Public sector finances, UK: March 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: March 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 £151.8 billion or around 6.4% of gross domestic product (GDP) in the financial year ending (FYE) March 2022; this was the third-highest financial year (FY) borrowing since records began in FYE March 1947, but less than half of the £317.6 billion borrowed in the same period last year.

• The public sector current budget deficit excluding public sector banks was £89.5 billion or around 3.8% of GDP in the FYE March 2022; this was the sixth-highest FY current budget deficit since records began in FYE March 1947, but around a third of the £245.8 billion deficit in the same period last year.

• Central government receipts were £830.0 billion in the FYE March 2022, £105.3 billion more than in the FYE March 2021, of which tax receipts were £619.9 billion, an increase of £94.3 billion.

• Central government current (or day-to-day) expenditure was £893.3 billion in the FYE March 2022, £50.3 billion less than in FYE March 2021, with a reduction of £67.4 billion in subsidies being partially offset by a £30.5 billion increase in debt interest payments.

• PSNB ex was £18.1 billion in March 2022, the second-highest March borrowing since monthly records began in 1993; this was £8.8 billion less than in March 2021 but still £11.9 billion more than in March 2020.

• Central government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was £18.7 billion in March 2022, £2.1 billion less than in March 2021, bringing the total for the FYE March 2022 to £129.2 billion.

• Public sector net debt excluding public sector banks (PSND ex) was £2,343.8 billion at the end of March 2022 or around 96.2% of GDP, an increase of £209.4 billion or 2.3 percentage points of GDP compared with March 2021 and reaching levels not seen since the early 1960s.

• Public sector net debt excluding public sector banks and the Bank of England (PSND ex BoE) was £2,025.1 billion at the end of March 2022 or around 83.1% of GDP, an increase of £121.9 billion or a reduction of 0.7 percentage points of GDP compared with March 2021.

The public sector borrowed £151.8 billion in the financial year ending (FYE) March 2022, £24.0 billion more than the £127.8 billion forecast by Office for Budget Responsibility (OBR) in their Economic and fiscal outlook - March 2022. However, borrowing was significantly lower than in the same period a year earlier. The £151.8 billion borrowed in the FYE March 2022 was less than half of that borrowed in the FYE March 2021, albeit similar to the amount borrowed in FYE March 2010 following the global financial crisis.

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 financial year ending FYE March 2021 was 14.8%, the highest for 75 years. Provisional estimates indicate that this ratio has fallen by 8.4 percentage points over the last 12 months to 6.4%.

Notes:

1. Public Sector Net Borrowing ex - net borrowing excluding public sector banks.
2. Financial year refers to the months April to March.
3. Figures may not sum because of rounding.

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. 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.

Notes:

1. Public Sector Net Borrowing ex - net borrowing excluding public sector banks.
2. Financial year refers to the months April to March.
3. Figures may not sum because of rounding.

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

Notes:

1. L&P - Land and Property.
2. Financial year refers to the months April to March.
3. Other taxes on income and wealth include Capital Gains Tax receipts and balancing residual items that are often negative.
4. Figures may not sum because of rounding.

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. These forecasts will be updated to reflect those published in the Economic and fiscal outlook - March 2022 in May 2022 when the corresponding monthly profiles are available.

Notes:

1. Includes investment income attributable to insurance policy holders.
2. Procurement - purchase of goods and services.
3. This cost includes the expenditure by the Department of Health and Social Care (DHSC), devolved administrations and other departments in response to the coronavirus pandemic. It also includes the NHS Test and Trace programme and the cost of vaccines.
4. Current and capital transfers between central government and local government are based on administrative data supplied by HM Treasury and have no impact at the public sector level.
5. Value added tax (VAT) and gross national income-based contributions to the EU budget.
6. Payments under the Withdrawal Agreement.
7. CJRS - Coronavirus Job Retention Scheme. The scheme closed in September 2021.
8. SEISS - Self-Employment Income Support Scheme. The scheme closed in September 2021.
9. Financial year refers to the months April to March.
10. Figures may not sum because of rounding.

Interest payments on debt by central government

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 the FYE March 2022, debt interest was £69.9 billion, the highest financial year value on record. The RPI uplift on index-linked gilts was £34.7 billion over and above the accrued coupon payments and other components of debt interest.

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.

Bulb Energy Ltd

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 Recent and upcoming changes to public sector finance statistics: December 2021 article.

