How do you price the priceless?

When a nation decides to count assets as well as incomes, it has to face some difficult questions.

The Financial Times has a report today on the efforts of the Treasury to publish the "whole-of-government accounts" for the first time. The usual practice for governments is to focus on income and outgoings, paying little heed to their assets and liabilities, but the fate of Greece put an end to that practice.

The problem with totting up everything a government owns is that their portfolio is rather different from that of, say, Barclays or John Lewis. They own things like Stonehenge:

Although unthinkable in practice, it would in theory be possible to price the site as if it were a business put up for sale, Mr Thurley [the head of English Heritage] admits. More than 1m people visit each year, with adults paying £7.50 each. “If we were to put Stonehenge on the market, we would probably sell it for a very large sum of money,” he says.

But applying a theme-park template would hardly have done justice to the ancient mystery of the stones, nor to English Heritage’s stewardship role. The fact that Stonehenge would have been ultimately lumped into an accounting category called “furniture, fittings and other” in the whole of government accounts would only have added insult to injury.

In the end, English Heritage kept Stonehenge and the vast majority of its treasures off the UK’s balance sheet by arguing that the cost of carrying out the valuation would have been out of all proportion to the benefits of disclosure. A similar approach has been taken by big museums and galleries, not to mention the Ministry of Defence, which declined to put a price tag on historical items such as the Enigma Machine, the second world war code-breaking device.

Thurley accepts that would be some benefits to English Heritage for valuing their less archaeological properties, since it would allow them to compare their performance against listed property management companies. It is hard to think of an acceptable use of valuing Stonehenge, though; the first chancellor to put the site up as collateral for a loan would probably be the last as well.

A real investment property; could do with some renovation. Credit: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images
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There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR