Public sector finances, UK: January 2023

Other commentary from the latest public sector finances data can be found on the following pages:

• Recent and upcoming changes to public sector finance statistics: January 2023

• Public sector finances borrowing by sub-sector dataset

• UK government debt and deficit: September 2022

• Public sector net borrowing (PSNB ex) in January 2023 was in surplus by £5.4 billion, which was a £7.1 billion smaller surplus than in January 2022 but a £5.0 billion larger surplus than forecast by the Office for Budget Responsibility (OBR).

• Self-assessed income tax receipts were £21.9 billion in January 2023, which was the highest January figure since monthly records began in April 1999 and £5.5 billion or one-third higher than in January 2022.

• January’s high annual self-assessed tax receipts were partly offset by substantial spending on energy support schemes and large one-off payments relating to historic customs duties owed to the EU.

• Central government debt interest payable was £6.7 billion in January 2023, which was the highest January figure since monthly records began in April 1997; the recent increases are largely because of the effect of Retail Prices Index (RPI) changes on index-linked gilts.

• In the financial year-to-January 2023, the public sector borrowed £116.9 billion, which was £7.0 billion more than in the same period last year but £30.6 billion less than forecast by the OBR (after temporary differences because of student loan estimates are taken into account – see Section 10: Measuring the data).

• Public sector net debt (PSND ex) at the end of January 2023 was £2,492.1 billion, or around 98.9% of gross domestic product (GDP), with the debt-to-GDP ratio at levels last seen in the early 1960s.

• Public sector net debt excluding the Bank of England was £2,198.7 billion, or around 87.2% of GDP, which was £293.4 billion less than the wider measure.

• Central government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was in surplus by £20.9 billion in January 2023, bringing the total net cash requirement for the financial year-to-January 2023 to £79.4 billion.

Initial estimates for January 2023 show that the public sector spent less than it received in taxes and other income, resulting in a surplus of £5.4 billion. Each January, accrued receipts tend to be higher than in other months owing to receipts from self-assessed taxes, often leading to a public sector net surplus.

Breakdowns of public sector net borrowing by both sub-sector and transaction are presented in our Public sector finances borrowing by sub-sector dataset. A further detailed breakdown of public sector income is presented in Public sector current receipts: Appendix D.

Central government forms the largest part of the public sector, and the relationship between its receipts and expenditure is the main determinant of public sector borrowing.

Initial estimates show that central government’s current receipts in January 2023 were £107.8 billion, which was an increase of £12.6 billion (13.6%) compared with January 2022. Over the same period, current expenditure rose by £12.0 billion (16.4%).

Total expenditure, which includes depreciation and net investment, grew considerably to £103.6 billion in January 2023, which was £20.1 billion (24.0%) more than a year earlier.

The increase in central government’s expenditure in January 2023 compared with the previous year was mainly because of substantial spending on energy support schemes and large one-off payments relating to historic customs duties owed to the EU.

Self-assessed tax receipts

Each January, accrued receipts tend to be higher than in other months owing to receipts from self-assessed (SA) Income Taxes.

In January 2023, SA Income Tax receipts have been provisionally estimated at £21.9 billion, which was the highest in any month since records began in April 1999, up one-third from a year ago.

SA Capital Gains Tax receipts (presented within “other taxes on income & wealth” in Tables 2 and 6) have been provisionally estimated at £13.2 billion, which was the highest in any month since records began in January 1998.

Payments close to the deadline, and the time taken for those to then appear in administrative data, mean that the proportion of self-assessed taxes recorded in January and February can vary year-on-year, and it is therefore advisable to consider these two months together when making annual comparisons.

Further briefing is available in HMRC tax receipts and National Insurance contributions for the UK on the GOV.UK website.

Bank of England Asset Purchase Facility Fund

The Bank of England Asset Purchase Facility Fund (APF) received its second payment from HM Treasury under the indemnity agreement in January 2023.

This £4.2 billion of central government expenditure was recorded as a capital transfer to the Bank of England, which is a component of the net investment category in Tables 3 and 7.

