Public sector finances, UK: November 2015

• Public sector net borrowing excluding public sector banks decreased by £6.6 billion to £66.9 billion in the current financial year-to-date (April 2015 to November 2015) compared with the same period in 2014

• Public sector net borrowing excluding public sector banks increased by £1.3 billion to £14.2 billion in November 2015 compared with November 2014

• Public sector net debt excluding public sector banks at the end of November 2015 was £1,536.4 billion, equivalent to 80.5% of Gross Domestic Product; an increase of £71.9 billion compared with November 2014

• Central government net cash requirement decreased by £8.2 billion to £49.4 billion in the current financial year-to-date (April 2015 to November 2015) compared with the same period in 2014

• Due to the volatility of the monthly data, the cumulative financial year-to-date borrowing figures provide a better indication of the progress of the public finances than the individual months

A summary version of this publication is available Public Sector Finances, November 2015: A summary of the UK government’s financial position which some users may find helpful.

• Understanding this release Introduces a number of important terms used within this release and how they fit together.

• Summary of latest net borrowing position Shows how much has been borrowed in the latest month and financial year-to-date, together with comparisons with periods and explanation in terms of receipts and expenditure.

• Summary of latest net debt position Explains how accumulated borrowing has led to the current level of debt.

• Net borrowing and debt data compared with OBR forecast Compares the current borrowing and debt figures with latest Office for Budget Responsibility forecasts.

• International comparisons of borrowing and debt Outlines the measures of general government borrowing and net debt as supplied to Eurostat under the requirements of the Maastricht Treaty.

• Public sector net cash requirement Provides the net cash requirement for the public sector (a measure of borrowing on a cash basis).

• Central government receipts and expenditure Provides detail on the current receipts, current expenditure, current budget deficit and net investment of central government.

• Recent events and methodological changes Information on events which have had an impact on the public sector finances in the last 12 to 18 months.

• Revisions since previous bulletin Information on the revisions between this publication and last month’s publication.

• New for this bulletin Information on new or recently added tables included in (or associated with) the current or future publications.

This statistical bulletin provides important information on the UK government financial position. It enables government, the public, economists and financial analysts to monitor public sector expenditure, receipts, investments, borrowing and debt. By comparing these data with forecasts from The Office for Budget Responsibility (OBR) the current UK fiscal position can be evaluated.

We recently published an article titled The debt and deficit of the UK public sector explained which some users may also find useful.

The following tables and diagram are intended to provide users with the important terms needed to understand these data and how the statistics relate to each other.

Diagram 1 illustrates how debt between periods changes as a result of transaction flows (for example expenditure and receipts) on an accrued and cash basis. The transaction flows are provided for the current financial year-to-date (April 2015 to November 2015).

The headline measures of current budget deficit, net borrowing, net cash requirement and net debt are highlighted in the diagram as they provide the important indicators for the performance of the UK public finances.

When expenditure is greater than income, the public sector runs a deficit, known as the current budget deficit. Net borrowing is made up of the current budget deficit plus net investment (spending on capital less capital receipts). The diagram shows how net borrowing contributes to the change in net debt.

The net cash requirement is closely related to net debt (the amount owed). It is important because it represents the cash needed to be raised from the financial markets to service the government’s borrowing deficit. Changes in net debt between 2 points in time are normally similar to the net cash requirement for the intervening period, though the relationship is not an exact one.

Diagram 1: Changes in Public Sector Finances (excluding public sector banks) Financial year-to-date ending 2016 (£ billion)

Notes:

1. Cash transactions in (non-financing) financial assets which do not impact on net borrowing.
2. Timing differences between cash and accrued data.
3. Revaluation of foreign currency debt (for example foreign currency). Debt issuances or redemptions above/below debt valuation (for example Bond premia/discounts and capital uplifts). Changes in volume of debt not due to transactions (for example Sector reclassification).

Download this image Diagram 1: Changes in Public Sector Finances (excluding public sector banks) Financial year-to-date ending 2016 (£ billion)

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This release presents the first estimate of November 2015 public sector finances and updates previous financial years’ data.

Table 1 summarises the latest headline public sector finances measures, comparing the latest month and cumulative totals for the financial year-to-date for each with the equivalent period in the previous year. Time series for each component are available in Table PSA1.

In the UK, the public sector consists of 5 sub-sectors: central government, local government, public non-financial corporations, Bank of England and public financial corporations (that is, public sector banks).

Table 2 summarises the current monthly and year-to-date borrowing position of each of these sub-sectors along with the public sector aggregates. Full time series for these data can be found in Table PSA2.

While public sector finance data are available on a monthly basis, due to the volatility of the monthly time series, it is often more informative to look at the financial year-to-date or complete financial year data in order to discern underlying patterns. Estimates are revised over time as additional data becomes available.

Figure 1 illustrates public sector net borrowing excluding public sector banks (PSNB ex) for the last 22 financial years. For all but three years in the period the public sector has been in deficit and had to borrow to fund the gap between expenditure and revenue.

Figure 1: Public sector net borrowing excluding public sector banks; the financial year ending 1994 to date

All data excluding public sector banks, UK

Source: Office for National Statistics

Notes:

1. OBR full financial year forecast for PSNB ex from November 2015 Economic & Fiscal Outlook (EFO).
2. Financial year 1993/94 represents financial year ending 1994 (April 1993 to March 1994).
3. Ytd = year-to-date (April to November).
4. GDP = Gross Domestic Product.

Download this image Figure 1: Public sector net borrowing excluding public sector banks; the financial year ending 1994 to date

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PSNB ex peaked in the financial year ending 2010 (April 2009 to March 2010) as the effects of the economic downturn impacted on the public finances (reducing tax receipts while expenditure continued to increase). PSNB ex has reduced since then, although remained higher than before the financial year ending 2008 (April 2007 to March 2008) and the 2007 global financial market shock.

PSNB ex in the financial year ending 2013 (April 2012 to March 2013) was higher than in the previous financial year largely as a result of the recording of an £8.9 billion payable capital transfer in April 2012, as recognition that the liabilities transferred from the Royal Mail Pension Plan exceeded the assets transferred.

Net borrowing for the financial year-to-date (April 2015 to November 2015)

Due to the volatility of the monthly data, the cumulative financial year-to-date borrowing figures provide a better indication of the progress of the public finances than the individual months.

