For the first time, the UK’s national accounts are being drawn up on a similar basis to those for public-listed companies. Whilst the full details are due this autumn, the recently reported headline numbers are, as expected, immensely concerning.

With the standard Public Sector Net Debt (PSND) figure of a staggering c£1 trillion, the latest data has focussed on two additional elements - public sector pension liabilities and the Private Finance Initiative (PFI). In respect of the former, the liabilities figure is reported to be c£1.1 trillion. This is an enormous number which reflects the ‘It’ll be Alright on the Night’ economics that have applied for decades to public sector pension entitlements. At one time, when private sector pension provision was generous and public sector wages were often below the private sector equivalent, this disparity was more tolerable.

Nowadays, with the marked reversal of these two trends, it certainly is not. Hence, the Government should act aggressively to cut this massive liability. Increased public sector employee contributions, a higher retirement age qualification and reduced retirement benefits should all play a part. The latest figures also highlighted the Government’s escalating PFI exposure. Compared with the pension figure, an estimated c£40 billion liability may look small beer – not so. Although PFI’s appeal has been waning of late – rightly so – efforts are needed to reduce this liability.

Whilst the UK’s PSND reflects internationally approved financing criteria – and therefore excludes both public sector pension and PFI liabilities – the markets are less forgiving. The turmoil in recent days, especially in Italian bond markets, reflects the serious damage that high debt levels can inflict. The next few years will be no time for the UK to wobble on its priority to tackle both its massive PSND and other liabilities. It may take a decade to return the UK’s public finances to equilibrium.