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Statistical bulletin: Government Deficit and Debt Under the Maastricht Treaty, September 2012 This product is designated as National Statistics

Released: 28 September 2012 Download PDF

General government deficit and debt

  • General government deficit (or net borrowing) in 2011/12 was £117.5 billion, equivalent to 7.7 per cent of gross domestic product (GDP) - down from 9.6 per cent of GDP in 2010/11 and 11.5 per cent in 2009/10.
  • General government gross consolidated debt at nominal value was £1,312.1 billion at the end of March 2012, equivalent to 85.8 per cent of GDP up from 79.9 per cent of GDP in March 2011 and 74.1 per cent in March 2010.

Background

This statistics bulletin on government deficit and debt under the Maastricht Treaty is published every six months, at the end of March and September each year to coincide with the dates when the UK and other EU Member States are obliged to report to the European Commission their actual and planned government deficit and debt.

The source data for this publication are the same as those used in compiling the monthly Public Sector Finances bulletin however, there are four main differences between this bulletin and the Public Sector Finances.

  1. This bulletin includes only debt and deficit recorded to central and local government, whereas the Public Sector Finance bulletin also includes measures of other public sector bodies.

  2. This bulletin reports gross debt, that is all financial liabilities of central and local government, whereas the Public Sector Finance bulletin headline figure is net debt, that is the liabilities minus liquid assets (mainly in the form of cash deposits).

  3. This bulletin includes the financial institutions of Northern Rock Asset Management and Bradford & Bingley within central government, whereas the Public Sector Finance bulletin at present considers them as within the public financial corporations sector.

  4. General government net borrowing reported in this bulletin differs from that in the Public Sector Finances bulletin in order to make it fully consistent with guidance in the Manual on Government Deficit and Debt.

Annex A contains full details of these differences and a quantification of the size.

Main statistics

Government Deficit and Debt

Financial Years 2007/08  2008/09  2009/10  2010/11  2011/12
General government deficit £bn 40.5 100.1 163.0 141.7 117.5
as a percentage of GDP 2.8 7.0 11.5 9.6 7.7
General government debt at nominal values £bn 620.1 799.9 1,049.0 1,182.6 1,312.1
as a percentage of GDP 43.3 56.2 74.1 79.9 85.8

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Figure 1: General government gross debt as a percentage of GDP

General government gross debt as a percentage of gross domestic product from 1993/94 to 2011/12
Source: Office for National Statistics

Notes:

  1. 1. GDP = Gross Domestic Product

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Figure 2: General government net borrowing as a percentage of GDP

General government net borrowing as a percentage of gross domestic product from 1993/94 to 2011/12
Source: Office for National Statistics

Notes:

  1. 1. GDP = Gross Domestic Product

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Article 126 of the Treaty on the Functioning of the European Union (EU) 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 deficit is a measure of how much the government has to borrow to cover its expenditure once revenue has been netted off. This is also known as net borrowing. The monetary values quoted are in ‘current prices’, that is, they represent the price of borrowing in the year to which they relate without any adjustments for inflation. Thus for comparisons over time the figures as a percentage of GDP (also measured in current prices) are used to ensure that the changes are on a like for like basis.

In 2011/12, the UK government deficit stood at £117.5 billion (7.7 per cent of GDP). This has fallen for the second year running after rising from 2.8 per cent in 2007/8 to its recent peak in 2009/10 at 11.5 per cent of GDP. 

At the end of March 2012, UK government gross debt was £1312.1 billion (85.8 per cent of GDP). The general government gross debt first exceeded the ‘excessive deficit’ reference value in 2009/10 when it was 74.1 per cent of GDP at the end of March 2010.

Longer term trends

After the recession of 1992/3 ended, net borrowing as a percentage of GDP remained above the 3 per cent figure until 1997/8. Between then and the start of the recession in 2008, the deficit ranged between -£3.7 billion in 2000/1 (a surplus) and £3.6 billion in 2004/5.

As a percentage of GDP general government, gross debt has risen every year since the end of March 2003. Prior to 2003, gross debt had been falling since 1996/97 when it was at 50.5 per cent of GDP. 

