This edition of the Public Sector Finances statistical bulletin introduces a new format to the publication. This new format has been arrived at following user consultation, and it aims to provide more commentary and contextual information on the public sector finance statistics. The bulletin also includes some additional data not previously published, or previously published outside of the main bulletin.
At the front of the bulletin are the main aggregates and information on recent events and/or methodological changes which impact on the statistics. 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. Information on revisions since the last publication and more detailed notes on the publication are located towards the back of the bulletin.
Four new tables (PSF3A, PSF6A, PSF6B and PSF10B) have been added to the bulletin. Table PSF3A shows central government data for the latest month, and the year to date, and compares it with the same periods in the previous year. Tables PSF6A and PSF6B show a breakdown of public sector gross and net debt.
This breakdown was previously published separately to the Public Sector Finances bulletin. Table PSF10B presents a reconciliation between central government net borrowing and central government net cash requirement. In addition, table PSF7 has been extended to include cumulative central government net cash requirement figures. Due to the introduction of these new tables some of the table numbering used in previous bulletins has been changed, for example, the previous table PSF3 is now PSF3B.
The table ‘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.
|June||April – June|
|PS Current Budget3||-13.0||-12.4||-0.6||-41.6||-35.1||-6.5|
|PS Net Investment4||1.4||1.5||-0.1||-26.6||3.4||-30.0|
|PS Net Borrowing (PSNB ex)5||14.4||13.9||0.5||14.9||38.4||-23.5|
|PS Net Debt (PSND ex)6||1,038.3||944.6||93.7||:||:||:|
|PS Net Debt as a % of annual GDP||66.1||62.3||3.8||:||:||:|
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 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 OBR forecast, published in March 2012, for public sector net borrowing in 2011/12 was £126 billion. The latest estimate for public sector net borrowing in 2011/12, as published in this bulletin, is £125.7 billion.
The table 'Latest Outturn Estimates and OBR Forecasts' calculates the growth rate between 2012/13 data for April to June 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 March 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 18.6 per cent compared to the same period last year. The comparable forecast is for a full year growth in current budget of 3.8 per cent between 2011/12 and 2012/13.
Comparisons between public sector net investment and net borrowing for the April to June period are dominated by the £28 billion transfer received by government from the assets of the Royal Mail pension plan in April. Although, this transfer was foreseen by the OBR and included in their forecast, the size of the transfer is sufficient to significantly distort comparisons between the year to date and the full year. For this reason, the table includes public sector net investment and net borrowing figures excluding the Royal Mail pension transfer. These figures show that, for the year to date, public sector net borrowing has risen by 11.7 per cent, which compares to a forecasted 4.6 per cent decline for the full year.
Caution must 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 sizeable 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. 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.
|April-June Year to date||Full Year|
|2012/13||2011/12||Growth||2012/13 OBR Forecast||2011/12 Outturn||Forecasted Growth|
|PS Current Budget (PSCB)3||-41.6||-35.1||-18.6%||-95.3||-99.1||3.8%|
|PS Net Investment (PSNI)4||-26.6||3.4||-890.2%||-3.4||26.6||-112.8%|
|PSNI excluding Royal Mail pension transfer||1.4||3.4||-59.8%||24.6||26.6||-7.6%|
|PS Net Borrowing (PSNB ex)5||14.9||38.4||-61.2%||91.9||125.7||-26.9%|
|PSNB ex excluding Royal Mail pension transfer||42.9||38.4||11.7%||119.9||125.7||-4.6%|
|PS Net Debt (PSND ex)6||1,038.3||944.6||9.9%||1,159.0||1,023.1||13.3%|
|PS Net Debt as a % of annual GDP||66.1||62.3||6.1%||71.9||65.8||9.3%|
A new methodology has been introduced for accruing the cash paid by government as coupons to holders of gilts. Gilt coupons are interest payments made at regular intervals, with most gilts attracting coupons every six months. Previously, this cash data was accrued by taking the total cash paid in a year and smoothing it over the twelve months (using a splining algorithm).
This method while attractive in its simplicity does not accurately reflect the gilt interest accrued in any month as it doesn’t adjust for gilt issuances and redemptions. So, although the sum of the accrued data correctly matches the sum of the cash data, the profile for the accrued data does not reflect the pattern of gilt issuances and redemptions.
The new methodology for accruing gilt coupons improves on the previous methodology by considering each gilt issuance separately. In this way accrued interest begins to be recorded as soon as a gilt is auctioned (or otherwise issued), is regularly zeroed with each coupon paid, and then accrues again, following this pattern up until the point of gilt redemption.
