Public sector finances, UK: December 2019

• Borrowing (public sector net borrowing excluding public sector banks, PSNB ex) in December 2019 was £4.8 billion, £0.2 billion less than in December 2018.

• Borrowing in the current financial year-to-date (April 2019 to December 2019) was £54.6 billion, £4.0 billion more than in the same period last year.

• Debt (public sector net debt excluding public sector banks, PSND ex) at the end of December 2019 was £1,819.0 billion (or 80.8% of gross domestic product, GDP); this is an increase of £35.5 billion (or a decrease of 0.9 percentage points) on December 2018.

• Debt at the end of December 2019 excluding the Bank of England (BoE) (mainly quantitative easing) was £1,644.2 billion (or 73.0% of GDP); this is an increase of £48.0 billion (or a decrease of 0.1 percentage points) on December 2018.

• Central government net cash requirement was £57.6 billion in the current financial year-to-date; this is £17.1 billion more than in the same period in the previous year.

• Central government net cash requirement excluding both UK Asset Resolution Ltd and Network Rail was £58.1 billion in the current financial year-to-date; this is £15.8 billion more than in the same period last year.  

This section presents information on aspects of data or methodology that have been introduced or improved since the publication of the previous bulletin (20 December 2019), along with supporting information that users may find useful.

Early repayment of Term Funding Scheme loans

The introduction of the Term Funding Scheme (TFS) in September 2016 led to an increase in public sector net debt (PSND), as the loans provided under the scheme were not liquid assets and therefore did not net off in PSND (against the liabilities incurred in providing the loans). The TFS closed for drawdowns of further loans on 28 February 2018 with a loan liability of £127.0 billion.

In December 2019, the Bank of England (BoE) received a £4.6 billion early repayment on the TFS loans, reducing the outstanding loan liability to £108.2 billion at end of December 2019. This repayment reduced the BoE’s contribution to net debt by £4.6 billion and therefore reduced PSND by an equivalent amount.

On 7 January, it was announced that a Budget will be held on Wednesday 11 March 2020.

The Budget, or Financial Statement, is a statement made to the House of Commons by the Chancellor of the Exchequer on the nation’s finances and the government’s proposals for changes to taxation and spending. The Budget also includes forecasts for the economy made by the Office for Budget Responsibility (OBR).

In December 2019, the public sector spent more money than it received in taxes and other income to the extent that it had to borrow £4.8 billion, £0.2 billion less than in December 2018. Of this £4.8 billion, central government borrowed £4.2 billion and local government borrowed £1.4 billion. The Bank of England’s (BoE’s) contribution to net borrowing was a surplus of £0.9 billion.

Figure 1 presents both monthly and cumulative public sector net borrowing excluding public sector banks (PSNB ex) in the current financial year-to-date (April 2019 to December 2019) and compares these with the same period in the previous financial year.

Figure 2 summarises public sector net borrowing (PSNB) by sub-sector in December 2019 and compares this with the equivalent measures in the same month a year earlier (December 2018). This presentation splits PSNB ex into each of its five sub-sectors: central government, local government, non-financial public corporations, public sector pensions and the BoE.

The data for the latest months of every release contain a degree of forecasts. This is because profiles of tax receipts, along with departmental and local government spending, are still provisional. This means that the data for these months are typically more prone to revision than other months and can be subject to sizeable revisions in later months.

Figure 2: How each sector contributes to the growth in monthly borrowing

Public sector net borrowing by sub-sector, UK, December 2019, compared with December 2018

Source: Office for National Statistics – Public sector finances

Notes:

1. PSNB ex – Public sector net borrowing excluding public sector banks.
2. CGNB – Central government net borrowing.
3. LGNB – Local government net borrowing.
4. PCNB – Non-financial public corporations’ net borrowing.
5. BoENB – Bank of England net borrowing.
6. L&P – Land and property.
7. I&W – Income and wealth.
8. NICs – National Insurance contributions.
9. Contributions to EU – UK VAT, GNI and abatement contributions to the EU budget.
10. o/w – Of which.

