UK government debt and deficit: March 2017

• General government gross debt was £1,720.1 billion at the end of the financial year ending March 2017, equivalent to 88.0% of gross domestic product (GDP), an increase of £68.1 billion compared with the end of March 2016 (when it was 87.6% of GDP).

• The latest government debt figure exceeds the reference value of 60% of GDP set out in the Protocol on the Excessive Deficit Procedure; general government gross debt first exceeded the 60% Maastricht reference value at the end of the financial year ending March 2010, when it was 70.3% of GDP or £1,076.6 billion.

• General government deficit (or net borrowing) was £47.0 billion in the financial year ending March 2017 (equivalent to 2.4% GDP), a decrease of £28.2 billion compared with the financial year ending March 2016 (when it was 4.0% of GDP).

• The Protocol on the Excessive Deficit Procedure states that general government deficit should not exceed the reference value of 3% of GDP; this is the first time the government deficit has been below the reference value since the financial year ending March 2008, when it was 2.9% of GDP or £45.3 billion.

This section presents information on aspects of data or methodology, introduced since the last publication in April 2017, that are important to understand when reading this bulletin.

Lloyds share sales

In recent years the government has entered a programme of selling shares in publicly owned organisations. On 15 March 2017, the government announced that its current trading plan has enabled its remaining shareholding in Lloyds Banking Group (LBG) to be reduced to less than 3%, and on 21 April 2017 that sales had reduced the government shareholding further to 2%. Finally, on 17 May 2017, the government announced that it had sold its entire stake in Lloyds Banking Group. The proceeds of the sales have no impact on government net borrowing and gross debt.

The recording of fines and deferred prosecution agreements

We have reviewed the way in which we collect and record fines imposed by the Financial Conduct Authority and deferred prosecution agreements imposed by the Serious Fraud Office. By taking data directly from their respective website we have been able to improve both the timeliness and accuracy of the data.

The impact of this improvement is an increase in central government receipts by £74 million in the financial year ending March 2016 and by £172 million in the financial year ending March 2017.

The recording of UK Asset Resolution bank deposits with Bank of England

Quality assurance work has enabled us to improve our central government data relating to the recording of UK Asset Resolution (UKAR) bank deposits. These improvements impact on central government bank deposit stocks and have no impact on government gross debt or deficit, nor do they impact bank deposits data.

Background

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

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

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

• a debt to GDP ratio of 60%

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

What are the most important terms I need to know?

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

Debt represents the amount the public sector owes to UK private sector organisations and overseas institutions, largely as a result of government financial liabilities on the bonds (gilts) and Treasury bills it has issued.

While deficit represents the difference between income and spending over a period of time, debt represents the total amount of money owed at a point in time. This debt has been built up by successive government administrations over many years. When the government borrows (that is, runs a deficit), this adds to the debt total. So reducing the deficit is not the same as reducing the debt.

Are our figures adjusted for inflation?

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

Is this release consistent with UK public sector finances?

The general government debt and deficit figures published in this bulletin (for the time period 1997 onwards), are fully consistent with those published in the UK Public sector finances: May 2017 statistical bulletin, published on 21 June 2017.

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

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

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

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

How do these figures compare internationally?

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

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

Both the debt and deficit figures in this statistical bulletin will be published by Eurostat on 20 July 2017.

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

The tables in this bulletin present the UK government debt and deficit position at the end of both the financial and calendar years. The UK, uniquely within the EU, is assessed against the deficit and debt on a UK financial year basis (that is, April to March). In June 2017, the UK provided to Eurostat first estimates for the financial year ending March 2017 and revised estimates for the calendar year 2016.

This bulletin reports that, in 2016, the UK government deficit figure is equal to the reference value of 3% of GDP and, in the financial year ending March 2017, the UK government deficit as a percentage of GDP is below the reference value; while debt at the end of 2016 and in the financial year ending March 2017 still exceeds the 60% of GDP reference value.

This bulletin reports that, in the financial year ending March 2017, the UK government deficit as a percentage of GDP was below the 3% reference value, while in 2016 it was equal to the reference value. By contrast, UK government debt at the end of 2016 and the financial year ending March 2017 significantly exceeded the 60% of GDP reference value.

At the end of the financial year ending March 2017, UK government gross debt was £1,720.1 billion, equivalent to 88.0% of gross domestic product (GDP), an increase of £68.1 billion compared with the financial year ending March 2016.

This is the 15th consecutive annual increase in debt as a proportion of GDP. General government gross debt first exceeded the 60.0% Maastricht reference value at the end of the financial year ending March 2010, when it was 70.3% of GDP or £1,076.6 billion.

At the end of the calendar year 2016, UK government gross debt was £1,731.4 billion (89.3% of GDP). This represents an increase of £65.4 billion since the end of the calendar year 2015.

The higher gross debt value at the end of the calendar year 2016 compared with at the end of the financial year ending March 2017, largely reflects the drop in stock of Treasury bills in issuance over the first quarter (Jan to Mar) of 2017 of around £27 billion. This drop in the liabilities from Treasury bills is partly offset by increases in the liabilities on gilts, loans and deposits.

In the financial year ending March 2017, the UK government deficit was £47.0 billion, equivalent to 2.4% of gross domestic product (GDP), a decrease of £28.2 billion compared with the financial year ending March 2016. This represents the lowest annual deficit (as a percentage of GDP) since the financial year ending March 2003, when it was also 2.4% of GDP and the first time the UK government deficit has been below 3% of GDP since the financial year ending March 2008, when it was 2.9% of GDP.

In the calendar year 2016, the UK government deficit was £57.2 billion (3.0% of GDP), a decrease of £24.2 billion compared with the calendar year 2015.

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

This quarter (Quarter 1 (Jan to Mar) 2017) we have reviewed Scottish and Welsh data for Council Tax and business rates identifying some final revisions to the data that had not previously been taken. Incorporating these data has led to some downward revisions to government deficit data back to the financial year ending March 2007.

Scottish local government provisional outturn data for the financial year ending March 2016 has been replaced by published final outturn data, which has led to a small increase in government deficit for this year.

Table M8R presents the revisions to our main aggregates since the last publication of the Government Deficit and Debt Return as reported to the European Commission in April 2017. These revisions are consistent with revisions incorporated within the public sector finances statistical bulletin.

The Public sector finances revision policy provides information of when users of the statistics published in the public sector finances and UK government debt and deficit for Eurostat statistical bulletins should expect to see methodological and data-related revisions. More detail of the methodology and sources employed can be found in the Public sector finances methodological guide.

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

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

• uses and users of the data

• how the output was created

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

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

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

Classification decisions

Each quarter we publish a forward workplan outlining the classification assessments we expect to undertake over the coming 12 months. To supplement this, each month a classifications update is published, which announces classification decisions made and includes expected implementation points (for different statistics) where possible. Classification decisions are reflected in the public sector finances at the first available opportunity and, where necessary, outlined in this section of the statistical bulletin.

Supporting documentation

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

Summary, reconciliation and revisions information on UK government deficit and debt figures by calendar and financial year.

European System of Accounts (ESA) 2010 Table 2

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

ESA Table 25

Quarterly non-financial accounts of general government ESA Table 25 provides a breakdown of general government expenditure (both current and capital) and general government revenue.

ESA Table 27

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

ESA Table 28

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