The new methodology has been implemented from 2002/03 with the result that accrued gilt interest, and so central government net borrowing, has risen in 2004/05, 2006/07, 2007/08, 2008/09, 2009/10, 2010/11 and 2011/12 by £99 million, £115 million, £233 million, £526 million, £234 million, £216 million and £203 million respectively. Contrastingly, accrued gilt interest, and so central government net borrowing, has reduced in 2002/03, 2003/04 and 2005/06 by £223 million, £278 million and £273 million respectively.
The methodological change has no impact on cash data or the public sector net debt.
A change to the accrual methodology for tobacco excise duties has been implemented back to 2002/03. This change follows a methodological review by HM Revenue and Customs (HMRC).
Accrued tax receipts are calculated using formulae to time adjust the cash data. For instance, cash from the PAYE income tax system is received, on average, a month after the period to which it relates. Therefore, to estimate the accrued value for PAYE income tax receipts the cash data are lagged by one month.
Similarly to PAYE data, excise duties for wine, spirits and beer are accrued by lagging the cash data by one month. Contrastingly, tobacco duties have been accrued by smoothing total annual cash receipts across the year. By smoothing in this way information about peaks of economic activity, such as forestalling activities, are removed from the accrued data. The review for tobacco duties concluded that there was no rationale for treating tobacco duties differently to other excise duties on products. As a result, the accrual methodology for tobacco duties has been brought in line with other similar excise duties by applying a one month lag to the cash data.
HM Treasury is currently replacing its COINS system for financial reporting with a new Online System for Central Accounting and Reporting (OSCAR). This system collects public spending data from central government departments and the devolved administrations. June is the second 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 over the first half of 2012/13.
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 (i.e. £28 billion).
Central government net borrowing for April 2012 has been reduced by the total value of all the assets (i.e. £28 billion).
Central government net cash requirement, from April 2012 onwards, has been boosted (i.e. 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 (i.e. gilts) previously held by the pension fund and transferred to central government. Net debt is reduced by the cash as this is an illiquid 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.
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 which has been recorded as a capital grant to Central Government from the Bank of England in April. 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.
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 three per cent, and a debt to GDP ratio of 60 per cent. EU Member Governments have to report their actual and planned government deficits, and the levels of their debt, 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 30 March 2012 reports that in 2011 the general government deficit (or net borrowing) was 8.3 per cent of GDP, and at the end of December 2011 the general government gross debt was 82.9 per cent 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. Eurostat published on this website the latest EU and Member State deficit and debt figures on 23 April 2012. A full set of government finance tables provided by the UK to Eurostat as part of the April notification were published on the ONS website on 26 April 2012.
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’.
In June 2012 the public sector net borrowing, excluding the temporary effects of financial interventions (PSNB ex), was £14.4 billion, which was £0.5 billion higher than in June 2011, when PSNB ex was £13.9 billion.
For the period April to June 2012, the public sector net borrowing, excluding the temporary effects of financial interventions (PSNB ex), was £14.9 billion, which was £23.5 billion lower than in the same period of the previous year, when PSNB ex was £38.4 billion.
The April 2012 net borrowing figures include two one-off transactions. The first is a £28 billion transaction to the Government from the transfer of the Royal Mail Pension Plan and the second is a £2.3 billion transaction to the Government from the closure of the Special Liquidity Scheme.
For details of these one-off events see the ‘Recent events and methodological changes’ section. If the effect of these two one-off transactions is removed from the public sector net borrowing then PSNB ex in the period April to June 2012 would be £45.2 billion, which would be £6.8 billion higher than in April to June 2011.
In 2011/12 the public sector net borrowing, excluding the temporary effects of the financial interventions (PSNB ex), was £125.7 billion, which was £15.0 billion lower than in 2010/11, when PSNB ex was £140.7 billion. The £15.0 billion drop in PSNB ex between 2011/12 and 2010/11 is composed of a £11.3 billion reduction in net investment and £3.7 billion reduction in the current budget deficit.
Values (as for all figures in this bulletin) are in current prices, i.e 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 (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.
In the UK the public sector consists of four sub-sectors; central government, local government, non-financial public corporations and financial public corporations (that is, public sector banking groups). As can be seen in the table ‘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.
|June||April – June|
|Non-Financial Public Corporations3||0.2||-0.6||0.8||0.7||-0.4||1.2|
|PS Net Borrowing (PSNB ex)1||14.4||13.9||0.5||14.9||38.4||-23.5|
|Public Sector Banking Groups||-2.4||-2.8||0.5||-4.8||-8.6||3.8|
|PS Net Borrowing (PSNB)2||12.1||11.1||1.0||10.2||29.9||-19.7|
At the end of June 2012 the public sector net debt excluding the temporary effects of financial interventions (PSND ex) was £1,038.3 billion (66.1 per cent of GDP). This compares to a PSND ex of £944.6 billion (62.3 per cent of GDP) at the end of June 2011.
