Public sector finances, UK: May 2016

How the relationship between UK public sector monthly income and expenditure leads to changes in deficit and debt.

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Release date:
21 June 2016

Next release:
21 July 2016

1. Main Points

This bulletin presents the third provisional estimate of public sector finances in the UK for the complete financial year ending March 2016 (April 2015 to March 2016); these are not final figures and may be revised over the coming months as provisional data are replaced with finalised and audited data.

Public sector net borrowing (excluding public sector banks) decreased by £16.7 billion to £74.9 billion in the complete financial year ending March 2016 (April 2015 to March 2016), compared with the previous financial year. This £74.9 billion represents a £0.9 billion increase to the initial estimate of the complete financial year borrowing published in the March 2016 statistical bulletin.

Public sector net borrowing (excluding public sector banks) increased by £0.2 billion to £17.9 billion in the current financial year-to-date (April to May 2016) compared with the same period in 2015.

Public sector net borrowing (excluding public sector banks) decreased by £0.4 billion to £9.7 billion in May 2016, compared with May 2015.

Public sector net debt (excluding public sector banks) at the end of May 2016 was £1,606.9 billion, equivalent to 83.7% of gross domestic product (GDP); an increase of £49.6 billion compared with May 2015.

Central government net cash requirement decreased by £26.5 billion to £58.1 billion in the complete financial year ending March 2016 (April 2015 to March 2016), compared with the previous financial year.

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2. Summary

This section provides a summary of the main messages of this statistical bulletin which you may find helpful. You may also like to receive Twitter updates by following @frasermunropsf. We recently published an article titled The debt and deficit of the UK public sector explained which you may also find useful.

Public sector borrowing (or deficit)

In May 2016, the public sector spent more money than it received in taxes and other income. This meant it had to borrow £9.7 billion to balance the books.

Of this £9.7 billion, £7.8 billion related to the cost of the “day-to-day” activities of the public sector (the current budget deficit), while £1.9 billion related to the spending on infrastructure (net investment).

Annual borrowing has generally been falling since the peak in the financial year ending March 2010 (April 2009 to March 2010). In the financial year ending March 2016 (April 2015 to March 2016), the public sector borrowed £74.9 billion; £16.7 billion lower than in the previous financial year. These are not final figures and may be revised over the coming months as provisional data are replaced with finalised and audited data.

This provisional estimate suggests that borrowing in the financial year ending March 2016 is less than half of that in the financial year ending March 2010 (both in terms of £ billion and percentage of GDP).

The Office for Budget Responsibility (OBR), which produces economic and fiscal forecasts for government, recorded that the public sector would borrow £72.2 billion during the financial year ending March 2016. So, based on the provisional estimate, borrowing in financial year ending March 2016 is £2.7 billion higher than OBR predicted.

OBR have estimated that the public sector will borrow £55.5 billion during the financial year ending March 2017; a reduction of £19.4 billion on the financial year ending March 2016.

Income and spending by central government

Central government’s income and spending make the largest contribution to the amount borrowed by the public sector. In the financial year ending March 2016 (April 2015 to March 2016), central government received £634.5 billion in income. This was around 3% higher than in the previous financial year, largely due to receiving more Income Tax, and National Insurance contributions, along with taxes on production such as VAT and Stamp Duty, compared with the previous year.

Over the same period (April 2015 and March 2016) central government spent £686.1 billion; roughly the same as 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 the government’s outstanding debt.

Debt

While deficit represents the difference between income and spending over a period of time, debt represents the total amount of money owed at a point in time. Debt has been built up by successive government administrations over many years. When the government borrows, this adds to the debt total. So reducing the deficit is not the same as reducing the debt.

The amount of money owed by the government to the private sector stood at £1.6 trillion at the end of May 2016, which equates to 84% of the value of all the goods and services currently produced by the UK economy in a year (or GDP).

EU government debt and deficit

On 15 April 2016, we published the latest UK Government Debt and Deficit for Eurostat statistical bulletin which reported that:

  • general government deficit (Maastricht borrowing) in the financial year ending March 2015 (April 2014 to March 2015) was £91.1 billion, equivalent to 5.0% of GDP

  • general government gross debt (Maastricht debt) at the end of March 2015 was £1,601.3 billion, equivalent to 87.4% of GDP

This publication reports a slightly revised Maastricht borrowing, in the financial year ending March 2015, to £90.7 billion and Maastricht debt at the end of March 2015 of £1,601.7 billion.

Please refer to section 7, International comparisons of borrowing and debt for further detail.

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3. Understanding this release

This statistical bulletin provides important information on the UK government financial position. It enables government, the public, economists and financial analysts to monitor public sector expenditure, receipts, investments, borrowing and debt. By comparing these data with forecasts from The Office for Budget Responsibility (OBR) the current UK fiscal position can be evaluated.

Table 9: Terms to help you understand this release, located in the background notes of this bulletin, is intended to provide users with the important terms needed to understand the data within this bulletin. We recently published an article titled The debt and deficit of the UK public sector explained which you may also find useful.

Headline public sector finances data

This release presents the first estimate of May 2016 public sector finances and the third estimate of the complete financial year ending March 2016 (April 2015 to March 2016); these are not final figures and may be revised as provisional data are replaced with finalised and audited data.

Table 1 summarises the latest headline public sector finances measures, comparing the latest month and cumulative totals for the financial year-to-date, with the equivalent period in the previous financial year.

Time series for each component are available in Table PSA1 in the Public Sector Finances Tables 1 to 10: Appendix A dataset.

How the public sector finances fit together

Figure 3 illustrates how the difference in income (often referred to as current receipts) and spending (often referred to as current expenditure) lead to the accumulation of debt.

The headline measures of current budget deficit, net borrowing, net cash requirement and net debt are highlighted in the diagram as they provide the important indicators for the performance of the UK public finances.

When expenditure is greater than income, the public sector runs a deficit, known as the current budget deficit. Net borrowing is made up of the current budget deficit plus net investment (spending on capital less capital receipts). The diagram shows how net borrowing contributes to the change in net debt.

The net cash requirement is closely related to net debt (the amount owed). It is important because it represents the cash needed to be raised from the financial markets to service the government’s borrowing deficit. Changes in net debt between 2 points in time are normally similar to the net cash requirement for the intervening period, though the relationship is not an exact one.

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4. The latest public sector net borrowing position

In the UK, the public sector consists of 5 sub-sectors: central government, local government, public non-financial corporations, Bank of England and public financial corporations (that is, public sector banks).

Table 2 summarises the current monthly and financial year-to-date borrowing position of each of these sub-sectors along with the public sector aggregates.

While public sector finance data are available on a monthly basis, due to the volatility of the monthly time series, it is often more informative to look at the financial year-to-date or complete financial year data in order to discern underlying patterns. Estimates are revised over time as additional data becomes available.

Full time series for these data can be found in Table PSA2 in the Public Sector Finances Tables 1 to 10: Appendix A dataset.

Figure 4 illustrates public sector net borrowing excluding public sector banks (PSNB ex) for the last 23 financial years. For all but 3 years in the period the public sector has been in deficit and had to borrow to fund the gap between expenditure and revenue.

PSNB ex peaked in the financial year ending March 2010 (April 2009 to March 2010) as the effects of the economic downturn impacted on the public finances (reducing tax receipts while expenditure continued to increase).

In the financial year ending March 2016 (April 2015 to March 2016), the public sector borrowed £74.9 billion. This was £16.7 billion lower than in the previous financial year. These are not final figures and may be revised over the coming months as provisional data are replaced with finalised and audited data.

This provisional estimate suggests that borrowing in the financial year ending March 2016 is less than half of that in the financial year ending March 2010; both in terms of £ billion (Table PSA2) and percentage of GDP (Table PSA5A).

