Public Net Worth: Accounting – Government - Democracy

Foreword
Acknowledgements
Contents
About the Authors
List of Figures
List of Tables
Part I: Purpose and Prologue
	1: Purpose and Prologue
		1.1	 Owning and Owing
		1.2	 The Question at the Heart of Government Finance…Where Is the Balance Sheet?
		1.3	 The Importance of History, and Historical Importance
		1.4	 Why Accounting Is Important for Democracy
		1.5	 Eighteenth Century Tools, Twenty-First Century Fiscal Rules
		1.6	 Credit Risk or Inflation Risk? What Happens When Government Finances Go Wrong
		1.7	 Delivering Better Public Services, More Efficiently
		1.8	 Which Balance Sheet Are We Talking About?
		1.9	 Why the G7 Focus?
		1.10	 Conclusion
	2: From Warfare to Welfare in Three Generations
		2.1	 The Evolution of Public Finances over 300 Years
		2.2	 Bismarck and the Foundations of the Welfare State
		2.3	 The Impact of the Welfare State on Public Finances
		2.4	 Conclusion
Part II: Accounting for Government
	3: Accounting for Government
		3.1	 Why Government Accounting Matters
		3.2	 Governments Are Important
		3.3	 The Direct Impact of Government Is Far Greater Than Service Provision
		3.4	 Indirect Impact of Government
		3.5	 The Scale and Complexity of Government
		3.6	 Governments Need to Be Well-Managed
		3.7	 Government Finances Are Also Large and Complex
		3.8	 Conclusion
	4: What Does the Government’s Balance Sheet Look Like?
		4.1	 Net Worth
		4.2	 Reading the New Zealand Government’s Balance Sheet
		4.3	 Classifying Assets and Liabilities by Purpose
		4.4	 Managing Government Assets
		4.5	 Liabilities on the Government Balance Sheet
		4.6	 Conclusion
	5: Why Accrual Accounting Matters
		5.1	 Financial Decision-Making in Government
		5.2	 The Required Information Reflects the Complexity of the Government’s Finances
		5.3	 Why Accrual Accounting Is So Important
		5.4	 The Cash Basis for Accounting
		5.5	 Accrual Accounting Is Different
		5.6	 The Balance Sheet Is Critical
		5.7	 Limitations of the Conventional Balance Sheet
		5.8	 The Importance of Timely Information
		5.9	 Conclusion
	6: Accrual Accounting – A Glimpse of How it Works in Practice
		6.1	 A Week in the Life of a Small Government
		6.2	 Accrual Information for Decision-Making
		6.3	 The Need to Account for Assets
		6.4	 Decisions and Incentives
		6.5	 Accrual Information at the Heart of the Financial Management System
		6.6	 Conclusion
	7: Central Banks and the Public Sector Balance Sheet
		7.1	 Central Bank Structure and Ownership
		7.2	 A Free Lunch? Money as an Irredeemable Liability, and “Seigniorage”
		7.3	 Central Bank Activity and Its Impact on the Public Sector Balance Sheet
		7.4	 Conclusion
	8: Looking to the Future: The Comprehensive Balance Sheet
		8.1	 Building the Comprehensive Balance Sheet
		8.2	 Comprehensive Balance Sheet: Prediction or Planning Tool?
		8.3	 What Does a Solvent – or Insolvent – Comprehensive Balance Sheet Look Like?
		8.4	 New Zealand’s Comprehensive Balance Sheet Approach
		8.5	 Constructing the Comprehensive Balance Sheet – and Why Does It Matter?
		8.6	 Orders of Magnitude: What Really Matters?
		8.7	 Conclusion
	9: Comparison of Public Sector Balance Sheets
		9.1	 The IMF: Promoting Better Public Sector Financial Management
		9.2	 Assets Versus Liabilities
		9.3	 What Assets Do Governments Own?
		9.4	 Debt – and Other Liabilities
		9.5	 Getting to the Bottom Line – The Importance of Net Worth
		9.6	 Focus on the G7: Overview
		9.7	 G7 Public Sector Balance Sheet Comparisons
		9.8	 How Did G7 Countries Get to This Position?
		9.9	 Conclusion
	10: Comparison of Comprehensive Balance Sheets
		10.1	 Evaluating the Comprehensive Balance Sheet: The IMF Framework
			Base Year
			Key Drivers of Cost and Revenue Assumptions
			Outputs
		10.2	 Sustainability of Public Finances: What the Model Tells Us
		10.3	 An Alternative Source: The UK Office for Budget Responsibility
		10.4	 A View Through Time – Can Adjustments Be Made?
		10.5	 Who’s Got the Bill? The Welfare State and Intergenerational Fairness
		10.6	 “Markets Versus Morons”: Do Financial Markets Take Financial Sustainability Into Account?