In the financial year-to-date (April 2015 to November 2015), public sector net borrowing excluding banking groups (PSNB ex) was £66.9 billion; a decrease of £6.6 billion, or 8.9% compared with the same period in 2014. This decrease in net borrowing was predominantly due to a decrease of £6.3 billion in central government net borrowing, partially offset by an increase of £1.6 billion in local government net borrowing.

Over the same period, Bank of England (BoE) net borrowing was £1.8 billion lower than in the same period in 2014, almost entirely due to Asset Purchase Facility (APF) transfers to central government. The combined net borrowing of central government and the BoE in the financial year-to-date (April 2015 to November 2015) was £8.1 billion lower than in the previous financial year.

Central government receipts for the financial year-to-date (April 2015 to November 2015) were £402.4 billion, an increase of £12.0 billion, or 3.1%, compared with the same period in 2014. Of which:

• income tax-related payments increased by £4.4 billion, or 4.6%, to £100.5 billion

• VAT receipts increased by £3.4 billion, or 4.1%, to £86.1 billion

• social (national insurance) contributions increased by £2.8 billion, or 4.0%, to £72.8 billion

• corporation tax increased by £1.8 billion, or 6.4%, to £29.3 billion

• interest & dividends decreased by £1.8 billion, or 12.7%, to £12.3 billion

Central government expenditure (current and capital) for the financial year-to-date (April 2015 to November 2015) was £460.1 billion, an increase of £5.5 billion, or 1.2%, compared with the same period in 2014. Of which:

• other current expenditure (mainly departmental spending) increased by £3.3 billion, or 1.2%, to £269.1 billion; largely as a result of increases in departmental spending on goods and services, partially offset by decreases in transfers to local government

• central government net investment (capital expenditure) increased by £1.7 billion, or 8.7%, to £20.7 billion; largely as a result of an increase in gross capital formation

• net social benefits (mainly pension payments) increased by £1.4 billion, or 1.0%, to £137.2 billion; largely as a result of increases in state pension payments (within National Insurance Fund benefits) and public sector pension payments, being partially offset by a fall in public sector pension contributions

• debt interest decreased by £0.8 billion, or 2.5%, to £33.1 billion; of this £33.1 billion, £9.3 billion is the interest payable to the Bank of England Asset Purchase Facility on its gilt holdings (see Table PSA9) which are PSNB ex neutral.

Local government net borrowing (LGNB) for the financial year-to-date (April 2015 to November 2015) was estimated to be in surplus by £1.0 billion, a decrease in surplus of £1.6 billion on the same period in the previous year, mainly due to decreases in grants received from central government, particularly in April. Local government data for the current financial year-to-date are provisional estimates mainly based on budget figures received from the Department for Communities and Local Government (DCLG) and the devolved administrations, while estimates for the previous financial year-to-date are largely based on final outturn figures.

Public corporations’ net borrowing (PCNB) for the financial year-to-date (April 2015 to November 2015) was estimated to be in surplus by £0.5 billion, equivalent to that in the same period in 2014. Public corporation data for the current financial year-to-date are mainly provisional estimates.

Net borrowing in November 2015

In November 2015, public sector net borrowing excluding public sector banks (PSNB ex) was £14.2 billion; an increase in borrowing of £1.3 billion, or 10.1% compared with November 2014. This increase in net borrowing was largely due to an increase of £1.2 billion in central government net borrowing.

Central government receipts in November 2015 were £46.3 billion, an increase of £0.5 billion, or 1.1% compared with November 2014. Of this:

• corporation tax increased by £0.4 billion, or 26.8%, to £1.7 billion

• income tax-related payments increased by £0.3 billion, or 2.5%, to £11.4 billion

• interest & dividends increased by £0.3 billion, or 53.2%, to £0.7 billion

• social (national insurance) contributions increased by £0.2 billion, or 2.1%, to £8.9 billion

• VAT receipts increased by £0.1 billion, or 0.8%, to £10.9 billion

• other receipts decreased by £1.0 billion, or 35.7%, to £1.9 billion (see "Fines paid to central government" below)

Central government expenditure (current and capital) in November 2015 was £58.0 billion, an increase of £1.6 billion, or 2.9%, compared with November 2014. Of this:

• other current expenditure (mainly departmental spending) increased by £1.2 billion, or 3.8%, to £33.0 billion; largely as a result of increases in expenditure on goods and services and contributions to the European Union

• central government net investment (capital expenditure) increased by £1.0 billion, or 41.8%, to £3.3 billion; largely as a result of an increase in capital transfers to other sectors

• net social benefits (mainly pension payments) increased by £0.3 billion, or 1.8%, to £18.4 billion; largely as a result of decreases in payments within National Insurance Fund benefits, being offset by increases in public sector pension payments

• debt interest decreased by £0.9 billion, or 20.7%, to £3.3 billion; of this £3.3 billion, £1.0 billion is the interest paid to the Asset Purchase Facility Fund (APF) on its gilt holdings (see Table PSA9) which are PSNB ex neutral

Detailed time series for each of the expenditure and revenue component series of central government net borrowing are presented in Tables PSA6B to 6F attached to this bulletin.

Fines paid to central government

In November 2015, the the Financial Conduct Authority (FCA) fined Barclays Bank £0.1 billion for failing to minimise the risk that it may be used to facilitate financial crime. These fines are recorded in the public sector finances as “other receipts” paid to central government.

In November 2014, a number of UK banks were fined by the FCA for failures in their foreign currency operations. The fines amounted to £1.1 billion and although payments of the fines were spread over November and December the receipts have all been recorded in November when the fine liabilities arose.

The £1.0 billion difference in fine revenue explains the November fall in “other receipts” and is reflected directly in the increase in both central government and public sector net borrowing between November 2014 and 2015.

Detailed time series for each of the expenditure and revenue component series of central government net borrowing are presented in Tables PSA6G to 6K attached to this bulletin.

In November 2015, local government net borrowing (LGNB) was estimated at £2.0 billion, equivalent to that in November 2014. Local government data for November 2015 are provisional estimates mainly based on budget figures received from the Department for Communities and Local Government (DCLG) and the devolved administrations, while estimates for November 2014 are largely based on final outturn figures.

