UK's real debt means we each owe £65,000

By Steve Doughty for the Daily Mail
Updated: 04:40 EST, 14 July 2010

 

Every man, woman and child in the country is carrying a £65,000 share of state debt, according to the first official breakdown of how much the Government really owes.

The estimate from the Office for National Statistics puts the real level of the national debt at £4 trillion - double the amount calculated by independent analysts.

An average household would have to work for five years to pay off its portion of the vast sum.

The unprecedented study was drawn up to echo the thinking of Margaret Thatcher, who said governments should look at spending and debt in the same way households calculate what their families can afford.

The final report includes an attempt to show the full scale of taxpayer debts by including often-disputed figures for public-sector pensions, the state pension scheme, costs run up by Labour under the Private Finance Initiative system, and the amount spent bailing out banks during the recession.

It assessed the value of state assets, including every school, hospital, office and council house, together with all the land, roads, railways, vehicles, ships and aircraft - putting their worth at just under £1.4 trillion.

This left assets of £317.4bn after the official public-sector net debt of just over £1.08 trillion is accounted for.

However the ONS said figures for pensions and other disputed areas come to a debt of £4 trillion. This is made up of:

• Between £1 trillion and £1.5 trillion for the takeover of Royal Bank of Scotland and Lloyds Banking Group. Official confirmation of the cost will not be available until the autumn.

• Up to £1.2 trillion for public-sector pensions. This is a private-sector estimate that contradicts the Treasury's claim that £770 bn of public-sector pensions must be met by the taxpayer.

• Between £1.17trillion and £ 1.35 trillion to pay the state pension.

• Other costs that taxpayers must cover include £200bn for PFI deals and £40bn for decommissioning old nuclear power stations. The ONS also allowed £ 500bn for contingencies.

The total debt is, according to the ONS, around £4 trillion. This compares with the £2 trillion figure produced by the City think tank, the Centre for Economics and Business Research, earlier this week.

The CEBR estimate is lower because it did not include some of the liabilities counted by the ONS, notably the cost of paying the state pension - which could be cut by future governments. The CEBR also allowed a much lower provision for contingencies and put the cost of the Public Finance Initiative at £43bn.

The ONS's £4 trillion total amounts to around £65,000 for each one of the 62m adults and children in the country - or £230,000 for a family of four. Latest earnings figures show that average household income last year after taxes and benefits was £29,100.

That is less than a fifth of the average household share of the debt, which works out at £156,000, double the £78,000 per household estimated by the CEBR.

ONS chief economist Joe Grice said that the estimates were 'important steps to assessment of the public finances and their sustainability'.

But critics said the full scale of the national debt could be double the level admitted yesterday.

Mike Denham of the TaxPayers' Alliance said: 'Once you take account of the full extent of state pension liabilities and other costs associated with an ageing population it may be double even these figures.'

The Treasury said it had established the Office for Budget Responsibility to properly assess the public finances and the Public Service Pension Commission to look at how public sector pensions can be made sustainable.