International comparability

All European Union (EU) Member States report their latest deficit and debt values to the European Commission twice a year, which are then published by Eurostat (the European statistical agency). The figures in this statistical bulletin will be published by Eurostat on 24 October 2012.

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. This means that in September the UK provide their first estimates for the previous financial year (2011/12 in the case of this bulletin) whereas other EU Member States at this point in the year are providing revised estimates for the previous calendar year (2011 in this case). In March 2013 the UK will publish revised estimates for 2011/12 as well as initial estimates for 2012.

The UK figures may be compared to those of other EU Member States on the Government Finance Statistics section of the Eurostat website. As observed in the above, the latest UK government deficit and debt figures exceed the reference values set out in the Protocol on the Excessive Deficit Procedure. According to the last deficit and debt figures published on 23 April 2012, 17 Member States had a deficit in 2011 exceeding the three per cent reference value and 14 Member States had gross debts  exceeding the 60 per cent reference value. 

While the key statistics provided to Eurostat are those of general government consolidated gross debt and general government net borrowing (or deficit) detailed datasets showing the components of the debt and deficit statistics, as well as supplementary government finance statistics, are also supplied by Member States.

A full set of government finance tables provided by the UK to Eurostat in September / October 2012 will be published on the ONS website on 23 October 2012. A similar set of tables, published as part of the March / April 2012 data transmission, were published on the ONS website on 26 April 2012.

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

In line with revised international guidance in Eurostat's Manual on Government Deficit and Debt, 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.  Further information on the reclassification is available in the ONS news release, published 28 September 2012.

As these financial corporations were previously classified under public corporations they were excluded from general government deficit and debt estimates published by ONS. However, since April 2011, Eurostat have been revising and publishing the EDP data for the UK to incorporate these two corporations within central government.

The UK were awaiting the latest version of the Manual on Government Deficit and Debt, published in March 2012, before formally reviewing the classification of the two organisations.

This reclassification has resulted in an increase of UK general government gross debt and a decrease in deficit. The initial estimates published in this bulletin are sourced from published company accounts and show an increase in general government gross debt due to NRAM and B&B of £37.4 billion at the end of 2011/12, having fallen from a debt impact of £53.4 billion at the end of 2010/11.

The profits from NRAM and B&B lead to a small improvement to general government deficit of £740 million in 2011/12 and £800 million in 2010/11. It should be noted that these figures represent initial estimates for the impact of consolidating NRAM and B&B within central government. A consolidation of the NRAM, B&B and Central Government accounts for statistical reporting will be worked on over the coming months and this is likely to lead to some revisions of the debt and deficit figures.

Revisions

Table M8R presents the revisions to key aggregates since the last publication in March 2012.  Revisions to the data are consistent with revisions incorporated within the Public Sector Finances statistical bulletin since March 2012. 

The deficit revisions include three long time series revisions. The first of these relates to the accrued interest on gilt coupons back to 2002/03. The second to the accrued treatment of tobacco excise duties also back to 2002/03 and the third to the accrual of income tax due to the programme of work, by HM Revenue and Customs (HMRC), of repayments and recoveries relating to the introduction of a new PAYE computer system in June 2009.

Further information on these and other revisions can be found in the PSF statistical bulletin and the summary quality report (201.4 Kb Pdf) relating to EDP and PSF statistics.

Annex A - Comparability with UK Public Sector Finances

The UK publishes a monthly Public Sector Finances (PSF) statistical bulletin which provides the latest estimates of the public sector finances, including figures for public sector net borrowing and public sector net debt. These Public Sector Finances (PSF) statistical bulletins focus on data for the latest month and the financial year to date, although they also include long time series which put the data in context.

The PSF statistics, and the statistics in this bulletin, are both compiled using National Account concepts and rules, following the European System of Accounts 1995 (ESA95) and additional guidance in the Manual on Government Deficit and Debt.

Although the statistics in the PSF bulletin and this bulletin are compiled using the same data sources and national accounting practices broadly follow, there are some differences between the coverage of the two bulletins and the definitions of the key statistical aggregates.

There are four main differences between the figures. The first is one of coverage. The Public Sector Finances covers the entire public sector while the figures in this bulletin are restricted to general government. The general government sector, as defined in National Accounts, covers agencies and departments within central government and within local government. The public sector is a wider concept covering publicly-controlled companies as well as general government.

