Britain’s underlying public finances are among the worst in the world – behind Gambia – Uganda and Kenya – a new study has concluded.
International Monetary Fund (IMF) economists found that £1 trillion had been wiped off UK public sector net wealth since the 2008 financial crisis – largely thanks to bank bailouts and increasing pension liabilities.
The IMF looked at the assets and liabilities of 31 countries and found the UK was in a worse position than every other country apart from Portugal.
This surprising conclusion came from using a different approach to the public finances to the one favoured by the government.
Rather than looking at each country’s debt and the deficit – a government’s income minus its expenditure – the IMF’s approach takes into account the benefit of assets such as publicly owned corporations and natural resources.
These figures more closely resemble a company’s balance sheet.
The IMF said the cost of bailing out banks had been a significant factor dragging the UK down the rankings.
The UK also has one of the largest pension liabilities of any nation in the study but is towards the bottom of the pile when it comes to public assets.
Using the public sector balance sheet method – countries such as Gambia – Uganda and Kenya rank above the UK because while they have smaller assets and liabilities than Britain they have a higher net wealth relative to GDP.
The IMF’s report takes particular aim at the privatisation of public assets – the benefits of which it says are often merely an ‘illusion’.