Forecasts from 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.
Figure 1a illustrates the cumulative monthly public sector net borrowing excluding the temporary effects of financial interventions. Figure 1b shows the same data but with the effects of the transfer from the Royal Mail Pension Plan (in April 2012) and the transfers from the Bank of England Asset Purchase Facility Fund removed.
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 monthly, quarterly and annual fiscal measures can be found in table PSF1 of this bulletin.
|United Kingdom||£ billion1(not seasonally adjusted)|
|January||April - January|
|PS Current Budget2||7.9||12.7||-4.7||-60.1||-73.5||13.4|
|PS Current Budget ex APF 2,6||7.9||8.9||-1.0||-72.3||-77.2||4.9|
|PS Net Investment3||3.2||2.9||0.3||18.4||-10.6||29.0|
|PS Net Investment ex RM3,5||3.2||2.9||0.3||18.4||17.4||1.0|
|PS Net Borrowing (PSNB ex)4||-4.7||-9.8||5.1||78.5||62.8||15.6|
|PS Net Borrowing (PSNB ex) ex RM and APF4,5,6||-4.7||-6.0||1.3||90.7||94.6||-4.0|
|PS Net Debt (PSND ex)7||1,239.6||1,158.4||81.2||1,239.6||1,158.4||81.2|
|PS Net Debt as a % of annual GDP8||74.6||72.6||2.0||74.6||72.6||2.0|
Table 1 shows that public sector net borrowing (PSNB ex) in January 2014 was £-4.7 billion (a surplus), which is £5.1 billion less of a surplus than public sector net borrowing in January 2013.
For the period April 2013 to January 2014, public sector net borrowing (PSNB ex) was £78.5 billion. If the Asset Purchase Facility cash transfers between April and January 2014 are excluded then public sector net borrowing for the period was £90.7 billion. For the same period last year the public sector net borrowing excluding the Asset Purchase Facility cash transfers along with the effect of the Royal Mail Pension Plan transfer in April 2012 was £94.6 billion.
The May 2013 net borrowing includes the actual payments received to date (£800 million) from Swiss banks related to a tax co-operation agreement between the UK Government and the Swiss authorities. Further details are available in the “Recent events and methodological changes” section.
The effect on net borrowing of the transfer in April 2012 of the historic liabilities and some of the assets of the Royal Mail Pension Plan (RMPP) is estimated to be £28.0 billion.
The Office for Budget Responsibility (OBR) produces medium term forecasts of the public finances twice a year (normally in March and December). The latest published forecasts were that:-
PSNB ex in 2011/12 would be £126.0 billion;
PSNB ex in 2012/13 would be £86.5 billion;
PSNB ex in 2012/13 after removing the impacts of the transfer of the Royal Mail Pension Plan and the transfers from the Asset Purchase Facility would be £120.9 billion;
PSND ex at the end of March 2013 would be £1,189.2 billion.
OBR Forecasts for 2013/14 are summarised in Table 2.
This statistical bulletin reports the latest estimates of outturn as:
PSNB ex in 2011/12 was £117.4 billion;
PSNB ex in 2012/13 was £80.3 billion;
PSNB ex in 2012/13 after removing the impacts of the transfer of the Royal Mail Pension Plan and the transfers from the Asset Purchase Facility was £114.8 billion;
PSND ex at the end of March 2013 was £1,185.2 billion.
Table 2 'Latest Outturn Estimates vs OBR Forecasts' calculates the rate of increase/decrease between the outturn estimates for the period April 2013 to January 2014 and the outturn for the same period in 2012/13. These estimates can then be compared with the rate of increase/decrease between the outturn for 2012/13 and the OBR forecast for 2013/14 (published in December 2013).
