And it has assets, including for instance its stakes in publicly owned companies and holdings of public capital more broadly. But these two items are comparatively small. Much more important are implicit fiscal assets and liabilities. Implicit fiscal assets are the discounted value of all future tax revenues. Implicit fiscal liabilities are the discounted value of all future primary expenditure.
If the residual value of the balance sheet or “public equity” is negative, then somebody has to pick up the bill at some point: either taxes have to increase – implying a loss for the taxpayer; or government expenditure has to be reduced – implying a loss for those who benefit from public services; or the value of the debt has to be reduced – which means a loss for the creditors.