The government is currently sitting on a £1.85trn “hidden debt time bomb”, much of which is due to public pension liabilities, according to free-market think tank the Adam Smith Institute. Out of £1.3trn in liabilities owed by public-sector pension schemes, 93% are currently unfunded – meaning that instead of putting money aside today to cover the pensions that these schemes will one day have to pay, the government is “choosing instead to bury their head in the sand safe in the knowledge that they’ll not be in office when it’s time to cough up the cash”.
Other liabilities, including unpaid student loans and RBS shareholdings, are also partly to blame for the huge funding hole. If it wants to deliver on its promises, the Treasury will need to raise £1.85trn to fill this gap via increased taxation and further cuts to public spending, says the Adam Smith Institute. This “hidden” debt can be added to the government’s publicised national debt, which brings the total cost up to a staggering £3.45trn.