PSNB ex has reduced since financial year ending March 2010, although remained higher than before the financial year ending March 2008 (April 2007 to March 2008) and the 2007 global financial market shock.

PSNB ex in the financial year ending March 2013 (April 2012 to March 2013) was higher than in the previous financial year largely as a result of the recording of an £8.9 billion payable capital transfer in April 2012, as recognition that the liabilities transferred from the Royal Mail Pension Plan exceeded the assets transferred.

Net borrowing for the financial year ending March 2016 (April 2015 to March 2016)

This bulletin presents the third provisional estimate of the complete financial year ending March 2016 (April 2015 to March 2016); these are not final figures and may be revised as provisional data are replaced with finalised and audited data.

In the financial year ending March 2016 (April 2015 to March 2016), public sector net borrowing excluding public sector banks (PSNB ex) was £74.9 billion; a decrease of £16.7 billion, or 18.2% compared with the previous financial year.

This £16.7 billion decrease in net borrowing was predominantly due to a decrease of £18.8 billion in central government net borrowing, partially offset by an increase in local government net borrowing of £2.5 billion.

Over the same period, Bank of England (BoE) net borrowing was £1.5 billion lower than in the previous financial year, almost entirely due to Asset Purchase Facility (APF) transfers to central government. The combined net borrowing of central government and the BoE in the financial year ending March 2016 (April 2015 to March 2016) was £20.3 billion lower than in the previous financial year.

Central government receipts for the financial year ending March 2016 (April 2015 to March 2016) were £634.5 billion, an increase of £20.2 billion, or 3.3%, compared with the previous financial year. Of which:

  • Income Tax-related payments increased by £7.3 billion, or 4.3%, to £176.4 billion

  • VAT receipts increased by £5.6 billion, or 4.5%, to £130.4 billion

  • Social (National Insurance) Contributions increased by £3.2 billion, or 2.9%, to £113.4 billion

  • Corporation Tax increased by £1.3 billion, or 3.1%, to £44.3 billion

  • Interest & Dividends decreased by £1.9 billion, or 9.9%, to £17.3 billion

Government departments have not yet supplied HM Treasury (via the OSCAR system) with their finalised spending for the financial year just ended. Most departments will finalise their data in order to lay their audited resource accounts before Parliament over the summer. Revisions from this process are usually reflected in the September bulletin.

Central government expenditure (current and capital) for the financial year ending March 2016 (April 2015 to March 2016) was £686.1 billion, an increase of £0.9 billion, or 0.1%, compared with the previous financial year. Of which:

  • net social benefits (mainly pension payments) increased by £1.8 billion, or 0.9%, to £203.4 billion; largely as a result of increases in state pension payments (within National Insurance Fund benefits) and public sector pension payments, being partially offset by a rise in public sector pension contributions

  • other current expenditure (mainly departmental spending) increased by £0.9 billion, or 0.2%, to £403.8 billion; largely as a result of increases in departmental spending on goods and services, being almost entirely offset by decreases in transfers to local government

  • debt interest decreased by £0.3 billion, or 0.7%, to £44.9 billion; of this £44.9 billion, £13.6 billion is the interest payable to the Bank of England Asset Purchase Facility on its gilt holdings (see Table PSA9 in the Public Sector Finances Tables 1 to 10: Appendix A dataset) which are PSNB ex neutral

  • central government net investment (capital expenditure) decreased by £1.4 billion, or 4.1%, to £33.9 billion; largely as a result of increases in transfers to central government from other sectors, particularly local government

Local government net borrowing (LGNB) for the financial year ending March 2016 (April 2015 to March 2016) was estimated to be £4.4 billion, an increase of £2.5 billion on the same period in the previous financial year. This increase was mainly due to decreases in grants received from central government (grants received are treated as negative expenditure), particularly in April, being partially offset by decreases in expenditure on goods and services.

Local government data for the financial year ending March 2016 (April 2015 to March 2016) are provisional estimates based on budget and provisional outturn figures received from the Department for Communities and Local Government (DCLG) and the devolved administrations, while estimates for the previous financial year-to-date are largely based on final outturn figures.

Public corporations’ net borrowing (PCNB) for the financial year ending March 2016 (April 2015 to March 2016) was estimated to be £3.7 billion, an increase of £1.0 billion on the same period in the previous financial year.

Public corporation data for the financial year ending March 2016 (April 2015 to March 2016) are mainly provisional estimates, while estimates for the previous financial year are largely based on final outturn figures.

Net borrowing for the financial year-to-date (April to May 2016)

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

In the financial year-to-date (April to May 2016), public sector net borrowing excluding public sector banks (PSNB ex) was £17.9 billion; an increase of £0.2 billion, or 0.8% compared with the same period in 2015. In this period, a £1.0 billion increase in local government net borrowing is offset by a £0.7 billion decrease in central government net borrowing.

Central government receipts for the financial year-to-date (April to May 2016) were £103.8 billion, an increase of £3.4 billion, or 3.4%, compared with the same period in the previous financial year. Of which:

  • Social (National Insurance) Contributions increased by £1.5 billion, or 7.9%, to £19.9 billion

  • Stamp Duty on land & property increased by £0.4 billion, or 21.0%, to £2.1 billion

  • Income Tax-related payments increased by £0.3 billion, or 1.4%, to £23.6 billion

  • VAT receipts increased by £0.7 billion, or 3.2%, to £21.7 billion

  • Corporation Tax increased by £0.1 billion, or 1.2%, to £7.7 billion

Central government expenditure (current and capital) for the financial year-to-date (April to May 2016) was £119.7 billion, an increase of £2.4 billion, or 2.1%, compared with the same period in the previous financial year. Of which:

  • net social benefits (mainly pension payments) increased by £0.3 billion, or 1.0%, to £34.2 billion; largely as a result of increases in state pension payments (within National Insurance Fund benefits)

  • central government net investment (capital expenditure) increased by £2.3 billion, or 50.2%, to £6.8 billion; largely as a result of an increase in gross capital formation and transfers between central government and other sectors

  • other current expenditure (mainly departmental spending) decreased by £0.9 billion, or 1.3%, to £68.9 billion; largely as a result of increases in departmental spending on goods & services, being offset by decreases in transfers to local government

  • debt interest increased by £0.8 billion, or 8.8%, to £9.7 billion; of this £9.7 billion, £2.3 billion is the interest payable to the Bank of England Asset Purchase Facility on its gilt holdings (see Table PSA9 in Table PSA1 in the Public Sector Finances Tables 1 to 10: Appendix A dataset) which are PSNB ex neutral

Local government net borrowing (LGNB) for the financial year-to-date (April to May 2016) was estimated to be in surplus £3.4 billion, a £1.0 billion decrease in surplus on the same period in the previous financial year. This decrease in surplus was largely due to decreases in grants received from central government, particularly in April, being partially offset by decreases in expenditure on goods & services.

Local government data for April and May 2016 are initial estimates. Most of the components are calculated by ONS based on OBR forecasts. Administrative source data are used for central government to local government transfers.

Detailed time series for each of the expenditure and revenue component series of local government net borrowing are presented in Tables PSA6G to 6K in the Public Sector Finances Tables 1 to 10: Appendix A dataset.

Public corporations’ net borrowing (PCNB) for the financial year-to-date (April to May 2016) was estimated to be £0.4 billion, a decrease of £0.1 billion on the same period in the previous financial year.

Public corporations data for April and May 2016 are provisional estimates calculated by ONS based on OBR forecasts.

Net borrowing in May 2016

In May 2016, public sector net borrowing excluding public sector banks (PSNB ex) was £9.7 billion; a decrease of £0.4 billion, or 3.8% compared with May 2015.

This decrease in borrowing was largely due to a decrease both in central and local government net borrowing of £0.3 billion and £0.1 billion respectively.

