Broke Back Mountain
Posted: Wed Jul 13, 2011 5:05 am
The REAL cost of Britain's debt mountain: £78,000 for every family... thanks to Labour
Kirsty Walker 13th July 2011
The true size of Britain’s debt mountain can be revealed today as £2trillion – nearly £80,000 a household.
Previously ‘hidden’ liabilities including the cost of public sector pensions and building projects are being published by the Treasury. They show that future payments to retired teachers, police officers and NHS staff will cost taxpayers £1.1trillion, or £1,100billion. The enormous figure, which is equal to 80 per cent of Britain’s output, is treble the combined national debts of Greece, Spain, Portugal and Ireland. The future cost of schools and hospitals built under the controversial Private Finance Initiative will pile an extra £40billion on to our debt mountain. The £1.1trillion and the £40billion come on top of the official debt figure of £909billion. The figures will appear on the Government books for the first time when it publishes full accounts for every Whitehall department.
The idea – backed by Chancellor George Osborne – is to give taxpayers an idea of what the public finances would look like if the state was a private company. In 2008, Labour put the official estimate for public sector pension liabilities at £770billion – £330billion less than today. And last March it costed PFI projects at £5.1billion – a fraction of the latest £40billion figure. Adding the new figures to the official debt of £909billion produces a figure of £2.049trillion. That works out as a £78,807 bill for each of the nation’s 26million households. ‘Many people would be amazed to know that until now the government did not have a single set of accounts like any company would,’ said a Treasury source.
After years of foot dragging by the last government we have finally got a true picture of the liabilities that have been built up for future generations. Officially, the extra costs will not affect the official debt and borrowing figures as these are measured using national accounting standards. The new figures also do not include future receipts from tax revenues. However, they will add fuel to the debate about the cost and sustainability of public sector pensions following last month’s strikes by unions which saw thousands of schools forced to close. Ministers say public sector pensions will remain ‘among the very best available’, providing a guaranteed income for all employees – something enjoyed by very few in the private sector. But they argue staff must pay more in contributions and work for longer before drawing their pension, as most private sector workers have had to do. Tory MP Jesse Norman said: ‘These are eye-watering figures. Thank goodness we now have the proper accounting processes now in place. ‘It shows the monumental scale of the task face this Government and the extent to which the last Government failed to recognise these additional costs in a formal way.’
Laith Khalaf, a pensions expert at Hargreaves Lansdown, said: ‘The cost of public sector pensions has been hidden and downplayed for too long so greater transparency is welcome.’ Emma Boon, of the TaxPayers’ Alliance, said: ‘These latest figures on PFI and the public sector pension liabilities make extremely worrying reading. ‘They will also make it harder for trade unions to continue to resist very necessary changes to public sector pensions. ‘The Government has proposed moderate reforms to public sector pensions to make them more affordable and must also make steps to bring PFI costs under control and ensure that further debts aren’t racked up.’ Meanwhile, a report from the Institute of Economic Affairs has claimed that the Government could make extra spending cuts of £215billion – which would take £7,500 off the average household’s tax bill. The think tank has called for a further reduction in public spending from 50 per cent to 30 per cent of gross domestic product to help spur economic growth. The institute said 70 per cent of the public would support tougher spending cuts if it leads to lower taxes. Director general Mark Littlewood said: ‘The coalition Government should listen more to the British people in general and less to organised special interest groups that push for more government spending. ‘This poll makes clear that the public favour a dramatic reduction in the size of government and the right to keep more of their own money rather than surrender it in tax.’ The institute’s report gives a comprehensive review of government spending, suggesting large reductions in the size and scope of government activity, and allowing for correspondingly large tax cuts. It claims that, in combination, these measures would provide for accelerated GDP growth across the medium and long term. The publication of the debt figures coincides with the Office of Budget Responsibility’s first assessment of the long-term state of the nation’s coffers.
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