Download this image Figure 2: How each sector contributes to the growth in monthly borrowing

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Central government receipts in December 2019 increased by £2.2 billion (or 3.7%) to £62.2 billion, compared with December 2018, while total central government expenditure increased by £1.7 billion (or 2.7%) to £63.9 billion. As a result, central government borrowed £4.2 billion in December 2019, a decrease of £0.4 billion (or 8.9%) on the previous December.

Central government receipts were boosted by increases in National Insurance contributions (NICs) of £0.5 billion, interest and dividends receipts of £0.3 billion, and across many of the taxes on production (such as Value Added Tax (VAT), tobacco duty and stamp duty) totalling £1.1 billion.

Taxes on income and wealth saw a small reduction (less than £0.0 billion), with an increase in petroleum revenue tax of £0.3 billion being offset by decreases in both Corporation Tax and Income Tax receipts of £0.3 billion and £0.1 billion respectively.

It is important to note that both the accrued measures of Corporation Tax and VAT contain a portion of forecast cash receipts data and are liable to revision as actual cash receipts data are received.

Of £63.9 billion spent by central government in December 2019, £60.2 billion related to the cost of the “day-to-day” activities of the public sector (the current expenditure), which increased by £2.5 billion (or 4.3%), compared with December 2018.

Departmental expenditure on goods and services increased by £2.3 billion, compared with December 2018, including a £0.8 billion increase in expenditure on staff costs and a £1.2 billion increase in the purchase of goods and services. This increase in pay and procurement partially reflects that we have entered the first of the five years covered by the Department of Health and Social Care (DHSC) spending settlement.

Overseas spending (or current transfers abroad) by the Department for International Development (DfID) has increased by £0.9 billion, compared with December 2018. The DfID is responsible for administering the UK government’s overseas aid.

Interest payments on the government’s outstanding debt decreased by £1.1 billion, compared with December 2018. Changes in debt interest are largely a result of movements in the Retail Prices Index (RPI), to which index-linked bonds are pegged. The relationship between the RPI and the valuation index-linked bonds is explored further in the Public sector finances Quality and Methodology Information (QMI).

In December 2019, central government spent £3.7 billion on capital (or net investment), such as on infrastructure; this is a decrease of £0.8 billion (or 18.4%), compared with December 2018. While gross capital formation (the purchase of capital) increased by £0.4 billion, capital transfers from central government to the private sector decreased by £1.2 billion. This decrease in capital grants reflects the timing of student loans sales, each of which is accompanied by the recording of a capital transfer to account for the difference between the cash realised from the sale and the national accounts valuation of the loan book sold. In this case, there was a sale in Decmber 2018 but no sale in December 2019.

Both local government and public corporations’ net borrowing grew by £0.1 billion, compared with December 2018.

Local government data are mainly based on budget data for England, Wales and Scotland for the financial year ending (FYE) March 2020. Public corporations’ data remain initial estimates, based on the Office for Budget Responsibility (OBR) forecasts. Current and capital transfers between these sectors and central government are based on administrative data supplied by HM Treasury.

Pensions data for the current financial year are our estimates based on the latest available data. Some of these estimates rely on actuarial modelling; this is a complex process that most public sector schemes conduct every three to four years. Until such valuations become available, we forecast the change in pension liability using our knowledge of the economic climate. Pensions in the public sector finances: a methodological guide outlines both the theory and practice behind our calculation of pension scheme estimates.

Because of the volatility of the monthly data, the cumulative financial year-to-date borrowing figures often provide a better indication of the position of the public sector finances than the individual months’ figures.

Figure 3 summarises the contributions of each sub-sector to PSNB ex in the current financial year-to-date (April 2019 to December 2019) and compares these with the same period last year.
 

