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Statistical bulletin: Public Sector Finances, January 2013 This product is designated as National Statistics

Released: 21 February 2013 Download PDF

Latest figures

  • Public sector net borrowing was -£11.4 billion (a repayment) in January 2013; this is a £5.0 billion higher net repayment than in January 2012, when net borrowing was -£6.4 billion (a repayment).
  • Public sector current budget surplus was £14.9 billion in January 2013; this is a £5.1 billion higher surplus than in January 2012, when there was a surplus of £9.8 billion.
  • For the period April 2012 to January 2013, public sector net borrowing (excluding the capital payment recorded as part of the Royal Mail Pension Plan transfer in April 2012) was £93.8 billion; this is £1.5 billion higher net borrowing than in the same period the previous year, when net borrowing was £92.3 billion.
  • January 2013 public sector net borrowing and public sector current budget figures include the first cash transfer from the Bank of England Asset Purchase Facility Fund to Government of £3.8 billion, which took place on 7 January 2013.
  • Public sector net debt was £1,162.8 billion at the end of January 2013, equivalent to 73.8% of gross domestic product (GDP).
  • In 2011/12, public sector net borrowing was £121.0 billion; this is £5.0 billion lower than the Office for Budget Responsibility (OBR) forecasted net borrowing for 2011/12 of £126.0 billion.
  • Figures in this bulletin include for the first time the impact on the public sector finances of the reclassification of Northern Rock Asset Management (NRAM) and Bradford & Bingley to central government.

Background

The statistical bulletin on public sector finances is published jointly by Office for National Statistics (ONS) and HM Treasury on a monthly basis and provides the latest available estimates for key public sector finance statistics, such as public sector net borrowing, public sector net debt and public sector current budget deficit/surplus.

The bulletin is structured with the latest headline figures, revisions and information on recent events and/or methodological changes which impact on the statistics, located at the front of the bulletin. Following this there is some contextual information for users and then more detailed information on each of the key aggregates. Historic data on public sector net debt and public sector net borrowing have been included to put the latest figures in context. More detailed notes on the publication are located towards the back of the bulletin.

Key measures

Figure 1: Cumulative public sector net borrowing by month

Excluding the temporary effects of financial interventions

Chart showing Cumulative public sector net borrowing by month
Source: Office for National Statistics

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Table 1 ‘Key Measures of the Public Sector Finances’ presents the latest headline figures for the Public Sector Finances. The table compares the figures for the latest month with the same month a year ago and cumulative figures for the financial year to date compared with the same period in the last financial year. A time series presentation of these same fiscal measures can be found in table PSF1 of this bulletin.

Table 1: Key Measures of the Public Sector (PS) Finances by month and financial year-to-date

Excluding the temporary effects of financial interventions

United Kingdom, £ billion1 (not seasonally adjusted)
    January April – January
    2013 2012 Difference 2012/13 2011/12 Difference
             
PS Current Budget2 14.9 9.8 5.1 -76.0 -74.3 -1.7
PS Net Investment 3 3.5 3.4 0.1 -10.2 18.0 -28.2
PS Net Borrowing (PSNB ex) 4 -11.4 -6.4 -5.0 65.8 92.3 -26.5
PS Net Debt (PSND ex) 5 1,162.8 1,071.2 91.6  1,162.8  1,071.2  91.6
PS Net Debt as a % of annual GDP 73.8 69.9 3.9  73.8  69.9  3.9

Table source: Office for National Statistics

Table notes:

  1. Unless otherwise stated
  2. Current Budget is the difference between current receipts and current expenditure
  3. Net Investment is investment less depreciation
  4. Net Borrowing is Current Budget less Net Investment
  5. Net Debt is financial liabilities less liquid assets

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In this month’s bulletin:

  • Northern Rock Asset Management (NRAM) and Bradford & Bingley (B&B) have been included within central government for the first time (following a classification decision on this in September 2012);

  • the first cash payment from the Bank of England Asset Purchase Facility Fund Facility (BEAPFF) to the Government has taken place and been included in the figures;

  • the cash payment from the Special Liquidity Scheme (SLS) to Government in April 2012 has been reclassified as a current rather than capital receipt;

  • the first estimates of January income tax receipts, including self assessment, have been recorded.

As can be seen in Table 1, public sector net borrowing (PSNB ex) for April 2012 to January 2013 is £65.8 billion which is £26.5 billion lower than for the same period the previous year. However, in April 2012 the Royal Mail Pension Plan was transferred to Government which led to a reduction in PSNB ex of £28 billion. If this one-off effect is removed then PSNB ex for April 2012 to January 2013 is actually £1.5 billion higher than in the same period in the previous year.

There are other events included in the PSF measures where there is user demand to see the figures with these events removed. These include the £2.3 billion transfer to Government of the final profits of the SLS and the £3.8 billion receipt of cash from the BEAPFF. If these two additional effects are removed then PSNB ex for April 2012 to January 2013 is £7.5 billion higher than in the same period in the previous year.

Details of all the events and methodological changes referred to in this summary can be found in the relevant later sections of this bulletin.

Outturn vs forecast

The Office for Budget Responsibility (OBR) forecast, published in March 2012, for public sector net borrowing in 2011/12 was £126.0 billion. The latest estimate for public sector net borrowing in 2011/12, as published in this bulletin, is £121.0 billion.

The statistical measures in this bulletin are all defined according to concepts set out in European and International statistical accounting frameworks. The Treasury uses the same measures to set budgets and produce fiscal policy, and the Office for Budget Responsibility (OBR) uses them to forecast and evaluate the public finances. This standardisation in data definitions enables much of the outturn data in this bulletin to be compared directly to corresponding figures in OBR forecasts. However, care must be taken when making these comparisons. This section sets out some of the factors that require taking into account when making comparisons.

In December 2012, the OBR revised their forecast for public sector net borrowing (PSNB ex) in 2012/13 down from £91.9 billion to £80.5 billion. OBR also revised their forecast for public sector net debt (PSND ex) at the end of 2012/13 up from £1,159 billion to £1,186 billion. The reduction in the OBR forecast for 2012/13 net borrowing and the increase to the OBR forecast for 2012/13 net debt largely reflect OBR's estimates for the transfer of surplus cash from the Bank of England Asset Purchase Facility Fund (BEAPFF), the proceeds from the 4G spectrum auction and the reclassification of Northern Rock Asset Management (NRAM) and Bradford & Bingley (B&B) to the central government sector. This bulletin for the first time includes NRAM and B&B within central government and records the first transfer of cash from the BEAPFF to Government. This has reduced the conceptual differences between the Public Sector Finances, as published in this bulletin, and the OBR forecasts. However, it should be remembered that there are a number of events still to happen in 2012/13 which are expected to have a significant impact on the public sector finance statistics. These include further transfers of cash from the BEAPFF to the Government and the receipt of proceeds from the 4G spectrum auction. More information on these can be found in the ‘Recent events and methodological changes’ section of this bulletin.

For those who wish to compare the figures in this bulletin with the 2012/13 OBR forecasts, it is worth noting that OBR state in their ‘Economic and Fiscal Outlook’ publication, of December 2012, that they have assumed for their forecast that in 2012/13 the sales of the 4G spectrum will reduce central government net investment and so the public sector net borrowing (ex measure) by £3.5 billion.

Table 2 'Latest Outturn Estimates and OBR Forecasts' calculates the growth rate between 2012/13 data for April to January and the same period in 2011/12. As a comparison the table also shows the forecasted full year growth rate based on the OBR forecast for 2012/13 (published in December 2012) and the latest outturn estimates for 2011/12. As an example, the latest year to date current budget figures are showing a fall of 2.2% compared to the same period last year. The comparable forecast is for a full year growth in current budget of 3.6% between 2011/12 and 2012/13.

In addition to the differences mentioned earlier between the OBR latest forecasts and the outturn figures in this bulletin, comparisons between public sector net investment and net borrowing for the year to date period are affected by the £28 billion transfer received by government from the assets of the Royal Mail Pension Plan in April 2012. In this case, although the year-to-date outturn figures include the transfer as does the OBR 2012/13 forecast, the size of the transfer can make comparisons between year-to-date and full year figures misleading. The size of the transfer also similarly affects comparisons between years.

