UK government debt and deficit: December 2017

Quarterly estimates of UK government deficit and debt, given to the European Commission under the excessive deficit procedure protocol, as part of the Maastricht Treaty.

This is not the latest release. View latest release

This is an accredited national statistic.

Contact:
Email Ana Oliveira

Release date:
17 April 2018

Next release:
17 July 2018

1. Main points

  • General government gross debt was £1,786.3 billion at the end of December 2017, equivalent to 87.7% of gross domestic product (GDP), 27.7 percentage points above the reference value of 60% set out in the Protocol on the Excessive Deficit Procedure.

  • General government gross debt first exceeded the 60% Maastricht reference value at the end of 2009, when it was 64.1% of GDP.

  • General government deficit (or net borrowing) was £39.4 billion in 2017, a decrease of £19.0 billion compared with 2016; this is equivalent to 1.9% of GDP, 1.1 percentage points below the reference value of 3.0% set out in the Protocol on the Excessive Deficit Procedure.

  • This is the first time the government deficit has been below the 3.0% Maastricht reference value since 2007, when it was 2.6% of GDP.

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2. What’s changed in this release?

This section presents information on aspects of data or methodology, introduced since the last publication in January 2018.

Value Added Tax on electronic services

On 1 January 2015, European legislation relating to the Value Added Tax (VAT) applied to the supply of telecommunications, radio and television broadcasting, and electronically-supplied services changed.

Prior to 1 January 2015, supplies made by EU businesses to EU-resident customers were subject to the VAT applied in the country where the suppliers were established; from 1 January 2015, they have been subject to VAT applied in the country where the customer is resident.

The legislation allows a transition period of four years, during which the VAT is collected in the country of the supplier and a portion retained, prior to passing on the remainder to the country where the customer is resident. From 1 January 2019, all collected tax must be transferred to the tax authority of the country where the customer is resident.

To comply with international guidance, VAT collected for the UK will be recorded as current transfers between countries, rather than tax. The accrued measure of VAT recorded has increased by an amount equal to the VAT retained by other EU countries (as an administration fee). This increase is offset in central government expenditure as a current transfer between countries (revenue) and, as a result, general government net borrowing reduced in each of the three calendar years from 2015.

Vehicle Excise Duty

This release includes an annual update to the weights used to portion the Vehicle Excise Duty (VED) collected by the Driver and Vehicle Licensing Agency (DVLA) between taxes on production (business users) and taxes on income and wealth (households). This regular exercise, using data from the Annual Business Inquiry, has led to updated weights back to April 1997; however, we expect further updates to be limited to more recent financial years. These updates have had no net effect on the total VED receipts recorded in the estimation of government borrowing.

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3. Things you need to know about this release

What countries are in the EU?

The European Union (EU) is an economic and political union of 28 countries. It operates an internal (or single) market, which allows free movement of goods, capital, services and people between member states.

The EU countries are:

Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the UK.

The background to this release

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

Article 126 of the Treaty on the Functioning of the European Union (EU) obliges member states to avoid excessive budgetary deficits. The Protocol on the Excessive Deficit Procedure, annexed to the Maastricht Treaty, defines two criteria and reference values with which member states’ governments should comply. These are:

  • a deficit (net borrowing) to gross domestic product (GDP) ratio of 3%

  • a debt to GDP ratio of 60%

For the UK, financial year (April to March) figures are used by the European Commission when assessing against the Protocol on the Excessive Deficit Procedure.

What are the most important terms I need to know?

Deficit (or net borrowing) measures the gap between revenue raised (current receipts) and total spending (current expenditure plus net investment). A positive value indicates borrowing while a negative value indicates a surplus.

Debt represents the amount 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.

Are our figures adjusted for inflation?

The monetary values quoted are in current prices, that is, they represent the price of debt and deficit in the year to which they relate without any adjustments for inflation. For comparisons over time, the figures as a percentage of GDP (also measured in current prices) are used to provide comparable time series.

Is this release consistent with UK public sector finances?

The general government debt and deficit figures published in this bulletin (for the time period 1997 onwards), are fully consistent with those published in the Public sector finances, UK: February 2018 statistical bulletin, published on 21 March 2018.

What are the differences between this release and the figures published in the public sector finances bulletin?

There are two main differences between the headline debt and deficit measures published in the public sector finances and the debt and deficit figures published in this bulletin:

  • coverage – this bulletin includes only the debt and deficit of central and local government bodies, whereas the public sector finances’ measures also include the debt and deficit of other public sector bodies, including public non-financial corporations and Bank of England

  • the treatment of liquid assets in debt – this bulletin reports gross debt, whereas the public sector finances’ focus is net debt; gross debt represents only the financial liabilities (debt securities, loans and deposits) of central and local government, while net debt deducts any liquid assets (official reserve assets and other cash or cash-like assets) from these financial liabilities

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4. How do these figures compare internationally?

This release is fully consistent with the latest data transmission on UK government deficit (or net borrowing) and debt that the UK and other EU member states are required to report quarterly to the European Commission.

