UK fiscal framework needs overhaul to better reflect public assets and liabilities

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UK fiscal framework overhaul

Highlights

Proposed UK fiscal framework reform would add public net worth to fiscal metrics alongside debt, deficits, and short-term funding needs.
The reform aims to tie the Budget process more closely to Whole of Government Accounts, focusing ministerial accountability on asset maintenance and liability recognition.
A UK Asset Map review is suggested to detail public assets' ownership, use, value, and costs, informing whether fiscal decisions preserve or erode public wealth.

Proposed changes to fiscal oversight

As argued by the Financial Times, the current UK framework gives investors and ministers too narrow a view because it focuses heavily on headline debt while giving less weight to assets, depreciation, long-term liabilities and overall public net worth.

That structure can make governments appear fiscally responsible even when they defer maintenance, sell assets or let infrastructure deteriorate. It can also treat borrowing for durable public investment too much like day-to-day consumption, despite the different long-term effects on the public balance sheet.

A stronger regime would test not only whether debt is falling at a chosen forecast point, but whether the state is improving or weakening its full financial position. That would include asking what assets are being created, who controls them, how they will be maintained, what liabilities are attached and whether asset sales strengthen finances or merely reduce reported debt while eroding public value.

The proposed reform has three main elements. Public net worth would become a formal part of the fiscal framework alongside debt, deficits and short-term funding needs; the Budget process would be tied more closely to financial statements such as the Whole of Government Accounts; and ministers would be judged on asset maintenance, liability recognition and broader stewardship, not only annual borrowing totals.

Implications for UK investment and public finances

The case for reform is tied to what the article describes as years of postponed maintenance, weak infrastructure investment, public land sales and the build-up of long-term obligations. In that view, Britain has benefited not only from lower defence spending in earlier periods, but also from what is described as a depreciation dividend, the apparent savings from cutting back on asset upkeep.

The article argues that the asset side of the public balance sheet also needs more active management. Land, buildings, infrastructure, enterprises and development rights are spread across departments, councils, transport bodies, NHS trusts and public corporations, often recorded formally but not managed as economic portfolios.

One suggested starting point is a UK Asset Map, a rapid review of commercially relevant publicly controlled assets, their ownership, use, value and holding costs. The purpose would not be to prepare privatisations, but to give ministers, the Treasury, investors and the public a clearer basis for judging whether fiscal decisions preserve public wealth or weaken it over time.

Our earlier article on the UK’s planned Digital Gilt Instrument explained how Britain aims to pilot a blockchain-based sovereign bond to modernise debt issuance and reduce operational frictions for market participants. It also noted that the Bank of England is prepared to accept the digital gilt as collateral, a step intended to help embed tokenised instruments into core market infrastructure.

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