Osborne to Use Royal Mail Pension Transfer to Reduce U.K. Debt

Chancellor of the Exchequer George Osborne will use assets in the transfer of Royal Mail Group Ltd.’s pension fund to the government’s balance sheet to reduce debt, said a person with knowledge of the matter.

The government will gain 28 billion pounds ($44.3 billion) of assets from April, subject to approval of European Union regulators, said the person, who declined to be identified because the plans aren’t yet public. Contingent liabilities worth 37.5 billion pounds will appear on the government’s balance sheet as they become due over the next two decades.

The plans, to be announced by Osborne in the March 21 Budget, leave the government responsible for Royal Mail’s 8.4 billion-pound pension shortfall, ahead of a sale of the state- owned postal service. U.K. public sector net debt will be 1.2 trillion pounds in the year through March 2013.

EU regulators can block payments that would give one company an unfair advantage over rivals. The EU is also investigating German subsidies for Deutsche Post AG (DPW) and Belgian aid to La Poste.

To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net