1. Main points

  • Public sector net borrowing (excluding public sector banks) decreased by £20.0 billion to £52.0 billion in the financial year ending March 2017 (April 2016 to March 2017), compared with the financial year ending March 2016; this is the lowest net borrowing since the financial year ending March 2008.

  • The Office for Budget Responsibility (OBR) forecast that public sector net borrowing (excluding public sector banks) would be £51.7 billion during the financial year ending March 2017.

  • Public sector net borrowing (excluding public sector banks) increased by £0.8 billion to £5.1 billion in March 2017, compared with March 2016; this is the highest March borrowing since 2015.

  • Public sector net debt (excluding public sector banks) was £1,729.5 billion at the end of March 2017, equivalent to 86.6% of gross domestic product (GDP); an increase of £123.5 billion (or 3.0 percentage points as a ratio of GDP) on March 2016.

  • Public sector net debt (excluding both public sector banks and Bank of England) was £1,612.3 billion at the end of March 2017, equivalent to 80.7% of GDP; an increase of £49.1 billion (or a decrease of 0.7 percentage points as a ratio of GDP) since March 2016.

  • Central government net cash requirement increased by £0.4 billion to £61.1 billion in the financial ending March 2017, compared with the financial year ending March 2016; this is the highest financial year central government net cash requirement since the financial year ending March 2015.

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2. What’s changed in this release?

This section presents information on aspects of data or methodology that is important to understand when reading this bulletin. Where appropriate, further details of individual changes are discussed in the Quality and methodology section of this bulletin.

How early estimates of the components of net borrowing are improved over time

This bulletin presents the first provisional estimates of UK public sector finances for the complete financial year ending March 2017; these are not final figures and will be revised over the coming months as we replace our initial estimates with provisional and then final outturn data.

Appendix G: Revisions to the first reported estimate of financial-year-end public sector net borrowing (excluding public sector banks) by sub-sector; summarises revisions to the first estimate of public sector borrowing (excluding public sector banks) by sub-sector for the last 6 financial years. Revisions are shown at 6 and 12 months after year end.

We have published an article, Public Sector Finances – Sources summary and their timing which provides a brief summary of the different sources used and the implications of using those data in the monthly Public Sector Finances (PSF) statistical bulletin.

Diverted Profits Tax

As of March 2017, total Corporation Tax includes Diverted Profits Tax (DPT). Although these are different taxes, they have been combined to prevent the publication of disclosive taxpayer information.

Lloyds share sales

In recent years the government has entered a programme of selling shares in publicly owned organisations. On 15 March 2017, the government announced that its current trading plan has enabled its remaining shareholding in Lloyds Banking Group (LBG) to be reduced to less than 3%, and on 21 April 2017 that sales had reduced the government shareholding further to just 2%.

This month we have recorded £1.0 billion of LBG shares sales in March 2017, bringing the government’s disposal of LBG share sales since September 2013 to £20.0 billion.

The proceeds of such sales reduce the central government net cash requirement (CGNCR) and public sector net debt (PSND) by an amount corresponding to the cash raised from the sale but have no impact on public sector net borrowing.

Green Investment Bank

On 20 April 2017, the government announced the sale of Green Investment Bank (GIB plc) to Macquaire Group Limited. The sale is expected to complete in around 2 months. The implications of this sale on public sector finances will be announced in due course.

UK Asset Resolution asset sales

On 31 March 2017, the government announced its intention to sell £11.8 billion sale of Bradford & Bingley (B&B) loans to Prudential plc. This sale will be recorded within public sector finances on completion of the transaction.

The proceeds of such sales reduce the central government net cash requirement (CGNCR) and public sector net debt (PSND) by an amount corresponding to the cash raised from the sale but have no impact on public sector net borrowing.

Country and Regional PSF

Following our consultation on Country and Regional Public Sector Finances, we will be publishing Country and Regional PSF for the first time on 23 May 2017.

The aim of these experimental statistics is to allow users to see what expenditure has occurred for the benefit of residents or enterprises in a particular country or region and what revenues have been raised in a particular country or region. These sub-UK statistics will be presented at a NUTS1 geography.

Figures expressed as a ratio of gross domestic product

At the end of each financial year, while data for current budget deficit, net investment and net borrowing for the final quarter of the financial year (January to March) are available, gross domestic product (GDP) for the corresponding period is not. To enable us to publish estimates of these figures as ratios of GDP for the latest full financial year, the final quarter of the GDP denominator is estimated based on forecasts produced by the Office of Budget Responsibility (OBR).

