LONDON (Reuters) - Chancellor George Osborne will use a 28 billion pound ($44.36 billion) asset transfer from taking on the Royal Mail’s pension fund to pay down government debt next year, a government source said on Sunday.
The transfer of the state-owned mail company’s pension scheme - subject to European Union approval and due to be announced in next week’s budget - will reduce the government’s budget deficit next year, while the liabilities from the scheme, worth 37.5 billion pounds, will show up on the government’s accounts across the next two decades as they are drawn on by scheme members.
Next year’s boost to the government’s deficit figures will therefore not follow through to forthcoming years, but will lower Britain’s overall debt burden in the short term.
In the long run, however, there will be an overall cost to the Treasury from the transfer because the scheme’s liabilities outweigh its assets.
The decision to take on the pension liabilities on April 1 is intended to secure the safety of the fund for employees, and it is also hoped the move will attract private sector investment to Royal Mail.
Osborne will also announce new measures to crack down on tax avoidance in his March 21 budget, according to a Treasury source, by launching an anti-abuse rule targeted at avoidance schemes which help companies and individuals dodge taxes.
“The government has been clear that it is committed to tackling tax avoidance. At a time when the top economic priority is cutting the deficit, it is unacceptable for anyone to try to avoid paying a fair share,” the source said.
Legislation for the measure - which will protect future revenues rather than raid current avoidance schemes - is expected in 2013.
($1 = 0.6312 British pounds)
Reporting by Matt Falloon; Editing by Leslie Adler