Figure 3: How each sector contributes to the growth in borrowing

Public sector net borrowing by sub-sector, UK, current financial year-to-date (April to December 2019) compared with the same period last year

Source: Office for National Statistics – Public sector finances

Notes:

1. PSNB ex – Public sector net borrowing excluding public sector banks.
2. CGNB – Central government net borrowing.
3. LGNB – Local government net borrowing.
4. PCNB – Non-financial public corporations' net borrowing.
5. BoENB – Bank of England net borrowing.
6. L&P – Land and property.
7. I&W – Income and wealth.
8. NICs – National Insurance contributions.
9. Contributions to EU – UK VAT, GNI and abatement contributions to the EU budget.
10. o/w – Of which.

Download this image Figure 3: How each sector contributes to the growth in borrowing

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In the current financial year-to-date (April 2019 to December 2019), public sector spending has exceeded the money received in taxes and other income. This meant across these nine months, the public sector had to borrow a total of £54.6 billion, £4.0 billion (or 7.9%) more than in the same period last year.

Of the £54.6 billion, £24.4 billion related to the cost of the “day-to-day” activities of the public sector (the current budget deficit), while £30.3 billion was capital spending (or net investment), such as on infrastructure.

The difference between central government’s income and spending makes the largest contribution to the amount borrowed by the public sector.

In the current financial year-to-date, central government receipts grew by 2.3% on the same period last year to £548.2 billion, including £402.7 billion in tax revenue.

Over the same period, central government spent £577.5 billion, an increase of 2.6%. Of this amount, around two-thirds was spent by central government departments (Education, Defence, and Health and Social Care); just below one-third was spent on social benefits (such as pensions, unemployment payments, Child Benefit and Statutory Maternity Pay); and the remainder was spent on capital investment and interest on the government’s outstanding debt.

Figure 4 shows annual borrowing has generally been falling since its peak in the financial year ending (FYE) March 2010 (April 2009 to March 2010).

Figure 4: Annual borrowing has generally been falling since its peak in the financial year ending March 2010

Public sector net borrowing excluding public sector banks, UK, April 1993 to December 2019

Source: Office for National Statistics – Public sector finances

Notes:

1. The Office for Budget Responsibility (OBR) full financial year forecast of public sector net borrowing excluding public sector banks (PSNB ex) for the financial year ending (FYE) March 2020, taken from the restated March 2019 forecast, published in December 2019.
2. Financial year 2018 to 2019 represents the FYE 2019 (April 2018 to March 2019).
3. YTD – year-to-date (April to December).

Download this image Figure 4: Annual borrowing has generally been falling since its peak in the financial year ending March 2010

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In the latest full financial year (April 2018 to March 2019), the £38.0 billion (or 1.8% of gross domestic product, GDP) borrowed by the public sector was around a quarter (24.0%) of the amount seen in the FYE March 2010, when borrowing was £158.3 billion (or 10.2% of GDP).  

Public sector net debt excluding public sector banks (PSND ex) represents the total amount of money the public sector owes to private sector organisations (including overseas institutions), which has been 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 December 2019, the amount of money owed by the public sector to the private sector stood at approximately £1.8 trillion (or £1,819.0 billion) (Figure 5), which equates to 80.8% of gross domestic product (GDP) (the value of all the goods and services currently produced by the UK economy in a year). Though debt has increased by £35.5 billion on December 2018, the ratio of debt to GDP has decreased by 0.9 percentage points, implying that UK GDP is currently growing at a greater rate than debt.

Figure 5: Debt as a percentage of gross domestic product has been falling in recent financial years

Public sector net debt excluding public sector banks, UK, March 1994 to the end of December 2019

Source: Office for National Statistics – Public sector finances

Notes:

1. Includes Asset Purchase Facility (APF), which includes the Term Funding Scheme (TFS).
2. Public sector net debt excluding public sector banks (PSND ex) is the combination of PSND ex Bank of England (BoE) plus the BoE’s contribution to PSND ex.
3. Public sector net debt excluding public sector banks (PSND ex) shown at the end of each financial year (March), unless otherwise stated.