		10.7	 Conclusion
	11: Fiscal Rules
		11.1	 Fiscal Rules: What Are They?
		11.2	 The UK and EU Examples
		11.3	 IMF on Fiscal Rules
		11.4	 New Zealand as an Exception – The Fiscal Responsibility Act 1994
		11.5	 Principles of Responsible Fiscal Management
		11.6	 The Fiscal Outcomes
		11.7	 Conclusion
Part III: Managing Public Commercial Assets and Liabilities
	12: Finding, Understanding, and Valuing Public Commercial Assets
		12.1	 Assets, What Assets?
		12.2	 What Are Public Commercial Assets?
		12.3	 Hidden Assets – A Missed Opportunity
			Rio de Janeiro’s Escola Municipal Cicero Pena and Best Use
			The US Federal Government Owns a Third of the Country
			City of Pittsburgh Real Estate Portfolio – 70 Times Undervalued
		12.4	 An Alternative Source of Funding for US Infrastructure Investments
			Transport for London – and “Levelling Up” in the UK
		12.5	 Governments Are Hiding Assets
			“The Fastest Road to Become Rich – Buy Public Commercial Assets”
			UK Government Real Estate – By Far the Most Significant Element of the British Government’s Divestitures
		12.6	 Conclusion
	13: The Asset Map: A Shortcut to Understanding Property Holdings
		13.1	 The Politics of Asset Maps and Improved Transparency
			Is the Government Taking the Lead?
			Catch-22 and the Rating Agencies
			IMF and World Bank—Debt Sustainability Analysis
		13.2	 The Mechanics of an Asset Map
			Desk-Top Analysis
		13.3	 Process
			Collaborative Analysis
		13.4	 Conclusion
	14: Institutionalising the Management of Public Wealth
		14.1	 Separating Wealth Management from Policymaking Has Historical Roots
		14.2	 Competition at the Heart of Economic Policy
		14.3	 Public Service Obligations and Other Subsidies
		14.4	 Efficient Capital Allocation
		14.5	 Why Consolidating Ownership of Public Commercial Assets Is Critical
		14.6	 The Ministry of Finance Is the Natural Custodian of Governance
		14.7	 Transfer of Wealth to Future Generations
		14.8	 The Mechanics of Setting Up a Holding Company
		14.9	 Conclusion
	15: What Should Governments Do with Public Commercial Assets?
		15.1	 The Opportunity Cost of Not Managing Public Commercial Assets
			Public Assets Are Less Productive Than Private
			Sale of Public Commercial Assets
		15.2	 The example of UK Water
			Regulation and Accounting Is Key
			New Zealand and Net Worth
		15.3	 State Capitalism on the Rise
			China, the World’s Most Extensive Laboratory for State Capitalism
			The Washington Consensus
		15.4	 Swedish Experiment—As If Owned by Private Shareholders
			Euro Crisis Calls for Reform of Public Assets
		15.5	 Political Will Is Key
			Singapore Moved the Economy from Developing to Developed Status in a Single Generation
		15.6	 Conclusion
	16: Managing Assets Better: The Role of Public Wealth Funds
		16.1	 Necessity Is the Mother of Invention
		16.2	 Local Government Development
		16.3	 Even Selling Assets Requires a Professional Institution
			Securum—The Swedish Experience
		16.4	 Principles for Governing Public, Commercial Assets
		16.5	 Recruiting the Supervisory Board
		16.6	 Setting Up the Management Team
		16.7	 The Basics of Developing Public Commercial Assets
		16.8	 A Holding Company Is a Tool That Can Be Used for Good or Bad
		16.9	 Singapore—Improving the Net Worth for Future Generations
		16.10	 Conclusion
	17: Pensions and Other Liabilities: The Benefits of Disclosure and Management
		17.1	 How Pensions Appear on the Public Sector Balance Sheet
		17.2	 The Magnitude of Pensions Obligations on the Public Sector Balance Sheet
		17.3	 Why Accounting Properly for Pensions Matters
		17.4	 Out of Sight, Out of Mind
		17.5	 Do Government Pension Commitments Represent Value for Money?
		17.6	 Should Governments Borrow to Invest?
		17.7	 Is this a “Free Lunch”?
		17.8	 Institutional Structures, Policy Implications
		17.9	 Conclusion
Part IV: Past, Present and Future
	18: Balance Sheets, Culture and National Achievement in Europe 1560–1834
		18.1	 Balancing the Books of the First Global Empire
		18.2	 Reclaiming the Land: Dutch Accounting Culture and the Birth of a Nation
		18.3	 Polders to Plutocrats: Dutch Accounting Culture and the Birth of Modern Capitalism
		18.4	 Dutch Accounting Culture: Philosophy, Politics and Economics
		18.5	 Accounting and Autocracy in Seventeenth Century France
		18.6	 Political Arithmetic in Eighteenth Century Britain
		18.7	 “Scarcely Susceptible of Melioration”: Accounting Systems in Post Napoleonic France and Britain
		18.8	 Conclusion
	19: How Accounting Can Save Democracy
		19.1	 Complex, Big and Growing: The Problem in Government Finances
		19.2	 Accounting, Fiscal Rules and Financial Management: Why Net Worth Matters
		19.3	 Intergenerational Fairness
		19.4	 History, Accounting and Democracy
		19.5	 Can We Rely on Markets to Regulate Government Finances?
		19.6	 Accounting and Management
		19.7	 Conclusion: Saving Democracy
	20: Implementing Change
		20.1	 A Common Programme for Change
		20.2	 How Implementation Plans Will Differ Between Countries
		20.3	 Final Thoughts
Glossary and Abbreviations
Bibliography
Index