Public sector finances, UK: April 2023

• Public sector net borrowing (PSNB ex) in April 2023 was £25.6 billion, £11.9 billion more than in April 2022 and the second-highest April borrowing since monthly records began in 1993, with the growth in receipts being exceeded by the additional costs of the energy support schemes, increases in benefit payments and higher debt interest payable.

• Central government debt interest payable was £9.8 billion in April 2023, £3.1 billion more than April 2022 and the highest April figure since monthly records began in 1997; the recent large movements in interest payable are because of the effect of Retail Prices Index (RPI) inflation on index-linked gilts.

• Since our March 2023 publication, we have revised down our initial estimate of PSNB ex in the financial year ending (FYE) March 2023 by £2.1 billion to £137.1 billion, now £15.3 billion less than the £152.4 billion forecast by the Office for Budget Responsibility (OBR).

• Public sector net debt (PSND ex) at the end of April 2023 was £2,536.9 billion or around 99.2% of gross domestic product (GDP), with the debt-to-GDP ratio at levels last seen in the early 1960s; excluding the Bank of England, debt was £2,273.6 billion or around 88.9% of GDP, £263.2 billion lower than the wider measure.

• Public sector net worth (PSNW ex) was a deficit of £611.8 billion at the end of April 2023.

• Central government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was £18.8 billion in April 2023, £5.6 billion below the OBR expectation; the total for the FYE March 2023 remains at £111.3 billion, £4.1 billion less than the £115.4 billion forecast by the OBR.

Initial estimates for April 2023 show that the public sector spent more than it received in taxes and other income, requiring it to borrow £25.6 billion. This was £11.9 billion more than that borrowed in April 2022 and the second highest April borrowing since monthly records began in 1993, behind April 2020.

Public sector borrowing consists of two broad components: the current budget deficit and capital expenditure (or net investment).

In April 2023, the public sector current budget deficit (or borrowing to fund day-to-day activities) was £19.4 billion, £10.1 billion more than in April 2022. Over the same period, public sector net investment increased by £1.8 billion to £6.2 billion.

Notes

1. Public Sector excluding Bank of England and the public sector controlled banks.

2. Public Sector excluding the public sector controlled banks.

3. Excludes Network Rail Limited and UK Asset Resolution Limited.

4. The data in this table correspond to that published in table PSA2 of Public sector finances tables 1 to 10: Appendix A

Central government forms the largest part of the public sector and the relationship between its receipts and expenditure is the main determinant of public sector borrowing.

A breakdown of net borrowing by sub-sector and a summary of central government receipts and expenditure data are presented in Tables 1 to 3 in our Public sector finances summary tables: Appendix M.

A further detailed breakdown of public sector income is presented in our Public sector current receipts: Appendix D.

While central government’s receipts fell by £2.7 billion to £69.7 billion compared with April 2022, its total expenditure grew by £22.0 billion to £109.0 billion.

Compulsory social contributions fell by £1.3 billion to £12.9 billion compared with April 2022. This was largely because a temporary higher rate for the Health and Social Care Levy was introduced in April 2022 and later removed from 6 November 2022. Combined, central government tax receipts and compulsory social contributions were broadly flat compared with April last year.

Payments to and from central government and the Bank of England Asset Purchase Facility Fund cause a £3.2 billion fall in receipts and £9.8 billion extra capital expenditure, however the effect is neutral for public sector borrowing overall. We explain these transactions, along with other notable areas of April’s expenditure, in this section.

Interest payable on central government debt

In April 2023, the interest payable on central government debt was £9.8 billion, £3.1 billion more than in April 2022, as rises in the Retail Prices Index have increased the interest payable on index-linked gilts. This represents the third-highest interest payable in any month on record, behind the £20.0 billion in June 2022 and the £18.0 billion in December 2022.

On 18 July 2022, we published our The calculation of interest payable on government gilts article.

Energy support payments

In April 2023, central government spent £3.9 billion on subsidies, £1.8 billion more than in the April 2022. This growth was largely because of the cost of the Energy Price Guarantee for households and the Energy Bills Discount Scheme, which replaced the Energy Bill Relief Scheme for businesses across the UK from April 2023.

Other current grants

Central government paid £1.8 billion in “other current grants” in April 2023, £3.4 billion less than in April 2022. This fall was largely because of the £3.2 billion cost-of-living council tax rebate payments to households in England and Wales in April 2022.

Net social benefits

Net social benefits paid by central government in April 2023 were £25.4 billion, £4.5 billion more than in April 2022. This increase was in part because of inflation linked benefits uprating, along with the £2.2 billion Department for Work and Pensions (DWP): Means tested benefits cost-of-living payments, recorded this month.

