Public sector finances, UK: July 2023

• Public sector net borrowing excluding public sector banks (PSNB ex) in July 2023 was £4.3 billion, £3.4 billion more than in July 2022 and the fifth-highest July borrowing since monthly records began in 1993.

• Self-assessed income tax (SA) receipts in July 2023 were £11.8 billion, £2.5 billion more than in July 2022; however, because of the possibility of delayed July payments we recommend considering July and August SA receipts as a whole when making year-on-year comparisons.

• PSNB ex in the financial year to July 2023 was £56.6 billion, £13.7 billion more than in the same four-month period last year but £11.3 billion less than the £68.0 billion forecast by the Office for Budget Responsibility (OBR).

• Central government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was £10.0 billion in July 2023, £10.9 billion below the £20.9 billion forecast by the OBR.

• Public sector net debt (PSND ex) was £2,578.9 billion at the end of July 2023 and provisionally estimated at around 98.5% of the UK’s annual gross domestic product (GDP); this is 1.9 percentage points higher than in July 2022 and continuing at levels last seen in the early 1960s.

• Excluding the Bank of England, public sector net debt was £2,345.9 billion or around 89.6% of GDP, £233.0 billion (or 8.9 percentage points) lower than the wider measure.

• Public sector net worth (PSNW ex) was in deficit by £630.9 billion at the end of July 2023; this compares with a £524.0 billion deficit at the end of July 2022.

In July 2023, the public sector spent more than it received in taxes and other income, requiring it to borrow £4.3 billion. This was £3.4 billion more than that borrowed in July 2022 and is the fifth-highest July borrowing since monthly records began in 1993, behind the July of the coronavirus (COVID-19) pandemic of 2020 and the three years following the global economic downturn (July 2009, July 2010 and July 2011).

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 July 2023, central government borrowed £17.9 billion, £15.7 billion more than in July 2022 and £3.0 billion more than the £14.9 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 £85.2 billion, £3.4 billion more than in July 2022 and £2.3 billion more than the £82.9 billion forecast by the OBR. Of this £85.2 billion, tax receipts were £65.6 billion, £3.9 billion more than in July 2022, with increases in income taxes, corporation tax and Value Added Tax (VAT) receipts of £3.5 billion, £0.7 billion, and £0.6 billion, respectively.

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

Self-assessed income tax

In July (and January), accrued receipts are usually high because of receipts from self-assessed income taxes (SA). This month SA receipts were £11.8 billion, £2.5 billion more than in July 2022 and £1.9 billion more than the £9.9 billion forecast by the OBR.

As well as primarily affecting July receipts, the revenue raised through SA taxes also tends to lead to higher receipts in August, although to a lesser degree. This is because any delayed July payments will be recorded as August receipts. We recommend considering July and August SA receipts as a whole when making year-on-year comparisons.

Central government expenditure

In July 2023, central government’s expenditure was £103.0 billion, £19.2 billion more than in July 2022 and £5.2 billion more than the £97.8 billion forecast by the OBR.

Net investment

In July 2023, central government net investment was £19.7 billion, £15.9 billion more than in July 2022. This increase was largely a result of payments (recorded as a capital transfer) to Bank of England Asset Purchase Facility Fund (APF) from HM Treasury under the indemnity agreement. Payments occur every three months, and this month saw a payment of £14.3 billion to the APF.

As with other such payments, intra-public sector transfers are public sector net borrowing neutral. However, these central government transactions will impact our public sector net borrowing, excluding the Bank of England (PSNB ex BoE) measure.

Interest payable on central government debt

In July 2023, the interest payable on central government debt was £7.7 billion, £1.5 billion more than in July 2022, but £0.3 billion below the OBR’s forecast of £8.0 billion. This was the highest interest payable in any July since monthly records began in April 1997.

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

Of the £7.7 billion interest payable in July 2023, £3.9 billion was mainly attributable to the 0.7% increase in the RPI between April and May 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.

Net social benefits

Net social benefits paid by central government in July 2023 were £23.1 billion, £0.4 billion more than in July 2022. In recent months we have seen large increases in benefit payments largely because of inflation-linked benefits uprating and disability cost-of-living payments. However, July 2022 included a substantial cost-of-living benefit payments of around £2.4 billion, reducing the year-on-year growth between July 2022 and 2023.

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.

The £4.3 billion borrowed in July 2023, combined with a reduction of £2.1 billion to our previously published financial year to June 2023 borrowing estimate (largely because of updated provisional central government spending data), brings our provisional estimate for the total borrowed in the financial year to July 2023 to £56.6 billion.