Even when taking account of the effects of the Royal Mail pension plan transfer, BEAPFF transfers, 4G spectrum sale  and NRAM and B&B reclassification caution must still be exercised when interpreting the latest in year data with full year forecasts as some data, such as current receipts, show strong seasonal effects. These seasonal variations within the year mean that you would not necessarily expect growth (or decline) over a portion of the year to reflect the growth (or decline) for the full year. Also, allowance should be made for the fact that the outturn estimates for recent periods are provisional and may be subject to revisions in later months. More information on revisions and their magnitude can be found in the Revisions and Background Notes sections of this bulletin.

To assist interpretation of the statistics, each month, on the day of the release of the Public Sector Finances statistical bulletin, the OBR publishes on its website a commentary on the latest figures and how these reflect on their forecasts. As has been highlighted, there are many reasons why the outturn data in this publication may differ from the OBR forecasts and the OBR commentary provides qualitative information to help users interpret these differences.

Table 2: Latest Outturn Estimates vs OBR Forecasts for 2012/13

Excluding the temporary effects of financial interventions; OBR = Office for Budget Responsibility

United Kingdom, £ billion1 (not seasonally adjusted)
         April – January Forecast vs Outturn
Year to date
2012/13 2011/12 Growth 2012/13 OBR Forecast 2011/12 Outturn Growth
PS Current Budget (PSCB) 2 -76.0 -74.3 -2.2% -89.0 -92.3 3.6%
PS Net Investment (PSNI) 3 -10.2 18.0 -156.5% -8.5 28.7 -129.7%
PSNI excluding Royal Mail pension transfer 17.8 18.0 -0.9% 19.5 28.7 -32.0%
PS Net Borrowing (PSNB ex) 4 65.8 92.3 -28.7% 80.5 121.0 -33.5%
PSNB ex excluding Royal Mail pension transfer 93.8 92.3 1.6% 108.5 121.0 -10.3%
PS Net Debt (PSND ex) 5 1,162.8 1,071.2 8.6% 1,186.0 1,103.6 7.5%
PS Net Debt as a % of annual GDP 73.8 69.9 5.6% 74.7 71.8 4.0%

Table source: Office for National Statistics

Table notes:

  1. Unless otherwise stated
  2. Current Budget is the difference between current receipts and current expenditure
  3. Net Investment is investment less depreciation
  4. Net Borrowing is Current Budget less Net Investment
  5. Net Debt is financial liabilities less liquid assets

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Revisions

Table PSF12R presents the revisions to the key public sector finance measures since last month’s publication. The largest revisions normally occur in the month following first release, when estimated and provisional data are replaced with firmer information. However, this month there are a large number of other revisions extending back to  January 2010. These revisions mainly relate to the reclassification of Northern Rock Asset Management (NRAM) and Bradford & Bingley (B&B) from being public sector financial corporations to being part of central government.

Details of the NRAM and B&B classification change, as well as its implementation, can be found in the “Recent events and methodological changes” section. This section provides a summary of the revisions caused by the implementation.

Revisions to net debt are almost entirely due to the reclassification of NRAM and B&B. Public sector net debt excluding the temporary effects of financial interventions (PSND ex) has been revised upward by:

  • £58.8 billion at the end of 2009/10,

  • £91.6 billion at the end of 2010/11,

  • £77.3 billion at the end of 2011/12,

  • £71.0 billion at December 2012.

These revisions reflect both the outstanding debt of NRAM and B&B (as defined within the National Accounts framework) and the consolidation of government assets and liabilities held by NRAM and B&B.

Public sector net debt including the temporary effects of financial interventions (PSND) has been revised downward by between £5 billion and £0.5 billion between 2010 and 2012. Conceptually, PSND should be unrevised (as NRAM and B&B have been reclassified from one part of the public sector to another) but revisions are recorded following the identification and use of improved data sources.

Revisions to net borrowing prior to 2012/13 are almost entirely due to the reclassification of NRAM and B&B. Public sector net borrowing excluding the temporary effects of financial interventions (PSNB ex) has been revised downward by:

  • £90 million in 2009/10,

  • £736 million in 2010/11,

  • £669 million in 2011/12.

These revisions reflect the net income position of NRAM and B&B once interest payments, administrative expenses and loan write-offs have been netted off.

Public sector net borrowing including the temporary effects of financial interventions (PSNB) has been revised downward by the same amount as PSNB ex. Conceptually, PSNB should be unrevised (as NRAM and B&B have been reclassified from one part of the public sector to another) but previously no data had been included for the net borrowing of NRAM and B&B due to lack of available data.

Revisions to PSNB ex in 2012/13 reflect in part revisions to the NRAM and B&B reclassification change and in part reflect revised expenditure and revenue data from government departments and bodies.

Public sector net borrowing for the first nine months of 2012/13 has been revised down by £1,273 million. This revision is primarily related to central government where the net borrowing has been revised down by £1,632 million. This is partly offset by an upward revision to local government net borrowing of £362 million.

The central government revisions are composed of an upward revision of £2,132 million to receipts for 2012/13 and a £500 million upward revision to expenditure (split fairly equally between current and capital expenditure). These figures exclude the off-setting revision of £2,270 between central government net investment and central government current receipts. This revision relates to the reclassification of the Special Liquidiy Scheme payment in April 2012 from being treated as a capital transfer to being treated as a dividend. More information can be found in the “Recent events and methodological changes” section.

Recent events and methodological changes

4G Spectrum Auction

The media regulator Ofcom announced on 20 February 2013 that the auction for the use of the 4G spectrum had ended and raised £2.34bn. This will be reflected in the public sector finances statistical bulletin once the payments have been received.

Bank of England Asset Purchase Facility Fund (BEAPFF)

The Chancellor announced on 9 November 2012 that it had been agreed with the Bank of England to transfer to the Exchequer the excess cash in the Asset Purchase Facility Fund. The announcement stated that the excess cash accumulated by the fund up to the end of 2012/13 would not be transferred in one lump sum but would be transferred in stages over 2012/13 and 2013/14. Excess cash accumulated by the fund in 2013/14 and beyond would be subject to regular quarterly transfers.

The first cash transfer from the BEAPFF to Government took place on 7 January 2013 and as such this month’s statistical bulletin is the first time that the cash transfers have impacted on the public sector finance measures. The cash transferred on 7 January was £3.8 billion and two further cash transfers of the same amount are planned for this financial year, one in February and the other in March.

The classification of these cash transfers under National Accounts rules and in the Public Sector Finances fiscal measures is something that has been the subject of consideration by committees who provide advice on classification issues. The recommendations of these committees has led to classification decisions which are being reported in parallel to the publication of this statistical bulletin. A classification announcement notice setting out the classification decision is being published along with a technical note (55.7 Kb Pdf) explaining the rationale for the decision.

The key impacts of the classification decision on the figures in this bulletin are that:

  • the £3.8 billion cash transfer in January is recorded as receipt of a dividend and so public sector net borrowing (PSNB ex) is reduced by £3.8 billion,

  • the recording of the £2.3 billion April 2012 transfer from the final profits of the Special Liquidity Scheme (SLS) has been changed from a capital transfer to a dividend payment, with consequently no impact on public sector net borrowing (PSNB ex),

  • both the £3.8 billion BEAPFF transfer and £2.3 billion SLS transfer increase government cash reserves, which as liquid assets reduce public sector net debt (PSND ex),

  • the wider measures of public sector net debt (PSND) and net borrowing (PSNB) are not directly impacted by the cash movements as the flows cancel out (that is consolidate out).

More detail on the change to the recording of the SLS payment can be found below.