Download this image Figure 5: Debt as a percentage of gross domestic product has been falling in recent financial years

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The Bank of England’s (BoE’s) contribution to net debt is largely a product of their quantitative easing measures, namely the Bank of England Asset Purchase Facility Fund (BEAPFF) and the Term Funding Scheme (TFS). If we were to exclude the BoE from our calculation of PSND ex, it would reduce by £174.8 billion, from £1,819.0 billion to £1,644.2 billion, or from 80.8% of GDP to 73.0%.

Figure 6 breaks down outstanding public sector net debt (PSND) at the end of December 2019 into the sub-sectors of the public sector. In addition to PSND ex, this presentation includes the effect of public sector banks on debt.

Figure 7 incorporates the borrowing components detailed in Figure 3 to show how the differences between income and spending (both current and capital) have led to the accumulation of debt in the current financial year-to-date (April 2019 to December 2019).

The reconciliation between public sector net borrowing (PSNB) and the net cash requirement is presented in more detail in Table REC1 in the Public sector finances tables 1 to 10: Appendix A dataset.

Figure 7: How the differences in expenditure and receipts affect public sector net debt excluding public sector banks

UK, current financial year-to-date (April 2019 to December 2019)

Source: Office for National Statistics – Public sector finances

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. This includes revaluation of foreign currency debt (for example, foreign currency); debt issuances or redemptions above or below debt valuation (for example, bond premia or discounts and capital uplifts); and changes in volume of debt not resulting from transactions (for example, sector reclassification).

Download this image Figure 7: How the differences in expenditure and receipts affect public sector net debt excluding public sector banks

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Revisions can be the result of both updated data sources and methodology changes. This month, revisions to public sector finance statistics are a result of updated data only.

Revisions summary

Table 1 shows the revisions to the headline statistics presented in this bulletin, compared with those presented in the previous bulletin (published on 20 December 2019).

Revisions to public sector net borrowing excluding public sector banks in the current financial year-to-date (April to November 2019)

The data for the latest months of every release contain a degree of forecasts. The initial outturn estimates for the early months of the financial year, particularly April, contain more forecast data than other months. This is because profiles of tax receipts, along with departmental and local government spending, are still provisional. This means that the data for these months are typically more prone to revision than other months and can be subject to sizeable revisions in later months.

Public sector net borrowing excluding public sector banks (PSNB ex) in the current financial year-to-date (April to November 2019) has been revised down by £1.0 billion, compared with figures presented in the previous bulletin (published on 20 December 2019) as a result of new data.

Central government receipts increased by £0.3 billion. Notably, a £0.2 billion reduction to previous estimates of both Value Added Tax (VAT) and Income Tax receipts has been offset by increases in tobacco duty (up £0.2 billion), apprenticeship levy (up £0.2 billion) and insurance premium tax (up £0.1 billion).

Central government current expenditure reduced by £0.8 billion, again because of regular data updates.

Previous estimates of net social benefits reduced by £0.6 billion, with National Insurance fund benefits (mainly those related to pensions) reducing by £0.3 billion and social assistance (mainly related to unemployment, disability and income support) reducing by £0.2 billion.

Current grants to local government reduced by £0.1 billion because of regular data updates. While reducing central government borrowing, this reduction in transfers has an equal but opposite effect on local government borrowing, increasing it by £0.1 billion across the current financial year-to-date.

Figure 8 summarises the revisions to PSNB ex by sub-sector, comparing the latest estimates of borrowing with those presented in the previous bulletin (published on 20 December 2019). This presentation splits the revisions to PSNB ex into each of its five sub-sectors: central government, local government, non-financial public corporations, public sector pensions and the Bank of England (BoE).

