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Provisional estimates of the public finances show that in May: ...
Provisional estimates of the public finances show that in May:

* The public sector surplus on current budget was minus£2.1bn

* Public sector net borrowing was£3.0bn

At the end of May public sector net debt outstanding was£311.3bn, equivalent to 30.2 per cent of gross domestic product


1. A guide to monthly public sector finance statistics is available

here . It explains the concepts and measurement

of the monthly data, plus those previously published, and gives some

long runs of historical data. It is number 12 in the GSS

methodological guide series, ISBN 1 85774 296 6, (price£5). These

background notes explain the monthly data.

2. The surplus on current budget is derived, as net saving plus

receipts of capital taxes, from national accounts under the European

System of Accounts 1995 (ESA95). It is the key measure for assessing

progress against the golden rule, one of the government's two strict

fiscal rules. This states that, on average over the economic cycle,

the government should borrow only to invest and not to fund current

expenditure. So to accord with the rule, the average surplus on

current budget over the cycle should be positive.

3. Procedures for calculating net borrowing are discussed in the

methodological guide. The surplus on current budget is obtained by

subtracting net borrowing from an estimate of net investment. For

central government this is checked against some monthly data for some

current and capital transactions.

4. Net investment is defined as investment less depreciation.

Investment is capital formation (acquisition of fixed assets, stocks

and valuables net of any sales) plus net payments of capital grants.

Data sources are: Capital expenditure: for central government new

procedures have been established to collect capital expenditure

monthly from departments within a timetable needed for publication in

this First Release. For local government, monthly capital expenditure

data are not available, so estimates are made based on local

government's view of its expected capital expenditure for the year,

updated by actual quarterly outturn data, and monthly information on

asset sales. For public corporations there is a mixture of reported

monthly capital expenditure figures and estimates. Depreciation is

derived from a model that uses assumptions about asset lives and a

rolling estimate of the public sector's stock of capital assets

derived from capital expenditure data. The figures are reasonably

stable through time so adequate monthly figures can be estimated that

are consistent with the model's expected quarterly outputs.

5. Public sector net debt is built up by first calculating the public

sector's financial liabilities that are related to the financing

items of the public sector net cash requirement (PSNCR). These are

scored at face value. Liquid assets, mainly foreign exchange reserves

and bank deposits, are then subtracted to reach net debt. Net debt in

this First Release is calculated from the latest available

measurement of the stock of public sector financing liabilities and

liquid assets, and adding the change since then implied by PSNCR.

This method is refined by taking account of some other adjustments,

such as revaluations of the foreign exchange reserves due to currency

exchange rate movements, and discounts/premia on the nominal price of

debt issued.

6. Public sector net debt is the key measure for assessing progress

against the Government's other strict fiscal rule, the sustainable

investment rule. This requires that public sector net debt, as a

proportion of Gross Domestic Product (GDP), will be held, over the

economic cycle, at a stable and prudent level. The GDP figure used

here is that for the 12 months centred on when the debt is measured.

Hence this requires an estimate of GDP to be available covering the

period from six months before to six months after. An entirely

mechanical procedure is used to derive GDP figures for those periods

where national accounts outturn data are not available, and to

produce monthly GDP figures. The procedure computes the quarterly

growth rate implied by HM Treasury's last published forecasts of

financial year money GDP, and applies those growth rates to the

latest quarterly GDP figure published by National Statistics. Monthly

figures are derived by dividing the quarters by three.

7. Net borrowing is consistent with the definitions in ESA95. Public

sector net borrowing is the Government's preferred measure of the

short term impact of fiscal policy on the economy

8. General government net borrowing reported in this release forms

the basis of the reports of Government Deficit under the Maastricht

Treaty. In the most recent release of government debt & deficit data,

on 28 February 2002, a new European Regulation was implemented,

changing the definition of general government net borrowing to be

reported for the Excessive Deficits Procedure under the Maastricht

Treaty. This regulation requires that payments on Swaps are treated

as interest payments; for all other purposes, including the national

accounts and the Public Sector Finances First Release, such payments

are shown as financing items, consistent with ESA95. The Government

Debt and Deficit under the Maastricht Treaty First Release now

includes three versions of the deficit. It starts with the deficit

consistent with the net borrowing shown in this release, then shows

the effect of the alternative treatment of swaps and finally shows an

alternative treatment of the government's receipts for allowing the

use of spectrum by third generation mobile phone companies. UK

interpretation of ESA95 is that these receipts should be treated as

rents, which is the treatment used in the preparation of the Public

Sector Finances First Release. Eurostat requires that for the

Excessive Deficits Procedure, they be reported as being for the sale

of assets; cash receipts of #22.5 billion were paid to government by

the mobile phone companies during the second and third quarters of

2000. These are treated in Public Sector Finances as pre-payments of

rent at the rate of #1 billion per annum over the life of the

licences. For more detail please refer to the PSA homepage under


9. The Current and capital accounts for each of the three sectors

shown here are available quarterly. These appear in the quarterly

Public Sector Accounts First Release, which is published with

national accounts about 12 weeks after the end of the latest quarter

reported. The release of Public Sector Accounts data leads to

revisions of the data published in Public Sector Finances. Monthly

versions of the revised data, consistent with the quarterly Public

Sector Accounts First Release, are released electronically as soon as

is possible, often at the same time as the Public Sector Accounts

First Release. They are also published in Financial Statistics early

in the following month. Public Sector Accounts will next be published

on 28 June. Revisions will start from 1998Q1; and include a more

comprehensive view of financial year 2001-2002.

10. The period from January 2002 has been open to revision in this

release. A revisions table is included in the briefing note available


11. Budget 2002, (published by HM Treasury 17 April 2002) gave the

following forecasts for the financial year 2002-2003:

public sector surplus on current budget: # billion

public sector net borrowing: #11 billion,

public sector net debt: 30.2 per cent of GDP at end March 2003

Table C22 in Budget 2002 gives a forecast of the components of net

borrowing and the surplus on current budget, using the same ESA95

concepts and definitions as in this First Release.

12. Data underlying the graphs in the First Release are available on


13. The data in this First Release may be obtained in computer

readable form from the National Statistics Databank service, which

provides macro economic time series data on magnetic tape or disk.

Details of the service offered and the schedule of charges may be

obtained from the Sales Office, National Statistics, Room B1/06, 1

Drummond Gate, London SW1V 2QQ (telephone 020-7533 5675).

14. Details of the policy governing the release of new data are

available from the National Statistics press offfice. Special

arrangements apply to the public sector finances, which is a joint

release with HM Treasury. Its Public Sector Finances (PSF) team

working on the data have access to them at all stages, and certain

other individuals in HM Treasury may have access to them earlier than

would be the case with most Office for National Statistics (ONS)

releases. A list of those outside the ONS and the PSF team with

pre-publication access to the contents of this release is available

on request.

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