The data for the latest month of every release contains some forecast data. The initial outturn estimates for the early months of the financial year contain more forecast data than other months, as profiles of tax receipts and departmental spending on OSCAR and local government spending are provisional. This means that the data for these months are typically more prone to revision than other months and can be subject to sizeable revisions in later months.

Central government receipts in May 2016 were £47.6 billion, an increase of £1.6 billion, or 3.5%, compared with May 2015. Of this:

  • Social (National Insurance) Contributions increased by £0.7 billion, or 7.6%, to £10.0 billion

  • Corporation Tax increased by £0.4 billion, or 26.2%, to £1.9 billion

  • Income Tax-related payments increased by £0.2 billion, or 1.5%, to £11.6 billion

  • VAT receipts increased by £0.2 billion, or 1.9%, to £10.6 billion

Central government expenditure (current and capital) in May 2016 was £56.0 billion, an increase of £1.2 billion, or 2.2%, compared with May 2015. Of this:

  • debt interest in May 2016 increased by £0.7 billion, or 16.7%, to £4.6 billion; of this £4.6 billion, £1.2 billion is the net interest paid to the Asset Purchase Facility Fund (APF) on its gilt holdings (see Table PSA9 in the Public Sector Finances Tables 1 to 10: Appendix A dataset) which are PSNB ex neutral

  • central government net investment (capital expenditure) increased by £0.1 billion, or 2.8%, to £2.2 billion; largely as a result of increases in gross capital formation, offset by decreases in the net capital transfers from central government to other sectors

  • net social benefits (mainly pension payments) was £16.9 billion, equivalent to that paid in May 2015 other current expenditure (mainly departmental spending) increased by £0.5 billion, or 1.5%, to £32.4 billion; largely as a result of an increase in departmental spending on goods & services

Detailed time series for each of the expenditure and revenue component series of central government net borrowing are presented in Tables PSA6B to 6F in the Public Sector Finances Tables 1 to 10: Appendix A dataset.

In May 2016, local government net borrowing (LGNB) was estimated to be £0.5 billion; a decrease of £0.1 billion compared with May 2015.

Local government data for May 2016 are initial estimates. Most of the components are calculated by ONS based on OBR forecasts. Administrative source data are used for central government to local government transfers.

Detailed time series for each of the expenditure and revenue component series of local government net borrowing are presented in Tables PSA6G to 6K in the Public Sector Finances Tables 1 to 10: Appendix A dataset.

In May 2016, it was estimated that public corporations’ net borrowing (PCNB) was £0.2 billion, a decrease of £0.1 billion compared with May 2015.

Public corporations data for May 2016 are provisional estimates calculated by ONS based on OBR forecasts.

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5. The latest public sector net debt position

Public sector net debt excluding public sector banks (PSND ex) represents the amount of money the public sector owes to UK private sector organisations and overseas institutions, largely as a result of government financial liabilities on the bonds (gilts) and Treasury bills it has issued.

While deficit represents the difference between income and spending over a period of time, debt represents the total amount of money owed at a point in time. This debt has been built up by successive government administrations over many years. When the government borrows (that is, runs a deficit), this adds to the debt total. So reducing the deficit is not the same as reducing the debt.

At the end of May 2016, PSND ex stood at £1,606.9 billion; an increase of £49.6 billion compared with May 2015. This increase in net debt is a result of:

  • £75.1 billion of public sector net borrowing

  • less £1.6 billion in timing differences between cash flows for gilt interest payments and the accrued gilt interest flows

  • less £23.8 billion in net cash transactions related to acquisition or disposal of financial assets of equivalent value (for example loans) and timing of recording

Figure 5 illustrates public sector net debt excluding banking groups (PSND ex) from the financial year ending March 1994 to date.

The increases in debt between the financial year ending March 2009 (April 2008 to March 2009) and the financial year ending March 2011 (April 2010 to March 2011) were larger than in the early part of the decade, as the economic downturn meant public sector net borrowing excluding public sector banks (PSNB ex) increased. Since then it has continued to increase but at a slower rate.

For the purposes of UK fiscal policy, 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 and without significant loss. These liquid assets mainly comprise foreign exchange reserves and bank deposits.

Figure 6 presents public sector debt excluding public sector banks at the end of May 2016 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.

Changes in net debt between 2 points in time are normally similar to the net cash requirement for the intervening period, though the relationship is not an exact one because the net cash requirement reflects actual prices paid, while the net debt is at nominal prices. For instance, gilts are recorded in net debt at their redemption (or face) value, but they are often issued at a different price due to premia or discounts being applied. The net cash requirement will reflect the actual issuance and redemption prices, but net debt only ever records the face (or nominal) value.

Net cash requirement is discussed further in Section 8 of this bulletin.

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6. Net borrowing and debt statistics compared with OBR forecast

The Office for Budget Responsibility (OBR) normally produces forecasts of the public finances twice a year (normally in March and December). The latest OBR forecast was published on 16 March 2016.

Figure 7, Table 3 and Table 4 enable users to compare emerging data against the OBR forecasts. Caution should be taken when comparing public finance 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, in-year timing effects on spending and receipts can affect year-to-date comparisons with previous years.

There can also be some methodological differences between OBR forecasts and outturn data. In its latest publication, OBR published a table within their Economic and Fiscal Outlook Supplementary Fiscal Tables – March 2016 titled “Table: 2.45 Items included in OBR forecasts that ONS have not yet included in outturn”.

Figure 7 illustrates the public sector net borrowing excluding public sector banks (PSNB ex) for the third provisional estimate of the complete financial year ending March 2016 (April 2015 to March 2016), along with the provisional estimate of the current financial year-to-date (April to May 2016). These are not final figures and may be revised as provisional data are replaced with finalised and audited data.

The third provisional estimates suggest that in the financial year ending March 2016 (April 2015 to March 2016), borrowing fell by £16.7 billion to £74.9 billion, compared with the previous financial year. By comparison, the OBR forecast for the financial year ending March 2016 (April 2015 to March 2016) was £72.2 billion which is £2.7 billion below the latest outturn estimate.

OBR have estimated that the public sector will borrow £55.5 billion during the financial year ending March 2017 (April 2016 to March 2017); a reduction of £19.4 billion on the provisional outturn for the financial year ending March 2016 (April 2015 to March 2016).

Table 3 compares the year-to-date (April to May 2016) estimate of the main public sector fiscal aggregates with the same period in the previous financial year. It contrasts these data with the percentage change between the latest full year outturn data for the financial year ending March 2016 (April 2015 to March 2016) and the OBR forecast for the financial year ending March 2017 (April 2016 to March 2017), as published in March 2016. It is important to note that these provisional ONS estimates are not final figures and may be revised as provisional data are replaced with finalised and audited data.

Table 4 presents the third provisional estimate of public sector net borrowing split by sub-sector for the complete financial year ending March 2016 (April 2015 to March 2016) along with the corresponding OBR forecast; published in Table 2.38 (General government transactions by economic category) of the Economic and Fiscal Outlook Supplementary Fiscal Tables - March 2016.

On the same day as this bulletin is released, the OBR publishes a commentary on the latest figures and how these reflect on its forecasts. The OBR provides this commentary to help users interpret the differences between the latest outturn data and the OBR forecasts by providing contextual information about assumptions made during the OBR’s forecasting process.

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7. International comparisons of borrowing and debt

The UK government debt and deficit for Eurostat statistical bulletin is published quarterly (in January, April, July and November 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 15 April 2016, we published the UK Government Debt and Deficit for Eurostat statistical bulletin. The data used to produce the 15 April 2016 publication are consistent with those used in the production of the Public Sector Finances statistical bulletin published on 22 March 2016.

