generis), to one in which national accounting and

government budgeting have the dominant influence.

The primary purpose of this paper is to offer an understanding of what these

two other forms of accounting are. The next section synthesises their

theoretical and practical development. The paper then concentrates on the

relationship between national accounting and the accounting discipline, by

reviewing an early attempt to reconcile the two. Examples are then given of

how the Budget in the UK gradually moved away from the accounting

discipline. In the final section, we summarise elements of the current situation

102 JONES

ßBlackwellPublishers Ltd 2000