THE OFFICE for National Statistics (ONS) has said it will not rule before January on whether the UK’s finances will be affected by a change to the handling of interest on the Bank of England’s £375bn of gilt holdings.
The change could affect whether chancellor George Osborne meets politically sensitive deficit reduction targets. But an initial assessment of this in a half-yearly budget update due on 5 December will be made by the government’s budget watchdog, without a final ruling from the statistics office.
Osborne recently announced that the Bank would return to the Treasury some £35bn of interest paid on these gilts, bought as part of the Bank’s quantitative easing programme, and that future interest payments would also go to the Treasury to pay down debt.
Some critics said the move will make it easier for Osborne to meet deficit reduction targets that he is in danger of missing. Yet it is unclear how the payments will be accounted for in official statistics, and whether they will affect the measures of public sector net borrowing and public sector net debt targeted by the government.
City A.M. Reporter