Public sector finances, UK: November 2022

Other commentary from the latest public sector finances data can be found on the following pages:

• Recent and upcoming changes to public sector finance statistics: November 2022

• Public sector finances borrowing by sub-sector dataset

• UK government debt and deficit: June 2022

• In November 2022, the public sector spent more than it received in taxes and other income, requiring it to borrow (public sector net borrowing excluding public sector banks (PSNB ex)) £22.0 billion, which was £13.9 billion more than in November 2021, and the highest November borrowing since monthly records began in 1993.

• Public sector total expenditure was £98.9 billion in November 2022; of this, central government current (or day-to-day) spending was £82.0 billion, £13.5 billion more than in November 2021.

• Central government debt interest payable was £7.3 billion in November 2022, which was £2.4 billion more than in November 2021 and the highest November figure since monthly records began in April 1997; the volatility in interest payable is largely because of the effect of Retail Prices Index (RPI) changes on index-linked gilts.

• Public sector total receipts were £76.9 billion in November 2022; of this, central government tax receipts were £51.6 billion, £2.2 billion more than in November 2021.

• PSNB ex was £105.4 billion in the financial year to November 2022; this was £7.6 billion less than in the same period last year, but £50.8 billion more than in the financial year to November 2019 (pre-coronavirus), and is the fourth highest financial year to November borrowing since monthly records began in 1993.

• Central government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was £25.5 billion in November 2022, which was £12.5 billion more than in November 2021; this brought the total to £77.2 billion for the financial year to November 2022.

• Public sector net debt excluding public sector banks (PSND ex) was £2,477.5 billion at the end of November 2022, or around 98.7% of gross domestic product (GDP), which was an increase of £125.9 billion, or a decrease of 0.3 percentage points of GDP, compared with November 2021.

• Public sector net debt excluding public sector banks and the Bank of England (PSND ex BoE) was £2,176.0 billion at the end of November 2022, or around 86.7% of GDP, which was an increase of £151.7 billion, or 1.5 percentage points of GDP, compared with November 2021.

Initial estimates for November 2022 show that the public sector spent more than it received in taxes and other income, requiring it to borrow £22.0 billion.

Breakdowns of public sector net borrowing by both sub-sector and transaction are presented in our Public sector finances borrowing by sub-sector dataset.

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

Central government receipts

Central government receipts in November 2022 were estimated to have been £69.2 billion, which was £3.2 billion more than in November 2021. Of these receipts, tax revenue increased by £2.2 billion to £51.6 billion.

On 3 November 2022, the Serious Fraud Office announced a £281 million fine levied on Glencore Energy UK Ltd. As with similar fines this has been recorded within "other receipts" in Table 2.

Central government expenditure

Central government bodies spent £82.0 billion on current (or day-to-day) expenditure in November 2022, which was £13.5 billion more than in November 2021.

Social assistance

In November 2022, assistance payments were £13.2 billion, £3.3 billion more than in November 2021. This increase was largely because of an increase in cost-of-living payments.

Energy Bills Support Scheme

The Energy Bills Support Scheme (EBSS), as explained on GOV.UK, is a government scheme announced in April 2022, giving households in Great Britain (with a domestic electricity contract) £400 towards the cost of their energy bills.

It is paid in six evenly spread portions between October 2022 and March 2023. This month sees the second round of EBSS payments, as shown on GOV.UK, with £1.9 billion of central government expenditure recorded as a current transfer from government to households, and presented within the "other expenditure" category in Tables 3 and 7.

Energy Price Guarantee schemes

In September 2022, the UK Government announced further plans to help households and businesses manage the cost of energy. These include the Energy Price Guarantee (EPG) for households and the Energy Bill Relief Scheme (EBRS) for businesses across the UK.

This month sees the second round of payments under the scheme for households and businesses, with the associated central government expenditure recorded within the "subsidies – other" category in Tables 3 and 7. This month’s figure is an initial indicative estimate, which will be revised over the coming months.

Interest payable on central government debt

Since mid-2021, the cost of servicing central government debt has increased considerably. These rising costs do not principally reflect recent increases in the level of government debt, nor is the change in servicing costs driven by large increases in the interest – or coupon – payments by government. Instead, the recent high levels of debt interest payable are largely a result of higher inflation, with the interest payable on index-linked gilts rising in line with the Retail Prices Index (RPI).

In November 2022, the interest payable on central government debt was £7.3 billion with an underlying £4.3 billion reflecting the impact of inflation.

The inflation-linked portion of interest payable on most index-linked gilts is calculated using a three-month lagged RPI. In November 2022, we reference the RPI movement between August and September 2022. We will reflect RPI increases in the most recent months in our interest estimates for future months.

