Public sector finances, UK: January 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: January 2022

• Looking ahead - developments in public sector finance statistics: 2022

• Public sector finances borrowing by sub-sector dataset

• UK government debt and deficit: September 2021

• Public sector net borrowing excluding public sector banks (PSNB ex) was a surplus of £2.9 billion in January 2022; this was equivalent to £5.4 billion less borrowing than in January 2021 but still a £7.0 billion smaller surplus than in January 2020, before the coronavirus (COVID-19) pandemic.

• Central government receipts were £91.6 billion in January 2022, £8.6 billion more than in January 2021, of which Self-assessed Income Tax receipts were £18.4 billion, an increase of £2.0 billion.

• Central government current (or day-to-day) expenditure was £76.3 billion in January 2022, £0.5 billion more than in January 2021, of which debt interest payments were £6.1 billion, an increase of £4.5 billion.

• PSNB ex was £138.5 billion in the financial year-to-January 2022; this was the second-highest financial year-to-January borrowing since monthly records began in 1993 but around half (or £140.2 billion less than) that of the same period last year.

• Central government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was a surplus of £23.2 billion in January 2022, a £12.5 billion greater surplus than in January 2021, bringing the total for the financial year-to-January 2022 to £108.9 billion.

• Public sector net debt excluding public sector banks (PSND ex) was £2,317.6 billion at the end of January 2022 or around 94.9% of gross domestic product (GDP), maintaining a level not seen since the early 1960s.

• Public sector net debt excluding public sector banks and the Bank of England (PSND ex BoE) was £1,995.5 billion at the end of January 2022 or around 81.7% of GDP.

The coronavirus (COVID-19) pandemic has had a substantial impact on the economy as well as public sector borrowing and debt.

In total, more than 50 schemes have been announced by the UK government and the devolved administrations to support individuals and businesses during the coronavirus pandemic. Lower receipts combined with the additional cost of these schemes have resulted in record borrowing.

Provisional estimates indicate that in the financial year ending (FYE) 2021 (April 2020 to March 2021), the public sector borrowed £321.9 billion, more than double the previous record of £157.8 billion in FYE 2010, during the economic downturn following the global financial crisis.

Borrowing in FYE 2021 was equivalent to 15.0% of UK gross domestic product (GDP), the highest such ratio since the end of World War Two, when it was 15.2% in FYE 1946.

The extra funding required by government coronavirus support schemes, combined with reduced cash receipts and a fall in GDP, have all helped to push public sector net debt at the end of January 2022 to 94.9% of GDP, a level last seen in the early 1960s.

In January 2022, the public sector spent less than it received in taxes and other income, resulting in a surplus of £2.9 billion. Each January, accrued receipts tend to be higher than in other months owing to receipts from self-assessed taxes, often leading to a public sector net surplus.

Central government receipts

Central government receipts in January 2022 were estimated to have been £91.6 billion, an £8.6 billion increase compared with January 2021. Of these receipts, tax revenue increased by £7.2 billion to £73.0 billion.

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.

Forecasts underlying our current tax estimates reflect the Office for Budget Responsibility's (OBR) Economic and Fiscal Outlook - October 2021 and the subsequent monthly profiles published on 9 December 2021.

Self-assessed Income Tax receipts

Each January (February, July and August), accrued receipts tend to be higher than in other months owing to receipts from Self Assessment (SA).

In January 2022, SA Income Tax receipts have been provisionally estimated at £18.4 billion, £2.0 billion more than in January 2021.

For SA payments, the distribution between Income Tax, NICs and Capital Gains Tax remains an estimate until analysis of SA Returns is complete. This means there will be revisions affecting Income Tax and Capital Gains Tax receipts for the months of April 2021 to January 2022 presented in next month's statistical bulletin, after the provisional analysis of SA Returns is complete.

There will then be further revisions later in 2022 after the analysis of SA Returns is updated.

