Treasury debt is twice Chancellor's 'sustainable' figure, says think-tank

Treasury debt is twice Chancellor's 'sustainable' figure, says think-tank

Gordon Brown has hidden liabilities worth more than £500bn, and the true size of the public debt is up to 87 per cent of GDP, more than twice the Treasury's 'sustainable' limit, according to the Institute for Fiscal Studies.

Using the government's calculations for the cost of public sector pensions, private finance initiative schemes, and Network Rail's debt, which the Treasury guarantees, the think-tank has reached a total figure of more than £1,100bn - twice what the Treasury admits to.

The IFS's Christine Frayne said the £100bn-worth of PFI payments the government has signed up to were not the same as debts, because Whitehall might be able to negotiate them down in future, But she argued that the Treasury's calculations fail to represent the government's true fiscal position. 'It would be nice to see these liabilities taken into account in some way,' she said.

Vince Cable, the LibDem Treasury spokesman, said Brown had charged into billions of pounds' worth of PFI deals, with the aim of disguising the true level of government liabilities: 'What's happened is that the government has rushed into PFI deals in order to hide debt.'

Under these arrangements, a private company builds a school, hospital or other public project in return for regular payments over a period of up to 30 years. The Treasury can then score this as day-to-day spending, instead of debt.

George Osborne, shadow chancellor, said: 'Now the independent IFS.....continued below

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has confirmed that Gordon Brown has run up debts more than double the level he admits. The Chancellor has been rumbled for keeping the scale of his borrowing off the books. No wonder people are asking where all the money has gone.'

The most onerous burden facing the Treasury is the bill for civil servants' pensions, which are funded from current tax revenues. In response to a parliamentary question in 2005, the government estimated that the total cost could exceed £500bn. Roger Bootle, economic advisor to Deloitte and Touche, said that just as public companies have been forced by law to declare the cost of their pension promises, the government should make its own liabilities public. 'In a sense, pension liabilities are a bit like gilts [government bonds] - they're just there. You can't get away from them. I don't see why they shouldn't be on the balance sheet.'

As one of his self-imposed fiscal rules, Brown promises to keep government debt below a 'sustainable' limit, defined as 40 per cent of GDP - but adding in the pension liabilities takes the level to more than 75 per cent of GDP. The IFS recommends that Brown's successor consider redefining 'sustainable' to include provision for the pensions bill.

A Treasury spokesman said: 'Public sector net debt is measured using data compiled by the independent Office for National Statistics, using the internationally accepted methodology. Decisions taken about how to prepare public sector accounts are scrutinised by the National Audit Office and Audit Commission. '

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