Chapter C - continued
C66 In 2001-02 and 2002-03, departmental expenditure was controlled on a 'near cash' basis. Table C13 shows outturns and plans on this basis. Both tables have been updated since the Pre-Budget Report to reflect transfers between departments and programmes, additions and allocations from central funds and reclassifications.
C67 At the Pre-Budget Report planned DEL for 2002-03 on a 'near cash' basis was £231.4 billion. Since then £2.3 billion has been added to total planned DEL reflecting the addition to the special reserve and classification changes, giving a total planned DEL of £233.7 billion. As Table C13 shows, in 2002-03 total DEL spending remains within plans. In line with previous practice, an allowance for shortfall of £4.0 billion, representing estimates of the likely underspend beneath departmental estimates, is made.
| Table C13: Departmental Expenditure Limits on a 2000 Spending Review basis - resource and capital budgets | |||
| £ billion | |||
| Outturn | Estimate | ||
| 2001-02 | 2002-03 | ||
| Resource Budget | |||
| Education and Skills | 16.5 | 20.0 | |
| Health | 48.7 | 54.5 | |
| of which: NHS | 47.5 | 52.3 | |
| Transport | 2.7 | 3.1 | |
| Office of the Deputy Prime Minister | 1.3 | 1.8 | |
| Local government | 36.9 | 37.4 | |
| Home Office | 9.7 | 10.4 | |
| Lord Chancellor's departments | 2.9 | 3.1 | |
| Attorney General's departments | 0.4 | 0.5 | |
| Defence | 18.5 | 20.2 | |
| Foreign and Commonwealth Office | 1.3 | 1.4 | |
| International Development | 3.2 | 3.4 | |
| Trade and Industry | 3.5 | 3.8 | |
| Environment, Food and Rural Affairs | 2.7 | 2.2 | |
| Culture, Media and Sport | 1.0 | 1.2 | |
| Work and Pensions | 6.2 | 7.4 | |
| Scotland1 | 14.2 | 16.1 | |
| Wales1 | 7.5 | 8.5 | |
| Northern Ireland Executive1 | 4.7 | 5.7 | |
| Northern Ireland Office | 1.0 | 1.1 | |
| Chancellor's departments | 3.8 | 4.2 | |
| Cabinet Office | 1.3 | 1.4 | |
| Invest to Save Budget | 0.0 | 0.0 | |
| Capital Modernisation Fund | 0.0 | 0.0 | |
| Reserve | 0.0 | 0.0 | |
| Unallocated special reserve2 | 0.0 | 2.0 | |
| Allowance for shortfall | 0.0 | -3.1 | |
| Total Resource Budget DEL | 188.1 | 206.3 | |
| Capital Budget | |||
| Education and Skills | 2.5 | 3.2 | |
| Health | 1.9 | 2.2 | |
| of which: NHS | 1.8 | 2.1 | |
| Transport | 4.3 | 5.6 | |
| Office of the Deputy Prime Minister | 2.6 | 3.2 | |
| Local government | 0.1 | 0.2 | |
| Home Office | 0.8 | 1.1 | |
| Lord Chancellor's departments | 0.1 | 0.1 | |
| Attorney General's departments | 0.0 | 0.0 | |
| Defence | 5.9 | 6.3 | |
| Foreign and Commonwealth Office | 0.1 | 0.1 | |
| International Development | 0.0 | 0.0 | |
| Trade and Industry | 0.5 | 1.0 | |
| Environment, Food and Rural Affairs | 0.5 | 0.6 | |
| Culture, Media and Sport | 0.1 | 0.1 | |
| Work and Pensions | 0.2 | 0.2 | |
| Scotland1 | 2.2 | 2.0 | |
| Wales1 | 0.9 | 1.1 | |
| Northern Ireland Executive1 | 0.5 | 0.5 | |
| Northern Ireland Office | 0.0 | 0.1 | |
| Chancellor's departments | 0.2 | 0.4 | |
| Cabinet Office | 0.2 | 0.2 | |
| Invest to Save Budget | 0.0 | 0.0 | |
| Capital Modernisation Fund | 0.0 | 0.0 | |
| Reserve | 0.0 | 0.0 | |
| Allowance for shortfall | 0.0 | -0.9 | |
| Total Capital Budget DEL | 23.7 | 27.3 | |
| Total Departmental Expenditure Limits | 211.8 | 233.7 | |
| Total education spending | 49.4 | 53.6 | |
1 For Scotland and Wales and Northern Ireland, the split between current and capital budgets is decided by the respective executives.
|
|||
C68 Table C14 shows changes in DEL and AME components since the Pre-Budget Report. It has also been updated to incorporate reclassifications including between DEL and AME as well as between current and capital DEL, and the reduction in DEL brought about by the reallocation of the Capital Modernisation Fund (CMF) and measures announced in this Budget. Net public service pensions figures are now reported on a Financial Reporting Standard 17 (FRS17) basis. This means that the measure of expenditure for this component has changed from being a cash record of flows in and out of the schemes to one that records the movements in the liability of the various pension schemes, including the accruing costs as members serve additional years. Additional non-cash costs are also now included in the non-cash items in AME line. This change is neutral on TME but does mean that meaningful comparisons between the net public service pensions, non-cash items in AME and the accounting adjustments lines shown in Table C11 and in the Pre-Budget Report cannot be made and these lines have therefore been excluded from this table.
C69 As described in Chapter 6, the Government has made a special reserve allocation of £3 billion to ensure that resources are available to cover the full cost of the UK's military obligations in Iraq, of which £1 billion has already been allocated to the Ministry of Defence budget. The full amount of the provision has been allocated to 2002-03, although it is not yet clear when these costs will fall. In the light of continuing uncertainty, and in order to protect committed investment while responding prudently to heightened global risks, the Government has decided to make no further allocations from the CMF. Instead, the unallocated CMF funding will contribute towards the rebuilding of the AME margin to ensure that the public spending projections include a prudent and cautious safety margin against unexpected events.
C70 Total DEL spending in 2002-03, net of depreciation, is now estimated to be around £2.7 billion higher than in the Pre-Budget Report. £2.2 billion of this is due to the further allocations to the special reserve of £2 billion and a £0.2 billion increase in capital DEL from reclassified PFI projects. The remainder reflects changes in non-cash items, other than depreciation, which are then removed in the AME accounting adjustments and are therefore TME neutral. DEL changes in later years are due to reclassifications and other switches between DEL and AME and between resource and capital DEL.
| Table C14: Changes to Total Managed Expenditure since the 2002 Pre-Budget Report | |||||
| £ billion | |||||
| Outturn | Estimate | Projections | |||
| 2001-02 | 2002-03 | 2003-04 | 2004-05 | 2005-06 | |
| Departmental Expenditure Limits | |||||
| Resource Budget | 2.7 | 11.4 | -3.3 | -3.2 | -3.2 |
| Capital Budget | -0.1 | -0.6 | -0.1 | -0.8 | -1.0 |
| Less depreciation | 0.0 | -8.1 | 0.7 | 0.4 | 0.4 |
| Total Departmental Expenditure Limits1 | 2.6 | 2.7 | -2.7 | -3.7 | -3.9 |
| Annually Managed Expenditure | |||||
| Social security benefits | -0.2 | 0.6 | 0.9 | 1.0 | 0.9 |
| Tax credits | 0.1 | -0.2 | 0.0 | -0.2 | -0.2 |
| Housing Revenue Account subsidies | 0.0 | 0.0 | 0.1 | -0.2 | -0.1 |
| Common Agricultural Policy | -0.1 | 0.2 | 0.0 | -0.1 | -0.2 |
| National Lottery | 0.0 | -0.1 | 0.0 | 0.0 | 0.0 |
| Other departmental expenditure | -0.5 | 0.8 | 1.6 | 0.7 | 1.1 |
| Net payments to EC institutions | 0.0 | 0.7 | 0.1 | 0.0 | 0.0 |
| Locally financed expenditure | -0.4 | -0.2 | 0.7 | 1.2 | 1.4 |
| Central government gross debt interest | -0.1 | 0.1 | 0.3 | -0.6 | 0.4 |
| Public corporations' own-financed capital expenditure | -0.4 | -0.4 | -0.2 | 0.1 | 0.1 |
| AME margin | 0.0 | -0.1 | -0.8 | 1.5 | 2.5 |
| Annually Managed Expenditure | -4.9 | -1.5 | 3.6 | 6.7 | 8.8 |
| Total Managed Expenditure | -2.3 | 1.2 | 0.9 | 3.0 | 4.9 |
| of which: | |||||
|
|
-3.0 | 3.7 | 1.8 | 2.2 | 3.9 |
|
|
0.7 | -2.1 | -0.7 | 1.1 | 1.3 |
|
|
0.0 | -0.3 | -0.3 | -0.3 | -0.3 |
1 DEL in 2001-02 and 2002-03 is controlled on a 'near cash' basis as set out in paragraph C67. |
|||||
C71 Forecasts of individual AME programmes were reviewed in the Pre-Budget Report and have been reviewed again for this Budget. In addition, and following usual practice, the Government has decided to reset the AME margin to £1 billion in 2003-04, £2 billion in 2004-05 and £3 billion in 2005-06.
C72 The main economic assumptions underpinning AME projections are set out in Box C1 and Table C3. In particular, it is assumed that UK claimant unemployment will increase slightly, in line with the average of independent forecasts, from its recent level of 0.93 million (the average of the three months ending in March 2003) to 1.03 million in 2005-06.
C73 Higher forecasts for inflation - which affects the uprating of benefits - and claimant unemployment have increased the social security expenditure forecast since the Pre-Budget Report by around £1/2 billion from 2004-05. New interim population projections based on the 2001 Census have also had an upward effect of around £0.2 billion from 2004-05, largely because of an increase in the forecast growth of the pensioner population. In addition, the additional funding for pensioners and other social security payments announced in this Budget add a further £0.2 billion in the last two years.
C74 Locally financed expenditure is also higher at the end of the projection period, and reflects the convention of forward projections based on the average of recent years' council tax increases. However, this has a broadly neutral impact on the fiscal balances as it is matched by additional resources raised at the local level.
