With governments around the world increasingly adapting accruals accounts, they now have a far more comprehensive set of integrated financial information to help support policy making. While balance sheet management has not been an area of focus for government up until recently, we expect this to change. This is particularly because some of the most valuable information in integrated financial statements concerns the financial position and the assets and liabilities set out in the Balance Sheet.
The balance sheet shines a light on both the assets that are available to government but especially the risk and liabilities that have been built up. The liabilities of government are the consequences of the decisions of today, whether the national debt, for government pensions or the decommissioning of the nuclear industry. Because in many cases these liabilities will exist for decades, they represent the legacy of today’s decisions for future generations so it is vital that these liabilities are managed effectively.
This Policy Insight aims to help public officials understand what is in their Balance Sheets. The value of the information about different sorts of assets and liabilities and how some governments around the world are using it to support more effective policy making. In particular to help government ask the right questions to make the most of their financial information, for example:
- What assets do they have and are they getting the best use out of them?
- Should government’s increase or decrease investment?
- What are their liabilities and how are they going to settle or service them?
- Could refinancing offer opportunities to save money?
- How fast are liabilities increasing relative to income and could heir growth be slowed?
- What is the long term impact of decisions with financial consequences beyond the next year?
- This policy insight draws on the balance sheet information published in the UK’s Whole of Government Accounts and financial reports published by the Australian, Canadian, French, German and New Zealand governments to highlight areas where better balance sheet management can help governments to use resources more effectively.
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