While any RPI uplift will affect accrued expenditure (as used in the calculation of borrowing), it will not be wholly and immediately reflected in the central government net cash requirement. These movements are reflected in the government’s liabilities, which will be realised as the existing stock of index-linked gilts is redeemed.

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

Public sector net borrowing excluding public sector banks (PSNB ex) was £105.4 billion in the financial year (FY) to November 2022, £7.6 billion less than in the same period last year.

The latest forecast published by the Office for Budget Responsibility (OBR) in its Economic and fiscal outlook – November 2022 estimates that the public sector will borrow £177.0 billion in the FY ending March 2023, £71.6 billion more than in the eight months to November 2022.

Public sector current budget deficit

The public sector current budget deficit is the gap between current expenditure and current receipts on an accrued basis, having taken account of depreciation. The current budget deficit can be thought of as borrowing to fund day-to-day spending, as it excludes the capital expenditure (or net investment) present in the wider net borrowing measure.

Central government receipts

Central government receipts in the financial year (FY) to November 2022 were £580.1 billion, which was £60.0 billion more than a year earlier. Of these, tax receipts were £424.9 billion, which was £42.3 billion more than in the FY to November 2021.

Central government expenditure

Central government bodies spent £628.6 billion on current (or day-to-day) expenditure in the FY to November 2022, which was £35.5 billion more than in the same eight-month period last year.

In April 2022, we recorded the Council Tax rebate, as explained on GOV.UK, in England as a payable tax credit from central government to households. This payment was recorded within the other expenditure category in Table 7, and the additional expenditure increased central government and consequently public sector net borrowing by £3.0 billion in April 2022.

In October 2022, the UK Government began making payments under its energy support package schemes. To date it has paid £3.8 billion under The Energy Bills Support Scheme (EBSS) (presented within the "other expenditure" category in Tables 3 and 7).

In October 2022, the UK Government also began making payments under the Energy Price Guarantee (EPG) for households and the Energy Bill Relief Scheme (EBRS) for businesses across the UK. These payments are recorded as subsidies (within the "subsidies – other" category in Tables 3 and 7) but at this stage are initial indicative estimates, which will be revised over the coming months.

The public sector borrowed £125.4 billion in the financial year ending (FYE) March 2022. This was £2.4 billion less than the £127.8 billion forecast by the Office for Budget Responsibility (OBR) in its Economic and fiscal outlook – March 2022 and substantially less than the £312.8 billion borrowed in the FYE March 2021.

The coronavirus (COVID-19) pandemic has had a substantial impact on the economy as well as public sector borrowing. Expressed as a ratio of UK gross domestic product (GDP), borrowing in the FYE March 2021 was 15.0%, which was the highest for 75 years. Our latest estimates indicate that this ratio fell by 9.6 percentage points to 5.4% for the 12 months to March 2022.

The central government net cash requirement (CGNCR), excluding UK Asset Resolution Ltd and Network Rail, is the amount of cash needed immediately for the UK government to meet its obligations. To obtain cash, the UK government sells financial instruments, gilts or Treasury Bills.

The amount of cash required will be affected by changes in the timing of payments to and from central government, but it does not depend on forecast tax receipts in the same way as our accrued (or national accounts-based) measures of borrowing.

The CGNCR consequently contains the timeliest information and is less susceptible to revision than other statistics in this release.

However, as for any cash measure, the CGNCR does not reflect the overall amount the government is liable for or the point at which any liability is incurred – it only reflects when cash is received and spent.

As a result of an index-linked gilt redemption, we have recorded an additional £9.9 billion of central government expenditure in November 2022. We have provisionally recorded this expenditure as a negative value under “other receipts” in Tables 9 and 10 but will review this recording in line with available guidance.

Public sector net debt excluding public sector banks (PSND ex) was £2,477.5 billion at the end of November 2022, which was an increase of £125.9 billion compared with November last year.

The extra funding required by government over the course of the coronavirus (COVID-19) pandemic, combined with reduced cash receipts and a fall in gross domestic product (GDP), have all helped to push public sector net debt at the end of November 2022 to 98.7% of GDP.

Debt is largely made up of gilts (or bonds) issued to investors by central government. Of the £2,084.9 billion of gilts in circulation at the end of November 2022:

• £1,550.3 billion are conventional gilts that pay a fixed interest rate

• £534.6 billion are index-linked gilts that pay an interest rate pegged to the Retail Prices Index (RPI) and are recorded at their redemption value

These gilts are auctioned by the Debt Management Office (DMO) in accordance with its financing remit, on behalf of central government.

