Fuente : UK Government
http://www.open.gov.uk/

UK: PUBLIC SECTOR FINANCES MARCH 2005

/noticias.info/ Provisional estimates of the public finances show that in March the public sector had:

- a current budget deficit of £0.4 billion

- net borrowing of £3.8 billion;

and at the end of March:

- net debt was £415.3 billion, equivalent to 34.5 per cent of gross domestic product

Main Statistics

The main statistics released show, that in March 2005:

* the public sector current budget was in deficit by £0.4 billion; this is a £2.3 billion lower deficit than in March 2004,when there was a deficit of £2.7 billion;

* public sector net borrowing was £3.8 billion; this is £1.7 billion lower net borrowing than in March 2004,when net borrowing was £5.5 billion;

* the public sector net cash requirement (see table PSF4)was £13.6 billion, a £1.2 billion lower net cash requirement than in March 2004,when there was a net cash requirement of £14.7 billion. N.B. rather than looking at the cash measure, which can be misleading due to timing factors, it is better to look at the other, accruals-based, statistics;

* at the end of March 2005 public sector net debt was £415.3 billion (equivalent to 34.5 per cent of GDP).This compares to £376.0 billion (32.8%) as at the end of March 2004.

Financial year to date (April 2004 - March 2005)): Monthly data may be volatile, so it can be misleading to read too much into one month 's data. The following paragraphs give information on financial year 2004/05 and comparisons with the previous financial year (2003/04).

In financial year 2004/05:

* the public sector current budget was in deficit by £16.6 billion; this is a £4.4 billion lower deficit than in 2003/04,when there was a deficit of £21.1 billion;

* public sector net borrowing was £34.5 billion. This was £1.3 billion lower net borrowing than in 2003/04,when there was net borrowing of £35.7 billion;

* the public sector net cash requirement (see table PSF7)was £38.6 billion;£1.0 billion lower net cash requirement when compared with 2003/04 when there was a net cash requirement of £39.6 billion.

Revisions since last data release

(Please refer to http://www.statistics.gov.uk to view tables referred to in this release)

The data in this release have been revised from January 2003.Table PSF8R presents revisions to key aggregates.

It is usual for estimates to be revised in the months after they are first released, as estimated and provisional data are replaced with firmer information. This is the case in this dataset, where Central Government receipts and expenditure estimates for January and February 2005 have been revised. There are also revisions to Central Government expenditure data in 2003 and 2004,as a result of the need to correct for some inconsistencies between the estimates published in last month's First Release and estimates in the National Accounts. The total revisions to Public Sector Current Budget are:2003 -04 +£0.4bn; 2004 -05 (to February)-£0.4bn.

There are potential further revisions, to local government data in 2003 -04,although at this stage the indication is that they will lead to offsetting changes between receipts and expenditure components rather than a change to the main fiscal aggregates. Details of the public sector statistics revisions policy, covering this and the other public sector first releases, is available at: http://www.statistics.gov.uk/about/Methodology_by_theme/ Public_sector_accounts/default.asp.

BACKGROUND NOTES

1. A guide to monthly public sector finance statistics is available from http://www.statistics.gov.uk/downloads/theme_other/ GSSMethodology_No_12_v2.pdf It explains the concepts and measurement of the monthly data, plus those previously published, and gives some long runs of historical data. It is also available as a paper publication, number 12 in the GSS methodological guide series, ISBN 1 85774 296 6,(price £5).These background notes explain the monthly data.

2. The 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 main fiscal rules. This states that, on average over the economic cycle, the Government should borrow only to invest and not to fund current expenditure. HM Treasury has stated that progress against the golden rule will be measured by averaging the surplus on current budget, when expressed as a percentage of GDP, over each year of the economic cycle. So to accord with the rule, this average should be positive. HM Treasury 's provisional judgement is that the current economic cycle began in 1999/2000 and is forecast to end in 2005/06.This was set out in Budget 2005 (published by HM Treasury on 16 March 2005) which gave the following forecasts of Public sector current budget as a percentage of GDP:2004/05 -1.4%and 2005/06 -0.5%.

3. Procedures for calculating net borrowing are discussed in the methodological guide. The 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 revaluation's 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 main fiscal rule, the sustainable investment rule. The Economic and Fiscal Strategy Report (1998)states (page 5)that to meet this rule, "Net public debt as a proportion of GDP will be held over the economic cycle at a stable and prudent level." It also states ((page 22) that "The Government believes that, other things equal, it is desirable that net public debt be reduced to below 40 per cent of GDP over the economic cycle." From Budget 2002 HM Treasury has also published a version of public sector net debt excluding the effect of cyclical fluctuations, this is referred to as 'core debt'.The GDP figure used to calculate the net debt ratio 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 the periods where National Accounts outturn GDP data are not available, and to produce monthly GDP figures. The procedure computes the quarterly growth rate implied by HM Treasury 's last published forecast 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. The most recent release of government debt &deficit data was on 28 February 2005. The definition of general government net borrowing to be reported for the Excessive Deficits Procedure under the Maastricht Treaty is different to that used for National Accounts. A 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 definition of net borrowing used 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 Articles http://www.statistics.gov.uk/psa/

9. As detailed in: the 20 July 2004 Public Sector Finances First Release, new revisions policy was introduced for the Public Sector Finances that allows all periods to be open for comprehensive revision. As a result of this the quarterly Public Sector Accounts First Release ,which was published with national accounts about 12 weeks after the end of the latest quarter reported was no longer necessary and was discontinued.