This estimate of GDP will be used in the March, April and May publications and revised in the June publication when the published value of GDP becomes available.

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3. Things you need to know about this release

What are the most important terms I need to know?

Public sector net borrowing excluding public sector banks (PSNB ex) measures the gap between revenue raised (current receipts) and total spending (current expenditure plus net investment (capital spending less capital receipts)). Public sector net borrowing is often referred to as “the deficit”.

The public sector net cash requirement (PSNCR) represents the cash needed to be raised from the financial markets over a period of time to finance the government’s activities. This can be close to the deficit for the same period but there are some transactions, for example, loans to the private sector that need to be financed but do not contribute to the deficit. It is also close but not identical to the changes in the level of net debt between two points in time.

Public sector net debt excluding public sector banks (PSND ex) represents the amount of money the public sector owes to private sector organisations including overseas institutions, largely as a result of issuing gilts and treasury bills, less the amount of cash and other short-term assets it holds.

While borrowing (or the deficit) represents the difference between total spending and receipts over a period of time, debt represents the total amount of money owed at a point in time.

The debt has been built up by successive government administrations over many years. When the government borrows (that is, runs a deficit), this normally adds to the debt total. So reducing the deficit is not the same as reducing the debt.

If you’d like to know more about the relationship between debt and deficit, please refer to our article The debt and deficit of the UK public sector explained.

What does the public sector include?

In the UK, the public sector consists of five sub-sectors: central government, local government, public non-financial corporations, Bank of England and public financial corporations (that is, public sector banks – currently only Royal Bank of Scotland (RBS)).

The figures quoted in this bulletin exclude public financial corporations (unless otherwise stated) as the reported position of both borrowing and debt would be dominated and distorted by the inclusion of RBS’s balance sheet (and transactions) given its size relative to the rest of the public sector.

Additionally the government’s fiscal rules are based on aggregates that exclude public sector banks.

The sub-sector breakdown of public sector net borrowing is summarised in Table PSA2 in the Public Sector Finances Tables 1 to 10: Appendix A dataset.

Should I look at monthly or financial year-to-date data to understand public sector finances?

A financial year is an accounting period of 12 months running from 1 April one year to 31 March the following year. For example, the financial year ending March 2016 comprises the months from April 2015 to March 2016.

Due to the volatility of the monthly data, the cumulative financial year-to-date borrowing figures provide a better indication of the position of the public finances than the individual months.

Are our figures adjusted for inflation?

All monetary values in the PSF bulletin are expressed 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.

In order to compare data over long time periods, to aid international comparisons and provide an indication of a country’s ability to service borrowing and debt, commentators often discuss changes over time to fiscal aggregates in terms of gross domestic product (GDP) ratios. GDP represents the value of all the goods and services currently produced by the UK economy in a period of time.

Are our figures adjusted for seasonal patterns?

All monetary values in the PSF bulletin are not seasonally adjusted. We recommend you use year-on-year comparisons (be it cumulative financial year-to-date or individual monthly borrowing figures) rather than making month-on-month comparisons.

Are our monthly figures likely to change over time?

Each PSF bulletin contains the first estimate of public sector borrowing for the most recent period and is likely to be revised in later months as more data become available.

In publishing monthly estimates, it is necessary to use a range of different types of data sources. Some of these are subject to revision as budget estimates (forecasts) are replaced by out-turn data and these then feed into the published aggregates.

In addition to those that stem from updated data sources, revisions can also result from methodology changes. An example of the latter is the changes that were due to the introduction of improved methodology for the recording of Corporation Tax, Bank Corporation Tax Surcharge receipts and Bank Levy implemented in the PSF estimates released in February 2017.

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4. How much is the public sector borrowing?

In the latest full financial year (April 2016 to March 2017), the public sector spent more money than it received in taxes and other income. This meant it had to borrow £52.0 billion; £20.0 billion less than in the previous financial year (April 2015 to March 2016).

Of this £52.0 billion of public sector net borrowing excluding public sector banks (PSNB ex), £14.0 billion related to the cost of the “day-to-day” activities of the public sector (the current budget deficit), while £38.0 billion related to capital spending (or net investment) such as infrastructure.

Figure 1 presents cumulative public sector net borrowing (excluding public sector banks) by month in the latest full financial year and compares the cumulative borrowing with that in the previous financial year.

The difference between central government's income and spending makes the largest contribution to the amount borrowed by the public sector. In the latest full financial year, £43.3 billion of the £52.0 billion borrowed by the public sector was by central government.

