Public sector finances, UK: August 2023

• Public sector net borrowing excluding public sector banks (PSNB ex) in August 2023 was £11.6 billion, £3.5 billion more than in August 2022 and the fourth highest August borrowing since monthly records began in 1993.

• PSNB ex in the financial year to August 2023 was £69.6 billion, £19.3 billion more than in the same five-month period last year but £11.4 billion less than the £81.0 billion forecast by the Office for Budget Responsibility (OBR).

• Public sector net debt (PSND ex) was £2,594.1 billion at the end of August 2023 and was provisionally estimated at around 98.8% of the UK’s annual gross domestic product (GDP); this is 2.3 percentage points higher than in August 2022 and continuing at levels last seen in the early 1960s.

• Excluding the Bank of England, public sector net debt was £2,358.7 billion or around 89.8% of GDP, £235.4 billion (or 9.0 percentage points) lower than the wider measure.

• Central government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was £5.9 billion in August 2023; this brings the financial year to August 2023 to £71.8 billion, £12.7 billion below the £84.5 billion forecast by the OBR.

• Public sector net worth (PSNW ex) was in deficit by £617.8 billion at the end of August 2023; this compares with a £486.6 billion deficit at the end of August 2022.

In August 2023, the public sector spent more than it received in taxes and other income, requiring it to borrow £11.6 billion. This was £3.5 billion more than was borrowed in August 2022 and is the fourth-highest August borrowing since monthly records began in 1993, behind those of August of 2020 and 2021, during the coronavirus (COVID-19) pandemic, and August 2009 following the global economic downturn.

A breakdown of net borrowing by sub-sector and a summary of central government receipts and expenditure data are presented in Tables 1 to 3 in our Public sector finances summary tables: Appendix M dataset.

Central government borrowing

Central government forms the largest part of the public sector and includes HM Revenue and Customs, the Department of Health and Social Care, the Department for Education, and the Ministry of Defence.

The relationship between central government’s receipts and expenditure is the main determinant of public sector borrowing.

In August 2023, central government borrowed £8.3 billion, £1.2 billion more than in August 2022 but £1.1 billion less than the £9.4 billion forecast by the Office for Budget Responsibility (OBR) in their Economic and fiscal outlook – March 2023 report.

Central government receipts

Central government’s receipts were £76.6 billion, £3.1 billion more than in August 2022 and £1.2 billion more than the £75.4 billion forecast by the OBR. Of this £76.6 billion, tax receipts were £57.6 billion, £2.7 billion more than in August 2022, with income taxes and Value Added Tax (VAT) both increasing by £1.2 billion.

A detailed breakdown of central government income is presented in our Public sector current receipts: Appendix D dataset.

Self-assessed income tax

In August, accrued receipts are usually high because of receipts from self-assessed income tax (SA) payments received after the July deadline. This month, SA receipts were £1.5 billion, £0.8 billion less than in August 2022.

This brings the total SA receipts for July and August 2023 combined to £13.3 billion, £1.7 billion more than in the same two months in 2022 and £0.9 billion more than the £12.4 billion forecast by the OBR.

Central government expenditure

In August 2023, central government’s total expenditure was £84.9 billion, £4.3 billion more than in August 2022 and £0.1 billion more than the £84.8 billion forecast by the OBR.

Net social benefits

Net social benefits paid by central government in August 2023 were £23.5 billion, £2.7 billion more than in August 2022. In recent months we have seen large increases in benefit payments largely because of inflation-linked benefits uprating and cost-of-living payments.

For more information on these benefit payments, see UK Parliament’s Benefit uprating 2023 to 2024 report and GOV.UK’s Cost of Living Payments 2023 to 2024 guidance.

Interest payable on central government debt

In August 2023, the interest payable on central government debt was £5.6 billion, £3.1 billion less than in August 2022, and £2.2 billion below the OBR’s forecast of £7.8 billion. This was the third highest interest payable in any August since monthly records began in April 1997, behind those of August of 2021 and 2022.

Fluctuations in debt interest are largely a result of movements in the Retail Prices Index (RPI), to which index-linked gilts are pegged. The large month-on-month increases in RPI observed since early 2021 have led to substantial increases in debt interest payable, with the largest three months on record being in 2022 and 2023.

