Public Sector Net Debt

The Office for Budget Responsibility (OBR) was created last year to provide independent analysis of the UK’s public finances.

The OBR’s first annual Fiscal Sustainability Report has been released and provides insights into past and future public sector activity (reflected in the form of assets and liabilities on a balance sheet). According to the Report, in March 2011, Public Sector Net Debt (PSND) stood at £906 billion, 60 per cent of GDP or £35,000 per household.

Further, the OBR’s findings suggest that public finances are likely to come under pressure over the longer term, primarily as a result of an ageing population (and thus increasing health, state pension and social care costs) and revenue from sources including transport taxes and North Sea oil declining.

Alongside this, The Treasury has published an unaudited summary of the Whole of Government Accounts (WGA) for the year 2009-10. The Chancellor of the Exchequer, George Osborne, described “the information published by the Treasury and the OBR represents a step change in transparency, lifting the lid on the liabilities built up in the past and the pressures we face in the future”.

Yet in another development, the Institute for Economic Affairs (IEA) has published a report urging the Chancellor and government to go further and adopt a “Plan A+”. The IEA’s proposals include abolishing the NHS and limiting overseas aid. While the fact that people are living longer healthier lives and the release of detailed information on the government’s balance sheet is to be welcomed; if the OBR’s calculations are correct and public sector net debt is on a continuously rising trajectory, the situation is clearly not sustainable.

The ‘Spending Review Challenge’, launched in July 2010, invited the public to suggest money saving ideas ahead of the Spending Review. Similarly, the Chancellor launched an online budget ideas portal prior to the Budget. I wonder if any of these suggestions/ideas could help.