In light of the government's deferral policy over the coronavirus (COVID-19) period and the government's payment plan facility to help those who expected to have difficulty in meeting their July 2020 and January 2021 obligations, this year it is advisable to look at the combined self-assessed Income Tax receipts across the whole financial year when drawing conclusions from year-on-year comparisons.

Currently, in the financial year-to-January 2022, SA Income Tax receipts were £34.9 billion, £9.1 billion more than in the same period last year.

Capital Gains Tax receipts

Self-assessed Capital Gains Tax obligations are due to be paid each January.

This month Capital Gains Tax receipts were £8.4 billion, £0.8 billion more than in January 2021.

Capital Gains Tax receipts will also be revised following analysis of SA Returns, in the same way as for SA Income Tax described above.

Like SA Income Tax, this year it is advisable to look at the combined self-assessed Income Tax receipts across the whole financial year when drawing conclusions from year-on-year comparisons.

Currently, in the financial year-to-January 2022, Capital Gains Tax receipts were £9.8 billion, £1.8 billion more than in the same period last year.

Interest and dividends receipts

In January 2022, there was a £0.7 billion dividend transfer from the Bank of England Asset Purchase Facility Fund (BEAPFF) to HM Treasury. This brings the total transfer in the current financial year-to-January 2022 to £7.4 billion.

As with other such transfers, central government net borrowing is reduced by the value of transfer receipt, while the net borrowing of the Bank of England is increased by an equal and offsetting amount. There is no impact at the public sector level.

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

Our article Recent and upcoming changes to public sector finance statistics: November 2021 discusses the treatment of the Asset Purchase Facility Fund in our fiscal aggregates.

Central government expenditure

Central government bodies spent £87.7 billion in January 2022, £2.3 billion more than in January 2021.

Interest payments on debt by central government

Accrued interest payments on central government debt were £6.1 billion in January 2022, the highest January amount since records began in April 1997, £4.5 billion more than in January 2021, but lower than in June 2021 when interest payments were £9.0 billion.

The recent high levels of debt interest payments are largely a result of movements in the Retail Prices Index (RPI) to which index-linked gilts are pegged.

In January 2022, the RPI uplift on index-linked gilts was £3.4 billion over and above the accrued coupon payments and other components of debt interest.

To estimate the RPI uplift for three-month lagged index-linked gilts in January 2022, we reference the RPI movement between October and November 2021. RPI increases in the most recent periods will be reflected in our interest estimates in the coming months.

While any RPI uplift will impact on 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.

Support package for energy bills including council tax rebate scheme

On 3 February 2022, following Ofgem's announcement of a rise in the energy price cap, the UK government responded with a package of support for households.

Details of the formal classification decision on the recording of the Council Tax rebate scheme for England in the National Accounts and the Public Sector Finances statistics are expected in the Public Sector Classifications Guide to be published on 28 February 2022.

We will provide details on our classification and treatment of the energy bills discount scheme as information about this policy becomes available.

Bulb Energy Limited

On 24 November 2021, the energy provider Bulb Energy Ltd was placed in a Special Administration Regime (SAR) by the UK government to ensure continued provision of essential services to its customers.

We will consider the impact of the SAR on the public sector finances and review its recording as part of our classifications work. In the meantime, payments made under the SAR are provisionally treated as expenditure under "other capital transfers", a component of net investment, as they happen. 

Further information is available in our article Recent and upcoming changes to public sector finance statistics: December 2021.

The public sector borrowed £138.5 billion in the financial year-to-January 2022 (April 2021 to January 2022), £140.2 billion less than in the same period a year earlier and £17.7 billion less than the official Office for Budget Responsibility (OBR) forecast.

Borrowing had generally been falling since its peak of £157.8 billion during the economic downturn in financial year ending (FYE) 2010. However, largely as a result of the impact of the coronavirus (COVID-19) pandemic, the £321.9 billion borrowed in FYE 2021 was more than double this previous record.

In some cases, the full financial year borrowing may be less than that of the year-to-January indicating that there was an overall surplus in the latter part of that financial year, largely because of to the timing of payments of some tax receipts, such as self-assessed Income Tax, which are largely paid in January each year.