As with other such payments, intra-public sector transfers are public sector net borrowing neutral. However, this increase in central government expenditure will affect measures that exclude the Bank of England.

Interest payable on central government debt

In January 2023, the interest payable on central government debt was £6.7 billion, which was the largest January interest payable on record – but significantly lower than the previous month.

The recent high levels of debt interest payable are largely a result of higher inflation, with the interest payable on index-linked gilts rising in line with the Retail Prices Index (RPI).

Of the £6.7 billion interest payable in January 2023, £3.3 billion reflects the impact of inflation on the index-linked gilt stock.

The inflation-linked portion of interest payable on most index-linked gilts is calculated using a three-month lagged RPI. In January 2023, we referenced the RPI movement between October and November 2022. We will reflect RPI changes in the most recent months in our interest estimates for future months.

While any RPI uplift will affect accrued expenditure (as used in the calculation of borrowing), it will not be wholly and immediately reflected in the central government net cash requirement. These movements are reflected in the government’s liabilities, which are realised as the existing stock of index-linked gilts is redeemed.

On 18 July 2022, we published an article explaining The calculation of interest payable on government gilts.

Energy price guarantee schemes

In September 2022, the UK government announced further plans to help households and businesses manage the cost of energy. These include the Energy Price Guarantee (EPG) for households and the Energy Bill Relief Scheme (EBRS) for businesses across the UK.

The schemes for households and businesses started in October 2022, with the associated central government expenditure recorded within the “subsidies – other” category in Tables 3 and 7. This month’s figure is an initial indicative estimate that will be revised over the coming months.

Energy Bills Support Scheme

The Energy Bills Support Scheme (EBSS) is a government scheme announced in April 2022, giving households in Great Britain (with a domestic electricity contract) £400 towards the cost of their energy bills.

It is paid in six evenly spread portions between October 2022 and March 2023. This month sees the fourth round of EBSS payments, with £1.9 billion of central government expenditure recorded as a current transfer from government to households.

Energy support schemes for Northern Ireland have not yet been formally classified, however an estimate of expenditure in January 2023 has provisionally been recorded in line with the EBSS as current transfers to households. We will revist this recording in due course, once the classification has been completed.

Both energy bills support schemes are presented within the "other expenditure" category in Tables 3 and 7.

EU payments – customs undervaluation case

In February 2023, the government announced the conclusion of the proceedings brought against the UK by the European Commission for the failure to prevent the undervaluation of customs duties on Chinese footwear and textile products while the UK was an EU Member State.

The amount owed by the UK has been confirmed at £2.3 billion (€2.6 billion), which the UK has settled in three payments (June 2022, January 2023 and February 2023).

Though these payments are reflected in the central government net cash requirement in the respective months in which they were made, international statistical guidance dictates that the total value of these payments should only be recorded as government expenditure at the time the liability amount was finalised, in this case increasing public sector net borrowing (PSNB) by £2.3 billion in January 2023.

Following international statistical guidance, we have recorded the payments of principal as a £1.2 billion (€1.4 billion) capital transfer from central government to the EU, presented as a component of the “net investment” category in Tables 3 and 7, and a £1.1 billion (€1.2 billion) payment relating to interest has been initially recorded as a current transfer, presented within the “other expenditure” category in Tables 3 and 7.

Further information on the statistical treatment of this case is available in our Recent and upcoming changes to public sector finance statistics: January 2023 article.

Borrowing in the financial year-to-January 2023

The £5.4 billion surplus borrowing in January 2023, combined with a reduction of £5.8 billion to our previously published financial year-to-December borrowing estimate, brings the total borrowed in the financial year-to-January 2023 to £116.9 billion.

This was £7.0 billion more than in the same period last year but £22.0 billion less than the £138.9 billion forecast by the Office for Budget Responsibility (OBR), or £30.6 billion below forecast on a like-for-like basis (after temporary differences because of student loans estimates are taken into account).

The latest forecast published by the OBR in its Economic and fiscal outlook – November 2022 estimated that the public sector will borrow £177.0 billion in the financial year (FY) ending March 2023, which is £60.1 billion more than in the ten months to January 2022.

