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Britain will go bust by 2060: Dire warning predicts we will owe more than we earn in decades
Britain's debt is now �2trillion - �78,000 for each family
By Kirsty Walker

Last updated at 2:38 PM on 13th July 2011

: Chancellor of the Exchequer George Osborne wants the taxpayer's to see a more transparent version of the country's accounts
Britain will go bust by 2060 if Government fails to offset the impact of an ageing population with higher taxes and tough spending cuts.

As people live for longer, public finances are likely to set off on an 'unsustainable upward trajectory', the Office for Budget Responsibilty has warned in its first Fiscal Sustainability report.
The horrific prospect comes after news that the true size of Britain�s debt mountain can be revealed today as �2trillion � nearly �80,000 a household.

Previously �hidden� liabilities including the cost of public sector pensions and building projects are being published by the Treasury.

They show that future payments to retired teachers, police officers and NHS staff will cost taxpayers �1.1trillion, or �1,100billion.

The enormous figure, which is equal to 80 per cent of Britain�s output, is treble the combined national debts of Greece, Spain, Portugal and Ireland.
The future cost of schools and hospitals built under the controversial Private Finance Initiative will pile an extra �40billion on to our debt mountain.

The �1.1trillion and the �40billion come on top of the official debt figure of �909billion. The figures will appear on the Government books for the first time when it publishes full accounts for every Whitehall department.

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The idea � backed by Chancellor George Osborne � is to give taxpayers an idea of what the public finances would look like if the state was a private company.

In 2008, Labour put the official estimate for public sector pension liabilities at �770billion � �330billion less than today.

Hard times: Britain's 26million households face combined debts of �2.049 trillion
And last March it costed PFI projects at �5.1billion � a fraction of the latest �40billion figure.

Adding the new figures to the official debt of �909bn produces a figure of �2.049trillion. That works out as a �78,807 bill for each of the nation�s 26million households.

BLEAK OUTLOOK FROM FIRST OBR REPORT
The OBR's report was designed to look beyond its current forecasts for public sector net debt, which go as far as 2013/14.

The OBR said net debt is forecast to rise from its current level of 66.1 per cent to peak at 70.9 per cent of GDP by 2013, before it will decline again.

But as the effects of an ageing population kick in, the net debt will once again start to rise from around 2030.

The �1.1 trillion pension bill in March 2010 - equal to 78.7 per cent of GDP - was �331 billion higher than a year earlier, the OBR said.

Elsewhere, the report revealed liabilities arising from Private Finance Initiative contracts were around �40 billion - far above the �5.1 billion previously revealed.

There was a further �105 billion in provisions for potential future costs, which among other factors include the potential bill for nuclear decommissioning.

The main pressures of age-related spending are from health, state pension costs and social care costs.
Health spending will rise from 7.4 per cent of GDP in 2015/16 to 9.8 per cent of GDP in 2060/61, rising smoothly as the population ages, the OBR said.

State pension costs will increase from 5.5 per cent of GDP to 7.9 per cent, while social care costs will rise from 1.2 per cent of GDP in 2015/16 to 2 per cent in 2060/61.

The OBR also highlighted the impact the new student financial support arrangements announced in December 2010 will have on national debt.

Student loans are projected to add �63 billion in today's terms to the net debt by the early 2030s but will fall to �49 billion by 2060 as the value of loan repayments rises.

The report stated that if stakes in state-backed banks - including Northern Rock, Royal Bank of Scotland and Lloyds Banking Group - were sold at current market prices, they would generate a loss of �13.5 billion.

The OBR added: 'Needless to say, while our remit is to look at the fiscal challenges of an ageing population, the fact that people are living longer - and longer in good health - is clearly something that society should welcome.'

�Many people would be amazed to know that until now the government did not have a single set of accounts like any company would,� said a Treasury source.
�After years of foot dragging by the last government we have finally got a true picture of the liabilities that have been built up for future generations.�

Officially, the extra costs will not affect the official debt and borrowing figures as these are measured using national accounting standards.

The new figures also do not include future receipts from tax revenues. However, they will add fuel to the debate about the cost and sustainability of public sector pensions following last month�s strikes by unions which saw thousands of schools forced to close.

Ministers say public sector pensions will remain �among the very best available�, providing a guaranteed income for all employees � something enjoyed by very few in the private sector.

But they argue staff must pay more in contributions and work for longer before drawing their pension, as most private sector workers have had to do.

Tory MP Jesse Norman said: �These are eye-watering figures. Thank goodness we now have the proper accounting processes now in place.

�It shows the monumental scale of the task face this Government and the extent to which the last Government failed to recognise these additional costs in a formal way.�
Laith Khalaf, a pensions expert at Hargreaves Lansdown, said: �The cost of public sector pensions has been hidden and downplayed for too long so greater transparency is welcome.�

Emma Boon, of the TaxPayers� Alliance, said: �These latest figures on PFI and the public sector pension liabilities make extremely worrying reading.
�They will also make it harder for trade unions to continue to resist very necessary changes to public sector pensions.

�The Government has proposed moderate reforms to public sector pensions to make them more affordable and must also make steps to bring PFI costs under control and ensure that further debts aren�t racked up.�

Meanwhile, a report from the Institute of Economic Affairs has claimed that the Government could make extra spending cuts of �215billion � which would take �7,500 off the average household�s tax bill.

The think tank has called for a further reduction in public spending from 50 per cent to 30 per cent of gross domestic product to help spur economic growth.

Legacy: Gordon Brown left British families with a huge burden of debt
The institute said 70 per cent of the public would support tougher spending cuts if it leads to lower taxes. Director general Mark Littlewood said: �The coalition Government should listen more to the British people in general and less to organised special interest groups that push for more government spending.

�This poll makes clear that the public favour a dramatic reduction in the size of government and the right to keep more of their own money rather than surrender it in tax.�

The institute�s report gives a comprehensive review of government spending, suggesting large reductions in the size and scope of government activity, and allowing for correspondingly large tax cuts.

It claims that, in combination, these measures would provide for accelerated GDP growth across the medium and long term.

The publication of the debt figures coincides with the Office of Budget Responsibility�sMy household would struggle to find a spare �78 let alone �78,000. As a british citizen born in this country I don't see why the government running MY country's finances should continue to fritter away the ridiculous amounts they do on foreign aid, EU bailouts and form filling idiots that are being employed to fill forms for idiots that cannot do it for themselves! I want British job contracts to be given to British companies, I want MY National Insurance to pay for British patients to be treated FROM THE CRADLE TO THE GRAVE, not just until they cease to be employed. I want the National debt in my country to be lessened by the cessation of millions of our pounds being sent to Eastern European countries by Eastern European workers that are taking most of the available unskilled jobs here. But what i want most of all is to get out of the EU so that we can close our borders and send home the millions of free-loaders we have to support.