Public sector finance statistics including borrowing and debt

Summary

Statistics on public sector finances, including borrowing and debt, are published by the Office for National Statistics (ONS) and HM Treasury (HMT), in their monthly Public Sector Finances statistical bulletins. The statistics, particularly the main fiscal aggregates, are used by the Office for Budget Responsibility (OBR) as the basis for its economic and fiscal forecasts. 

As is the case for the UK National Accounts, the public sector finance statistics are produced on an internationally comparable basis, in accordance with the System of National Accounts 2008: SNA 2008 and the European System of Accounts 2010: ESA 2010. 

In the UK, the ‘public sector’ refers to six sub-sectors: central government, local government, public non-financial corporations, public sector-funded pensions, the Bank of England and public financial corporations (including public sector banks).  

Public sector finance statistics cover a range of statistics, which are detailed in the glossary published by ONS. Two of the most frequently cited statistics are: 

• Public sector net borrowing (PSNB)  

Net borrowing, commonly known as “the deficit”, is the difference between the income the public sector receives (in taxes, etc) and its current and capital expenditure, on an accrued basis (meaning transactions are recorded when the economic activity occurs and not necessarily when cash is paid). 

• Public sector net debt (PSND) 

Public sector net debt (often incorrectly referred to as national debt) is the total outstanding amount the government has borrowed. Net debt considers liquid assets whereas gross debt does not. To allow meaningful comparisons over time, it’s most appropriate to express PSND as a percentage of gross domestic product (GDP).  

What to look out for in statements on public sector finances

Reducing the deficit is not the same as reducing debt. When the public sector borrows (runs a deficit), this adds to the total stock of cash debt. 

Revisions to public sector finance statistics are inevitable and normal. Notices alongside the statistics explaining the role of revisions are there to help communicate this uncertainty and are not a limitation of the statistics.  

Debt expressed as a percentage of GDP will also be affected by changes or revisions in GDP, as well as changes to cash debt. 

Claims that refer to changes in debt resulting specifically from policy action should be clear on how this has been measured and what is the reference point. For example, policy actions may mean that debt is lower in a specific year than previously forecast, but still rising over time. 

Analogies are sometimes made between government debt and deficit statistics and household finances. However, care should be taken as there are fundamental differences between the two, including that government has powers to raise future revenue through taxation. 

Questions you can ask yourself 

How is debt defined? The statement should be clear on whether it refers to the broadest measure of public sector net debt, the narrower measure that excludes public sector banks, or the underlying measure that excludes public sector banks and the Bank of England? It should also be clear on whether it is referring to debt in cash terms or as a percentage of GDP. 

What time period does the statement cover? Claims that debt is falling should be clear on whether it means debt has fallen in the latest month or over a longer period in the outturn data. Alternatively, if it is comparing forecasted levels of debt, it should be clear that this is the case. 

Is the UK position being compared with that of other countries? International comparisons should be clear about the source, time period, and the definition of debt being used. For example, it isn’t always possible to make like-for-like comparisons of heading debt and deficit statistics with other countries, as other countries normally do not report figures for the whole public sector. 

Similar questions should be asked about other aspects of public sector finances, for example borrowing. 

Wider support

ONS publishes a Public sector finances Quality and Methodology Information article, detailing the methodology of the statistics, and an article on the effects of the economy on public sector net debt.  

The OBR publishes guidance and contextual information in its Guide to public finances. 

The Institute for Fiscal Studies (IFS) is an independent economics research institute. The IFS publishes its own analysis and forecasts on a range of economic and fiscal topics.