By David Milliken
LONDON (Reuters) - Britain may need to raise almost 10 billion pounds less from financial markets this year than previously thought, after its statisticians and the finance ministry discovered a raft of errors in a key measure of borrowing needs.
The Office for National Statistics said on Wednesday that errors in the finance ministry's reporting systems - largely linked to transfers from the Bank of England - meant the amount of money that Britain needed to borrow since December 2012 had been overstated by 9.684 billion pounds ($15 billion).
The mistakes in the calculation of the central government net cash requirement (CGNCR) - one of the longest-running pieces of government financial data - do not affect the measure against which the government's deficit reduction goals are benchmarked.
As a result, the figures will not give finance minister George Osborne a windfall to play with before May's election, or alleviate the problem of weaker-than-expected income tax revenue so far this year.
But they do mean that Britain is likely to need to raise much less money from financial markets between now and the end of March than previously stated, unless a budget update in December shows a sharp deterioration in the public finances.
The UK Debt Management Office said in April that it aimed to raise 141.2 billion pounds from markets by issuing 127.2 billion pounds of government bonds and a net 14.0 billion pounds of Treasury bills with maturities of a year and under.
Typically, the DMO deals with changes in how much Britain needs to borrow during the course of the year by altering the supply of Treasury bills, rather than gilts, said Vatsala Datta, a bonds strategist at RBC.
"There's going to be approximately a 9.7 billion-pound reduction in the net cash requirement, all other things being equal. I don't think that sort of number will be reflected over the next months in terms of reduced gilt sales," she said.
So far, Britain has sold 73.1 billion pounds of gilts. Net Treasury bill issuance is left to the final three months of the tax year, which ends in March.
Reduced Treasury bill issuance this financial year is likely to translate into reduced gilt issuance in 2015/16, however.
The DMO said on Wednesday that it would take the new borrowing needs into account when it gives an update on its debt issuance plans after Osborne delivers a budget update on Dec. 3.
It will also have to factor in new growth and borrowing forecasts from the government's fiscal watchdog, the Office for Budget Responsibility, which on Monday said that income tax receipts were below forecast.
The mistakes in the CGNCR came to light during work by the ONS and the finance ministry to make the links between the CGNCR and the newer headline measure of public sector net borrowing (PSNB) clearer.
While CGNCR is based on cashflows, PSNB, which was revamped last month, works on a so-called accruals basis - it takes into account when payments are due, rather than when they are made.
The biggest error was made in March 2013, when CGNCR was overstated by nearly 12 billion pounds. The mistake was caused by a mix of incorrect recording of debt interest paid from one part of the public sector to another, cash transfers between the Bank of England and the Treasury and the omission of short-term asset holdings.
The errors also had a knock-on effect on the public sector net cash requirement, which includes the borrowing needs of local government and state-owned enterprises as well as central government.
(Editing by Larry King)