Public sector finances, UK: September 2023

• Public sector net borrowing excluding public sector banks (PSNB ex) in September 2023 was £14.3 billion, £1.6 billion less than in September 2022 and the sixth highest September borrowing since monthly records began in 1993.

• The interest payable on central government debt in September 2023 was £0.7 billion, £7.2 billion less than in September 2022 and the third lowest in any month since monthly records began in 1997; this was largely because of the fall in the Retail Prices Index (RPI) between June and July 2023 reducing the inflationary impact on index-linked gilts.

• PSNB ex in the first half of the financial year (April to September 2023) was £81.7 billion, £15.3 billion more than in the same six-month period last year but £19.8 billion less than the £101.5 billion forecast by the Office for Budget Responsibility (OBR) in March 2023.

• Public sector net debt (PSND ex) was £2,599.0 billion at the end of September 2023 and was provisionally estimated at around 97.8% of the UK’s annual gross domestic product (GDP); this is 2.1 percentage points higher than in September 2022 and continues at levels last seen in the early 1960s.

• Excluding the Bank of England, public sector net debt was £2,372.9 billion or around 89.3% of GDP, £226.2 billion (or 8.5 percentage points) lower than the wider measure.

• Public sector net worth (PSNW ex) was in deficit by £667.3 billion at the end of September 2023; this compares with a £519.4 billion deficit at the end of September 2022.

• Central government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was £15.2 billion in September 2023, £1.5 billion more than in September 2022 but £1.4 billion less than the £16.6 billion forecast by the OBR in March 2023.

In September 2023, the public sector spent more than it received in taxes and other income, requiring it to borrow £14.3 billion. This was £1.6 billion less than was borrowed in September 2022 and is the sixth highest September borrowing since monthly records began in 1993, behind those around the coronavirus (COVID-19) pandemic period, and those following the global financial crisis.

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 September 2023, central government borrowed £10.7 billion, £3.8 billion less than in September 2022 but £5.9 billion less than the £16.6 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 £77.3 billion, £3.4 billion more than in September 2022 and £1.9 billion more than the £75.4 billion forecast by the OBR in March 2023.

Of this £77.3 billion, tax receipts were £57.4 billion, £3.7 billion more than in September 2022, with receipts from income taxes increasing by £1.7 billion and receipts from Value Added Tax (VAT) increasing by £1.6 billion.

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

Central government expenditure

In September 2023, central government’s total expenditure was £88.0 billion, £0.5 billion less than in September 2022 and £4.1 billion less than the £92.1 billion forecast by the OBR in March 2023.

Net social benefits

Net social benefits paid by central government in September 2023 were £27.7 billion, £1.9 billion more than in September 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.

Winter Fuel Payments are also recorded this month (on an accruals basis) as eligibility is determined in September each year, although the cash will not be paid until November.

Goods and services

Central government consumption expenditure in September 2023 was £33.1 billion, £2.7 billion more than in September 2022. This included a £1.2 billion increase in spending on staff costs and a £1.6 billion increase in spending on goods and services.

Interest payable on central government debt

In September 2023, the interest payable on central government debt was £0.7 billion, £7.2 billion less than in September 2022, and £4.1 billion below the OBR’s March 2023 forecast of £4.8 billion.

This was the third lowest interest payable in any month since monthly records began in April 1997, behind that of March 2018 and March 2019, and largely because of recent movements in monthly inflation.

Fluctuations in debt interest are largely a result of movements in the Retail Prices Index (RPI), to which index-linked gilts are pegged. The large month-on-month increases in RPI previously observed since early 2021 have led to substantial increases in debt interest payable, with the largest three months on record being in 2022 and 2023.

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 this month.

A monthly time series of the total capital uplift on the index-linked gilts in issue are 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.

The £14.3 billion borrowed in September 2023, combined with a downward revision of £2.3 billion to our previously published financial year to August 2023 borrowing estimate, brings our provisional estimate for the total borrowed in the financial year to September 2023 to £81.7 billion.

The principal determinants of borrowing in the first six months of the current financial year were the central government and the Bank of England (BoE) sub-sectors, with much of these increases in borrowing because of increases in expenditure caused by inflation.

Central government borrowing increased by £30.4 billion to £98.6 billion compared with the same period a year ago, however the borrowing impact of the BoE reduced by £13.8 billion.

The borrowing for both of these sub-sectors is affected by the £24.1 billion paid by central government to the BoE under the Asset Purchase Facility Fund indemnity agreement, which increased central government’s borrowing but reduced the borrowing impact of the BoE by an equal and offsetting amount.