C75 With the exception of 2004-05, central government gross debt interest payments are higher than at the Pre-Budget Report. This reflects higher borrowing and higher forecasts for inflation, affecting the accrued uplift on index-linked gilts, offset by lower market expectations for interest rates. In 2004-05 the forecast for inflation is lower than at the Pre-Budget Report and this, in combination with lower interest rates, more than offsets the effects of higher borrowing.
C76 The main accounting adjustments, which consist of those items within TME but outside DEL and AME main programmes, are shown in Table C15. Accounting adjustments also reflect the impact on DEL of a fall in the cost of capital charge made to departments. This change is TME neutral and constitutes a reduction in non-cash spending in DEL and a corresponding reduction in AME of the accounting adjustment that removes non-cash spending.
| Table C15: Accounting adjustments | |||||
| £ billion | |||||
| Outturn | Estimate | Projections | |||
| 2001-02 | 2002-03 | 2003-04 | 2004-05 | 2005-06 | |
| Removal of non-cash spending in DEL1 | -11.2 | -10.0 | -6.6 | -6.9 | -7.3 |
| Financial transactions in DEL | -1.6 | -1.5 | -1.9 | -1.4 | -1.4 |
| Removal of non-cash spending in AME | -29.4 | -27.1 | -23.6 | -24.7 | -25.6 |
| Financial transactions in AME | 0.1 | -0.4 | -0.1 | 0.7 | 0.6 |
| Adjustments for public corporations | 3.3 | 3.1 | 3.6 | 3.6 | 3.8 |
| Central government non-trading capital consumption | 8.3 | 8.5 | 9.0 | 9.4 | 9.9 |
| VAT refunded on general government expenditure | 7.6 | 8.8 | 9.8 | 10.6 | 11.6 |
| EC contributions | -6.1 | -4.2 | -4.5 | -4.2 | -4.1 |
| Tax credits | 0.9 | 1.3 | 0.8 | 0.8 | 0.9 |
| Intra-general government debt interest | -3.0 | -3.6 | -2.5 | -2.8 | -2.8 |
| Other accounting adjustments | -1.1 | -1.7 | -2.0 | -0.7 | -0.9 |
| Total accounting adjustments | -32.2 | -26.7 | -18.0 | -15.7 | -15.4 |
1 Excluding depreciation in resource DEL. |
|||||
C77 Table C16 shows public sector capital expenditure from 2001-02 to 2005-06.
| Table C16: Public sector capital expenditure | |||||
| £ billion | |||||
| Outturn | Estimate | Projections | |||
| 2001-02 | 2002-03 | 2003-04 | 2004-05 | 2005-06 | |
| Capital Budget DEL | 18.0 | 20.7 | 25.1 | 26.8 | 29.1 |
| Locally financed expenditure | 1.2 | 1.3 | 1.5 | 1.8 | 1.7 |
| National Lottery | 0.9 | 0.9 | 1.2 | 1.1 | 0.8 |
| Public corporations' own-financed capital expenditure | 1.5 | 2.2 | 2.6 | 2.7 | 2.7 |
| Other capital spending in AME | 1.3 | 0.9 | 2.9 | 5.1 | 5.9 |
| AME margin | 0.0 | 0.0 | 0.1 | 0.8 | 1.1 |
| Public sector gross investment1 | 23.0 | 26.0 | 33.4 | 38.2 | 41.3 |
| Less depreciation | 13.4 | 13.8 | 14.4 | 15.2 | 15.9 |
| Public sector net investment | 9.6 | 12.2 | 18.9 | 23.0 | 25.4 |
| Proceeds from the sale of fixed assets2 | 4.3 | 4.5 | 3.8 | 3.8 | 3.8 |
1 This and previous lines are all net of sales of fixed assets.
|
|||||
C78 Table C17 shows estimated receipts from loans and sales of assets from 2001-02 to 2005-06. The figures for sales of financial assets include proceeds of £0.1 billion for the sale of a stake in QinetiQ (formerly the Defence Evaluation and Research Agency) in the first quarter of 2003. The total proceeds of the Public Private Partnership (PPP) will be £0.2 billion, including receipts in 2001-02 and those due in future years.
| Table C17: Loans and sales of assets | |||||
| £ billion | |||||
| Outturn | Estimate | Projections | |||
| 2001-02 | 2002-03 | 2003-04 | 2004-05 | 2005-06 | |
| Sales of fixed assets | |||||
| Central government | 0.9 | 1.0 | 1.0 | 1.0 | 1.0 |
| Local authorities | 3.4 | 3.5 | 2.8 | 2.8 | 2.8 |
| Total sales of fixed assets | 4.3 | 4.5 | 3.8 | 3.8 | 3.8 |
| Total loans and sales of financial assets | -1.8 | -2.6 | -2.1 | -1.4 | -1.5 |
| Total loans and sales of assets | 2.5 | 1.9 | 1.6 | 2.4 | 2.2 |
PRIVATE FINANCE INITIATIVE
C79 Under the Private Finance Initiative (PFI) the public sector purchases services from a private sector partner. In addition to requiring capital investment to be undertaken by the private sector, the ability of the private sector partner to be innovative and manage risks appropriately allocated to it can result in a specified level of service at a price that represents value for money.
C80 The PFI has now become one of the established methods of delivering many public services that require significant investment in capital assets. Projects have been approved in such diverse areas as schools, colleges, hospitals, local authorities, defence and property management since May 1997. Approval of a PFI scheme depends on value-for-money based on an assessment of the lifetime costs of both providing and maintaining the underlying asset and the running costs of delivering the required service.
C81 The Government is committed to developing PFI and other partnership arrangements with the private sector to further enhance the delivery of public services, ensure value for money for the public sector and to ensure the delivery of a higher sustainable level of public sector investment. The Government wants to exploit all commercial potential and spare capacity in public sector assets through a sensible balance of risk and reward.
C82 Table C18 shows a breakdown by department of the estimated public sector investment resulting from signed contracts and Table C19 shows those expected to reach preferred bidder stage within the next three years.
C83 Under PFI, the public sector contracts for services facilities availability and management not assets. Capital investment is only one of the activities undertaken by the private sector in order to supply these services. The figures in Tables C18 and C19, therefore, do not reflect the total value of the contracts.
| Table C18: Departmental estimate of capital spending by the private sector (signed deals) | |||
| £ million | |||
| Projections | |||
| 2003-04 | 2004-05 | 2005-06 | |
| Education and Skills1 | 0 | 0 | 0 |
| Health | 338 | 210 | 89 |
| Transport2 | 6 624 | 552 | 370 |
| Local government3,4 | 1 940 | 2 330 | 2 700 |
| Home Office | 186 | 150 | 46 |
| Lord Chancellor's department | 52 | 6 | 11 |
| Defence | 175 | 0 | 0 |
| Foreign and Commonwealth Office | 5 | 5 | 5 |
| Trade and Industry | 6 | 2 | 0 |
| Environment, Food and Rural Affairs | 3 | 0 | 0 |
| Work and Pensions | 14 | 22 | 0 |
| Scotland | 381 | 330 | 1 |
| Wales | 43 | 34 | 0 |
| Northern Ireland Executive | 13 | 3 | 0 |
| Chancellor's departments | 49 | 24 | 11 |
| Cabinet Office | 12 | 4 | 0 |
| Total | 9 841 | 3 672 | 3 233 |
1 Excludes private finance activity in education institutions classified to the private sector. Schools projects funded through Revenue Support Grant are included in the local government figures.
|
|||
| Table C19: Estimated aggregated capital value of projects at preferred bidder stage | |||
| £ million | |||
| Projections | |||
| 2003-04 | 2004-05 | 2005-06 | |
| Health | 145 | 197 | 193 |
| Transport1 | 10 759 | 32 | 11 |
| Home Office | 26 | 17 | 0 |
| Lord Chancellor's department | 19 | 19 | 0 |
| Defence | 1 364 | 1 393 | 0 |
| Scotland | 9 | 48 | 16 |
| Wales | 96 | 0 | 0 |
| Northern Ireland Executive | 31 | 33 | 0 |
| Total | 12 449 | 1 739 | 220 |
1 The 2003-04 figure includes the estimated capital value of the LUL PPP contracts not yet signed over the next 15 years.
|
|||
C84 Table C20 shows a forecast of the estimated payments for services flowing from new private investment in signed projects over the next 25
C84 Table C20 shows a forecast of the estimated payments for services flowing from new private investment in signed projects over the next 25 years. Actual expenditure will depend on the details of the payment mechanism for each contract. Payments may be lower than estimated due to deductions from the service payments caused by the supplier's failure to meet the required performance standards. In addition, variances may occur due to changes in the service requirements agreed during the course of the contracts. Payments may also vary as a result of the early termination of a contract triggering contractual arrangements for compensation on termination.
| Table C20: Estimated payments under PFI contracts - April 2003 (signed deals)1 | |||
| £ billion | |||
| Projections | |||
| 2003-04 | 5.4 | 2016-17 | 4.8 |
| 2004-05 | 5.7 | 2017-18 | 4.1 |
| 2005-06 | 5.8 | 2018-19 | 3.6 |
| 2006-07 | 6.0 | 2019-20 | 3.4 |
| 2007-08 | 6.0 | 2020-21 | 3.6 |
| 2008-09 | 5.8 | 2021-22 | 3.2 |
| 2009-10 | 5.8 | 2022-23 | 3.1 |
| 2010-11 | 5.6 | 2023-24 | 3.1 |
| 2011-12 | 5.3 | 2024-25 | 3.1 |
| 2012-13 | 5.1 | 2025-26 | 3.0 |
| 2013-14 | 5.0 | 2026-27 | 1.6 |
| 2014-15 | 4.9 | 2027-28 | 1.3 |
| 2015-16 | 4.8 | 2028-29 | 1.2 |
1 The figures between 2003-04 and 2016-17 include estimated payments for the Tubelines LUL PPP contracts. These contracts contain periodic reviews every 7.5 years and therefore the service payments are not fixed after 2009-10.
