Parking public servants' pensions off-balance sheet suits politicians

An "elephant in the room" is an inconvenient fact too big to ignore. So the term cannot be applied to the UK's £1.3tn deficit for public sector occupational pensions, which politicians have succeeded in disguising as an exceptionally grey and wrinkly piece of furniture.

Parties are vying for a veneer of financial responsibility in the election, as illustrated by a Labour manifesto on Monday that promised to reverse the rise in national debt. But none of them is likely to factor pension debts to the likes of police officers and nurses into headline numbers.

The UK's net debt stood at £1.4tn in 2013-14, according to Whole of Government Accounts. This document received minimal publicity compared with the 2015 Budget, also published last month. However, Nigel Wilson, chief executive of Legal & General, believes it is time for the UK to face up to a net liability of £1.85tn identified by the WGA. He argues that this figure makes more difference to future economics than marginal tweaks to corporation tax.

The difference between the debt and liability figures is largely down to workplace pension promises, estimated as a current cost offset by the value of assets such as government buildings. The Treasury airily excludes pensions for public servants from net debt on the basis that they are "contingent" liabilities. This is a half-truth: the notional cost will bounce up and down with discount rates, but beneficiaries are unlikely to waive their entitlements when they retire.

The government can reduce the running cost of the universal state pension by raising the retirement age. This is harder to do with its workplace schemes, so the burden is set to grow. Perhaps it is time to repurpose the jibe that BT is a big company with an even bigger pension scheme and describe the UK as a large state - with income of some £650bn - but public sector pension liabilities twice that.

Fly-past of the wingmen

Are you a round peg kind of person? Then become a finance director, and round holes will be plentifully supplied. This is clear from job moves among chief financial officers and FDs. Andrew Findlay is moving from Halfords to EasyJet to fill the gap created when Chris Kennedy leaves for Arm, after Tim Score retires. Stuart Bridges is quitting Hiscox for ICAP because Iain Torrens joined TalkTalk when Steve Makin stepped down.

None of the moves involves a numbers ninja becoming a chief executive. Ambitious finance directors may frown at this. In the eyes of many in the City, their breed occupies a position on boards second only to the big boss. Typically, the CEO and FD are a double act at presentations. The stats brain answers tricky numerical questions but avoids butting in when the chief is expounding on strategy.

Analysts and investors are more inclined to like finance directors than otherwise, which can help them when they seek internal promotion. Finance directors who have hopped up to the top job have included Tidjane Thiam at Prudential. David Thomas will achieve the same feat at Barratt.

The current outbreak of do-si-dos suggests a different theme is playing, with finance directors as career wingmen. Their specialism is more transferable than operations management, allowing established names to skip between sectors. That reflects risk aversion among boards, according to Mark Freebairn of recruiter Odgers Berndtson. The criticism may apply to FDs too. Those round pegs may never win plaudits as inspirational leaders, but they are less likely to be fired by the board too.

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