Current budget deficit

Public sector current budget deficit is the difference between current (day-to-day) expenditure and current receipts (mainly from taxes), having taken account of depreciation.

In the financial year-to-January 2022, the public sector current budget deficit (excluding public sector banks) was £95.4 billion, indicating that current expenditure was greater than income received.

Central government receipts

Central government receipts in the financial year-to-January 2022 were estimated to have been £678.9 billion, an £86.9 billion increase compared with the same period in 2020. Of these receipts, tax revenue increased by £78.0 billion to £505.1 billion.

Central government expenditure

Central government day-to-day (or current) spending was estimated to have fallen by £38.1 billion to £747.2 billion in financial year-to-January 2022, compared with the same period a year earlier.

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 tax payments by individuals and businesses, but does not depend on forecast tax receipts in the same way as our accrued (or national accounts) based measures.

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 for which the government is liable or the point at which any liability is incurred - it only reflects when cash is received and spent.

Public sector net debt represents the amount of money the public sector owes to private sector organisations (including overseas institutions).

When the government borrows, this normally adds to the debt total, but it is important to remember that reducing borrowing (the deficit) is not the same as reducing the debt.

Public sector net debt excluding public sector banks (PSND ex) was £2,317.6 billion at the end of January 2022, an increase of £210.7 billion compared with the same time the previous 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 January 2022 to 94.9% of GDP, a level last seen in the early 1960s.

Debt is largely made up of gilts (or bonds) issued to investors by central government. Of the £2,021.3 billion gilts in circulation at the end of January 2022:

• £1,524.4 billion are conventional gilts that pay a fixed interest rate

• £497.0 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), on behalf of central government in accordance with its financing remit.

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

At the end of January 2022, the APF held £760.0 billion in conventional gilts, however, these are not recorded directly as a component of public sector net debt. Instead, we record the £115.0 billion difference between the £874.9 billion of reserves created to purchase gilts (or market value of the gilts) and the £760.0 billion face (or 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 BoE's contribution to public sector net debt.

Our public sector net debt excluding the public sector banks and the Bank of England (PSND ex BoE) measure removes the debt impact of these schemes along with the other transactions relating to the normal operations of the BoE. Currently standing at £1,995.5 billion at the end of January 2022 (or around 81.7% of GDP), PSND ex BoE is £322.2 billion (or 13.2 percentage points of GDP) less than PSND ex.

Wider measures of the public sector balance sheet

Public sector net financial liabilities excluding public sector banks (PSNFL ex) provide a more comprehensive measure of the public sector balance sheet, capturing 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 £1,952.6 billion at the end of January 2022 (or around 79.9% of GDP), £365.1 billion (or 15.0 percentage points of GDP) less than PSND ex.

Table PSNFL 3, published as a part of Public sector finances tables 1 to 10: Appendix A, provides a reconciliation between the latest measure of PSND ex and PSNFL ex.

PSNFL ex is very similar to the national accounts' concept of public sector net worth (PSNW). The notable differences between the two aggregates are:

• PSNW includes non-financial assets, whereas PSNFL ex does not

• deposit, loan and debt security liabilities are recorded at market value in PSNW, whereas in PSNFL ex they are recorded at face value

Our latest estimates of PSNW are presented in the dataset International Monetary Fund's Government Finance Statistics framework in the public sector finances: Appendix E.

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.

Most central government departments usually publish their audited resource accounts by August of each year enabling us to reflect them in the September publication. Because of the exceptional demands of the coronavirus (COVID-19) pandemic, a number of central government departments are yet to publish their audited accounts for the FYE (financial year ending) 2021 (April 2020 to March 2021).

We will reflect updates from audited outturn in our dataset at the earliest opportunity.

Revisions to net borrowing in the financial year-to-December 2021

Since our last publication (25 January 2022), we have reduced our estimate of borrowing in the financial year-to-December 2021 by £5.4 billion. This is largely because of a reduction of £5.7 billion to our previous estimates of central government borrowing.