|
|||
|
Box C2: Transparency in reporting liabilities and contingent liabilities The United Kingdom is one of the few countries in the world in which the Government has a statutory requirement to report its liabilities, assets and all other key financial information in the same way as private sector companies. Since 1997, the Government has introduced a series of reforms to ensure greater transparency and increased availability of information about national and departmental finances. The Code for fiscal stability commits the Government to apply best-practice accounting methods in the production of its accounts. In 2000, the Government introduced new legislation that requires departmental accounts to follow Generally Accepted Accounting Practices (UK GAAP), adapted as necessary for the public sector context. In line with these statutory requirements, departments now produce full resource accounts. The UK has an extremely transparent system for reporting liabilities, including contingent liabilities:
The Government is committed to further improvements. In particular, it is working towards the production of Central Government Accounts (CGA) as part of the staged approach to preparing Whole of Government Accounts (WGA). Both CGA and WGA represent a significant step forward by making available, for the first time, consolidated accounts information about central government and, subsequently, the public sector as a whole. One of the benefits of CGA and WGA will be consolidated information on contingent liabilities. |
FINANCING REQUIREMENT
C85 Table C21 presents projections of the net cash requirement by sector, giving details of financial transactions that do not affect net borrowing (the change in the sector's net financial indebtedness) but do affect its financing requirement. The large difference in accounts receivable/payable between 2002-03 and 2003-04 is due to a combination of factors affecting differences between cash and accrued receipts and spending. This is partly a result of the cash and accrual implications of the national insurance contribution measures announced in Budget 2002. These increase accrued receipts by more than cash receipts - reducing public sector net borrowing by more than the public sector net cash requirement.
| Table C21: Public sector net cash requirement | ||||||||
| £ billion | ||||||||
| 2002-03 | 2003-04 | |||||||
| General government | General government | |||||||
| Central | Local | Public | Public | Central | Local | Public | Public | |
| government | authorities | corporations | sector | government | authorities | corporations | sector | |
| Net borrowing | 24.5 | -0.7 | 0.1 | 24.0 | 27.2 | -0.1 | 0.2 | 27.3 |
| Financial transactions | ||||||||
| Net lending to private sector and abroad | 2.7 | -0.1 | 0.0 | 2.6 | 2.2 | -0.1 | 0.0 | 2.1 |
| Cash expenditure on company securities | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Accounts receivable/payable | -1.0 | 0.0 | 0.0 | -1.0 | 4.7 | -0.1 | 0.0 | 4.7 |
| Adjustment for interest on gilts | -1.5 | 0.0 | 0.0 | -1.5 | -1.0 | 0.0 | 0.0 | -1.0 |
| Miscellaneous financial transactions | -1.7 | 0.0 | 0.1 | -1.6 | 0.0 | 0.0 | -0.7 | -0.7 |
| Own account net cash requirement | 23.0 | -0.8 | 0.2 | 22.5 | 33.2 | -0.3 | -0.5 | 32.4 |
| Net lending within the public sector | -1.6 | 1.5 | 0.1 | 0.0 | 2.1 | -0.3 | -1.9 | 0.0 |
| Net cash requirement1 | 21.4 | 0.7 | 0.3 | 22.5 | 35.3 | -0.5 | -2.3 | 32.4 |
1 Market and overseas borrowing for local government and public corporation sectors. |
||||||||
C86 In order to comply with the Code for fiscal stability, the Provisional Debt Management Report 2003-04 (PDMR) was published on 20 March 2003 in advance of Budget 2003. As well as updating the financing arithmetic for 2002-03, it also outlined provisional financing plans for 2003-04. The forecasts for both years' financing arithmetic were based on the public finance forecasts published in the Pre-Budget Report. For 2003-04, the provisional net financing requirement was £51.3 billion. This was to be met by gross gilts issuance of
£40 billion and a £9.8 billion adjustment in the net short-term debt position.
C87 Table C22 updates the financing arithmetic for both 2002-03 and 2003-04 in line with the new forecasts for the public finances. The forecast for the central government net cash requirement for 2002-03 is £21.4 billion, an increase of £2.7 billion from the Pre-Budget Report forecast. Additionally, there have been changes to the level of the Debt Management Office's (DMO's) buy-backs of near maturity stock, their cash deposit at the Bank of England (BoE) and National Savings and Investments' (NS&I's) net contribution. Overall, this means that the net financing requirement for 2002-03 has been revised to £38.3 billion. This was met by gross gilts sales in 2002-03 of £26.3 billion and a net short-term debt adjustment of £12 billion. These changes have resulted in an end-March 2003 level for the DMO's net cash position of £4.5 billion, £2.3 billion lower than forecast in the PDMR.
C88 The forecast for the central government net cash requirement for 2003-04 is £35.3 billion, an increase of £5.1 billion from the forecast published in the PDMR. The net financing requirement is forecast to be £54.8 billion, an increase of £5 billion from the forecast published in the PDMR .
C89 In order to meet this financing requirement, the DMO's remit has been revised such that:
- gross gilt sales have been increased by £7.4 billion to £47.4 billion; and
- net-short term debt sales have decreased by £2.4 billion to £7.4 billion.
C90 Full details of these measures and complete financing tables for 2002-03 and 2003-04 can be found in the Debt and Reserves Management Report 2003-04, which is being published alongside this Budget.
| Table C22: Financing requirement forecast | |||||||
| £ billion | |||||||
| 2002-03 | 2003-04 | ||||||
| Mar-2002 | Apr-2002 | Nov- 2002 |
Mar-2003 | Apr-2003 | Mar-2003 | Apr-2003 | |
| Original remit1 | Budget remit | Pre-Budget Report | PDMR2 | Budget | PDMR2 | Budget | |
| Central government net cash requirement | 13.6 | 13.5 | 18.7 | 18.7 | 21.4 | 30.2 | 35.3 |
| Gilt redemptions | 17.2 | 17.0 | 17.0 | 17.0 | 17.0 | 21.1 | 21.1 |
| Debt buy-backs | 0.0 | 0.0 | 0.3 | 0.3 | 0.4 | 0.0 | 0.0 |
| Gross financing requirement | 30.8 | 30.5 | 36.0 | 36.0 | 38.8 | 51.3 | 56.4 |
| Less assumed net NS&I's contribution | -1.5 | -1.5 | -1.0 | 0.2 | 0.7 | 1.5 | 1.5 |
| Less change in DMO's cash balance at BoE | 0.0 | -0.1 | -0.1 | -0.1 | -0.2 | 0.0 | 0.1 |
| Net financing requirement | 32.3 | 32.1 | 37.1 | 35.9 | 38.3 | 49.8 | 54.8 |
| Financed by | |||||||
| Gross gilt sales | 23.0 | 22.4 | 26.2 | 26.4 | 26.3 | 40.0 | 47.4 |
| Changes in short term debt | 9.3 | 9.7 | 10.9 | 9.5 | 12.0 | 9.8 | 7.4 |
Note: Figures may not sum due to rounding.
|
|||||||
ANALYSIS BY SUBSECTOR AND ECONOMIC CATEGORY
C91 Table C23 shows a breakdown of general government transactions by economic category for 2001-02 to 2005-06. Table C24 shows a more detailed breakdown for public sector transactions by sub-sector and economic category for 2002-03 and 2003-04.
