The change in public sector net worth in any given forecast year is largely driven by the operating balance and property, plant and equipment revaluations.
[1] Research suggests that the main fiscal factor driving bond yields hence appears to be government net worth.
While net worth is central to financial management in the private sector, based on audited accrual numbers, most governments today overlook their balance sheets.
The Office for Budget Responsibility supported using Public Net Worth as a key fiscal target in its 2019 report, which concluded: "...the net worth objective would allow the government to take advantage of historically low interest rates to borrow in order to invest in meeting the long-term challenges of restarting productivity growth, tackling climate change, and modernizing our public service infrastructure.
Likewise, it would force the government to confront its significant and growing non-debt liabilities, including unfunded public sector pensions.
[14] Andy Haldane, the former Chief Economist at the Bank of England, said in the Financial Times: "Just as a company or household would look at their net worth when making investment choices, so too should government.
Our current debt-based fiscal rules, by constraining public investment, have contributed to a reduction in macroeconomic resilience and a bulging of the safety net following shocks.
[16] Martin Wolf commented on the Labour Party's plans in the Financial Times: "This [Public Net Worth] should reduce the tendency to slash investment whenever fiscal difficulties emerge.
Meanwhile, governments have sold off public assets and used the proceeds to fund tax cuts, creating the illusion of national wealth while in fact leaving the state poorer.
The result is that Britain has the second lowest public net worth of any major economy after Italy, according to the International Monetary Fund: a staggering minus 96 per cent of GDP.