Sovereign Net Worth: An Analytical Framework

Abstract

The Fiscal Responsibility Act requires the Crown to articulate targets for a series of fiscal variables, including net worth. Given the dramatic improvement in the fiscal position in recent years, a critical policy question relates to how (and which) measures of Crown net worth should be targeted. This paper sets out a framework for targeting Crown net worth. It does so by supplementing the GAAP-based measure with forward-looking information about spending and tax revenue. The paper argues that targeting net worth for the Crown requires the estimation of a path, rather than a static level.