In September 2019, we introduced some methodology changes to public sector finance statistics. These changes affect estimates of our headline measures of public sector net borrowing excluding public sector banks, public sector net debt excluding public sector banks and public sector net financial liabilities excluding public sector banks. In this article we present estimates of our headline measures had these changes not been introduced.Nôl i'r tabl cynnwys
We have adopted a new, gross presentation of funded employment-related pensions. This change, predominantly presentational in nature, has greatly increased the volume of assets recorded on the public sector balance sheet but consolidated many inter-public sector balances and transactions. We now also include the Pension Protection Fund within the public sector boundary.
These changes have reduced public sector net debt excluding public sector banks at the end of March 2019 by £28.6 billion, reflecting the consolidation of gilts and recognition of liquid assets held by the public pension schemes.Nôl i'r tabl cynnwys
Improvements in the statistical treatment of student loans have added £12.4 billion to public sector net borrowing excluding public sector banks in the financial year ending (FYE) March 2019. Outlays are no longer all treated as conventional loans. Instead, we split lending into two components: a genuine loan to students and government spending. This new approach recognises that a significant proportion of student loan debt will never be repaid. We record government expenditure related to the expected cancellation of student loans in the period that loans are issued. Further, government revenue no longer includes interest accrued that will never be paid.Nôl i'r tabl cynnwys
In June 2019, we announced our intention to introduce a number of improvements to the estimation of capital stocks and therefore the consumption of fixed capital in September 2019. These improvements included a review of:
the life length of fixed assets
the classification of stocks by asset, industry and the institutional sector
the modelling of the age-efficiency profile of capital assets
Any updates to capital consumption are public sector net borrowing excluding public sector banks neutral and have no impact on public sector net debt excluding public sector banks or public sector net financial liabilities excluding public sector banks.Nôl i'r tabl cynnwys
Tables 1, 2 and 3 present our latest estimates of public sector net borrowing excluding public sector banks, public sector net debt excluding public sector banks, and public sector net financial liabilities excluding public sector banks with the impact of the methodology changes introduced in September 2019 removed.
|£ billion (not seasonally adjusted)|
|Public sector net borrowing ex¹||Public sector net borrowing ex as a percentage of GDP¹||Public sector funded pension schemes²||Student loans||Capital consumption||Public sector net borrowing ex³||Public sector net borrowing ex as a percentage of GDP³|
Download this table Table 1: The impacts on public sector net borrowing of removing the changes to the accounting for public sector pensions, student loans and capital consumption introduced in September 2019.xls .csv
|£ billion (not seasonally adjusted)|
|Public sector net debt ex¹||Public sector net debt ex as a percentage of GDP¹||Public sector funded pension schemes²||Student loans||Capital consumption||Public sector net debt ex³||Public sector net debt ex as a percentage of GDP³|
Download this table Table 2: The impacts on public sector net debt of removing the changes to the accounting for public sector pensions, student loans and capital consumption introduced in September 2019.xls .csv
|£ billion (not seasonally adjusted) unless otherwise stated|
|Public sector net financial liabilities¹||Public sector net financial liabilities as a percentage of GDP¹||Public sector funded pension schemes²||Student loans||Public sector net financial liabilities³||Public sector net financial liabilities as a percentage of GDP³|
Download this table Table 3: The impacts on public sector net financial liabilities of removing the changes to the accounting for public sector pensions, student loans and capital consumption introduced in September 2019.xls .csv
Impact of student loans, public sector-funded pension scheme changes and capital consumption changes introduced in September 2019: Appendix G expands this presentation to include the impact on current budget deficit and net investment. It also provides additional quarterly and monthly time series. We plan to continue publishing updated versions of these tables until the end of the current financial year (April 2020).Nôl i'r tabl cynnwys
This section presents information on aspects of data or methodology that are planned but not yet included in the public sector finances.
Developments in public sector finance statistics
On 31 May 2019, we published the second in our series of development articles, Looking ahead – developments in public sector finance statistics: 2019. In this article, we listed a number of short-term areas of work that we aim to implement in public sector finance statistics within 18 months from the date of this publication. These include:
the treatment of student loans (subsequently introduced in September 2019)
the presentation of pension data on a gross basis (subsequently introduced in September 2019)
the International Monetary Fund’s (IMF) Government Finance Statistics Framework (GFSM) (subsequently introduced in October 2019)
the treatment of capital consumption, or depreciation (subsequently introduced in September 2019)
the continuous development of public sector net financial liabilities (PSNFL)
the recording of leases
The article also provides some detail on the areas of planned medium- and longer-term development.