Eurostat analyses all data provided by member states and publishes a press release, which places the UK figures in a European context and provides commentary on any issues specific to member states.

Both the debt and deficit figures in this statistical bulletin will be published by Eurostat on 23 April 2018 in context with the other 27 EU member states. More detailed statistics on quarterly debt and deficit of European member states will be published on 24 April.

According to the latest figures published in October 2017, there were two member states that had a deficit in 2016 higher than 3% of gross domestic product (GDP) reference value, while 16 member states (including the UK) had gross debt as at the end of 2016 that exceeded the 60% of GDP reference value.

The tables in this bulletin present the UK government debt and deficit position at the end of both the financial and calendar years. The UK, uniquely within the EU, is assessed against the deficit and debt on a UK financial year basis (that is, April to March). In March 2018, the UK provided to Eurostat first estimates for the calendar year 2017 and revised estimates for the financial year ending March 2017. Estimates for the financial year ending March 2017 were first provided in June 2017.

This bulletin reports that, in 2017 and in the financial year ending March 2017, the UK government deficit as a percentage of GDP is below the reference value, while debt at the end of 2017 and in the financial year ending March 2017 still exceeds the 60% of GDP reference value.

While the main statistics provided to Eurostat are those of general government consolidated gross debt and deficit, supplementary government finance statistics are also supplied by member states. A full set of government finance tables provided by the UK to Eurostat in March 2018 are included in this release.

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5. How much is the general government gross debt?

At the end of 2017, UK general government gross debt was £1,786.3 billion, equivalent to 87.7% of gross domestic product (GDP) (Table 1 and Figure 1). This represents an increase of £54.9 billion since the end of December 2016, although debt as a percentage of GDP fell by 0.5 percentage points to 87.7%. This is the first time that debt as a value of GDP has dropped compared with the previous year since the year 2000.

General government gross debt first exceeded the 60.0% Maastricht reference value at the end of 2009, when it was 64.1% of GDP (or £979.8 billion) and continues to remain above this reference value.

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6. How much is the general government deficit?

In 2017, the UK general government deficit was £39.4 billion, equivalent to 1.9% of GDP (Table 2 and Figure 2). This represents a decrease of £19.0 billion compared with the calendar year 2016. The annual deficit in 2017 (as a percentage of GDP) was the lowest since 2003 when it was 3.1% (£39.1 billion).

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7. Revisions since previous release

This is the first time that debt and deficit figures for the 2017 calendar year have been reported in this statistical bulletin series; it is the fourth time that debt and deficit figures for the financial year ending 2017 have been reported.

Since the last publication of this bulletin in January 2018, the deficit at the end of 2016 has been revised upwards by £0.4 billion and the latest estimate of debt for 2016 remained unchanged at £1,731.4 billion.

Revisions can be the result of both updated data sources and methodology changes.

This quarter (Quarter 4 2017 or October to December 2017) we introduced changes to the methodology that led to revisions to government deficit data. Such changes are discussed in Section 2 of this release.

Most of the data revisions relate to revised departmental (and other government bodies) source data being received for the financial year ending March 2017 (April 2016 to March 2017). However, revisions are not limited to this period; there have been some revisions in earlier years, which are discussed in Section 2 of this release.

Table M8R presents the revisions to our main aggregates since the last publication of the government deficit and debt return as reported to the European Commission in January 2018. These revisions are consistent with revisions incorporated within the Public sector finances statistical bulletin.

The Public sector finances revisions policy provides information of when users of the statistics published in the Public sector finances and UK government debt and deficit for Eurostat 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.

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8. Quality and methodology

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

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

  • uses and users of the data

  • how the output was created

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

On 20 June 2017, the UK Statistics Authority published a letter confirming the designation of the quarterly UK government debt and deficit bulletin as a National Statistic. This letter completes the 2015 assessment of public sector finances.

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

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.

Supporting documentation

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

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10. Annex B: Supplementary tables

Excessive Deficit Procedure (EDP) main tables

The EDP financial year and calendar year main tables report annually on UK government deficit and debt levels.

European System of Accounts (ESA) 2010 Table 2

Main aggregates of general government
ESA Table 2 provides a breakdown of general government expenditure (both current and capital) and general government revenue.

ESA Table 25

Quarterly non-financial accounts of general government

ESA Table 25 provides a breakdown of general government expenditure (both current and capital) and general government revenue.

ESA Table 27

Quarterly financial accounts of general government

Complete set of quarterly financial accounts of the general government sector and its sub-sectors compiled according to ESA 2010.

ESA Table 28

Quarterly government debt (Maastricht debt) for general government

Government debt on a quarterly basis, for general government and its sub-sectors.

ESA Table 11 Annual expenditure of general government

Reports on annual UK government expenditure broken down by function using the Classification of Functions of Government (COFOG), for central government, local government and general government. Notes explaining the COFOG codes can be found on the UNStats website.

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Contact details for this Statistical bulletin

Ana Oliveira
public.sector.accounts@ons.gov.uk
Telephone: +44 (0)1633 651792