· 2 min read
illuminem summarizes for you the essential news of the day. Read the full piece on the Financial Times or enjoy below:
🗞️ Driving the news: A recent debate has emerged over whether fiscal policy should focus on debt and deficits or consider a broader measure of public sector net worth, which includes assets and liabilities
• The Institute for Fiscal Studies, in its latest Green Budget, suggests that the benefits of shifting to balance sheet targeting might not justify the potential costs but the article argues that focusing solely on debt sustainability is equally narrow-minded
🔭 The context: Fiscal assessments that consider assets are crucial, as better asset management could enhance government income
• The UK's past fiscal decisions, driven by a narrow focus on reducing reported debt, have led to questionable practices like selling off the student loan book and cutting public investment
• They have also been marked by frequent changes in rules, diminishing the credibility of these policies
🌍 Why it matters for the planet: Effective governance, crucial for creating a prosperous society, requires governments to act as stewards of a country's natural, physical, and human capital
• The article emphasizes that underinvestment in these areas, as seen in the UK, constitutes poor stewardship and can have long-term detrimental effects on national well-being and sustainability
⏭️ What's next: The article advocates for a broader discussion on public sector net worth and the national balance sheet, alongside debt sustainability
• This approach would naturally lead to a more comprehensive evaluation of political choices and a better understanding of the government's financial position
💬 One quote: "Instead of trusting simple rules that embarrassed governments then change, we must confront reality," (Ian Ball, co-author of Public Net Worth)
📈 One stat: The UK's public sector net worth in 2021 was minus 96% of GDP, significantly lower than other G7 countries
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