Public Sector Finances, UK: March 2019 - Public Sector Debt £1.8 Trillion

24th April 2019

Excerpts From The Report published by The Office for National Statistics. See the link at the bottom to go to the full report.

Main points

This bulletin presents the first provisional estimates of UK public sector finances for the latest full financial year (April 2018 to March 2019); these are not final figures and will be revised over the coming months as we replace our initial estimates with provisional and then final outturn data.

Borrowing in the latest full financial year (April 2018 to March 2019) was £24.7 billion, £17.2 billion less than in the previous financial year; the lowest financial year borrowing for 17 years (April 2001 to March 2002).

Borrowing in the latest full financial year was £1.9 billion more than the £22.8 billion forecast by the Office of Budget Responsibility (OBR) in its Economic and Fiscal Outlook - March 2019.

Borrowing (public sector net borrowing excluding public sector banks) in March 2019 was £1.7 billion, £0.9 billion more than in March 2018; with March 2018 remaining the lowest March borrowing since 2006.

Debt (public sector net debt excluding public sector banks) at the end of March 2019 was £1,801.0 billion (or 83.1% of gross domestic product (GDP)); an increase of £22.1 billion (or a decrease of 1.5 percentage points of GDP) on March 2018.

Debt at the end of the latest full financial year was £2.0 billion less than the £1,803.0 billion forecast by the OBR, or lower by 0.2 percentage points of GDP.

Debt at the end of March 2019 excluding Bank of England (mainly quantitative easing) was £1,617.6 billion (or 74.6% of GDP); an increase of £28.1 billion (or a decrease of 1.0 percentage point of GDP) on March 2018.

Central government net cash requirement in the latest full financial year (April 2018 to March 2019) was £35.9 billion (£2.7 billion less than in the previous financial year) or £37.3 billion excluding both UK Asset Resolution Ltd and Network Rail (£3.4 billion less than in the previous financial year).

How much is the public sector borrowing?

In March 2019, the public sector spent more money than it received in taxes and other income, meaning it had to borrow £1.7 billion.

Figure 1 summarises public sector borrowing by sub-sector in March 2019 and compares this with the equivalent measures in the same month a year earlier (March 2018). This presentation splits public sector net borrowing excluding public sector banks (PSNB ex) into each of its four sub-sectors: central government, local government, public corporations and Bank of England.

Central government receipts in March 2019 increased by 3.1 billion (or 5%) compared with March 2018, to £65.1 billion, while total central government expenditure increased by 5.7% (or £3.5 billion) to £65.7 billion.

Much of this annual growth in central government receipts in March 2019 came from Income Tax-related revenue, with Pay As You Earn (PAYE) and National Insurance contributions increasing by £0.8 billion and £1.1 billion respectively.

This month, accrued receipts of Value Added Tax (VAT) increased by £0.4 billion compared with March 2018, however, accrued Corporation Tax (CT) receipts decreased by £0.1 billion over the same period. It is important to note that both of these taxes contain forecast cash receipts data and are liable to revision as actual cash receipts data are received.

Over the same period, there were notable increases in expenditure on goods and services, net social benefits, gross capital formation and capital transfers to the private sector of £1.9 billion, £0.6 billion, £0.6 billion and £0.8 billion respectively.

Unusually in March 2019, accrued interest on central government's outstanding debt was recorded as a negative component of net borrowing. This was due to downward movements (between December 2018 and January 2019) in the Retail Prices Index (RPI) to which index-linked bonds are pegged.

The valuation of index-linked gilts is based on the value at issuance uplifted by the RPI. When RPI increases, this increases the value of the gilts stock and when it decreases, it decreases the value of the gilts stock. This movement in the stock of index-linked gilts is captured as accrued interest, which was negative this month due to a drop in the RPI. The negative figure does not reflect an actual flow of money into central government; in March 2019 central government's cash outlay on interest (including gilt coupon payments) was £7.6 billion.

As explained, this fall in RPI reduces not only the accrued interest but also the stock of index-linked gilts and therefore contributes to a reduction in public sector net debt (PSND) of around £3 billion, although this is offset by other impacts on PSND.

Local government data for March 2019 are based on budget forecasts for England, Wales and Scotland, while public corporations data remain initial estimates, with most components calculated by the Office for National Statistics (ONS) based on the Office for Budget Responsibility (OBR) forecasts. In both cases, additional administrative source data are used to estimate transfers to each of these sectors from central government.

How much does the public sector owe?

Public sector net debt (PSND ex) represents the amount of money the public sector owes to private sector organisations (including overseas institutions), that has built up by successive government administrations over many years.

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

At the end of March 2019, the amount of money owed by the public sector to the private sector stood at around £1.8 trillion (Figure 5), which equates to 83.1% of the value of all the goods and services currently produced by the UK economy in a year (or gross domestic product (GDP)).

Read the full report HERE

To Read More about UK National Debt see Wikipedia HERE