After a lengthy enquiry, the Office for National Statistics has just published its revised estimates for public sector debt. At issue was the thorny question of whether taxpayer liabilities under PFI contracts constitute debt.
As you know, PFI involves the private sector funding and building new schools and hospitals etc, and then "renting" them to the public sector under longterm contracts- generally for 25-30 years. And as long as the facility is maintained in an operational condition, taxpayers are obligated to pay up- we're on the hook. Which under any real world definition, means PFI is debt.
We've blogged this many times, and based on the Treasury's latest projection of contracted PFI rental payments, we estimate the true value of this debt currently stands at £90bn (see here).
Unfortunately, after God knows what backroom arm twisting, the ONS has folded under pressure from Gordo, and decided that only £4.95bn needs to be included in its official total for public sector debt. That's just five out of 149 PFI projects.
We needn't go into its tortured reasoning (including a flimsy distinction between "finance" leases - debt - and "operational" leases - not debt*). We just need to remember its figures for public sector debt remain wildly understated, not just because of PFI, but also because they omit other big ticket liabilities like those unfunded public sector pension liabilities.
Here's a handy cut-out and keep comparison with The Truth:
- PFI debt- ONS= £4.95bn (0.4% of GDP); The Truth= £90bn (7.2% of GDP)
- Total Government Debt- ONS= £474.2bn (36.7% of GDP); The Truth= £1,800 bn (144% of GDP)
£1,800 bn is £75,000 for every household in Britain.
Relative to GDP, Gordo has already clocked up nearly as much debt as Lloyd George needed to fight the First World War. Pretty soon we'll be on a par with WW2- and that took us two decades of misery to pay down.
*Clarification from our eagle-eyed correspondent in Canary Wharf: "Although Operating Leases are off-balance sheet under most GAAP schemes (so many companies do the same trick), credit rating agencies recapitalise them and count them as debt when establishing a credit rating. So this will come back to sting the government (sooner than the actual debt will)."