| Table C23: General government transactions by sub-sector | |||||
| £ billion | |||||
| Outturn | Projections | ||||
| 2001-02 | 2002-03 | 2003-04 | 2004-05 | 2005-06 | |
| Current receipts | |||||
| Taxes on income and wealth | 145.1 | 143.5 | 152.9 | 168.8 | 184.8 |
| Taxes on production and imports | 136.1 | 143.3 | 149.1 | 157.3 | 166.3 |
| Other current taxes | 18.3 | 19.8 | 22.0 | 23.7 | 25.7 |
| Taxes on capital | 2.4 | 2.4 | 2.4 | 2.7 | 2.8 |
| Social contributions | 63.1 | 63.6 | 76.2 | 80.8 | 85.1 |
| Gross operating surplus | 8.3 | 8.5 | 9.0 | 9.4 | 9.9 |
| Rent and other current transfers | 2.2 | 2.0 | 1.6 | 1.7 | 1.7 |
| Interest and dividends from private sector and abroad | 4.0 | 3.5 | 3.4 | 3.9 | 4.1 |
| Interest and dividends from public sector | 7.2 | 7.0 | 7.6 | 7.8 | 8.0 |
| Total current receipts | 386.6 | 393.7 | 424.1 | 456.0 | 488.5 |
| Current expenditure | |||||
| Current expenditure on goods and services | 196.4 | 212.7 | 232.0 | 247.3 | 264.2 |
| Subsidies | 6.0 | 7.7 | 7.6 | 8.6 | 9.9 |
| Net social benefits | 124.1 | 129.6 | 136.3 | 142.9 | 149.2 |
| Net current grants abroad | -1.9 | 0.5 | -0.2 | -0.9 | -1.6 |
| Other current grants | 19.4 | 23.2 | 23.4 | 23.7 | 26.9 |
| Interest and dividends paid | 22.4 | 21.2 | 22.2 | 23.5 | 24.6 |
| AME margin | 0.0 | 0.0 | 0.9 | 1.2 | 1.9 |
| Total current expenditure | 366.5 | 395.0 | 422.2 | 446.3 | 475.0 |
| Depreciation | 8.3 | 8.5 | 9.0 | 9.4 | 9.9 |
| Surplus on current budget | 11.8 | -9.8 | -7.0 | 0.3 | 3.6 |
| Capital expenditure | |||||
| Gross domestic fixed capital formation | 12.4 | 14.5 | 19.7 | 22.6 | 24.6 |
| Less depreciation | -8.3 | -8.5 | -9.0 | -9.4 | -9.9 |
| Increase in inventories | 0.0 | 0.5 | 0.1 | 0.3 | 0.3 |
| Capital grants (net) within public sector | 1.3 | 1.4 | 0.6 | 0.6 | 0.6 |
| Capital grants to private sector | 6.9 | 7.0 | 9.8 | 10.6 | 11.4 |
| Capital grants from private sector | -0.9 | -0.9 | -1.1 | -1.0 | -1.0 |
| AME margin | 0.0 | 0.0 | 0.1 | 0.8 | 1.1 |
| Net investment | 11.4 | 14.0 | 20.1 | 24.5 | 27.1 |
| Net borrowing1 | -0.4 | 23.8 | 27.1 | 24.2 | 23.5 |
| of which: | |||||
|
|
-0.5 | 24.5 | 27.2 | 23.0 | 23.0 |
|
|
0.1 | -0.7 | -0.1 | 1.3 | 0.5 |
1 Although this is based on the ESA95 definition of general government net borrowing (GGNB), the forecasts are identical to GGNB calculated on a Maastricht definition. |
|||||
| Table C24: Public sector transactions by sub-sector and economic category | ||||
| £ billion | ||||
| 2002-03 | ||||
| General government | ||||
| Central government | Local authorities | Public corporations | Public sector | |
| Current receipts | ||||
| Taxes on income and wealth | 143.5 | 0.0 | -0.1 | 143.5 |
| Taxes on production and imports | 143.1 | 0.1 | 0.0 | 143.3 |
| Other current taxes | 3.2 | 16.6 | 0.0 | 19.8 |
| Taxes on capital | 2.4 | 0.0 | 0.0 | 2.4 |
| Social contributions | 63.6 | 0.0 | 0.0 | 63.6 |
| Gross operating surplus | 4.7 | 3.8 | 9.2 | 17.7 |
| Rent and other current transfers | 2.0 | 0.0 | 0.6 | 2.6 |
| Interest and dividends from private sector and abroad | 2.8 | 0.7 | 0.6 | 4.1 |
| Interest and dividends from public sector | 6.2 | 0.8 | -7.0 | 0.0 |
| Total current receipts | 371.6 | 22.1 | 3.4 | 397.1 |
| Current expenditure | ||||
| Current expenditure on goods and services | 130.3 | 82.5 | 0.0 | 212.7 |
| Subsidies | 6.6 | 1.1 | 0.0 | 7.7 |
| Net social benefits | 117.0 | 12.6 | 0.0 | 129.6 |
| Net current grants abroad | 0.5 | 0.0 | 0.0 | 0.5 |
| Current grants (net) within public sector | 78.4 | -78.4 | 0.0 | 0.0 |
| Other current grants | 23.2 | 0.0 | 0.0 | 23.2 |
| Interest and dividends paid | 20.8 | 0.3 | 0.1 | 21.3 |
| AME margin | 0.0 | 0.0 | 0.0 | 0.0 |
| Total current expenditure | 376.9 | 18.0 | 0.1 | 395.0 |
| Depreciation | 4.7 | 3.8 | 5.2 | 13.8 |
| Surplus on current budget | -10.0 | 0.2 | -1.9 | -11.7 |
| Capital expenditure | ||||
| Gross domestic fixed capital formation | 5.9 | 8.7 | 4.6 | 19.1 |
| Less depreciation | -4.7 | -3.8 | -5.2 | -13.8 |
| Increase in inventories | 0.5 | 0.0 | 0.0 | 0.5 |
| Capital grants (net) within public sector | 7.3 | -5.9 | -1.4 | 0.0 |
| Capital grants to private sector | 5.9 | 1.1 | 0.3 | 7.3 |
| Capital grants from private sector | -0.4 | -0.5 | 0.0 | -0.9 |
| AME margin | 0.0 | 0.0 | 0.0 | 0.0 |
| Net investment | 14.5 | -0.5 | -1.8 | 12.2 |
| Net borrowing | 24.5 | -0.7 | 0.1 | 24.0 |
| Table C24: Public sector transactions by sub-sector and economic category | ||||
| £ billion | ||||
| 2003-04 | ||||
| General government | ||||
| Central government | Local authorities | Public corporations | Public sector | |
| Current receipts | ||||
| Taxes on income and wealth | 152.9 | 0.0 | -0.1 | 152.8 |
| Taxes on production and imports | 148.9 | 0.1 | 0.0 | 149.1 |
| Other current taxes | 3.4 | 18.6 | 0.0 | 22.0 |
| Taxes on capital | 2.4 | 0.0 | 0.0 | 2.4 |
| Social contributions | 76.2 | 0.0 | 0.0 | 76.2 |
| Gross operating surplus | 4.9 | 4.0 | 10.5 | 19.5 |
| Rent and other current transfers | 1.6 | 0.0 | 0.7 | 2.3 |
| Interest and dividends from private sector and abroad | 2.7 | 0.7 | 0.6 | 4.0 |
| Interest and dividends from public sector | 5.1 | 2.5 | -7.6 | 0.0 |
| Total current receipts | 398.2 | 26.0 | 4.2 | 428.3 |
| Current expenditure | ||||
| Current expenditure on goods and services | 139.7 | 92.3 | 0.0 | 232.0 |
| Subsidies | 6.4 | 1.1 | 0.0 | 7.6 |
| Net social benefits | 123.4 | 12.9 | 0.0 | 136.3 |
| Net current grants abroad | -0.2 | 0.0 | 0.0 | -0.2 |
| Current grants (net) within public sector | 85.3 | -85.3 | 0.0 | 0.0 |
| Other current grants | 23.4 | 0.0 | 0.0 | 23.4 |
| Interest and dividends paid | 21.8 | 0.3 | 0.1 | 22.3 |
| AME margin | 0.9 | 0.0 | 0.0 | 0.9 |
| Total current expenditure | 400.7 | 21.4 | 0.1 | 422.3 |
| Depreciation | 4.9 | 4.0 | 5.5 | 14.4 |
| Surplus on current budget | -7.5 | 0.5 | -1.4 | -8.4 |
| Capital expenditure | ||||
| Gross domestic fixed capital formation | 9.0 | 10.7 | 4.5 | 24.2 |
| Less depreciation | -4.9 | -4.0 | -5.5 | -14.4 |
| Increase in inventories | 0.1 | 0.0 | 0.0 | 0.1 |
| Capital grants (net) within public sector | 7.3 | -6.7 | -0.6 | 0.0 |
| Capital grants to private sector | 8.6 | 1.2 | 0.3 | 10.1 |
| Capital grants from private sector | -0.4 | -0.7 | 0.0 | -1.1 |
| AME margin | 0.1 | 0.0 | 0.0 | 0.1 |
| Net investment | 19.7 | 0.4 | -1.2 | 18.9 |
| Net borrowing | 27.2 | -0.1 | 0.2 | 27.3 |
HISTORICAL SERIES
| Table C25: Historical series of public sector balances, receipts and debt | ||||||||||
| Per cent of GDP | ||||||||||
| Public | Public | Cyclically | Public | General | Net taxes | Public | Public | General | Public | |
| sector | sector | adjusted public | sector | government | and social | sector | sector | government | sector | |
| current | net | sector net | net cash | net | security | current | net | gross | net | |
| budget | borrowing | borrowing | requirement | borrowing1 | contributions | receipts | debt2 | debt3 | worth4 | |