In November 2015, public corporations’ net borrowing (PCNB) was estimated to be in surplus by £0.1 billion, equivalent to that in November 2014. Public corporation data for November 2015 are mainly provisional estimates.

Public sector net debt ex (PSND ex) represents the amount of money 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 at a point in time, debt represents the total amount of money owed over time. This debt has been built up by successive government administrations over many years. When the government borrows, this adds to the debt total. So reducing the deficit is not the same as reducing the debt.

At the end of November 2015 PSND ex stood at £1,536.4 billion, equivalent to 80.5% of GDP. This represents an increase of £71.9 billion compared with November 2014.This increase in net debt is a result of:

• £82.6 billion of public sector net borrowing

• plus £0.4 billion in timing differences between cash flows for gilt interest payments and the accrued gilt interest flows

• less £11.1 billion in net cash transactions related to acquisition or disposal of financial assets of equivalent value (for example loans) and timing of recording

Figure 2 illustrates public sector net debt excluding banking groups (PSND ex) from the financial year ending March 1994 to date. PSND ex represents the amount of money the public sector owes to UK private sector organisations and overseas institutions, largely as a result of government liabilities on the bonds (gilts) and Treasury bills it has issued.

Figure 2: Public sector net debt excluding public sector banks; the financial year ending 1994 to date

All data excluding public sector banks, UK

Source: Office for National Statistics

Notes:

1. Financial year ending 1994 (April 1993 to March 1994) to the financial year ending 2015 (April 2014 to March 2015).
2. GDP = Gross Domestic Product.
3. ytd = year-to-date (April to November).

Download this image Figure 2: Public sector net debt excluding public sector banks; the financial year ending 1994 to date

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The increases in debt between the financial year ending 2009 (April 2008 to March 2009) and the financial year ending 2011 (April 2010 to March 2011) were larger than in the early part of the decade, as the economic downturn meant public sector net borrowing excluding public sector banks (PSNB ex) increased. Since then it has continued to increase but at a slower rate.

For the purposes of UK fiscal policy, net debt is defined as total gross financial liabilities less liquid financial assets, where liquid assets are cash and short-term assets which can be released for cash at short notice and without significant loss. These liquid assets mainly comprise foreign exchange reserves and bank deposits.

Diagram 2 presents public sector excluding public sector banks debt at the end of November 2015 by sub-sector. Time series for each of these component series are presented in Tables PSA8A to D attached to this bulletin.

Diagram 2: Sub-sector split of public sector net debt excluding public sector banks at November 2015 (£ billion)

Notes:

1. Cross holdings between sub-sectors are removed in calculating public sector net debt, gross debt and liquid assets.
2. PC Corporations' debt (consolidated) = non-financial PC gross debt (EYYD) Less CG/NFPCs' gross debt (KSC8) Less LG/NFPCs' cross holdings of debt (KSC9).
3. APF - Bank of England Asset Purchase Facility.

Download this image Diagram 2: Sub-sector split of public sector net debt excluding public sector banks at November 2015 (£ billion)

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The Office for Budget Responsibility (OBR) normally produces forecasts of the public finances twice a year (normally in March and December). The latest OBR forecast was published on 25 November 2015.

Figure 1 and Table 2 enable users to compare emerging data against the OBR forecasts. Caution should be taken when comparing public finance data with OBR figures for the full financial year, as data are not finalised until after the financial year ends. Initial estimates soon after the end of the financial year can be subject to sizeable revisions in later months. In addition, in-year timing effects on spending and receipts can affect year-to-date comparisons with previous years.

There can also be some methodological differences between OBR forecasts and outturn data. In its latest publication, OBR published a table within their Economic and fiscal outlook supplementary fiscal tables December 2015 titled “Table: 2.44 Items included in OBR forecasts that ONS have not yet included in outturn”.

Housing Associations Reclassification

In addition to the above differences, OBR included in their November 2015 forecast English private registered providers of social housing (that is, housing associations) which were recently reclassified as public corporations. This classification decision has yet to be implemented in the Public Sector Finances. Therefore in order to compare the OBR forecast data and Public Sector Finances on a like-for-like basis an adjustment needs to be made for housing associations.

OBR have forecast that the impact of the housing association reclassification, in the financial year ending March 2016, will be to increase public sector net borrowing excluding public sector banks (PSNB ex) by £4.6 billion and increase public sector net debt excluding public sector banks (PSND ex) by £64 billion. Therefore OBR forecast figures excluding the housing association reclassification, for the financial year ending March 2016, are a PSNB ex of £68.9 billion and a PSND ex of £1,535 billion.

Figure 3 and Table 3 below are not adjusted for the housing associations reclassification. This is consistent with the treatment of other methodological differences between the Public Sector Finances and OBR forecasts.

More information on the reclassification of housing associations and implementation plans for the Public Sector Finances can be found in Section 8.

Figure 3 illustrates the public sector net borrowing excluding public sector banks (PSNB ex) for the financial year ending 2015 (April 2014 to March 2015), along with the first 8 month’s borrowing of the financial year ending 2016 (April to November 2015).

In the financial year-to-date (April to November 2015), borrowing fell by £6.6 billion to £66.9 billion compared with the same period in 2014.

The OBR forecast for the financial year ending 2016 (April 2015 to March 2016) is £73.5 billion which is £15.7 billion below the outturn in financial year ending 2015 (April 2014 to March 2015) of £89.2 billion presented in this bulletin. As noted above, the OBR forecast figure has not been adjusted for the reclassification of housing associations.

Table 3 summarises the percentage change between the latest data for the financial year-to-date (April to November 2015) and in the previous financial year (April to November 2014). It contrasts these data with the percentage change between the latest full year outturn data for the financial year ending 2015 (April 2014 to March 2015) and the OBR forecast for the financial year ending 2016 (April 2015 to March 2016) (as published in July 2015).

On the same day as this bulletin is released, the OBR publishes a commentary on the latest figures and how these reflect on its forecasts. The OBR provides this commentary to help users interpret the differences between the latest outturn data and the OBR forecasts by providing contextual information about assumptions made during the OBR’s forecasting process.

