Public sector finances, UK: October 2023

How the relationship between UK public sector monthly income and expenditure leads to changes in deficit and debt.

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Release date:
21 November 2023

Next release:
21 December 2023

1. Main points

  • Public sector net borrowing excluding public sector banks (PSNB ex) in October 2023 was £14.9 billion, £4.4 billion more than in October 2022 and the second highest October borrowing since monthly records began in 1993.  

  • PSNB ex in the financial year-to-October 2023 was £98.3 billion, £21.9 billion more than in the same seven-month period last year, but £16.9 billion less than the £115.2 billion forecast by the Office for Budget Responsibility (OBR) in March 2023. 

  • Public sector net debt (PSND ex) was £2,643.7 billion at the end of October 2023 and was provisionally estimated at around 97.8% of the UK's annual gross domestic product (GDP); this is 2.3 percentage points higher than in October 2022 and remains at levels last seen in the early 1960s. 

  • Excluding the Bank of England, public sector net debt was £2,394.8 billion, or around 88.6% of GDP, £248.9 billion (or 9.2 percentage points) lower than the wider measure. 

  • Estimates of public sector net worth (PSNW ex) was in deficit by £715.9 billion at the end of October 2023; this compares with a £533.9 billion deficit at the end of October 2022. 

  • Central government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was £18.2 billion in October 2023, £9.6 billion more than in October 2022 and £1.9 billion more than the £16.3 billion forecast by the OBR in March 2023.

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Our initial estimates of borrowing for the most recent months are prone to revisions in later months because some tax receipts contain a degree of OBR-based forecast data, and both departmental and local government spending profiles are provisional.

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2. October 2023 indicators at a glance

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3. Borrowing in October 2023

In October 2023, the public sector spent more than it received in taxes and other income, requiring it to borrow £14.9 billion. This was £4.4 billion more than was borrowed in October 2022 and is the second highest October borrowing since monthly records began in 1993, behind that of 2020 during the coronavirus (COVID-19) pandemic period.

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 October 2023, central government borrowed £22.7 billion, £11.2 billion more than in October 2022 and £4.1 billion more than the £18.6 billion forecast by the Office for Budget Responsibility (OBR) in its Economic and fiscal outlook -- March 2023 report

Central government receipts 

Central government's receipts were £76.9 billion, £2.5 billion more than in October 2022 and £1.5 billion more than the £75.4 billion forecast by the OBR in March 2023.  

Of this £76.9 billion, tax receipts were £57.9 billion, £2.7 billion more than in October 2022, with Value Added Tax (VAT) receipts increasing by £1.2 billion and income tax receipts increasing by £1.1 billion. 

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

Central government expenditure 

In October 2023, central government's total expenditure was £99.6 billion, £13.7 billion more than in October 2022 and £5.5 billion more than the £94.1 billion forecast by the OBR in March 2023. 

Net social benefits 

Net social benefits paid by central government were £24.9 billion in October 2023, £4.5 billion more than in October 2022. In recent months we have seen large increases in benefit payments largely because of inflation-linked benefits uprating and cost-of-living payments.  

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

Subsidies 

Subsidies paid by central government were £2.2 billion in October 2023, £2.6 billion less than in October 2022. This is largely because of the cost of the Energy Price Guarantee (for households) and Energy Bill Relief Scheme (for businesses) affecting this month last year. 

Other current expenditure 

Payments recorded under central government "other current grants" were £1.7 billion in October 2023, £2.0 billion less than in October 2022, largely because of the cost of last year's Energy Bills Support Scheme

Net investment 

Central government net investment was £14.2 billion in October 2023, £9.7 billion more than in October 2022. This increase was largely a result of payments to the Bank of England Asset Purchase Facility Fund (APF) from HM Treasury under the indemnity agreement. These payments, recorded as capital transfers, began in October 2022 and occur every three months. This month saw a payment of £9.1 billion to the APF, £8.3 billion more than in October 2022. 

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

Interest payable on central government debt 

In October 2023, the interest payable on central government debt was £7.5 billion, £1.1 billion more than in October 2022, and £2.6 billion more than the OBR's March 2023 forecast of £4.9 billion. This was the highest interest payable in any October since monthly records began in April 1997.

The large month-on-month increases in Retail Price Index (RPI) observed since early 2021 have led to substantial increases in debt interest payable, with the largest three months on record occurring in 2022 and 2023. The additional interest caused by RPI inflation is described as capital uplift and affects the value of the gilt principal. 

In October 2023, capital uplift was £4.1 billion and was largely determined by the 0.6% increase in the RPI between July and August 2023. This increased the capital uplift on the three-month lagged index-linked gilts which make up around three-quarters of the index-linked gilt stock.  

Conversely, the low amount of central government interest payable in September 2023 was largely because of a 0.6% decrease in the RPI between June and July 2023, which resulted in a negative capital uplift of £3.2 billion on index-linked gilts.  

A monthly time series of the total capital uplift on the index-linked gilts in issue is available on our website as series identifier code MW7L. For further details of our approach, see our Calculation of interest payable on government gilts methodology.

