Massive Deficit in Ealing Council Pension Fund

£178 million shortfall raises fears of further tax rises

A further body blow for the finances of London Borough of Ealing was revealed with the recent publication of the Council's latest accounts.

The extra £16 million in short term borrowings taken out during the financial year to March 2003 is dwarfed by a massive increase in the shortfall on the borough's pension fund.

The deficit in the pension fund increased from £81mn to £178mn - this in part will be due to salary increases as well as a weak stock market during the period..

The Council sold equity markets heavily during 2002/3 with over £50 million being sold in UK shares with much of the proceeds being put into bonds. The equity markets have recovered well since this period whereas bond markets have been hit by rising interest rates.

The fund's managers are Fidelity Investments and UBS. One city analyst who lives in the borough said, "The funds original exposure to equities seems to have been very high and they have clearly been hit hard by the sharp fall in markets in this period. Unfortunately, their aggressive sales of equities means that they are unlikely to benefit fully from the market's recovery."

No provision has been deemed necessary despite the massive deficit but the accounts state that an actuarial report will be made into the fund this year to consider ways in which the shortfall might be covered. Many firms in the private sector have had to make large contributions to their pension funds to cover such shortfalls. Funding this deficit in Ealing would almost certainly require further cuts in front-line services on top of the ones that have already occurred

Ealing Council remain committed to their £50 million "response" programme.

February 27, 2004