In the latest full financial year, central government received £674.1 billion in income; including £507.0 billion in taxes. This was around 6% more than in the previous financial year.

Over the same period, central government spent £698.6 billion; around 2% more than in the previous financial year. Of this amount, just below two-thirds was spent by central government departments (such as health, education and defence), around a third on social benefits (such as pensions, unemployment payments, Child Benefit and Maternity Pay) with the remaining being spent on capital investment and interest on government’s outstanding debt.

Figure 2 summarises public sector borrowing by sub-sector in the latest full financial year and compares these measures with the previous financial year (April 2015 to March 2016).

This presentation splits PSNB ex into each of its 4 sub-sectors: central government, local government, public corporations and Bank of England.

A further breakdown (receipts, expenditure (both current and capital) and depreciation) is provided for central government, local government and public corporations; with current receipts and current expenditure being presented in further detail.

Figure 3 illustrates that annual borrowing has generally been falling since the peak in the financial year ending March 2010 (April 2009 to March 2010).

Initial estimates indicate that in the financial year ending March 2017 (April 2016 to March 2017), the public sector borrowed £52.0 billion or 2.6% of gross domestic product (GDP). This was £20.0 billion lower than in the previous financial year and around a third of that in the financial year ending March 2010 when borrowing was £151.7 billion or 9.9 % of GDP.

Focusing on the current month

In March 2017, the public sector spent more money than it received in taxes and other income. This meant it had to borrow £5.1 billion; £0.8 billion more than in March 2016.

Figure 4 summarises public sector borrowing by sub-sector in March 2017 and compares this with the equivalent measures in the same month a year earlier (March 2016).

This presentation splits PSNB ex into each of its four sub-sectors: central government, local government, public corporations and Bank of England.

A further breakdown (receipts, current expenditure, capital expenditure and depreciation) is provided for central government, local government and public corporations, with receipts and current expenditure being presented in further detail.

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5. How big is public sector debt?

The amount of money owed by the public sector to the private sector stood at just above £1.7 trillion at the end of March 2017, which equates to 86.6% of the value of all the goods & services currently produced by the UK economy in a year (or gross domestic product (GDP)).

This debt figure of £1.7 trillion (or £1,729.5 billion) at the end of March 2017, represents an increase of £123.6 billion since the end of March 2016. Of this £123.6 billion, £74.5 billion is attributable to debt accumulated within the Bank of England, nearly all of it in the Asset Purchase Facility. Of this £74.5 billion, £53.5 billion relates to the Term Funding Scheme (TFS).

Figure 5 breaks down outstanding public sector net debt at the end of March 2017 into the sub-sectors of the public sector. In addition to public sector net debt excluding public sector banks (PSND ex), this presentation includes the impact of public sector banks on debt.

Net debt is defined as total gross financial liabilities less liquid financial assets, where liquid assets are cash and short-term assets, which can be released for cash at short notice without significant loss. These liquid assets mainly comprise foreign exchange reserves and bank deposits.

Figure 6 presents public PSND ex at the end of March 2017 by sub-sector. Time series for each of these component series are presented in Tables PSA8A to D in the Public Sector Finances Tables 1 to 10: Appendix A dataset.

Figure 7 illustrates PSND ex from the financial year ending March 1994 to the end of March 2017.

PSND ex increased at the time of the economic downturn. Since then, it has continued to increase but at a slower rate. The introduction of the Term Funding Scheme in late 2016 has led to a rise in net debt as the loans provided under the scheme are not liquid assets and therefore do not net off in public sector net debt (against the liabilities incurred in providing the loans).

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6. How much cash does the public sector need to raise?

The net cash requirement is a measure of how much cash the public sector needs to raise from the financial markets (or pay out from its cash reserves) to finance its activities. This amount can be close to the deficit for the same period but there are some transactions, for example, lending to the private sector or the purchase of shares, that need to be financed but do not contribute to the deficit. Similarly, repayments of principal on loans extended by government or sales of shares will reduce the level of financing necessary but not reduce the deficit.

Figure 8 presents public sector cash requirement by sub-sector for the latest full financial year (April 2016 to March 2017). Time series for each of these component series are presented in Table PSA7A in the Public Sector Finances Tables 1 to 10: Appendix A dataset.

Central government net cash requirement (CGNCR) is a focus for some users, as it provides an indication of the volume of gilts (government bonds) the Debt Management Office may issue to meet the government’s borrowing requirements.

