Network Rail to be ‘government body’ adding £30bn to UK national debt
ONS says state’s role overseeing company through rail regulator means Network Rail should be considered a public body.
Network Rail will be reclassified as a government body in 2014 as part of a package of changes to the public finances, adding £30bn to Britain’s national debt, the Office for National Statistics (ONS) has announced.
Because the government plays a significant role in overseeing Network Rail, through the Office of the Rail Regulator, and the taxpayer would inevitably be left picking up the bill for keeping the trains running if Network Rail collapsed, the ONS says it is best considered a “central government body”.
That will bump up public sector net debt for 2012-13 by approximately £30bn, or 2% of GDP, when the change is implemented next year – and will fuel the debate about the size of the public subsidy for the railway network.
Transport secretary Patrick McLoughlin said in a statement: “The government welcomes the ONS review and has always been committed to the transparent reporting of public liabilities.”
He added: “I am committed to ensuring that Network Rail maintains the operational flexibility to continue to deliver a safe, punctual rail network and increased capacity for our busy railways and that it is able to attract a high calibre of staff, while still providing value for money and being accountable to Parliament”.
The announcement came as part of an ONS consultation on plans to implement pan-European standards on calculating taxation, public spending and debt, known as ESA10.
As well as the national debt, public sector net borrowing – the amount the Treasury has to borrow each year to fund its day-to-day spending – is also likely to increase, by £2.5bn, as a result of the reclassification of Network Rail.
The Royal Mail pension scheme, which was brought on to the Treasury’s books when it decided to underwrite the scheme in April 2012, will also have to be treated differently.
Instead of a short-term boost to the government’s coffers from taking charge of the Royal Mail scheme’s assets, the ONS will record the transfer as negative, because over time the assets are likely to fall short of the pension liabilities, by approximately £9bn.
“It may be that this shortfall in the pension scheme will be best reflected by a capital expenditure by government at the point of transfer in April 2012. This would increase public sector net borrowing in that period by £9bn,” the ONS said in a statement on Tuesday. It is negotiating with the statistical body Eurostat about the precise details of the changes.
Taken together with other changes demanded by the new European rules, the ONS said the overall impact of implementing ESA10 could be an increase in public borrowing of £37bn for 2012-13.