Although, the £3.8 billion of cash transferred from the BEAPFF in January is being treated as a dividend not all the future payments will be treated in the same way. National Accounts guidance essentially puts a limit on how much cash can be transferred from a Central Bank to Government in any given period and still affect the Government deficit (or net borrowing). For 2012/13, this ceiling has been calculated to be £9.1 billion. This means that the £2.3 billion SLS transfer and the £3.8 billion BEAPFF transfer both can be treated as dividends and so affect government net borrowing, but this leaves only £3.0 billion of cash transfers that can be considered as dividends within 2012/13. Any cash transfers above this limit will be treated as government withdrawing equity in the Bank of England and as such will not impact on public sector net borrowing (PSNB ex), although the full cash amount will still affect public sector net debt (PSND ex).

For more details on the classification decision, its impacts and background see the published technical note.

Special Liquidity Scheme

The Bank of England Special Liquidity Scheme (SLS) officially closed at the end of January 2012. On closure the accumulated net profits of the scheme were transferred to the Treasury in April 2012. The net profits amounted to £2.3 billion. As part of the winding up of the scheme the SLS has reclaimed the corporation tax paid on its operations. This amounted to £0.7 billion and was repaid to the Bank by HMRC in March depressing recorded tax receipts in that month.

In previous versions of this statistical bulletin the £2.3 billion payment from the SLS was recorded as a capital transfer to the Government from the Bank of England. Following the classification review of the cash movements from the Bank of England Asset Purchase Facility Fund to Government (see above) it was decided that all cash movements from the Bank of England to Government, such as the transfer of SLS profits, should be subject to the so called “super-dividend” test. This test identifies how much of the cash transfers can be recorded as dividends and so reduce government net borrowing. 

The impact of this classification decision is that:

  • the recording of the £2.3 billion April 2012 transfer from the final profits of the Special Liquidity Scheme (SLS) has been changed from a capital transfer to a dividend payment,

  • there is no resulting revision to public sector net borrowing (PSNB ex) as the impact of the SLS classification decision is to move the transaction from the capital account to the current account, leaving net borrowing unaffected.

Northern Rock Asset Management (NRAM) and Bradford & Bingley (B&B)

This is the first month for which the classification decision bringing Northern Rock Asset Management (NRAM) and Bradford & Bingley (B&B) into central government has been implemented.

The headline impacts of the reclassification are to:

  • increase central government net debt, and so PSND ex, by £71 billion at the end of 2012,

  • reduce central government net borrowing, and so PSNB ex, by £670 million in 2011/12 and £740 million in 2010/11.

Further details of the classification impacts can be found in the “Revisions” section of this bulletin.

As reported in an ONS news release on 28 September 2012, ONS has reclassified NRAM and B&B plc as central government bodies, with effect from January 2010 and July 2010 respectively. These financial corporations came into public ownership in 2008/9 and prior to their classification in central government were classified as public financial corporations. 

B&B and NRAM prior to their classification in central government were considered as temporary effects of financial interventions in the public sector finances and so their balance sheets impact on PSND but not on PSND ex. ONS considered whether the reclassification of B&B and NRAM as central government bodies moved them from being temporary effects on the public sector finances to permanent ones and concluded that it did. In the ONS article (166.8 Kb Pdf)   on the conceptual boundaries of PSNB ex and PSND ex four key principles are set out by which ex-measures are to be judged. The second of these principles states at its outset: "Permanent effects from financial interventions are those that will ultimately have an effect on central government's net debt or net borrowing". As B&B and NRAM have been reclassified to central government they now impact on central government's net debt and net borrowing and are therefore permanent effects to be recorded as such in PSNB ex and PSND ex.

The implementation of the reclassification of NRAM and B&B has been done on a provisional basis using data sourced from UK Asset Resolution Ltd, the body who manage both NRAM and B&B. The process of implementing the reclassification has led to improved data sources being obtained and the identification of some deficiencies in the data sources previously used when recording NRAM and B&B in the public sector banking sector.

The debt and cash data, previously used to include NRAM and B&B within the public sector banking groups totals, have been removed using data sources equivalent to those used in the original compilation.

The debt and net borrowing impacts of the inclusion of NRAM and B&B within central government have been calculated using improved data sources. As the data removed from the public sector banking group sector is not exactly the same as that incorporated within the central government sector some revisions to PSND and PSNB are observed.

There has been no change to the net borrowing of the public sector banking groups as data for NRAM and B&B net borrowing had been missing in the figures since data collection arrangements for the two institutions changed in 2010. The trigger for the change in data collection requirements was the loss of banking licenses by the organisations.

Revisions to the central government net cash requirement due to the inclusion of NRAM and B&B in the sector have not yet taken place due to some concerns over data quality. Cash data is being sourced and will be included in the central government figures as soon as it is available.

On 11 December 2012, the Economic Secretary to the Treasury announced that Northern Rock Asset Management (NRAM) would be refunding interest payments to some customers. The refunds are being made because of failure by NRAM to comply with all the requirements for loan documentation under the Consumer Credit Act 2008. The UK Asset Resolution (UKAR – the holding company which manages NRAM) have stated that they will be refunding the interest payments made by affected customers over the period that their documentation was not compliant. They estimate that the total cost of this action will be of the order of £270 million. More information can be found on the UKAR website. When the refund payments take place they will be recorded, under National Accounts rules, as current transfers to the private sector, which means that they will increase the public sector current budget deficit and the public sector net borrowing. As most of the payments will be used to reduce the loan balances of NRAM customers there will also be a simultaneous reduction in public sector loan assets.

Income Tax: Self-assessment

January is always a month when high taxes on income and wealth are recorded due to self assessment returns and quarterly corporation tax figures. The due date for self assessment is the last day of January and so some self assessment receipts may be recorded in February as well as January. As the percentage of receipts recorded in February and January may vary between years, year on year comparisons of income tax data can be misleading.

OSCAR

HM Treasury has replaced its COINS system for financial reporting with a new Online System for Central Accounting and Reporting (OSCAR) for 2012/13 onwards. This system collects public spending data from central government departments and the devolved administrations. January is the ninth month that the central government spending data for 2012/13 has been produced using this system. Although the data are for the most part of comparable quality to previous years, there are still some initial data and system issues. Resolving these issues may lead to larger than normal revisions in the central government expenditure data reported during 2012/13.

Royal Mail Pension Plan

Following Royal Assent for the Postal Services Act, on 13 June 2011 the Department for Business, Innovation and Skills (BIS) has transferred assets and liabilities from the Royal Mail Pension Plan (RMPP) to a new government run unfunded public sector pension scheme. Under the terms of the Act, the Government assumes both the RMPP pension liabilities, accrued up to March 2012, and the bulk of the RMPP’s assets. These transactions took place in April 2012. More information regarding the transfer can be found on the BIS website. 

The value of the RMPP assets transferred was £28.0 billion and the value of the transferred liabilities was approximately £38 billion. Under National Accounts rules, the pension liabilities of unfunded pension plans, like those for the Civil Service, are contingent liabilities and are therefore not recorded as liabilities in the National Accounts or Public Sector Finances. However, the transfer of the assets will provide the government finances with a one off boost in the short term, though government expenditure rises over the longer term as it pays out the pensions to retired Royal Mail workers. 

Guidance on how to record the government assumption of pension liabilities in circumstances like this is explicitly set out in the Eurostat Manual on Government Deficit and Debt chapter on "Payments to government from transfer of pension obligations". Following this guidance, the impact of the transfer of assets has been that:

  • Central government net investment for April 2012 has been reduced by the total value of all the assets (that is, £28 billion).

  • Central government net borrowing for April 2012 has been reduced by the total value of all the assets (that is, £28 billion).

  • Central government net cash requirement, from April 2012 onwards, has been boosted (that is, reduced) by that element of the total assets that has been realised as cash during the month.

  • Central government net debt at the end of April 2012 has been reduced by more than £16 billion due to the value of the cash realised in April 2012 plus the uplifted nominal value of government bonds (that is, gilts) previously held by the pension fund and transferred to central government. Net debt is reduced by the cash as this is a liquid asset, while the government bonds impact the debt as once they become government assets they are netted off government liabilities.

Other transferred illiquid assets will only impact on net debt and net cash requirement at the point at which they are sold.

