Statistical bulletin: Government Deficit and Debt Under the Maastricht Treaty, Financial Year 2010-11

General government net borrowing and consolidated debt

• General government net borrowing in 2010/11 was £140.0 billion; equivalent to 9.5 per cent of gross domestic product (GDP)
• At end March 2011 general government gross consolidated debt at nominal value was £1130 billion; 76.7 per cent of GDP

Background

Article 126 of the Treaty on the Functioning of the European Union obliges member states to avoid excessive budgetary deficits. The Protocol on the Excessive Deficit Procedure, annexed to the Maastricht Treaty, defines two criteria and reference values for compliance. These are a deficit to Gross Domestic Product (GDP) ratio of three per cent, and a debt to GDP ratio of 60 per cent.

EU Member Governments have to report their actual and planned government deficits, and the levels of their debt, promptly to the European Commission, to specific deadlines twice each year. The estimates in this statistical bulletin have been supplied to the European Commission by ONS in accordance with the schedules in the Excessive Deficit Procedure. Forecasts for future years are provided separately by HM Treasury.  

Main Statistics

General government net borrowing as a percentage of GDP

Source: Office for National Statistics

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General government gross debt as a percentage of GDP

Source: Office for National Statistics

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General government net borrowing

The tables in this bulletin present the UK Government debt and deficit position at the end of both the financial and calendar years (The United Kingdom, uniquely within the European Union, is assessed against the deficit and debt on a financial year basis). The reference value for ‘excessive deficit’ is three per cent. In 2010/11, the deficit stood at £140.0 billion (9.5 per cent of GDP).  Net borrowing exceeded the reference value from 1991/2 to 1996/7, peaking at £52.5 billion (7.9 per cent of GDP) in 1993/4. It then fell steadily, moving into net lending (or surplus) in 1998/9, before starting to rise again, returning to net borrowing (or deficit) in 2001/2.

Previously ONS has presented in this bulletin an alternative version of the deficit, which is consistent with a Eurostat decision on the treatment of receipts for use of the electro-magnetic spectrum. This alternative version has now been fully integrated into this bulletin following a decision to amend the treatment of the UK spectrum receipts to align with the international consensus. More information is contained in the background notes to this bulletin and in table M7.

General government gross debt

The reference value for ‘excessive debt’ is 60 per cent of GDP. At the end of March 2011, gross debt was £1129.6 billion (76.7 per cent of GDP). As a percentage of GDP, it has risen every year since the end of March 2004. At the end of December 2010 gross debt was £1108.0 billion (76.1 per cent of GDP). See table M1.

Interventions in the financial crisis

The statistical recording of government and central bank rescue and support operations in the financial crisis has been the subject of international discussion.  Further information can be found in the September 2009 Statistical Bulletin. More detail is also contained in the ONS article on classification of financial crisis interventions 

In January 2011, for the first time data for Royal Bank of Scotland and Lloyds Banking Group were fully incorporated into the public sector finances.  This has impacted considerably on the measure of public sector net debt that includes the effects of the financial interventions. However, it does not impact significantly upon the General Government measures in this bulletin.

Supplementary table for the financial crisis

Member states are required to report to Eurostat, supplementary tables on the financial crisis.  The tables are published in this statistical bulletin as table M9.

Revisions since last data release

Table M8R presents revisions to key aggregates in this bulletin since data were last supplied to Eurostat in March 2011.

Revisions to the deficit and debt data are generally less than 0.1 per cent of GDP.   

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Background notes

1. Introducing government deficit and debt under the Maastricht Treaty

   Article 126 of the Treaty on the Functioning of the European Union obliges member states to avoid excessive budgetary deficits. The Protocol on the Excessive Deficit Procedure, annexed to the Maastricht Treaty, defines two criteria and reference values for compliance. These are a deficit to Gross Domestic Product (GDP) ratio of three per cent, and a debt to GDP ratio of 60 per cent.

   The first deadline (1 April) is designed so that the European Commission can gain an early sight of member states compliance for the previous calendar year. However, for the United Kingdom, uniquely within the European Union, the Stability and Growth Pact sets the reference period to be the financial year (1 April to 31 March), recognising the different budgetary year arrangements in the United Kingdom. The second deadline (1 October) thus provides the first estimate for the latest financial year.

   The Protocol on the Excessive Deficit Procedure gives the definition of Government deficit and debt according to the European System of Accounts. This is also the manual that governs the United Kingdom’s National Accounts.

   ‘Government’ is defined as the general government sector, which covers central, state and local government and social security funds. ‘Government deficit’ is defined as general government net borrowing.

2. Coherence

   The deficit data in this Statistical Bulletin are based on that published in the Public Sector Finances Statistical Bulletin of 21 September 2011, but have been modified to take account of a European Regulation that requires payments on swaps to be treated as interest, and hence part of general government net borrowing as reported for the Excessive Deficit Procedure. The Regulation does not amend general government net borrowing for National Accounts purposes, which is also presented in the Public Sector Finances Statistical Bulletin. For these purposes swaps are treated as financial items. The UK Government does not use swaps to the same extent as some European Union member states. The reconciliation between these two versions of net borrowing is shown in table M7.

   Previously ONS has also presented in table M7 an alternative version of the deficit, which is consistent with a Eurostat decision on the treatment of receipts for use of the spectrum. Over time, international opinion has settled on using this alternative approach. International guidance issued in 2010 now requires, in most cases, an approach that treats spectrum licenses as the sale of an intangible non-produced asset. In light of the clear international consensus that now exists in this area, and despite our original view that treatment as rent is closer to the spirit of ESA 95, ONS has concluded that treating the 2000 spectrum auction as the sale of an asset is an acceptable statistical treatment. ONS has therefore amended its treatment of the 3G spectrum licenses to record a sale of an asset in 2000. This alternative approach has now been fully integrated into this bulletin. It will subsequently be implemented in the Public Sector Finances, and National Accounts. The reasons for the decision  were published on 31 August 2011.

   Table M7 shows the reconciliation of the two different versions of general government net borrowing. The net borrowing in column one is the headline net borrowing figure presented elsewhere in the bulletin. The net borrowing in column 5 are the net borrowing figures published in the public sector finances of 21 September 2011. To reconcile these figures it is necessary to adjust for payment on swaps and the new classification of 3G spectrum licence receipts, as described in the previous paragraphs. The adjustment for the 3G spectrum licences is required here as the new treatment has yet to be taken on in the UK public sector finances. By the next bulletin in March 2012 this classification will have been made in the public sector finances and the adjustment will no longer be necessary. 

   The estimate of GDP used in this bulletin is consistent with that published on 28 June 2011 in the UK National Accounts.

3. Revisions

   Table M8R presents revisions to the data since last supplied to Eurostat in March 2011. It includes revisions incorporated since the Excessive Deficit Procedure data were last published in March 2011.

4. Quality reporting

   Data in this bulletin are consistent with those published in the latest Public Sector Finances Statistical Bulletin. A summary quality report for the public sector finances can be found here Summary Quality Report for PSF. This report describes in detail the intended uses of the statistics presented in this publication, their general quality and the methods used to produce them.

5. Relevant links

   Details of the revisions policy for this and the other public sector finances statistical bulletins is available at Public Sector Statistics  Revisions policy

   Information on the classification of institutional units for the purposes of National Accounts can be found at National Accounts classifications 

   Here is the latest public sector finances statistical bulletin

   Data supplied to Eurostat under the Excessive Deficit Procedure are available here

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