Banking choice 'costing taxpayer'

Banking choice 'costing taxpayer'
Updated on 16 October 2009 Source PA News
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Public bodies are costing the taxpayer millions of pounds a year by keeping money in commercial bank accounts, the Whitehall spending watchdog has found.
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 31, 2008.
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.
"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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