CGNCR is quoted both including and excluding the net cash requirement of Network Rail (NR) and UK Asset Resolution LTD (UKAR) (who manage the closed mortgage books of both Bradford & Bingley and Northern Rock Asset Management). It is the CGNCR excluding NR and UKAR that is the particular focus of users with an interest in the gilt market.

CGNCR excluding NR and UKAR decreased by £7.4 billion to £71.1 billion in the latest full financial year (April 2016 to March 2017), compared with the previous full financial year.

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7. How was debt in this financial year accumulated?

Figure 9 brings together the borrowing components detailed in Figure 2 to illustrate how the differences between income and spending (both current and capital) have led to the accumulation of debt in the current financial year.

This presentation excludes public sector banks, focusing instead on the public sector net borrowing excluding public sector banks (PSNB ex) measure.

The reconciliation between public sector net borrowing and net cash requirement is presented in more detail in Table REC1 in the Public Sector Finances Tables 1 to 10: Appendix A dataset.

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8. How do these figures compare with official forecasts?

The Office for Budget Responsibility (OBR) normally produces forecasts of the public finances twice a year (currently in March and November). The latest OBR forecast was published on 8 March 2017.

The government has adopted OBR forecasts as its official forecast.

OBR has forecast that the public sector would borrow £51.7 billion during the financial year ending March 2017; a reduction of £20.3 billion on outturn for the financial year ending March 2016. The first provisional outturn estimate for the financial year ending March 2017 was £52.0 billion, £0.3 billion more than the OBR forecast.

Figure 10 presents the cumulative public sector net borrowing for the latest full and previous financial years. The figure also presents the OBR forecasts for the corresponding financial years.

Table 1 compares the first estimates of full financial year data against the OBR forecasts. Caution should be taken when comparing public sector finances data with OBR figures for the full financial year as data are not finalised until after the financial year ends.

Initial estimates soon after the end of the financial year can be subject to sizeable revisions in later months.

In addition, the monthly path of spending and receipts is not smooth within the year and also can vary compared with previous years, both of which can affect year on year comparisons.

There can also be methodological differences between OBR forecasts and out-turn data. In its latest publication, OBR published a table within its Economic and fiscal outlook supplementary fiscal tables: receipts and other – March 2017 titled “Table: 2.46 Items included in OBR forecasts that ONS have not yet included in out-turn”.

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9. Revisions since previous release

Revisions can be the result of both updated data sources and methodology changes. This month the reported revisions are largely the result of data changes, with methodology changes introduced around the treatment of nuclear decommissioning (discussed in section 2) having no impact on public sector fiscal aggregates as the amended transactions are offset between the central government and public corporations sub-sectors.

Table 2 summarises revisions to the headline statistics presented in this bulletin and the previous publication (21 March 2017), while Figure 11 focuses solely on the revisions to public sector net borrowing excluding public sector banks (PSNB ex) in the current financial year-to-date (April 2016 to February 2017) between these publications.

Revisions to net borrowing in the current financial year

Figure 11 compares the latest estimate of public sector net borrowing excluding public sector banks (PSNB ex) for the period April 2016 to February 2017, with that presented in the previous bulletin (21 March 2017).

This presentation splits PSNB ex into each of its four sub-sectors: central government, local government, public corporations and Bank of England (BoE).

Given that, in the latest full financial, £43.3 billion of the £52.0 billion borrowed by the public sector was borrowed by central government, a further breakdown of central government current receipts and current expenditure is presented to reflect the significance of these components.

Since the previous bulletin, central government borrowing in the period April 2016 to February 2017 has been revised down by £0.8 billion. Of this:

  • current receipts were largely unchanged at an aggregate level; however VAT receipts were revised downwards by £1.6 billion between December 2016 and February 2017; the estimates of Income Tax and National insurance contributions received in February were revised upwards by £0.8 billion and £0.6 billion respectively.

  • current Expenditure was revised downward by £0.5 billion

  • expenditure on capital spending (or net investment) was revised downwards by £0.2 billion

Revisions to net debt at the end of February 2017

Since the previous publication, the estimate of public sector net debt excluding public sector banks (PSND ex) recorded at the end of February has decreased by £0.7 billion. Of this:

  • new data received from HM Treasury around the APF scheme has led to estimate of Bank of England’s contribution to net debt being reduced by £0.4 billion

  • new data received from the Department of Communities and Local Government (DCLG) has led to the estimate of Local Government’s liquid assets being increased by £0.3 billion

The reporting of errors in the public sector finance dataset

It is important to note that revisions do not occur as a result of errors; errors lead to corrections and are identified as such when they occur.

