Some £90m has been drawn from the reserve fund over the past three years to rebalance the public finances in the wake of the VAT bombshell.
With the government’s revenue account for day to day spending now balanced, attention now turns to replenishing the other reserves which have been heavily depleted.
During the Budget debate, backbencher Alfred Cannan (Michael) argued that the Treasury Minister could not proclaim that the government’s books were balanced when reserves are falling by a further £77m in the coming year.
The government has externally invested funds such as the reserve fund, National Insurance fund and pension fund but also a whole range of internal funds.
These include the capital fund used to pay for capital schemes, and a number of pots of cash used for specific purposes such as town and village regeneration.
These internal funds have fallen dramatically, from about £350m in 2009 to about £123m next year.
To replenish the capital fund, departments will have to start paying interest again on their capital borrowings, initially at a rate of 1 per cent but rising to 1.5 per cent and then 2 per cent.