As an example of how to interpret the table, the public sector net borrowing excluding temporary effects of financial interventions and also excluding the effects of the transfer of the Royal Mail Pension Plan and the transfers from the Bank of England Asset Purchase Facility Fund shows a decrease of 4.2% between the estimates for the April 2013 to January 2014 period and the outturn in the same period in 2012/13. The comparable OBR forecast is for a full year fall of 3.1% between 2012/13 and 2013/14.
|United Kingdom||£ billion1 (not seasonally adjusted)|
|April -January||Forecast vs Outturn|
|2013/14||2012/13||Increase/ Decrease %||2013/14 OBR Forecast7||2012/13 Outturn||Forecast Increase/Decrease %|
|PS Current Budget (PSCB)2||-60.1||-73.5||18.2||-74.2||-85.5||13.2|
|PSCB excluding Asset Purchase Facility (APF) Transfers||-72.3||-77.2||6.4||-86.3||-91.9||6.1|
|PS Net Investment (PSNI)3||18.4||-10.6||272.5||24.9||-5.2||581.3|
|PSNI excluding Royal Mail Pension Plan (RMPP)||18.4||17.4||5.6||24.9||22.9||9.0|
|PS Net Borrowing (PSNB ex)4||78.5||62.8||24.9||99.0||80.3||23.2|
|PSNB ex excluding (RMPP)||78.5||90.9||-13.6||99.0||108.4||-8.6|
|PSNB ex excluding RMPP and APF||90.7||94.6||-4.2||111.2||114.8||-3.1|
|PS Net Debt (PSND ex)||1,239.6||1,158.4||7.0||1,269.0||1,185.2||7.1|
|PS Net Debt as a % of annual GDP 5,6||74.6||72.6||2.8||75.5||73.8||2.3|
In its latest Economic and Fiscal Outlook, the OBR shows the impact on public sector net borrowing (PSNB ex) of a range of different events.
It is important to remember that initial outturn estimates early in the financial year are provisional and can be subject to sizeable revisions in later months. More information on the source and likely scale of future revisions to estimates can be found in the Revisions overview section. It is also important to note that due to in year timing effects, caution should be taken when using year to date estimates for series such as net borrowing to predict year end positions.
For 2012/13, central government net cash requirement was £105.0 billion. This figure includes the impact of Bradford and Bingley and Northern Rock Asset Management and is comparable with the OBR estimate for CGNCR of £105 billion.
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 its forecasts. There are many reasons why the outturn data in this publication may differ from the OBR forecasts. For instance, the OBR will have included in its forecasts its estimates of the impacts of certain pending ONS classification decisions which have yet to be implemented in the outturn data. The OBR commentary provides qualitative information to help users identify where differences may be expected.
A new central government account table has been published this month (PSF3C). It provides additional detail for specific current and capital transactions. This table has been produced to comply with the European Directive 2011/85/EU (also called the “six-pack” agreement) and it will be published monthly.
The net borrowing figure produced in the new table (under the “six-pack” agreement) is the same as that produced under the UK Fiscal framework. However, it provides an alternative presentation of underlying components. It does this by reallocating components recorded as negative current or capital expenditure (under the UK Fiscal framework), and reallocates these components to central government revenue.
The components affected are: market output, pension contributions, current grants to central government and capital transfers to central government.
In October 2013 the UK Government sold a 60% stake in Royal Mail, and at the same time awarded 10% plus 160,000 shares to eligible employees. Following this flotation of Royal Mail on the London Stock Exchange, ONS reviewed the classification of the company and decided that it should be classified as a Private Non-Financial Corporation (moving it from the Public to Private sector). More detail on the decision is provided in the classification article Royal Mail sale: Impacts in the National Accounts and Public Sector Finances .
For the Public Sector Finances, the impact on net borrowing is caused by the shares awarded to eligible employees. These shares were recorded as a capital transfer from central government to the private sector. This added to central government net borrowing and therefore public sector net borrowing by £331 million in October 2013. This is calculated based on a price of £3.30 for the 10% (plus 160,000) shares provided to employees. The sale of a 60% stake in Royal Mail was a financial transaction and therefore did not affect net borrowing.
The impact on public sector net cash requirement is primarily from the receipt of cash from the sale of shares. The central government (and the public sector) net cash requirement was reduced by £2.0 billion in October 2013. This is calculated based on a price of £3.30 for 60% of the shares in Royal Mail. In addition, the cash requirement related to Royal Mail is no longer included in the public sector, however this is of a smaller order of magnitude.