In the publication of 15 April 2016 we reported that:

  • general government deficit (Maastricht borrowing) in the financial year ending March 2015 (April 2014 to March 2015) was £91.1 billion, equivalent to 5.0% of GDP; a decrease of £12.2 billion compared with the financial year ending March 2014

  • general government gross debt (Maastricht debt) at the end of March 2015 was £1,601.3 billion, equivalent to 87.4% of GDP; an increase of £79.9 billion compared with the end of the financial year ending March 2014

We also reported first estimates for calendar year 2015:

  • general government deficit in 2015 was estimated to be £82.2 billion

  • general government gross debt at the end of 2015 to be £1,663.0 billion

The latest public sector finances data in this bulletin report that:

  • general government net borrowing in the financial year ending March 2015 (April 2014 to March 2015) was £90.7 billion, equivalent to 5.0% of GDP; a downward revision of £0.4 billion since the 15 April 2016 publication

  • general government gross debt at the end of March 2015 was £1,601.7 billion, equivalent to 87.4% of GDP; unchanged since the 15 April 2016 publication

Although the revisions to data for the financial year ending March 2015 are relatively small, there have been much larger revisions to the deficit estimates for calendar year 2015, which in large part reflect the provisional nature of data for the financial year ending March 2016.

The latest data in this bulletin report that the general government net borrowing (or deficit) in 2015 was £79.3 billion; a downward revision of £2.9 billion since the 15 April 2016 publication. The estimate for general government gross debt at the end of 2015 remains largely unchanged at £1,663.4 billion.

On 21 April 2016, Eurostat published a government debt and deficit comparison from the information collated across its 28 member states.

On 15 July 2016, we will publish the latest UK Government Debt and Deficit for Eurostat statistical bulletin. The data used to produce the 15 July 2016 publication are consistent with those used in the production of the Public Sector Finances statistics in this bulletin (published on 21 June 2016).

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 Eurostat statistical bulletin differs from that used within the public sector finances statistical bulletin.

An article, The use of GDP in 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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8. Public sector net cash requirement

Net cash requirement is a measure of how much cash the government needs to borrow (or lend) to balance its accounts. In very broad terms, net cash requirement equates to the change in the level of debt.

Central government net cash requirement is reconciled against the change in central government net debt in Table REC3 in the Public Sector Finances Tables 1 to 10: Appendix A dataset.

The public sector net cash requirement excluding public sector banks (PSNCR ex) follows a similar trend to that of public sector net borrowing by peaking in the financial year ending March 2010, though in recent years transfers from the Asset Purchase Facility have had a substantial impact on PSNCR ex but are PSNB ex neutral.

PSNCR ex in the financial year ending March 2016 (April 2015 to March 2016) was £50.2 billion; £26.1 billion, or 34.3% lower than the previous financial year.

Initial estimates suggest that PSNCR ex in the current financial year-to-date (April to May 2016) was £3.6 billion; £1.7 billion, or 32.1% lower than in the same period in 2015.

Figure 8 presents public sector cash requirement by sub-sector for the financial year-to-date (April to May 2016). 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 how many gilts (government bonds) the Debt Management Office may issue to meet the government’s borrowing requirements.

CGNCR was £3.4 billion in May 2016; a decrease of £7.1 billion, or 67.7% compared with May 2015. Initial estimates suggest that CGNCR in the current financial year-to-date (April to May 2016) was £5.5 billion; £3.3 billion, or 37.5% lower than in the same period in 2015.

In the financial year ending March 2016 (April 2015 to March 2016), CGNCR was £58.1 billion; a decrease of £26.5 billion, or 31.3%, compared with the previous financial year.

Cash transfers from the Asset Purchase Facility (APF) were £2.2 billion lower in the financial year ending March 2016 (April 2015 to March 2016), than the previous financial year. Without the impact of these transfers, CGNCR would have been £28.7 billion lower in the financial year ending March 2016 (April 2015 to March 2016) than the previous financial year.

Recent events impacting on CGNCR

For the current financial year, ending March 2017 (April 2016 to March 2017) the following events has reduced the CGNCR to date:

  • the transfers between the Bank of England Asset Purchase Facility Fund (BEAPFF) and central government

In the financial year ending March 2016 (April 2015 to March 2016) the following events reduced the CGNCR:

  • the transfers between the Bank of England Asset Purchase Facility Fund (BEAPFF) and central government

  • the sale of shares in Lloyds Banking Group

  • the sale of shares in Eurostar

  • the sale of shares in Royal Mail

  • the sale of shares in Royal Bank of Scotland

  • the sale of UK Asset Resolution Limited (UKAR) assets

  • the re-imbursement of support payments made to Icesave

In the financial year ending March 2015 (April 2014 to March 2015) the following events reduced the CGNCR:

  • the transfers between the BEAPFF and central government

  • the sale of shares in Lloyds Banking Group

In the financial year ending March 2014 (April 2013 to March 2014) the following events reduced the CGNCR:

  • the transfers between the BEAPFF and central government

  • the sale of shares in Lloyds Banking Group

  • the sale of shares in Royal Mail

In the financial year ending March 2013 (April 2012 to March 2013) the following events reduced the CGNCR:

  • the transfers between the BEAPFF and central government

  • the Royal Mail Pension Plan transfer and subsequent sale of assets

  • the transfer of the Special Liquidity Scheme final profits between Bank of England and central government

  • the 4G Spectrum sale

Public sector net cash requirement

Although the central government net cash requirement is the largest part of the public sector net cash requirement excluding public sector banks (PSNCR ex), the total public sector net cash requirement (PSNCR) can be very different. The reason is that the PSNCR 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.

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9. Central government receipts and expenditure

Current receipts

The government receives income mainly from taxes but also from National Insurance contributions, interest and dividends, fines and rent.

As cash receipts are generally accrued back to earlier periods when the economic activity took place, the first monthly estimate for receipts is by nature provisional, and must include a substantial amount of forecast data.

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.

In both January and July (to a lesser extent) 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 primarily affecting January and July receipts, also tends to lead to high receipts in the following month (March and November respectively), although to a lesser degree.

Pay as you earn (PAYE) tends to vary little throughout the financial year on a monthly basis (excluding bonus months). In recent years transfers from both the Bank of England Asset Purchase Facility Fund (BEAPFF) and the Special Liquidity Scheme (SLS) have boosted central government receipts. These transfers to central government have no impact on public sector borrowing due to the central government receipts being offset by the payments from the Bank of England.

Current expenditure

Current expenditure is the government’s spending on activities such as: social benefits (mainly pension payments), interest payments and other current expenditure including government departmental spending (excluding spending on capital assets).

Trends in central government current expenditure can be affected by monthly changes in debt interest payments, which can be volatile as they depend on the movements in the Retail Prices Index. Excluding debt interest makes this statistic less volatile.

There is however one regular peak in net social benefits, which are higher in November than in other months due to the annual payment of the winter fuel allowance.

Year-on-year growth in net social benefits is affected by the uprating of benefits to compensate for inflation based on the Consumer Prices Index (CPI).

For recent years these are: 2.7% in the financial year ending March 2015; 1.2% in the financial year ending March 2016 and -0.1% for the financial year ending March 2017 (meaning that the rates have remained frozen). These apply to benefits for pensioners (apart from the State Pension). Most benefits for people of working age are frozen for the financial year ending March 2017.

However, for State Pensions, the largest component within net social benefits, there is a “triple guarantee” that means that they are uprated by the highest of the CPI, increases in earnings or 2.5%. For the financial year ending March 2017, they were uprated by the rise in annual earnings which was 2.9%.

It can be difficult to compare the profile of monthly central government expenditure even when excluding both debt interest and net social benefits.

For the 4 years since the financial year ending March 2014, there have been continual changes to the profile of central government grants to local government.