In the financial year to July 2023, central government borrowed £83.1 billion, £36.5 billion more than in the same period a year earlier. A £16.9 billion increase in central government current receipts over this period was exceeded by a £23.8 billion increase in current expenditure. This additional spending included increases in:

• benefit payments of £11.4 billion
• staff costs of £8.2 billion
• the additional costs of the energy support schemes of around £4.7 billion
• procurement of £3.4 billion
• grants to local government of £3.2 billion (but these in turn reduce local government borrowing)

These increases in current expenditure were partially offset by a reduction in debt interest payable of £3.1 billion.

Central government’s net investment increased by £28.8 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 £8.6 billion, from £139.2 billion to £130.6 billion.

This was £9.4 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 £78.2 billion, £5.5 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 increased by £3.8 billion to £52.4 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 9.8 percentage points to 5.2% 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 remained at 5.2%, 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.

At the end of July 2023, the net debt-to-GDP ratio was provisionally estimated at 98.5%, 1.9 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 Section 8: Revisions to public sector net debt expressed as a percentage of GDP and Section 12: Expressing public sector net debt as a percentage of GDP.

Public sector net debt excluding the Bank of England (BoE) was £2,345.9 billion, or around 89.6% of GDP, £233.0 billion (or 8.9 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 July 2023, we record the £107.4 billion difference between the £785.3 billion of reserves created to purchase its gilts (at market value) and their £677.9 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 £630.9 billion at the end of July 2023. This compares with a £524.0 billion deficit at the end of July 2022.

The main reason for the £106.9 billion reduction in PSNW ex over the last 12 months was a £158.5 billion increase in PSND ex, partly offset by a £72.3 billion increase in public sector non-financial assets.

If we exclude the public sector’s £1,604.3 billion of non-financial assets, the public sector net financial worth excluding public sector banks (PSNFW ex) deteriorated by £179.1 billion over the same period to a deficit of £2,235.2 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 published in our Public sector finances, UK: June 2023 bulletin published on 21 July 2023, and highlight the revisions to borrowing by sub-sector, central government receipts and expenditure.

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

Since publishing our Public sector finances, UK: June 2023 bulletin, we have reduced our estimate of borrowing in the financial year to June 2023 by £2.1 billion.

This month we have reduced our estimate of total central government expenditure by £2.4 billion across the current financial year-to-date. Expenditure data are still very provisional at this time of year and likely to be revised.

Our previous estimate of central government tax receipts has increased by £0.4 billion across the first three months of the current financial year. This is because a reduction of £1.1 billion to corporation tax receipts was more than offset by several smaller increases in other taxes.

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.

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

Since publishing our Public sector finances, UK: June 2023 bulletin, we have reduced our estimate of borrowing for the 12 months to March 2023 by £1.5 billion.

This month, we have aligned our tax receipts data to those published in the HM Revenue and Customs annual report and accounts: 2022 to 2023 corporate report. In doing so, we have increased overall central government tax receipts by £0.7 billion and national insurance contributions by £0.8 billion.

Some updates to cash received in the financial year ending (FYE) 2023 will accrue back into FYE 2022. These updates have reduced overall central government tax receipts by £0.2 billion and increased national insurance contributions by £1.1 billion. As a result, we reduced borrowing in the FYE 2022 by £1.0 billion.

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

Since publishing our Public sector finances, UK: June 2023 bulletin, we have reduced our estimate of public sector net debt (PSND ex) at the end of June 2023 by £0.2 billion. This change was largely because of updated Network Rail and Bank of England Asset Purchase Facility Fund data, which are reported a month in arrears.

Revisions to public sector net debt expressed as a percentage of GDP

This month we have replaced our forecast of gross domestic product (GDP) for April to June 2023 with our GDP first quarterly estimate, UK: April to June 2023 bulletin published on 11 August 2023.

The latest published GDP estimate for this three-month period was £32.5 billion higher than previously estimated, As a result, we have reduced our estimate of public sector net debt (PSND ex) expressed as a percentage of GDP as at the end of June 2023 by 1.3 percentage points, from 100.8% to 99.5%.

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.

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 (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.

Upcoming data updates in September 2023

In September 2023, we aim to implement our regular annual data updates. These changes are discussed in our Recent and upcoming changes to public sector finance statistics: July 2023 article, which highlights the expected impact of our update to public sector-funded pensions estimates on our headline statistics. These expected impacts are provisional and may change between now and September 2023, as we are continuing to work on these changes.

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.

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

Both local government and public corporations’ data in the most recent periods are initial estimates, largely based on the OBR’s Economic and fiscal outlook – March 2023 report, with adjustments being applied as needed.

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 £1.4 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 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 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 The 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 yet 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 June 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).