Fund is tempting target

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THE Government needs to borrow pounds 50bn this financial year as unemployment benefit payments rise and tax revenues fall. Funding the shortfall will not be easy, so the idea of using pounds 480m from the British Coal staff pension fund is tempting - especially as an extra coal subsidy now has to be paid for as well, writes Robert Chote.

The Government has raised pounds 7bn so far this year by selling gilt-edged government bills, with pounds 3bn to pounds 4bn carried over from last year. The Budget also allowed up to pounds 6bn of gilts bought by banks and building societies to be counted towards the total. National Savings is expected to provide about pounds 6bn, but pounds 7bn will be needed to buy back bills which have matured.

This suggests the Government still has to find about pounds 40bn this year - which may explain why the Government is looking so closely at public sector pension funds.

If the British Coal pension fund trustees agree that the company now does not have to pay pounds 480m into the staff pension fund - which the DTI insists would be a coincidence - then the pressure would be relieved.