Figure 8: How each element of the public sector contributes to the revision in financial year-to-date net borrowing (PSNB ex)

UK, latest data covering the months of April to November 2019, compared with that presented in the previous bulletin (published on 20 December 2019)

Source: Office for National Statistics – Public sector finances

Notes:

1. PSNB ex – Public sector net borrowing excluding public sector banks.
2. CGNB – Central government net borrowing.
3. LGNB – Local government net borrowing.
4. PCNB – Non-financial public corporations' net borrowing.
5. BoENB – Bank of England net borrowing.
6. L&P – Land and property.
7. I&W – Income and wealth.
8. NICs – National insurance contributions.
9. Contributions to EU – UK VAT, GNI and abatement contributions to the EU budget.
10. o/w – Of which.

Download this image Figure 8: How each element of the public sector contributes to the revision in financial year-to-date net borrowing (PSNB ex)

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Revisions to the net borrowing of public sector banks

Estimates of the net borrowing of the public sector banks are derived from the profit and loss (P&L) accounts of these organisations, supplied to us by the BoE.

This month, we have received P&L data covering the period July to September 2019 for the first time, along with revised data extending back to March 2019. These data have enabled us to update previous estimates associated with public sector banks. Further, our own estimates covering the period November 2019 to date have been updated to reflect this new information.

As a consequence of receiving these data, our estimate of the public sector net borrowing (PSNB) of public sector banks for the financial year-to-date (April 2019 to November 2019) has reduced by £0.1 billion.

Revisions to public sector net debt excluding public sector banks

Public sector net debt excluding public sector banks (PSND ex) at the end of November 2019 is largely unchanged, compared with that presented in the previous bulletin (published on 20 December 2019). Previous estimates of housing association data have been updated with the latest available data, leading to an increase in the level of debt of £0.1 billion at the end of March 2019 and £0.2 billion at the end of March 2018.

In the current financial year, we have removed the £0.2 billion debt impact of the Sukuk (an Islamic financial certificate, similar to a bond) as these have now matured.

As a result of incorporating the latest estimates of gross domestic product (GDP) (published on 20 December 2019), our estimates of statistics (such as debt) expressed as a ratio of GDP have been revised across the current financial year.

Revisions to public sector net cash requirement excluding public sector banks

Public sector net cash requirement excluding public sector banks (PSNCR ex) in the current financial year-to-date has been revised down by £0.4 billion, largely as a result of updated UK Asset Resolution (UKAR) data.

The public sector

In the UK, the public sector consists of six sub-sectors: central government, local government, public non-financial corporations, public sector pensions, the Bank of England (BoE) and public financial corporations (or public sector banks).

Public sector current budget deficit

Public sector current budget is the difference between revenue (taxes and so on) and current expenditure, on an accrued basis; it is the gap between current expenditure and current receipts (having taken account of depreciation). The current budget is in surplus when receipts are greater than expenditure.

Public sector net investment

Net investment refers to the balance of acquisition less disposals of capital assets and liabilities.

Public sector net borrowing

Public sector net borrowing excluding public sector banks (PSNB ex) measures the gap between revenue raised (current receipts) and total spending (current expenditure plus net investment (capital spending less capital receipts)). Public sector net borrowing (PSNB) is often referred to by commentators as “the deficit”.

Public sector net cash requirement

The public sector net cash requirement (PSNCR) represents the cash needed to be raised from the financial markets over a period of time to finance the government’s activities. This can be close to the deficit for the same period; however, there are some transactions, for example, loans to the private sector, that need to be financed but do not contribute to the deficit. It is also close but not identical to the changes in the level of net debt between two points in time.

Public sector net debt

Public sector net debt excluding public sector banks (PSND ex) represents the amount of money the public sector owes to private sector organisations including overseas institutions, largely as a result of issuing gilts and Treasury Bills, minus the amount of cash and other short-term assets it holds. Public sector net debt (PSND) is often referred to by commentators as “the national debt”.