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 (i.e. the cost to the issuer at redemption) and consolidated (i.e. 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 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.
In June 2012, central government accrued current receipts were £40.9 billion, which was £1.4 billion, or 3.6 per cent, higher than in June 2011, when central government current receipts were £39.5 billion.
For the period April to June 2012, central government accrued current receipts were £122.2 billion, which was £3.0 billion, or 2.5 per cent, higher than in the same period of the previous year, when central government current receipts were £119.1 billion.
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.
A large part of the rise in receipts between 2011/12 and 2010/11 was attributable to a rise in VAT receipts of £12.4 billion. This rise, in large part, reflects the change in the rate from 17.5 to 20 per cent. 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 £4.8 billion, or 1.9 per cent, compared to 2010/11.
Other taxes rose by £2.4 billion between 2011/12 and 2010/11 due to the Bank Levy which was introduced in July 2011. However, rises in taxes on production were suppressed by the one-off Bank Payroll Tax which only applied in 2010/11, and which raised £3.5 billion, all accrued to April 2010.
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. 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 June 2012, central government accrued current expenditure was £52.4 billion, which was £0.4 billion, or 0.8 per cent, lower than June 2011, when central government current expenditure was £52.8 billion.
For the period April to June 2012, central government accrued current expenditure was £160.8 billion, which was £3.4 billion, or 2.1 per cent, higher than in the same period of the previous year, when central government current expenditure was £157.5 billion.
The rise of £10.6 billion is due to a rise in debt interest payments of £2.6 billion, a rise of net social benefits of £8.3 billion and a fall in other expenditure of £0.2 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 £570.0 billon, which was £8.0 billion, or 1.4 per cent, higher than in 2010/11.
In June 2012, central government net investment was £2.3 billion, which was £0.1 billion, or 4.8 per cent, higher than in June 2011, when central government net investment was £2.2 billion.
For the period April to June 2012, central government net investment was -£23.7 billion, which was £29.4 billion lower than in the same period of the previous year, when central government net investment was £5.7 billion.
The April 2012 central government net investment includes two one-off transactions. The first is a £28 billion capital grant to the Government from the transfer of the Royal Mail Pension Plan and the second is a £2.3 billion capital grant to the Government from for the profits of the Special Liquidity Scheme, after its closure.
For details of these one-off events see the ‘Recent events and methodological changes’ section. If the effect of these two one-off transactions were to be removed from central government net investment then for the period April to June 2012 the central government net investment would be £6.6 billion, which would be £0.9 billion higher than in April to June 2011.
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 last month's 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 £30.8 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.
In June 2012, central government net cash requirement (CGNCR) was £21.6 billion, which was £1.8 billion, or 7.7 per cent, lower than in June 2011, when there was a CGNCR of £23.4 billion.
For the period April to June 2012, CGNCR was £28.0 billion, which was £13.7 billion, or 32.9 per cent, lower than in the same period of the previous year, when there was a CGNCR of £41.8 billion.
A large part of the drop in CGNCR between April to June 2012 and the same period in the previous year can be attributed to the cash realised in 2012/12 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 per cent, 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.
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 (i.e 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, 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, 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’.
The 2011/12 public sector net borrowing including the temporary effects of financial interventions is £97.5 billion which is £28.2 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.
|June||April – June|
|PS Current Budget3||-10.6||-9.6||-1.0||-34.3||-26.5||-7.8|
|PS Net Investment4||1.5||1.5||0.0||-24.1||3.4||-27.5|
|PS Net Borrowing (PSNB)5||12.1||11.1||1.0||10.2||29.9||-19.7|
|PS Net Debt (PSND)6||2,268.1||2,259.0||9.1||:||:||:|
|PS Net Debt as a % of annual GDP||144.5||149.0||-4.5||:||:||:|
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 June 2012 was £2,268.1 billion (144.5 per cent of GDP), this compares to a public sector net debt excluding the temporary effects of financial interventions of £1,038.3 billion (66.1 per cent 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 £1,123 billion at the end of June 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.
Although public sector net debt rose by £9.1 billion between June 2011 and June 2012, the net debt as a percentage of GDP actually fell from 149.0 per cent to 144.5 per cent. 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.
Table PSF12R presents the revisions to key aggregates 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.
There have been changes to public sector current budget and net borrowing estimates back to 2002/03 as a result of, a methodological change to the way that accrued interest is calculated for gilt coupons, and a further methodological change to the way that tobacco duties are accrued. Details of both these methodological changes are given in the ‘Recent events and methodological changes’ section of this bulletin.