| 1970-71 | 6.7 | -0.6 | -0.8 | 1.2 | -2.1 | 43.3 | ||||
| 1971-72 | 4.2 | 1.1 | 0.5 | 1.4 | -0.7 | 41.4 | ||||
| 1972-73 | 2.0 | 2.8 | 2.7 | 3.6 | 2.2 | 39.0 | ||||
| 1973-74 | 0.3 | 4.9 | 5.7 | 5.9 | 4.4 | 39.5 | ||||
| 1974-75 | -1.1 | 6.6 | 7.2 | 9.0 | 4.1 | 42.3 | 52.1 | 60.4 | ||
| 1975-76 | -1.6 | 7.0 | 6.5 | 9.3 | 4.8 | 42.9 | 53.9 | 58.7 | ||
| 1976-77 | -1.2 | 5.5 | 4.8 | 6.4 | 4.1 | 43.3 | 52.4 | 59.1 | ||
| 1977-78 | -1.4 | 4.3 | 3.8 | 3.7 | 3.6 | 41.5 | 49.0 | 57.1 | ||
| 1978-79 | -2.6 | 5.0 | 4.8 | 5.2 | 4.3 | 33.3 | 40.2 | 47.1 | 56.2 | |
| 1979-80 | -1.9 | 4.1 | 4.0 | 4.7 | 3.0 | 33.8 | 40.7 | 43.9 | 51.8 | |
| 1980-81 | -3.0 | 4.9 | 2.9 | 5.2 | 3.8 | 35.8 | 42.4 | 46.1 | 52.9 | |
| 1981-82 | -1.4 | 2.3 | -1.7 | 3.3 | 3.3 | 38.5 | 45.8 | 46.1 | 51.7 | |
| 1982-83 | -1.5 | 3.0 | -1.1 | 3.2 | 3.1 | 38.7 | 45.5 | 44.8 | 50.4 | |
| 1983-84 | -2.0 | 3.8 | 0.6 | 3.2 | 3.8 | 38.3 | 44.5 | 45.3 | 50.4 | |
| 1984-85 | -2.2 | 3.7 | 1.0 | 3.1 | 3.3 | 38.9 | 44.4 | 45.2 | 50.3 | |
| 1985-86 | -1.2 | 2.4 | 0.9 | 1.6 | 2.6 | 38.1 | 43.1 | 43.4 | 49.5 | |
| 1986-87 | -1.4 | 2.1 | 1.9 | 0.9 | 2.3 | 37.8 | 42.0 | 41.1 | 48.9 | |
| 1987-88 | -0.3 | 1.0 | 2.1 | -0.7 | 1.3 | 37.6 | 41.1 | 36.8 | 46.5 | 75.8 |
| 1988-89 | 1.7 | -1.3 | 1.2 | -3.0 | -0.9 | 36.9 | 40.7 | 30.6 | 40.6 | 81.8 |
| 1989-90 | 1.4 | -0.2 | 2.5 | -1.3 | 0.3 | 36.2 | 39.9 | 27.7 | 35.5 | 73.5 |
| 1990-91 | 0.4 | 1.0 | 2.6 | -0.1 | 1.4 | 35.9 | 39.0 | 26.2 | 33.3 | 62.3 |
| 1991-92 | -1.9 | 3.8 | 3.2 | 2.3 | 3.7 | 34.7 | 38.6 | 27.4 | 34.4 | 54.5 |
| 1992-93 | -5.6 | 7.6 | 5.5 | 5.9 | 7.4 | 33.7 | 36.6 | 32.0 | 40.6 | 42.1 |
| 1993-94 | -6.2 | 7.8 | 5.4 | 7.1 | 7.8 | 33.0 | 35.8 | 37.1 | 45.9 | 27.9 |
| 1994-95 | -4.8 | 6.3 | 4.9 | 5.3 | 6.5 | 34.0 | 36.9 | 40.8 | 49.4 | 26.7 |
| 1995-96 | -3.4 | 4.8 | 4.1 | 4.3 | 5.0 | 34.8 | 37.8 | 42.8 | 51.9 | 18.6 |
| 1996-97 | -3.0 | 3.7 | 3.1 | 2.9 | 3.9 | 34.9 | 37.4 | 43.7 | 52.1 | 14.7 |
| 1997-98 | -0.2 | 0.8 | 0.8 | 0.1 | 0.9 | 36.0 | 38.5 | 41.4 | 49.1 | 10.6 |
| 1998-99 | 1.2 | -0.5 | -0.2 | -0.8 | -0.5 | 36.5 | 38.8 | 39.2 | 46.3 | 10.2 |
| 1999-00 | 2.2 | -1.7 | -1.4 | -0.9 | -1.7 | 36.6 | 39.1 | 36.3 | 43.2 | 15.1 |
| 2000-01 | 2.2 | -1.7 | -1.2 | -3.9 | -1.7 | 37.4 | 39.8 | 31.2 | 39.8 | 21.3 |
| 2001-02 | 1.0 | 0.0 | 0.1 | 0.3 | 0.0 | 36.8 | 38.8 | 30.2 | 37.9 | 26.2 |
1 UK National Accounts definition.
|
||||||||||
| Table C26: Historical series of government expenditure | ||||||||||
| £ billion (2001-02 prices) | Per cent of GDP | |||||||||
| Public | Public | Public | Public | Public | Public | |||||
| sector | sector | sector | Total | sector | sector | sector | Total | |||
| current | net | gross | Managed | current | net | gross | Managed | |||
| expenditure | investment | investment1 | Expenditure | expenditure | investment | investment1 | Expenditure | |||
| 1970-71 | 161.9 | 30.4 | 49.7 | 211.6 | 32.6 | 6.1 | 10.0 | 42.7 | ||
| 1971-72 | 169.3 | 26.8 | 46.6 | 215.9 | 33.3 | 5.3 | 9.2 | 42.5 | ||
| 1972-73 | 177.0 | 25.8 | 46.6 | 223.6 | 33.1 | 4.8 | 8.7 | 41.8 | ||
| 1973-74 | 194.5 | 29.0 | 52.3 | 246.8 | 35.0 | 5.2 | 9.4 | 44.4 | ||
| 1974-75 | 215.1 | 30.6 | 55.6 | 270.7 | 38.8 | 5.5 | 10.0 | 48.8 | ||
| 1975-76 | 219.8 | 30.0 | 55.3 | 275.1 | 39.9 | 5.5 | 10.0 | 49.9 | ||
| 1976-77 | 225.9 | 24.5 | 50.6 | 276.5 | 39.9 | 4.3 | 8.9 | 48.8 | ||
| 1977-78 | 222.5 | 16.6 | 42.7 | 265.2 | 38.4 | 2.9 | 7.4 | 45.8 | ||
| 1978-79 | 229.2 | 14.5 | 41.1 | 270.3 | 38.4 | 2.4 | 6.9 | 45.2 | ||
| 1979-80 | 234.9 | 13.4 | 40.5 | 275.3 | 38.2 | 2.2 | 6.6 | 44.8 | ||
| 1980-81 | 241.7 | 10.8 | 38.1 | 279.9 | 40.8 | 1.8 | 6.4 | 47.3 | ||
| 1981-82 | 252.7 | 5.5 | 32.7 | 285.4 | 42.6 | 0.9 | 5.5 | 48.1 | ||
| 1982-83 | 258.5 | 9.1 | 35.5 | 293.9 | 42.7 | 1.5 | 5.9 | 48.5 | ||
| 1983-84 | 266.7 | 11.2 | 37.5 | 304.2 | 42.3 | 1.8 | 5.9 | 48.3 | ||
| 1984-85 | 274.2 | 9.9 | 34.8 | 309.0 | 42.6 | 1.5 | 5.4 | 48.1 | ||
| 1985-86 | 274.1 | 8.3 | 30.6 | 304.7 | 41.0 | 1.2 | 4.6 | 45.5 | ||
| 1986-87 | 278.1 | 5.0 | 27.5 | 305.6 | 40.1 | 0.7 | 4.0 | 44.1 | ||
| 1987-88 | 281.8 | 4.8 | 25.6 | 307.4 | 38.6 | 0.7 | 3.5 | 42.1 | ||
| 1988-89 | 275.4 | 2.7 | 24.3 | 299.7 | 36.2 | 0.4 | 3.2 | 39.4 | ||
| 1989-90 | 277.2 | 9.3 | 31.0 | 308.2 | 35.7 | 1.2 | 4.0 | 39.7 | ||
| 1990-91 | 279.0 | 11.2 | 30.1 | 309.1 | 36.1 | 1.4 | 3.9 | 40.0 | ||
| 1991-92 | 295.8 | 14.2 | 30.2 | 325.9 | 38.4 | 1.8 | 3.9 | 42.3 | ||
| 1992-93 | 310.5 | 15.5 | 30.4 | 340.9 | 40.3 | 2.0 | 3.9 | 44.2 | ||
| 1993-94 | 320.8 | 12.7 | 27.3 | 348.1 | 40.1 | 1.6 | 3.4 | 43.6 | ||
| 1994-95 | 332.0 | 12.5 | 27.6 | 359.6 | 39.9 | 1.5 | 3.3 | 43.2 | ||
| 1995-96 | 337.1 | 12.0 | 27.3 | 364.4 | 39.4 | 1.4 | 3.2 | 42.6 | ||
| 1996-97 | 340.5 | 6.0 | 20.2 | 360.7 | 38.7 | 0.7 | 2.3 | 41.0 | ||
| 1997-98 | 337.9 | 5.4 | 19.1 | 356.9 | 37.2 | 0.6 | 2.1 | 39.3 | ||
| 1998-99 | 337.7 | 6.5 | 20.0 | 357.7 | 36.2 | 0.7 | 2.1 | 38.4 | ||
| 1999-00 | 342.3 | 4.6 | 17.9 | 360.2 | 35.6 | 0.5 | 1.9 | 37.4 | ||
| 2000-01 | 357.3 | 5.3 | 18.7 | 376.0 | 36.2 | 0.5 | 1.9 | 38.1 | ||
| 2001-02 | 366.6 | 9.6 | 23.0 | 389.6 | 36.5 | 1.0 | 2.3 | 38.8 | ||
1 Net of sales of fixed assets. |
||||||||||
CONVENTIONS USED IN PRESENTING THE PUBLIC FINANCES
|
FORMAT FOR THE PUBLIC FINANCES The June 1998 Economic and Fiscal Strategy Report (EFSR), set out a new format for presenting the public finances that corresponded more closely to the two fiscal rules. The three principle measures are:
These measures are based on the National Accounts and are consistent with the European System of Accounts 1995 (ESA95). Estimates and forecasts of the public sector net cash requirement (formerly called the public sector borrowing requirement) are still shown in the FSBR, but they are given less prominence. The fiscal rules are similar to the criteria for deficits and debt laid down in the Treaty but there are important definitional differences:
From February 2000 the Treaty deficit moved to being reported on an ESA95 basis. |
CONVENTIONS USED IN PRESENTING THE PUBLIC FINANCES
|
FORMAT FOR THE PUBLIC FINANCES The June 1998 Economic and Fiscal Strategy Report (EFSR), set out a new format for presenting the public finances that corresponded more closely to the two fiscal rules. The three principle measures are:
These measures are based on the National Accounts and are consistent with the European System of Accounts 1995 (ESA95). Estimates and forecasts of the public sector net cash requirement (formerly called the public sector borrowing requirement) are still shown in the FSBR, but they are given less prominence. The fiscal rules are similar to the criteria for deficits and debt laid down in the Treaty but there are important definitional differences:
From February 2000 the Treaty deficit moved to being reported on an ESA95 basis. |
NATIONAL ACCOUNTS
The National Accounts record most transactions, including most taxes (although not corporation tax), on an accruals basis, and impute the value of some transactions where no money changes hands (for example, non-trading capital consumption). The principle measures drawn from the National Accounts are described below.
The current budget (formerly known as the current balance) measures the balance of current account revenue over current expenditure. The definition of the current budget presented in this chapter is very similar to the National Accounts concept of net saving. It differs only in that it includes taxes on capital (mainly inheritance tax) in current rather than capital receipts.
Public sector net borrowing (formerly known as the financial deficit in the UK National Accounts) is the balance between expenditure and income in the consolidated current and capital accounts. It differs from the public sector net cash requirement in that it is measured on an accruals basis and because certain financial transactions (notably net lending and net acquisition of other financial assets, which affect the level of borrowing but not the public sector's net financial indebtedness) are excluded from public sector net borrowing but included in the public sector net cash requirement.
General government net borrowing, which excludes net borrowing of public corporations, is the most internationally comparable measure of the budget deficit. It was established as the European Commission's reported measure under the Maastricht Treaty, although its definition has since been slightly modified to depart from that in ESA95.
PUBLIC SECTOR CURRENT RECEIPTS
Net taxes and social security contributions (NTSSC) is a measure of net cash payments made to UK government and differs in several respects from the National Accounts measure of total public sector current receipts (PSCR). A reconciliation between the two aggregates is given in the lower half of Table C8. The main adjustments are:
- accruals adjustments, mainly on income tax, national insurance contributions and VAT, are added to change the basis of figures from cash to National Accounts accruals;
- some tax payments that are collected by the government, but then paid to the EC, are subtracted as they do not score as government receipts in the National Accounts;
- tax paid by public corporations is also subtracted, as it has no impact on overall public sector receipts;
- an adjustment is made for tax credits. In NTSSC, all tax credits are scored as negative tax to the extent that they are less than or equal to the tax liability of the household, and as public expenditure where they exceed the liability, in line with OECD Revenue Statistics guidelines. Although the Office for National Statistics (ONS) have adopted this treatment for the Working Tax Credit and Child Tax Credit, due to be introduced in April 2003, they have continued to treat the Working Families' Tax Credit (WFTC), the Disabled Person's Tax Credit (DPTC) and enhanced and payable company tax credits entirely as public expenditure in the National Accounts. Those parts of WFTC, DPTC and company tax credits that offset tax liability in NTSSC are added back into current receipts in Table C8; and
- interest and other non-tax receipts, which are excluded from NTSSC, are added. This excludes oil royalties, as they are already included in NTSSC, even though the National Accounts treat them as non-tax receipts.