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

On 16 October 2015, we published the latest EU Government Deficit and Debt Return. In this publication we report that:

• general government net borrowing (Maastricht Borrowing) in the financial year ending 2015 (April 2014 to March 2015) was £93.5 billion, equivalent to 5.1% of GDP

• general government gross debt (Maastricht Debt) at the end of March 2015 was £1,601 billion, equivalent to 87.5% of GDP

Eurostat published a government debt and deficit comparison from the information collated across its 28 member states.

The data used to produce the 16 October 2015 publication are consistent with those used in the production of the public sector finances statistical bulletin published on 22 September 2015. The latest public sector finances data in this bulletin reports that:

• general government net borrowing in the financial year ending 2015 (April 2014 to March 2015) was £91.9 billion, equivalent to 5.0% of GDP; a decrease of £12.2 billion compared with the previous financial year.

• general government gross debt at the end of March 2015 was £1,603.4 billion, equivalent to 87.5% of GDP; an increase of £79.9 billion compared with March 2014.

It is important to note that the GDP measure used as the denominator in the calculation of the debt ratios in the EU Government Deficit and Debt Return differs from that used within the public sector finances statistical bulletin.

An article, the use of GDP in fiscal ratio statistics (70.8 Kb Pdf), explains that for debt figures reported in the monthly public sector finances, a 12 month GDP total centred on the month is employed, while in the EU Government Deficit and Debt Return the total GDP for the preceding 12 months is used.

Excessive Deficit Procedure (EDP) Inventory

On the 21 November 2015, we published an update to the Inventory of the methods, procedures and sources used for the compilation of deficit and debt data and the underlying government sector accounts according to ESA2010.

The content and structure of the Inventory is prescribed by Eurostat and is followed by all EU Member States in order to aid comparison between countries.

Net cash requirement is a measure of how much cash the government needs to borrow (or lend) to balance its accounts. In very broad terms, net cash requirement equates to the change in the level of debt.

Central government net cash requirement is reconciled against the change in central government net debt in Table REC3 attached to this bulletin.

The public sector net cash requirement excluding public sector banks (PSNCR ex) follows a similar trend to that of public sector net borrowing: peaking in the financial year ending 2010, though in recent years transfers from the Asset Purchase Facility have had a substantial impact on PSNCR ex but are PSNB ex neutral.

Public sector net cash requirement excluding public sector banks (PSNCR ex) in the financial year-to-date (April 2015 to November 2015) was £37.8 billion; £10.0 billion, or 20.9% less than in the same period in 2014.

Diagram 3 presents public sector cash requirement by sub-sector for the current financial year-to-date (April 2015 to November 2015). Time series for each of these component series are presented in Table PSA7A attached to this bulletin.

Diagram 3: Sub-sector split of public sector net cash requirement excluding public sector banks, financial year-to-date (April to November 2015) (£ billion)

Notes:

1. Effects of cash transactions between sub-sectors are removed in calculating public sector total net cash requirement (and consolidated expenditure and income totals).
2. APF - Bank of England Asset Purchase Facility.

Download this image Diagram 3: Sub-sector split of public sector net cash requirement excluding public sector banks, financial year-to-date (April to November 2015) (£ billion)

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Central government net cash requirement (CGNCR) is a focus for some users, as it provides an indication of how many gilts (government bonds) the Debt Management Office may issue to meet the government’s borrowing requirements.

CGNCR was £7.0 billion in November 2015; £0.3 billion, or 4.5% less than in November 2014.

In the current financial year-to-date (April 2015 to November 2015), CGNCR was £49.4 billion; a decrease of £8.2 billion, or 14.2%, compared with the same period in 2014.

Cash transfers from the Asset Purchase Facility (APF) were £2.1 billion lower in the current financial year-to-date (April 2015 to November 2015), than the previous financial year. Without the impact of these transfers, CGNCR would have been £10.2 billion lower in the current financial year-to-date (April 2015 to November 2015) than the same period in 2014.

Recent events impacting on CGNCR

In the financial year ending 2016 (April 2015 to March 2016) the following events reduced the CGNCR:

• the transfers between the Bank of England Asset Purchase Facility Fund (BEAPFF) and central government

• the sale of shares in Lloyds Banking Group

• the sale of shares in Eurostar

• the sale of shares in Royal Mail

• the sale of shares in Royal Bank of Scotland

In the financial year ending 2015 (April 2014 to March 2015) the following events reduced the CGNCR:

• the transfers between the BEAPFF and central government

• the sale of shares in Lloyds Banking Group

In the financial year ending 2014 (April 2013 to March 2014) the following events reduced the CGNCR:

• the transfers between the BEAPFF and central government

• the sale of shares in Lloyds Banking Group

• the sale of shares in Royal Mail

In the financial year ending 2013 (April 2012 to March 2013) the following events reduced the CGNCR:

• the transfers between the BEAPFF and central government

• the Royal Mail Pension Plan transfer and subsequent sale of assets

• the transfer of the Special Liquidity Scheme final profits between BoE and central government

• the 4G Spectrum sale

Public sector net cash requirement

Although the central government net cash requirement is the largest part of the public sector net cash requirement excluding public sector banks (PSNCR ex), the total public sector net cash requirement (PSNCR) can be very different. The reason is that the PSNCR includes the net cash requirement of the public sector banking groups. In recent years, the public sector banking groups have recorded large cash surpluses which have had a substantial impact on the public sector net cash requirement.

Current receipts

The government receives income mainly from taxes but also from national insurance contributions, interest & dividends, fines and rent.

As cash receipts are generally accrued back to earlier periods when the economic activity took place, the first monthly estimate for receipts is by nature provisional, and must include a substantial amount of forecast data.

Central government receipts follow a strong cyclical pattern over the year, with high receipts in April, July, October and January due to quarterly corporation tax returns being accrued to these months.

In both January and July (to a lesser extent) accrued receipts are particularly high due to receipts from quarterly corporation tax combining with those from income tax self-assessment. The revenue raised through income tax self-assessment, as well as primarily affecting January and July receipts, also tends to lead to high receipts in the following month (February and November respectively), although to a lesser degree.

Pay as you earn (PAYE) tends to vary little throughout the financial year on a monthly basis (excluding bonus months).

In recent years transfers from both the Bank of England Asset Purchase Facility Fund (BEAPFF) and the Special Liquidity Scheme (SLS) have boosted central government receipts. Though these transfers to central government have no impact on public sector borrowing due to the central government receipts being offset by the payments from the Bank of England.