Public sector consolidated gross debt is calculated from the sum of public sector liabilities (but where the corresponding assets are held within the public sector the liabilities are cancelled out). All liabilities held by Royal Mail are now in the private sector which means that the non-financial public corporation gross debt position was reduced by approximately £1.4 billion in October 2013. However, the reduction in the consolidated public sector gross debt position was closer to £0.4 billion because a large proportion of Royal Mail liabilities are owed to central government.
Net debt is defined as gross debt (where the position was reduced by £0.4 billion) minus liquid assets. Royal Mail liquid assets were estimated at £0.5 billion for October 2013. The removal of these assets from the public sector led to an increase of approximately £0.1 billion in the public sector net debt position. The unwinding of public sector liabilities and assets in the coming months may lead to slight revisions to these debt impacts.
The Royal Mail classification decision will be implemented in the Q4 2013 dataset for National Accounts. The first publication of this dataset will be in the February 2014 publication of GDP.
On 17 September 2013 the UK Government began selling part of its share holding in Lloyds Banking Group. The sale of the shares does not impact on the public sector net borrowing because it is a financial transaction. The cash received from the sale of the government’s six per cent stake (at 75p a share) was £3.2 billion. This is the amount recorded as a reduction in the central government net cash requirement.
The impact on public sector net debt in September 2013 was a reduction of £3.2 billion. The impact on public sector net debt excluding temporary effects of financial interventions was £0.6 billion (£586 million). This is the difference between the cash received from the sale (£3.2 billion) and the valuation of those shares when they were held by government. ONS valued the 4,282 million shares at £2.6 billion. This is based on the average price the government paid for all of the Lloyds shares it purchased.
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.
In 2012/13, there were £11.3 billion of transfers from the Asset Purchase Facility to HM Treasury. Of these £6.4 billion affected PSNB ex.
In January 2014, there was a £2.2 billion transfer from the Bank of England Asset Purchase Facility Fund to HM Treasury. No further payments in the current financial year will impact on PSNB ex. This is because the total transferred this year has exceeded the 2013/14 annual limit for cash transfers from the Bank of England which can impact on net borrowing. The 2013/14 annual limit was calculated from the 2012/13 entrepreneurial income of the Bank as £12.3 billion. However, all cash transferred during 2013/14 will impact on central government net cash requirement and net debt.
For further information see Recent Classification Decisions and Economic Events Affecting Public Sector Finances Statistics. (23 Kb Pdf)
On 1 January 2013 an agreement between the UK and the Swiss Confederation on co-operation in the area of taxation came into force. Under the terms of the agreement banking deposits of UK residents held in Swiss banks became liable for taxation.
The May 2013 net borrowing figures include the actual payments received to date (£800 million) from Swiss banks related to the tax co-operation agreement. No payments were made in January 2014. Further payments will continue to be included as and when received. Under National Accounts rules the cash amount will be accrued to May 2013, meaning this month will continue to be revised until the full payment is received. The payment has been recorded as “Other taxes” in Tables PSF3A and PSF3B.
The adoption of new economic governance regulations by the European Parliament and Council will lead to additional central and local government data being published as part of the statistical bulletin. The implementation of the new tables to derive central and local government total expenditure and total revenue on a Government Finance Statistics basis will be carried out in a phased manner. The first central government tables have been implemented in February 2014. However, similar data on local government is currently only published in the PSF Supplementary Table on a quarterly basis, and will therefore be implemented later.
Further detail is available in an article titled
Comparison of Government Expenditure and Revenue statistics in the monthly Public Sector Finances and quarterly National Accounts (99.2 Kb Pdf)
The bulk of the Revenue Support Grants were paid by central government to local government in April in the financial year 2013/14, with smaller balances paid in later months. This means that a comparison of central government current expenditure year-on-year growth between April 2012 and 2013 is high while year-on-year growth in other months will, generally, be lower.