TOTAL MANAGED EXPENDITURE
Public expenditure is measured across the whole of the public sector using the aggregate Total Managed Expenditure (TME). TME is the sum of public sector current expenditure, public sector net investment and public sector depreciation. These aggregates are based on National Accounts definitions defined under ESA95.
Public sector current expenditure is the sum of expenditure on pay, and related costs, plus spending on goods and services, and current grants made to the private sector. Current expenditure is net of receipts from sales of goods and services.
Public sector capital expenditure is shown in Table C16. It includes:
- gross domestic fixed capital formation (i.e. expenditure on fixed assets such as schools and hospitals, roads, computers, plant and machinery and intangible assets) net of receipts from sales of fixed assets (e.g. council houses and surplus land);
- grants in support of capital expenditure in the private sector; and
- the value of the physical increase in stocks (for central government, primarily agricultural commodity stocks).
Public sector net investment: in Table C1 nets off depreciation of the public sector's stock of fixed assets.
Public sector depreciation: is the annual charge that is made in relation to the reduction in value of the public sector's capital assets over a particular financial year.
For budgeting purposes, TME is further split into:
Departmental Expenditure Limits (DEL) are firm three-year spending limits for departments. In general DEL will cover all running costs and all programme expenditure except that spending that is included in departmental Annually Managed Expenditure due to it not being reasonably subject to close control over the three year period. DEL has distinct resource and capital budgets, as shown in Table C13.
Annually Managed Expenditure (AME) is spending that cannot be reasonably subject to firm multi-year limits. AME components are shown in Table C11 and are defined as follows:
Social security benefits in AME expenditure covers contributory, non-contributory and income-related benefits for children, people of working age and pensioners. Broadly, benefits are paid in respect of retirement, unemployment, incapacity or disability, caring responsibilities and bereavement, as well as housing costs for all groups. Some expenditure on housing-related benefits is, however, covered by the Housing Revenue Account subsidies and locally financed expenditure categories.
Tax credits scored as expenditure includes spending on the Working Families' Tax Credit
and Disabled Person's Tax Credit and that element of the Working Tax Credit and the Child
Tax Credit that is classified as public expenditure under National Accounts definitions. For 2001-02 to 2004-05, expenditure related to the child allowances in Income Support and Jobseekers' Allowance, which, from 2003-04, are paid as part of the Child Tax Credit, have been included in the tax credit line rather than in the social security benefits line in order to present figures on a consistent definition over the period shown.
Housing Revenue Account subsidies relates to two main areas of public expenditure: Housing Benefit paid to tenants of local authority-owned social housing; and subsidy to meet deficits on local authority Housing Revenue Accounts as part of a national redistributive system.
Common Agriculture Policy expenditure comprises direct payments to farmers and market price supports (intervention purchases and export refunds).
Net public service pensions. The main unfunded public service pension schemes, following FRS17, report any increase in liabilities accrued in the period less contributions received from employers, employees and inward transfers. This line does not include an amount for the unwinding of the discount rate on the liability (which scores elsewhere in AME). For some small unfunded schemes, information is not available on an FRS17 basis, and these schemes report the difference between the cash paid out during the year and any contributions received.
National Lottery expenditures relate to the distribution of the money received from the National Lottery for good causes. Funds are drawn down by Distributor Bodies and directed towards Lottery funded projects.
Non-cash items in AME. Under the 2002 Spending Review resource budgeting regime, a department's spending budget includes certain items that do not have a cash component at the time when the expense is recorded. Examples include depreciation, cost of capital charges and provisions.
Other departmental expenditure aggregates all other expenditure made by departments that is not separately identified in the AME table.
Net Payments to EC (European Communities) institutions is the balance between the UK's gross contribution to the EC Budget minus the UK abatement and public sector receipts from the EC Budget (net contribution to EC budget). For domestic public expenditure planning purposes part of the UK's contribution to the EC budget is attributed to the overseas aid programme and excluded from the net payments to EC institutions figures.
Locally financed expenditure consists of local authority self-financed expenditure (LASFE) and Scottish spending financed by local taxation (non-domestic rates and, if and when levied, the Scottish variable rate of income tax). LASFE is the difference between total local authority expenditure, including most gross debt interest but net of capital receipts, and central government support to local authorities (i.e. Aggregate External Finance (AEF), specific grants and credit approvals).
Central government debt interest is shown gross - only interest paid within the public sector is netted off. All other receipts of interest and dividends are included in current receipts. The capital uplift on index-linked gilts is also scored here as interest at the time it accrues as is the amortisation of discounts on gilts at issue.
Public corporations' own-financed capital expenditure. This is the amount of capital expenditure by public corporations that is not financed by general government.
AME margin is an unallocated margin on total AME spending and is included as a measure of caution against AME expenditure exceeding its forecast levels.
The accounting adjustments include various items within TME but outside DEL, which are not shown separately in Table C11. The definition of each line is as follows:
Removal of non-cash spending in DEL4 and AME pertain to a number of non-cash expenditure items recorded as DEL and AME expenditure that are not consistent with TME defined under a National Accounts basis.
Financial transactions in DEL and in AME are deducted. This is because TME measures the current and capital expenditure of the public sector, as defined in the National Accounts. This excludes expenditure on the acquisition of financial assets since in the National Accounts these are classified as financial transactions, not capital expenditure. Departmental budgets include the net acquisition of certain types of financial assets. These are assets acquired for policy purposes rather than cash flow management and typically refer to transactions in shares and lending to businesses and individuals.
Adjustments for public corporations. Under the 2002 Spending Review, departments' budgets score transactions with their public corporations. These adjustments remove those transactions and move the scoring of public corporations' spending onto a National Accounts basis.
Central government non-trading capital consumption (i.e. depreciation) as measured by ONS for National Accounts is added.
VAT refunded on general government expenditure is added back and covers refunds obtained by central government departments, local authorities and certain public corporations. DEL and AME programme expenditure are measured net of these refunds, while TME is recorded with VAT paid.
EC contribution deducts traditional own resources (i.e. payments of Customs duties and agricultural and sugar levies) and VAT contributions to European Community, which are included in the net payments to EC institutions line in AME but excluded from TME.
Tax credits are only added back if they score as public expenditure under National Accounts conventions but are not included as expenditure in AME. This includes Mortgage Interest Relief, Life Assurance Premium Relief, Private Medical Insurance Premium Relief, Vocational Training Relief (part up to 1998-99; all from 1999-2000), Working Families' Tax Credit and Disabled Person's Tax Credit (from 1999-2000) and the Research and Development Tax Credit (from 2001-02).
Intra-general government debt interest is deducted as it removes intra-public sector debt interest and dividend payments and receipts, which are included elsewhere in DEL and AME. The reason for this is that TME is consolidated public sector expenditure; so it records only those distributive transactions that are paid outside the public sector. Payments of grants and interest that are within the public sector do not score in TME. So it is necessary to deduct any interest payments to the public sector included in DEL or the debt interest figures in AME in other AME.
Other accounting adjustments shows other adjustments and includes, among others, the deduction of grants paid to local authorities by non-departmental public bodies classified to the central government sector, loan and debt write-offs and loan guarantees.
DEBT AND WEALTH
Public sector net debt is approximately the stock analogue of the public sector net cash requirement. It measures the public sector's financial liabilities to the private sector and abroad, net of short-term financial assets such as bank deposits and foreign exchange reserves.
General government gross debt, the Treaty debt ratio, is the measure of debt used in the European Union's Excessive Deficit Procedure. As a general government measure, it excludes the debt of public corporations. It measures general government's total financial liabilities before netting off short-term financial assets.
Public sector net worth represents the public sector's overall net balance sheet position. It is equal to the sum of the public sector's financial and non-financial assets less its total financial liabilities. The estimates of tangible assets are subject to wide margins of error, because they depend on broad assumptions, for example about asset lives, which may not be appropriate in all cases. The introduction of resource accounting for central government departments will lead in time to an improvement in data quality, as audited information compiled from detailed asset registers becomes available.
4 Excluding depreciation in resource DEL.
Chapter C - continued
C66 In 2001-02 and 2002-03, departmental expenditure was controlled on a 'near cash' basis. Table C13 shows outturns and plans on this basis. Both tables have been updated since the Pre-Budget Report to reflect transfers between departments and programmes, additions and allocations from central funds and reclassifications.
C67 At the Pre-Budget Report planned DEL for 2002-03 on a 'near cash' basis was £231.4 billion. Since then £2.3 billion has been added to total planned DEL reflecting the addition to the special reserve and classification changes, giving a total planned DEL of £233.7 billion. As Table C13 shows, in 2002-03 total DEL spending remains within plans. In line with previous practice, an allowance for shortfall of £4.0 billion, representing estimates of the likely underspend beneath departmental estimates, is made.