Excluding these indemnity payments, there was an increase in the interest payable by the BoE to the private sector (and rest of the world) of £14.2 billion. This moved from a net income position of £2.4 billion to a net cost of £11.8 billion compared with the same six-month period a year ago, and increased the BoE’s contribution to public sector net borrowing.

For central government, a £24.7 billion increase in current receipts over this period was exceeded by a £55.1 billion increase in total expenditure. This additional spending included increases in:

• uprated benefit payments of £16.1 billion
• consumption spending (largely pay and procurement) of £16.9 billion
• additional subsidies (largely the cost of the energy support schemes) of £3.7 billion
• grants to local government of £4.3 billion (these reduce local government borrowing)
• net investment of £30.5 billion, of which £24.1 billion was to the BoE

These increases were partially offset by a reduction in central government debt interest payable of £13.6 billion, largely because of a slowing of the month-on-month growth in the Retail Prices Index.

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 £10.9 billion, from £139.2 billion to £128.3 billion.

This was £5.3 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 £80.6 billion, £10.9 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.

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.

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 September 2023, the net debt-to-GDP ratio was provisionally estimated at 97.8%, 2.1 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 £2,372.9 billion, or around 89.3% of GDP, £226.2 billion (or 8.5 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 September 2023, we record the £105.6 billion difference between the £757.3 billion of reserves created to purchase its gilts (at market value) and their £651.7 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 £667.3 billion at the end of September 2023. This compares with a £519.4 billion deficit at the end of September 2022.

The main reason for the £147.9 billion reduction in PSNW ex over the last 12 months was a £157.7 billion increase in PSND ex, partly offset by a £42.4 billion increase in public sector non-financial assets.

If we exclude the public sector’s £1,565.4 billion of non-financial assets, the public sector net financial worth excluding public sector banks (PSNFW ex) deteriorated by £190.3 billion over the same period to a deficit of £2,232.7 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 in our Public sector finances, UK: August 2023 bulletin, published on 21 September 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 August 2023

Since publishing our Public sector finances, UK: August 2023 bulletin, we have reduced our estimate of borrowing in the financial year to August 2023 by £2.3 billion. This change was the result of new data replacing previous estimates, with our previously published central government borrowing being reduced by £2.6 billion and local government borrowing being increased by £0.3 billion.

Our previous estimate of central government receipts remains largely unchanged, increasing by £0.3 billion across the first five months of the current financial year, however there were some large offsetting changes as provisional estimates were updated with improved estimates informed by updated cash data. Corporation tax receipts were increased by £2.7 billion, however this increase was offset by a reduction in other estimates, most notably a reduction of £2.0 billion to our previous Value Added Tax (VAT) estimate.

Over the same period, we have reduced our previous estimate of central government current expenditure by £1.7 billion and net investment spending by £0.6 billion, which reflects the provisional nature of the data at this time of year.

Within current expenditure, we have reduced our estimates for central government subsidies by £1.0 billion, largely because of updated estimates of the cost of the energy support schemes. However, these estimates remain highly provisional.

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

Since publishing our Public sector finances, UK: August 2023 bulletin, we have reduced our estimate of debt at the end of August 2023 by £1.3 billion. This change was largely because of routine updates to Bank of England Asset Purchase Facility Fund data that are reported one month in arrears.

Revisions to gross domestic product

Since publishing our Public sector finances, UK: August 2023 bulletin, we have reduced our estimate of debt expressed as a ratio of gross domestic product (GDP) at the end of August 2023 by 0.9 percentage points, from 98.8% to 97.9% of GDP.

This change was largely because of routine updates to our latest estimates of GDP, where GDP quarterly national accounts, UK: April to June 2023 published on 29 September 2023 replaced our previous estimates.

On 29 September 2023, we published Revisions to the UK's public sector net debt and borrowing statics expressed as a ratio of GDP, August 2023. This dataset presents the impact of the updated GDP estimates on the headline measures of debt and borrowing published on 21 September 2023. These GDP updates have been fully reflected in this bulletin, published on 20 October 2023.

Revisions to public sector net worth (PSNW)

Since publishing our Public sector finances, UK: August 2023 bulletin, we have reduced our estimate of public sector net worth at the end of August 2023 by £37.6 billion. This change was largely due to an annual update to the stock of public sector non-financial assets, reducing total non-financial assets held by the public sector by £38.6 billion.

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”.

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.

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.

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 financial year ending (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).