Banking choice 'costing taxpayer'
Updated on 16 October 2009
Source PA News
Public bodies are costing the taxpayer millions of pounds a year by keeping
money in commercial bank accounts, the Whitehall spending watchdog has
An estimated £4 billion of taxpayers' cash is held with commercial banks
that pay interest at a lower rate than it costs the Government to borrow,
the National Audit Office (NAO) said.
It called for departments and their affiliated bodies to hold their main
accounts with the Government Banking Service, so that spare money is held by
the Exchequer to reduce borrowing.
The move could save the Government £28 million a year, the auditor said,
based on the £4 billion it reckoned was kept in commercial accounts on March
The interest rate earned by public bodies studied by the NAO was on average
0.7% below the Bank of England base rate, at about which the Government has
to borrow money.
Apart from saving money, keeping accounts with the Exchequer would also
allow the Government to manage its cashflow more effectively, the NAO said.
Auditor General Amyas Morse said: "In the light of the current fiscal
position, good cashflow management is more important than ever. Departments
and the Treasury are working to improve performance, but central government
as a whole is not maximising value for money in the way it manages its cash.
"More money needs to be kept in the Exchequer by departments and sponsored
bodies, and forecasts of cashflows should be improved.
"Where organisations do need to use commercial bank accounts, they should
use shared knowledge to negotiate arrangements which give the best possible
deal for the taxpayer."
Tory MP Edward Leigh, chairman of the Commons Public Accounts Committee,
said: "In these bleak economic times, government departments are wasting
millions of pounds each year, simply by unnecessarily keeping cash in
commercial bank accounts rather than in the Exchequer."
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