IEA Economics Fellow Julian Jessop has written an article for UK in a Changing Europe explaining and analysing the ONS’ new ‘public sector net worth’ metric.

Julian wrote:

“Public finance geeks have been even more excited than usual about the latest statistical bulletin from the Office for National Statistics (ONS), which includes new data on a balance sheet aggregate known as ‘public sector net worth’. What is this, and why does it matter?

“Public sector net worth, or PSNW, is a relatively comprehensive measure of the total value of the public sector’s assets, both financial and non-financial, minus its liabilities. This is broader than the more familiar ‘public sector net debt’.

“On the assets side, PSNW also includes the value of physical assets owned by the state (such as hospitals, schools, roads and other forms of infrastructure), as well as relatively illiquid financial assets (such as student loans).

“The coverage is also wider on the liabilities side, because (among other things) PSNW includes loan guarantees, financial derivatives, and public sector pensions.

“So, why should this be of any interest to someone who is not obsessed with the nitty-gritty of the government’s accounts? The short point is that PSNW can give a more accurate picture of the long-term sustainability (or otherwise) of the public finances.

“It is also already mentioned in the ‘Charter for Budget Responsibility’ as one of a broader set of indicators that the Treasury should consider in its management of fiscal policy.”

Read Julian’s full piece here.