It is expected another large instalment of the grant will be made in February, which will increase current expenditure in February 2014 compared with February 2013. The impact of this central government expenditure will largely be offset in local government net borrowing.
Table 3 summarises revisions between the data contained in this bulletin and the previous publication. The causes of revisions impacting on net borrowing are outlined below.
Public sector net borrowing in 2010/11 and 2011/12 has been revised down by £0.2 billion (see local government). Public Sector net borrowing in 2012/13 has been revised down by £0.1 billion and in 2013/14 down by £0.7 billion (see central and local government as well as public corporations).
Revisions to central government net borrowing (CGNB) are confined to the current financial year.
In 2013/14 CGNB was revised downwards by £2.1 billion. This is a combination of upward revisions to taxes on production and income and capital gains tax as well as downward revisions to other current expenditure (primarily departmental spending) and net investment.
The following have caused revisions to local government net borrowing (LGNB):
From 2010/11 onwards LGNB has been reduced by just over £0.2 billion each year as additional revenue from Crossrail business rate supplements has been included.
In 2013/14 LGNB has increased by £1.4 billion. Approximately half of this revision is a result of an error being highlighted for local government final consumption expenditure, through the reconciliation of National Accounts data with Public Sector Finances. The remainder of the revision is a result of later departmental data for current and capital grants.
Revisions to non-financial public corporations net borrowing (PCNB) from 2012/13 onwards relate to updated data for gross fixed capital formation. The revisions have increased PCNB by £0.1 billion in 2012/13 and are broadly neutral on the year to date in 2013/14.
|United Kingdom||£ billion1 (not seasonally adjusted)|
|Net Borrowing||Net Debt|
|Period||CG||LG||Non-financial PCs||PSNB ex||PS Banks||PSNB||PSND ex||PSND ex as % of GDP2||PSNCR|
This bulletin contains the latest estimate of public sector borrowing for the 2012/13 financial year. This estimate will be revised in later months as improved data are received or provisional data sources are replaced with data sources which are closer to finalised.
In publishing monthly estimates, it is necessary that a range of different types of data sources are used. A summary of the different sources used and the implications this has for data revisions is provided in the document Sources summary and their timing (22.8 Kb Pdf) . More detail of the methodology and sources employed can be found in the Public Sector Finances Methodological Guide (360.3 Kb Pdf) .
In January 2014, public sector net borrowing, excluding the temporary effects of financial interventions (PSNB ex) was £-4.7 billion (a surplus). This was £5.1 billion less of a surplus than in January 2013, when net borrowing was £-9.8 billion (a surplus).
For the financial year to date 2013/14, the public sector net borrowing, excluding the temporary effects of financial interventions (PSNB ex) and removing the impact of the cash transfers from the asset purchase facility and the Royal Mail Pension Plan transfer, was £90.7 billion. This was £4.0 billion lower than in the same period in 2012/13, when net borrowing was £94.6 billion. If the impact of the cash transfers from the Asset Purchase Facility and Royal Mail Pension Plan transfer are included, then public sector net borrowing increased from £62.8 billion to £78.5 billion, an increase of £15.6 billion over the same period.
In 2012/13, the public sector net borrowing, excluding the temporary effects of financial interventions (PSNB ex) and removing the impact of the cash transfers from the asset purchase facility and the Royal Mail Pension Plan transfer, was £114.8 billion. This was £2.6 billion lower than in 2011/12, when net borrowing was £117.4 billion. If the impact of the cash transfers from the Asset Purchase Facility and Royal Mail Pension Plan transfer are included then public sector net borrowing in 2012/13 was £37.1 billion lower than in 2011/12.
The £2.6 billion fall in PSNB ex between 2011/12 and 2012/13, once cash transfers from the Asset Purchase Facility and the Royal Mail Pension Plan transfer impacts are removed, is composed of a £5.9 billion reduction in net investment and a £3.3 billion increase in the current budget deficit.
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 (that is, 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 amount.