This means that this bulletin does not include the gross debt of public corporations. In the latest PSF bulletin, at the end of 2011/12, the reported gross debt for non-financial public corporations is £10.8 billion and for financial public corporations is £2,397.7 billion.

The second difference is that the net debt measure reported in the PSF 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 debt measure used as part of the Excessive Deficit Procedure (EDP) and reported in this bulletin is a gross debt measure which is calculated as the total stock of all financial liabilities. For this reason, the general government gross debt reported here is higher than the general government net debt found in the Public Sector Finances bulletin.

The third difference is that the PSF publication has yet to implement the recent classification change for Northern Rock Asset Management (NRAM) and Bradford & Bingley (B&B), whereas the figures in this bulletin have included provisional figures for the debt and deficit of NRAM and B&B within the reported general government aggregates. For more information see the section of this bulletin on Northern Rock Asset Management and Bradford & Bingley.

The move from net debt to gross debt means general government liquid assets of £136.1 billion, at the end of 2011/12 are not accounted for in this bulletin.

The fourth difference is that EDP deficit and debt are consistent with the guidance in the Manual on Government Deficit and Debt. There are two conceptual differences. The first is that  General government net borrowing published in the PSF statistical bulletin, in accordance with ESA95 rules, excludes interest payments or receipts received as part of financial instruments known as swaps and forward rate agreements.

However, the measures in this bulletin are compiled according to EDP rules which explicitly include these interest payments/receipts within the definition of the general government net borrowing.

A swap agreement is one where two parties agree to exchange cash flows. As an example, the Government may hold foreign currency bonds, whose interest payments are subject to variable exchange rates.

In order to receive a more steady cash flow the Government may enter a swap agreement with another organisation where they agree to swap the interest flow of the foreign currency bonds with an alternative interest flow provided by the counterpart organisation. This is an illustrative example only and governments may enter into swap and forward rate agreements for a wide range of reasons.

The other difference is in the recording of expenditure on single use military equipment. In the UK National Accounts and PSF this expenditure is currently recorded on an accrued basis in line with International Financial Reporting Standards (IFRS). However, in this publication the military expenditure is accrued to the point of delivery of the goods, in line with Eurostat guidance in the Manual on Government Deficit and Debt.

The effect of including swap and forward rate agreements can increase or decrease general government net borrowing. Similarly, accruing military goods expenditure at the point of delivery, instead of as stage payments are made, can drive net borrowing up or down. In 2011/12 the adjustment for swap and forward rate agreements amounted to an increase in net borrowing of £0.3 billion, and the adjustment for military expenditure an decrease in net borrowing of £3.0 billion. 

A full reconciliation of the two deficit measures back to 2002/03 is available within Table M7 of this statistical bulletin.

For further information on the methodology employed within the Public Sector Finances and this bulletin, then a methodological guide can be found on the ONS website.

Annex B - Data tables

There are nine tables included as part of this bulletin. Data for all tables extends back to 1992/93 but for presentational purposes the pdf versions of the tables do not extend this far back in time. However, the downloadable MS Excel versions contain full time series.

All values in the tables are at current prices and are not seasonally adjusted. The debt figures are at nominal value. That is the debt is valued at the face value of the debt, which is what the government will be liable to pay, and not the market value of the debt.

Table M1 shows the general government deficit and debt (in £ million and as a percentage of GDP).

Table M2 shows the general government debt by financial instrument (in £ million).

Table M3 shows transactions (ie changes) in general government debt by financial instrument (in £ million).

Table M4 shows how the deficit can be reconciled with the changes in gross debt (in £ million).

Table M5 shows how the unconsolidated financial liabilities of central government and local government are consolidated to arrive at general government consolidated gross debt (in £ million).

Table M6 shows how the unconsolidated transactions (i.e. changes) in financial liabilities of central government and local government are consolidated to arrive at consolidated transactions in general government gross debt (in £ million).

Table M7 shows how general government net borrowing (ie deficit) can be reconciled with the general government net borrowing reported in the Public Sector Finances bulletin of 21 September 2012 (in £ million and as a percentage of GDP).

