Public sector finances, UK: June 2023

• Public sector net borrowing excluding public sector banks (PSNB ex) in June 2023 was £18.5 billion, £0.4 billion less than in June 2022, and the third-highest June borrowing since monthly records began in 1993; higher tax receipts and a substantial fall in debt interest payable compared with June 2022, were largely offset by increased benefit payments and other costs.

• In June 2023, the interest payable on central government debt was £12.5 billion, £7.5 billion less than the record £20.0 billion in June 2022 and the third-highest in any single month on record.

• PSNB ex in the financial year to June 2023 was £54.4 billion, £12.2 billion more than in the same three-month period last year but £7.5 billion less than the £61.9 billion forecast by the Office for Budget Responsibility.

• Public sector net debt (PSND ex) was £2,596.2 billion at the end of June 2023 or provisionally estimated at around 100.8% of the UK's annual gross domestic product (GDP), continuing at levels last seen in the early 1960s.

• This month we have revised down our end-of-May 2023 estimate of public sector net debt as a ratio of GDP by 0.2 percentage points from 100.1% to 99.9% with the latest published GDP estimate indicating that the output of the economy was higher than our initial estimate - see Section 12: Strengths and limitations.

• Excluding the Bank of England, public sector net debt was £2,330.3 billion or around 90.4% of GDP, £265.9 billion (or 10.4 percentage points) lower than the wider measure.

• Central government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was £20.1 billion in June 2023, £1.7 billion above the £18.4 billion OBR forecast.

• Public sector net worth (PSNW ex) was in deficit by £646.1 billion at the end of June 2023; this compares with a £538.5 billion deficit at the end of June 2022.

In June 2023, the public sector spent more than it received in taxes and other income, requiring it to borrow £18.5 billion. This was £0.4 billion less than was borrowed in June 2022 but is the third-highest June borrowing since monthly records began in 1993, behind June 2020 and 2022.

Increases in central government tax receipts and a substantial fall in debt interest payable compared with June 2022, were largely offset by additional costs related to inflation and the rising cost of living, including the energy support schemes (introduced in October 2022) and up-rated benefit payments.

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.

In June 2023, central government borrowed £19.4 billion, £0.4 billion less than in June 2022 and £0.5 billion less than the £19.9 billion forecast by the Office for Budget Responsibility (OBR) in their Economic and fiscal outlook – March 2023.

Central government's receipts were £77.4 billion, £5.6 billion more than in June 2022 and £2.9 billion more than the £74.5 billion forecast by the OBR. Of this £77.4 billion, tax receipts were £57.3 billion, £4.6 billion more than in June 2022, with increases in income tax, corporation tax and VAT receipts of £2.0 billion, £1.6 billion, and £1.0 billion, respectively.

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

Over the same period, total central government expenditure grew by £5.2 billion to £96.7 billion, £2.3 billion higher than the £94.4 billion forecast by the OBR.

Interest payable on central government debt

In June 2023, the interest payable on central government debt was £12.5 billion, £7.5 billion less than in June 2022, and £1.5 billion below the OBR's forecast of £14.0 billion. This was the third highest payable in any single month on record behind June and December 2022.

Fluctuations in debt interest are largely a result of movements in the Retail Prices Index (RPI) to which index-linked gilts are pegged. Of the £12.5 billion interest payable in June 2023, £9.3 billion was mainly attributable to the large (1.5%) increase in the RPI between March and April 2023, affecting the uplift of the three-month lagged index-linked gilts.

In July 2022, we published our methodology, The calculation of interest payable on government gilts.

Energy support payments

In June 2023, central government spent £3.6 billion on subsidies, £1.4 billion more than in June 2022. This growth was largely because of the combined cost of the Energy Price Guarantee for households and the Energy Bills Discount Scheme for businesses across the UK, estimated by the OBR to be around £1.3 billion this month.