In the UK the public sector consists of four sub-sectors: central government, local government, non financial public corporations and financial public corporations (i.e. public sector banking groups). The largest share of the public sector net borrowing relates to central government transactions, as shown in Table 4 ‘Sectoral Breakdown of Public Sector Net Borrowing’. A time series presentation of these same data can be found in table PSF2 of this bulletin.
|United Kingdom||£ billion1 (not seasonally adjusted)|
|Non-Financial Public Corporations2||-0.3||-0.3||-0.1||-2.5||-2.5||0.1|
|PS Net Borrowing (PSNB ex)||-4.7||-9.8||5.1||78.5||62.8||15.6|
|Public Sector Banking Groups||-1.7||2.0||-3.7||-5.1||-14.6||9.5|
|PS Net Borrowing (PSNB)||-6.4||-7.8||1.3||73.4||48.3||25.2|
At the end of January 2014 the public sector net debt excluding the temporary effects of financial interventions (PSND ex) was £1,239.6 billion (74.6% of GDP). This compares with a PSND ex of £1,158.4 billion (72.6% of GDP) at the end of January 2013.
Public sector net debt data 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 2000/01,
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.
The central government accrued data are shown in three 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,
PSF3C which provides the central government account data consistent with definitions used for the European System of Accounts.
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.
In January 2014, central government accrued current receipts were £62.1 billion, which was £3.8 billion, or 5.7%, lower than in January 2013, when central government current receipts were £65.8 billion. The main reductions in the lower receipts in January 2014 (compared with January 2013) were in taxes on income and wealth and in interest and dividends.
Income tax reported in January 2014 decreased by £1.3 billion, or 4.9% compared with the same month last year. January receipts are influenced by the timing of HMRC income tax returns. Self assessment returns will also be received in February, meaning that a conclusion on total income receipts should not be drawn at this stage.
PAYE tends to vary little throughout the financial year on a monthly basis (excluding bonus months).
Interest and dividends receipts in January 2014 were £3.6 billion, or 83.7% lower than in the same month last year. January 2013 included a £3.8 billion asset purchase facility (APF) transfer , whereas January 2014 receipts do not include any APF transfers.
For the period April to January 2014, central government accrued current receipts were £480.5 billion, which was £23.6 billion higher than the same period the previous year.
Dividends from the Bank of England Asset Purchase Facility Fund have increased current receipts by £12.2 billion between April to 2013 and January 2014. However, Between April 2012 and to January 2013 the current receipts were also increased by dividend payments, in this case £2.3 billion of dividends from the Special Liquidity Scheme (SLS) and a £3.8 billion APF transfer. If the effects of these transactions were excluded then central government accrued current receipts for the period April 2013 to January 2014 would be £17.4 billion, or 3.9% higher than in the same period the previous year.
In 2012/13, central government accrued current receipts were £550.5 billion, which was £12.7 billion, or 2.4%, higher than in 2011/12, when central government current receipts were £537.8 billion. The largest components of the £12.7 billion increase (between 2011/12 and 2012/13) in central government accrued current receipts were: a £7.1 billion increase in interest and dividends, a £2.3 billion increase in VAT, a £3.8 billion increase in income tax and national insurance contributions and a £3.0 billion decrease in corporation tax.
Although receipts have increased by £12.7 billion between 2011/12 and 2012/13 if the effect of the SLS transaction and asset purchase facility transactions were to be excluded then central government receipts would have increased by £4.0 billion between 2011/12 and 2012/13.
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 substantial amount of forecast data. Therefore, care must be taken when making inferences based on receipts data for the latest months.
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 Figure 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.
In January 2014, central government accrued current expenditure was £52.6 billion, which was £0.4 billion, or 0.8%, higher than January 2013, when central government current expenditure was £52.2 billion.
For the period April 2013 to January 2014, central government accrued current expenditure was £534.7 billion, which was £6.8 billion, or 1.3%, higher than the same period the previous year. Within this, net social benefit expenditure was £163.2 billion, which was £1.7 billion, or 1.0%, higher than in the same period in 2012/13.
It is difficult to compare monthly expenditure between 2013/14 and 2012/13. This is because there have been a number of changes to the way that local authorities are funded.
