Northern Rock could ‘be left off the balance sheet’
TORY HQ last night branded “outrageous” the prospect of Alistair Darling announcing that he is to keep the £110bn Northern Rock debt off the government balance sheet to protect one of the Chancellor’s two golden rules.
The sustainable development rule states that the national debt to GDP ratio should be “prudent” and not go above 40% of national income but, if the nationalised bank’s debts were included, the ratio would hit 45%.
In a pre-Budget skirmish, Philip Hammond, Shadow Chief Secretary to the Treasury, said: “Northern Rock’s £110bn liabilities would blow the fiscal rules apart and destroy any shred of credibility the Chancellor has left.
“It will be outrageous if Alistair Darling tries to keep the Northern Rock liabilities off the balance sheet when the Office for National Statistics ruled they should be included.”
However, a spokeswoman for the Treasury told The Herald that the department had made clear in January that the UK Government’s fiscal rules allowed for “temporary and exceptional events”, which meant they did not have to go on the balance sheet. She said there would be an update on the policy in next Tuesday’s Budget, Mr Darling’s first.
Asked to comment on Mr Hammond’s remarks, she added: “We are not offering a running commentary on Northern Rock.”
Mr Darling is expected to repeat how the UK economy, faced with global turbulence in the face of a credit crunch, is well-placed to weather the storm and also to forecast a slowing of growth this year.
Public sector pay restraint is set to continue to try to keep a lid on inflation so that interest rates can be cut towards the end of the year to generate a feelgood factor ahead of a possible general election in 2009.