Public sector finances, UK: December 2023

• Public sector net borrowing excluding public sector banks (borrowing) in December 2023 was £7.8 billion, around half or £8.4 billion less than that borrowed in December 2022 and the lowest December borrowing since 2019.

• Central government debt interest payable was £4.0 billion in December 2023, £14.1 billion less than in December 2022 and the lowest December figure since 2020; changes in interest payable are largely the effect of Retail Prices Index (RPI) movements on index-linked gilts.

• Borrowing in the financial year-to-December 2023 was £119.1 billion, £11.1 billion more than in the same nine-month period the previous year and the fourth-highest financial year-to-December borrowing on record.

• Public sector net debt excluding public sector banks (debt) was £2,685.6 billion at the end of December 2023 and was provisionally estimated at around 97.7% of the UK's annual gross domestic product (GDP); this is 1.9 percentage points higher than in December 2022 and remains at levels last seen in the early 1960s.

• Excluding the Bank of England, debt was £2,437.9 billion, or around 88.7% of GDP, £247.7 billion (or 9.0 percentage points) lower than the wider measure.

• Public sector net worth excluding public sector banks was in deficit by £715.4 billion at the end of December 2023; this compares with a £593.7 billion deficit at the end of December 2022.

• Central government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was £18.7 billion in December 2023, £4.5 billion less than in December 2022.

The public sector spent more than it received in taxes and other income in December 2023, requiring it to borrow £7.8 billion. This was £8.4 billion less than was borrowed in December 2022 and the lowest December borrowing since 2019.

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 dataset.

Central government borrowing

Central government forms the largest part of the public sector and includes HM Revenue and Customs, the Department of Health and Social Care, the Department for Education and the Ministry of Defence.

The relationship between central government's receipts and expenditure is the main determinant of public sector borrowing. Central government borrowed £4.6 billion in December 2023, £10.1 billion less than in December 2022 and £6.7 billion less than the £11.3 billion forecast by the Office for Budget Responsibility (OBR).

Central government receipts

Central government's receipts were £81.5 billion in December 2023, £4.8 billion more than in December 2022 but £1.8 billion less than the £83.3 billion forecast by the OBR. Of this £81.5 billion, tax receipts were £61.1 billion, £3.5 billion more than in December 2022, with Income Tax receipts and Value Added Tax (VAT) receipts increasing by £1.3 billion and £1.2 billion, respectively.

A detailed breakdown of central government income is presented in our Public sector current receipts: Appendix D dataset.

Central government expenditure

Central government's total expenditure was £86.1 billion in December 2023, £5.4 billion less than in December 2022 and £8.4 billion less than the £94.5 billion forecast by the OBR.

Net investment

Central government's net investment was £5.4 billion in December 2023, £10.5 billion more than the negative £5.1 billion recorded in December 2022.

In February 2022, the UK government announced changes to interest rates and repayment terms for student loans in England. As a result of these changes, the central government's student loans book (or the money lent by government to students to fund their studies and living costs) was revalued and increased by £10.0 billion. That is, the amount expected to be repaid to government increased by £10.0 billion and therefore the amount not expected to be repaid, the amount recorded as paid by government, decreased by £10.0 billion.

In December 2022, when these regulations took effect, this revaluation was recorded as a £10.0 billion capital transfer from households to central government and so reduced net investment by a corresponding amount. There was no similar transaction in December 2023.

Net social benefits

Net social benefits paid by central government were £23.7 billion in December 2023, £2.7 billion more than in December 2022. In recent months we have seen large increases in benefit payments largely because of inflation-linked benefits uprating and cost-of-living payments. For more information on these benefit payments, see UK Parliament's Benefit uprating 2023 to 2024 report and GOV.UK's Cost of Living Payments 2023 to 2024 guidance.

Energy support schemes

Subsidies paid by central government were £2.4 billion in December 2023, £4.2 billion less than in December 2022. This is largely because of the cost of the Energy Price Guarantee (for households) and the Energy Bill Relief Scheme (for businesses), which affected this month the previous year.

Payments recorded under central government "other current grants" were £2.0 billion in December 2023, £1.7 billion less than in December 2022. This decrease was largely because of the cost of the previous year's Energy Bills Support Scheme when six monthly relief payments were made directly to households between October 2022 and March 2023.

