ASI report 'UK PLC: Britain's Debt Time Bomb' gets front page coverage and sweep of national newspapers

The ASI's new report titled 'UK PLC: Britain's Debt Time Bomb' has received excellent coverage across a number of national and regional newspapers, including the front page of The Daily Telegraph:

Every person in Britain would have to pay more than £53,000 to cover the cost of public sector pensions and other unfunded government schemes, a think tank warns. The Adam Smith Institute said the £1.85 trillion "hidden debt time bomb" was "staggering".

The Daily Mirror reported:

The Tories risk bankrupting future generations with a £1.85 trillion "hidden debt time bomb", experts warn. Around £1.3 trillion alone will need to be found to cover the 93% of public sector pensions currently unfunded, the Adam Smith Institute will say today. The think-tank's director Eamonn Butler said: "Home-owners worry about their mortgages and cut back when they are overstretched, but governments don't".

The Metro noted:

Reckless government spending risks bankrupting future generations with hidden debt of £1.85 trillion a think tank has warned. Two thirds of the "crippling" debt is made up of "unsustainable" public sector pensions, according to the Adam Smith Institute, which has accused ministers of disguising the true scale of the problem. 
Overall the real cost of debt to every man, woman and child in the UK is £53,822, according to the institute. Report author Nigel Hawkins said excessive public debt must be cut "or condemn future generations to staggering financial turmoil".

The MailOnline reported:

The Adam Smith Institute's analysis of the Whole of Government Accounts found "crippling'" liabilities of £1.85 trillion on top of the national debt, two thirds of which is made up of "unsustainable" public sector pensions.

Report author 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."

The Daily Express reported:

Public sector pensions are a ticking debt bomb with around £1.3trillion needed to cover 93 per cent of the benefits that are currently unfunded, according to a report by the Adam Smith Institute.The state is taking on new liabilities, while disguising the huge debt that could implode for future generations, the think tank claimed after analysis of the Whole of Government Accounts.

It said the actions are both immoral and reckless with crippling liabilities on top of the national debt, two thirds of which is made up of "unsustainable" public sector retirement monies.

And from City AM:

The UK national liability figure, compiling "debts waiting to happen", brings the nation's total debt to £3.45 trillion, according to the Adam Smith Institute. The report warned the liability, which includes £1.3 trillion in public sector pensions, will cost every person in the UK £53,822. 
In addition to public sector pensions, 93 per cent of which the Adam Smith Institute said are unfunded, the report picks out student loans as a major cost. The Adam Smith Institute quotes figures from the Department of Business, Innovation and Skills showing 45 per cent not expected to be repaid.

The report was also featured in print and online across 140 regional titles. 

Read the full DailyTelegraph article here.

Read the full Daily Mirror article here.

Read the full Mail Online article here.

Read the full Daily Express article here.

Read the full City AM article here

Read the full report here

Sam Bowman, Executive Director of the Adam Smith Institute, comments on the latest Treasury report

The Treasury's numbers are based on a scenario of Britain coming to a limited Canada-style free trade agreement with the EU, which would indeed be a poor outcome. The UK is far too deeply economically integrated with the EU for such a limited trade arrangement to work. But this is very unlikely to be what does happen. It is only likely if we think the government and civil service would seek a post-Brexit deal that they themselves believe to be against Britain's interests.
The best and most likely arrangement for the UK after Brexit would be to remain inside the Single Market – the so-called "EEA Option" – while disengaging politically from the EU. By maintaining economic union, at least for the foreseeable future, the UK can take the economic risk out of Brexit and voters can focus on the real question: whether political union with the rest of the EU is right for Britain and that the House of Commons would never vote through.

For further comments or to arrange an interview, contact Head of Communications Flora Laven-Morris at flora@adamsmith.org / 07584 778207.

Press Release: Britain at risk from hidden debt time bomb

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.

Press Release: Stuck in the middle with EU - Why it’s time we cut out the middle man and become global citizens

For further comments or to arrange an interview, contact Head of Communications Flora Laven-Morris at flora@adamsmith.org / 07584 778207.

