UK government debt and deficit: June 2016

General government deficit (net borrowing) was £76.6 billion in the financial year ending March 2016 (4.1% of gross domestic product (GDP)), a decrease of £17.8 billion compared with the financial year ending March 2015 (when it was 5.1% of GDP).

General government gross debt was £1,651.9 billion at the end of the financial year ending March 2016 (87.8% of GDP), an increase of £47.9 billion compared with the end of March 2015 (when it was 87.4% of GDP).

This release is fully consistent with the latest data transmission on UK government deficit (or net borrowing) and debt that the UK and other European Union (EU) member states are required to report quarterly to the European Commission.

The figures for 1997 onwards in this statistical bulletin are fully consistent with the data published in the Public Sector Finances statistical bulletin of 21 September 2016.

The EU government deficit and debt statistical bulletin is published quarterly in January, April, July and October each year, to coincide with when the UK and other European Union (EU) member states are required to report on their deficit (or net borrowing) and debt to the European Commission.

Article 126 of the Treaty on the Functioning of the European Union (EU) obliges member states to avoid excessive budgetary deficits. The Protocol on the Excessive Deficit Procedure, annexed to the Maastricht Treaty, defines 2 criteria and reference values with which member states’ governments should comply. These are:

• a deficit (net borrowing) to gross domestic product (GDP) ratio of 3%

• a debt to GDP ratio of 60%

The deficit is a measure of how much the government has to borrow to cover its expenditure once revenue has been netted off, for this reason it is also known as net borrowing. The monetary values quoted are in current prices, that is, they represent the price of borrowing in the year to which they relate without any adjustments for inflation. Thus for comparisons over time the figures as a percentage of GDP (also measured in current prices) are used to provide a comparable time series.

The source data, and therefore the debt and deficit figures published in this bulletin (for the time period 1997 onwards), are the same as those published in the Public Sector Finances, August 2016 statistical bulletin published on 21 September 2016. There are 2 main differences between the main borrowing and debt measures published in the Public Sector Finances and the deficit and debt figures published in this bulletin:

1. This bulletin includes only debt and deficit recorded to central and local government, whereas the UK Public Sector Finances’ measures also include the debt and deficit of other public sector bodies

2. This bulletin reports gross debt, whereas the Public Sector Finances’ headline measure is net debt. Gross debt is the financial liabilities (debt securities, loans and deposits) of central and local government. Net debt is calculated as these financial liabilities less liquid assets (official reserve assets and other cash or cash-like assets).

This section provides the latest headline data for deficit (net borrowing) and debt, and supporting information.

The Public Sector Finances, August 2016 statistical bulletin published (on 21 September 2016) estimates for the headline measures of general government net borrowing and general government gross debt. This bulletin provides further information of these estimates and presents them in the context of the European Union (EU) requirements.

Table 1 shows the headline measures on a calendar year and financial year basis both as £ billion values and as a percentage of gross domestic product (GDP).

General government deficit

In the financial year ending March 2016, the UK government deficit (net borrowing) was £76.6 billion (4.1% of GDP). This represents a decrease of £17.8 billion since the financial year ending March 2015, and is the lowest value as a percentage of GDP since the financial year ending March 2008 when it was 3.0% of GDP (£45.8 billion). However, the deficit remains above the Maastricht reference value of 3.0%.

In the calendar year 2015, the UK government deficit (net borrowing) was £81.1 billion (4.3% of GDP). This represents a decrease of £23.3 billion since the calendar year 2014 and is the lowest value as a percentage of GDP since the calendar year 2007 when it was 2.9% of GDP (£44.5 billion).

The long-term general government deficit (net borrowing) as a percentage of GDP is illustrated in Figure 1.

General government gross debt

At the end of the financial year ending March 2016, UK government gross debt was £1,651.9 billion (87.8% of GDP). As a proportion of GDP, this is the 14th consecutive annual increase. The general government gross debt first exceeded the 60% Maastricht reference value at the end of the financial year ending March 2010 when it was 70.3% of GDP (£1,076.6 billion).

At the end of the calendar year 2015, UK government gross debt was £1,666.0 billion (89.1% of GDP). This represents an increase of £61.2 billion since the end of the calendar year 2014. The higher gross debt value at the end of the calendar year 2015 compared to at the end of the financial year ending March 2016 represents a small decrease in the first quarter of 2016, however it should be noted that quarterly values can fluctuate according to the time of recording of transactions.

The long-term general government gross debt as a percentage of GDP is illustrated in Figure 2.