In the financial year ending March 2016, the Revenue Support Grant (the main general grant paid to local authorities in England) was paid with a third of the total in April and the remainder in equal instalments in all the other months, whereas, in the financial year ending March 2015, more than half of it was paid in April with the bulk of the remaining balance paid in February and March. This financial year (ending March 2017) the monthly pattern of grants has changed again and is much flatter - with 10% being paid in April and the remainder flat though the year. The overall level is also lower than last year.

Current budget deficit

The gap between current expenditure and current receipts (having taken account of depreciation) is referred to as the current budget. When current expenditure is greater than current receipts (income), the public sector runs a current budget deficit.

In May 2016, the central government current budget deficit was £7.8 billion, a decrease in the deficit of £0.3 billion, or 4.3% compared with May 2015. Initial estimates suggest that central government current budget deficit in the current financial year-to-date (April to May 2016) was £12.3 billion; £3.0 billion, or 19.5% lower than in the same period in 2015.

In the financial year ending March 2016 (April 2015 to March 2016), the central government current budget deficit was £36.1 billion, a decrease in the deficit of £17.3 billion, or 32.4% compared with the previous financial year.

Figure 9 illustrates that the central government current budget deficit (as a percentage of GDP) has reduced since the financial year ending March 2010 (April 2009 to March 2010), but is still larger than before the global financial shock.

In recent years the current budget has been in deficit in most months. January and July tend to be surplus months as these are the 2 months with the highest receipts.

Net investment

Net investment represents the government’s spending on capital assets, like infrastructure projects, property and IT equipment, both as grants and by public sector bodies themselves minus capital receipts from the sale of capital assets.

In the financial year ending March 2016 (April 2015 to March 2016), central government’s net investment was £33.9 billion. This represents a decrease of £1.4 billion, or 4.1%, on the same period in the previous year and is largely due to a fall in central government capital consumption (depreciation).

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 vary from year to year. Net investment in the last quarter of the financial year is usually markedly higher than that in the previous 3 quarters.

Central government net investment includes the direct acquisition minus disposal of capital assets (such as buildings, vehicles, computing infrastructure) by central government. 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 (that is conceding a debt will not be repaid).

The sum of net investment (spending on capital less capital receipts) and the current budget deficit constitute net borrowing.

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10. Recent events and methodological changes

Classification decisions

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.

Local government cash data

We are currently working with the Department for Communities and Local Government to review the methodology used to calculate local government net cash requirement. We will update you on the progress and findings of this review in the next few months.

Final completion of the sale of former Northern Rock mortgages

The previously reported sale of £13 billion of former Northern Rock mortgages was completed on 5 May 2016 when the government received the final £520 million from Cerberus as part of the conclusion of this sale.

The mortgages, which were originally owned by Northern Rock and were acquired by the government during the financial crisis, were sold by UK Asset Resolution (UKAR) to Cerberus.

The sale was authorised by the Chancellor and announced on 13 November 2015.

The money raised from the completion of this sale (£520 million) will reduce central government net cash requirement and net debt in May 2016 by a corresponding amount.

Bank of England Asset Purchase Facility Fund (APF)

The APF currently holds government securities (gilts) on which it earns interest and it pays interest on the reserves created by the Bank of England to finance it. These flows are reflected in PSNB ex as they enter and leave the APF. The net liabilities of the APF increase PSND ex.

On 9 November 2012, the Chancellor announced an agreement with the Bank of England to transfer the excess cash in the APF to the Exchequer. These flows are internal to the public sector and so do not affect PSNB ex.

In May 2016, there were no transfers from the Bank of England Asset Purchase Facility Fund (BEAPFF) to HM Treasury. The next expected APF transfer will occur in July 2016.

The Bank of England entrepreneurial income for the financial year ending March 2016 (April 2015 to March 2016) was calculated as £11.9 billion. This is the total amount of dividend transfers that can impact on central government net borrowing in the financial year ending March 2017 (April 2016 to March 2017).

This treatment follows the conclusion of the 2013 PSF Review consultation.

All cash transferred from the Asset Purchase Facility to HM Treasury is fully reflected in central government net cash requirement and net debt.

For more detail of transactions relating to the Asset Purchase Facility, see Table PSA9 in the Public Sector Finances Tables 1 to 10: Appendix A dataset.

Lloyds Banking Group share sales

In recent years the government has entered a programme of selling shares in publicly owned organisations. For most share sales, the proceeds will 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.

On 17 September 2013, the UK government began selling part of its share holdings in Lloyds Banking Group (LBG). A further share sale on 23 and 24 March 2014 meant that the UK government surrendered in total a 13.5% stake in the institution, a quantity sufficient to lead to LBG being re-classified from a public sector body to a private sector body.

Based on the currently available information, we have recorded no LBG share sales in May 2016, though this may be revised at a later date.

Since December 2014, the government has continued reducing its shareholding in LBG via a pre-arranged trading plan, raising an estimated total of £16.2 billion to date.

In January 2016, the government announced that it would extend Lloyds’ trading plan for a further 6 months (ending no later than 30 June 2016). It stated that the current trading plan has reduced the government’s remaining stake in Lloyds to around 9%.

March 2016 Budget

The UK government published its latest fiscal plans on 16 March 2016 and alongside this the Office for Budget Responsibility (OBR) published its Economic and Fiscal Outlook. We will consider the impact on public sector finances of any future policy changes announced in the Budget and report on these in due course.

Housing associations

The reclassification of English private registered providers of social housing (referred to in this bulletin as housing associations) from the private to the public corporation sector was reflected in public sector finances for the first time in the January 2016 statistical bulletin. This reclassification, announced on 30 October 2015, affects over 1,500 bodies providing social housing and applies back to July 2008 when the controls in the Housing and Regeneration Act 2008 came into force.

It is important to realise that current estimates of the impact of the reclassification of housing associations are preliminary estimates which may be updated when new data become available or methodological improvements are made. At present, we are actively seeking alternative data sources to investigate the impact of smaller providers on net borrowing, net cash requirement and net debt.

We are also doing further work to test the assumptions that have been made in compiling the estimates. These were:

  • all housing association debt is assumed to be held by the private sector - the Quarterly Survey of Private Registered Providers for March 2015 showed that banks, building societies and capital markets contributed 99% to agreed sources of funding

  • the Global Accounts are collected for the entire financial year - monthly transactions were estimated by dividing the financial year figure by 12

  • providers which own less than 250 properties (less than 2% of the total stock) are assumed to have no net debt and not be investing in new properties

  • providers owning or managing between 250 and 1,000 properties are assumed to have the same gross debt per 1,000 properties as those owning or managing between 1,000 and 2,500 homes

  • the relative impact of small providers on the accounts is assumed to be constant between financial year ending March 2009 and financial year ending March 2015

This reclassification is being introduced in public sector finances before implementation in the Quarterly National Accounts and Blue Book publications. Any work to improve the methods and data sources used in these estimates will be reflected in the National Accounts publications at the time the reclassification is implemented.

Bank Corporation Tax surcharge

In July 2015, HM Revenue and Customs (HMRC) published details of a surcharge to be levied on profits of banking companies in accounting periods beginning on or after 1 January 2016.

The measure imposes a surcharge of 8% on the profits of banking companies. The profits will be calculated and reported on the same basis as for Corporation Tax, but with some reliefs added back.

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

This bulletin contains the third estimate of public sector borrowing for the financial year ending March 2016 (April 2015 to March 2016). This is likely to be revised in later months as more data become available.

In publishing monthly estimates, it is necessary that a range of different types of data sources are used. This section describes the regular timetable for updating initial estimates of public sector net borrowing to incorporate provisional and then final outturn data and the implications that has for data revisions.

