True level of UK government debt exceeds £5 trillion
The Treasury has recently published Whole of Government Accounts (WGAs), which for the first time include an estimate of the UK’s actual debt, including pension liabilities. Firstly I would like to say how much I welcome this development as a massive step towards genuine transparency.
I have been asked to update the figures in the paper A Bankruptcy Foretold 2010 in the light of this development, and explain why the results are still higher than the Treasury’s. Taking the Treasury’s figures at face value, I set out below my estimate of government debt as at 31 March 2010:
|Source||My estimate (£bn)||Treasury estimate (£bn)|
|Public service pensions||1,408||1,133.3|
|Gilt edged securities||804||803.8|
|Current state pensions in payment||1,120||Ignored|
|Future basic state pensioners||1,211||Ignored|
|Future additional pensions||467||Ignored|
|Total||5,494 (392% GDP)||2,422 (173% GDP)|
So, my calculation of the UK’s total debt is £5.5 trillion, over twice as much as the Treasury’s figure. My figures are slightly higher than those calculated in A Bankruptcy Foretold 2010 because the Treasury has kindly provided me with more accurate and up to date figures than I had available at the time.
The difference between my figures and Treasury’s are twofold. First of all, for calculating public service pension liabilities I have used a lower discount rate. The Treasury uses the corporate bond discount rate, which is entirely appropriate for company funded pensions schemes, but entirely inappropriate for unfunded public sector schemes, which should use government bond yields. Secondly, the Treasury has not included liabilities from the National Insurance Fund, which I have extensively argued are genuine liabilities and should be included in the WGAs.