Examining the latest Whole of Government Accounts for 2013/14, which showed the UK had net liabilities of £1,852bn, Centre for Policy Studies research fellow Michael Johnson said these amounted to around £70,000 per household.
Public sector pension liabilities accounted for 41% of the total and government borrowing 34%.
However, Johnson highlighted the state pension was not included in the accounts, as it is deemed by the Treasury to be a benefit payment rather than an obligation. If this was included, the estimated £4,000bn liability would increase the per household liability to an estimated £221,000, he said.
To improve transparency in public sector accountability, Johnson, who is speaking at this year’s CIPFA conference, set out six proposals for reform. As well as including a liability to represent future state pension payments, based on expected cash outflow discounted using the UK gilt yield curve, he called for government spending plans to include an impact on inter-generational equity.
Without an assessment of this impact, he warned the current generation of young people could be the first generation with a quality of life below that of their parents, as the post-war baby boomers generation had become “masters at perpetrating inter-generational injustice”.
“Reining back on unfunded promises means either stop making them, or fund them now, which would require higher taxation, or additional cuts in public spending,” he concluded.