The size of the revisions to public sector net borrowing excluding the temporary effects of financial interventions (PSNB ex) stemming from these methodological improvements are:
£197 million decrease in PSNB ex in 2002/03.
£780 million decrease in PSNB ex in 2003/04.
£140 million increase in PSNB ex in 2004/05.
£760 million decrease in PSNB ex in 2005/06.
£618 million increase in PSNB ex in 2006/07.
£282 million increase in PSNB ex in 2007/08.
£988 million increase in PSNB ex in 2008/09.
£423 million decrease in PSNB ex in 2009/10.
£58 million increase in PSNB ex in 2010/11.
£144 million decrease in PSNB ex in 2011/12.
Local government net borrowing in 2011/12 has been revised downwards by £1.4 billion due to receipt of revised, end of year, figures for capital spending of local authorities.
Central government net borrowing for the first two months of 2012/13 has been revised up by £254 million, largely as a result of actual tax receipts replacing previous forecasts and departments improve on their initial expenditure estimates.
Local government net borrowing for the first two months of 2012/13 has been revised down by £818 million, as a result of revised forecasts for capital spending during the year.
Gross Domestic Product (GDP) has been revised in this month’s bulletin following revisions in June 2012 as part of the quarterly national accounts release. The GDP revisions extend back to 2000/01 and consequently fiscal aggregates presented as a percentage of GDP have been revised since this point. The impact has been to revise PSND ex as a percentage of GDP by up to 0.4%.
PSF1 Public Sector Summary Balances
PSF2 Public Sector Net Borrowing: by sector
PSF3A Central Government Account: 2011/12
PSF3B Central Government Account: time series
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
PSF8 Public Sector Finances: Net debt (excluding the temporary effects of financial interventions)
PSF9 Long Run of Fiscal Indicators as a percentage of GDP
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 (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.
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.
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 is still within the public sector and continues to be included within the data of this bulletin.
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.
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.
A methodology guide 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.
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.
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.
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 (70.8 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.
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.
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.
As part of our continuous engagement strategy, we welcome comments on how else we might improve the Public Sector Finances Statistical Bulletin. If you have recommendations for the improvement of the Public Sector Finances Statistical Bulletin, please email them to firstname.lastname@example.org or see the contact details below.
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.
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 in March 2012.
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.
Since April 2011, Eurostat has amended the UK estimates of EDP deficit and debt to reflect an alternative treatment of data for Northern Rock Asset Management plc and Bradford and Bingley plc. ONS classifies these as financial corporations within the public sector, but Eurostat's view is that they are defeasance structures and should be classified to the central government sector. The appropriate classification for these entities is currently under review.
Tax receipts data published in this bulletin are presented in terms of broad tax categories (e.g. Income Tax, VAT). For more detail 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 PSF6 of the bulletin.
Data from HM Treasury’s COINS database underlie the Central Government expenditure figures provided in this publication up to March 2012. 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. Subsequently, updated COINS data for 2006/7 to 2009/10 and latest outturn data for 2010/11 were released in September 2011. In-year quarterly COINS data are also published by HM Treasury, with the latest quarterly release made on 26 June 2012. The data are accessible from HM Treasury's website.
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.
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 and 2012/13 are at stage 1.
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.
Before January 2012, local government net borrowing in the bulletin was derived in two different ways depending on the month to which the net borrowing related. Local government net borrowing for the most recent month (or months) was estimated from information on local government cash deposits and loans.
Local government 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, this approach led to significant revisions (upwards and downwards) in local government data when estimates originally arrived at through financial loans / deposit data were updated quarterly to reflect the latest information on accrued expenditure and revenue.
These revisions in local government data were unhelpful when trying to capture the latest position of public sector borrowing. A development which is expected to reduce the size of these data revisions and improve the reliability of in-year local government data is the new quarterly data being collected by the Department for Communities and Local Government via their Quarterly Revenue Outturn.
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, since January 2012, to estimate the local government net borrowing consistently for all time periods from accrued current expenditure, revenue and net investment data.
Currently data for the public sector banking groups are only available for periods up to December 2011. Values for months from January 2012 onwards are ONS estimates. Consequently these, and the aggregates which include the impacts of financial interventions, may be revised substantially when new data become available.
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)||14,220||-784 *||1,486|
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 May 2006 (for April 2006 to April 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 on the ONS website. 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.
Details of the policy governing the release of new data are available from the Media Relations Office.
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 (21.6 Kb Pdf) to the contents of this bulletin is available. 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.
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.
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: email@example.com
These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.
|David Bailey||+44 (0)1633 455668||Public Sector Financesfirstname.lastname@example.org|