Latest month

Central government

Departmental expenditure data are in-year outturns for the most recent month and in some cases data are based on budget estimates (forecasts). Adjustments are made to these forecasts for some departments to account for likely under-or over- spending. The income data are again a mixture of in-year outturn data and forecasts.

Local government

While some income data are available monthly, the majority of expenditure and income data are based on previously forecasted levels from the most recent quarter.

Local authorities publish their budget data towards the beginning of each financial year. The first estimates for the latest financial year are based on these budget data (divided by 12 to convert to months). There are adjustments in main categories of spending to account for likely under-or over- spending. The adjustments are based on what happened in previous years.

Public corporations

All data for public corporations for the latest month are based on our forecasts.

Earlier months

Central government

For the 2 to 3 months prior to latest month a mixture of in-year outturn data and budget estimates (forecasts) are used.

Local government

Quarterly local government data are available for England for some areas of spending, namely capital payments and receipts, and revenue expenditure. These data are taken into account in the public sector finance statistics around 3 to 4 months after the end of the quarter. Where quarterly data are not available, the budget data continue to be used.

Local authorities in Scotland and England provide provisional outturn data in the spring/summer for the preceding full financial year. These data will be reflected in the public sector finances in either the June or September statistical bulletin (depending on exactly when the provisional outturn data are published).

After this, we receive final outturn data for Welsh local authorities in October and English local authorities in November, covering the preceding full financial year. These data will be reflected in the public sector finances in the December statistical bulletin.

We retain our estimates of local authority spending in Northern Ireland until being supplied with final outturn data, usually in January, for the preceding full financial year.

Public corporations

We conduct a quarterly survey of the 4 largest public corporations. These figures are used around 3 to 4 months after the end of the quarter. Data for the remaining public corporations are based on our estimates until we receive provisional unaudited data from the HM Treasury Whole of Government Accounts. These data tend to be reflected in the public sector finances in the December statistical bulletin.

English private registered providers of social housing (referred to in this bulletin as housing associations) are public corporations. Data used to estimate their net borrowing and net debt are based on the OBR forecast until outturn data are published around a year after the end of the preceding financial year.

Every local authority in England, Scotland, and Wales that still owns and manages council houses is required to keep a ring-fenced account for housing services. This is called its Housing Revenue Account (HRA). All Housing Revenue Accounts are treated as a single public corporation, but the source data are supplied according to the local government data timetable.

Audited accounts

Each government department, local authority and public corporation produces a set of final, audited accounts that have been officially examined to check that they are accurate.

The publication of these accounts broadly follows the timetable outlined in Table 5.

Even after all audited data for the public sector are available: there may still be revisions to reflect, for example, the implementation of classification decisions and other methodological changes.

Assessing the end year position

The implication is that the earliest estimates of outturn for the financial year ending March 2016 (April 2015 to March 2016) will be subject to revision as revised data are provided to us by data suppliers.

Table 6 summarises revisions to the first estimate of PSNB ex for the last 6 financial years and shows both upwards and downwards revisions.

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12. Revisions since previous bulletin

In publishing monthly estimates, it is necessary that a range of different types of data sources are used. A summary of the different sources used and the implications this has for data revisions is provided in the document Sources summary and their timing.

The Public Sector Finances Revision Policy provides information of when users of the statistics published in the public sector finances and Government Deficit and Debt under the Maastricht Treaty statistical bulletins should expect to see methodological and data related revisions.

More detail of the methodology and sources employed can be found in the Public Sector Finances Methodological Guide.

Each quarter PSF data are aligned to the data reported in the EU Government Deficit and Debt return to take advantage of the more detailed quarterly data underpinning the latter publication.

This month’s statistical bulletin coincides with the production of the 2016 annual national accounts publication (Blue Book 2016) published on 30 June 2016. These changes have resulted in an extended period of revisions that have been reflected in this publication. Revisions tend to be the result of both updated data sources and methodology changes. This month the reported revisions are largely the result of updated data sources.

Table 7 summarises revisions between the data contained in this bulletin and the previous publication.

Public sector net borrowing (excluding public sector banks)

Revisions to public sector net borrowing excluding public sector banks (PSNB ex) are largely limited to the latest four financial years, though there are some small (£0.2 billion and below) upward revisions to borrowing in financial years ending March 1999 and 2000.

Revisions to the April 2016 net borrowing

The provisional estimate PSNB ex in April 2016 has been revised up by £1.0 billion to £8.2 billion as a result of a £1.7 billion increase in local government borrowing, partially offset by a £0.8 billion decrease in central government borrowing.

When considering the revisions to the current financial year-to-date (in this case April 2016 only, we have previously noted, data for the latest month of every release contains some forecast data. The initial outturn estimates for the early months of the financial year, particularly April, contain more forecast data than other months as profiles of tax receipts, along with departmental and local government spending are still provisional. This means that the data for these months are typically more prone to revision than other months and can be subject to sizeable revisions in later months.

The estimate of local government net borrowing (LGNB) for April has been revised up by £1.7 billion. This change is largely due to initial estimates of current transfers from central to local government in April being reduced by £2.1 billion.

The estimate of the central government current receipts (including taxes) in April were collectively revised up by £0.3 billion while at the same time, estimates of current expenditure has been revised down by £0.9 billion. These revisions to the current account along with a £ 0.3 billion increase to the estimate of capital expenditure resulted in the estimate of central government net borrowing (CGNB) in April has been revised down by £0.8 billion.

Revisions to net borrowing in the financial year ending March 2016

In the financial year ending March 2016 (April 2015 to March 2016), estimates of CGNB and LGNB were revised down by £0.4 billion and £1.4 billion respectively. A partially offsetting upward revision of £0.8 billion to PCNB meant that the previous estimate of PSNB ex was revised downward by £1.0 billion.

CGNB was revised down by £0.4 billion. A £0.9 billion upward revision to current receipts was largely offset by a £0.8 billion rise in the estimate of current expenditure leading to a relatively unchanged current account. However, a decrease of £0.3 billion to the estimate of capital spending (net investment), largely due to a decrease in the estimate of capital transfers from central government to other sectors, led to an decrease in the estimate of CGNB of £0.4 billion. The largest revisions in receipts were a £1.1 billion upward revision to taxes on production (of which VAT receipts increased by £0.7 billion) and a £0.3 billion downward revision to interest & dividends. In each case this was a result of outturn replacing forecast data. Current expenditure was revised up by £0.8 billion, with “other current expenditure” increasing by £0.6 billion; largely as a result of increases in the estimates of the purchase of goods & services and market output.

PCNB was revised up by £0.8 billion. This upward revision to PCNB was almost entirely due to new receipts data replacing previous estimates. Current receipts were revised downward by £0.9 billion; gross operating surplus and Interest and dividends (net) from public sector being revised down by £0.5 billion and £0.4 billion respectively.

LGNB was revised down by £1.4 billion. This revision is spread across a few components. Net investment was revised down by £1.0 billion, and the revision was roughly equally split between gross capital formation and net capital grants to the private sector. These revisions are due to updated source data, specifically provisional outturn figures for England replacing budget data.

Current expenditure on goods and services was revised down by £0.3 billion, again due to updated source data. Provisional outturn data for Scotland now replace budget estimates, and other items of source data have also been updated.

There are smaller revisions in other components.

Revisions to net borrowing in the financial year ending March 2015

In the financial year ending March 2015 (April 2014 to March 2015), there were no substantial revisions to the previous estimate of public sector net borrowing.

Revisions to net borrowing in the financial year ending March 2014

In the financial year ending March 2014 (April 2013 to March 2014), though estimates of central government remained largely unchanged, there were increases to the estimate of local government and public corporations’ net borrowing which increased by £1.1 billion and £0.3 billion respectively. As a result of these changes, the estimate of public sector net borrowing was increased by £1.3 billion.