Gilt prices

In recent months, market interest rates for government debt (gilts) have risen and in many cases, are now higher than the "coupon rate" offered on gilts, reversing the pattern of the last 18 financial years. As a result, achieved gilt auction prices are currently often below the face value of the gilt: that is, they are sold at a discount. If gilts are sold at a discount, the government must sell more gilts to raise a given amount of cash, meaning that debt increases by more than the net cash requirement.

Table REC3 in our Public sector finances tables 1 to 10: Appendix A explains the relationship between central government net cash requirement and net debt, listing both gilt discounts/premia and the inflation uplift on index linked gilts as important determinants in this reconciliation.

The Bank of England’s contribution to debt

The Bank of England's (BoE) contribution to public sector net debt is largely a result of its quantitative easing activities. These include both the gilt-purchasing activities and corporate bond holdings of the Asset Purchase Facility Fund (APF) and loans made under Term Funding Schemes (TFS).

Our measure of public sector net debt excluding the public sector banks and the Bank of England (PSND ex BoE) removes the debt impact of these schemes along with the other transactions relating to the normal operations of the BoE. Standing at £2,176.0 billion at the end of November 2022 (or around 86.7% of GDP), PSND ex BoE was £301.5 billion (or 12.0 percentage points of GDP) less than PSND ex.

The impact of the APF gilt holdings on debt

The APF’s gilt holdings currently stand at £744.9 billion (at redemption value), a decrease of £6.8 billion compared with October 2022. For more information of their market operations, see the Bank of England’s Results and usage data.

It is important to understand that the APF’s gilt holding is not recorded directly as a component of public sector net debt. Instead, in November 2022, we record the £105.0 billion difference between the £849.9 billion of reserves created to purchase gilts (at market value) and the £744.9 billion redemption value of the gilts purchased.

Table PSA9A in our Public sector finances tables 1 to 10: Appendix A presents the impact of both APF and TFS as a part of the BoE’s contribution to public sector net debt.

Public sector net financial liabilities

Public sector net financial liabilities excluding public sector banks (PSNFL ex) provides a more comprehensive measure of the public sector balance sheet. It captures a wider range of financial assets and liabilities than recorded in PSND ex, such as the assets held under the TFS, which fall outside the boundary of PSND ex.

PSNFL ex was £2,153.8 billion at the end of November 2022 (or around 85.8% of GDP), which was £323.7 billion (or 12.9 percentage points of GDP) less than PSND ex.

Table PSNFL3, published as a part of our Public sector finances tables 1 to 10: Appendix A, provides a reconciliation between the latest measures of PSND ex and PSNFL ex.

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

Revisions to net borrowing (PSNB ex) in the financial year to October 2022

Since our last public sector finances bulletin on 22 November 2022, we have reduced our estimate of borrowing in the financial year to October 2022 by £1.1 billion.

This change was largely a result of £1.3 billion reduction in our provisional estimate of local government borrowing, where we replaced our budget forecast estimates of capital expenditure by local authorities in England with in-year estimates supplied by the Department for Levelling Up, Housing and Communities.

Since our last publication, we have updated our provisional estimates of public corporations’ data for the current financial year to reflect that published in OBR's Economic and fiscal outlook – November 2022, resulting in an increase of £0.4 billion to our previously published estimate of public corporations’ net borrowing in the financial year to October 2022.

Finally, as a result of many offsetting changes to previously published central government data, we have reduced our previously published estimate of central government net borrowing in the financial year to October 2022 by £0.2 billion.

Tables 12 and 13 show the revisions to central government receipts and expenditure in the financial year to October 2022 and financial year ending (FYE) March 2022 since our last publication.

Revisions to net borrowing (PSNB ex) in previous financial years

This month we have made some substantial updates to our previous estimates of public sector net borrowing, most notably on the FYE March 2022 and FYE March 2020.

Financial year ending March 2022

Since our last bulletin, we have reduced our previous estimate of public sector borrowing in the FYE March 2022 by £7.3 billion, largely because of an update to our previously published information for government loan guarantee schemes, contributing to a £6.1 billion reduction in central government net borrowing.

In September 2021, we recorded provisional estimates of the expected loss under the government loan guarantee schemes (Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Recovery Loan Scheme).

This expenditure was recorded in line with international statistical guidance in the form of a capital transfer from central government to the private sector at the time the guarantees were provided, reflecting estimated losses under the schemes over their lifetimes. These losses were estimated as £19.3 billion in the FYE March 2021 and £0.9 billion in the FYE March 2022, increasing our borrowing estimates accordingly.

The Department for Business, Energy and Industrial Strategy have released annual reports and accounts for the FYE March 2022, therefore this month, we have recorded a £5.2 billion capital transfer from the private sector to central government in March 2022, offsetting a portion of the initial loss and so reducing our previous estimate of borrowing in the most recent full financial year.