An electronic dataset is made available three working days after publication of the Public Sector Finances First Release. This contains quarterly data previously published in the Public Sector Accounts First Release and provides quarterly data, consistent with the latest Public Sector Finances First Release, analysed by economic category and sub-sector.

The new dataset is available at: http://www.statistics.gov.uk/STATBASE/Product.asp?vlnk=13583

10. The national accounts methodology for the new tax credits introduced in April 2003, was announced in April 2002.It is described in NACC decisions - Classification of Tax Credits available at http://www.statistics.gov.uk. From their introduction, the new tax credits (Working Tax Credit and Child Tax Credit) will count either as negative tax (e.g. a deduction from income tax) or amounts within the tax liability of the recipient or as a benefit (current expenditure)for amounts that exceed the recipient 's tax liability. Hitherto, tax credits (then the Working Families 'Tax Credit and Disabled Person's Tax Credit) were treated entirely as benefits and this treatment is unchanged in the main National Accounts based fiscal measures. The main effect of this change will be a reduction in both current expenditure (net social benefits)and current receipts (accrued income tax)by the amount of the tax deduction. The effect on fiscal aggregates, such as the public sector surplus on current budget and public sector net borrowing, is neutral because the effect on receipts and expenditure nets out.

11.The monthly estimates of the split of receipts between Compulsory social contributions and Income and capital gains tax are provisional. Estimates are used for apportioning certain PAYE payments during the fiscal year between income tax and national insurance contributions. When employers ' end-of-year tax returns are received and processed, compensating adjustments can be made'.

12. Following the establishment of HM Revenue and Customs in April 2005, table PSF6 will no longer be able to show separate payover figures for the former two departments (columns 1 and 5).From next month these will be combined for the whole period covered by the table.

13. The Budget Report,(published by HM Treasury 16 March 2005)gave the following forecasts for the financial year 2004/2005:-

- public sector surplus on current budget: minus £16.1 billion

- public sector net borrowing:£34.4 billion,

- public sector net debt:34.4 per cent of GDP at end March 2005 Table C23 in the Budget Report 2005 gives a forecast of the components of net borrowing and the current budget, using the same ESA95 concepts and definitions as in this First Release.

14. Data underlying the graphs in the First Release are available on request.

15. One indication of the reliability of the key indicators in this release can be obtained by monitoring the size of revisions. The table below is designed to show the size and pattern of revisions from first publication to one year later. The ONS standard presentation is to show the average of five years worth of revisions (e.g. sixty monthly observations).However, as there are less than five years worth of observations for one of these key series, the analysis for current budget is based from when the monthly time series began. The latest observations in this table are for the February 2004 first estimates, the revision to the March 2004 first estimate is excluded from the table. Please note that these indicators only report summary measures for revisions, the revised data may still be subject to measurement error.

The on page 10 ( refer to the website) covers sixty monthly estimates of Public Sector Net Borrowing and Public Sector Net Debt as a percentage of GDP and fifty three estimates of Public Sector Current Budget.

A spreadsheet giving these estimates and the calculations behind the averages in the tables is available on the National Statistics website at: http://www.statistics.gov.uk/StatBase/Product.asp?vlnk=805 Table PSF8R presents the latest revisions to key aggregates. The largest revisions normally occur in the month following first release, when estimated and provisional data are replaced with firmer information. More information about the revisions material in this Release can be found on the National Statistics website: http://www.statistics.gov.uk/cci/article.asp?ID=793

16. The estimate for 2004/5 Public Sector Current Budget as a percentage of GDP, given in the table on page 2,uses outturn GDP data for the first three quarters of the 2004/5 financial year plus an ONS projection for the remaining quarter. This projection is calculated by taking the annualised seasonally adjusted GDP growth rate from the first three quarters of the financial year and applying it to the first quarter outturn for 2004.This projection will be replaced by outturn GDP data in the 20 June 2005 Public Sector Finances First Release .

17. On 24 September 2004 ONS announced that British Energy was being classified as part of the public sector. This classification took effect from September 2002.This release includes the reclassification.

18.The United Nations Statistics Commission has approved the comprehensive and parallel updating of the National Accounts and related manuals, in order to ensure their consistency and achieve greater harmonisation. These manuals are the: System of National Accounts, 1993 (SNA93); Balance of Payments Manual, 5th edition (BPM5);and the Government Finance Statistics, 2001 (GFSM2001).

The ONS has developed the following webpage to inform users of progress and to invite their input: http://www.statistics.gov.uk/about/Consultations/NA/default.asp

19. Complete runs of series in this Release are available to download free of charge at http://www.statistics.gov.uk/timeseries . Alternatively, for low-cost tailored data call Online Services on 020 7533 5675 or email tailored@statistics.gov.uk

20. Details of the policy governing the release of new data are available from the National Statistics press office. 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 National Statistics 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.

21. National Statistics are produced to high professional standards set out in the National Statistics Code of Practice. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference. (c) Crown copyright 2005.

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