Public debt and pensions black hole

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THE right-wing, free market think tank, the Adam Smith Institute, yesterday hit out at the Tories’ ‘deeply immoral’ failure to bring down the national debt by imposing austerity cuts vastly exceeding anything the government has proposed so far.

According to its report, the official national debt, which stands in the region of £1.5 trillion and growing by the day as the government pays its creditors’ interest on this staggering amount, is a gross underestimation. The UK national debt is the total amount of money the government owes to the private sector, money borrowed to cover public spending.

The institute has pointed to the fact, ignored by Tory chancellor George Osborne, that this amount leaves out an additional £1.85 trillion of debt run up by unfunded government schemes creating a ‘hidden debt time bomb’ that was ‘truly staggering’.

The total of £1.8 trillion is, according to this think tank, largely made up of pension liabilities to public sector workers, losses incurred by unpaid student loans and money spent on propping up Lloyds and TSB bank.

In its press release, the institute claimed that 93% of public sector pensions were unfunded, with the government putting no money aside to pay the inevitable £1.3 trillion required in the future to meet pension liabilities.

As for student loans, the report laments the fact that 45% of students earn too little to actually repay the huge debts they are forced to run up in order to complete a university degree.

Being an extreme right-wing organisation, it manages to blame students themselves for not being able to pay off debts that can run as high as £50,000, by dismissing the majority of degree courses as just ‘vanity’ courses that will not lead to high paid jobs like those in banking or the creative accountancy employed by tax evasion specialists.

Interestingly, the report omits to mention the not so hidden costs of the Public Finance Initiative (PFI) schemes. These schemes were, according to a National; Audit Office report in December 2015, responsible for a debt of £222 billion.

This debt, owed to the private financiers and speculators, is also not included in the national debt figures. What proposals are the highly influential think tank advocating to deal with what it, accurately, calls a debt time-bomb?

Basically it amounts to driving the pension contributions of the 4.2 million public sector employees – NHS workers, teachers and civil servants – up to unaffordable levels while at the same time cutting pensions. Education would become the sole preserve of the rich, while cutting out those subjects like the arts that capitalism deems to be unproductive – that cannot produce a profit.

As for the banks, whose debts were taken over by the capitalist state to prevent their collapse, the Institute advocates selling them off at a loss as quickly as possible and returning them to the private sector.

The report is scathing about Osborne’s failure to come clean on the real depth of the debt crisis that is drowning British capitalism and it is clearly designed to push the Tories forward into carrying out even more savage austerity cuts than those already announced.

Where Osborne talked about cutting the size of the state back to that of the 1930s, the Adam Smith Institute is calling for a return to the 19th century when there were no pensions, no education for the working class and no welfare state – a return to the days of the workhouse and poor laws with the whole weight of capitalism’s crisis dumped on the back of workers and their families.

The problem for the Institute and the Tories is that a weak, divided Tory government faces a working class that will not passively accept seeing its lives smashed up just to keep a bankrupt capitalist system from drowning in this sea of debt.

The answer workers must make to this report is to demand that the leadership of the trade unions mobilise the strength of the working class by calling a general strike to kick out the Tories and advance to a workers government and socialism.