Of the £5.6 billion interest payable in August 2023, £1.9 billion was mainly attributable to the 0.3% increase in the RPI between May and June 2023, affecting the uplift of the three-month lagged index-linked gilts.

For further details of our approach, see our Calculation of interest payable on government gilts methodology.

The £11.6 billion borrowed in August 2023, combined with an increase of £1.5 billion to our previously published financial year to July 2023 borrowing estimate (largely because of the regular updates to local government data), brings our provisional estimate for the total borrowed in the financial year to August 2023 to £69.6 billion.

In the financial year to August 2023, central government borrowed £90.5 billion, £36.9 billion more than in the same period a year earlier. A £21.0 billion increase in central government current receipts over this period was exceeded by a £27.5 billion increase in current expenditure. This additional spending included increases in:

• benefit payments of £13.9 billion

• staff costs of £9.4 billion

• procurement of £5.3 billion

• the additional costs of the energy support schemes of around £4.7 billion

• grants to local government of £4.1 billion (but these in turn reduce local government borrowing)

These increases were partially offset by a reduction in central government debt interest payable of £6.4 billion.

Central government’s net investment increased by £29.5 billion over the same period, with £24.1 billion being paid to the Bank of England (BoE) under the Asset Purchase Facility (APF) Fund indemnity agreement. This central government expenditure has reduced the BoE’s contribution to public sector net borrowing by a corresponding amount.

Since our Public sector finances, UK: March 2023 bulletin published on 25 April 2023, we have reduced our estimate of borrowing for the 12 months to March 2023 (FYE 2023) by £10.8 billion, from £139.2 billion to £128.4 billion.

This was £5.5 billion more borrowing than in the previous financial year (FYE 2022). It remains the fourth highest FYE borrowing since monthly records began in FYE 1947, behind FYE 2021 (during the coronavirus (COVID-19) pandemic) and both the FYE 2010 and FYE 2011 (following the global financial downturn).

Public sector borrowing consists of two broad components: the current budget deficit (or borrowing to fund day-to-day activities) and capital expenditure (net investment).

In FYE 2023, the public sector current budget deficit was £80.8 billion, £11.1 billion more than in FYE 2022. This figure includes an estimated £39.4 billion cost of the energy support schemes. Over the same period, public sector net investment decreased by £5.6 billion to £47.6 billion.

Expressing borrowing as a ratio of gross domestic product (GDP) (the value of the output of the economy) gives an estimate of its affordability and provides a more robust measure for comparison of the UK’s fiscal position over time.

The coronavirus (COVID-19) pandemic had a substantial impact on the economy as well as public sector borrowing. Expressed as a proportion of GDP, borrowing in the financial year ending (FYE) 2021 was 15.0%, the highest for 75 years.

This proportion fell by 9.7 percentage points to 5.3% of GDP in FYE 2022 as the economy recovered from the coronavirus pandemic. Current estimates show that for the 12 months to March 2023, the proportion reduced by only another 0.2 percentage points to 5.1%, in part because of the impact of higher energy prices on the economy and public finances.

The public sector balance sheet describes its financial position at a point in time. It shows its liabilities (amounts owed) and its assets (amounts owned).

There are several measures of the public sector balance sheet which we discuss in our What the UK government owns and what it owes blog.

Table 2 presents the narrowest balance sheet measure, which is the redemption value of central government gilts. It then builds upon this measure, widening coverage by both the sub-sector and the range of asset and liability types included to reach the far wider measure of public sector net worth, which we explain in our Wider measures of the public sector balance sheet: public sector net worth methodology.

Our Public sector balance sheet tables: Appendix N presents a detailed reconciliation between the balance sheet measures summarised in Table 2.

Public sector net debt

The most widely used balance sheet measure used to describe the UK public sector’s financial position at a point in time is public sector net debt excluding public sector banks (PSND ex). Debt is commonly expressed as a ratio of gross domestic product (GDP) (the value of the output of the economy) to provide an estimate of its affordability and to provide a more robust measure for comparison of the UK’s fiscal position over time.

At the end of August 2023, the net debt-to-GDP ratio was provisionally estimated at 98.8%, 2.3 percentage points higher than a year ago. However, this is a highly provisional estimate and likely to be revised in future publications because it partly relies on GDP estimates based on the latest Office for Budget Responsibility (OBR) forecast. For further information, see sub-section Expressing public sector net debt as a percentage of GDP within Section 12: Strengths and limitations.