Table M8R shows revisions in deficit and debt between the figures published in this bulletin and those published in the last bulletin on 30 March 2012 (in £ million and as a percentage of GDP)

Table M9 relates to government activities undertaken to support financial institutions during the financial crisis.  It does not include wider economic stimulus packages. The table is presented into two parts. Part 1 shows the impact on government deficit from both the expenditure undertaken by government and the revenue received as part of these support measures.

Part 2 shows the impact on the government balance sheet from the support measures. Part 2 also includes estimates of the contingent liabilities that government is exposed to through the activities undertaken to support financial institutions. All figures are in £ million.

Background notes

  1. Government deficit and debt under the Maastricht Treaty

    Article 126 of the Treaty on the Functioning of the European Union (commonly known as the Maastricht Treaty) 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 States have to report their actual and planned government deficits, and their levels of debt, to the European Commission to specific deadlines twice each year. The estimates in this statistical bulletin are 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.

    The first deadline (1 April) is designed so that the European Commission can gain an early sight of Member States’ debt and deficit for the previous calendar year, and the second deadline (1 October) is to receive updates to these figures. 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 for the UK the first estimate for the latest financial year.

  2. Data quality

    Data in this bulletin are consistent with those published in the latest Public Sector Finances statistical bulletin. A  summary quality report (201.4 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.

  3. Coherence

    The net borrowing (or deficit) data in this statistical bulletin are based on those published in the Public Sector Finances statistical bulletin of 21 September 2012, but have been modified to take account of a European Regulation that requires payments/receipts for certain financial instruments (i.e. swaps and forward rate agreements) 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 the version presented in the Public Sector Finances Statistical Bulletin.

    The reconciliation between the net borrowing published in this bulletin and that published in the Public Sector Finances (PSF) statistical bulletin of 21 September 2012 is shown in table M7. It can be seen in table M7 that the net borrowing figures do not only differ due to the different methodologies for swaps but also differ with regard to the recording of expenditure on single use military equipment. In the UK National Accounts and PSF this expenditure is currently recorded on an accrued basis in line with International Financial Reporting Standards (IFRS). However, in this publication the military expenditure is accrued to the point of delivery of the goods, in line with Eurostat guidance.

    The estimate of GDP used in this bulletin is consistent with that published on 27 September 2012 in the UK National Accounts.

  4. Relevance to users

    The UK Statistics Authority (UKSA) conducted an assessment of the Government Deficit and Debt 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.

    As part of our continuous engagement strategy, we welcome comments on how else we might improve the Government Deficit and Debt Statistical Bulletin. If you have recommendations for the improvement of the Government Deficit and Debt Statistical Bulletin, please email them to psa@ons.gsi.gov.uk or see the contact details below.

  5. Revisions

    Table M8R presents the revisions to key aggregates since the last publication. These figures were reported in the March version of this publication.

    Revisions to the EDP data are consistent with the revisions period in the Public Sector Finances statistical bulletin, which aims to incorporate the most up-to-date information for all time periods and therefore revisions can be included for any time periods.  The PSF statistical bulletin and the summary quality report (201.4 Kb Pdf) provide further information on revisions. 

  6. Relevant links

    The latest public sector finances statistical bulletin is available on the ONS website.

    Detailed data supplied to Eurostat under the Excessive Deficit Procedure are available on both the ONS website and on the Eurostat website. The latest available data are those published in April 2012. Once finalised the detailed data relating to this publication will be published on 23 October 2012.

    Eurostat analyse all data provided by Member States and publish a press release which places the UK figures in a European context and provides commentary on any issues specific to member states.

    Details of the revisions policy for this and the other public sector finances statistical bulletins is available in the 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.

    An inventory (133.3 Kb Pdf) of the data sources used within the data supplied for the Excessive Deficit Procedure is available on the ONS website.

  7. A list of ministers and officials with pre-publication access (43.3 Kb Pdf) 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 HM Treasury bulletin, but only within the 24 hour pre-release period, because they place the data on the website.

  8. Publication policy

    Complete runs of series in this bulletin are available to download free of charge. 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 subsector.

  9. Following ONS

    Follow ONS on Twitter and Facebook or view our podcasts on YouTube

  10. 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

Statistical contacts

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