Methodological changes and other recent events affecting UK general government deficit (net borrowing) and/or UK general government gross debt are detailed below:

Classification of London and Continental Railways

Following a review of the treatment of London and Continental Railways (LCR), we have identified some transactions, including liabilities relating to bonds and loans, that required further reclassification work to bring recording into line with the 2009 classification decision as a central government body. The net effect on government net borrowing is in most years downwards prior to 2009 as a result of the removal of grants and debt-cancellation payable to LCR, and upwards from 2009 onwards due to additional interest payable on bonds. In the financial year ending March 2016 the net effect was an increase in government deficit of £0.2 billion. Debt is revised upwards due to the inclusion of government-guaranteed bonds, but partly offset prior to 2009 due to the removal of finance leasing loans between LCR and government. The effect on UK government gross debt was to increase it by £2.8 billion at the end of the financial year ending March 2016.

Improved source data for official reserves and national savings

Following a period of quality assurance, improved data sources for the stock of, and transactions in, repurchase agreements (repos) between the official reserves and overseas or UK financial institutions has been introduced. Introducing these data has had a positive effect on UK government gross debt in each year of between £0 and £4.2 billion. Improved source data for National Savings deposits have also been included for the first time in these statistics, and have a negative effect on UK government gross debt of roughly £1 billion every year since 2005. The combined effect of adopting these updated data sources is to decrease UK government gross debt by £0.8 billion at the end of the financial year ending March 2016.

In addition to these changes, some of the more significant recent events which impact on the reported government deficit and debt are summarised below. For more information on the methodological changes and events impacting these statistics please see the relevant section of the Public Sector Finances, August 2016 statistical bulletin.

Bank of England Asset Purchase Facility Fund

The Chancellor announced on 9 November 2012 that it had been agreed with the Bank of England to transfer to the Exchequer the excess cash in the Asset Purchase Facility Fund. In line with European guidance (from Eurostat) the amount of cash that reduces deficit is limited by the entrepreneurial income earned by the Bank of England in the previous year.

In the financial year ending March 2016, there was a £8.5 billion transfer from the Asset Purchase Facility to HM Treasury. The Bank of England entrepreneurial income for the financial year ending March 2016 was calculated as £12.5 billion; as the amount of dividend transfers made did not exceed the entrepreneurial income, the impact of these transfers was to reduce deficit by £8.5 billion. The entrepreneurial income for the financial year ending March 2016 is £11.9 billion, and therefore this will be the limit for transfers that affect the deficit in the financial year ending March 2017.

Lloyds Banking Group

On 17 September 2013 the UK government began selling part of its share holding in Lloyds Banking Group. The sale of the shares does not directly impact on general government deficit or general government gross debt because it is purely a financial transaction exchanging equity for cash.

The cash received from the September 2013 sale of the government’s 6% stake (at 75p a share) was £3.2 billion.

A further sale was held on 23 to 24 March 2014 of a 7.5% stake, which raised £4.2 billion.

Following the March 2014 sale of shares, Lloyds Banking Group was reclassified from being a public financial corporation to a private financial corporation. Ongoing sales of the remaining stake raised a further £1.7 billion in the financial year ending March 2015.

Share sales in the financial year ending March 2016

Further share sales have occurred in the financial year ending March 2016. These are as follows:

• the sale of the government’s 40% stake in the cross-Channel train operator Eurostar raised £757 million in May 2015

• the sale of half of the government’s retained shareholding in Royal Mail (a 15% stake) raised £750 million in June 2015

• the sale of 5.4% of the government’s stake in the Royal Bank of Scotland raised £2.1 billion in August 2015

• the ongoing sale of shares in Lloyds Banking group has raised a total of £7.1 billion throughout the financial year ending in March 2016

Sale of loans by UKAR

In December 2015, UK Asset Resolution (UKAR) sold approximately £13 billion of loan assets relating to mortgages previously held by Northern Rock.

Under the Excessive Deficit Procedure all European Union (EU) member states report their latest detailed deficit and debt information to the European Commission twice a year. Supporting statistical information, including deficit and debt values, are reported quarterly. Both the biannual and quarterly returns are published by Eurostat (the European statistical agency).

Both the debt and deficit figures in this statistical bulletin will be published by Eurostat on 21 October 2016.

The tables in this bulletin present the UK government debt and deficit position at the end of both the financial and calendar years. The UK, uniquely within the European Union, is assessed against the deficit and debt on a UK financial year basis (that is, April to March). In September 2016, the UK provided to Eurostat revised estimates for the financial year April 2015 to March 2016, and revised estimates for the calendar year 2015. Estimates for the financial year ending in March 2016 were first provided in June 2016, and estimates for the calendar year 2015 were first provided in March 2016.

The UK figures may be compared with those of other EU member states on the Government Finance Statistics section of the Eurostat website.

The latest UK government deficit and debt figures exceed the reference values set out in the Protocol on the Excessive Deficit Procedure. According to the latest deficit and debt figures published in July 2016, 7 member states (including the UK) had a deficit exceeding the 3% of gross domestic product (GDP) reference value in 2015 and 17 member states (including the UK) had gross debts exceeding the 60% of GDP reference value as at the end of 2015.