Public sector net debt excluding the Bank of England (BoE) was £2,358.7 billion, or around 89.8% of GDP, £235.4 billion (or 9.0 percentage points of GDP) less than the wider measure. This difference is largely a result of the BoE’s quantitative easing activities, including the gilt-purchasing activities of the Asset Purchase Facility (APF) Fund.

The APF’s gilt holding is not recorded directly as a component of public sector net debt. Instead, in August 2023, we record the £107.2 billion difference between the £781.5 billion of reserves created to purchase its gilts (at market value) and their £674.3 billion redemption value.

For details of the BoE’s contribution to public sector net debt, see Table PSA9A of our Public sector finances tables 1 to 10: Appendix A dataset.

Public sector net worth

Public sector net worth excluding public sector banks (PSNW ex) was in deficit by £617.8 billion at the end of August 2023. This compares with a £486.6 billion deficit at the end of August 2022.

The main reason for the £131.2 billion reduction in PSNW ex over the last 12 months was a £163.4 billion increase in PSND ex, partly offset by a £58.7 billion increase in public sector non-financial assets.

If we exclude the public sector’s £1,604.0 billion of non-financial assets, the public sector net financial worth excluding public sector banks (PSNFW ex) deteriorated by £189.9 billion over the same period to a deficit of £2,221.8 billion.

PSNFW ex is equivalent to public sector net financial liabilities excluding public sector banks (PSNFL ex), shown in Table 2 but expressed with the reverse sign.

The data for the latest months of every release contain a degree of forecasts. Subsequently, these are replaced by improved estimates, as further data are made available, and finally by outturn data.

Tables 4 to 6 of our Public sector finances summary tables: Appendix M dataset compare our latest public sector finances data with those in our Public sector finances, UK: July 2023 bulletin published on 22 August 2023, and highlight the revisions to borrowing by sub-sector, central government receipts and expenditure.

Our Public sector finance revisions analysis: Appendix P dataset records monthly borrowing data as at first and at subsequent publications, graphically illustrating any potential bias to our early estimates.

Annual data update September 2023

This month we have implemented our regular annual data updates to incorporate the latest available data. These changes are discussed in our Recent and upcoming changes to public sector finance statistics: August 2023 article.

Our Changes to public sector finance statistics: Appendix L dataset, presents the impacts of our larger data updates on our headline statistics, including those for public sector funded pensions, student loans, COVID-19 loan guarantee schemes, Bank of England, national non-domestic rates and the consumption of fixed capital.

Revision to net borrowing (PSNB ex) in the financial year to July 2023

Since publishing our Public sector finances, UK: July 2023 bulletin, we have increased our estimate of borrowing in the financial year to July 2023 by £1.5 billion. This change was the result of new data replacing previous forecasts, with our previous estimate of central government borrowing being reduced by £0.9 billion and local government borrowing being increased by £2.1 billion.

Our previous estimate of central government receipts has increased by £1.0 billion across the first four months of the current financial year, largely because of an increase of £2.8 billion to tax receipts, partially offset by a reduction to our provisional estimate of £1.8 billion in interest and dividend receipts.

While our previous estimate of total central government expenditure remains largely unchanged across the current financial year-to-date, there were several offsetting changes to underlying components, which reflects the provisional nature of the data at this time of year.

Local government data for the current financial year have been updated with budget data, replacing previous estimates based on the latest Office for Budget Responsibility forecasts. These data remain provisional and are likely to be revised in future months.

Revision to net borrowing (PSNB ex) in the financial year ending (FYE) March 2023

Since publishing our Public sector finances, UK: July 2023 bulletin, we have reduced our estimate of borrowing for the 12 months to March 2023 by £2.2 billion. This change was the result of new data replacing previous forecasts.

While our previous estimate of central government borrowing remains largely unchanged, our estimate of local government borrowing has increased by £3.9 billion. However, this increase was more than offset by reductions to the borrowing of both the public sector funded pensions and public corporations’ subsectors by £4.5 billion and £1.6 billion respectively.

Local government data tends to be updated quarterly. This month we have received updates to capital expenditure data for both England and Scotland, where budget data were replaced by provisional outturn data. Budget revenue data for Scotland were also replaced by provisional outturn data. Additionally, the annual updates to public sector funded pensions and capital consumption both impact on local government data, though the latter is borrowing neutral.

