Keeping track of spending in the fight to stop the pandemic
ABILLION here, a billion there. Pretty soon it begins to add up to real money.’ No-one is quite sure who first spun that quip about free-spending governments. But we can be certain that the truckloads of cash spent on combatting Covid-19 worldwide certainly adds up to serious money. And you can count it in the trillions rather than the billions. $9 trillion in fact, by the IMF’s count.
What concerns accountants is not so much the total spent on digging society out of the crisis triggered by the pandemic.
After all, ACCA and just about every other responsible finance organisation agrees that a blend of public and private investment is key to recovery.
It’s a big problem demanding big actions, which come with a big bill attached.
It is how we count the spending that matters as much as the sum itself. The numbers must add up to value for money for the public.
At ACCA we joined up with the World Bank and IFAC (International Federation of Accountants) to explore how 10 countries (UK, Brazil, Canada, Indonesia, Italy, Japan, New Zealand, South Africa, Turkey and the USA) are keeping count of their Covid-related spending.
It triggered alarms that governments aren’t capturing their spending commitments carefully enough or in the right way.
Our conclusion was that governments must apply the rigour of a balance sheet to public spending accounts and give equal measure to the value of the assets accrued by the eye-watering levels of spending.
It’s not just about the cash. My colleague Alex Metcalfe, who is head of public sector at ACCA, wrote the report.
He said: ‘This global crisis could be a catalyst for more governments to adopt this balance sheet approach, which can improve decision-making, act as the benchmark for new fiscal targets, and support governments to rebuild economies for a more inclusive and greener future.’
A balance sheet approach gives governments, among other things, a clearer idea of the true position of the public finances.
It can give a better indication of how much scope there is for more action. And it also means that governments and citizens get a sharper sense of value for money.
A balance sheet mentality rather than a ‘spend-now-worryabout-the-bill-tomorrow’ approach can also save governments from expensive mistakes driven by short-term fixes.
For example, it means they’re more likely to avoid fire sale privatisations which give a quick cash boost but detract from the public sector’s net worth, which costs taxpayers money in the long run.
This matters to us a great deal in Wales, where public sector spending is an especially vital part of our economy.
Wales has benefited from public investment in our infrastructure, and that has been important not just at a national level, but also locally.
The debate continues about how well that money has been spent, and on priorities for the future.
It will be interesting to see how the National Infrastructure Commission shapes spending to meet future needs, as well as the levels of funding coming to Wales through the Shared Prosperity Fund, which is due to replace EU cash.
The technological divide between city and country has been acute in Wales and is a real faultline which affects local economies.
It creates hardship, isolation and social disadvantages for many, including those running a business online, delivering healthcare services, and for those who need online home schooling.
Few changes do more to level the playing field of opportunity than equal access to fast and stable internet access.
That’s why it was pleasing to see Broadway Partners, a telecoms company which specialises in bringing broadband to rural parts of the UK, launch a £2m scheme to support faster networks across Monmouthshire.
The project is part-funded by a commercial loan from Monmouthshire County Council, with the aim of stimulating investment in villages where connectivity is needed most.
It looks like a textbook example of local government assessing a real need and using public money to support a solution.
That kind of investment can bring long-term benefits to countless people and brings an asset to the county which can in time offset the immediate liability.
Hopefully it is an example that can be scaled up and adopted elsewhere in Wales.
The sector is not devolved to Wales, but the Welsh Government does have some powers. It claims to have used these to more than double the availability of fast broadband across Wales through Superfast Cymru.
It’s the kind of balance sheet equation of short-term cost with long-term value that could act as a model for national governments who are piling up mountains of public debt with no summit in sight.
It would be wrong of me not to mention another local issue alongside these global matters.
With the new football season already on the horizon it is a source of sadness that Cardiff City and Swansea City remain in the Championship.
Both sides lost their play-off semi-finals and missed out on promotion to the Premier League. As well as breaking the hearts of supporters it also has consequences for the Welsh economy.
Not for nothing is the Championship play-off final dubbed The £100m Match.
That is the conservative estimate of how much a place in the Premier League brings to a promoted side, and the knock-on effects for a region’s economy are evident – the income they generate through TV revenue and matchday income, as well as their community outreach work and raising awareness of Wales as a tourism and investment destination is enormous.
All I can say is that we hope for better at the end of the coming season – whenever that may be, Covid willing.
■ Lloyd Powell is Head of ACCA Cymru Wales