Current expenditure

Current expenditure is the government’s spending on activities such as: social benefits (mainly pension payments), interest payments and other current expenditure including government departmental spending (excluding spending on capital assets).

Trends in central government current expenditure can be affected by monthly changes in debt interest payments which can be volatile as they depend on the movements in the Retail Prices Index. Excluding debt interest makes this statistic less volatile.

There is however one regular peak in net social benefits, which are higher in November than in other months due to the annual payment of the winter fuel allowance.

Year on year growth in net social benefits is affected by the uprating of benefits to compensate for inflation based on the Consumer Prices Index (CPI). For recent years these are 5.2% for the financial year ending 2013, 2.2% in the financial year ending 2014, 2.7% in the financial year ending 2015 and 1.2% in the financial year ending 2016. However, for State Pensions there is a “triple guarantee” that means that they are up-rated by the highest of the CPI, increases in earnings or 2.5%. Also since the financial year ending 2014 (April 2013 to March 2014), the up-rating only applies to benefits received by disabled people and pensioners – benefits for people of working age have only been increased by 1% in these 3 years.

It can be difficult to compare the profile of monthly central government expenditure even when excluding both debt interest and net social benefits. Since the financial year ending 2014, there have been continuous changes to the profile of central government grants to local government and a number of changes to central government funding for local authorities (in particular the timing of grants).

In the latest financial year (ending 2016), the Revenue Support Grant, the main general grant paid to local authorities has been paid with a third of the total in April and the remainder in equal instalments in all the other months, whereas last year more than half of it was paid in April with the bulk of the remaining balance paid in February. This means that for this financial year, other current expenditure growth in April and February will be lower while year on year growth in other months will generally be higher.

Current budget deficit

The gap between current expenditure and current receipts (having taken account of depreciation) is referred to as the current budget. When current expenditure is greater than current receipts (income), the public sector runs a current budget deficit.

In November 2015, the central government current budget deficit was £9.9 billion, an increase of £0.2 billion, or 2.1% compared with November 2014.

In the current financial year-to-date (April 2015 to November 2015), the central government current budget deficit was £49.1 billion, a decrease of £8.0 billion, or 14.0% compared with November 2014.

Figure 4 illustrates that the central government current budget deficit (as a percentage of GDP) has reduced since the financial year ending 2010 (April 2009 to March 2010), but is still larger than before the global financial shock.

In recent years the current budget has been in deficit in most months. January and July tend to be surplus months as these are the 2 months with the highest receipts.

Net investment

Net investment represents the government’s spending on capital assets, like infrastructure projects, property and IT equipment, both as grants and by public sector bodies themselves minus capital receipts from the sale of capital assets.

In the financial year-to-date (April 2015 to November 2015), central government’s net investment was £20.7 billion, this represents an increase of £1.7 billion, or 8.7%, on the same period in the previous year and is largely due to increases in gross capital formation.

Central government net investment is difficult to predict in terms of its monthly profile as it includes some large capital grants (such as those to local authorities and education institutions), and can include some large capital acquisitions or disposals, all of which vary from year to year. Net investment in the last quarter of the financial year is usually markedly higher than that in the previous 3 quarters.

Central government net investment includes the direct acquisition minus disposal of capital assets (such as buildings, vehicles, computing infrastructure) by central government. It also includes capital grants to and from the private sector and other parts of the public sector. Capital grants are varied in nature and cover payments made to assist in the acquisition of a capital asset, payments made as a result of the disposal of a capital asset, transfers in ownership of a capital asset and the unreciprocated cancellation of a liability (that is conceding a debt will not be repaid).

The sum of net investment (spending on capital less capital receipts) and the current budget deficit constitute net borrowing.

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.

Sale of loans by UKAR

On 13 November 2015, UK Asset Resolution (UKAR) announced an agreement to sell £13 billion of assets. UKAR is classified as a central government body. When the sale is concluded it is expected to reduce UKAR’s liabilities to the private sector and will also enable UKAR to repay some of its loan from the government. These balance sheet movements will affect public sector net debt (PSND) and central government net cash requirement (CGNCR), but will have no immediate impact on public sector net borrowing (PSNB), although any future reduction in debt interest payments and receipts will impact PSNB.

We expect that this transaction will be fully recorded in the December 2015 public sector finances published on 22 January 2016.

Bank Corporation Tax surcharge

In July 2015, HM Revenue and Customs (HMRC) published details of a surcharge to be levied on profits of banking companies in accounting periods beginning on or after 1 January 2016.

The measure imposes a surcharge of 8% on the profits of banking companies. The profits will be calculated and reported on the same basis as for corporation tax, but with some reliefs added back.

Share sales

In recent years the government has entered a program of selling shares in publicly owned organisations. For most share sales, the proceeds will reduce the central government net cash requirement (CGNCR) and public sector net debt (PSND) by an amount corresponding to the cash raised from the sale but have no impact on public sector net borrowing.

This section outlines the recent central government share sale program. In addition OBR discuss state-owned asset sales in their Economic and Fiscal Outlook July 2015 indicating expected future share sales in Chart 4.14.

Lloyds Banking Group

On 17 September 2013, the UK government began selling part of its share holdings in Lloyds Banking Group (LBG). A further share sale on 23 and 24 March 2014 meant that the UK government surrendered in total a 13.5% stake in the institution, a quantity sufficient to lead to LBG being re-classified from a public sector body to a private sector body.

Based on the currently available information, we have recorded no LBG share sales in November 2015, though this may be revised at a later date.

Since December 2014, the government has continued reducing its shareholding in LBG via a pre-arranged trading plan, raising an estimated total of £16.2 billion to date.

In December 2015, the government announced that it would extend Lloyds trading plan for a further six months (ending no later than 30 June 2016). It stated that the current trading plan has reduced the government’s remaining stake in Lloyds to around 9%.

The government had previously announced (June 2015) that it will launch an LBG share sale to the public "in the next 12 months".

Royal Bank of Scotland

In August 2015, the government announced the sale of approximately 5.4% of its shareholding in Royal Bank of Scotland. The £2.1 billion raised from this sale reduced central government net cash requirement and net debt in August 2015 by a corresponding amount.