In March 2022, the public sector spent more than it received in taxes and other income, requiring it to borrow £18.1 billion.

Notes:

1. Public Sector Net Borrowing ex - net borrowing excluding public sector banks.
2. Figures may not sum because of rounding.

Central government receipts

Central government receipts in March 2022 were estimated to have been £73.8 billion, an £8.0 billion increase compared with March 2021. Of these receipts, tax revenue increased by £6.6 billion to £54.8 billion.

Notes:

1. L&P - Land and Property.
2. Other taxes on income and wealth include Capital Gains Tax receipts and balancing residual items that are often negative.
3. Figures may not sum because of rounding.

Central government expenditure

Central government bodies spent £77.3 billion on current (day-to-day) expenditure in March 2022, £8.4 billion less than in March 2021.

Notes:

1. Includes investment income attributable to insurance policy holders.
2. Procurement - purchase of goods and services.
3. This cost includes the expenditure by the Department of Health and Social Care (DHSC), devolved administrations and other departments in response to the coronavirus pandemic. It also includes the NHS Test and Trace programme and the cost of vaccines.
4. Current and capital transfers between central government and local government are based on administrative data supplied by HM Treasury and have no impact at the public sector level.
5. Value added tax (VAT) and gross national income-based contributions to the EU budget.
6. Payments under the Withdrawal Agreement.
7. CJRS - Coronavirus Job Retention Scheme. The scheme closed in September 2021.
8. SEISS - Self-Employment Income Support Scheme. The scheme closed in September 2021.
9. Figures may not sum because of rounding.

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

NatWest Group plc share sales

On 28 March 2022, the government announced a £1.2 billion sale of NatWest Group shares. This sale has reduced central government net cash requirement in March 2022 by an equivalent £1.2 billion.

Notes:

1. Comprises payments into the Consolidated Fund and all pay overs of National Insurance contributions (NICS) excluding those for Northern Ireland.
2. Income Tax includes Capital Gains Tax and is gross of any tax credits treated by HM Revenue and Customs as tax deductions.
3. UK receipts net of personal pension rebates; gross of Statutory Maternity Pay and Statutory Sick Pay.
4. Payments into Consolidated Fund.
5. Gross of tax credits and includes diverted profit tax.
6. Including some elements of expenditure not separately identified.
7. Mainly comprises privatisation proceeds.
8. Net of certain receipts and excluding on-lending to local authorities and public corporations.
9. Coronavirus Job Retention Scheme. The scheme closed in September 2021.
10. Coronavirus Self Employment Income Support Scheme. The scheme closed in September 2021.
11. Excludes Northern Rock Asset Management, Bradford & Bingley and Network Rail.
12. Includes Northern Rock Asset Management, Bradford & Bingley and Network Rail.
13. Figures may not sum because of rounding.

Notes:

1. Financial year refers to the months April to March.
2. Figures may not sum because of rounding.

Public sector net debt excluding public sector banks (PSND ex) was £2,343.8 billion at the end of March 2022, an increase of £209.4 billion compared with March 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 March 2022 to 96.2% of GDP. These levels have not been seen for around 60 years.

Debt is largely made up of gilts (or bonds) issued to investors by central government. Of the £2,003.7 billion gilts in circulation at the end of March 2022:

• £1,500.0 billion are conventional gilts that pay a fixed interest rate

• £503.7 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.

The Bank of England's contribution to debt

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

In February 2022, BoE announced that it will no longer be replenishing the gilt stock of the APF. As a result of a gilt redemption, in March 2022, the APF's gilt holdings (at face value) reduced by £25.1 billion, to a redemption value of £734.9 billion.

It is important to understand that this £734.9 billion (conventional) gilt holding, is not recorded directly as a component of public sector net debt. Instead, we record the £112.1 billion difference between the £847.0 billion of reserves created to purchase gilts (or market value of the gilts) and the £734.9 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 £2,025.1 billion at the end of March 2022 (or around 83.1% of GDP), PSND ex BoE is £318.7 billion (or 13.1 percentage points of GDP) less than PSND ex.

Public sector net financial liabilities

Public sector net financial liabilities excluding public sector banks (PSNFL ex) provide a more comprehensive measure of the public sector balance sheet. They capture 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 £2,032.7 billion at the end of March 2022 (or around 83.4% of GDP), £311.1 billion (or 12.8 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.

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.