In 2011/12 and earlier years the funds were distributed in multiple, near equal sized, payments throughout the year. In 2012/13 local authorities received almost all their funding from DCLG through redistributed business rates, rather than the Revenue Support Grant. In addition in 2012/13, as in earlier years, the bulk of the Revenue Support Grant was paid in April with a small balance paid later in the year.
From the start of 2013/14 local authorities retain half of the business rates they collect, with the remainder redistributed through the Revenue Support Grant. The retained business rates are still classified as a central government tax (see background note). Furthermore, the Revenue Support Grant in 2013/14 includes a number of grants that were paid by other departments in 2012/13, including one to fund council tax benefit localisation. This means that central government current expenditure year-on-year growth for April is high while year on year growth in other months will, generally, be lower.
In 2012/13, central government accrued current expenditure was £630.8 billion, which was £11.8 billion, or 1.9%, higher than in 2011/12, when central government current expenditure was £619.0 billion.
The £11.8 billion increase in central government accrued current expenditure between 2011/12 and 2012/13 is composed of a £10.0 billion increase in net social benefits (largely pension benefits), a £0.8 billion decrease in interest payments and a £2.6 billion increase in other current expenditure. The increase in year on year spending on net social benefits is mainly due to the uprating of benefits. Benefits were uprated by 5.2% in 2012/13 in line with the Consumer Prices Index (CPI). This contrasts with an equivalent figure of 2.2% in 2013/14 - which partly explains the low growth in net social benefits in the period April 2013 to January 2014 outlined above.
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. On this basis, the total accrued current expenditure excluding debt interest was £494.1 billion for the year to date 2013/14, which was £6.7 billion, or 1.4% higher than in the same period in 2012/13.
The profile of accrued central government expenditure is broadly flat through the year as can be seen in Figure 3 and Figure 4. However, one observable cyclical pattern is that Net Social Benefits in December is higher than in other months 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.
In January 2014, central government net investment was £2.8 billion, which was £0.3 billion or 12.0%, higher than in January 2013, when it was £2.5 billion.
For the period April 2013 to January 2014, central government net investment was £22.4 billion, which was £29.5 billion higher than the same period the previous year.
April 2012 net investment was negative (a surplus) as a result of the transfer of the historic liabilities and some of the assets of the Royal Mail Pension Plan. This transfer resulted in a £28.0 billion reduction to central government net investment. If the effect of the transfer were to be excluded then central government net investment for the period April 2013 and January 2014 would be £1.5 billion higher than that between April 2012 and January 2013.
In 2012/13, central government net investment was -£3.5 billion, which was £26.5 billion lower than in 2011/12, when central government net investment was £23.0 billion. If the effect of the Royal Mail Pension Plan transfer were to be excluded then central government net investment for 2012/13 would be £24.5 billion, which would be £1.5 billion higher than in 2011/12.
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 transfers to and from the private sector and other parts of the public sector. Capital transfers 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.
In January 2014, central government net cash requirement (CGNCR) was £-13.7 billion (a surplus), which was £3.6 billion, or 20.8%, less of a surplus than in January 2013, when there was a CGNCR of £-17.3 billion (a surplus),.
For the period April 2013 to January 2014, CGNCR was £49.7 billion, which was £21.9 billion, or 30.6%, lower than in the same period the previous year, when there was a CGNCR of £71.6 billion.In the financial year 2012/13 the following events reduced CGNCR;
the Royal Mail Pension Plan transfer and subsequent sale of assets,
the transfer of the Special Liquidity Scheme final profits,
the 4G Spectrum sale and
the transfers between the asset purchase facility and Government
In the financial year 2013/14 the following reduced the CGNCR:
the transfers between the asset purchase facility and Government;
the sale of shares in Lloyds and Royal Mail
Net cash requirement data can be found in the following tables in this bulletin:
PSF4 provides net cash requirement by sector,
PSF5A & B 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 in a given period. 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.
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 45% of GDP at the end of March 2009 to 74% of GDP at the end of March 2013.