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4. Borrowing in the financial year-to-October 2023

The £14.9 billion borrowed in October 2023, combined with an upward revision of £1.7 billion to our previously published financial year-to-September 2023 borrowing estimate, brings our provisional estimate for the total borrowed in the financial year-to-October 2023 to £98.3 billion.

The principal determinants of the £98.3 billion borrowed by the public sector in the first seven months of the current financial year was the £123.4 billion borrowed by central government, which was partially offset by a £19.3 billion Bank of England (BoE) surplus.  

The borrowing of both of these subsectors is affected by payments totalling £33.2 billion made by central government to the BoE over the last seven months under the Asset Purchase Facility Fund (APF) indemnity agreement. This was £32.4 billion more than the £0.8 billion paid in the same period last year. 

As with similar intra public sector transactions, these payments are public sector borrowing neutral. They increase central government's borrowing by £32.4 billion compared with the same period last year, but reduce the borrowing impact of the BoE by an equal and offsetting amount.  

The receipt of these indemnity payments reduced the BoE's contribution to net borrowing by £32.4 billion compared with a year earlier. However, this decrease was partially offset by a £16.0 billion increase in the net interest payable by the BoE, largely on the reserves created to finance the quantitative easing activities of the APF.  

In the seven months to October 2023, central government received £540.5 billion in taxes and other payments, an increase of £23.4 billion compared with the same period a year ago. However, this increase was exceeded by a £67.4 billion increase in total expenditure, rising to £663.9 billion over the same period. This additional spending included increases in: 

  • net investment of £40.2 billion, of which £32.4 billion was an increase in payments to the APF (these reduce BoE borrowing) 

  • inflation-linked uprated benefits and cost-of-living payments of £20.5 billion 

  • consumption spending (largely pay and procurement) of £17.9 billion 

  • grants to local government of £5.2 billion (these reduce local government borrowing) 

These increases were partially offset by a reduction in central government debt interest payable of £12.6 billion, largely because of a slowing of the month-on-month growth in the Retail Prices Index.

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On 22 November 2023, the Office for Budget Responsibility (OBR) will publish its Economic and fiscal outlook. The statistics in this release do not reflect these updated economic and public sector forecasts

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5. Borrowing in the financial year ending March 2023

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 (financial year ending (FYE) 2023) by £11.4 billion, from £139.2 billion to £127.8 billion. 

This was £5.0 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 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 FYE 2023, the public sector current budget deficit was £80.2 billion, £10.6 billion more than in FYE 2022. This figure includes an estimated £39.4 billion cost of the energy support schemes. Over the same period, public sector net investment decreased by £5.6 billion to £47.6 billion. 

The affordability of borrowing in the financial year ending March 2023 

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 reduced by only another 0.2 percentage points to 5.0%, in part because of the impact of higher energy prices on the economy and public finances.

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6. The public sector balance sheet

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). 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 comparability over time. 

At the end of October 2023, the net debt-to-GDP ratio was provisionally estimated at 97.8%, 2.3 percentage points higher than a year ago. However, this is a highly provisional estimate and likely to be revised in future publications because it partly relies on GDP estimates based on the March 2023 Office for Budget Responsibility (OBR) forecast.

Public sector net debt excluding the Bank of England (BoE) was £2,394.8 billion, or around 88.6% of GDP, £248.9 billion (or 9.2 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 October 2023, we record the £104.9 billion difference between the £750.3 billion of reserves created to purchase its gilts (at market value) and their £645.4 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 £715.9 billion at the end of October 2023. This compares with a £533.9 billion deficit at the end of October 2022.  

The main reason for the £182.0 billion reduction in PSNW ex over the last 12 months was a £190.0 billion increase in PSND ex, partly offset by a £45.5 billion increase in public sector non-financial assets. 

If we exclude the public sector's £1,565.4 billion of non-financial assets, public sector net financial worth excluding public sector banks (PSNFW ex) deteriorated by £227.6 billion over the same period to a deficit of £2,281.4 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.

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7. Revisions

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.

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The initial outturn estimates for the early months of the financial year contain more forecast data than other months, as profiles of tax receipts, and departmental and local government spending are still provisional. The data for these months are typically more prone to sizeable revisions in later months.

Tables 4 to 6 of our Public sector finances summary tables: Appendix M dataset compare our latest public sector finances data with those in our Public sector finances, UK: September 2023 bulletin, published on 20 October 2023, and highlight the revisions to borrowing by sub-sector, central government receipts and expenditure. 

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

Revision to public sector net borrowing (PSNB ex) in the financial year-to-September 2023 

Since publishing our Public sector finances, UK: September 2023 bulletin, we have increased our estimate of borrowing in the financial year-to-September 2023 by £1.7 billion. This change was the result of new central government data replacing previous estimates. 

We have reduced our previous estimate of central government receipts for the six months to September 2023 by £3.4 billion. This is largely because of regular updates to tax and national insurance contributions, which reduced by a total of £2.9 billion, with updated data replacing our initial estimates. 