Notes

1. Public Sector Net Borrowing ex - net borrowing excluding public sector banks.
2. Year-to-date refers to the months April 2021 to February 2022.
3. Full financial year refers to the months April 2020 to March 2021.
4. Figures may not sum because of rounding.

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

These audited accounts have now been published and we will reflect updates in our dataset at the earliest opportunity.

Revisions to net borrowing in the financial year-to-February 2022

Since our last public sector finances publication (22 March 2022), we have reduced our estimate of borrowing in the financial year-to-February 2022 by £4.7 billion. In addition to an increase of £1.5 billion to our previous estimate of central government tax receipts, we have reduced our previous estimates of the expenditure on goods and services by £2.0 billion and social assistance by £0.8 billion.

Tables 11 and 12 detail the revisions to central government receipts and expenditure in the financial year-to-February 2022 since our last publication.

Notes

1. L&P - Land and Property.
2. Other taxes on income and wealth include Capital Gains Tax receipts and balancing residual items that are often negative.
3. Year-to-date refers to the months April 2021 to February 2022.
4. Full financial year refers to the months April 2020 to March 2021.
5. Figures may not sum because of rounding.

Notes:

1. Includes investment income attributable to insurance policy holders
2. Procurement - purchase of goods and services.
3. This cost includes the expenditure by the Department of Health and Social Care (DHSC), devolved administrations and other departments in response to the coronavirus pandemic. It also includes the NHS Test and Trace programme and the cost of vaccines
4. Current and capital transfers between central government and local government are based on administrative data supplied by HM Treasury and have no impact at the public sector level.
5. Value added tax (VAT) and gross national income-based contributions to the EU budget.
6. Payments under the Withdrawal Agreement.
7. CJRS - Coronavirus Job Retention Scheme. The scheme closed in September 2021.
8. SEISS - Self-Employment Income Support Scheme. The scheme closed in September 2021.
9. Year-to-date refers to the months April 2021 to February 2022.
10. Full financial year refers to the months April 2020 to March 2021.
11. Figures may not sum due to rounding.

Revisions to public sector net debt

This month we have increased our previous estimate of the level of debt at the end of February 2022 by £0.1 billion from that published on 22 March 2022. This was largely the result of updates to non-financial public corporations contribution to net debt.

Revisions to gross domestic product

This month we have increased our previous estimate of the level of debt at the end of February 2022 expressed as a ratio of gross domestic product (GDP) by 1.2 percentage points. This largely because we have updated our GDP denominator to include the latest published data.

The GDP estimates used to present debt and other headline measures are partly based on provisional and official forecast data. Our March 2022 estimate of monthly GDP requires data across five quarters of GDP. Of these, two are based on the GDP quarterly national accounts, UK: October to December 2021 published by the Office for National Statistics (ONS) on 31 March 2022 and three are based on the Office for Budget Responsibility's Economic and fiscal outlook - March 2022 published on 23 March 2022.

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 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".

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.

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.

Notes

1. This table uses the Economic and fiscal outlook – March 2022
2. Bank of England
3. All public sector measures in this table exclude public sector banks.
4. Figures may not sum because of rounding.

In their Economic and fiscal outlook - March 2022, OBR estimated that a reduction on calls on the government’s coronavirus (Covid-19) loan guarantee schemes would reduce net borrowing by £4.4 billion in the financial year ending (FYE) March 2022. We will include any impact arising from a change in expectations when sufficiently reliable data become available.

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 were presented in the Public sector classifications guide published on 28 February 2022.

In our Classification of the Council Tax rebate in England statement we concluded that the Council Tax rebate in England should be classified as a payable tax credit, specifically as a current transfer paid by central government to households.

This one-off payment will increase public sector net borrowing in April 2022.

Classifications assessments for other parts of the Energy Bills Rebate package, including the proposed £200 discount on autumn 2022 domestic energy bills, will be made when more information becomes available.

Student loans

On 24 February 2022, the UK government announced new changes to the student finance system in England. These changes are explained in our article Recent and upcoming changes to public sector finance statistics: February 2022 but are not yet reflected in the public sector finance statistics. OBR have estimated the impact of these changes on borrowing in their Economic and fiscal outlook - March 2022.

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

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 £0.5 billion downward adjustment to current expenditure on benefits, 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's capital expenditure

• a £3.5 billion upward adjustment to England's current expenditure on goods and services

We apply a further £2.1 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 Office for Budget Responsibility's (OBR's) 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.