Royal Mail

In June 2015, the government announced the sale of half of its retained shareholding in Royal Mail. The £750 million raised from this sale of a 15% stake reduced central government net cash requirement and net debt in June 2015 by a corresponding amount.

Eurostar

In March 2015, the government announced the sale of its 40% stake in the cross-Channel train operator Eurostar. The £757 million raised from this sale reduced central government net cash requirement and net debt in May 2015 by a corresponding amount.

Housing associations

As we announced on 30 November 2015, “private registered providers” of social housing in England have been reclassified from the private corporation sector to the public corporation sector. The reclassification affects over 1,500 bodies providing social housing, including most housing associations and some for-profit housing bodies.

The reclassification will increase public sector net debt (PSND) back to July 2008 as the outstanding debt of the social housing providers is added. Based on data published by the Homes and Communities Agency (HCA), we estimate that PSND at the end of March 2014 will increase by £55 billion and that public sector net borrowing (PSNB) for the financial year ending March 2014 will increase by around £3 billion. From discussions with the HCA, it is likely that PSNB for the financial year ending March 2015 will be higher at around £4.5 billion and assuming that this borrowing is financed by loans, bonds or similar instruments that PSND in this year will be £4.5 billion higher than the previous year at a total debt of £59 billion. These are initial estimates that may revise once further work has been completed to assure that the data being used are consistent with public sector finances methodologies and once the final outturn data for the financial year ending 2015 are available.

As indicated in the announcement on 30 November, we will continue to work to implement the reclassification in the public sector finances with the aim of inclusion in early 2016. Reclassifications such as this require some time to implement as data must be assured for quality and consistency with public sector finance methodologies and full monthly time series must be constructed (in this case back to July 2008).

Other government revenue

In last month’s bulletin we announced a programme of quality assurance work by ONS and HM Treasury which has identified some additional departmental income that is not currently incorporated in the Public Sector Finances.

We are working on sourcing full time series for these income streams and aim to introduce them in early 2016.

The majority of these income items are fees for services (which are recorded as negative current expenditure) with an expected impact, in the financial year ending 2015, of reducing annual public sector net borrowing by approximately £0.5 billion.

There is a further £0.2 billion which are likely to increase current receipts (both through taxes on production and other receipts) and so reduce net borrowing.

There may also be a small reduction in net investment, and so net borrowing, as a result of some additional capital receipts.

Bank of England Asset Purchase Facility Fund (APF)

The APF currently holds government securities (gilts) on which it earns interest and it pays interest on the reserves created by the Bank of England to finance it. These flows are reflected in PSNB ex as they enter and leave the APF. The net liabilities of the APF increase PSND ex.

On 9 November 2012, the Chancellor announced an agreement with the Bank of England to transfer the excess cash in the APF to the Exchequer. These flows are internal to the public sector and so do not affect PSNB ex.

Note this treatment follows the conclusion of the 2013 PSF Review consultation.

In November 2015, there were no transfers from the Bank of England Asset Purchase Facility Fund (BEAPFF) to HM Treasury, with the amount transferred in the current financial year-to-date (April 2015 to November 2015) remaining at £6.6 billion; £2.1 billion less than in the equivalent period in 2014.

The next expected APF transfer will occur in January 2016.

The Bank of England entrepreneurial income for the financial year ending 2015 (April 2014 to March 2015) was calculated as £12.5 billion. This is the total amount of dividend transfers that can impact on central government net borrowing in the financial year ending 2016 (April 2015 to March 2016).

Between April 2012 and March 2013, there were £11.3 billion of transfers from the BEAPFF to HM Treasury, while in the same period in financial year ending 2014 and 2015 the transfers were £31.1 billion and £10.7 billion respectively.

All cash transferred from the Asset Purchase Facility to HM Treasury is fully reflected in central government net cash requirement and net debt. For more detail of transactions relating to the Asset Purchase Facility, see Table PSA9.

EU contributions

Every year the European Commission (EC) reports retrospective adjustments to the EC budget contributions by EU member states based on the latest Value Added Tax (VAT) and gross national income (GNI) data.

In December 2014, the public sector finances recorded £2.9 billion of current expenditure in that month that related to increases in the UK contribution due to revised GNI data over a long historical period (as far back as 2002 for most member states). The gross liability of £2.9 billion for the UK arose in December 2014 and so has been recorded, then even though the cash was not paid by the UK government until 2015. The first cash payment of £0.4 billion (rounded) was made in July 2015, with the final payment of £2.4 billion (rounded) made in September 2015.

Previous month's bulletins have noted the existence of 2 transactions which would offset this £2.9 billion:

• a repayment (estimated by OBR as £1.2 billion) as the Commission returns all the member states’ additional contributions related to the data revisions

• an increase in the UK rebate (estimated by the OBR as £0.8 billion) as a result of the UK's additional payment

The rebate is a regular transfer made by the EC to the UK. These transactions are reflected in the public sector finances when they occur (and are recorded as part of "Current transfers received from abroad" in Table PSA6E).

The latest guidance received from Eurostat makes it clear that the £1.2 billion repayment should be recorded in 2014 in the same way that the £2.9 billion payment has been. This has resulted in the December 2014 current expenditure for that month being revised down by £1.2 billion to reflect the repayment from the EC to the UK, which is accrued to December 2014 although the cash transactions take place in 2015. This is consistent with the approach taken by the OBR.

Of the £1.2 billion repayment, £0.5 billion was received in February 2015, so the accrued impact on borrowing in February 2015 is £0.5 billion higher than the cash impact on the net cash requirement to account for the fact that the £1.2 billion repayment has already been recorded within the net borrowing of December 2014.

More details of these EU budget contributions can be found on the EU Commission website.

Grants to local government

The Revenue Support Grant (RSG) is the main revenue funding grant paid by central government to local government in England.

In the financial year ending 2015 (March 2014 to April 2015), more than half of the RSG was paid in April with the remaining balance paid in February and March. The payment profile has changed for the financial year ending 2016 (March 2015 to April 2016), with one-third of the grant paid in April and the rest expected to be paid evenly through the year.

This change in profile explains almost all of the fall in central government current transfers to local government and central government other current spending in April 2015 compared with April last year. The impact of this change is offset in local government net borrowing.

In publishing monthly estimates, it is necessary that a range of different types of data sources are used. A summary of the different sources used and the implications this has for data revisions is provided in the document Sources summary and their timing.

