LONDON (MNI) – The April UK public sector finances are set to show
a large surplus as a result of transfer of the assets from the Royal
Mail pension fund, but the boost will be illusory.
Longer term the transfer of Royal Mail Pension Fund will weigh on
the public coffers with liabilities exceeding assets, but in the short
term the headline UK borrowing numbers will look a lot rosier.
While some analysts appeared not to have factored in the Royal Mail
effect into their forecasts most did, and the median forecast is for the
April headline public sector net borrowing number (PSNB-X) to show a
Stg20 billion surplus.
The Office for Budget Responsibility, the official fiscal
forecasting body, first flagged up the looming impact of the Royal Mail
pension fund transfer back at the time of March Budget. The Royal Mail
pension deficit and a share of its assets were finally transferred on to
the public sector balance sheet at the start of April.
“This will lead to a one-off reduction in PSNB of Stg28 billion in
April,” the OBR said in a note last month.
The OBR has restated the line it used in March, that while it
“appears very favourable for the public finances … the long-term
impact is likely to be negative as the present value of the transferred
liabilities … exceeds the value of the transferred assets.”
The key point behind the accounting for the impact of the Royal
Mail pension move is that while near term the assets being transferred
will boost the public finances the liabilities – future payments to
pensioners – will hit the finances down the road.
Analysts, and the OBR, will look through the impact of the Royal
Mail transfer, with the latter saying it will comment on public
borrowing both including and excluding the Royal Mail in coming months.
Back at the time of the March Budget the Government also announced
it intended to cancel the gilt portfolio it was set to acquire from the
Royal Mail during this fiscal year. By transferring the gilts back to
the public accounts, the government was in essence acquiring its own
liabilities.
On Monday, the Debt Management Office announced details of the
Stg7.98 billion of gilts which are set for cancellation, with Stg2.24
billion of conventional gilts and Stg5.74 billion of index-linked gilt.
The DMO said it would consult on the timing of the cancellations,
with the Government set to retain a small share of the gilts through
until Q4 2012-13.
The OBR, however, has said that while the transfer of the Royal
Mail gilts will reduce public sector net debt by over Stg9 billion in
2012-13, “the subsequent cancellation of the gilts will have no further
impact on the fiscal aggregates.”
Another boost to the public finances in April will come from a
Stg2.3 billion capital receipt as a result of the closure of the Bank of
England’s Special Liquidity Scheme, with fees received by the Bank of
England being transferred to central government.
The April public finance data are due out at 0930GMT Tuesday.
–London Bureau; Tel: +442078627491; e-mail:drobinson@marketnews.com
[TOPICS: M$BDS$,MABDS$]