28 September 2007
The Office for National Statistics has reclassified the £2.4bn debt of London Underground contractors Tube Lines and Metronet as public sector borrowing, increasing net debt by up to 0.1% of gross domestic product.
The reclassification brings the ONS's accountancy treatment into line with 1995 European Union rules which state that 'control' rather than 'ownership' of an entity should determine how its assets and liabilities are reported.
Although Metronet and Tube Lines are private companies, the ONS discovered that London Underground Ltd holds 'special shares' in both, which effectively gave it control.
As part of the borrowing was already stated in LUL's accounts, the move adds just £300m to public debt.
The change to the accounts will be backdated to 2002 when the first contract was signed.
The ONS reclassification was published alongside its August report on the public sector finances. They showed that public sector net debt is now £509.3bn — or 36.7% of GDP — 3.3% below the Treasury's 40% cap and up by 0.5% since August 2006.
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