My word, what an admission

Yup, him:

Durkin has a history of producing documentaries that have been open to challenge with regard to the facts; his last for Channel 4 denied global warming and in the process aligned itself with the libertarian right of politics. This programme looks as though it does the same thing. The national debt is not £4.8 trillion. To construct any number near that amount ignores the fact that state pension liabilities might be paid over the next sixty years. Few are due now: all those that are can be afforded.

A trained accountant unfamiliar with the concept of accruals.

The £4.8 trillion, recall, is made up of payments to be made in the future for promises already made and the payments for which we\’ve already received. The public sector pensions which people have already paid their (laughably low) chunks of cash in and which are now contractually due to them. The State pensions which people have already paid national insurance for and are, even if not contractually, at least supposedly due.

They may or may not be affordable, none of them are due now: but they are debts which we should indeed be counting as debts.

And, umm, if we don\’t make provisions for such then we should be recognising them as accruals: as any accountant will tell you. For unless we do that how can we work out whether they are in fact affordable when they become due?

11 comments on “My word, what an admission

  1. Maybe Richard has a secret plan for eliminating the liabilities.

    Killing people? Then the pensions will not need to be paid.

    Nah, gotta be wrong!

  2. I reckon his secret plan is the same as Bernanke’s: print loads more money so that the pension payments become worthless.

  3. “The national debt is not £4.8 trillion. To construct any number near that amount ignores the fact that state pension liabilities might be paid over the next sixty years. Few are due now.”

    Surely debts ARE amounts that are due in the future. If companies only included amounts payable now, their balance sheets would look rather different.

  4. So I can start a company promising pensions for people in 40 years time, collect the premiums for a few years, and the company will be valued at whatever premiums I’ve collected so far, because there are no debts? I’ll sell the company for less than the cash value and disappear into the sunset. What could possibly go wrong?

  5. It’s fair enough if we also include the value of the government’s exected tax take over 60 years too which comes to about $25 trillion on a back-of-an-envelope calculation.

  6. Matthew – however, if we’re going to follow the (bonkers, yes) logic of the post, we also need to calculate the NPV of future defence payments, healthcare costs, criminal justice costs, etc – because without those, we couldn’t possibly have a society that would incur the pension commitments that are in contention…

  7. It’s a fair point, the obvious starting policy is defence spending as we have a Nato commitment to spend 2% of GDP.

  8. however, if we’re going to follow the (bonkers, yes) logic of the post

    Oh dear, last time we discussed this, I got you to the point where you were merely calling the logic “a bit silly”. Now you’re back to calling it bonkers.

    we also need to calculate the NPV of future defence payments, healthcare costs, criminal justice costs, etc because without those, we couldn’t possibly have a society that would incur the pension commitments that are in contention…

    To the extent that we have made future promises of spending on these areas (eg large capital purchases such as defence equipment, hospitals, prisons) I agree that those future promises in these areas should be counted. However, on the other hand, why should normal domestic expenditure be NPVed? Society managed to function one 100 years ago without current healthcare costs, and indeed to offer pensions (a lot less generous ones than today, once you adjust for life expectancies), so the claim that our society is dependent on healthcare spending to incurr pension commitments strikes me as unfounded. Ditto for many aspects of criminal justice (eg save money on prisons by decriminalising drug dealing, making more use of community service, and/or reverting to floggings instead of time.) And defence payments, with the exceptions of those large capital purchases I mentioned, and things like pension payments are very non-calculable, how many wars will we get involved in over the next generation? Beats me.

    So, basically, the difference between NPVing pension promises and government debt, but not operating expenditure on healthcare/criminal justice/defence payments, is that with pensions and debt, the UK government has made promises to people to pay them specific amounts of money in the future. The UK government as a sovereign can of course renege on its promises of both pension payments and debt repayments (or on its contracts for things like new aircraft carriers, hospitals, etc), but until it does so, its MPs and citizens should have an idea of what the future commitments are so as to help inform their judgement on the merits of other proposed government spending or tax cuts. Thus including promised future pension payments along with formal government debt in total figures is sensible.

  9. with pensions and debt, the UK government has made promises to people to pay them specific amounts of money in the future.

    As before: debt is a legally binding commitment; pensions are a nebulous assurance of jam tomorrow based on fuck all. If you really can’t see the difference, there isn’t much hope for you.

  10. As before: debt is a legally binding commitment; pensions are a nebulous assurance of jam tomorrow based on fuck all.

    As before, a sovereign nation can default on its debts as legally as it can default on its pensions promises.
    Given that a sovereign nation can default on its debts, do you think it should report those debts at all to voters, MPs, etc?

    If you really can’t see the difference, there isn’t much hope for you.

    You’re thinking about this from the wrong angle. The question isn’t “is there a difference?” It is “what information best helps citizens and MPs in making decisions about government policy?”.

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