Tuesday, December 06, 2005

Mired In Debt

Gordo has now admitted he will be borrowing more than he claimed before the Election.

Between now and the next Election he now reckons he will borrow about £170bn, taking declared public sector debt up to almost £600bn, nearly 40% of GDP. So much for prudence.

But of course, the real picture is much worse than that. For one thing, as pointed out yesterday, his forecasts still factor in some pretty wishful thinking on both the growth of tax revenue, and the non-growth of various spending elements (like social security and debt interest).

More fundamentally, his debt projections take no account of massive off-balance sheet liabilities. George Osborne has done his own sums:

"The UK's total net debt, made up of on and off-balance sheet liabilities, in 2004-05 totalled £1,308 billion or 105 per cent of GDP. By comparison, the UK's official on-balance sheet Public Sector Net Debt was £417 billion for the same period, or 34.6 per cent of GDP. This means that the UK now has off-balance sheet liabilities - where the UK Government is the ultimate guarantor - of £891 billion."

We've blogged this before. Public sector pension liabilities are estimated by Watson Wyatt (Britain's leading pension actuaries) at £690bn. Our PFI liabilities (who did you think was paying for all those PFI schools and hospitals?) add up to £60bn. And then there's all that rail debt, which again, we're guaranteeing. Hence George's calculation.

But actually...pass me the oxygen mask...it's even worse than that. As we all become older and more decrepid the ultimate off-balance sheet liability balloons. Last time I did the sums, the capitalised value of our state pensions liability came out at a heart-stopping £2.5- £3 TRILLION.

Gordo is busily maxxing out every credit card we've got. When he stands at the dispatch box yet again crowing about how much more he's going to spend, you'd better work out how you're going to pay for it.

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