Ongoing developments in public sector finance statistics
This subsection presents information on our current continuous improvement projects and methodological decisions that are planned but not yet included in the public sector finances.
Thomas Cook Group plc
On 23 September 2019, winding up orders were made against Thomas Cook Group plc and associated companies. The court appointed the Official Receiver as the liquidator. We will announce the implications of this decision on the public finances in due course.
On 15 January 2020, the government provided an update on Flybe and outlined an upcoming review of regional connectivity. As part of this work and ahead of the March Budget, HM Treasury will also be reviewing Air Passenger Duty (APD). We will announce the implications of this decision on the public finances in due course.
On 29 January 2020, the government announced that from 1 March 2020, the Northern Rail franchise will be taken into public ownership. We will announce the implications of this decision on the public finances in due course.
East Coast Mainline
On 16 May 2018, the government announced that from 24 June 2018, London North Eastern Railway (LNER) will take over the running of East Coast Mainline services. On 31 August 2018, we announced that LNER would be classified to the public non-financial corporations sub-sector, effective from 14 February 2018. We will announce the implications of this decision on the public finances in due course.
Sale of railway arches
On 11 September 2018, Network Rail announced they had agreed terms for the sale of their Commercial Estate business in England and Wales. On 4 February 2019, the National Audit Office confirmed that Network Rail had completed a £1.46 billion sale of its commercial property portfolio consisting of approximately 5,200 properties across England and Wales, mainly railway arches.
Public sector net debt at the end of February 2019 and the central government net cash requirement in February 2019 were each reduced by an amount equivalent to the cash received by central government from the sale.
We are currently investigating the nature of the transaction to ensure that the impacts will be fully reflected in the public sector finances, so it has yet to be determined whether public sector net borrowing is affected and therefore it remains unchanged.
McCloud pension case
In 2015, the government introduced changes to most public sector pension schemes. As part of the transitional arrangements, older members of the pension schemes had an opportunity to stay in their original pension schemes, which offered better terms than the new schemes introduced at the time. Younger members had to transfer to the new schemes. In December 2018, the Court of Appeal ruled that these arrangements amounted to unlawful age discrimination in a decision that was later upheld by the Supreme Court.
Although the court ruling was related to judges’ and firefighters’ pension schemes, on 15 July 2019 the government confirmed that the difference in treatment will need to be remedied across all relevant public sector pension schemes.
Though the government published a progress update on 31 January 2020, the impact of this decision on the public sector finances is still not yet known, but it has the potential to change the size of the pension liability as well as the net borrowing position of the public sector pension sub-sector. We will provide further information on the impacts of this ruling when it becomes available.
Clinical Negligence Indemnity Cover
On 1 April 2019, the government announced the Clinical Negligence Scheme for General Practice (CNSGP), operated by NHS Resolution on behalf of the Secretary of State for Health and Social Care.
The scheme provides comprehensive cover to all General Practitioners (GPs) and their wider practice team for clinical negligence relating to NHS services occurring from 1 April 2019. In parallel, the government has agreed commercial terms with the Medical Protection Society covering claims for historical NHS clinical negligence incidents concerning their GP members occurring at any time before 1 April 2019.
We are currently assessing the implications of this scheme for the public sector finances and will announce our findings at the earliest opportunity.
Following Carillion Plc declaring insolvency on 15 January 2018, the UK government announced that it would provide the funding required by the Official Receiver, to ensure continuity of public services through an orderly liquidation. The Official Receiver has been appointed by the court as liquidator, along with partners at PwC that have been appointed as Special Managers. The defined benefit pension schemes of former Carillion employees are currently being assessed by the Pension Protection Fund prior to any transition into the Pension Protection Fund scheme.
We are currently investigating the various impacts of the liquidation of Carillion on the public sector finances, including in relation to the public-private partnership projects in which Carillion was involved and the additional funding that the government has provided to maintain public services. We will announce our findings in due course.
Prior to liquidation, Carillion held approximately 450 contracts with government, representing 38% of Carillion’s 2016 reported revenue.Nôl i'r tabl cynnwys