Bank of England Asset Purchase Facility Fund

Between January 2013 and July 2022, HM Treasury received regular payments from the Bank of England Asset Purchase Facility Fund (APF) under the indemnity agreement. These payments have now stopped. As a result, central government interest and dividend receipts in April 2023 were estimated to be £1.0 billion, a reduction of £2.8 billion compared with April 2022.

This month the APF received its third payment from HM Treasury under the indemnity agreement. This £9.8 billion of central government expenditure has been recorded as a capital transfer to the Bank of England, a component of net investment.

As with other such payments, intra-public sector transfers are public sector net borrowing neutral. However, these central government transactions will impact our public sector net borrowing excluding the Bank of England (PSNB ex BoE) measure.

Since our Public sector finances, UK: March 2023 bulletin published on 25 April 2023, we have reduced our initial estimate of borrowing for the 12 months to March 2023 by £2.1 billion, to £137.1 billion.

This was £16.1 billion more borrowing than in the financial year ending (FYE) 2022. It remains the fourth-highest FYE borrowing since monthly records began, behind FYE 2021 (during the coronavirus (COVID-19) pandemic) and both the FYE 2010 and FYE 2011 (after the effects of the global financial downturn).

Public sector borrowing is calculated as the difference between its spending and its income.

We estimate that spending in the financial year ending March 2023 was £1,154.6 billion, £17.4 billion below the Office for Budget Responsibility (OBR) forecast of £1,172.0 billion, and including an estimated £41.2 billion on central government energy support payments and £106.7 billion on the interest payable on central government debt.

We also estimate that income in the financial year ending March 2023 was £1,017.5 billion, £2.2 billion below the OBR forecast of £1,019.7 billion. This income included central government tax receipts of £697.5 billion and compulsory social contributions (largely National Insurance Contributions) of £177.6 billion.

The affordability of borrowing FYE March 2023

Expressing borrowing as a ratio of gross domestic product (GDP) – the value of the output of the economy – gives an estimate of its affordability and provides a more robust comparison of the UK’s fiscal position over time.

The coronavirus pandemic had a substantial impact on the economy as well as public sector borrowing. Expressed as a proportion of GDP, borrowing in the FYE March 2021 was 15.0%, the highest for 75 years.

This proportion fell by 9.8 percentage points to 5.2% in the FYE March 2022 as the economy recovered from the coronavirus pandemic. However, initial estimates show that for the 12 months to March 2023, the proportion has risen by 0.2 percentage points to 5.4%, in part because of the impact of energy prices on the economy and public finances.

The balance sheet describes the financial position at a point in time. It shows the liabilities, (amounts owed) and the assets (amounts owned).

There are several measures of the public sector balance sheet which we discuss in our blog What the UK government owns and what it owes. Here we consider the narrowest measure, which is the redemption value of central government gilts issued by the UK government's Debt Management Office. We build upon this measure by widening coverage by both the sub-sector and the range of asset and liability types included to reach the far wider measure of public sector net worth, as explained in our methodology guide.

Notes

1. All aggregates are presented on a 2010 European system of national and regional accounts (ESA 2010) (PDF, 6.4MB) basis unless indicated.

2. Consolidation between sub-sectors mean that the size of assets and liabilities (such as gilts) impacting on the measure can change as the coverage increases.

3. Total equals liabilities less assets except public sector net worth, where total equals assets less liabilities.

4. Non-financial account data based on the UK national balance sheet.

5. “Liquid financial assets” mainly consists of foreign exchange reserves and cash deposits. “Illiquid financial assets” includes assets such as loans, financial derivatives, and other accounts receivable.

6. Gilt liabilities have been adjusted to remove those held by Pool Re which is classified as a central government body.

7. “Other financial liabilities” includes monetary gold and special drawing rights, standardised guarantees, financial derivatives, funded pension liabilities and other accounts payable.

8. We publish an additional presentation of the UK public sector balance sheet following International Monetary Fund’s Government Finance Statistics framework in the public sector finances: Appendix E.

Our public sector balance sheet tables: Appendix N presents a detailed reconciliation between the balance sheet measures summarised in Table 2.

Public sector net worth

Public sector net worth excluding public sector banks (PSNW ex) was a deficit of £611.8 billion at the end of April 2023. This compares with a £529.0 billion deficit at the end of April 2022.

The main reason for the £82.7 billion deterioration in PSNW ex over the past year was a £153.2 billion increase in PSND ex, partly offset by a £62.7 billion increase in public sector non-financial assets.