Public sector current budget deficit

The public sector current budget deficit is the gap between current expenditure and current receipts on an accrued basis, having taken account of depreciation. The current budget deficit can be thought of as borrowing to fund day-to-day spending, as it excludes the capital expenditure (or net investment) present in the wider net borrowing measure.

The public sector current budget deficit, excluding the Bank of England and public sector banks, was £68.3 billion in the financial year-to-January 2023, down £9.8 billion from the same period last year. The total public sector current budget deficit was £65.0 billion in the financial year-to-January 2023, which was a little higher than the £64.1 billion deficit the previous year.

Central government receipts

Central government receipts in the FY to January 2023 were £768.1 billion, which was £81.0 billion (11.8%) higher than a year earlier. Of these, tax receipts were £575.0 billion, which was £62.1 billion more than in the FY to January 2022.

Central government expenditure

Central government bodies spent £802.6 billion on current (or day-to-day) expenditure in the FY to January 2023, which was £61.5 billion (8.3%) more than in the same ten-month period the previous year.

Interest payable on central government debt

Debt interest payable has increased by £34.8 billion (57.3%) compared with the same period the previous year, to £95.6 billion, as the rises in the Retail Prices Index (RPI) have increased the interest payable on index-linked gilts. This financial year has seen the two highest monthly amounts on record for debt interest payable, in June and December 2022.

Energy price support schemes

In October 2022, the UK government began making payments under the Energy Price Guarantee (EPG) for households and the Energy Bill Relief Scheme (EBRS) for businesses across the UK. These payments are recorded as subsidies (within the "subsidies – other" category in Tables 3 and 7) but at this stage are initial indicative estimates, which are subject to revision over the coming months.

In October 2022, the UK government also began making payments under the Energy Bills Support Scheme (EBSS). To date, it has paid £7.7 billion under the EBSS to households in Great Britain (presented within the "other expenditure" category in Tables 3 and 7).

Council tax rebate

In April 2022, we recorded the Council Tax rebate in England as a payable tax credit from central government to households. This £3.0 billion payment was recorded within the "other expenditure" category in Tables 3 and 7.

The public sector borrowed £122.4 billion in the financial year ending (FYE) March 2022. This was £5.4 billion less than the £127.8 billion forecast by the Office for Budget Responsibility (OBR) in its Economic and fiscal outlook – March 2022 and substantially less than the £312.7 billion borrowed in the FYE March 2021.

The coronavirus (COVID-19) pandemic has had a substantial impact on the economy as well as public sector borrowing. Expressed as a ratio of UK gross domestic product (GDP), borrowing in the FYE March 2021 was 15.0%, the highest for 75 years. Our latest estimates indicate that this ratio fell by 9.8 percentage points to 5.2% for the 12 months to March 2022.

The central government net cash requirement (CGNCR), excluding UK Asset Resolution Ltd and Network Rail, is the amount of cash needed immediately for the UK government to meet its obligations. To obtain cash, the UK government sells financial instruments, gilts or Treasury Bills.

The amount of cash required will be affected by changes in the timing of payments to and from central government, but it does not depend on forecast tax receipts in the same way as our accrued (or national accounts-based) measures of borrowing.

The CGNCR consequently contains the timeliest information and is less susceptible to revision than other statistics in this release.

However, as for any cash measure, the CGNCR does not reflect the overall amount the government is liable for or the point at which any liability is incurred – it only reflects when cash is received and spent.

Central government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was in surplus by £20.9 billion in January 2023, bringing the total net cash requirement for the financial year-to-January 2023 to £79.4 billion.

Public sector net debt excluding public sector banks (PSND ex) was £2,492.1 billion at the end of January 2023, which was an increase of £143.4 billion compared with January last year.

Expressing debt 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 comparison of the UK’s balance sheet over time.

Public sector debt (PSND ex) at the end of January 2023 was around 98.9% of GDP, with the debt-to-GDP ratio at levels last seen in the early 1960s.