Spending on goods and services

Central government departmental spending on goods and services was £33.7 billion in December 2023, £2.3 billion more than in December 2022, as inflation increased running costs. Of this, staff costs increased by £1.2 billion, and spending on the procurement of goods and services increased by £1.0 billion.

Interest payable on central government debt

In December 2023, the interest payable on central government debt was £4.0 billion, £14.1 billion less than in December 2022. This was the lowest December interest payable since 2020 and £5.5 billion less than the £9.5 billion forecast by the OBR.

The large month-on-month increases in the Retail Prices Index (RPI) observed since early 2021 led to substantial increases in debt interest payable, with the largest three months on record occurring in 2022 and 2023. The additional interest caused by RPI inflation is described as capital uplift and affects the value of the gilt principal.

Capital uplift in December 2023 was negative £0.1 billion reflecting the 0.2% decrease in the RPI between September and October 2023. This reduced the capital uplift on the three-month lagged index-linked gilts, which make up around three-quarters of the index-linked gilt stock. A monthly time series of the total capital uplift on the index-linked gilts in issue is available as series identifier code MW7L.

For further details of our approach, see our Calculation of interest payable on government gilts methodology.

The £7.8 billion borrowed in December 2023, combined with a downward revision of £5.0 billion to our previously published financial year-to-November 2023 borrowing estimate, brings our provisional estimate for the total borrowed in the financial year-to-December 2023 to £119.1 billion. This was £5.0 billion lower borrowing than the £124.1 billion forecast by the Office for Budget Responsibility (OBR). It is the fourth-highest year-to-December estimate since monthly records began in 1993, behind those of the 2020 and 2021 coronavirus (COVID-19) pandemic period and in 2009 following the global financial crisis.

Of the £119.1 billion borrowed by the public sector in the first nine months of the current financial year, central government borrowed £136.8 billion. This was partially offset by a £15.3 billion Bank of England (BoE) surplus and balanced by remaining sub-sectors.

The borrowing of both of these sub-sectors is affected by payments totalling £33.2 billion made by central government to the BoE over the last nine months under the Asset Purchase Facility Fund (APF) indemnity agreement. This was £32.4 billion more than the £0.8 billion paid in the same period the previous year. As with similar intra-public sector transactions, these payments are public sector borrowing neutral. They increase central government's borrowing by £32.4 billion compared with the same period the previous year but reduce the borrowing impact of the BoE by an equal and offsetting amount.

Though these indemnity payments reduced the BoE's contribution to net borrowing by £32.4 billion compared with the same period a year earlier, this decrease was partially offset by an £18.2 billion increase in the net interest payable by the BoE, largely on the reserves created to finance the quantitative easing activities of the APF.

In the nine months to December 2023, central government's income was £703.8 billion, an increase of £35.3 billion compared with the same period a year ago. Of this, tax receipts grew by £34.6 billion, to £528.3 billion and compulsory social contributions (largely national insurance contributions) fell by £1.9 billion to £129.8 billion.

However, this increase in income was exceeded by a £65.0 billion increase in total expenditure, which rose to £840.6 billion over the same period. This additional spending included increases in:

• net investment of £50.4 billion, of which £32.4 billion was an increase in payments to the APF (these reduce BoE borrowing) and £10.0 billion was because of the recording of a capital receipt from the household sector in December 2022 caused by an exceptional update to the value of the UK government's student loans book

• spending on goods and services (largely pay and procurement) of £24.6 billion

• inflation uprated benefits and cost-of-living payments leading to increases in net social benefits of £24.3 billion

• grants to local government of £5.1 billion (these reduce local government borrowing)

These increases were partially offset by reductions in:

• central government debt interest payable, of £25.2 billion, largely because of a slowing of the month-on-month growth in the Retail Prices Index

• subsidy payments, of £6.3 billion, mostly because the costs of the energy support schemes that began in October 2022 have largely ended

• other current grants, of £8.5 billion, partly because of a £3.2 billion one-off Cost-of-Living Council Tax Rebate paid in April 2022, and the £5.7 billion energy support payment to households between October and December 2022, were not paid in the same period in 2023

In its Economic and fiscal outlook – November 2023, the OBR forecast that borrowing will reach £123.9 billion in the financial year ending March 2024.

Since our Public sector finances, UK: March 2023 bulletin published on 25 April 2023, we have reduced our estimate of borrowing for the 12 months to March 2023 (financial year ending (FYE) 2023) by £9.1 billion, from £139.2 billion to £130.1 billion.