Public sector net debt

The most widely used balance sheet measure is public sector net debt excluding public sector banks (PSND ex). It comprises the excess of the public sector's financial liabilities (in the form of loans, debt securities, deposit holdings and currency) over its liquid financial assets (mainly foreign exchange reserves and cash deposits), with both measured at face or nominal value.

Expressing debt as a ratio of gross domestic product (GDP – the value of the output of the economy) gives an estimate of its affordability and provides a more robust comparison of the UK’s balance sheet over time.

The Bank of England’s contribution to net debt

Public sector net debt excluding the Bank of England (BoE) was £2,273.6 billion, or around 88.9% of GDP, £263.2 billion (or 10.3 percentage points of GDP) less than the wider measure. This difference is largely a result of the BoE’s quantitative easing activities, including the gilt-purchasing activities of the Asset Purchase Facility (APF) Fund.

The APF’s gilt holding is not recorded directly as a component of public sector net debt. Instead, in April 2023, we record the £110.1 billion difference between the £814.4 billion of reserves created to purchase its gilts (at market value) and their £704.3 billion redemption value.

Table PSA9A in our Public sector finances tables 1 to 10: Appendix A details the BoE’s contribution to public sector net debt.

The data for the latest months of every release contain a degree of forecasts. Subsequently, these are replaced by improved estimates, as further data are made available, and finally by outturn data.

Notes

1. Public Sector excluding Bank of England and the public sector controlled banks.

2. Public Sector excluding the public sector controlled banks.

3. The data in this table corresponds to that published in table PSA2 of Public sector finances tables 1 to 10: Appendix A.

Tables 4 to 6 of our Public sector finances summary tables: Appendix M compare our latest public sector finances data with those published in our Public sector finances, UK: March 2023 bulletin published on 25 April 2023 and highlight the revisions to borrowing by sub-sector, central government receipts and expenditure.

Revision to net borrowing (PSNB ex) in the financial year-to-March 2023

Since our Public sector finances, UK: March 2023 bulletin published on 25 April 2023, we have reduced our estimate of borrowing for the twelve months to March 2023 by £2.1 billion, to £137.1 billion. This is largely because of regular updates to our accrued central government tax receipts estimates of £1.5 billion. These estimates now include cash tax receipts received in April 2023 and updated cash tax forecasts published by the Office for Budget Responsibility (OBR) in its Economic and fiscal outlook – March 2023.

Revision to net debt (PSND ex) at the end of March 2023

Since our Public sector finances, UK: March 2023 bulletin published on 25 April 2023, we have reduced our previous estimate of debt at the end of March 2023 by £0.2 billion. This is largely because of regular updates to our estimate of the Bank of England’s (BoE) contribution to public sector net debt, where some components are reported in arrears.

Gross domestic product

This month we have updated our previous estimate of gross domestic product (GDP) for the final quarter of the financial year ending (FYE) 2023 with that published in our GDP first quarterly estimate, UK: January to March 2023 bulletin (12 May 2023).

This replaces our previous estimate, based on the OBR’s forecast growth of GDP used as the denominator in our presentation of debt (along with net borrowing, current budget deficit and net investment) as a proportion of GDP.

Given that the published GDP figure for the final quarter of the FYE 2023 was more than our initial estimate, this month our headline ratios have been revised down.

Table 7 of our Public sector finances summary tables: Appendix M compares our latest data with our last publication and highlights the revisions with our main public sector net debt measures.

Revisions to public sector net debt including public sector banks (PSND)

Estimates of the contribution of public sector banks to net debt are derived from the balance sheet data, supplied to us by the Bank of England twice annually.

This month we have received the balance sheet data covering the period July to December 2022 for the first time, enabling us to update previous estimates of PSND and to improve our previous forecast covering the period January 2023 to date.

As a consequence of receiving these data, our estimate of PSND at the end of March 2023 has increased by £12.9 billion.

Public sector

In the UK, the public sector consists of six sub-sectors: central government, local government, public non-financial corporations, public sector pensions, the Bank of England (BoE) and public financial corporations (or public sector banks). The figures presented in this release exclude public financial corporations unless otherwise noted.

Public sector current budget deficit

Public sector current budget deficit (PSCB) is the gap between current expenditure and current receipts on an accruals basis, having taken account of depreciation. The current budget is in surplus when receipts are greater than expenditure and is indicated with a negative sign.