Gilt liabilities

The foundation of the public sector balance sheet is its gilt (or bond) liabilities. These gilts are issued to investors by the Debt Management Office (DMO) in accordance with its financing remit, on behalf of central government. Of the £2,103.4 billion of gilts in circulation at the end of January 2023:

• £1,549.4 billion (73.7%) are conventional gilts that pay a fixed interest rate

• £554.0 billion (26.3%) are index-linked gilts that pay an interest rate pegged to the Retail Prices Index (RPI) and are recorded at their redemption value

Gilt prices

In recent months, market interest rates for government debt (gilts) have risen and in many cases, are now higher than the “coupon rate” offered on gilts, reversing the pattern of the last 18 financial years. As a result, achieved gilt auction prices are currently often below the face value of the gilt; that is, they are sold as a discount. If gilts are sold at a discount, the government must sell more gilts to raise a given amount of cash, meaning that debt increases by more than the net cash requirement.

Table REC3 in our Public sector finances tables 1 to 10: Appendix A explains the relationship between central government net cash requirement and net debt, listing both gilt discounts (or premia) and the inflation uplift on index-linked gilts as important determinants in this reconciliation.

The Bank of England’s contribution to net debt

Public sector debt excluding the Bank of England (BoE) was £2,198.7 billion or around 87.2% of GDP, which was £293.4 billion 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 Fund (APF).

The APF’s gilt holding is not recorded directly as a component of public sector net debt. Instead, in January 2023, we record the £112.4 billion difference between the £827.8 billion of reserves created to purchase its gilts (at market value) and their £715.4 billion redemption value.

Table PSA9A in our Public sector finances tables 1 to 10: Appendix A details the BoE's contribution to public sector net debt.

Public sector net financial liabilities

Public sector net financial liabilities excluding public sector banks (PSNFL ex) provides a more comprehensive measure of the public sector balance sheet. It captures a wider range of financial assets and liabilities than recorded in PSND ex, such as the illiquid financial assets held under the Term Funding Schemes (TFS), which fall outside the boundary of PSND ex.

PSNFL ex was £2,152.8 billion at the end of January 2023 (or around 85.4% of GDP), which was £339.2 billion (or 13.5 percentage points of GDP) less than PSND ex.

Table PSNFL3, published as a part of our Public sector finances tables 1 to 10: Appendix A, provides a reconciliation between the latest measures of PSND ex and PSNFL ex.

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

Revisions to net borrowing (PSNB ex) in the financial year-to-December 2022

Since our last public sector finances bulletin published on 24 January 2023, we have reduced our estimate of borrowing for the nine months to December 2022 by £5.8 billion. These changes were a result of improved central government data replacing previous provisional estimates.

Higher-than-anticipated January VAT cash receipts, accrued back over October, November and December 2022, resulted in an overall upward revision of £3.2 billion across the financial year-to-date.

Additionally, we have reduced our accrued Corporation Tax cash receipts for the financial-year-to-December 2022 by £1.5 billion. Corporation Tax cash receipts in the most recent periods reflect the tax liabilities on company profits over an extended period. As such, any updates of cash receipts or forecast cash expectations for future months result in extended revisions in earlier periods, as they are accrued back to reflect the timing of the economic activity that generated them.

There have been several (largely) offsetting revisions to our previously published central government current expenditure estimates where a reduction in our previous estimates of subsidies paid have been partially offset by smaller increases to our previous estimates of debt interest and current transfers to local government and other sectors.

We have updated our estimates of subsidies in the three months between October and December 2022 from initial estimates of the payments to energy companies under the Energy Price Guarantee (EPG) for households and the Energy Bill Relief Scheme (EBRS)for businesses across the UK. These estimates are still provisional and are likely to be subject to further revision over the coming months.

Revisions to net borrowing (PSNB ex) in the financial year-to-March 2022

Since our last public sector finances bulletin published on 24 January 2023, we have reduced our estimate of borrowing for the financial year ending (FYE) March 2022 by £1.0 billion because of updated Corporation Tax data.