Pensions estimates in the public sector finances are heavily based on actuarial modelling with a lag of approximately two years between the relevant period and the publication of data. This month, we have updated our funded pensions estimates to include the latest available data. These changes are discussed in our Recent and upcoming changes to public sector finance statistics: August 2023 article and presented in our Changes to public sector finance statistics: Appendix L dataset.

Public corporations’ data were updated to include the latest Housing Revenue Account (HRA) data along with smaller updates to survey data.

Revision to net borrowing (PSNB ex) in the financial year ending (FYE) March 2022

Since publishing our Public sector finances, UK: July 2023 bulletin, we have increased our estimate of borrowing for the 12 months to March 2023 by £1.7 billion. This change was the result of new data replacing previous forecasts.

A £5.0 billion increase to previous estimates of local government borrowing, along with a £2.1 billion increase to public sector funded pensions borrowing, were partially offset by reductions to our previous estimate of central government borrowing and public corporations borrowing of £4.4 billion and £1.0 billion respectively.

This month we have received updates to both current and capital expenditure data for local authorities in Scotland, where provisional outturn data were replaced by final outturn data. These updates were accompanied by our annual updates to public sector funded pensions and capital consumption, both impacting on local government data, though the latter is borrowing neutral.

Public corporations data have been updated to include the latest estimates to National Accounts coverage concepts such as inventories and insurance.

While central government receipts data remain largely unchanged, we have received final outturn expenditure data and have reduced our estimates of pay and procurement by £4.9 billion and £1.7 billion, respectively. Additionally, we have increased our previous estimate of gross capital formation by £1.6 billion.

Revisions to net borrowing (PSNB ex) in earlier financial years

Changes to earlier periods are presented in our Changes to public sector finance statistics: Appendix L dataset and in our Public sector finances summary tables: Appendix M dataset.

Revision to public sector net debt at the end of July 2023

Since publishing our Public sector finances, UK: July 2023 bulletin, we have increased our estimate of public sector net debt (PSND ex) at the end of July 2023 by £2.9 billion. This change was largely because of routine updates to both our local government and public corporations’ datasets and annual updates to both our public sector funded pensions and Bank of England datasets.

Expected revisions to gross domestic product (GDP)

On 29 September 2023, we will publish updated estimates of gross domestic product (GDP) up to and including the second quarter of 2023 (April to June), following our Impact of Blue Book 2023 changes on gross domestic product dataset published on 1 September 2023. These data are not used in this publication and will be included in our next Public sector finances (PSF) bulletin published on 20 October 2023.

Public sector

In the UK, the public sector consists of six sub sectors: central government, local government, public non-financial corporations, public sector funded pensions, the Bank of England (BoE), and public financial corporations (or public sector banks). The figures presented in this release exclude public financial corporations unless otherwise noted.

Public sector current budget deficit

Public sector current budget deficit (PSCB) is the gap between current expenditure and current receipts on an accruals basis, having taken account of depreciation. The current budget is in surplus when receipts are greater than expenditure and is indicated with a negative sign.

Public sector net borrowing

Public sector net borrowing (PSNB) is the gap between total expenditure and current receipts on an accruals basis. If receipts exceed expenditure, this is referred to as a surplus and is indicated with a negative sign. Borrowing is often referred to by commentators as “the deficit”.

Central government net cash requirement

The central government net cash requirement (CGNCR) represents the cash needed to be raised from the financial markets over a period 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.

Public sector net debt

Public sector net debt (PSND) represents the amount of money the public sector owes to the private sector and overseas (in the form of loans, debt securities, deposit holdings and currency), net of liquid financial assets held.

Public sector net debt is often referred to by commentators as “the national debt”.

Public sector net financial liabilities

Public sector net financial liabilities (PSNFL) are a wider measure of the balance sheet than public sector net debt and includes all financial assets and liabilities recognised in the National Accounts.

Public sector net worth

Public sector net worth (PSNW) is the widest measure of the balance sheet, broadening the PSNFL measure by considering the public sector’s non-financial assets.

Comparing our data with official forecasts

The independent Office for Budget Responsibility (OBR) is responsible for the production of official forecasts for the UK government. These forecasts are usually produced twice a year, in spring and autumn. The latest forecast was published in the OBR’s Economic and fiscal outlook – March 2023 report.

