THE GOVERNMENT will improve its financial position by up to €2 billion under plans to assume the assets of pension funds in the semi-State sector.
The money will help keep the Government within Maastricht spending guidelines next year despite worsening tax revenues.
A Department of Finance spokesman confirmed yesterday the transfer of pension fund assets to the exchequer was "anticipated to affect the General Government Balance" - the measure of the State's finances that determines compliance with the EU Stability and Growth Pact.
Under a statutory instrument signed late in July, a number of institutions that have funded their own pension schemes to meet staff retirement costs were told the State intended to "assume the assets and liabilities of this scheme and meet future liabilities as they arise on a pay as you go basis". It is unclear how much these funds hold in assets but industry sources said it would amount to more than €2 billion.
The scale of the injection into exchequer finances will depend also on whether the Government moves against all non-commercial semi-States holding their own funded pension schemes and on whether it wins EU approval for its proposed accounting of the proceeds.
The move must be sanctioned by Eurostat, the EU body that oversees the methodology of compilation for national statistics.
There were doubts in Opposition circles that the use of the plan to boost the Government's financial position would be approved. However, economist Pat McArdle said the sharp decline in the economy could see it passed if it was seen as a once-off or temporary measure.
The Government initiative has been presented as a matter of "housekeeping" but Fine Gael finance spokesman Richard Bruton last night labelled it a "phony transaction". "This is simply creative accounting and will not reform anything or make it work better," he said.
Mr McArdle yesterday questioned why "if these schemes are funded, is the Government interfering, and if the Government position is that it guarantees these pensions anyway, why are they funded by the institutions and their staff".
He said it would, if approved by Eurostat, allow the Government to spend an additional €2 billion next year while staying within the Maastricht guidelines. This would give the Government "significant elbow room" when framing the next budget, he said, with €2 billion amounting to 1 per cent of GDP.
"It looks like they are trying to find money in any kitty they can rattle," said Mr Bruton. Heads of a Bill facilitating the transfer of the pension fund assets will be presented to Government in the autumn.