The Public Sector Finances Revision Policy provides information of when users of the statistics published in the public sector finances and Government Deficit and Debt under the Maastricht Treaty 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.

Revisions related to changes in methodology

We previously announced that in December 2015 we would be incorporating a number of taxes on production for the first time. In some cases these inclusions have reduced public sector net borrowing and in others have re-apportioned some central government income between taxes and fees.

Taxes are recorded as current receipts, whereas fees are recorded in the public sector finances as market output, which is a negative component of current expenditure. More detail on these taxes is provided below.

Police Service Agreement – Implementing the reclassification of these payments from fees to taxes will lead to an increase in central government current expenditure and an equal increase in central government current receipts, from financial year ending March 2004 and therefore have no impact on central government net borrowing.

Heavy Goods Vehicle Road User Levy – Implementing this change has corrected the apportionment between duty paid by businesses and duty paid by households with a downward revision to vehicle duty paid by households and a matching increase in vehicle duty paid by businesses. This change has no impact on central government net borrowing.

Community Infrastructure Levy – Community Infrastructure Levy is a planning charge, introduced by the Planning Act 2008 as a tool for local authorities in England and Wales to help deliver infrastructure to support the development of their area. The Community Infrastructure Levy has not previously been included and so its inclusion has reduced local government net borrowing from financial year ending March 2013 onwards. In the financial year ending March 2015 borrowing was reduced by £0.1 billion.

Light dues – These charges are levied on ships for the maintenance of lighthouses and other aids to navigation. The inclusion of these receipts have lead to a decrease in central government net borrowing of approximately £0.1 billion a financial year from financial year ending March 1998 to date.

Borrowing

Table 4 summarises revisions between the data contained in this bulletin and the previous publication.

This month’s bulletin reports revisions to public sector net borrowing (excluding public sector banks) (PSNB ex) since the previous (20 November 2015) publication. These revisions are largely limited to the financial years ending March 2014 and 2015, along with the financial year-to-date (April to October 2015).

Public sector net borrowing (excluding public sector banks)

PSNB ex in the current financial year-to-date (April to October 2015) was revised down by £1.5 billion, largely as a result of a downward revision to central government net borrowing.

PSNB ex in the financial year ending March 2015 has been revised down by £0.9 billion, while in the financial year ending March 2014, PSNB ex has been revised up by £1.0 billion. In both these financial years, changes to local government net borrowing have played a substantial role.

These net borrowing revisions are the result of updated data sources and methodology changes (see above) introduced this month.

Central government borrowing

The focus of this section will be on the current financial year, with reference made to revisions in earlier years made in later paragraphs.

Over the current financial year-to-date, central government net borrowing (CGNB) has been revised down by £1.7 billion.

Current receipts were revised up by £1.2 billion, with increases to estimates of taxes on production, income tax, social contributions of £0.9 billion, £0.3 billion and £0.2 billion respectively. Of the £0.9 billion increase in taxes on production, £0.4 billion was due to revisions to VAT data and £0.1 billion due to the inclusion of Light Dues and the Police Service Agreement in the public sector finances.These increases were partially offset by a £0.2 billion decrease to the estimate of interest & dividends.

Current expenditure was revised down by £0.2 billion, due to a decrease in the estimate of net social benefits and “other” current spending of £0.1 billion each. The changes to “other” current spending comprise of an increase of £0.1 billion due to the inclusion of the Police Service Agreement and so a £0.2 billion downward revision due to data changes.

The £1.2 billion increase in current receipts combined with the £0.2 billion decrease in current expenditure led to a £1.4 billion decrease to the central government current budget deficit estimate.

This decrease in the current account combined with a £0.3 billion downward revision to the estimate of capital spending (net investment), has resulted in a £1.7 billion decrease to the estimate of net borrowing in the current financial year-to-date.

In the financial year ending March 2015 CGNB has been revised down by £0.2 billion largely due to the inclusion of light dues and a £0.1 billion decrease in net investment.

In the financial year ending March 2014 CGNB has been revised up by £0.4 billion, due to the inclusion of light dues, updated local government grant data and data changes made in order to align with published resource accounts. These revisions were largely due to a £0.6 billion increase in net investment being partially offset by a £0.2 billion increase in ‘other receipts’.

In earlier financial years (back to financial year end 1998), the observed £0.1 billion decrease to CGNB may be almost entirely attributed to the inclusion of Light Dues to the public sector finances for the first time.

Local government borrowing

Over the current financial year-to-date, the estimate of local government net borrowing (LGNB) has decreased by £0.6 billion. This revision was largely due to the quality revisions in the treatment of payments connected with the end of the Housing Revenue Account subsidy scheme in Wales.

Local government accounts for the financial year ending March 2015 have been updated to include final outturn data for England and for Wales. As a result, LGNB has been revised down by £1.4 billion largely due to a £1.1 billion decrease in net investment.

In the financial year ending March 2014 LGNB has been revised up by £0.6 billion largely due to updates in grants from central government, leading to a £0.3 billion increase in net investment and a £0.4 billion increase in current expenditure.

Public corporations borrowing

The estimate of public corporation net borrowing (PCNB) over the current financial year-to-date and the financial year ending March 2015 have both been revised up by £0.7 billion.

These revisions are a result of data from the Whole of Government Accounts being incorporated into the public corporation accounts for the financial year ending March 2015. This information was then used to further inform forecasts for the current financial year.

Public sector net debt (excluding public sector banks)

Public sector net debt (excluding public sector banks) (PSND ex) at the end of October 2015 has been revised down by £0.1 billion.

Updated Network Rail information from April 2012 to date has lead to upward revisions in central government gross debt. These changes relate to new bond data, updated market-uplift estimates and revised loans from April 2012. The net effect of these changes has lead to an increase in central gross debt of £0.9 billion at the end of October 2015.

Quality assurance work by the Department for Communities and Local Government (DCLG) has lead to revisions in their estimates of local government gross debt (loans and bonds) from April 2012 to date. The inclusion of this revised data has resulted in a decrease of £6.0 billion at the end of October 2015.

In addition to the above, revisions to the cross holdings of central and local government gross debt (from April 2014 to date) have lead to a almost unchanged estimate for general government gross debt at the end of October 2015.