Public sector net borrowing

Public sector net borrowing (PSNB) is the gap between total expenditure and current receipts on an accruals basis. If receipts exceed expenditure, this is referred to as a surplus and is indicated with a negative sign. Borrowing is often referred to by commentators as “the deficit”.

Central government net cash requirement

The central government net cash requirement (CGNCR) represents the cash needed to be raised from the financial markets over a period to finance its activities. The amount of cash required will be affected by changes in the timing of payments to and from the public sector rather than when these liabilities were incurred.

Public sector net debt

Public sector net debt (PSND) represents the amount of money the public sector owes to the private sector and overseas, net of liquid financial assets held, and is often referred to by commentators as “the national debt”.

Public sector net financial liabilities

Public sector net financial liabilities (PSNFL) is a wider measure of the balance sheet than public sector net debt and includes all financial assets and liabilities recognised in the National Accounts.

Public sector net worth

Public sector net worth (PSNW) is the widest measure of the balance sheet, broadening the PSNFL measure by considering the public sector’s non-financial assets.

Comparing our data with official forecasts

The independent Office for Budget Responsibility (OBR) is responsible for the production of official forecasts for the UK government. These forecasts are usually produced twice a year, in spring and autumn.

In its Economic and fiscal outlook – March 2023, the OBR estimated that the public sector would borrow £152.4 billion in the financial year ending (FYE) 2023.

Notes

1. This table uses the Economic and fiscal outlook – March 2023.

2. Bank of England.

3. All public sector measures in this table exclude public sector banks.

4. Figures may not sum because of rounding.

Every month the OBR publishes a brief analysis of the latest public sector finances, explaining how it should be interpreted considering its most recent public finances forecast for the current financial year.

Changes planned for June 2023

In June 2023, we plan to implement the re-classification of Bulb Energy Limited from the private to the public sector and to provide updates to our public sector funded pensions data.

These changes and their expected impacts on the fiscal aggregates are explained in our Recent and upcoming changes to public sector finance statistics: April 2023 article.

Tax receipts

In the most recent months, tax receipts recorded on an accrued basis are subject to some uncertainty. This is because many taxes such as Value Added Tax, Corporation Tax, and Pay as You Earn Income Tax contain some forecast cash receipts data and are liable to revision when actual cash receipts data are received.

The forecasts underlying our current tax estimates reflect the expectations published in the Office for Budget Responsibility’s (OBR’s) Economic and fiscal outlook – March 2023.

Local government and public corporations

Both local government and public corporations’ data in the most recent periods are initial estimates, largely based on OBR’s Economic and fiscal outlook (EFO) – March 2023, with adjustments being applied as needed.

In recent years, planned local government expenditure initially reported in local authority budgets has been systematically lower than final outturn current expenditure reported in the audited accounts and higher than that reported in final outturn capital expenditure. We therefore include adjustments to increase or decrease the amounts reported at the budget stage. For the financial year ending (FYE) 2023, we include a:

• £0.8 billion downward adjustment to Scotland’s capital expenditure

• £0.4 billion downward adjustment to Wales’s capital expenditure

• £4.0 billion upward adjustment to England’s current expenditure on goods and services

We apply a further £2.0 billion downward adjustment to budget forecast current expenditure on benefits in the FYE 2023, to reflect the most recently available data for housing benefits.

Public corporations’ data in the FYE 2023 are also largely based on EFO, although supplemented by in-year data replacing previous estimates for train operating companies, the Housing Revenue Account and surveyed public corporations.

Estimating the cost of the energy support schemes

Though fully reflected in our central government expenditure estimates, the costs of the individual energy support schemes are not yet separately identifiable in our source data.

Expenditure on the energy price cap schemes, Energy Price Guarantee (EPG) for households and the Energy Bill Relief Scheme (EBRS) for business customers, is recorded within our “subsidies” data. To provide an indicative estimate of their combined cost between October 2022 and March 2023, we have highlighted the £29.7 billion forecast published in the OBR’s Economic and fiscal outlook – March 2023.

In April 2023, EBRS was replaced by the Energy Bills Discount Scheme (EBDS). To highlight an indicative estimate of the cost of the combined EPG and EBDS in April 2023, we have assumed that all the year-on-year growth in subsidies, totalling £1.8 billion is because of these schemes.

The cost of the energy support schemes paid directly to consumers in the six months to March 2023 was recorded within “other current expenditure” data. While payments under the Energy Bills Support Scheme (EBSS) to consumers in Great Britain, totalling £11.5 billion are published separately, we cannot separately identify and highlight the expenditure on the other smaller schemes under the wider EBSS umbrella within our dataset. The EBSS closed in March 2023.