Study reveals crippling national liabilities of £1.85 TRILLION on top of the national debt and warns that feckless government risks burdening our grandchildren with mammoth public pensions bill
- National liabilities of £1.85 trillion out-strip the national debt by £250 billion but are concealed by government
- Two-thirds of national liabilities made up of unsustainable public sector pensions
- 93% of public sector pensions currently unfunded, with no government money put aside to pay £1.3 trillion of inevitable debt
- 45% of student loans predicted to be a write-off by Department of Business, Innovation and Skills, forcing the taxpayer to fund vanity degrees
- Real cost of debt to every man, woman and child in the UK £53,822 each
The government’s total liabilities, better understood as debts waiting to happen, are even larger than its mammoth public debt at £1.85 trillion, according to a new investigative paper from the Adam Smith Institute.
The report exposes the true state of affairs which consecutive Chancellors, including George Osborne, have struggled to keep out of the public eye for years. By exploiting jargon and downplaying its own reports to the public, the government has consistently disguised the true size of the monolithic debt the UK’s young must pay, with the total cost standing at a staggering £3.45 TRILLION, more than double the national debt figure that George Osborne usually cites. The total cost of these liabilities, on top of the national debt, to every man, woman and child in the UK is a massive £53,822 each.
Public liabilities can be considered inevitable debt as they refer to inexorable costs and losses to the public purse such as student loans that will never be repaid and public sector pensions, as well as expensive current obligations such as Network Rail, whose £38 billion debt has just been incorporated into the public purse, and RBS shareholdings, which based on current share prices rack up another £22 billion loss to the taxpayer.
The paper, which critically analyses the Whole of Government Accounts published by the government, applies best practice auditing standards to the government’s own assets and liabilities, concluding that the majority of UK national liability is made up of £1.3 trillion in public sector pensions. These public pensions will severely impair the financial prospects of future generations and are yet to be addressed in any meaningful way by the current government despite their proclamations of being in a time of austerity.
An eye-wateringly high 93% of public sector pensions are currently unfunded, meaning that the government is yet to put any money aside to pay for them, choosing instead to bury their head in the sand safe in the knowledge that they’ll not be in office when it’s time to cough up the cash.
In order to deliver on its public sector pensions promises the government will have to raise £1.3 trillion through increased taxation and further cuts to public spending, on top of the cuts already being made to tackle the more widely publicised £1.6 trillion public debt.
Student loans also come under fire in the report as recent figures from the Department of Business Innovation and Skills indicate an expected write-off ratio of up to 45%. In effect it would mean that almost half of those in higher education to whom loans were extended actually received large grants irrespective of their means. The taxpayer is ostensibly fully funding increasing numbers of meaningless degrees for financially capable students whilst having their own welfare cut.
Dr Eamonn Butler, Director of the Adam Smith Institute, said:
Homeowners worry about their mortgages and cut back when they are overstretched, but governments don’t. Instead they keep taking on new liabilities, with schemes that buy votes today but mortgage the future of our children and grandchildren. This is not just wildly reckless, it is deeply immoral too.
Every law going through Parliament should have a price tag showing not just what it costs us today, but what it will cost us far into the future. Then, like the rest of us, politicians will have to live within their means.
Author of the report, Nigel Hawkins, said:
Successive Governments have failed to tackle the relentless increase in public sector pension liabilities, primarily for political reasons. Indeed, had leading PLCs, such as British Telecom, acted similarly in letting their already massive liabilities accumulate further, they would have been pilloried. As a matter of real urgency the Government must vigorously cut these excessive public sector liabilities or condemn future generations to staggering financial turmoil.
-ENDS-
Notes to editors:
For further comments or to arrange an interview, contact Flora Laven-Morris, Head of Communications, at flora@adamsmith.org | 07584 778207.
To report ‘UK PLC: Britain’s Hidden Debt Time Bomb’ will be live on the Adam Smith Institute website from 09:30 18th April 2016.
The Adam Smith Institute is a free market, libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.
