UK Finances: A Not-So Hidden Debt
The ongoing debate about spending cuts and deficits often do not shed light upon the true debt of UK argues Thomas Busby from Centre For Policy Studies.
At the moment, it is currently very difficult to talk politics without eventually talking about cuts. I was discussing the current situation with two staunch Labour supporters this week, and even they admit that cuts are necessary. The various disagreements appeared, of course, with regards to how much should be cut, and where the cuts are aimed.
This focus on the deficit often hides the scale of the national debt to which it is adding. Brooks Newmark MP and Ryan Bourne have today produced updated statistics for the Centre for Policy Studies. This update of Newmark’s 2009 CPS paper -‘The Hidden Debt Bombshell’ - shows that current true public debt is £3,617 billion, compared to the Office for National Statistics’ figure of £2,252 billion.
The official net debt according to the ONS has increased dramatically from 2009, when it was a comparatively paltry £875 billion. Now the ONS take into account the liabilities of the banks that have been rescued and the full cost of all measures used after the financial crisis in 2008.
However, as Newmark and Bourne point out in their update, the ONS report does not include a number of significant factors. Public pension liabilities add £1,180 billion, PFI (Private Finance Initiative) liabilities contribute an extra £169 billion, and the costs of Network Rail liabilities of £24 billion give us a grand total of £1,373 billion in hidden debt liabilities.
Thus we have our overall figure; a staggering £3,617 billion, which equates to 240% of GDP, or the equivalent of £138,359 per household – roughly the average mortgage.
If there wasn’t already a good case for strong, decisive fiscal policy to reduce the deficit, then this certainly shows the need to keep national debt acceleration in check.
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