Of these, corporation tax receipts were reduced by £1.5 billion and income taxes reduced by £1.2 billion, compared with our previous estimate. 

Over the same period, we have reduced our previous estimate of central government current expenditure by £1.4 billion. Updated pay and procurement data accounted for £1.3 billion of the change. 

Revision to public sector net debt (PSND ex) at the end of September 2023 

Since publishing our Public sector finances, UK: September 2023 bulletin, our estimate of debt at the end of September 2023 remains largely unchanged at £2,599.0 billion, with less than a £0.1 billion reduction compared with our first estimate.  

This was largely because routine updates to Bank of England Asset Purchase Facility Fund cash holding data being offset by updated Network Rail data, both of which are reported one month in arrears. 

Revisions to gross domestic product 

Since publishing our Public sector finances, UK: September 2023 bulletin, we have reduced our estimate of debt (PSND ex) expressed as a ratio of gross domestic product (GDP) at the end of September 2023 by 1.4 percentage points, from 97.8% to 96.4% of GDP. 

This change was largely because of routine updates to our latest estimates of GDP, where GDP first quarterly estimate, UK: July to September 2023, published on 10 November 2023, replaced our previous estimate. 

Revisions to public sector net borrowing and net debt including public sector banks 

This month, we have received both profit and loss data and balance sheet data for the UK's public sector banks covering the period January to June 2023 for the first time, and updates to previously supplied profit and loss data from January 2021. Further to this, our own estimates covering the period July 2023 to date have been updated to reflect this new information. 

As a result of incorporating these data, our estimate of the net borrowing of public sector banks for the financial year ending March 2023 (April 2022 to March 2023) has reduced by £1.7 billion. Meanwhile, their contribution to the wider measure of public sector net debt at the end of June 2023 has increased by £10.5 billion.

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8. Public sector finances data

Public sector finances summary tables: Appendix M
Dataset | Released 21 November 2023
The latest public sector net borrowing by sub-sector and a summary of central government receipts and expenditure data. 

Public sector balances sheet tables: Appendix N
Dataset | Released 21 November 2023
A reconciliation of the latest public sector balance sheet measures.  

Public sector finances borrowing by sub-sector
Dataset | Released 21 November 2023
A reconciliation of public sector net borrowing by subsector and transaction. 

Public sector finances tables 1 to 10: Appendix A
Dataset | Released 21 November 2023
The data underlying the public sector finances statistical bulletin are presented in the tables PSA 1 to 10. 

Public sector current receipts: Appendix D
Dataset | Released 21 November 2023
A breakdown of UK public sector income by latest month, financial year-to-date and full financial year, with comparisons with the same period in the previous financial year. 

Public sector finance revisions analysis: Appendix P
Dataset | Released 21 November 2023
Records monthly borrowing data as at first and at subsequent publications, graphically illustrating any bias to our early estimates.  

International Monetary Fund's Government Finance Statistics framework in the public sector finances: Appendix E
Dataset | Released 21 November 2023
Presents the balance sheet, statement of operations and statement of other economic flows for the public sector, compliant with the Government Finance Statistics Manual 2014: GFSM 2014 presentation. 

Public sector net worth: Appendix O
Dataset | Released 21 November 2023
Presents the balance sheet for the public sector, consistent with the 2010 European system of national accounts (ESA 2010) (PDF, 6.4MB) and Manual on Government Deficit and Debt (MGDD)

Public sector finance records: Appendix Q
Dataset | Released 21 November 2023
Presents a breakdown of records for borrowing, receipts and expenditure, on a monthly, year-to-date and financial year basis.

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9. Glossary

Public sector 

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

Public sector current budget deficit 

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

Public sector net borrowing 

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

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Public sector current budget deficit and net borrowing are measured 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. 

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.

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10. Measuring the data

Comparing our data with official forecasts 

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

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

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

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11. Strengths and limitations

Tax receipts 

In the most recent months, tax receipts recorded on an accrued basis are subject to some uncertainty. This is because many taxes such as Value Added Tax (VAT), Corporation Tax, and Pay as You Earn Income Tax contain some forecast cash receipts data and are liable to revision when actual cash receipts data are received.  

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

Local government and public corporations 

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

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

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

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

For the FYE 2024, we include a £0.5 billion downward adjustment to Scotland's capital expenditure. 

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

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

Estimating the cost of the energy support schemes 

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

The UK government provided cash estimates on the cost of each of the energy support schemes for the financial year ending (FYE) March 2023 in its Energy Prices Act 2022 and expenditure on energy schemes -- Q1 2023 statement, published on 8 July 2023.  

In addition, the OBR provided estimates of the ongoing cost of the energy subsidy schemes in its March 2023 Economic and fiscal outlook monthly profiles (XLSX, 125KB).

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13. Cite this statistical bulletin

Office for National Statistics (ONS), released 21 November 2023, ONS website, statistical bulletin, Public sector finances, UK: October 2023.

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Contact details for this Statistical bulletin

Fraser Munro
public.sector.inquiries@ons.gov.uk
Telephone: +44 1633 456402