Dear Listener

Some numbers are so big that they just defy understanding. I would suggest that £5 trillion is such a number and yet, just as we are getting used to the fact that the Government debt was approaching ONE trillion new figures suggest it might be FIVE trillion. And before you say ‘hang on a minute’ I will pause to remind you that a trillion is a million times a million which is a 1 followed by 12 zeroes. So it is a lot. Especially when it comes to pounds. In an entire working lifetime someone on an average annual pay of £25,000 a year will only earn £1,000,000 in 40 years (leaving aside rises for inflation). So a trillion is a million times what most of us will ever see. And in £5 notes would probably stretch to the moon and back (and before you ask I haven’t done the arithmetic on that! – let me know if you do).

So where has this new debt come from? Item 1 is the cost of the state pension. Although only a modest £97 odd a week each it is paid to more than 10 million people and millions more are earnings rights to at work as we speak. So the future promise to pay these state pensions amounts to a lot of money. In fact in 2003 it amounted to £1.17  trillion according to the Revenue and two years later was £1.35 trillion according to the Government Actuary.

A similar sum is also implied by the promises to pay work pensions to civil servants, police officers, fire-fighters teachers, NHS, and the armed forces. Their schemes are unfunded – in other words there is no fund (unlike University staff, local authority workers and, just so you know, the BBC which all do have a fund – adequate or not – to pay them from). Add on another £1.2 trillion for public sector pensions.

Another sum of similar size is the liability of rescuing the banks – though in the long term a lot of that (perhaps all) will be repaid but that is now put at between £1 and to £1.5 trillion.

Then there the tiddlers - £200 billion for the future payments on Private Finance Initiative projects (used to build hospitals and schools without hitting the normal public accounts), and £45 billion for decommissioning nuclear power stations and research facilities and perhaps another £500 billion for various odds and ends of promises made by the Government and – with nearly £900 billion of the regular public sector net debt we are familiar with (the total of the extra we’ve spent year by year over the generations) and you get a total of something between £4.8 and £5.7 trillion. Wow.

With gratitude – and apologies – to Dave Hobbs of the Office for National Statistics on whose careful, serious and caveated paper this superficial summary is based. See www.statistics.gov.uk/articles/nojournal/wider-measures-public-sector-debt.pdf 

***ON MONEY BOX THIS WEEK

*** Northern Rock is accused of treating its mortgage customers unfairly by charging them a fee to move their mortgage to another lender but not telling them they could avoid the charge if they moved it before 30 June.

***The Government has revealed the details of how it will get rid of the tough rules which said anyone aged over 75 has to take an income – usually an annuity – from their pension pot. The Minister explains his plans.

***Interest rate rebel – In June Andrew Sentance became the first member of the Bank of England’s Monetary Policy Committee in nearly two years to vote for a rise in rates. He tells us why.

***And 30,000 UK investors will find out by the end of the month what, if anything, they will get out of the administration of KeyData – they had invested £450 million some has gone but how much remains to be shared?

That’s our plan but it is always subject to breaking news. Find out you what finally makes it by listening live at noon on Saturday, or to the repeat at nine pm on Sunday, or at any time on the website www.bbc.co.uk/moneybox. There you can also read web pieces, download transcripts, follow links, and send us stories or ideas you want us to look into. And Have Your Say on those annuity plans.

Best wishes,

Paul

PS don’t forget the programme trail on Breakfast on BBC 1 between 0845 and 0900 on Saturday.

PPS This is the last Money Box of the present series. Next week Naga Munchetty of BBC2’s Working Lunch will present a special Money Box on saving and investing. And for the next four weeks Alvin Hall will be here look at how different generations cope with money. Money Box will be back in September with our new – and 34th – season.

e-mail Paul Lewis