Net social benefits

Net social benefits paid by central government in June 2023 were £24.0 billion, £4.0 billion more than in June 2022. This increase was largely because of inflation-linked benefits uprating and disability cost-of-living payments.

The £18.5 billion borrowed in June 2023, combined with a reduction of £7.0 billion to our previously published financial year-to-May 2023 borrowing estimate (largely because of higher than forecast tax receipts), brings our provisional estimate for the total borrowed in the financial year-to-June 2023 to £54.4 billion.

In the financial year to June 2023, central government borrowed £68.1 billion, £23.5 billion more than in the same period a year earlier. A £13.0 billion increase in central government current receipts over this period was exceeded by a £21.9 billion increase in current expenditure. This additional spending included:

• increases in benefit payments (up £11.2 billion)

• staff costs (up £5.6 billion)

• the additional costs of the energy support schemes (up £4.6 billion)

• procurement (up £4.2 billion)

• grants to local government (up £3.9 billion but in turn reducing local government borrowing)

These increases in current expenditure were partially offset by a reduction in debt interest payable of £4.8 billion, largely in June 2023.

Central government's net investment increased by £14.1 billion over the same period with £9.8 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 £7.1 billion, from £139.2 billion to £132.1 billion.

This was £9.9 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 (after the effects of the global financial crisis).

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 the FYE 2023, the public sector current budget deficit was £79.6 billion, £6.1 billion more than in FYE 2022. This figure includes an estimated £39.4 billion cost of the energy support schemes. Over the same period, public sector net investment increased by £3.8 billion to £52.4 billion.

Expressing borrowing as a ratio of nominal 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 FYE 2021 was 15.0%, the highest for 75 years.

This proportion fell by 9.8 percentage points to 5.2% of GDP in the FYE 2022 as the economy recovered from the pandemic. Initial 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 balance sheet describes the financial position at a point in time. It shows the liabilities, (amounts owed) and the assets (amounts owned).

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

Table 2 presents the narrowest balance sheet measure, which is the redemption value of central government gilts and builds upon it, 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, as explained in our methodology guide.

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 is public sector net debt excluding public sector banks (PSND ex). It comprises the excess of the public sector's financial liabilities (in the form of loans, debt securities, deposit holdings and currency) over and above its liquid financial assets (mainly foreign exchange reserves and cash deposits), with both measured at face or nominal value. 

Net debt is commonly expressed as a ratio of gross domestic product (GDP – the value of the output of the economy). This gives an indication of its affordability and is a more useful measure, either when looking at the UK's balance sheet over time or when comparing with other countries (which can have larger or smaller economies).

The public sector net debt-to-GDP ratio at the end of June 2023 was provisionally estimated at 100.8%, 3.5 percentage points higher than a year ago.

The Bank of England's contribution to net debt

Public sector net debt excluding the Bank of England (BoE) was £2,330.3 billion, or around 90.4% of GDP, £265.9 billion (or 10.4 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 June 2023, we record the £107.7 billion difference between the £803.3 billion of reserves created to purchase its gilts (at market value) and their £695.5 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 worth

Public sector net worth excluding public sector banks (PSNW ex) was a deficit of £646.1 billion at the end of June 2023. This compares with a £538.5 billion deficit at the end of June 2022.

The main reason for the £107.6 billion reduction in PSNW ex over the last year was a £171.2 billion increase in PSND ex, partly offset by a £83.6 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 £191.1 billion over the same period to a deficit of £2,250.4 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 compare our latest public sector finances data with those published in our Public sector finances, UK: May 2023 bulletin published on 21 June 2023, and highlight the revisions to borrowing by sub-sector, central government receipts and expenditure.

Electricity Generators Levy

The Electricity Generators Levy (EGL) is a temporary levy on low-carbon electricity generation announced in the Autumn Statement published on 17 November 2022. Having received Royal Assent on 11 July 2023, EGL has been included in the public sector finances for the first time this month.