There are no errors reported in this bulletin.

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10. International comparisons of borrowing and debt

The UK government debt and deficit for Eurostat statistical bulletin is published quarterly (in January, April, July and December each year), to coincide with when the UK and other European Union member states are required to report on their deficit (or net borrowing) and debt to the European Commission.

On 18 April 2017, we published the latest UK Government Debt and Deficit for Eurostat statistical bulletin, consistent with the February 2017 public sector finance bulletin (21 March 2017). In this publication we stated that:

  • general government gross debt was £1,731.4 billion at the end of December 2016, equivalent to 89.3% of gross domestic product (GDP); an increase of £65.4 billion on December 2015

  • general government deficit (or net borrowing) decreased by £24.2 billion to £57.2 billion (equivalent to 3.0% GDP) in 2016, compared with 2015

This bulletin presents a slightly revised estimate of deficit at £57.8 billion for 2016, while the estimate of debt at the end of December 2016 is unchanged.

It is important to note that the GDP measure, used as the denominator in the calculation of the debt ratios in the UK government debt and deficit for the Eurostat statistical bulletin, differs from that used within the public sector finances statistical bulletin.

An article, The use of GDP in public sector fiscal ratio statistics explains that for debt figures reported in the monthly public sector finances, a 12-month GDP total centred on the month is employed, while in the UK government debt and deficit for Eurostat statistical bulletin the total GDP for the preceding 12 months is used.

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11. Quality and methodology

The public sector finances Quality and Methodology Information document contains important information on:

  • the strengths and limitations of the data and how it compares with related data

  • uses and users of the data

  • how the output was created

  • the quality of the output including the accuracy of the data

UK Statistics Authority assessment of public sector finances

On 8 November 2015, the UK Statistics Authority published its latest assessment report of public sector finances. The report confirmed the National Statistics status of the public sector finances bulletin subject to certain requirements being met.

In order to meet these requirements we published an article, Quality assurance of administrative data used in the UK public sector finances. This report provides an assessment of the administrative data sources used in the compilation of the Public sector finance statistics in accordance with the UK Statistics Authority’s Administrative Data Quality Assurance Toolkit.

How are classification decisions made?

Each quarter we publish a forward workplan outlining the classification assessments we expect to undertake over the coming 12 months. To supplement this, each month a classifications update is published which announces classification decisions made, and includes expected implementation points (for different statistics) where possible.

Classification decisions are reflected in the public sector finances at the first available opportunity and, where necessary outlined in this section of the statistical bulletin.

The Monthly statistics on the Public Sector Finances: A methodological guide was last updated in August 2012. We are currently working to update this publication in 2017.

Further details on classification decisions and data changes that impact on this (and future) publications

Blue Book 2017

In September 2017, the public sector finances will incorporate methodological improvements being implemented for the annual UK National Accounts publication, the Blue Book 2017. These improvements will include updated estimates for gross fixed capital formation (GFCF), specifically with regard to estimates for the cost of transfer of fixed assets (such as legal costs incurred at point of sale of a property) and the net acquisition of entertainment, literary and artistic originals (such as film and TV recordings).

The first of these improvements will not impact the fiscal aggregates for the financial year ending March 2015 onwards (either net investment or net borrowing) as public sector data sources already include expenditure on costs of transfer. There will be revisions for earlier financial years as a result of removing existing negative estimates of transfer costs.

The second of these improvements is expected to impact the public corporations sub-sector by both increasing net investment and decreasing current budget deficit by equal and offsetting amounts (expected to be less than £0.5 billion) in recent years, with no impact, therefore, on public sector net borrowing. It will not impact general government estimates.

We have published an article National Accounts articles: Impact of Blue Book 2017 changes on current price gross domestic product estimates, 1997 to 2012 explaining these methodological improvements in more detail.

Supporting documentation

Documentation supporting this publication is available in appendices to the bulletin.

Public sector borrowing by sub-sector

Each month, at 9.30am on the working day following the public sector finance statistical bulletin, we publish Public Sector Finances borrowing by sub-sector .This release contains an extended breakdown of public sector borrowing in a matrix format and also estimates of Total Managed Expenditure (TME).

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Contact details for this Statistical bulletin

Fraser Munro
fraser.munro@ons.gsi.gov.uk
Telephone: +44 (0)1633 456402