Investing for a productive state

The core aim of public money allocation hasn’t really changed. It all comes down to transforming financial inputs into measurable outcomes that enhance societal wellbeing, strengthen the economy’s productive base and improve fiscal sustainability.

Rather, it’s the way we measure the success of public money management that must change. 

Accounting for how much is spent simply isn’t enough to effectively manage public money in today’s volatile fiscal environment. Government and public sector need to link spending to clear, achievable outcomes (like value creation and impact). And leaders must apply this kind of thinking not only to traditional budgetary spending, but the entire public balance sheet (including assets, liabilities and risk exposure). Why? Fiscal spending without transparent governance drives consumption — not growth. 

And growth is what we need most.

Traditional fiscal discourse focuses on the deficit and debt-to-GDP ratios. These indicators matter, but they tell only part of the story. What truly makes a difference in fiscal health is how governments influence both sides of the ratio: debt and liabilities, and economic growth and productive capacity. 

Public money, properly used, is an instrument of production. By borrowing for productive investment, governments can simultaneously strengthen fiscal sustainability and economic growth.

It’s time to rethink how. 

Based on EY economic modelling, we recommend a powerful new strategy: as demographic shifts bring attrition in the public sector workforce, policy-makers should divert funding to investment in digital and technological capital. Forecasting shows this redirection of resources will lead to productivity gains in the public sector, growth in the wider economy, increases in government revenue and improvements to fiscal competitiveness.