While the main statistics provided to Eurostat are those of general government consolidated gross debt and general government net borrowing (or deficit), supplementary government finance statistics are also supplied by member states. A full set of government finance tables provided by the UK to Eurostat in June 2016 are included in this release.

This is the second time that deficit and debt figures for the financial year ending March 2016 have been reported in this statistical bulletin series; it is the third time that deficit and debt figures for the calendar year 2015 have been reported. Since the last publication of the EU government debt and deficit as reported to the European Commission in July 2016, the deficit in the financial year ending in March 2016 has been revised upwards by £2.1 billion (2.9%) and debt as at the end of the financial year ending March 2016 has been revised up by £2.7 billion (0.2%).

The revisions to deficit are largely a result of outturn data for the financial year ending in March 2016 replacing earlier estimates. The revisions to debt at the end of March 2016 are composed of a £2.0 billion increase due to the methodological changes (see ‘Recent events and methodological changes’) and £0.7 billion due to other updates in source data.

Table M8R presents the revisions to main aggregates since the last publication of the EU government debt and deficit as reported to the European Commission in July 2016. Revisions to the data are consistent with revisions incorporated within the Public Sector Finances statistical bulletin.

Main methodological changes and recent events that affect data movements are described under “Recent events and methodological changes”.

There are 9 tables included as part of this bulletin. Most tables extend back to the financial year ending March 1993 in financial years and 1992 in calendar years. However, Table M7 extends back to 1995 and Tables M5, M6 and M9 only cover more recent periods.

All values in the tables are at current prices and are not seasonally adjusted. The debt figures are at nominal value. That is, the debt is valued at the face value of the debt, which is what the government will be liable to pay, and not the market value of the debt.

Table M1 shows the general government deficit and debt (in £ million and as a percentage of GDP).

Table M2 shows the general government debt by financial instrument (in £ million).

Table M3 shows transactions (or changes) in general government debt by financial instrument (in £ million).

Table M4 shows how the deficit can be reconciled with the changes in gross debt (in £ million).

Table M5 shows how the unconsolidated financial liabilities of central government and local government are consolidated to arrive at general government consolidated gross debt (in £ million).

Table M6 shows how the unconsolidated transactions (or changes) in financial liabilities of central government and local government are consolidated to arrive at consolidated transactions in general government gross debt (in £ million).

Table M7 shows how general government net borrowing (or deficit) is consistent with the general government net borrowing reported in the Public Sector Finances, August 2016 statistical bulletin published on 21 September 2016 (in £ million and as a percentage of GDP). The implementation of ESA 2010 in September 2014 has resulted in both outputs having consistent net borrowing figures from the financial year ending March 1998 onwards.

Table M8R shows revisions in deficit and debt between the figures published in this bulletin and those published in the last bulletin in July 2016 (in £ million and as a percentage of GDP).

Table M9 relates to government activities undertaken to support financial institutions during the financial crisis. It does not include wider economic stimulus packages. The table is presented in 2 parts.

Part 1 shows the impact on government deficit from both the expenditure undertaken by government and the revenue received as part of these support measures.

Part 2 shows the impact on the government balance sheet from the support measures. Part 2 also includes estimates of the contingent liabilities that government is exposed to through the activities undertaken to support financial institutions. All figures are in £ million. Following guidance from Eurostat, there has been a slight change to the presentation of figures in this table, and the assets and liabilities of defeasance structures that do not impact government debt are no longer included in the balance sheet information.

In addition, the Maastricht supplementary tables are included within this release. Information on these tables can be found within Annex B.

The tables in this release are copies of the data supplied to Eurostat in January 2016.

In all tables the Eurostat convention for recording missing values is used. This convention uses “M” when something is not applicable or the requested data does not exist, and “L” when the requested data is not available or the data exists but has not been collected or recorded.

All tables cover UK general government, that is UK central government and local government. The ESA tables 2, 25, 27, 28 are published four times a year (in January, April, July and October). The EDP tables are published twice a year (in April and October). ESA Table(s) 11 is published once a year (in April), and ESA Table 9 and the ESA Questionnaire (National Tax List) are published once a year (in October). All table valuations are in current prices and reported values are in £ millions.

Excessive Deficit Procedure (EDP) calendar year and financial year main tables

The EDP Financial Year and Calendar Year Main tables report annually on UK government deficit and debt levels. The time series covered for the calendar years is 2012 to 2015 and for the financial years from the financial year ending March 2013 to the financial year ending March 2016.