Swiss Tax Agreement

On 1 January 2013 an agreement between the UK and the Swiss Confederation on cooperation in the area of taxation came into force. Under the terms of the agreement banking deposits of UK residents held in Swiss banks will become liable for taxation. The details of the agreement can be read on the HMRC website. In January 2013, the Swiss authorities made an initial payment of £342 million to the UK Government which will accrue to May 2013 which is when the final liabilities will be known. 

International comparability

The Treaty on the Functioning of the European Union obliges member states to avoid excessive budgetary deficits. The Protocol on the Excessive Deficit Procedure (EDP), annexed to the Maastricht Treaty, defines two criteria and reference values for compliance. These are a deficit to Gross Domestic Product (GDP) ratio of 3%, and a debt to GDP ratio of 60%. EU Member State Governments have to report their actual and planned government deficits, and the levels of their debt, to the European Commission, at the end of March and September each year.

The UK publishes a statistical bulletin, at the same time as its data transmission to the European Commission, which provides a summary of the UK general government deficit and debt as defined by the annex to the Maastricht Treaty. The latest bulletin published on 28 September 2012 reports that in 2011/12 the general government deficit (or net borrowing) was 7.7% of GDP, and at the end of March 2012 the general government gross debt was 85.8% of GDP.

The definition of general government deficit under the Maastricht Treaty has some minor differences to the definition of general government net borrowing published in this Public Sector Finances statistical bulletin. A reconciliation of the two is available within the Government Deficit and Debt under the Maastricht Treaty statistical bulletin.

The definition of debt under the Maastricht Treaty is different to that used in this Public Sector Finances statistical bulletin. The net debt measure reported in this bulletin (and used by the UK Government for budget and forecast purposes) is calculated as the total stock of financial liabilities minus liquid assets. By contrast, the Maastricht debt is a gross debt measure which is calculated as the stock of financial liabilities. The other major difference in the two debt measures is that the Maastricht debt is limited to general government whereas in the public sector finances the principal debt measure is that for the public sector.

The UK figures may be compared to those of other EU Member States on the Government Finance Statistics section of the Eurostat website. A full set of government finance tables provided by the UK to Eurostat as the end of September 2012 were published on the ONS website on 23 October 2012.

Background for new users of Public Sector Finances

The Public Sector Finances (PSF) statistical bulletin is published jointly by Office for National Statistics (ONS) and the Treasury. A note that outlines the joint publication arrangement can be found on the ONS website. The bulletin is produced monthly and provides the latest available estimates for key public sector financial statistics, such as Public Sector Net Borrowing and Public Sector Net Debt.

The statistics in this bulletin present the latest figures for what the UK public sector has raised in revenue, spent and invested. The headline statistic is for Public Sector Net Borrowing which is a measure of the amount of money the Government has had to borrow in order to bridge the gap between expenditure and revenue. The other key statistics are Surplus on Current Budget and Public Sector Net Debt.

The Surplus on Current Budget is a measure of the amount by which current receipts are greater than current expenditure after allowing for depreciation.

Public Sector Net Debt is a measure of how much the UK public sector owes (to UK private sector organisations or overseas institutions) at a point in time. When the Government borrows money or in some other way increases its financial liabilities then it adds to its debt.

The statistical measures are all defined according to concepts set out in European and International statistical accounting frameworks. The Treasury uses the same measures to monitor and set fiscal policy, and the OBR uses them to forecast and evaluate the public finances. This standardisation in data definitions enables much of the outturn data in this bulletin to be compared directly to corresponding figures in OBR forecasts. The current government has set targets for fiscal policy based on the Current Budget Surplus and Public Sector Net Debt. These are detailed in the Charter for Budget Responsibility.

When making comparisons with OBR forecasts, or interpreting the data for other uses, allowance should be made for the fact that the outturn estimates for recent periods are provisional and may be subject to sizeable revisions in later months. More information on revisions and their magnitude can be found in the Revisions section of this bulletin.

Throughout the bulletin comparisons are made of the latest data with that of the same period of the previous year. The reason for this is that many of the expenditure and revenue items within the public sector finances have a “seasonal” pattern to them. For instance tax receipts are typically at their highest in January due to higher receipts than normal in this month from income tax self assessment and quarterly corporation tax. Similarly expenditure on social benefits is typically highest in November due to expenditure in this month for the winter fuel allowance.

All monetary values in the bulletin are in terms of ‘current prices’, that is, they represent the price in the period to which the expenditure or revenue relates and are not adjusted for inflation.

This bulletin contains statistics which both exclude and include the temporary effects of the financial interventions. More information on the background to these different measures and how they differ methodologically can be found in the section on ‘Excluding and including financial interventions’.

Public sector net borrowing

In January 2013 the public sector net borrowing, excluding the temporary effects of financial interventions (PSNB ex), was -£11.4 billion (a repayment), which is a £5.0 billion higher net repayment than in January 2012, when PSNB ex was -£6.4 billion (a repayment). 

For the period April 2012 to January 2013, the public sector net borrowing, excluding the temporary effects of financial interventions (PSNB ex), was £65.8 billion, which was £26.5 billion lower than in the same period of the previous year, when PSNB ex was £92.3 billion.

The April 2012 to January 2013 net borrowing figures include three one-off transactions. The first is a £28 billion transaction to the Government from the transfer of the Royal Mail Pension Plan, the second is a £2.3 billion transaction to the Government from the closure of the Special Liquidity Scheme and the third is a £3.8 billion transaction to the Government from the Bank of England Asset Purchase Facility. For details of these one-off events see the ‘Recent events and methodological changes’ section. If the effect of these three one-off transactions is removed from the public sector net borrowing then PSNB ex in the period April 2012 to January 2013 would be £99.9 billion, which would be £7.5 billion higher than in April 2011 to January 2012.

In 2011/12 the public sector net borrowing, excluding the temporary effects of the financial interventions (PSNB ex), was £121.0 billion, which was £20.0 billion lower than in 2010/11, when PSNB ex was £141.0 billion. The £20.0 billion drop in PSNB ex between 2010/11 and 2011/12 is composed of a £9.8 billion reduction in net investment and £10.2 billion reduction in the current budget deficit.

Values (as for all figures in this bulletin) are in current prices, ie not inflation adjusted. Therefore, the reduction in net borrowing in inflation adjusted prices, or ‘real terms’, between 2011/12 and 2010/11 will be lower.

Public sector net borrowing data can be found in the following tables in this bulletin:

  • PSF1 provides time series data for net borrowing measures,

  • PSF2 provides public sector net borrowing by sector,

  • PSF7 provides cumulative public sector net borrowing by month back to 2000/01,

  • PSF9 provides net borrowing measures as a percentage of GDP by financial year back to 1974/75,

  • PSF10A shows how the public sector net cash requirement reconciles with the public sector net borrowing.

Net borrowing can be defined as the difference between total accrued revenue (or receipts) and total accrued expenditure (both current and capital). Net borrowing is an accrued measure which is consolidated (ie intra sector transactions are not recorded).

During periods when the public sector revenue exceeds its expenditure then the public sector is able to repay some of its debt rather than borrow further. When there is a repayment the public sector net borrowing is shown as a negative.

Net borrowing by sector

In the UK the public sector consists of four sub-sectors; central government, local government, non-financial public corporations and financial public corporations (ie public sector banking groups). As can be seen in Table 3 ‘Sectoral Breakdown of Public Sector Net Borrowing’, much the largest share of the public sector net borrowing relates to central government transactions. A time series presentation of these same data can be found in table PSF2 of this bulletin.