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

Other important terms commonly used to describe public sector finances are listed in the public sector finances glossary.

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the Public sector finances QMI.

The public sector finances methodological guide provides comprehensive contextual and methodological information concerning the monthly public sector finances statistical bulletin. The guide sets out the conceptual and fiscal policy context for the bulletin, identifies the main fiscal measures, and explains how these are derived and interrelated. Additionally, it details the data sources used to compile the monthly estimates of the fiscal position.

How do our figures compare with official forecasts?

The independent Office for Budget Responsibility (OBR) is responsible for the production of official forecasts for government. These forecasts are usually produced twice a year, in spring and autumn.

On 16 December 2019, the OBR published a technical restatement of their March 2019 forecast for the public finances. This brings their forecast into line with current Office for National Statistics (ONS) statistical treatment, for example, to include the new treatment of student loans implemented in September 2019. These restated forecasts are reflected in this bulletin.

Table 2 compares forecasts for the main fiscal aggregates published in the OBR’s Economic and fiscal outlook (EFO) for March 2019 for the financial year ending (FYE) March 2020 with those presented in the December 2019 technical restatement. These restated forecasts are reflected in this bulletin.

Table 3 compares the current outturn estimates for each of our main public sector excluding public sector banks aggregates for the current financial year-to-date with the corresponding latest OBR forecasts for the following financial year. In addition, Table 3 compares the latest full financial year (April 2018 to March 2019) outturn estimates with those of the previous financial year.

Caution should be taken when comparing public sector finances data with the OBR figures for the full financial year. Data are not finalised until sometime after the financial year ends, with initial estimates made soon after the end of the financial year often subject to sizeable revisions in later months as forecasts are replaced with audited outturn data. There may also be known methodological differences between the OBR forecasts and outturn data.

Public sector banks

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

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

Local government forecasts

In recent years, planned expenditure initially reported in local authority budgets has been systematically higher than the final outturn expenditure reported in the audited accounts. We therefore include adjustments to reduce the amounts reported at the budget stage.

For the FYE March 2020, we include a £2.0 billion downward adjustment to England’s current expenditure on goods and services, along with £0.7 billion and £0.2 billion adjustments to Scotland’s and Wales’ capital expenditure respectively. We apply a further £2.6 billion downward adjustment to current expenditure on benefits in the FYE March 2020, to reflect the most recently available data for housing benefits.

Further information on these and additional adjustments can be found in the Public sector finances QMI.

This section explains the main methodology changes introduced to public sector finance statistics in September 2019 and presents estimates of our headline measures of public sector net borrowing excluding public sector banks (PSNB ex), public sector net debt excluding public sector banks (PSND ex) and public sector net financial liabilities excluding public sector banks (PSNFL ex), had these changes not been introduced.

Public sector pensions

We have adopted a new, gross presentation of funded employment-related pensions. This change, predominantly presentational in nature, has greatly increased the volume of assets recorded on the public sector balance sheet but consolidated many inter-public sector balances and transactions. We now also include the Pension Protection Fund within the public sector boundary.

These changes have reduced PSND ex at the end of March 2019 by £28.6 billion, reflecting the consolidation of gilts and recognition of liquid assets held by the public pension schemes.

Student loans

Improvements in the statistical treatment of student loans have added £12.4 billion to PSNB ex in the financial year ending (FYE) March 2019. Outlays are no longer all treated as conventional loans. Instead, we split lending into two components: a genuine loan to students and government spending. This new approach recognises that a significant proportion of student loan debt will never be repaid. We record government expenditure related to the expected cancellation of student loans in the period that loans are issued. Further, government revenue no longer includes interest accrued that will never be paid.