Further, in the FYE March 2022 we have reduced our previous estimates of corporation tax receipts by £0.7 billion and central government expenditure on subsidies and staff costs by £1.1 billion and £0.5 billion, respectively.

In addition, over the same period we have reduced our previous estimates of both local government and public corporations net borrowing by £0.6 billion each as our previous estimates have been improved, mainly by using published provisional outturn data.

Financial year ending March 2020

Since our last bulletin, we have reduced our estimate of public sector net borrowing in the FYE 2020 by £3.3 billion, because of an update to our previously published student loans data.

This month we have updated our student loans data from January 2020 to date. Most notably, as a result of further quality assurance work, we have reduced our previous estimate of student loan write-offs by £3.5 billion in the FYE March 2020, from £13.1 billion to £9.6 billion. As a result, we have reduced our previous estimate of expenditure on capital transfers by central government by £3.5 billion in March 2020 and consequently central government net borrowing by an equal amount.

Revisions to public sector net debt excluding public sector banks (PSND ex)

Since our last public sector finances bulletin on 22 November 2022, we have increased our estimate of debt at the end of October 2022 by £1.6 billion, as a result of updated local government and public corporations data.

Revisions to gross domestic product (GDP)

This month we have updated our estimate for GDP to include the forecast data presented in OBR’s Economic and fiscal outlook – November 2022 published on 17 November 2022.

As a result of this update, we have increased our estimate of the level of PSND ex at the end of October 2022 expressed as a ratio of GDP by 0.7 percentage points.

The revisions to our debt aggregates are presented in our Public sector finances tables 1 to 10: Appendix A.

Public sector

In the UK, the public sector consists of six sub-sectors: central government, local government, public non-financial corporations, public sector (funded) pensions, the Bank of England (BoE) and public financial corporations (or public sector banks).

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

Public sector current expenditure

Current expenditure measures reflect the cost of the public sector’s day-to-day activities. For example, central government’s provision of services and grants, payment of social benefits and the payment of the interest on its outstanding debt.

Public sector current budget deficit

Public sector current budget deficit is the gap between current expenditure and current receipts on an accrued basis, having taken account of depreciation. The current budget is in surplus when receipts are greater than expenditure.

Public sector net investment

Public sector net investment is the sum of all capital spending, mainly net acquisitions of capital assets and capital grants, less the depreciation of the stock of capital assets.

Public sector net borrowing

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). PSNB ex is often referred to by commentators as "the deficit".

Public sector net cash requirement

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 its activities. The amount of cash required will be affected by changes in the timing of payments to and from the public sector rather than when these liabilities were incurred.

However, it does not depend on forecast tax receipts in the same way as our accrued (or national accounts-based) measures of borrowing.

PSNCR may be similar to borrowing for the same period and close, but not identical, to the changes in the level of net debt between two points in time.

Public sector net debt

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) and is often referred to by commentators as "the national debt".

Comparing our data with official forecasts

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

On 17 November 2022, the OBR published Economic and fiscal outlook – November 2022 containing its latest outlook for the economy and for the public sector finances. The statistics in this bulletin do not yet reflect these updated forecasts, although we have updated our estimate of Gross Domestic Product and where possible, our tables and charts to reflect these latest data.

To supplement this release, we publish an accompanying public sector methodological guide and Public sector finances Quality and Methodology Information outlining the strengths, limitations, and appropriate uses of the public sector finances dataset.

Tax receipts

In the most recent months, tax receipts recorded on an accrued basis are subject to some uncertainty. This is because many taxes such as value added tax (VAT), corporation tax and Pay As You Earn (PAYE) income tax contain some forecast cash receipts data and are liable to revision when actual cash receipts data are received.

The forecasts underlying our current tax estimates reflect the expectations published in the Office for Budget Responsibility’s (OBR) Economic and fiscal outlook – March 2022 and the subsequent monthly profiles published on 12 May 2022. We will take account of the latest OBR forecast information at the earliest opportunity.

Local government and public corporations

In recent years, planned local government expenditure initially reported in local authority budgets has been systematically lower than final outturn current expenditure reported in the audited accounts and higher than that reported in final outturn capital expenditure. We therefore include adjustments to increase or decrease the amounts reported at the budget stage.

For the FYE 2023, we include:

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

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

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

We apply a further £2.2 billion downward adjustment to budget forecast current expenditure on benefits in the FYE 2023, to reflect the most recently available data for housing benefits.

Public corporations’ data in the most recent periods are initial estimates, largely based on the OBR's Economic and fiscal outlook – November 2022, with adjustments being applied as needed, though supplemented by in-year data replacing previous estimates for train operating companies and the Housing Revenue Account.