This was £5.6 billion more borrowing than in the previous financial year (FYE 2022). It remains the fourth-highest FYE borrowing since monthly records began in FYE 1947, behind FYE 2021 during the coronavirus (COVID-19) pandemic and both FYE 2010 and FYE 2011 (following the global financial crisis).

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

The public sector current budget deficit was £84.1 billion in FYE 2023, £14.1 billion more than in FYE 2022. This figure includes an estimated £39.4 billion cost of the energy support schemes. Over the same period, public sector net investment decreased by £8.4 billion to £45.9 billion.

The affordability of borrowing in the financial year ending 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 measure for comparison of the UK's fiscal position over time.

The coronavirus (COVID-19) pandemic had a substantial impact on the economy as well as public sector borrowing. Expressed as a proportion of GDP, borrowing in the financial year ending (FYE) 2021 was 15.0%, the highest for 75 years.

This proportion fell by 9.7 percentage points to 5.3% of GDP in FYE 2022 as the economy recovered from the pandemic. This was broadly in line with the borrowing ratio of 5.2% in FYE 2015 during the economic recovery following the global financial crisis of the late 2000s.

Current estimates show that for the 12 months to March 2023, the proportion remains broadly around that of FYE 2015, having reduced by only a further 0.2 percentage points to 5.1%.

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

There are several measures of the public sector balance sheet, which we discuss in our What the UK government owns and what it owes blog.

Table 2 presents the narrowest balance sheet measure, which is the redemption value of central government gilts. It then builds upon this measure, 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, which we explain in our Wider measures of the public sector balance sheet: public sector net worth methodology.

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

Public sector net debt

The most widely used balance sheet measure used to describe the UK public sector's financial position at a point in time is public sector net debt excluding public sector banks (PSND ex). Net debt is commonly expressed as a ratio of gross domestic product (GDP – the value of the output of the economy), which gives an indication of its affordability and helps with comparability over time.

The net debt-to-GDP ratio at the end of December 2023 was provisionally estimated at 97.7%, 1.9 percentage points higher than a year ago. However, this is a highly provisional estimate and is likely to be revised in future publications because it partly relies on gross domestic product (GDP) estimates based on the November 2023 Office for Budget Responsibility forecast.

Public sector net debt excluding the Bank of England (BoE) was £2,437.9 billion at the end of December 2023, or around 88.7% of GDP, £247.7 billion (or 9.0 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 December 2023, we record the £103.8 billion difference between the £743.9 billion of reserves created to purchase its gilts (at market value) and their £640.0 billion redemption value. For details of the BoE's contribution to public sector net debt, see Table PSA9A of our Public sector finances tables 1 to 10: Appendix A dataset.

Public sector net worth

Public sector net worth excluding public sector banks (PSNW ex) was in deficit by £715.4 billion at the end of December 2023. This compares with a £593.7 billion deficit at the end of December 2022.

The main reason for the £121.7 billion reduction in PSNW ex over the last 12 months was a £188.6 billion increase in PSND ex, partly offset by a £71.0 billion increase in public sector non-financial assets. 

If we exclude the public sector's £1,584.3 billion of non-financial assets, public sector net financial worth excluding public sector banks (PSNFW ex) deteriorated by £192.8 billion over the same period to a deficit of £2,299.8 billion.

PSNFW ex is equivalent to public sector net financial liabilities excluding public sector banks (PSNFL ex), shown in Table 2 but expressed with the reverse sign.

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.

Tables 4 to 6 of our Public sector finances summary tables: Appendix M dataset compare our latest public sector finances data with those in our Public sector finances, UK: November 2023 bulletin, published on 21 December 2023, and highlight the revisions to borrowing by sub-sector, central government receipts and expenditure.

Our Public sector finance revisions analysis: Appendix P dataset records monthly borrowing data as at first and at subsequent publications, graphically illustrating any potential bias to our early estimates.

Revision to public sector net borrowing (PSNB ex) in the financial year-to-November 2023

Since publishing our Public sector finances, UK: November 2023 bulletin, we have reduced our estimate of borrowing in the financial year-to-November 2023 by £5.0 billion. This change was the result of new central government data replacing previous estimates.

Regular updates to tax and National Insurance contributions increased receipts by a total of £4.2 billion, with updated data replacing our initial estimates.