Table 3: Sectoral Breakdown of Public Sector Net Borrowing by month and financial year-to-date

Excluding the temporary effects of financial interventions

United Kingdom, £ billion1 (not seasonally adjusted)
  January April – January
2013 2012 Difference 2012/13 2011/12 Difference
General Government -11.0 -6.1 -4.9 66.7 92.8 -26.1
of which            
Central Government -10.0 -8.1 -1.9 72.8 94.4 -21.6
Local Government -1.0 2.0 -3.0 -6.1 -1.6 -4.5
Non-Financial Public Corporations 2 -0.5 -0.4 -0.1 -0.9 -0.5 -0.4
PS Net Borrowing (PSNB ex) -11.4 -6.4 -5.0 65.8 92.3 -26.5
Public Sector Banking Groups 1.5 -2.0 3.5 -15.4 -23.3 7.9
PS Net Borrowing (PSNB) -9.9 -8.4 -1.4 50.4 69.0 -18.5

Table source: Office for National Statistics

Table notes:

  1. Unless otherwise stated

  2. For the purposes of this table the Bank of England data has been subsumed into the Non-Financial Public Corporations data

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Public sector net debt

At the end of January 2013 the public sector net debt excluding the temporary effects of financial interventions (PSND ex) was £1,162.8 billion (73.8% of GDP). This compares to a PSND ex of £1071.2 billion (69.9% of GDP) at the end of January 2012.

Public sector net debt data can be found in the following tables in this bulletin:

  • PSF1 provides time series data for net debt measures,

  • PSF6A shows how public sector consolidated gross debt is derived,

  • PSF6B shows how public sector net debt is derived,

  • PSF8 net debt (excluding temporary effects of financial interventions) by month back to 1993/94,

  • PSF9 provides net debt measures by financial year back to 1974/75.

Net debt, for the purposes of UK fiscal policy, is defined as total gross financial liabilities less liquid financial assets, where liquid assets are cash and short term assets which can be realised for cash at short notice and without significant loss. These liquid assets mainly comprise foreign exchange reserves and bank deposits. The net debt is a cash measure which is priced at nominal value (that is, the cost to the issuer at redemption) and consolidated (that is, intra sector holdings of liabilities/assets are removed). The net cash requirement is, approximately, the flows equivalent of net debt.

Central government receipts, expenditure and net investment

The central government accrued data are shown in two tables of this bulletin:

  • PSF3A which compares central government data with that of previous periods,

  • PSF3B which provides detailed time series data for central government.

As public sector net borrowing is largely driven by the central government accounts (see ‘Sectoral Breakdown of Public Sector Net Borrowing’ table) it can be informative to look at the detail of these central government accounts.

Central government accrued current receipts

In January 2013, central government accrued current receipts were £65.8 billion, which was £4.5 billion, or 7.3%, higher than in January 2012, when central government current receipts were £61.3 billion.

January 2013 includes £3.8 billion of dividend payments relating to cash flows from the Bank of England Asset Purchase Facility (BEAPFF) to Government. If these one-off transactions are excluded then accrued current receipts in January 2013 are £0.7 billion higher than in January 2012.

For the period April 2012 to January 2013, central government accrued current receipts were £453.0 billion, which was £8.1 billion, or 1.8%, higher than in the same period of the previous year, when central government current receipts were £444.9 billion.

In previous public sector finances statistical bulletins, the £2.3 billion transfer in April 2012 from the Special Liquidity Scheme (SLS) was included within central government net investment. Following review of the correct classification for the transfers from the Bank of England Asset Purchase Facility to the Government it has been decided that the £2.3 billion SLS transfer should be recorded as a dividend in the central government current receipts and not as a capital transfer in central government net investment. This reclassification of the SLS transfer has been implemented for the first time in this statistical bulletin.  For further details see the ‘Recent events and methodological changes’ section.

If the effect of the April 2012 SLS transaction and the January 2013 BEAPFF transaction were to be removed from central government current receipts then for the period April 2012 to January 2013 the central government net investment would be £447.0 billion, which would be £2.1 billion, or 0.5%, higher than in April 2011 to January 2012.

As cash receipts are generally accrued back to earlier periods, the first estimate for receipts in a month is by nature provisional, including, as it must, a significant amount of forecast data. Therefore, care must be taken when making inferences based on receipts data for the latest months.

Figure 2: Central government current receipts by month

Chart showing Central government current receipts
Source: Office for National Statistics

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In 2011/12, the central government accrued current receipts were £536.0 billion, which was £22.3 billion, or 4.3%, higher than 2010/11, when central government current receipts were £513.7 billion.

A large part of the rise in receipts between 2010/11 and 2011/12 was attributable to a rise in VAT receipts of £12.5 billion. This rise, in large part, reflects the change in the rate from 17.5% to 20%. The 2011/12 combined receipts of income tax and national insurance contributions (recorded as income and capital gains tax and compulsory social contributions) rose by £4.9 billion, or 2.0%, compared with 2010/11.

Central Government receipts follow a strong cyclical pattern over the year, with high receipts in April, July, October and January due to quarterly Corporation Tax returns being accrued to these months. This can be seen in Graph 2. January accrued receipts are particularly high due to receipts from quarterly corporation tax combining with those from income tax self assessment. The revenue raised through income tax self assessment, as well as affecting January receipts, also tends to lead to high receipts in February and, to a lesser degree, March.

Central government current expenditure

In January 2013, central government accrued current expenditure was £52.3 billion, which was £2.1 billion, or 4.1%, higher than January 2012, when central government current expenditure was £50.3 billion.

For the period April 2012 to January 2013, central government accrued current expenditure was £525.7 billion, which was £13.9  billion, or 2.7%, higher than in the same period of the previous year, when central government current expenditure was £511.8 billion.

Figure 3: Central government current expenditure (total) by month

Chart showing Central government current expenditure (total) by month
Source: Office for National Statistics

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In 2011/12, the central government accrued current expenditure was £618.8 billion, which was £11.5 billion, or 1.9%, higher than in 2010/11, when central government current expenditure was £607.3 billion.

The rise of £11.5 billion is due to a rise in debt interest payments of £2.6 billion, a rise of net social benefits of £8.2 billion and a rise in other expenditure of £0.7 billion.

The accrued debt interest payment rise between 2010/11 and 2011/12 reflected two factors. Firstly, the increase in the number of gilts in issue, as a means to finance the government debt, has increased government interest payments to gilt holders. Secondly, movements in the Retail Prices Index produced increases in the interest paid by government on index linked gilts.

As changes in debt interest payments can have a significant effect on government current expenditure trends it can be informative to consider the total central government current expenditure excluding debt interest payments. Changes in this measure largely reflect changes in the total outlay of departments and the devolved administrations. On this basis, the total accrued current expenditure excluding debt interest for 2011/12 was £570.8 billion, which was £8.8 billion, or 1.6%, higher than in 2010/11.

Figure 4: Central government current expenditure (excluding debt interest payments) by month

Chart showing Central government current expenditure(excluding debt interest payments)
Source: Office for National Statistics

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The profile of total accrued Central Government expenditure is broadly flat through the year, as can be seen in Graph 3 and 4. However, one observable cyclical pattern is that Net Social Benefits in November is higher than in other months due to payments in this month for the winter fuel allowance. A further cyclical trend is that “other” current expenditure tends to be highest at the end of the financial year in March.

Central government net investment

In January 2013, central government net investment was £2.8 billion, which was £0.4 billion, or 18.3%, higher than in January 2012, when central government net investment was £2.4 billion.

For the period April 2012 to January 2013, central government net investment was -£6.4 billion, which was £27.7 billion lower than in the same period of the previous year, when central government net investment was £21.3 billion.

The April 2012 central government net investment includes a £28 billion one-off transaction which relates to the transfer of the Royal Mail Pension Plan to the Government . For details of this one-off event see the ‘Recent events and methodological changes’ section. If the effect of this transaction were to be removed from central government net investment then for the period April 2012 to January 2013 the central government net investment would be £21.6 billion, which would be £0.3 billion higher than in April 2011 to January 2012.

In previous public sector finances statistical bulletins, the £2.3 billion transfer in April 2012 from the Special Liquidity Scheme (SLS) was included within central government net investment. Following review of the correct classification for the transfers from the Bank of England Asset Purchase Facility to the Government it has been decided that the £2.3 billion SLS transfer should be recorded as a dividend in the central government current receipts and not as a capital transfer in central government net investment. This reclassification of the SLS transfer has been implemented for the first time in this statistical bulletin. For further details see the ‘Recent events and methodological changes’ section.


Figure 5: Central government net investment by month

Chart showing Central government net investment by month
Source: Office for National Statistics

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In 2011/12, central government net investment was £23.1 billion, which was £14.9 billion, or 39.2%, lower than in 2010/11, when central government net investment was £37.9 billion.