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 Figure 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. Public sector net borrowing figures back to 1993/94 are illustrated in Figure 7. Between 1998/99 and 2000/01, when public sector net debt was falling, net borrowing cumulatively over the year was negative (i.e. there was a surplus), but before and after this period the net borrowing was positive (i.e. there was a deficit). Between 2003/04 and 2007/08 net borrowing was fairly static, varying between £35 billion and £43 billion, but with the onset of the financial shock in late 2007 net borrowing rose sharply to a peak of £157 billion in 2009/10 before falling a little to £139 billion in 2010/11 and then further to £117 billion in 2011/12 and £80 billion in 2012/13 (or £115 billion excluding the Royal Mail Pension Plan transfer and the Bank of England Asset Purchase Facility Fund transfers).
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, 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.
Since 2007/08 the Government has made several direct interventions in the UK financial sector as a response to the global financial shock. 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 an 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 PSF 11 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.
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, 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’.
Table 5 compares the key measures of PSNB and PSND, and related statistics, for the year to date in 2013/14 with the same period in 2012/13. It should be noted that 2013/14 figures for the public sector banking groups for July onwards are ONS estimates and so significant revisions can occur once outturn data become available.
|United Kingdom||£ billion1 (not seasonally adjusted)|
|January||April - January|
|PS Current Budget2||9.6||10.6||-1.0||-55.1||-58.9||3.8|
|PS Net Investment3||3.2||2.9||0.3||18.4||-10.6||29.0|
|PS Net Investment ex RM 3,5||3.2||2.9||0.3||18.4||17.4||0.9|
|PS Net Borrowing (PSNB)4||-6.4||-7.8||1.3||73.4||48.3||25.2|
|PS Net Borrowing (PSNB) ex RM 4,5||-6.4||-7.8||1.3||73.4||76.3||-2.9|
|PS Net Debt (PSND)6||2,215.6||2,201.6||14.0||2,215.6||2,201.6||14.0|
|PS Net Debt as a % of annual GDP 7||133.3||138.0||-4.7||133.3||138.0||-4.7|
Public sector net borrowing including the temporary effects of financial interventions (PSNB) covers all public sector bodies and so the cash transfers from the Bank of England Asset Purchase Facility Fund to the Government have no impact on PSNB. This is as the transfers are within the public sector and not between the public and private sector. However, in the case of the transfer of the Royal Mail Pension Plan this does impact on PSNB as the historic pension assets and liabilities were transferred from a pension fund (classified outside the public sector) to the Government. The impact of the Royal Mail Pension Plan transfer is shown in Table 5.
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 2014 was £2,215.6 billion (133.3% of GDP), this compares with a public sector net debt excluding the temporary effects of financial interventions of £1,239.6 billion (74.6% of GDP).
The net debt for the measure including any temporary effects of the financial interventions is 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 £925 billion at the end of September 2013. 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 2013 and January 2014 the public sector net debt (PSND) increased by £14.0 billion. Over this period, the debt-to-GDP ratio fell from 138.0% of GDP to 133.3% of GDP as a result of GDP growing faster than PSND.
Table PSF1 shows that the 2012/13 public sector net borrowing including the temporary effects of financial interventions is £65.0 billion which is £15.4 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 in those months not affected by the asset purchase facility fund 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.
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 2 October 2013 reports that in 2012 the general government deficit (or net borrowing) was 6.1% of GDP, and at the end of December 2012 the general government gross debt was 88.7% 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 as a whole.
The UK figures may be compared with 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 at the end of September 2013 were published on the ONS website on 18 October 2013.
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 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 with 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’.
On 12 June 2013, the UK Statistics Authority published its report on the statistical treatment of the cash transfers from the Bank of England Asset Purchase Facility Fund.
On 17 December 2013, ONS announced:
the impacts of the move from European System of Accounts 1995 to European System of Accounts 2010 on Public Sector Finance Statistics including the classification of Network Rail under this guidance;
The move to European System of Accounts 2010 will take place across all European Member States in September 2014. Any changes from the consultation will be implemented alongside ESA10 and so none of the impacts from these documents are shown in this release.