Capital consumption

In June 2019, we announced our intention to introduce a number of improvements to the estimation of capital stocks and therefore the consumption of fixed capital in September 2019. These improvements included a review of:

• the life length of fixed assets

• the classification of stocks by asset, industry and the institutional sector

• the modelling of the age-efficiency profile of capital assets

Any updates to capital consumption are PSNB ex neutral and have no impact on PSND ex or PSNFL ex.

The impact of these developments

Tables 4, 5 and 6 present our latest estimates of PSNB ex, PSND ex and PSNFL ex with the impact of the methodology changes introduced in September 2019 removed.

Impact of student loans, public sector-funded pension scheme changes and capital consumption changes introduced in September 2019: Appendix G expands this presentation to include the impact on current budget deficit and net investment. It also provides additional quarterly and monthly time series. We plan to continue publishing updated versions of these tables until the end of the current financial year (April 2020).

This section presents information on aspects of data or methodology that are planned but not yet included in the public sector finances.

Developments in public sector finance statistics

On 31 May 2019, we published the second in our series of development articles, Looking ahead – developments in public sector finance statistics: 2019. In this article, we listed a number of short-term areas of work that we aim to implement in public sector finance statistics within 18 months from the date of this publication. These include:

• the treatment of student loans (subsequently introduced in September 2019)

• the presentation of pension data on a gross basis (subsequently introduced in September 2019)

• the International Monetary Fund’s (IMF) Government Finance Statistics Framework (GFSM) (subsequently introduced in October 2019)

• the treatment of capital consumption or depreciation (subsequently introduced in September 2019)

• the continuous development of public sector net financial liabilities (PSNFL)

• the recording of leases

The article also provides some detail on the areas of planned medium- and longer-term development.

Ongoing developments in public sector finance statistics

This subsection presents information on our current continuous improvement projects and methodological decisions that are planned but not yet included in the public sector finances.

Thomas Cook Group plc

On 23 September 2019, winding up orders were made against Thomas Cook Group plc and associated companies. The court appointed the Official Receiver as the liquidator. We will investigate any implications of this decision on the public sector and announce the results in due course.

Clinical Negligence Indemnity Cover

On 1 April 2019, the government announced the Clinical Negligence Scheme for General Practice (CNSGP), operated by NHS Resolution on behalf of the Secretary of State for Health and Social Care.

The scheme provides comprehensive cover to all General Practitioners (GPs) and their wider practice team for clinical negligence relating to NHS services occurring from 1 April 2019. In parallel, the government has agreed commercial terms with the Medical Protection Society covering claims for historical NHS clinical negligence incidents concerning their GP members occurring at any time before 1 April 2019.

We are currently assessing the implications of this scheme for the public sector finances and will announce our findings at the earliest opportunity.

EU withdrawal agreement

Although the Office for Budget Responsibility (OBR) discusses the EU settlement in their Economic and fiscal outlook (EFO) for March 2019, the details in the report are still subject to negotiation.

There is insufficient certainty at this stage for us to complete a formal assessment of the impact on the UK public sector finances.

On 28 January 2019, former National Statistician John Pullinger released a statement outlining our legislative preparations for a possible no-deal Brexit.

East Coast Mainline

On 16 May 2018, the government announced that from 24 June 2018, London North Eastern Railway (LNER) will take over the running of East Coast Mainline services. On 31 August 2018, we announced that LNER would be classified to the public non-financial corporations sub-sector, effective from 14 February 2018. We are currently investigating the implications of this decision, and our conclusions will be announced in due course.

Carillion insolvency

Following Carillion Plc declaring insolvency on 15 January 2018, the UK government announced that it would provide the funding required by the Official Receiver, to ensure continuity of public services through an orderly liquidation. The Official Receiver has been appointed by the court as liquidator, along with partners at PwC that have been appointed as Special Managers. The defined benefit pension schemes of former Carillion employees are currently being assessed by the Pension Protection Fund prior to any transition into the Pension Protection Fund scheme.

