FOI REF: FOI-2023-1481
You asked
With regards to the statement on the ONS website entitled 'The debt and decifit of the UK public sector explained' (published 16 March 2016), it says the deficit is the difference between what the government has spent verses what it has received (in tax and earnings). But is the deficit the same thing as stating what the government's bank balance is? For example:
If the government has £100 billion in its bank account and it pays out £90 billion on Monday, but only receives £80 billion on Tuesday then the deficit is £10 billion because 90 - 80 = 10. The difference between what it spent and what it received is 10 billion. But that is not a reflection of the total amount of money left in its bank account, which would be £10 billion in credit. If it then receives 10 billion on Wednesday then the deficit disappears because 80 + 10 equals 90, which equals the £90 billion it spent on Monday. If we add that £90 billion to the £10 billion it never spent, then the government's bank balance would be £100 billion.
We said
Thank you for your query regarding 'The debt and deficit of the UK public sector explained' publication.
There are two presentations used by the government (and the public sector as a whole) to describe its financial position; that recorded on a cash basis and that recorded on an accrued basis.
In your example you are essentially describing the cash presentation, the balancing item of which is the net cash requirement. As you say, over a defined period (a month in the case of public sector finances) cash goes out and cash comes in, the end balance is described as the net cash requirement (or surplus if it's positive). The accumulation of these net cash requirements over time is essentially the government's (or public sector's) debt.
Central government net cash requirement is described in table PSA7D of the following publication: Public Sector Finance tables 1 to 10: Annex A.
Net borrowing (or deficit) is an equivalent measure described on an accrued basis. This measure uses time adjusted cash to estimate when the assets and liabilities are incurred rather than when the cash transactions occur and so attempts to measure activity.
Using the purchase of a home to illustrate these recording methods:
On an accrued basis we record the whole cost at the point the contract is signed, and the keys are handed over, so the point you take on the asset / liability.
On a cash basis we record the many, many mortgage payments made on the property.
All things being equal, over time the total is the same.
Central government net borrowing requirement is described in table PSA6B of the same tables.
There is no descriptor for the accumulation of net borrowing over time. Balance sheet measures, such as debt are cash concepts.
We publish a public sector finance methodology guide which provides a more detailed background to our published measures: Monthly statistics on public sector finance: a methodological guide.