The 2011/12 central government net investment is impacted by the transactions that took place in March 2012 around the abolishment of the Housing Revenue Account. For details of these transactions see the ‘Recent events and methodological changes’ section in the April 2012 statistical bulletin. If the effects of the Housing Revenue Account changes were to be removed from central government net investment then in 2011/12 the net investment would be £31.2 billion, which would be £6.8 billion lower than in 2010/11.

Central government net investment not only includes the direct acquisition minus disposal of capital assets (such as buildings, vehicles, computing infrastructure) by central government, but it also includes capital grants to and from the private sector and other parts of the public sector. Capital grants are varied in nature and cover payments made to assist in the acquisition of a capital asset, payments made as a result of the disposal of a capital asset, transfers in ownership of a capital asset and the unreciprocated cancellation of a liability.

Central government net investment is difficult to predict in terms of its monthly profile as it includes some large capital grants (such as those to local authorities and education institutions), and can include some large capital acquisitions or disposals, all of which do vary from year to year. One observable trend in the data, however, is that net investment in the last quarter of the financial year is usually markedly higher than that in the previous three quarters.

Net cash requirement

In January 2013, central government net cash requirement (CGNCR) was -£16.6 billion (a surplus), which was a £0.1 billion, or 0.5%, higher surplus than in January 2012, when there was a CGNCR of -£16.5 billion (a surplus).

For the period April to January 2012, CGNCR was £75.7 billion, which was £12.5 billion, or 14.1%, lower than in the same period of the previous year, when there was a CGNCR of £88.1 billion.

A significant part of the drop in CGNCR between April 2012 to January 2013 and the same period in the previous year can be attributed to the cash realised in 2012/13 from sales of the assets of the transferred Royal Mail Pension Plan.

In 2011/12, the central government net cash requirement (CGNCR) was £126.5 billion, which was £13.1 billion, or 9.4%, lower than in 2010/11, when there was a CGNCR of £139.6 billion.

Net cash requirement data can be found in the following tables in this bulletin:

  • PSF4 provides net cash requirement by sector,

  • PSF5 provides a detailed breakdown of the central government net cash requirement and the cash expenditure and receipts data from which it is derived,

  • PSF7 provides central government net cash requirement by month back to 2000/01,

  • PSF10A shows how the public sector net cash requirement reconciles with the public sector net borrowing,

  • PSF10B shows how the central government net cash requirement reconciles with the central government net borrowing.

The net cash requirement is a measure of how much cash in a period the government (or public sector) needs to borrow (or lend) so as to balance its accounts. Historically, when the UK government fiscal policy was on a cash basis rather than the current accruals basis, the net cash requirement was known as the borrowing requirement. Although in UK fiscal policy the net cash requirement has been replaced by the accruals measure of net borrowing, it is still an important measure.

The net cash requirement is in essence the flows equivalent of net debt, which is also a cash measure. This means that the changes in net debt between two points in time are (close to being) equal to the net cash requirement for the intervening period. The relationship is not an exact one because the net cash requirement reflects actual prices paid while the net debt is at nominal prices.

Although the central government net cash requirement is the largest part of the general government net cash requirement, the public sector net cash requirement can be very different. The reason for this is that the public sector net cash requirement includes the net cash requirement of the public sector banking groups. In recent years, the public sector banking groups have recorded large cash surpluses which have had a substantial impact on the public sector net cash requirement.

Net debt and net borrowing: time series

Figure 6: Public sector net debt as a percentage of GDP, 1976/77 to 2011/12

Excluding the temporary effects of financial interventions

Chart showing Public sector net debt as a percentage of GDP, 1976/77 to 2011/12
Source: Office for National Statistics

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Since 2001/02 public sector net debt has been increasing. At the end of March 2002, net debt was 30% of GDP then over the next six years, up until 2007/08, the average rate of increase was just over 1% of GDP a year. From 2008 public sector net debt increased sharply, rising from 36% of GDP at the end of March 2008 to 72% of GDP at the end of March 2012.

Public sector net debt figures are available back to 1974/75. Historically, public sector net debt has not been constant. As can be seen in Graph 6, it fell from a debt level, pre-1977/78, that was above 50% of GDP to a low of 26% at the end of 1990/91. The public sector net debt then grew again from 1990/91 until it reached a peak of 42% of GDP at the end of 1996/97, before falling back to 30% of GDP by the end of 2001/02.

Given the close relationship between net borrowing (a flow measure) and net debt (a stock measure) it is unsurprising to see a historical pattern to public sector net borrowing which complements that of public sector net debt. Monthly public sector net borrowing figures are available back to 1993, as shown in Graph 7. Between 1998/99 and 2000/01, when public sector net debt was falling, net borrowing cumulatively over the year was negative (ie, there was a surplus), but before and after this period the net borrowing was positive (ie, there was a deficit). Between 2003/04 and 2007/08 net borrowing was fairly static, varying between £33 billion and £41 billion, but with the onset of the financial crisis in late 2007 net borrowing rose sharply to a peak of £159 billion in 2009/10 before falling a little to £141 billion in 2010/11 and then further to £121 billion in 2011/12.

Figure 7: Public sector net borrowing, 1993/1994 to 2011/12

Excluding the temporary effects of financial interventions

Chart showing Public sector net borrowing, 1993/1994 to 2011/12
Source: Office for National Statistics

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Excluding and including financial interventions

Since 2007/08 the Government has made several direct interventions in the UK financial sector as a response to the global financial crisis. As a result of those government interventions some banks and other financial institutions which were previously designated within National Accounts as private companies have been reclassified as public financial corporations. The government interventions and the inclusion of banking groups, such as Royal Bank of Scotland and Lloyds, within the public sector have had a marked impact on the public sector finances. In recognition of this the 2008 Budget introduced a measure of public sector debt excluding the temporary effects of financial interventions (referred to here as PSND ex). A parallel measure of public sector net borrowing (referred to as PSNB ex) was then introduced in the 2009 Pre-Budget Report.

The measures excluding the temporary effects of financial interventions are intended to show the underlying state of the public sector finances without temporary distortions caused by financial interventions, but including any permanent effects from these interventions. The government bases its fiscal policy on these measures. Therefore, the main statistics in this bulletin also follow this approach and exclude the temporary effects of financial interventions.

The public sector net debt and net borrowing excluding the temporary effects of financial interventions (PSND ex and PSNB ex respectively) exclude the debt and borrowing of the public sector banking groups as well as that related to schemes such as the Asset Purchase Facility, but include public sector bank transactions with government and government interventions where the money spent is not expected to be recouped.

So as to provide a full picture of the public sector finances this bulletin does not limit itself to measures excluding the temporary effects of financial interventions but also contains figures that take account of all the effects of the government financial interventions, including the liabilities and transactions of the public sector banking groups. Table PSF12 of this bulletin provides a reconciliation showing how these measures of Public Sector Net Borrowing (PSNB) and Public Sector Net Debt (PSND) relate to their corresponding ex measures (that is, PSNB ex and PSND ex).

For more detail on the methodological differences between those statistics that exclude and include the temporary effects of the financial interventions a paper entitled Public sector finances excluding financial interventions (166.8 Kb Pdf) is available on the ONS website.

Statistics including financial interventions

The UK Government measures fiscal policy on the basis of public sector finance measures which exclude the temporary effects of financial interventions made by the Government. These interventions began in 2007/08, as a response to the financial crisis and have resulted in a number of banking groups being brought temporarily into the public sector.

This section of the bulletin provides statistics which include the temporary effects of the financial interventions, so as to allow the temporary impact of financial interventions to be monitored and to provide context to the measures which exclude the temporary effects of financial interventions. More information on the background to these different measures and how they methodologically differ can be found in the section on ‘Excluding and including financial interventions’.

In 2011/12 public sector net borrowing including the temporary effects of financial interventions was £93.6 billion which is £27.4 billion lower than the equivalent figure excluding the temporary effects of the financial interventions. The lower net borrowing for the measure including the temporary effects of the financial interventions is in large part due to the public sector banking groups, collectively, having a significant current budget surplus rather than a deficit. That is to say, under National Accounts recording rules, the public sector banking groups have an income in current receipts which is greater than their current expenditure.