We are currently investigating the various impacts of the liquidation of Carillion on the public sector finances, including in relation to the public–private partnership projects in which Carillion was involved and the additional funding that the government has provided to maintain public services. We will announce our findings in due course.

Prior to liquidation, Carillion held approximately 450 contracts with government, representing 38% of Carillion’s 2016 reported revenue.

Sale of railway arches

On 11 September 2018, Network Rail announced they had agreed terms for the sale of their Commercial Estate business in England and Wales. On 4 February 2019, the National Audit Office confirmed that Network Rail had completed a £1.46 billion sale of its commercial property portfolio consisting of approximately 5,200 properties across England and Wales, mainly railway arches.

Public sector net debt (PSND) at the end of February 2019 and the central government net cash requirement in February 2019 were each reduced by an amount equivalent to the cash received by central government from the sale.

We are currently investigating the nature of the transaction to ensure that the impacts will be fully reflected in the public sector finances, so it has yet to be determined whether public sector net borrowing (PSNB) is affected and therefore it remains unchanged.

McCloud pension case

In 2015, the government introduced changes to most public sector pension schemes. As part of the transitional arrangements, older members of the pension schemes had an opportunity to stay in their original pension schemes, which offered better terms than the new schemes introduced at the time. Younger members had to transfer to the new schemes. In December 2018, the Court of Appeal ruled that these arrangements amounted to unlawful age discrimination in a decision that was later upheld by the Supreme Court.

Although the court ruling was related to judges’ and firefighters’ pension schemes, on 15 July 2019 the government confirmed that the difference in treatment will need to be remedied across all relevant public sector pension schemes.

The impact of this decision on the public sector finances is not yet known, but it has the potential to change the size of the pension liability as well as the net borrowing position of the public sector pensions sub-sector. We will provide further information on the impacts of this ruling when it becomes available.

Flybe

On 15 January 2020, the government provided an update on Flybe and outlined anupcoming review of regional connectivity. As part of this work and ahead of the March Budget, HM Treasury will also be reviewing Air Passenger Duty (APD). We will provide further information on the impacts of this review in due course.

Government Finance Statistics

The UK government debt and deficit 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 national debt to the European Commission.

On 17 January 2020, we published UK government debt and deficit: September 2019, consistent with Public sector finances, UK: November 2019 (published on 20 December 2019). In this publication, we stated that:

• general government gross debt was £1,821.9 billion at the end of the financial year ending (FYE) March 2019, equivalent to 84.0% of gross domestic product (GDP); this is 24.0 percentage points above the Maastricht reference value of 60.0%

• general government deficit (or net borrowing) was £38.7 billion in the FYE March 2019, equivalent to 1.8% of GDP; this is 1.2 percentage points below the Maastricht reference value of 3.0%

It is important to note that the GDP measure used as the denominator in the calculation of the debt ratios in the UK government debt and deficit statistical bulletin differs from that used within the public sector finances statistical bulletin.

International Monetary Fund’s Government Finance Statistics framework

This month we have updated International Monetary Fund’s Government Finance Statistics framework in the public sector finances: Appendix E, which presents the latest balance sheet, statement of operations and statement of other economic flows for public sector compliant with the Government Finance Statistics Manual 2014 (GFSM 2014).

Reconciliation tables are included, and our methodological article, International Monetary Fund’s Government Finance Statistics framework in the public sector finances, accompanies the tables. It provides an overview of the International Monetary Fund’s (IMF’s) framework, explains differences to the national accounts framework, provides information on data sources and quality, and details our future plans.

Appendix E is updated quarterly, with the next update coinciding with the publication of the monthly public sector finances statistical bulletin on the 23 April 2020.

Country and regional public sector finances

On 20 December 2019, we published the latest release of our regular Country and regional public sector finances articles. This release, Country and regional public sector finances: financial year ending 2019, includes a summary of net fiscal balance, total revenue, and total expenditure by country and region within the UK.