Royal Mail pension windfall

Professor Philip Booth, the Editorial Director at the Institute of Economic Affairs, said the government's decision to nationalise the assets of the Royal Mail pension fund is "dangerous".

"The government's decision to nationalise the assets of the Royal Mail pension fund whilst taking on all future liabilities is short-sighted and dangerous.

"The assets will be used immediately to reduce the government's debt whilst the liabilities - made up of future pensions to workers - will no longer be funded and will have to be met by future generations of taxpayers. The liabilities will be hidden from the government's accounts."

News the pension transfer could happen within weeks was welcomed by the Communications Workers Union (CWU) which has campaigned for several years for the state to take over the pension.

The Chancellor was reported to be under pressure from Tory donors and backbenchers to splash the extra money created by the pension transfer on infrastructure projects, such as roads, schools and power stations.

But the Treasury said it would go immediately to cut the UK's record deficit.

George Osborne will use a £28 billion windfall from the transfer to the state of Royal Mail pensions to reduce the deficit and not to pay for major projects, the Treasury said.

The cash bonanza is expected to become available within weeks - with officials confident the EU will approve the deal in time for the Chancellor to announce it in Wednesday's Budget.

Taking over the pension scheme - which has a near £10 billion deficit - is designed to make the organisation more attractive to investors as the Government seeks to privatise it.