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UK data revamp could add 112 billion pounds to public debt

By David Milliken

LONDON, Dec 17 (Reuters) - Britain's national statistics agency proposed a revamp on Tuesday of how it presents politically sensitive public borrowing data, changes that could add more than 100 billion pounds ($163 billion) to how much the country officially owes.

Some of the alterations are due to new European Union statistical rules, which mean, for example, that the not-for-profit body which operates Britain's rail network will be classified as a public rather than a private corporation.

But others are part of an attempt to clean up how Britain's public accounts are presented after the financial crisis, which saw the purchase of big stakes in Royal Bank of Scotland and Lloyds Banking Group as well as over 375 billion pounds of government bond purchases by the Bank of England.

"The existing measures are no longer fit for guidance, no longer fit for purpose," Iain Bell, a senior official at the Office for National Statistics, told reporters as the ONS started a consultation into the proposed changes.

Many private-sector analysts and the government's budget watchdog already use a modified version of the ONS's headline measure of the public finances which additionally strips out some payments linked to BoE bond purchases and Royal Mail Group's historic pension assets and liabilities.

Credit ratings agencies prefer a separate measure, general government gross debt, which is more internationally comparable.

However, the ONS proposals go much further and raise questions about how easy it will be to compare the new numbers with past government forecasts of how rapidly Britain's budget deficit and debt level are falling in the run-up to the May 2015 national election.

Starting next September, the ONS plans to replace its current headline measure - public sector net borrowing excluding financial sector interventions - with a new measure, public sector net borrowing excluding public-sector banks.

The ONS said that the change - if implemented already - would add 112 billion pounds to Britain's public sector net debt for the 2012/13 fiscal year, when it already stood at 1.182 trillion pounds or 74 percent of gross domestic product.

Some 30 billion pounds of that increase is due to the change in classification of Network Rail, required by the EU.

Of the remainder, 24 billion pounds comes from a changed treatment of the BoE's bond purchases and 58 billion pounds from no longer counting the government's stakes in RBS and Lloyds and its payments into a bank bailout fund as liquid assets.

"When the guidance on the 'ex-measures' was first established, government share-holdings of banks were not expected to last as long as transpired," the ONS said.

The ONS said the effect of the changes on Britain's annual public sector net borrowing, which was 115 billion pounds or 7.3 percent of GDP last year, would be smaller than on the debt level, and last year would have been equivalent to a reduction in the shortfall of 4 billion pounds.

The ONS said it would offer further details on the changes in February.