Table 4: Measures of the Public Sector Finances by month and financial year-to-date

Including the temporary effects of financial interventions

United Kingdom, £ billion1 (not seasonally adjusted)
       January April – January
2013 2012 Difference 2012/13 2011/12 Difference
PS Current Budget 2 13.4 11.8 1.6 -60.5 -50.6 -10.0
PS Net Investment 3 3.5 3.4 0.1 -10.1 18.4 -28.5
PS Net Borrowing (PSNB) 4 -9.9 -8.4 -1.4 50.4 69.0 -18.5
PS Net Debt (PSND) 5 2,188.1 2,180.2 7.9 2,188.1 2,180.2 7.9
PS Net Debt as a % of annual GDP 138.9 142.3 -3.4 138.9 142.3 -3.4

Table source: Office for National Statistics

Table notes:

  1. Unless otherwise stated
  2. Current Budget is the difference between current receipts and current expenditure
  3. Net Investment is investment less depreciation
  4. Net Borrowing is Current Budget less Net Investment
  5. Net Debt is financial liabilities less liquid assets

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Including the temporary effects of the financial interventions has a large impact on public sector net debt. The public sector net debt including the temporary effects of the financial interventions, at the end of January 2013 was £2,188.1 billion (138.9% of GDP), this compares to a public sector net debt excluding the temporary effects of financial interventions of £1,162.8 billion (73.8% of GDP).

The net debt for the measure including any temporary effects of the financial interventions is so much higher than PSND ex as it includes the net debt of the public sector banking groups. Net debt is defined as all financial liabilities minus liquid assets (see ‘Net debt’ section for more background).

The public sector banking groups, like most banks, have a significantly greater amount of liabilities than they do liquid assets, and so a high net debt. The net debt for the public sector banking groups (including the debt of the Bank of England schemes, such as the asset purchase facility fund) was estimated to be £973 billion at the end of December 2012. This is not to say that the public sector banking groups have this amount of liabilities without any offsetting assets. Banks by the nature of their business have a large amount of their assets in the form of loans which, are recorded as illiquid assets and so, have no impact on the net debt measure.

Between January 2012 and January 2013 the public sector net debt increased by £7.9 billion and fell from 142.3% of GDP to 138.9% of GDP. The reason for this is that the growth in net debt was outstripped by the growth in GDP (as a rolling 12 month average) over the same period.

Background notes

  1. Data quality  

    summary quality report (109.6 Kb Pdf) for the public sector finances is available on the ONS website. 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.

  2. An overview note on the data sources used within public sector finances and the quality assurance processes that are undertaken in compiling the statistical release was published on the ONS website on 19 October 2012.

  3. Publication of data for all public sector banking groups and the Bank of England

    Data for the Royal Bank of Scotland and Lloyds Banking Group were fully incorporated into the public sector finances for the first time in the statistical bulletin published on 25 January 2011.

    Prior to this data for public sector banking groups related only to Northern Rock plc, Northern Rock (Asset Management) plc, and Bradford and Bingley plc. An article providing commentary on inputs to the public sector banks series, the sources of the data, processing methodologies, and the impacts on key aggregates is available from the ONS website (166.8 Kb Pdf) .

  4. Following the sale of Northern Rock plc to Virgin Money Holdings (UK) Ltd on 1 January 2012, Northern Rock plc has moved out of the public sector. Therefore, Northern Rock plc is not included in the data for public sector banking groups from January 2012 onwards.

    Northern Rock (Asset Management) plc and Bradford & Bingley have been reclassified from public financial corporations to central government with effect from January 2010 and July 2010 respectively.

  5. The Bank of England is also classified to the public sector. Data for the Bank have been presented separately in the PSF statistical bulletin (see tables PSF2 and PSF4) commencing with the publication dated 25 January 2011. The data are ONS estimates derived from the Bank's published accounts. Prior to the January 2011 publication, data for the Bank were included within series for public corporations in the public sector finances.

  6. Classification issues concerning financial interventions

    There have been numerous financial interventions in recent years. These are described in an article that was published on 6 November 2009.

    The article also explains the classification of the institutions and transactions associated with these measures in the UK's National Accounts and Public Sector Finances. This follows consultation with Eurostat, the Statistical Office of the European Union, to ensure consistent interpretation of the international guidance.

  7. Definitions

    A methodology guide (360.3 Kb Pdf)  to monthly public sector finance statistics is available on the ONS website. It explains the concepts and measurement of the monthly data, plus those previously published, and gives some long runs of historical data. The following background notes provide further information regarding the monthly data.

  8. The current budget is defined as net saving plus receipts of capital taxes, using National Accounts concepts as set out in the European System of Accounts 1995 (ESA95). For central and local government, monthly estimates of the current budget are obtained directly from data on transactions in current receipts and expenditures. For public corporations, the current budget is obtained by subtracting net borrowing from an estimate of net investment. Net borrowing is consistent with the definitions in ESA95; procedures for calculating it are discussed in the methodological guide. Net investment is defined as investment less depreciation. Investment is capital formation (acquisition of fixed assets, stocks and valuables net of any sales) plus net payments of capital grants.

  9. Public sector net debt (PSND) is calculated as financial liabilities less liquid assets with both scored at face value. Liquid assets mainly comprise foreign exchange reserves and bank deposits. Public sector holdings of public sector debt are consolidated out. The public sector net cash requirement is, approximately, the flows equivalent of PSND.

  10. The GDP figure used in the denominator for the calculation of fiscal aggregates as a percentage of GDP is the ‘not seasonally adjusted’ current price version. For the net debt ratio, the GDP denominator covers the 12 months centred around the observation, for example six months before and six months after it. For the current budget and net borrowing financial year ratios, the GDP denominator covers the financial year. These calculations require estimates or forecasts of GDP to be available for up to six months in the future.

    This estimation procedure is explained in detail in an article, The use of GDP in fiscal ratio statistics (113 Kb Pdf) . The use of GDP in fiscal ratio statistics, available from the ONS website. As a result of this estimation procedure the debt ratio is provisional when first published and subject to later revision when outturn GDP first becomes available, and again when more refined estimates of GDP are published.

  11. Relevance to users

    Forecasts of The Office for Budget Responsibility (OBR) are quoted within this statistical bulletin. The OBR was established in May 2010, and placed on a permanent, statutory footing in March 2011. As set out in the Budget Responsibility and National Audit Act 2011, the OBR has a duty to prepare fiscal and economic forecasts twice each year. The Government has adopted the OBR’s forecasts as official forecasts used to inform policy decisions. The Charter for Budget Responsibility sets out the Government’s intention to continue this practice.

  12. The UK Statistics Authority (UKSA) conducted an assessment of the Public Sector Finances Statistical Bulletin in 2011 to ensure that the bulletin and its compilation methods fully comply with all requirements of the National Statistics Code of Practice. A report of their findings was published on 3 November 2011. Following work to comply with the requirements itemised in the UKSA report, the Public Sector Finances has had designation as National Statistics confirmed.

  13. The United Kingdom Statistics Authority has designated these statistics as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Official Statistics.

    Designation can be broadly interpreted to mean that the statistics: 

    • meet identified user needs;

    • are well explained and readily accessible;

    • are produced according to sound methods; and

    • are managed impartially and objectively in the public interest.

    Once statistics have been designated as National Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.

  14. A brief paper explaining the roles and responsibilities of ONS and HM Treasury when producing and publishing the public sector finances statistical release was published on the ONS website on 26 June 2012.

  15. A note on the main uses and users of the public sector finances statistics was published on the ONS website on 21 September 2012.

  16. As part of a continuous engagement strategy, comments are welcomed on ways in which the Public Sector Finances Statistical Bulletin might be improved.

    Recommendations for the improvement of the Public Sector Finances Statistical Bulletin may be emailed to psa@ons.gsi.gov.uk. Full contact details are available at the end of the bulletin.