Classified as a central government tax on income and wealth, EGL receipts are recorded as a sub-component of corporation tax, increasing each of our previously published monthly estimates by around £0.3 billion per month from January 2023 to date on an accrued basis.

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

Since our Public sector finances, UK: May 2023 bulletin published on 21 June 2023, we have reduced our estimate of borrowing in the financial year to May 2023 by £7.0 billion. This change was largely because of an increase in central government tax receipts of £4.1 billion, with cash receipts in June being higher than forecast; most notably our previous estimates of corporation tax and VAT were raised by £2.3 billion and £1.5 billion, respectively.

This month we have reduced our estimate of total central government expenditure by £3.5 billion across the first two months of the current financial year. Expenditure data is still very provisional at this time of year with some departments entering their early outturn figures on the basis of their budgetary plans data.

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

Since our Public sector finances, UK: May 2023 bulletin published on 21 June 2023, we have reduced our estimate of borrowing for the 12 months to March 2023 by £2.1 billion. This change was due to an increase in central government tax receipts of £2.1 billion, again with cash receipts in June being higher than forecast.

Revision to net debt (PSND ex) at the end of May 2023

Since our Public sector finances, UK: May 2023 bulletin published on 21 June 2023, we have increased our estimate of debt at the end of May 2023 by £0.5 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 PSND ex expressed as a ratio of GDP

This month we have replaced the GDP first quarterly estimate, UK: January to March 2023 (published 12 May 2023) with the revised estimate GDP quarterly national accounts, UK: January to March 2023 (published 30 June 2023).

The latest published GDP estimate for this three-month period was £6.3 billion higher than previously estimated and as a result, we have reduced our estimate of public sector net debt as a ratio of GDP as at the end of May 2023 by 0.2 percentage points from 100.1% to 99.9%.

More information on our estimation of monthly GDP available in Section 12: Strengths and limitations.

Public sector

In the UK, the public sector consists of six subsectors: 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, net of liquid financial assets held, and is often referred to by commentators as "the national debt".

Public sector net financial liabilities

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

Public sector net worth

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

Comparing our data with official forecasts

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

Every month the OBR publishes a brief analysis of the latest public sector finances, explaining how it should be interpreted considering its most recent public finances forecast for the current financial year.

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, 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.

June 2023 VAT cash receipts should be treated as provisional and may be subject to further revision. Any changes to June 2023 cash receipts will affect accrued VAT receipts for the period March to May 2023 inclusive.

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.

Local government and public corporations

Both local government and public corporations' data in the most recent periods are initial estimates, largely based on OBR's Economic and fiscal outlook (EFO) – March 2023, 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

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

• £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 EFO, although supplemented by in-year data replacing previous estimates for train operating companies, the Housing Revenue Account and surveyed public corporations.

Expressing public sector net debt as a percentage of Gross Domestic Product

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.

Our article The use of GDP in public sector fiscal ratio statistics methodology, published 21 September 2016, explains how we calculate the net debt-to-GDP ratio figures reported in the monthly public sector finances.

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.

The GDP estimate used for the net debt-to-GDP ratio in June 2023 is currently based on one quarter of the Office for National Statistics' (ONS's) published estimates (January to March 2023) and three-quarters of Office for Budget Responsibility (OBR) based forecasts (April to December 2023).

These OBR-based forecasts will be replaced in the coming months with ONS estimates, which is likely to cause revisions to June 2023 for all measures expressed as a ratio of GDP.

The first time that June 2023's net debt-to-GDP ratio will become based entirely on published ONS GDP data will be February 2024.

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.

In its Energy Prices Act 2022 and expenditure on energy schemes – Q1 2023, published 8 June 2023, the UK government provided cash estimates on the cost of each of the energy support schemes for the financial year ending (FYE) March 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 March 2023. Some of the expenditure incurred in the last quarter of FYE March 2023 will be recognised in FYE March 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 theEnergy Bills Support Scheme (EBSS) umbrella in the six months to March 2023 was estimated at £12.8 billion.

In April 2023, 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).