The consultation on the Review of Public Sector Finance Statistics closed on 28 January 2014. A response to the comments received is planned for publication on the ONS website on 28 February 2014.
PSF1 Public Sector Summary Balances
PSF2 Public Sector Net Borrowing: by sector
PSF3A Central Government Account: 2012/13
PSF3B Central Government Account: Overview
PSF3C Central Government Account: Total Revenue,Total Expenditure and Net Borrowing
PSF4 Public Sector Net Cash Requirement
PSF5 Central Government Net Cash Requirement on own account (receipts and outlays on a cash basis)
PSF6A Public Sector Consolidated Gross Debt (nominal values at end of period)
PSF6B Public Sector Net Debt (nominal values at end of period)
PSF7 Public Sector Finances: Current Budget, Net Borrowing and Net Cash Requirement
PSF10A Reconciliation of Public Sector Net Borrowing and Net Cash Requirement
PSF10B Reconciliation of Central Government Net Borrowing and Net Cash Requirement
PSF11A Reconciliation of PSNB and PSNB ex
PSF11B Reconciliation of PSND and PSND ex
PSF12R Public Sector Statistics: revisions since last publication
A 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.
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.
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.
Range of measures published
In this bulletin we publish in tables the headline measures of borrowing and debt (PSNB ex and PSND ex) as well as the wider measures of borrowing and deficit which include temporary impacts of financial interventions.
The Public Sector Finances (PSF) have a more flexible revisions policy than other National Accounts data. Therefore, PSF data may be inconsistent with the published GDP and Sector and Financial accounts datasets because a revision may not be incorporated into the main National Accounts dataset until a later date. In Blue Book 2013, a process of alignment took place between National Accounts and Public Sector Finances. This significantly reduced the historic differences between National Accounts and Public Sector Finances. As a result of this work the figures in this monthly publication are largely consistent with the National Accounts figures, for more details of the alignment work and the existing differences between Public Sector Finances and National Accounts see the ONS article on the subject.
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 2 October 2013. The next bulletin will be published on 3 April 2014.
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.
The 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.
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 PSF5A & B of the bulletin.
OSCAR - Online System for Central Accounting and Reporting
In June 2010, HM Treasury published as part of the Government transparency agenda, raw data from the COINS database (the predecessor to OSCAR) for the years 2005/06 to 2009/10. From September 2012 onwards the data releases have been made from OSCAR the new accounting system.
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. These revisions are not normally included in the Public Sector Finances statistical bulletin until the September release
The local government data for 2010/11 and 2011/12 are based on final outturns for receipts and expenditure. Data for 2012/13 and 2013/14 are based on either provisional estimates or forecasts and are subject to revisions when final outturn data become available.
The public sector revisions’ policy (14.5 Kb Pdf) is available on the ONS website.
Currently data for the public sector banking groups are only available for periods up to June 2013. Values for months from July 2013 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.
Historically, local government and public corporation net borrowing in the bulletin were derived in two different ways depending on the month to which the net borrowing related.
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.
National Non-Domestic Rates (business rates)
In the financial year 2013/14 there was a change in the way national non-domestic rates were collected and re-distributed to local government. However, because the transactions take place between central and local government the impact on the overall public sector finances was, and will continue to be neutral.
The profile of the payments from central government to local government was previously relatively stable across the financial year. Under the new method some of the money is now transferred at the beginning and end of the financial year
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.
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.
|Revisions between first publication and estimate twelve months later|
|Latest monthly value||Average over the last five years||Average over the last five years (average absolute revision)|
|General Government Net borrowing, £m (-NNBK)||-4,378||-970||1,717|
As general government net borrowing is quite close in terms of coverage to PSNB ex, it is 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.
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.
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 sub-sector.
Recommendations for the improvement of the Public Sector Finances Statistical Bulletin may be emailed to firstname.lastname@example.org
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|Gareth Clancy||+44 (0)1633 455889||Public Sector Financesfirstname.lastname@example.org|