Public Sector Finances UK September 2022

21st October 2022

Public sector net borrowing excluding public sector banks (PSNB ex) was £20.0 billion in September 2022, which was £2.2 billion more than in September 2021 and the second highest September borrowing since monthly records began in 1993, being £8.2 billion lower than in September 2020 at the height of the coronavirus (COVID-19) pandemic.

Central government current (or day-to-day) expenditure was £79.3 billion in September 2022, which was £5.8 billion more than in September 2021; this largely reflected a £2.5 billion increase in debt interest payable, and a £4.4 billion increase in net social benefit payments being partially offset by a £1.4 billion reduction in subsidy payments.

Central government debt interest payable was £7.7 billion in September 2022, which was £2.5 billion more than in September 2021 and the highest September figure since monthly records began in April 1997; the volatility in interest payable is largely because of the effect of Retail Prices Index (RPI) changes on index-linked gilts.

Central government receipts were £71.2 billion in September 2022, which was £7.0 billion more than in September 2021; of this, tax receipts were £52.0 billion, which was £4.5 billion more than in September 2021.

PSNB ex was £72.5 billion in the financial year to September 2022; this was £24.9 billion less than in the same period last year but £35.6 billion more than in the financial year to September 2019, before the coronavirus pandemic.

Central government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was £13.7 billion in September 2022, which was £0.9 billion less than in September 2021; this brought the total to £43.1 billion in the financial year to September 2022.

Public sector net debt excluding public sector banks (PSND ex) was £2,450.2 billion at the end of September 2022, or around 98.0% of gross domestic product (GDP), which was an increase of £213.0 billion or 2.5 percentage points of gross domestic product (GDP) compared with September 2021.

Public sector net debt excluding public sector banks and the Bank of England (PSND ex BoE) was £2,128.7 billion at the end of September 2022, or around 85.1% of GDP, which was an increase of £120.8 billion but a reduction of 0.6 percentage points of GDP compared with September 2021.

Borrowing in September 2022
In September 2022, initial estimates show that the public sector spent more than it received in taxes and other income. This required it to borrow £20.0 billion, which was £5.2 billion more than the £14.8 billion forecast by the Office for Budget Responsibility (OBR).

Central government forms the largest part of the public sector and the relationship between its receipts and expenditure is the key determinant of public sector current budget deficit and borrowing.

Central government receipts
Central government receipts in September 2022 were estimated to have been £71.2 billion, which was £7.0 billion more than in September 2021. Of these receipts, tax revenue increased by £4.5 billion to £52.0 billion.

Energy profits levy
This month we have included estimates for the Energy Profits Levy (EPL), a new levy on the profits of oil and gas companies, for the first time. For more information, see GOV.UK's Energy Profits Levy Factsheet - 26 May 2022. Classified as a tax on the profits of oil and gas companies operating in the UK and the UK Continental Shelf, EPL receipts are recorded as a sub-component of corporation tax, increasing each of our previously published estimates by £0.7 billion in each month from June 2022 to date on an accrued basis.

Central government expenditure
Central government bodies spent £79.3 billion on current (or day-to-day) expenditure in September 2022, which was £5.8 billion more than in September 2021.

Interest payable on central government debt
Since mid-2021, the cost of servicing central government debt has increased considerably. These rising costs do not principally reflect recent increases in the level of government debt, nor is the change in servicing costs driven by large increases in the interest - or coupon - payments by government. Instead the recent high levels of debt interest payable are largely a result of higher inflation, with the interest payable on index-linked gilts rising in line with the Retail Prices Index (RPI).

In September 2022, the interest payable on central government debt was £7.7 billion, of which £4.7 billion reflected the impact of the RPI.

Net social benefits
In September 2022, net social benefit payments were £25.7 billion, £4.4 billion more than in September 2021. This increase was largely because of an increase in cost-of-living payments, chiefly enhanced Winter Fuel Payments that are recorded each September to be paid out during November and December.

Subsidies
In September 2022, subsidies paid by central government were £2.5 billion, £1.4 billion less than in September 2021. This reduction is largely because of the ending of payments related to the job support schemes paid during the coronavirus pandemic period.

Central government receipts
Central government receipts in the financial year (FY) to September 2022 were £436.4 billion, which was £53.1 billion more than a year earlier. Of these, tax receipts were £319.8 billion, which was £35.8 billion more than in the FY to September 2021.

Borrowing in the financial year ending March 2022
The public sector borrowed £133.3 billion in the financial year ending (FYE) March 2022. This was £5.5 billion more than the £127.8 billion forecast by the Office for Budget Responsibility (OBR) in its Economic and fiscal outlook - March 2022. However, this was less than half of the £312.6 billion borrowed in the FYE March 2021.

Debt
Public sector net debt excluding public sector banks (PSND ex) was £2,450.2 billion at the end of September 2022, which was an increase of £213.0 billion compared with September last year.

The extra funding required by government over the course of the coronavirus (COVID-19) pandemic, combined with reduced cash receipts and a fall in gross domestic product (GDP), have all helped to push public sector net debt at the end of September 2022 to 98.0% of GDP.

Debt is largely made up of gilts (or bonds) issued to investors by central government. Of the £2,056.4 billion gilts in circulation at the end of September 2022:

£1,506.8 billion are conventional gilts that pay a fixed interest rate

£549.6 billion are index-linked gilts that pay an interest rate pegged to the Retail Prices Index (RPI) and are recorded at their redemption value

The Bank of England's contribution to debt
The Bank of England's (BoE) contribution to public sector net debt is largely a result of its quantitative easing activities. These include both the gilt-purchasing activities and corporate bond holdings of the Asset Purchase Facility Fund (APF) and loans made under Term Funding Schemes (TFS).

Our measure of public sector net debt excluding the public sector banks and the Bank of England (PSND ex BoE) removes the debt impact of these schemes along with the other transactions relating to the normal operations of the BoE. Standing at £2,128.7 billion at the end of September 2022 (or around 85.1% of GDP), PSND ex BoE was £321.5 billion (or 12.9 percentage points of GDP) less than PSND ex.

Quantitative easing
On 28 September 2022, the BoE announced an intervention in the market in order to maintain financial stability through the temporary purchase of long-dated UK government bonds (gilts). As these gilt market operations are very similar to those used by the BoE in its quantitative easing, we have recorded these additional temporary gilt holdings within our APF estimates.

The APF's gilt holdings currently stand at £730.7 billion (at redemption value), a reduction of £1.0 billion compared with August 2022. This change was a result of a £5.8 billion redemption of gilts held by the APF that was partially offset by the purchase of £4.9 billion of gilts under its temporary holdings of long-dated UK government bonds scheme. For more information on their market operations, see the Bank of England's Results and usage data.

It is important to understand that this £730.7 billion (conventional) gilt holding is not recorded directly as a component of public sector net debt. Instead, in September 2022, we record the £110.8 billion difference between the £841.5 billion of reserves created to purchase gilts (at market value) and the £730.7 billion redemption value of the gilts purchased.

Public sector net financial liabilities
Public sector net financial liabilities excluding public sector banks (PSNFL ex) provides a more comprehensive measure of the public sector balance sheet. It captures a wider range of financial assets and liabilities than recorded in PSND ex, such as the assets held under the TFS, which fall outside the boundary of PSND ex.

PSNFL ex was £2,126.5 billion at the end of September 2022 (or around 85.0% of GDP), which was £323.7 billion (or 13.0 percentage points of GDP) less than PSND ex.

Note
The above are extracts from the ONS report. To read it in full with many links to other data go HERE