The definitions of deficit and debt are those defined by the Maastricht Treaty Annex and the EU Stability and Growth Pact. These state that:

• government deficit is general government net borrowing (calculated as current expenditure plus net investment minus current revenue)

• government debt is general government gross consolidated debt at nominal value

Sub-component tables;

• EDP Table 1 reports government deficit or surplus by government sector and debt levels by financial liability category

• EDP Tables 2A to 2D show the adjustments that must be made to transform the working balances for each government sub-sector (that is, net borrowing as published in the Public Sector Finances statistical bulletin) into the deficit as defined under the Maastricht Treaty

• EDP Tables 3A to 3E show how the deficit for the consolidated general government and each sub-sector reconciles with the change in government gross debt

• EDP Table 4 contains further memoranda data items requested by Eurostat

European System of Accounts (ESA) Table 2 Main Aggregates of General Government

ESA Table 2 is a complete set of annual (calendar years) non-financial accounts for the time series 1990 to 2015 of the general government sector, compiled according to ESA 2010. Table 2 provides a breakdown of general government expenditure (both current and capital) and general government revenue. The table uses ESA 2010 codes to identify the different transactions with “OTE” representing the total general government expenditure and “OTR” representing the total general government revenue. The table also shows the general government net borrowing (B.9) which is the difference between total revenue and total expenditure. The data is an annual presentation of the quarterly general government data in ESA Table 25.

European System of Accounts (ESA) Table 25 Quarterly Non-Financial Accounts of General Government

ESA Table 25 is a complete set of quarterly non-financial accounts for the time series Quarter 1 (Jan to Mar) 1987 to Quarter 2 (Apr to June) 2016 of the general government sector, compiled according to ESA 2010. Table 25 provides a breakdown of general government expenditure (both current and capital) and general government revenue. This table shows the general government net borrowing (B.9) which is the difference between total revenue and total expenditure. The data is a quarterly presentation of the annual general government data in ESA Table 2.

European System of Accounts (ESA) Table 27 Quarterly Financial Accounts of General Government

ESA table 27 (also known as QFAGG – quarterly financial accounts of general government) is a complete set of quarterly financial accounts for the time series Quarter 1 1987 to Quarter 2 2016 of the general government sector and its sub-sectors, compiled according to ESA 2010. The table deals with both financial transactions and the financial balance sheets. Data are consolidated within each sub-sector and are available both consolidated and unconsolidated at the general government level.

European System of Accounts (ESA) Table 28 Quarterly Government Debt (Maastricht Debt) for General Government

ESA Table 28 shows government debt on a quarterly basis for the time series Quarter 1 2000 to Quarter 2 2016, for general government and its sub-sectors, compiled according to ESA 2010. The table provides a breakdown of all debt instruments that are relevant in the EDP reporting of “Maastricht Debt”. These instruments are categorised under ESA 2010 as F.2 (cash and deposits), F.33 (securities other than shares) and F.4 (loans). Data are consolidated within each sub-sector and at the general government level; that is any debt liabilities of government which are held as assets by another part of government are removed.

European System of Accounts (ESA) Table 9 Detailed tax and social contribution receipts by type of tax or social contribution and receiving subsector

ESA Table 9 shows tax receipts on a calendar year basis for the time series 1995 to 2015, for general government and its sub-sectors, compiled according to ESA 2010. The table provides a breakdown of receipts for the different types of tax and social contributions.

European System of Accounts (ESA) Questionnaire on the detailed list of taxes and social contributions according to national classification

Otherwise known as the National Tax List, or NTL, this table shows a complete list of taxes and social contributions received by general government and its sub-sectors, compiled according to ESA 2010. Data are provided for the time series 1995 to 2015 and are consistent with ESA Table 9 as well as receipts data used in the compilation of the non-financial accounts.

The main terms used in this bulletin are:

• net borrowing – also known as deficit – measures the gap between revenue raised (current receipts) and total spending (current expenditure plus net investment); a positive value indicates borrowing while a negative value indicates a surplus

• gross debt – is a measure of how much the government owes at a point in time

• gross domestic product (GDP) – a measure of the total economic activity in a country or region, therefore a country’s gross debt, represented as a proportion of their GDP, can be thought of as a measurement of that country’s ability to pay back its debt

• asset purchase facility fund – an arm of the Bank of England able to purchase financial assets including government securities (gilts), the APF has earned interest which is periodically transferred back to central government

• Maastricht deficit – general government net borrowing as defined within the Maastricht Treaty and Stability and Growth Pact (and as supplied to Eurostat)

• Maastricht debt – general government gross debt as defined within the Maastricht Treaty and Stability and Growth Pact (and as supplied to Eurostat)

• public sector net borrowing (PSNB ex) – includes central government, local government, public corporations and Bank of England but excludes public sector banks

• public sector net debt (PSND ex) – includes central government, local government, public sector corporations and Bank of England but excludes public sector banks

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