We have increased our previous estimates of central government tax receipts by £1.5 billion, while our previous estimate of departmental expenditure on goods and services has reduced by £2.5 billion over the same nine-month period.

Tables 11 and 12 detail the revisions to central government receipts and expenditure in the financial year-to-December 2021 since our last publication.

Revisions to public sector net debt

This month we have reduced our previous estimate of the level of debt at the end of December 2021 by £0.2 billion from that published on 25 January 2022. This was the result of several small changes within the many components of public sector net debt.

Revisions to public sector net debt as a ratio of GDP

The GDP first quarterly estimate, UK: October to December 2021 was published on 11 February 2022, revising down the previously published estimates of gross domestic product (GDP) from Quarter 1 (Jan to Mar) 2020 to Quarter 3 (July to Sept) 2021 and presenting Quarter 4 (Oct to Dec) 2021 for the first time.

As a result we have increased our previous estimates of debt expressed as a ratio of GDP at the end of December 2021 by 0.4 percentage points.

Public sector

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

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 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 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 debt interest to revenue ratio

The debt interest to revenue ratio (DIR) represents the proportion of net interest paid (gross interest paid less interest received) by the public sector (excluding public sector banks), compared with the non-interest receipts it receives in a given period.

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 (capital spending less capital receipts)). PSNB 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 the government's activities.

This may be similar to borrowing (the deficit) 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".

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 financial liabilities

Public sector net financial liabilities excluding public sector banks (PSNFL ex) is a comprehensive measure of the public sector balance sheet, capturing a wider range of financial assets and liabilities than recorded in PSND ex.

Total managed expenditure

Total managed expenditure (TME) covers all current and capital spending carried out by the public sector, including depreciation. This is equal to public sector current expenditure, plus public sector net investment, plus deprecation.

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.

The government has announced that the Spring 2022 forecast statement will be published on 23 March 2022, which will be accompanied by an updated set of official forecasts published by the OBR.

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

Gross domestic product

Gross domestic product (GDP) measures the value of goods and services produced in the UK. It estimates the size of and growth in the economy.

GDP used to present debt and other headline measures are partly based on provisional and official forecast data. Our January 2022 estimate of monthly GDP requires data across five quarters of GDP. Of these, two are based on the GDP first quarterly estimate, UK: October to December 2021 published by the Office for National Statistics (ONS) on 11 February 2022 and three are based on the Office for Budget Responsibility's Economic and Fiscal Outlook (October 2021) .

Local government and public corporations

In recent years, planned local government expenditure initially reported in local authority budgets has been systematically higher than the final outturn expenditure reported in the audited accounts. We therefore include adjustments, usually to reduce the amounts reported at the budget stage.

For financial year ending (FYE) 2021 (April 2020 to March 2021) we have applied a £0.6 billion downward adjustment to provisional current expenditure on benefits in FYE 2021, to reflect the most recently available data for housing benefits.

For FYE 2022 we include:

• a £2.5 billion downward adjustment to England’s capital expenditure

• a £0.5 billion downward adjustment to Scotland's capital expenditure

• a £0.4 billion downward adjustment to Wales' capital expenditure

• a £6.0 billion upward adjustment to England's current expenditure on goods and services

We apply a further £0.6 billion downward adjustment to budget forecast current expenditure on benefits in FYE 2022, 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 Economic and fiscal outlook (EFO) - October 2021, with adjustments being applied as needed.

Economic statistics governance after EU exit

Following the UK's exit from the EU, new governance arrangements are being put in place that will support the adoption and implementation of high-quality standards for UK economic statistics. These governance arrangements will promote international comparability and add to the credibility and independence of the UK's statistical system.

At the centre of this new governance framework will be the new National Statistician's Committee for Advice on Standards for Economic Statistics (NSCASE).

Further information about NSCASE can be found in the article National Statistician's Committee for Advice on Standards for Economic Statistics (NSCASE) - UK Statistics Authority.

On 14 February 2022, the UK Statistical authority announced Professor Martin Weale had been appointed as Chair of NSCASE.