| Table C13: Departmental Expenditure Limits on a 2000 Spending Review basis - resource and capital budgets | |||
| £ billion | |||
| Outturn | Estimate | ||
| 2001-02 | 2002-03 | ||
| Resource Budget | |||
| Education and Skills | 16.5 | 20.0 | |
| Health | 48.7 | 54.5 | |
| of which: NHS | 47.5 | 52.3 | |
| Transport | 2.7 | 3.1 | |
| Office of the Deputy Prime Minister | 1.3 | 1.8 | |
| Local government | 36.9 | 37.4 | |
| Home Office | 9.7 | 10.4 | |
| Lord Chancellor's departments | 2.9 | 3.1 | |
| Attorney General's departments | 0.4 | 0.5 | |
| Defence | 18.5 | 20.2 | |
| Foreign and Commonwealth Office | 1.3 | 1.4 | |
| International Development | 3.2 | 3.4 | |
| Trade and Industry | 3.5 | 3.8 | |
| Environment, Food and Rural Affairs | 2.7 | 2.2 | |
| Culture, Media and Sport | 1.0 | 1.2 | |
| Work and Pensions | 6.2 | 7.4 | |
| Scotland1 | 14.2 | 16.1 | |
| Wales1 | 7.5 | 8.5 | |
| Northern Ireland Executive1 | 4.7 | 5.7 | |
| Northern Ireland Office | 1.0 | 1.1 | |
| Chancellor's departments | 3.8 | 4.2 | |
| Cabinet Office | 1.3 | 1.4 | |
| Invest to Save Budget | 0.0 | 0.0 | |
| Capital Modernisation Fund | 0.0 | 0.0 | |
| Reserve | 0.0 | 0.0 | |
| Unallocated special reserve2 | 0.0 | 2.0 | |
| Allowance for shortfall | 0.0 | -3.1 | |
| Total Resource Budget DEL | 188.1 | 206.3 | |
| Capital Budget | |||
| Education and Skills | 2.5 | 3.2 | |
| Health | 1.9 | 2.2 | |
| of which: NHS | 1.8 | 2.1 | |
| Transport | 4.3 | 5.6 | |
| Office of the Deputy Prime Minister | 2.6 | 3.2 | |
| Local government | 0.1 | 0.2 | |
| Home Office | 0.8 | 1.1 | |
| Lord Chancellor's departments | 0.1 | 0.1 | |
| Attorney General's departments | 0.0 | 0.0 | |
| Defence | 5.9 | 6.3 | |
| Foreign and Commonwealth Office | 0.1 | 0.1 | |
| International Development | 0.0 | 0.0 | |
| Trade and Industry | 0.5 | 1.0 | |
| Environment, Food and Rural Affairs | 0.5 | 0.6 | |
| Culture, Media and Sport | 0.1 | 0.1 | |
| Work and Pensions | 0.2 | 0.2 | |
| Scotland1 | 2.2 | 2.0 | |
| Wales1 | 0.9 | 1.1 | |
| Northern Ireland Executive1 | 0.5 | 0.5 | |
| Northern Ireland Office | 0.0 | 0.1 | |
| Chancellor's departments | 0.2 | 0.4 | |
| Cabinet Office | 0.2 | 0.2 | |
| Invest to Save Budget | 0.0 | 0.0 | |
| Capital Modernisation Fund | 0.0 | 0.0 | |
| Reserve | 0.0 | 0.0 | |
| Allowance for shortfall | 0.0 | -0.9 | |
| Total Capital Budget DEL | 23.7 | 27.3 | |
| Total Departmental Expenditure Limits | 211.8 | 233.7 | |
| Total education spending | 49.4 | 53.6 | |
1 For Scotland and Wales and Northern Ireland, the split between current and capital budgets is decided by the respective executives.
|
|||
C68 Table C14 shows changes in DEL and AME components since the Pre-Budget Report. It has also been updated to incorporate reclassifications including between DEL and AME as well as between current and capital DEL, and the reduction in DEL brought about by the reallocation of the Capital Modernisation Fund (CMF) and measures announced in this Budget. Net public service pensions figures are now reported on a Financial Reporting Standard 17 (FRS17) basis. This means that the measure of expenditure for this component has changed from being a cash record of flows in and out of the schemes to one that records the movements in the liability of the various pension schemes, including the accruing costs as members serve additional years. Additional non-cash costs are also now included in the non-cash items in AME line. This change is neutral on TME but does mean that meaningful comparisons between the net public service pensions, non-cash items in AME and the accounting adjustments lines shown in Table C11 and in the Pre-Budget Report cannot be made and these lines have therefore been excluded from this table.
C69 As described in Chapter 6, the Government has made a special reserve allocation of £3 billion to ensure that resources are available to cover the full cost of the UK's military obligations in Iraq, of which £1 billion has already been allocated to the Ministry of Defence budget. The full amount of the provision has been allocated to 2002-03, although it is not yet clear when these costs will fall. In the light of continuing uncertainty, and in order to protect committed investment while responding prudently to heightened global risks, the Government has decided to make no further allocations from the CMF. Instead, the unallocated CMF funding will contribute towards the rebuilding of the AME margin to ensure that the public spending projections include a prudent and cautious safety margin against unexpected events.
C70 Total DEL spending in 2002-03, net of depreciation, is now estimated to be around £2.7 billion higher than in the Pre-Budget Report. £2.2 billion of this is due to the further allocations to the special reserve of £2 billion and a £0.2 billion increase in capital DEL from reclassified PFI projects. The remainder reflects changes in non-cash items, other than depreciation, which are then removed in the AME accounting adjustments and are therefore TME neutral. DEL changes in later years are due to reclassifications and other switches between DEL and AME and between resource and capital DEL.
| Table C14: Changes to Total Managed Expenditure since the 2002 Pre-Budget Report | |||||
| £ billion | |||||
| Outturn | Estimate | Projections | |||
| 2001-02 | 2002-03 | 2003-04 | 2004-05 | 2005-06 | |
| Departmental Expenditure Limits | |||||
| Resource Budget | 2.7 | 11.4 | -3.3 | -3.2 | -3.2 |
| Capital Budget | -0.1 | -0.6 | -0.1 | -0.8 | -1.0 |
| Less depreciation | 0.0 | -8.1 | 0.7 | 0.4 | 0.4 |
| Total Departmental Expenditure Limits1 | 2.6 | 2.7 | -2.7 | -3.7 | -3.9 |
| Annually Managed Expenditure | |||||
| Social security benefits | -0.2 | 0.6 | 0.9 | 1.0 | 0.9 |
| Tax credits | 0.1 | -0.2 | 0.0 | -0.2 | -0.2 |
| Housing Revenue Account subsidies | 0.0 | 0.0 | 0.1 | -0.2 | -0.1 |
| Common Agricultural Policy | -0.1 | 0.2 | 0.0 | -0.1 | -0.2 |
| National Lottery | 0.0 | -0.1 | 0.0 | 0.0 | 0.0 |
| Other departmental expenditure | -0.5 | 0.8 | 1.6 | 0.7 | 1.1 |
| Net payments to EC institutions | 0.0 | 0.7 | 0.1 | 0.0 | 0.0 |
| Locally financed expenditure | -0.4 | -0.2 | 0.7 | 1.2 | 1.4 |
| Central government gross debt interest | -0.1 | 0.1 | 0.3 | -0.6 | 0.4 |
| Public corporations' own-financed capital expenditure | -0.4 | -0.4 | -0.2 | 0.1 | 0.1 |
| AME margin | 0.0 | -0.1 | -0.8 | 1.5 | 2.5 |
| Annually Managed Expenditure | -4.9 | -1.5 | 3.6 | 6.7 | 8.8 |
| Total Managed Expenditure | -2.3 | 1.2 | 0.9 | 3.0 | 4.9 |
| of which: | |||||
|
|
-3.0 | 3.7 | 1.8 | 2.2 | 3.9 |
|
|
0.7 | -2.1 | -0.7 | 1.1 | 1.3 |
|
|
0.0 | -0.3 | -0.3 | -0.3 | -0.3 |
1 DEL in 2001-02 and 2002-03 is controlled on a 'near cash' basis as set out in paragraph C67. |
|||||
C71 Forecasts of individual AME programmes were reviewed in the Pre-Budget Report and have been reviewed again for this Budget. In addition, and following usual practice, the Government has decided to reset the AME margin to £1 billion in 2003-04, £2 billion in 2004-05 and £3 billion in 2005-06.
C72 The main economic assumptions underpinning AME projections are set out in Box C1 and Table C3. In particular, it is assumed that UK claimant unemployment will increase slightly, in line with the average of independent forecasts, from its recent level of 0.93 million (the average of the three months ending in March 2003) to 1.03 million in 2005-06.
C73 Higher forecasts for inflation - which affects the uprating of benefits - and claimant unemployment have increased the social security expenditure forecast since the Pre-Budget Report by around £1/2 billion from 2004-05. New interim population projections based on the 2001 Census have also had an upward effect of around £0.2 billion from 2004-05, largely because of an increase in the forecast growth of the pensioner population. In addition, the additional funding for pensioners and other social security payments announced in this Budget add a further £0.2 billion in the last two years.
C74 Locally financed expenditure is also higher at the end of the projection period, and reflects the convention of forward projections based on the average of recent years' council tax increases. However, this has a broadly neutral impact on the fiscal balances as it is matched by additional resources raised at the local level.
C75 With the exception of 2004-05, central government gross debt interest payments are higher than at the Pre-Budget Report. This reflects higher borrowing and higher forecasts for inflation, affecting the accrued uplift on index-linked gilts, offset by lower market expectations for interest rates. In 2004-05 the forecast for inflation is lower than at the Pre-Budget Report and this, in combination with lower interest rates, more than offsets the effects of higher borrowing.
C76 The main accounting adjustments, which consist of those items within TME but outside DEL and AME main programmes, are shown in Table C15. Accounting adjustments also reflect the impact on DEL of a fall in the cost of capital charge made to departments. This change is TME neutral and constitutes a reduction in non-cash spending in DEL and a corresponding reduction in AME of the accounting adjustment that removes non-cash spending.
| Table C15: Accounting adjustments | |||||
| £ billion | |||||
| Outturn | Estimate | Projections | |||
| 2001-02 | 2002-03 | 2003-04 | 2004-05 | 2005-06 | |
| Removal of non-cash spending in DEL1 | -11.2 | -10.0 | -6.6 | -6.9 | -7.3 |
| Financial transactions in DEL | -1.6 | -1.5 | -1.9 | -1.4 | -1.4 |
| Removal of non-cash spending in AME | -29.4 | -27.1 | -23.6 | -24.7 | -25.6 |
| Financial transactions in AME | 0.1 | -0.4 | -0.1 | 0.7 | 0.6 |
| Adjustments for public corporations | 3.3 | 3.1 | 3.6 | 3.6 | 3.8 |
| Central government non-trading capital consumption | 8.3 | 8.5 | 9.0 | 9.4 | 9.9 |
| VAT refunded on general government expenditure | 7.6 | 8.8 | 9.8 | 10.6 | 11.6 |
| EC contributions | -6.1 | -4.2 | -4.5 | -4.2 | -4.1 |
| Tax credits | 0.9 | 1.3 | 0.8 | 0.8 | 0.9 |
| Intra-general government debt interest | -3.0 | -3.6 | -2.5 | -2.8 | -2.8 |
| Other accounting adjustments | -1.1 | -1.7 | -2.0 | -0.7 | -0.9 |
| Total accounting adjustments | -32.2 | -26.7 | -18.0 | -15.7 | -15.4 |
1 Excluding depreciation in resource DEL. |
|||||
C77 Table C16 shows public sector capital expenditure from 2001-02 to 2005-06.