The next OBR forecast will be published on 22 November 2023.

Each month on the same day as the Office for National Statistics (ONS) release, the OBR publishes a brief analysis of the latest public sector finances in their Monthly public finances release.

Public sector banks

Unless otherwise stated, the figures quoted in this bulletin exclude public sector banks, currently only the NatWest Group (NWG), formerly the Royal Bank of Scotland (RBS) Group.

The reported position of debt, and to a lesser extent borrowing, would be distorted by the inclusion of NWG’s balance sheet (and transactions). This is because the government does not need to borrow to fund the debt of NWG, nor would surpluses achieved by NWG be passed on to the government, other than through any dividends paid as a result of the government equity holdings.

Tax receipts

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 Income Tax contain some forecast cash receipts data and are liable to revision when actual cash receipts data are received.

The forecasts underlying our current tax estimates reflect the expectations published in the Office for Budget Responsibility’s (OBR’s) Economic and fiscal outlook – March 2023 report.

Local government and public corporations

In recent years, planned local government expenditure initially reported in local authority budgets has been systematically lower than final outturn current expenditure reported in the audited accounts, and higher than that reported in final outturn capital expenditure. We therefore include adjustments to increase or decrease the amounts reported at the budget stage. For the financial year ending (FYE) 2023, we include:

• £4.0 billion upward adjustment to England’s current expenditure on goods and services

• £0.4 billion downward adjustment to Wales’s capital expenditure

We apply a further £1.4 billion downward adjustment to budget data current expenditure on benefits in the FYE 2023, to reflect the most recently available data for housing benefits.

For the financial year ending (FYE) 2024, we include a £0.5 billion downward adjustment to Scotland’s capital expenditure.

We apply a further £1.8 billion downward adjustment to budget data current expenditure on benefits in the FYE 2024, to reflect the most recently available data for housing benefits.

Public corporations data in the FYE 2023 are also largely based on the OBR’s Economic and fiscal outlook – March 2023 report, although supplemented by in-year data replacing previous estimates for train operating companies, the Housing Revenue Account and surveyed public corporations.

Expressing public sector net debt as a percentage of gross domestic product (GDP)

Net debt is commonly expressed as a ratio of gross domestic product (GDP) (the value of the output of the economy), which gives an indication of its affordability and helps with compatibility over time. However, estimates of the net debt-to-GDP ratio for the most recent months should be considered highly provisional as they rely on forecast GDP estimates.

For an explanation of how we calculate the net debt-to-GDP ratio figures reported in the monthly public sector finances, see our Use of GDP in public sector fiscal ratio statistics methodology, published on 21 September 2016.

Each monthly estimate of net debt-to-GDP uses a 12-month total of GDP, centred around the chosen month – the six months up to (and including) that month, and six months after. This means that for the latest month, we use a GDP forecast six months into the future.

For an explanation of how we estimate UK debt to GDP figures and its susceptibility to revision, see our How the ONS estimates UK debt to GDP figures blog.

Estimating the cost of the energy support schemes

Though fully reflected in our central government expenditure estimates, the costs of the individual energy support schemes are not separately identifiable in our source data on an accrued basis.

The UK government provided cash estimates on the cost of each of the energy support schemes for the financial year ending (FYE) March 2023 in its Energy Prices Act 2022 and expenditure on energy schemes – Q1 2023 statement, published on 8 July 2023. These expenditure figures do not include accrued costs yet to be paid out and so may not represent the full cost of schemes in the FYE 2023. Some of the expenditure incurred in the last quarter of FYE 2023 will be recognised in FYE 2024, where it relates to energy scheme support from 1 April 2023 onwards.

In the statement, the UK government estimated that expenditure on the energy price cap schemes, Energy Price Guarantee (EPG) for households and the Energy Bill Relief Scheme (EBRS) for business customers, paid as subsidies to energy suppliers was £26.6 billion. Additionally, the cost of the energy support schemes paid directly to consumers under the Energy Bills Support Scheme (EBSS) umbrella in the six months to March 2023 was estimated at £12.8 billion.

In April 2023, the EBRS was replaced by the Energy Bills Discount Scheme (EBDS). To provide an estimate of the ongoing cost of the combined EPG and EBDS in the current financial year, we highlight the OBR monthly forecast published in its March 2023 Economic and fiscal outlook monthly profiles (XLSX, 125KB).