LGNB was revised up by £1.1 billion, mainly because current expenditure on goods and services was revised up by £0.9 billion. ONS recently reviewed the accuracy of the source data and calculations used for local government current expenditure on goods and services. This resulted in many changes at the most detailed level and the updated data are now being used for the first time. No single change explains the overall revision of £0.9 billion; rather it is the culmination of many changes, each of which has a small impact. Net investment was revised down by £0.1 billion, due to updated source data.

Public Corporations net borrowing was revised up by £0.3 billion mainly due to the reviewing and improving figures for Gross Operating Surplus. They include removing London and Continental Railways from the Public Corporations sector until its reclassification in the final quarter of 2014 and reviewing the calculation of Gross Operating Surplus using HM Treasury Whole of Government Accounts data.

Revisions to net borrowing in the financial year ending March 2013

In the financial year ending March 2013 (April 2012 to March 2013), though estimates of central government remained largely unchanged, there were increases to the estimate of local government and public corporation’s net borrowing increased by £1.4 billion and £1.1 billion respectively. As a result of these changes, the estimate of public sector net borrowing was increased by £2.5 billion.

LGNB was revised up by £1.4 billion. Within this, current expenditure on goods and services was revised up by £1.5 billion, due to implementing changes identified in the recent ONS review of source data, which also affected local government current expenditure on goods and services for the financial year ending March 2014.

Public Corporations net borrowing was revised up by £1.1 billion mainly due to the reviewing and improving figures for Gross Operating Surplus. They include removing London and Continental Railways from the Public Corporations sector until its reclassification in 2014q4 and reviewing the calculation of Gross Operating Surplus using HM Treasury Whole of Government Accounts data.

Revisions to net borrowing in earlier financial years

Revisions to PSNB ex in the financial years ending March 1999 and March 2000 are a result of quality assurance of and improvements to the calculation of the capital expenditure of public corporations in those years.

Public sector net cash requirement (excluding public sector banks)

Public sector net cash requirement (excluding public sector banks) (PSNCR ex) for April 2016 has been revised upwards by £0.3 billion due to increases in both local government and public corporations net cash requirement of £0.3 billion each, being partially offset by a decrease in the central government net cash requirement in the same period.

PSNCR ex in the financial year ending March 2016 (April 2015 to March 2016) has been revised downwards by £0.2 billion due to a decrease in the estimate of local government net cash requirement.

Public sector net debt (excluding public sector banks)

While the level of public sector net debt (excluding public sector banks) (PSND ex), at the end of March 2016, was revised down by £0.4 billion (largely due to updated data for public corporations), PSND ex at the end of April 2016 has been revised up by £0.1 billion, reflecting the latest data for central government, local government and public corporations.

To provide an insight into the drivers of the historical revisions between publications, this bulletin presents 3 revisions tables:

  • Table PSA1R complements PSA1 and provides a revisions summary (between the current and previous publication) to headline statistics in this release

  • Table PSA2R complements PSA2 and provides the revisions (between the current and previous publication) to net borrowing by sector

  • Table PSA6R complements PSA6B and provides the revisions (between the current and previous publication) to the components of central government net borrowing

Tables PSA1R and PSA6R are published in the Public Sector Finances Tables 1 to 10: Appendix A dataset.

In addition, the Revisions analysis for Public Sector Finances: Appendix C dataset presents a statistical analysis on several main components of the central government account (current receipts, current expenditure, net borrowing and net cash requirement) to determine whether their average revisions are statistically significant.

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13. New for the bulletin

Non-market output

As announced in the Public sector finance: April 2016 bulletin, to accommodate the subdivision of non-market output dependant on whether or not a payment is made to government, we have made a small change to the presentation of data in Tables PSA6C, PSA6H and PSA6J.

In table PSA6C, series MUT5, representing central government market output and output for own final use, is now accompanied by the footnote “Includes payments for non-market output”.

In both tables PSA6H and PSA6J, series NMIX, representing local government market output, has been replaced by series AE76 with the accompanying footnote updated “Market output, payments for non-market output, pension contributions, current grants received from central government and capital grants received from the private sector are recorded as negative expenditure.”

Social transfers in kind

As announced in the Public sector finance: April 2016 bulletin, to accommodate the subdivision of social transfers in kind dependant on whether government directly provides the good or pays a third party to do so, we have made a small change to the presentation of data in Table PSA6E.

In table PSA6E, series MF76, representing central government purchase of goods and services, is now accompanied by the footnote “Includes both non-market production and market production of social transfers in kind”.

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14. Consultation with users

As part of our continuous engagement strategy, comments are welcomed on ways in which the public sector finances statistical bulletin might be improved. Please email: public.sector.accounts@ons.gov.uk

Country and regional (sub-UK) public sector finances

Our public consultation to gather your suggestions for a country and regional public sector finances publication closed on 11 April 2016.

We published a summary of the information gathered as a part of this exercise on 16 May 2016. As a result of this exercise we will take forward plans to produce an annual Country and Regional Public Sector Finances publication, with the aim of publishing the first bulletin in 2017. The Country and Regional Public Sector Finances will be produced on an annual basis for financial year data only.

The use of GDP in public sector fiscal ratio statistics

Our public consultation on the use of GDP in our presentation of public sector finances closed on 18 March 2016. We will publish a summary of the information gathered as a part of this exercise within the next 12 weeks and implement any recommendations thereafter.

More information on the calculation of GDP ratios can be found in The Use of GDP in Public Sector Fiscal Ratio Statistics.

UK Statistics Authority assessment of public sector finances

Alongside monitoring the production and publication of official statistics, the UK Statistics Authority's statutory function is to prepare, adopt and publish a Code of Practice for Official Statistics (in consultation with others as appropriate), setting out the standards that the Statistics Authority expects official statistics to meet. The Statistics Authority also determines whether official statistics comply with the Code and, if so, designates them with the quality mark “National Statistics”. The process of determining compliance with the Code and designation as National Statistics is known as “Assessment”.

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.

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15 .Background notes

1. List of tables associated with this bulletin

Table 8 is lists all the data tables associated with this bulletin and may be found in the Public Sector Finances Tables 1 to 10: Appendix A dataset.

2. Appendices – Data in this release

  • Appendix A - Public Sector Finances Tables 1 to 10

  • Appendix B - Large impacts on public sector fiscal measures excluding financial intervention (one off events)

  • Appendix C - Revisions analysis on several main components of the central government account (current receipts, current expenditure, net borrowing and net cash requirement)

3. Data quality

A quality and methodology information report for the public sector finances is available on our website. This report describes in detail the intended uses of the statistics presented in this publication, their general quality and the methods used to produce them.

An overview note on the data sources used within public sector finances and the quality assurance processes that are undertaken in compiling the statistical release was published on our website on 19 October 2012.

4. Definitions

A methodology guide to monthly public sector finance statistics is available on our 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.

Table 9 is intended to provide users with the important terms needed to understand this release.

5. Guidance and methodology

The following articles aim to help users gain a better understanding of public sector finances statistics:

6. Range of measures published

In this bulletin we publish the headline measures of borrowing and debt (PSNB ex and PSND ex) in tables as well as the wider measures of borrowing and debt that include public sectors banks.

Since 1997, it has been an essential feature of the UK public sector finances' fiscal measures that they are based on National Accounts and European Government Finance Statistics concepts. It is important that these fiscal measures continue to be aligned with these international standards to ensure a high degree of comparability between domestic and international measures and because the government bases its fiscal policy on these aligned measures.

7. Coherence

EU Council Directive 2011/85/EU (part of the enhanced EU economic governance package regulations known as the "6 pack") includes statistical requirements for government finance statistics relating to the monthly publication of statistics and annual publication of specific contingent liabilities and other potential liabilities. Tables PSA6C and PSA6H were introduced in 2014 into the PSF bulletin in order to fully comply with the monthly government finance statistics requirements.