Tax receipts recorded on an accrued basis are subject to some uncertainty. This is because many taxes such as Corporation Tax, Value Added Tax (VAT) 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 and when forecasts are updated.

This month the forecasts underlying our current tax estimates were updated to reflect the expectations published in the Economic and fiscal outlook – November 2023 report from the Office for Budget Responsibility.

As a result of this update, we have increased our estimates of Corporation Tax by £5.0 billion and Pay As You Earn Income Tax by £0.8 billion for the eight months to November 2023. Over the same period, we have reduced our previous estimate of VAT by £1.6 billion.

Our previous estimates of central government expenditure over the same eight-month period remain largely unchanged.

Revision to public sector net borrowing (PSNB ex) in earlier financial years

Since publishing our Public sector finances, UK: November 2023 bulletin, we have reduced our estimate of borrowing in the financial year-to-March 2023 by £0.5 billion. These changes were the result of new data replacing previous estimates. Most notable was an increase to our previous Corporation Tax estimate of £0.4 billion, again because of updated forecasts.

Revision to public sector net debt (PSND ex) at the end of November 2023

Since publishing our Public sector finances, UK: November 2023 bulletin, our estimate of debt at the end of November 2023 is largely unchanged at £2,671.3 billion, £0.1 billion less than our previous estimate.

This change was largely because of routine monthly updates to our estimates of the cash holding of the Bank of England Asset Purchase Facility Fund, which we increased by £0.1 billion. These data are reported one month in arrears.

Revisions to gross domestic product

This month, we updated our estimates of gross domestic product (GDP) to include the GDP quarterly national accounts, UK: July to September 2023, published on 22 December 2023.

As a result, we have reduced our estimate of debt (PSND ex) expressed as a ratio of GDP at the end of November 2023 by 0.1 percentage points, from 97.5% to 97.4%.

We explain how we calculate our net debt-to-GDP ratio figures in our article The use of gross domestic product (GDP) in public sector fiscal ratio statistics.

Public sector

In the UK, the public sector consists of six sub-sectors: central government, local government, public non-financial corporations, public sector funded 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 (in the form of loans, debt securities, deposit holdings and currency), net of liquid financial assets held.

Public sector net debt is often referred to by commentators as "the national debt".

Public sector net financial liabilities

Public sector net financial liabilities (PSNFL) are 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. The latest forecast was published in the OBR's Economic and fiscal outlook – November 2023 report.

On 21 December 2023, OBR published its November 2023 Economic and fiscal outlook monthly profiles (XLSX, 121.5 KB). These data have been used in our latest estimates and presentations.

On 27 December 2023, the UK government announced that the Spring Budget 2024 will be on 6 March 2024. This will be accompanied by updated official OBR forecasts presented in an Economic and fiscal outlook report.

Each month on the same day as the Office for National Statistics (ONS) release, the OBR publishes a brief analysis of the latest public sector finances in its Monthly public finances release.

Public sector banks

Unless otherwise stated, the figures quoted in this bulletin exclude public sector banks, currently only the NatWest Group (NWG), formerly the Royal Bank of Scotland (RBS) Group.

The reported position of debt, and to a lesser extent borrowing, would be distorted by the inclusion of NWG's balance sheet (and transactions). This is because the government does not need to borrow to fund the debt of NWG, nor would surpluses achieved by NWG be passed on to the government, other than through any dividends paid as a result of the government equity holdings.

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 (VAT), 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 – November 2023 report.

Local government and public corporations

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) 2024, we include:

• a £2.0 billion upward adjustment to England's current expenditure on goods and services

• a £0.5 billion downward adjustment to Wales's capital expenditure

• a £0.5 billion downward adjustment to Scotland's capital expenditure

We apply a further £1.6 billion downward adjustment to budget data for current expenditure on benefits in the FYE 2024, to reflect the most recently available data for housing benefits. Data for public corporations in the FYE 2023 and FYE 2024 are largely based on the OBR's Economic and fiscal outlook – November 2023 report, 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 separately identifiable in our source data on an accruals basis.

The UK government provided cash estimates on the cost of each of the energy support schemes for the financial year ending (FYE) March 2023 in its Energy Prices Act 2022 and expenditure on energy schemes – Q1 2023 statement, published on 8 July 2023.

In addition, the OBR provided estimates of the ongoing cost of the energy subsidy schemes in its March 2023 Economic and fiscal outlook monthly profiles (XLSX, 125KB).