The Institute of Economic Affairs (IEA) has calculated that the national debt is £4.8 trillion once state and public sector pension liabilities are included, or £78,000 for every person in the UK.
The IEA raised its concerns after the latest public finances data from the Office for National Statistics (ONS) this week, which showed that the total debt, excluding bank bail-outs, is £816bn – itself a record high. However, the figures strip out the state’s pension liabilities in a contravention of standard accounting practices.
I made this the central theme of my speech on the Finance Bill on 22 Jun. I referred to the IEA’s work before looking at sovereign debt projections from the Bank for International Settlements. I said:
The Bank for International Settlements published a paper – working paper 300, which I recommend to hon. Members – that considers the future of public debts, the prospects and implications. In my hand, I have a set of graphs that show the public debt for western European nations, plus Japan and the United States, disappearing exponentially. Hundreds of per cent. of GDP are owed by the nations of the western world, including Europe and Japan. The situation is dire. By 2040, our largely age-related debt is projected to be five times GDP. By 2040, our interest payments would be more than a quarter of GDP. I do not know about the rest of the House, but I do not believe that we will ever get there. Long before interest payments reach 25% of GDP, we will have a social catastrophe. We cannot allow that to happen.
In summing up, I said:
If Members on both sides of the House are serious about building a better society, we have no choice but to reform radically the size, scope and role of the state.