Government accused over £1.85 trillion 'hidden debt time bomb'

The Government risks bankrupting future generations with a £1.85 trillion "hidden debt time bomb", a free market think tank has claimed.

Around £1.3 trillion will need to be found to cover the 93% of public sector pensions that are currently unfunded, according to the Adam Smith Institute.

It accused the Government of recklessly taking on new liabilities while disguising the true scale of the "monolithic debt" that will be left at the doors of younger people.

Eamonn Butler, Adam Smith Institute director, said: "Homeowners worry about their mortgages and cut back when they are overstretched, but governments don't. Instead they keep taking on new liabilities, with schemes that buy votes today but mortgage the future of our children and grandchildren. This is not just wildly reckless, it is deeply immoral too.

"Every law going through Parliament should have a price tag showing not just what it costs us today, but what it will cost us far into the future. Then, like the rest of us, politicians will have to live within their means."

Its analysis of the Whole of Government Accounts found "crippling" liabilities of £1.85 trillion on top of the national debt, two thirds of which is made up of "unsustainable" public sector pensions.

The Department of Business, Innovation and Skills expects to write off 45% of student loans, it said

Overall, the real cost of debt to every man, woman and child in the UK is £53,822 each, according to the Institute.

Report author Nigel Hawkins said: "Successive Governments have failed to tackle the relentless increase in public sector pension liabilities, primarily for political reasons.

"Indeed, had leading PLCs, such as British Telecom, acted similarly in letting their already massive liabilities accumulate further, they would have been pilloried. As a matter of real urgency the Government must vigorously cut these excessive public sector liabilities or condemn future generations to staggering financial turmoil."

A Treasury spokesman said: "Our first duty to the next generation is to put the public finances on a sustainable footing.

"That is exactly why we delivered a series of ambitious reforms to public sector pensions in the last parliament which will save over £430 billion by 2060."