Government concerns and tensions in accounting standard setting: The case of accounting for the private finance initiative in the UK

The setting of accounting standards in the UK has always and will always be surrounded by tensions due to the different interests of those who are involved either in the production or operation of the resulting standards. While some interests come and go, the UK's governments, over time and of all political persuasions, have a continuing concern that the actions of the accounting profession more generally, and the content of accounting standards specifically, should be perceived to be in the public interest. Although the views on what is in the public interest change over time, what is clear is that where this public interest is perceived not to be upheld, then tension between the government of the time and (primarily) the accounting standard-setting bodies is inevitable. At these times various forms of questioning of the actions of accounting standard-setting bodies occur. However, it is important to stress that when the public interest is perceived to be upheld, no overt tension is apparent, but this does not mean that this underlying concern does not exist. This paper's main focus is on one of the most recent points of overt tension related to accounting for the Private Finance Initiative (PFI). It locates this specific tension in an historical analysis of the battles that have led to and challenged the accounting profession's hard-won ability to regulate itself. It also compares and contrasts the disagreement surrounding accounting for PFI with a not dissimilar point of tension surrounding accounting for inflation in the 1970s and 1980s. This comparison is used to provide a richer historical understanding of what is argued to be a general and ongoing watching brief by any UK government (of any political persuasion) over the self-regulatory processes of the UK's accounting profession that they are working in the public interest.