  • EU membership rendered redundant by global governance
  • Global regulators revealed as the real law ‘manufacturers’, whilst the EU is often only the ‘wholesaler’
  • Key regulation affecting the UK deliberated at global level and leaving the EU would not diminish British influence
  • UK should leave the EU and focus on its position at the global top table

EU membership has been made redundant by global regulators, according to a new paper from the Adam Smith Institute released today. Published independently of both the major campaigns, the report reveals that the UK often has little say over EU regulation, as in reality so much of it originates at the global level.

Rather than the expected ‘bonfire of regulations’ upon exit, or a situation where the UK is at the mercy of Single Market regulations without having any influence on them, the free-market think tank has highlighted that 80% of Single Market legislation falls within the ambit of existing international organisations and is consequently open to global regulation. The EU itself originates very few market standards and rules, the study shows, despite its sprawling size, and it frequently outsources and copies global agreements verbatim.
 
The new paper Global Regulators: Stuck in the middle with EU, written by European Union expert and ASI fellow Roland Smith, lays out how the UK’s ability to influence global legislation would change for the better following an exit from the EU.
 
The author notes that whilst we are told EU membership is necessary so that we “have a say” in the rules affecting our industries, the fact is that everything from fishing to food packaging and car standards to disability rights are now driven by a myriad of global organisations – even the infamous rule on straight cucumbers is now in the hands of a global body.
 
Contrary to popular belief, the adoption of standards by the EU from bodies such as Codex is not voluntary, and is enforceable by the World Trade Organisation’s Technical Barriers to Trade Agreement. The TBT Agreement makes global bodies the ‘manufacturers’ of the law, whilst the EU is often merely the ‘wholesaler’.
 
The paper goes on to argue that rather than stay in the EU, the UK should focus on formalising and democratising the UK’s global governance involvement, bringing the UK’s full voice to it as an open, global trading nation. In the context of Brexit, ‘isolation’ is near impossible in the globalised world, in which Britain could operate at the new global top table as opposed to the EU’s shrinking one.
 
Author of the report Roland Smith said:
 
The rhetoric about the UK being isolated is out of place when you consider the global landscape. If the EU didn’t exist, we wouldn’t be in a rush to invent it. The global single market is overtaking the EU, and since we are not in the Euro and have no need for political integration, it is time to leave and take our place as a truly global citizen.
 
Sam Bowman, Executive Director of the Adam Smith Institute said:

“This report shows that the strongest argument for staying in the EU is actually rather weak. The EU is increasingly best understood as a regulatory intermediary, codifying for member states rules that have been agreed at an international level. If so, it is not clear at all that the UK would have less influence on global regulation if it left the EU – indeed, paradoxically, Britain may have a louder voice at the top tables if it was outside the EU rather than in.” 

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 download Global Regulators: Stuck in the middle with EU, click here.

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.

 

The ASI's Ben Southwood comments on the problems with Inheritance Tax

Inheritance tax is very unpopular, but it is also an economically damaging tax. Because it effectively taxes those who save instead of consume their income, it reduces investment and hence economic growth.

Inheritance tax is effectively an extremely high tax on one specific good: the welfare of your children. Since a lot of the stuff that buys welfare happens in the future, when they seek their own housing, cars, marriages, and children, this involves long-term saving and investment. 

Long term saving and investment are what raise productivity and our standard of living. Inheritance tax tells us that we should direct more of societies productive capacity towards current consumption like holidays and less toward investing for the future. We get a short term gain at the expense of long term pain.

The ASI's comments on the decline of the UK steel industry covered across national broadcast including Bloomberg, BBC News and Radio 5 Live.

Executive Director of the ASI, Sam Bowman, discussed the future of UK steel production and why it’s not viable in the long term with Bloomberg TV:

Where there might be a case for a very short term bridging with the government, say a buyer can’t get the money together immediately and the government steps in to fund the plant in that short period, the danger is that we are left carrying the baby. If the buyer who had expressed an interest in buying the firm just doesn’t in the end the government is left carrying these jobs and the plant – the problem with that is that these plants don't look like they are actually economically viable."

Listen to the full interview here

Bloomberg.com also drew on Sam’s arguments:

"If we bail out industries that are unprofitable in the long term, we’re locking capital and labor into unproductive work. If you bail out these firms, where do you stop? Basically you’d have given up on capitalism.”

Read the full article here

The ASI also contributed to the growing debate around the future of UK steel on BBC News, BBC Three Counties and Radio 5 Live.