A reason to be optimistic...
It's not often that accountancy gets exciting, but now it has done just that. For the first time the Office for National Statistics (ONS) has started to measure Public Sector Net Worth (PSNW). This represents the combined value of all state assets, minus its liabilities. It may sound techy, but it could mark a shift in received wisdom about what makes a strong economy.
Until last month, public finances were measured only in terms of debt. Rather than merely looking at the ‘size of the mortgage’ (or public debt), the government’s public accounts will now also consider the ‘value of the house’ (or public assets). Measuring and reporting on public assets for the first time suggests there is a growing understanding that focussing on debt and GDP gives us a very limited picture of the health of our economy and society. Measuring public assets as well – the value of things like schools, hospitals, roads and railways – will give us a more comprehensive picture of the country’s balance sheet, help us ask questions about public investment or the lack of it, and hopefully open the door for more investment and collective wealth.
We know how vital strong public services are for a strong economy. Now, having stats on our assets will help us make the case for investment, and debunk the myths of what’s affordable and what’s not. For decades, mass privatisation of publicly owned industries such as rail, telecoms, water and energy has made us collectively poorer and channelled our assets into the hands of private companies. Until now, we have lacked official figures to make the case. Reducing public debt was the rationale behind the deeply damaging austerity policies along with waves of privatisation. It is the reason, or so we’re told, why we cannot possibly afford to pay doctors and childcare workers decent wages, or to invest in better bus routes or insulate draughty homes. Now we have official figures that show how this kind of expenditure can directly increase the value of public assets.
With a deficit of over £600bn, the UK has the worst PSNW of any developed country. Now that this has been exposed, it provides a strong, ONS-backed argument for state investment. According to Bloomberg, the Labour Party plans to adopt PSNW in their fiscal rules and to balance what the government owes against what it owns. This could pave the way for investment in rebuilding and expanding our public services. It will also enable a new government to borrow the money we need to deliver the green infrastructure necessary to reach our climate goals.
The dominant economic model backed by an ideology of small statism and market centrality has decimated our collective wealth and is destroying the very planet we live on. But perhaps, just perhaps, the tide is turning.
People have lost faith in the promise that wealth ‘trickles down’. Soaring energy bills have pushed millions into poverty while energy companies announce record profits. The FTSE 350’s profits were 89% higher in the first half of 2022 than in 2019, yet millions can’t afford the very basics like clothes and rent. The mainstream narrative of inflation being caused by high wages is not holding water. Instead, the charge of ‘greedflation’, caused by profiteering CEOs, is gathering strength.
Last month, US National Security Advisor, Jake Sullivan explicitly condemned trickle down economic policies. He named “policies like regressive tax cuts, deep cuts to public investment, unchecked corporate concentration, and active measures to undermine the labor movement that initially built the American middle class” as trends that have damaged the US economy. Earlier this month, President of the European Commission, Ursula von der Leyen, announced that “fossil fuel centred growth is obsolete”. She was opening a major conference at the European Parliament called ‘Beyond Growth’, which championed policies for economic and social sustainability (and which featured a session on universal basic services led by Social Guarantee director Anna Coote). Calls for transformative change are moving into the mainstream.
At the Social Guarantee we know that the key to a strong economy is a healthy society in which everyone has access to life’s essentials. This cannot happen without flourishing public services and a thriving planet. A change in accounting models won’t bring about the collapse of the dominant market-centric ideology. But it is a mighty straw in the wind. A reason, for once, to be optimistic.