On 22 December 2014, we published for the first time the required information on government contingent liabilities and other potential liabilities. The latest update to these figures was published on 22 December 2015 alongside an article setting out the wider background to different debt measures used in the UK.

The public sector finances (PSF) has a more flexible revisions policy than other National Accounts data. Therefore, PSF data may be inconsistent with the published GDP and Sector and Financial Accounts datasets because a revision may not be incorporated into the main National Accounts dataset until a later date. More information can be found in the Public Sector Finances Revision Policy.

General government net borrowing and gross consolidated debt reported in this bulletin are calculated following the rules of the European System of Accounts 2010 (ESA 2010) and are the same in definition as the general government debt and deficit monitored under the Maastricht Treaty. This was most recently reported on 15 April 2016, with the next publication scheduled for 15 July 2016.

When calculating debt as a percentage of GDP in the bulletin on UK government debt and deficit for Eurostat, the general government gross debt at the end of the year is divided by the GDP for the previous 12 months. This methodology is adopted to be consistent with Eurostat publications which report on Maastricht debt for all EU countries.

However, when calculating public sector net debt as a percentage of GDP in the UK public sector finances the debt figure is divided by an annual GDP figure which is centred on the month to which the debt relates. To be consistent the general government gross debt as a percentage of GDP in the public sector finances is calculated using the same centred GDP figure. More information can be found in an article on the use of GDP in the fiscal ratio statistics.

Tax receipts data published in this bulletin are presented in terms of broad tax categories (for example, Income Tax, VAT). For more detail on individual taxes users can go to the HM Revenue and Customs website and access a monthly publication which provides cash tax receipts data which are entirely consistent with the data published in Table PSA7 in the Public Sector Finances Tables 1 to 10: Appendix A dataset.

8. OSCAR - Online System for Central Accounting and Reporting

In June 2010, HM Treasury published as part of the government transparency agenda, raw data from the COINS database (the predecessor to OSCAR) for the financial years ending March 2006 to 2010. From September 2012 onwards the data releases have been made from OSCAR, the replacement for COINS. The latest in-year quarterly data will be released on 21 June 2016, alongside this release, and the latest annual data were released on 20 November 2015. The data are accessible from HM Treasury’s website.

9. Accuracy

Central government departmental expenditure data are subject to various validation processes and improve over time. They go through 4 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 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 Statistics these financial year estimates are updated

  • stage 4 – in March the following year the winter update of the Treasury’s Public Spending Statistics is published and the financial year estimates are further improved; all departments’ and devolved administrations’ accounts will have been audited and finalised by this stage; these revisions are not normally included in the public sector finances statistical bulletin until the September release

Data up to and including the financial year ending March 2013 (April 2012 to March 2013) and the financial year ending March 2014 (April 2013 to March 2014) are at Stage 4, while data for the financial year ending March 2015 (April 2014 to March 2015) are at Stage 2 and data for the financial year ending March 2016 (April 2015 to March 2016) are at Stage 1.

The local government data for the financial year ending March 2011, 2012, 2013 and 2014 for local authorities are based on final outturns for receipts and expenditure.

Data for the financial year ending March 2015 (April 2014 to March 2015) are mainly based on final outturns (provisional outturns have been used for Scotland).

Estimates for financial year ending March 2016 (April 2015 to March 2016) are based on a combination of in-year returns, forecast data, and provisional outturns. These are subject to revision when more outturn data become available.

10. The reconciliation of net cash requirement to debt

The issues and subsequent revisions to CGNCR reported in November 2014 were identified through work undertaken to reconcile the 3 different fiscal measures (that is, net cash requirement, net borrowing and net debt) and to reconcile the central government net cash requirement with cash reported in audited resource accounts.

We are currently building these reconciliation processes into the monthly production systems. The first of these new reconciliations, Table REC3 in the Public Sector Finances Tables 1 to 10: Appendix A dataset, attempts to reconcile central government net cash requirement and net debt.

Table REC3 is not currently designated a National Statistic and should be considered as a work-in-progress, with plans to introduce further refinements in the coming months.

11. Revisions

We define a revision as a scheduled change to any published ONS output which may be made in order to incorporate better source data or to reflect improved methodology.

The Public Sector Finances Revision Policy is published on our website. It was last updated in September 2015.

Table 6 summaries revisions to the first estimate of PSNB ex for the last 6 financial years and illustrates that revisions to PSNB ex may be both upwards or downward.

The Revisions analysis for Public Sector Finances: Appendix C dataset to the monthly public sector finance statistical bulletin presents revisions analysis to a number of main central government measures (current receipts, current expenditure, net borrowing and net cash requirement).

By applying a statistical significance test, this analysis investigates the size and direction of revisions from each measure’s first publication to that recorded a year later. An average of 5 years worth of such revisions is used to identify any statistical bias.

These indicators only provide summary measures of revisions; the revised data may still be subject to measurement error.

Currently data for the public sector banks are only available for periods up to June 2015. Values for months from July 2015 onwards are our estimates. Consequently these, and the aggregates which include the impacts of financial interventions, may be revised substantially when actual data becomes available.

12. The alignment of public sector finance with the UK government debt and deficit for Eurostat statistical bulletin

Each quarter (March, June, September and December) public sector finance (PSF) data are aligned to the data reported in the UK government debt and deficit for Eurostat statistical bulletin to take advantage of the more detailed quarterly data underpinning the latter publication.

In order for the latest month and financial year-to-date to reflect the latest available information, while ensuring coherence between the UK government debt and deficit for Eurostat statistical bulletin output and the PSF statistical bulletin:

  • the latest reported month reflects the most up-to-date PSF data available

  • the quarterly data in the periods common to both the UK government debt and deficit for Eurostat statistical bulletin and PSF are aligned

  • the estimates for the month immediately prior to the latest month (and following that aligned to the UK government debt and deficit for Eurostat statistical bulletin) are calculated by taking the latest data for the cumulative financial year-to-date and subtracting both the cumulative totals for those aligned quarters in the financial year and the latest month estimates.

For example, in the PSF published in September:

• the August estimates use the latest reported data

• the PSF data in the period April to June are aligned to the UK government debt and deficit for Eurostat statistical bulletin

• the July figures are derived from the financial year-to-date (April to August) less the sum of the aligned period (April to June) and August.

This alignment process results in a temporary adjustment to the published monthly profiles which will unwind in the dataset reported in the bulletin published in the following month which is then de-coupled from the UK government debt and deficit for Eurostat statistical bulletin to reflect the latest available data.

In the example above, the derived estimate to July may revise substantially to reflect the latest monthly path.

This phenomenon is discussed further in the Public Sector Finances Revision Policy.

13. Publication policy

A brief paper explaining the roles and responsibilities of ONS and HM Treasury when producing and publishing the public sector finances statistical release is on our website.

A note on the main uses and users of the public sector finances statistics is available on our website.

Recommendations for the improvement of the public sector finances statistical bulletin may be emailed to public.sector.accounts@ons.gov.uk

National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority compliant with the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference.

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 to the contents of this bulletin is available on request. 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 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 these data on the website.

The UK Statistics Authority has designated these statistics as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Official Statistics.

Designation can be broadly interpreted to mean that the statistics:

  • meet identified user needs

  • are well explained and readily accessible

  • are produced according to sound methods

  • are managed impartially and objectively in the public interest

Once statistics have been designated as National Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.

Public sector finance data series previously published in Financial Statistics are made available for download on the public sector finance datasets 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.

14. Feedback

As part of our continuous engagement strategy, comments are welcomed on ways in which the public sector finances statistical bulletin might be improved. Please email: public.sector.accounts@ons.gov.uk

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Contact details for this Statistical bulletin

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