  17. Coherence

    The Public Sector Finances (PSF) differ from other National Accounts data in that they have a more flexible revisions policy. This means that the PSF data may be inconsistent with the published GDP data and sector and financial accounts, as a revision may not be incorporated into the main National Accounts data set until a later date due to the more restrictive revisions policy.

  18. General government net borrowing reported in this bulletin forms the basis of the reports of Government Deficit under the Maastricht Treaty. This was most recently reported on 28 September 2012.

  19. The definition of general government net borrowing to be reported for the European Excessive Deficit Procedure (EDP) is slightly different to that used for National Accounts. ONS publishes a biannual bulletin which presents the general government net borrowing and general government gross debt data  as required by the EDP.

    This bulletin on General Government Debt and Deficit under the Maastricht Treaty includes a table which reconciles the EDP defined general government net borrowing and that published here in the Public Sector Finances Statistical Bulletin.

  20. Tax receipts data published in this bulletin are presented in terms of broad tax categories (e.g. Income Tax, VAT). For more details on individual taxes, users can go to the HM Revenue & Customs website and access a monthly publication which provides cash tax receipts data which are entirely consistent with the data published in Table PSF5 of the bulletin.

  21. Data from HM Treasury’s COINS database underlie the Central Government expenditure figures provided in this publication up to March 2012 and those from April 2012 onwards are, sourced from the OSCAR database. In June 2010, HM Treasury released into the public domain, as part of the Government transparency agenda, raw data from the COINS database for the years 2005/06 to 2009/10. It was subsequently announced that annual updates to this raw data would be released in September.

    The latest outturn data for 2011/12 and updates to the four preceeding years were released on 21 September 2012. In-year quarterly data are also published by HM Treasury, with the latest quarterly release, the second quarterly data from OSCAR, published on 21 December 2012. The data are accessible from HM Treasury's website.

  22. The public sector finances bulletin is produced in partnership with HM Treasury (HMT). Further supporting information on public sector finances can be found on HMT's website. In addition, a range of public finance data are available from HMT’s Public Finances Databank.

  23. Accuracy

    Central government departmental expenditure data are subject to various validation processes and improve over time. They go through four main stages:

    Stage 1: Initially, they are estimated using in-year reported data,

    Stage 2: in the July following the completion of the financial year, departments update their full financial year estimates (but with no in-year profile), for publication in the Treasury’s Public Spending National Statistics annual publication. These estimates will be in line with the audited resource accounts for most departments,

    Stage 3: for the autumn update of the Treasury’s Public Spending National Statistics these financial year estimates are updated,

    Stage 4: in February the following year the winter update of the Treasury’s Public Spending National Statistics is published and the financial year estimates are further improved. All departments’ and devolved administrations’ accounts will have been audited and finalised by this stage.

    Data for 2009/10 and 2010/11 are at stage 4.

    Data for 2011/12 are at stage 3 and 2012/13 are at stage 1. 

  24. The local government data for 2009/10 and 2010/11 for local authorities are based on final outturns for receipts and expenditure. Data for 2011/12 and 2012/13 are based on either provisional estimates or forecasts and are subject to revisions when final outturn data become available.

  25. Revisions

    Currently data for the public sector banking groups are only available for periods up to June 2012. Values for months from July 2012 onwards are ONS estimates. Consequently these, and the aggregates which include the impacts of financial interventions, may be revised substantially when actual data become available.

  26. The public sector finances revisions’ policy was reviewed at the end of 2012 and subsequently updated to more fully reflect compilation processes. The  public sector revisions’ policy (59.3 Kb Pdf)  is available on the ONS website.

  27. Historically, local government and public corporation net borrowing in the bulletin were historically derived in two different ways depending on the month to which the net borrowing related. Net borrowing for the most recent month (or months) was estimated from information on cash deposits and loans. Net borrowing for earlier months was calculated from estimates of accrued current expenditure, revenue and net investment in a manner consistent with National Accounts.

    On occasions, these two approaches led to significant revisions (upwards and downwards) in the net borrowing when estimates originally arrived at through financial loans / deposit data were updated quarterly to reflect the latest information on accrued expenditure and revenue. Since January 2012 for local government and October 2012 for public corporations the methodology used to calculate quarterly net borrowing estimates has been modified to always use accrued current expenditure, revenue and net investment data. The cash deposits and loans data are only used to profile the monthly net borrowing within the quarterly estimates. It is expected that over time this approach will lead to less revisions to local government and public corporations net borrowing.

  28. A further recent development which is expected to reduce the size of local government data revisions and improve the reliability of in-year local government data is the introduction of the Quarterly Revenue Outturn data collection by the Department for Communities and Local Government. These data, first collected during 2011/12, provide quarterly updates for the main aspects of local government accrued current expenditure. The Public Sector Finances bulletin has used these data in its estimates of in-year local government net borrowing since January 2012.

  29. One indication of the reliability of the key indicators in this bulletin can be obtained by monitoring the size of revisions. Previously, analyses of revisions to the wider measures of public sector current budget, net borrowing, and net debt that include the impacts of financial interventions were presented in this bulletin. The sizeable revisions resulting from the replacement of imputed data by hard data for the public sector banking groups has meant that these revisions have become more prone to be statistically significant when tested. Given that the primary focus of users is on the ex-measures, it would be preferable to analyse and present revisions of these in the bulletin. As yet sufficiently long monthly time series are not available for the ex-measures to enable standard revisions analysis to be conducted on them.

    Summary table of revision indicators

         
      Latest monthly  value Revisions between first publication and estimate twelve months later
    Average over the last five  years Average over the last five years (average  absolute revision)
    General Government Net borrowing, £m (-NNBK) -10,954 -831 1,551

    Download table

  30. As general government net borrowing is quite close in terms of coverage to PSNB ex, it will in the interim be the subject of revisions analysis. The table shows summary information on the size and direction of revisions from first publication to one year later. The average of five years worth of such revisions is shown; for example – from those first published in June 2006 (for May 2006 to May 2011) first estimates. Please note that these indicators only report summary measures for revisions, the revised data may still be subject to measurement error.

  31. A statistical test is applied to the average revision to determine whether it is statistically significantly different from zero. An asterisk (*) is used to indicate if a mean revision has been found to be statistically significant. A spreadsheet giving these estimates and the calculations behind the averages in the tables is available on the ONS website in the data section for this statistical bulletin.

  32. Publication policy

    Complete runs of series in this bulletin are available to download free of charge here. An electronic dataset is made available one working day after publication of the Public Sector Finances Statistical Bulletin. The dataset contains quarterly data consistent with the latest Public Sector Finances Statistical Bulletin, analysed by economic category and sub-sector.

  33. Details of the policy governing the release of new data are available from the Media Relations Office. National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference.

  34. Special arrangements apply to the Public Sector Finances, which is produced jointly with HM Treasury. A list of ministers and officials with pre publication access to the contents of this bulletin is available on request. In addition some members of the Treasury’s Fiscal Statistics and Policy (FSP) team will have access to them at all stages, because they are involved in the compilation or quality assurance of the data, and some members of the Treasury’s Communications team will see the bulletin, but only within the 24 hour pre-release period, because they place the data on the website.

  35. Public sector finances data which supplement and extend the data provided in this bulletin have been available via the ONS Financial Statistics publication. However, publication of the Financial Statistics publication has ceased, with the last edition published on 12 July 2011.

    Some public sector finance data series previously published in Financial Statistics are not available elsewhere. Data series in this category are found in the Financial Statistics tables 1.2A, 1.3A, 1.3B, 1.3C, 1.3D and 1.4A. Therefore, these tables will continue to be made available for download on the Public Sector Finances web page.

    Tables 1.2A, 1.3A and 1.4A which are updated monthly will continue to be available monthly, published concurrently with the PSF Supplementary data, while Tables 1.3B, 1.3C and 1.3D will be available quarterly. 

  36. Following ONS

    Follow ONS on Twitter, Facebook and YouTube.

  37. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

    These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

Statistical contacts

Name Phone Department Email
David Bailey +44 (0)1633 455668 Public Sector Finances psa@ons.gsi.gov.uk
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