ALL Government departments may be forced to surrender their reserves to help ministers pay their way through the global economic storm, Scotland on Sunday understands.
The Treasury is believed to have called on all departments to scrutinise the bank accounts and to double-check whether they need the so-called 'underspend' cash which most have built up.
It is estimated that around £22bn is being hoarded by UK dep
artments, which are allowed to keep hold of funds at the end of a financial year even if they have not been spent.
Following last week's tumultuous events, ministers may be told that if they cannot offer a good reason to keep hold of the cash, they will have to hand it over.
The Treasury last week left itself exposed to a £500bn bail-out of the banking sector. On top of the nationalisation of Bradford & Bingley and Northern Rock, public borrowing looks set to exceed £100bn this year.
Economists are warning that, as a result, the country could be paying the sum off for years, leaving future Governments with no choice but to cut spending and increase taxes.
One senior Government source said: "There is real scrutiny going to be placed on departments who have been seen to be underspending. Any which can't explain it will end up being told to hand it over."
The move follows growing scepticism within the Treasury about many departments' level of underspend. In 2006-07, almost 24% of funds handed over for capital spending – cash used to pay for new buildings and infrastructure – was not spent.
In total, at the start of the last financial year, departments had underspent cumulatively by £12bn on revenue and £10bn on capital. The biggest culprit is the NHS, which had £1.65bn left over last year.
Treasury officials are also believed to have their eye on the likely drop in spending caused by the continuing withdrawal of troops from Iraq.
Underspend UNDERSPENDING by government departments has long been a bone of contention.
The Scottish Government was regularly criticised in the early days of devolution for building up underspends of up to £500m.
Last year, ministers were attacked for the opposite reason, after leaving behind an underspend of just £42m, out of a budget of £30bn – leaving the government vulnerable to emergencies.
When he was Chancellor, Gordon Brown set up the underspend facility. Now departments will have to prove they need it, as the credit crunch bites Whitehall.
The full article contains 414 words and appears in Scotland On Sunday newspaper.