Tables 12 and 13 show the revisions to central government receipts and expenditure in the financial year-to-December 2022 and FYE March 2022 since our last publication.

Revisions to public sector net debt excluding public sector banks (PSND ex)

Since our last public sector finances bulletin published on 24 January 2023, we have reduced our previous estimate of debt at the end of December 2022 by £15.4 billion, largely because of a £16.1 billion increase in our estimate of cash held by the Bank of England Asset Purchase Facility Fund, which is reported one month in arrears.

The revisions to our debt aggregates are presented in our Public sector finances tables 1 to 10: Appendix A.

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). The figures presented in this release exclude public financial corporations unless otherwise noted.

Public sector current budget deficit

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

Accruals accounting

Public sector current budget deficit and net borrowing are measued on an accruals basis, where transactions for revenue are recorded when earned and expenses are recorded when incurred rather than when the bills are paid (on a cash basis).

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. However, it does not depend on forecast tax receipts in the same way as our accruals (or national accounts) based measures of borrowing.

Cash requirement may be like borrowing for the same period and 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 represents the amount of money the public sector owes to private sector organisations (including overseas institutions) and is often referred to by commentators as “the national debt”.

Net debt comprises the public sector's financial liabilities (in the form of loans, debt securities, deposit holdings and currency) less its liquid financial assets (mainly official reserves and cash deposits), with both measured at face or nominal value. Net debt is often presented as a percentage of gross domestic product (GDP), which enables comparisons over time and is derived in accordance with European System of Accounts (ESA) principles.  

Comparing our data with official forecasts

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

On 17 November 2022, the OBR published Economic and fiscal outlook – November 2022  containing its latest outlook for the economy and for the public sector finances.

Student loan reforms

Following the February 2022 announcement of changes to terms for student loans in England, in their Economic and fiscal outlook – March 2022 the OBR estimated an £8.6 billion upward revaluation of outstanding student loans.

Recorded as a capital transfer from the private sector to central government paid in December 2022, this reduced the OBR’s December borrowing estimate.

We will record the full impact of the changes to student loan arrangements when more definite estimates become available. On a like-for-like basis, adjusting for the temporary £8.6 billion difference in student loan figures, the OBR’s estimate of borrowing in the financial year-to-January 2023 would increase to £147.5 billion. This is £30.6 billion above the provisional Office for National Statistics (ONS) estimate of £116.9 billion.

Change to bulletin format

In the coming months, we will publish a newly formatted, more concise Public Sector Finance (PSF) statistical bulletin.

We will not be removing any of our supporting datasets but will add a new expanded balance sheet presentation that will provide reconcilliation between the narrowest measure – the redemption value of central government gilts – and build upon this by widening the range of asset and liability types included to reach the far wider public sector net worth measure.

To aid accessibility, many of the tables in the current bulletin will be extended and presented in Excel only, linked from the relevant sections.

We will be removing our discussion of net cash requirement, though the main points and the detail will remain in Public sector finances tables 1 to 10: Appendix A.

A mock-up of the new format will soon be available on request by contacting us at public.sector.inquiries@ons.gov.uk.

To supplement this release, we publish an accompanying public sector finances methodological guide and Public sector finances Quality and Methodology Information (QMI) outlining the strengths, limitations, and appropriate uses of the public sector finances dataset.

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 (PAYE) 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) Economic and fiscal outlook – November 2022 and the subsequent monthly profiles published on 21 December 2022.

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:

• a £0.8 billion downward adjustment to Scotland’s capital expenditure
• a £0.4 billion downward adjustment to Wales’s capital expenditure
• a £4.0 billion upward adjustment to England’s current expenditure on goods and services

We apply a further £2.2 billion downward adjustment to budget forecast current expenditure on benefits in the FYE 2023, to reflect the most recently available data for housing benefits.

Public corporations' data in the most recent periods are initial estimates, largely based on the OBR's Economic and fiscal outlook – November 2022, with adjustments being applied as needed, though supplemented by in-year data replacing previous estimates for train operating companies and the Housing Revenue Account.