LONDON (Reuters) - Britain’s statistics office said on Monday that it would not rule before January on whether the country’s finances will be affected by a change to the handling of interest on the Bank of England’s 375 billion pounds of gilt holdings.
The change could affect whether Chancellor George Osborne meets politically sensitive debt reduction targets. But an initial assessment of this in a half-yearly budget update due on December 5 will be made by the government’s budget watchdog, without a final ruling from the statistics office.
Osborne announced 10 days ago that the Bank would return to the Treasury some 35 billion pounds of interest paid on these gilts, bought as part of the central bank’s quantitative easing asset purchase programme, and that future interest payments would also go to the Treasury to pay down debt.
Some economists and opposition politicians said the move was designed to make it easier for Osborne to meet debt and deficit reduction targets that he is in danger of missing.
However, it is unclear how the payments will be accounted for in Britain’s official statistics, and whether they will affect the measures of public sector net borrowing and public sector net debt targeted by the government.
The Office for National Statistics said on Monday that it would not rule on this until early January, shortly before the first payments are made.
“(ONS) committees will consider the issue ... and announce their conclusions by early January,” it said. “At this point we will also announce when the transfers will appear in the statistical bulletins and our estimate of the impact.”
The government’s budget watchdog, the Office for Budget Responsibility, said in response that it would go ahead with its own assessment of what the correct statistical treatment of the payments is in time for Osborne’s December 5 budget statement.
When the OBR gave an initial assessment of the Bank plans after they were announced on November 9, it said they were likely to lower public sector net borrowing in the short term, but raise costs in the long term as interest rates rose.
Reporting by David Milliken