Monday, April 24, 2006

Your Debts- Even More Horror


Taxpayers need to worry not just about today's taxes, but also tomorrow's. Which is why we keep a very close eye on government debt- the real total, not the much smaller Enroned figure Gordon Brown prefers.

When we blogged about it just after the Budget, we estimated the overall total at £1.3 trillion, or £55,000 per household. Bad enough, but it turned out we were too optimistic. Since then we've had updated estimates of unfunded public pensions liabilities (now increased to £960bn) and nuclear decommissioning costs (now put at £160bn). So the overall total moved up to £1.7 trillion, or £70,000 per household (see here).

Now, guess what. Yup- the figure just increased again.

This time it's a pensions liability not for those who are currently employed by the public sector, but for those who work for old nationalised industries now in the private sector. It now transpires that when these industries were privatised, somebody forgot to examine the smallprint. Shockingly, government officials don't seem to be sure what guarantees were agreed, but it seems obvious we taxpayers somehow got stuffed guaranteeing another huge swathe of pensions.

And the numbers are big. In the case of BT, this "Crown guarantee" attaches to around £28bn of its pension liabilities. But that's only what's surfaced so far. The same guarantee also reportedly applies to the pension liabilities of around 20 other privatised companies, including the £15bn Railways Pension Scheme, the £10bn British Coal Staff Superannuation Scheme, and the £13bn Mineworkers’ Pension Scheme.

Yes, of course we're told these are only "contingent guarantees", only redeemable in the event the companies go bust. But you wouldn't want to depend on that, particularly since officials are still scurrying around trying to discover precisely what the score is. Anyway the last two schemes mentioned no longer have an industry, let alone a sponsoring employer.

Sounds like another £50-100bn to add to that government debt mountain.

PS All the above debt figures of course exclude our liability for unfunded state pensions. As regular readers will know, based on the Turner Report's projections, we now estimate that at a neural flashover £7 trillion (see here).

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