There’s much ado happening today in Britain…the Queen’s 90th birthday, National Tea Day (ironically) and sweeping news that the country’s pension debt is devastatingly worse than originally estimated.
A report released this week by the Adam Smith Institute, a UK think tank, found that the British government has been concealing more than £1.85 trillion ($2.65 trillion) in liabilities on top of its national debt. That’s the equivalent of £53,822 ($77,120) for every man, woman and child in the UK. Of that debt, unfunded public pension liabilities make up a staggering two-thirds. An estimated £1.3 trillion ($1.86t) will need to be found to cover the 93 percent of public sector pensions that are currently unfunded, according to the report.
Here in the U.S., governments carry an estimated $4 trillion in public pension debt, equal to an incredible, $12,000 per U.S. citizen. And the similarities don’t end there. Like the U.S., British policymakers created unsustainable systems dependent on high-risk plans with tax-payers being held responsible when the schemes go south and, like here in the U.S., British policymakers continue to rack up enormous debt while avoiding true pension reform.
“Homeowners worry about their mortgages and cut back when they are overstretched, but governments don't,” said Eamonn Butler, the Institute’s director. “Instead they keep taking on new liabilities, with schemes that buy votes today but mortgage the future of our children and grandchildren.”
Calling the pension schemes “wildly reckless” and “deeply immoral,” Butler continued, “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.”
The report warns that the British government must immediately begin cutting excessive public sector liabilities and recommends drastically cutting the level of defined benefit pensions, or otherwise “condemn future generations to staggering financial turmoil.”