This, combined with new estimates of public corporation gross debt and liquid assets (£0.3 billion and £0.1 billion respectively), along with a reduction of £0.2 billion in the BoE contribution to net debt have resulted in PSND ex revising down by £0.1 billion at the end of October 2015.

Public sector net cash requirement (excluding public sector banks)

Public sector net cash requirement (excluding public sector banks) (PSNCR ex) in the financial year-to-date to (April to October 2015) has been down by £0.7 billion largely as a result of changes to local government cash position.

Quality assurance work by the Department for Communities and Local Government (DCLG) has lead to revisions in their estimates of local government net cash requirement (LGNCR) from July 2014 onwards. The inclusion of this revised data has resulted in a £0.3 billion decrease in LGNCR in the financial year ending March 2015 and a £0.8 billion decrease in the current financial year-to-date (April to October 2015).

To provide users with an insight into the drivers of the historical revisions between publications, this bulletin presents 3 revisions tables:

• Table PSA1R complements PSA1 and provides a revisions summary (between the current and previous publication) to headline statistics in this release

• Table PSA2R complements PSA2 and provides the revisions (between the current and previous publication) to net borrowing by sector

• Table PSA6R complements PSA6B and provides the revisions (between the current and previous publication) to the components of central government net borrowing

Tables PSA1R and PSA6R are published in excel format only in Appendix A to this release.

In addition, Appendix C to this bulletin presents a statistical analysis on several main components of the central government account (current receipts, current expenditure, net borrowing and net cash requirement) to determine whether their average revisions are statistically significant.

Recent public sector finance articles

We are currently in the process of updating public sector finance guidance and methodology articles published on our website. Recently we have updated articles covering:

• Public Sector Finances Revision Policy

• Public Sector Finances classification: Uses and Users of Government Finance Statistics

• Background for users of Public Sector Finance Statistics

• Production of the Public Sector Finances Statistical bulletin: responsibilities and accountabilities

• Methodological Improvements to National Accounts for Blue Book 2015: Classifications

• The use of GDP in fiscal ratio statistics

The reconciliation of net cash requirement to debt

The issues and subsequent revisions to CGNCR reported in November 2014 were identified through work undertaken to reconcile the 3 different fiscal measures (that is, net cash requirement, net borrowing and net debt) and to reconcile the central government net cash requirement with cash reported in audited resource accounts.

We are currently building these reconciliation processes into the monthly production systems. The first of these new reconciliations, Table REC3, attempts to reconcile central government net cash requirement and net debt.

Table REC3 is not currently designated a National Statistic and should be considered as a work-in-progress, with plans to introduce further refinements in the coming months.

UK Statistics Authority assessment of public sector finances

Alongside monitoring the production and publication of official statistics, the UK Statistics Authority's statutory function is to prepare, adopt and publish a Code of Practice for Statistics (in consultation with others as appropriate), setting out the standards that the Statistics Authority expects official statistics to meet. The Statistics Authority also determines whether official statistics comply with the Code and, if so, designates them with the quality mark “National Statistics”. The process of determining compliance with the Code and designation as National Statistics is known as “Assessment”.

On 8 November 2015, the UK Statistics Authority published its latest assessment report of public sector finances. The report confirmed the National Statistics status of the public sector finances bulletin subject to certain requirements being met.

We value your feedback

The public sector finances can be complex. To ensure these important statistics are accessible to all, we welcome your feedback on how best to explain concepts and trends in these data. Please contact us at: psa@ons.gov.uk

List of tables associated with this bulletin

• PSA1 Public Sector Summary

• PSA2 Public Sector Net Borrowing: by sector

• PSA3 Public Sector Current Budget Deficit, Net Borrowing and Net Cash Requirement (excluding public sector banks)

• PSA4 Public Sector Net Debt (excluding public sector banks)

• PSA5A Long Run of Fiscal Indicators as a percentage of GDP on a financial year basis

• PSA5B Long Run of Fiscal Indicators as a percentage of GDP on a quarterly basis*

• PSA6A Net Borrowing: month and year-to-date comparisions

• PSA6B Central Government Account: Overview

• PSA6C Central Government Account: Total Revenue,Total Expenditure and Net Borrowing

• PSA6D Central Government Account: Current Receipts

• PSA6E Central Government Account: Current Expenditure

• PSA6F Central Government Account: Net Investment

• SA6G Local Government Account: Overview*

• PSA6H Local Government Account: Total Revenue, Total Expenditure and Net Borrowing*

• PSA6I Local Government Account: Current Receipts*

• PSA6J Local Government Account: Current Expenditure*

• PSA6K Local Government Account: Net Investment*

• REC1 Reconciliation of Public Sector Net Borrowing and Net Cash Requirement (excluding banking groups)

• REC2 Reconciliation of Central Government Net Borrowing and Net Cash Requirement

• PSA7A Public Sector Net Cash Requirement

• PSA7B Public Sector Net Cash Requirement*

• PSA7C Central Government Net Cash Requirement

• PSA7D Central Government Net Cash Requirement on own account (receipts and outlays on a cash basis)

• REC3 Reconciliation of Central Government Net Cash Requirement and Debt (Experimental Statistic)

• PSA8A General Government Consolidated Gross Debt nominal values at end of period

• PSA8B Public Sector Consolidated Gross Debt nominal values at end of period

• PSA8C General Government Net Debt nominal values at end of period

• PSA8D Public Sector Net Debt nominal values at end of period

• PSA9 Bank of England Asset Purchase Facility Fund (APF)

• PSA10 Public Sector transactions by sub-sector and economic category

• PSA1R Public Sector Statistics: Revisions since last publication*

• PSA2R Public Sector Net Borrowing: by sector; Revisions since last publicationPSA6R Central Government Account: overview; Revisions since last publication*

• These tables are published in Excel format only.

Appendices – Data in this release

• Appendix A Public Sector Finances Tables 1 to 10

• Appendix B Large impacts on public sector fiscal measures excluding financial intervention (one off events).

• Appendix C Revisions Analysis on several main components of the central government account (current receipts, current expenditure, net borrowing and net cash requirement).

The following guidance documents aim to help users gain a detailed understanding of the public sector finances: Monthly statistics on Public Sector Finances: a methodological guide; Developments to Public Sector Finances Statistics and Quality and Methodology Information.