James Moore: Even Dennis the Menace would balk at this trick

Forget about the sober suit and the red box. George Osborne should turn up to the House of Commons dressed in the magician's traditional top hat and cape tomorrow. The Chancellor yesterday pulled not just one rabbit out of that hat by dint of the Government's decision to take on the Royal Mail's pension scheme. He produced 28 billion of them. How else to explain the £28bn that will next month be wiped from Britain's national debt?

Here's how it works: The scheme guarantees to pay members a pension based on their career average earnings. Like many other public-sector pension schemes, in fact.

As a result of the government takeover (always assuming Europe agrees) some £28bn of assets will be taken on to the Treasury's books. These can then be sold off with the proceeds used to reduce the deficit.

Sounds wonderful doesn't it? Of course there is just a small catch. Those 28 billion rabbits have been half-starved and they're going to need an awful lot of carrots to keep them happy. That's because the Royal Mail's scheme is deeply in deficit. Its £28bn of assets don't even come close to covering the scheme's liabilities, which are estimated at about £37.5bn.

That's where the conjuring trick comes in. Because those liabilities are uncertain and won't be realised for a decade or two they won't be counted on the Government's books as debt. Just like a raft of other unfunded public-sector pension schemes. The Treasury gets the credit for assets with no hit from the liabilities it will be on the hook for. But the credit is an illusion. The national debt has actually been increased by the size of the scheme's deficit, some £9.5bn. It doesn't really matter when that £9.5bn has to be paid. It will still have to be paid.

There might be sound reasons for doing the deal. It is no secret that the Royal Mail is struggling. The Government wants to privatise but knows it can't do that unless some creative thinking is applied to the pension problem. Sadly, it has turned instead to some highly creative accounting.

And it is not even original creative accounting. The idea was first floated by a certain Lord Mandelson back in 2009. The pensions expert John Ralfe described the deal as a "colossal fiddle" then. This time he relied on the word "outrageous". Both may be examples of understatement. Mr Ralfe was not referring to the deal itself. The government might have been on the hook for those pensions anyway. What he finds infuriating is the blatant dishonesty that is at work.

It seems rather appropriate that the Royal Mail is about to produce a set of stamps celebrating British comics such as The Dandy and The Beano. Although even the latter's star turn Dennis the Menace might balk at pulling off a trick as mendacious as this one.