| Table C16: Public sector capital expenditure | |||||
| £ billion | |||||
| Outturn | Estimate | Projections | |||
| 2001-02 | 2002-03 | 2003-04 | 2004-05 | 2005-06 | |
| Capital Budget DEL | 18.0 | 20.7 | 25.1 | 26.8 | 29.1 |
| Locally financed expenditure | 1.2 | 1.3 | 1.5 | 1.8 | 1.7 |
| National Lottery | 0.9 | 0.9 | 1.2 | 1.1 | 0.8 |
| Public corporations' own-financed capital expenditure | 1.5 | 2.2 | 2.6 | 2.7 | 2.7 |
| Other capital spending in AME | 1.3 | 0.9 | 2.9 | 5.1 | 5.9 |
| AME margin | 0.0 | 0.0 | 0.1 | 0.8 | 1.1 |
| Public sector gross investment1 | 23.0 | 26.0 | 33.4 | 38.2 | 41.3 |
| Less depreciation | 13.4 | 13.8 | 14.4 | 15.2 | 15.9 |
| Public sector net investment | 9.6 | 12.2 | 18.9 | 23.0 | 25.4 |
| Proceeds from the sale of fixed assets2 | 4.3 | 4.5 | 3.8 | 3.8 | 3.8 |
1 This and previous lines are all net of sales of fixed assets.
|
|||||
C78 Table C17 shows estimated receipts from loans and sales of assets from 2001-02 to 2005-06. The figures for sales of financial assets include proceeds of £0.1 billion for the sale of a stake in QinetiQ (formerly the Defence Evaluation and Research Agency) in the first quarter of 2003. The total proceeds of the Public Private Partnership (PPP) will be £0.2 billion, including receipts in 2001-02 and those due in future years.
| Table C17: Loans and sales of assets | |||||
| £ billion | |||||
| Outturn | Estimate | Projections | |||
| 2001-02 | 2002-03 | 2003-04 | 2004-05 | 2005-06 | |
| Sales of fixed assets | |||||
| Central government | 0.9 | 1.0 | 1.0 | 1.0 | 1.0 |
| Local authorities | 3.4 | 3.5 | 2.8 | 2.8 | 2.8 |
| Total sales of fixed assets | 4.3 | 4.5 | 3.8 | 3.8 | 3.8 |
| Total loans and sales of financial assets | -1.8 | -2.6 | -2.1 | -1.4 | -1.5 |
| Total loans and sales of assets | 2.5 | 1.9 | 1.6 | 2.4 | 2.2 |
PRIVATE FINANCE INITIATIVE
C79 Under the Private Finance Initiative (PFI) the public sector purchases services from a private sector partner. In addition to requiring capital investment to be undertaken by the private sector, the ability of the private sector partner to be innovative and manage risks appropriately allocated to it can result in a specified level of service at a price that represents value for money.
C80 The PFI has now become one of the established methods of delivering many public services that require significant investment in capital assets. Projects have been approved in such diverse areas as schools, colleges, hospitals, local authorities, defence and property management since May 1997. Approval of a PFI scheme depends on value-for-money based on an assessment of the lifetime costs of both providing and maintaining the underlying asset and the running costs of delivering the required service.
C81 The Government is committed to developing PFI and other partnership arrangements with the private sector to further enhance the delivery of public services, ensure value for money for the public sector and to ensure the delivery of a higher sustainable level of public sector investment. The Government wants to exploit all commercial potential and spare capacity in public sector assets through a sensible balance of risk and reward.
C82 Table C18 shows a breakdown by department of the estimated public sector investment resulting from signed contracts and Table C19 shows those expected to reach preferred bidder stage within the next three years.
C83 Under PFI, the public sector contracts for services facilities availability and management not assets. Capital investment is only one of the activities undertaken by the private sector in order to supply these services. The figures in Tables C18 and C19, therefore, do not reflect the total value of the contracts.
| Table C18: Departmental estimate of capital spending by the private sector (signed deals) | |||
| £ million | |||
| Projections | |||
| 2003-04 | 2004-05 | 2005-06 | |
| Education and Skills1 | 0 | 0 | 0 |
| Health | 338 | 210 | 89 |
| Transport2 | 6 624 | 552 | 370 |
| Local government3,4 | 1 940 | 2 330 | 2 700 |
| Home Office | 186 | 150 | 46 |
| Lord Chancellor's department | 52 | 6 | 11 |
| Defence | 175 | 0 | 0 |
| Foreign and Commonwealth Office | 5 | 5 | 5 |
| Trade and Industry | 6 | 2 | 0 |
| Environment, Food and Rural Affairs | 3 | 0 | 0 |
| Work and Pensions | 14 | 22 | 0 |
| Scotland | 381 | 330 | 1 |
| Wales | 43 | 34 | 0 |
| Northern Ireland Executive | 13 | 3 | 0 |
| Chancellor's departments | 49 | 24 | 11 |
| Cabinet Office | 12 | 4 | 0 |
| Total | 9 841 | 3 672 | 3 233 |
1 Excludes private finance activity in education institutions classified to the private sector. Schools projects funded through Revenue Support Grant are included in the local government figures.
|
|||
| Table C19: Estimated aggregated capital value of projects at preferred bidder stage | |||
| £ million | |||
| Projections | |||
| 2003-04 | 2004-05 | 2005-06 | |
| Health | 145 | 197 | 193 |
| Transport1 | 10 759 | 32 | 11 |
| Home Office | 26 | 17 | 0 |
| Lord Chancellor's department | 19 | 19 | 0 |
| Defence | 1 364 | 1 393 | 0 |
| Scotland | 9 | 48 | 16 |
| Wales | 96 | 0 | 0 |
| Northern Ireland Executive | 31 | 33 | 0 |
| Total | 12 449 | 1 739 | 220 |
1 The 2003-04 figure includes the estimated capital value of the LUL PPP contracts not yet signed over the next 15 years.
|
|||
C84 Table C20 shows a forecast of the estimated payments for services flowing from new private investment in signed projects over the next 25
C84 Table C20 shows a forecast of the estimated payments for services flowing from new private investment in signed projects over the next 25 years. Actual expenditure will depend on the details of the payment mechanism for each contract. Payments may be lower than estimated due to deductions from the service payments caused by the supplier's failure to meet the required performance standards. In addition, variances may occur due to changes in the service requirements agreed during the course of the contracts. Payments may also vary as a result of the early termination of a contract triggering contractual arrangements for compensation on termination.
| Table C20: Estimated payments under PFI contracts - April 2003 (signed deals)1 | |||
| £ billion | |||
| Projections | |||
| 2003-04 | 5.4 | 2016-17 | 4.8 |
| 2004-05 | 5.7 | 2017-18 | 4.1 |
| 2005-06 | 5.8 | 2018-19 | 3.6 |
| 2006-07 | 6.0 | 2019-20 | 3.4 |
| 2007-08 | 6.0 | 2020-21 | 3.6 |
| 2008-09 | 5.8 | 2021-22 | 3.2 |
| 2009-10 | 5.8 | 2022-23 | 3.1 |
| 2010-11 | 5.6 | 2023-24 | 3.1 |
| 2011-12 | 5.3 | 2024-25 | 3.1 |
| 2012-13 | 5.1 | 2025-26 | 3.0 |
| 2013-14 | 5.0 | 2026-27 | 1.6 |
| 2014-15 | 4.9 | 2027-28 | 1.3 |
| 2015-16 | 4.8 | 2028-29 | 1.2 |
1 The figures between 2003-04 and 2016-17 include estimated payments for the Tubelines LUL PPP contracts. These contracts contain periodic reviews every 7.5 years and therefore the service payments are not fixed after 2009-10.
|
|||
|
Box C2: Transparency in reporting liabilities and contingent liabilities The United Kingdom is one of the few countries in the world in which the Government has a statutory requirement to report its liabilities, assets and all other key financial information in the same way as private sector companies. Since 1997, the Government has introduced a series of reforms to ensure greater transparency and increased availability of information about national and departmental finances. The Code for fiscal stability commits the Government to apply best-practice accounting methods in the production of its accounts. In 2000, the Government introduced new legislation that requires departmental accounts to follow Generally Accepted Accounting Practices (UK GAAP), adapted as necessary for the public sector context. In line with these statutory requirements, departments now produce full resource accounts. The UK has an extremely transparent system for reporting liabilities, including contingent liabilities:
The Government is committed to further improvements. In particular, it is working towards the production of Central Government Accounts (CGA) as part of the staged approach to preparing Whole of Government Accounts (WGA). Both CGA and WGA represent a significant step forward by making available, for the first time, consolidated accounts information about central government and, subsequently, the public sector as a whole. One of the benefits of CGA and WGA will be consolidated information on contingent liabilities. |
FINANCING REQUIREMENT
C85 Table C21 presents projections of the net cash requirement by sector, giving details of financial transactions that do not affect net borrowing (the change in the sector's net financial indebtedness) but do affect its financing requirement. The large difference in accounts receivable/payable between 2002-03 and 2003-04 is due to a combination of factors affecting differences between cash and accrued receipts and spending.This is partly a result of the cash and accrual implications of the national insurance contribution measures announced in Budget 2002. These increase accrued receipts by more than cash receipts - reducing public sector net borrowing by more than the public sector net cash requirement.
| Table C21: Public sector net cash requirement | ||||||||
| £ billion | ||||||||
| 2002-03 | 2003-04 | |||||||
| General government | General government | |||||||
| Central | Local | Public | Public | Central | Local | Public | Public | |
| government | authorities | corporations | sector | government | authorities | corporations | sector | |
| Net borrowing | 24.5 | -0.7 | 0.1 | 24.0 | 27.2 | -0.1 | 0.2 | 27.3 |
| Financial transactions | ||||||||
| Net lending to private sector and abroad | 2.7 | -0.1 | 0.0 | 2.6 | 2.2 | -0.1 | 0.0 | 2.1 |
| Cash expenditure on company securities | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Accounts receivable/payable | -1.0 | 0.0 | 0.0 | -1.0 | 4.7 | -0.1 | 0.0 | 4.7 |
| Adjustment for interest on gilts | -1.5 | 0.0 | 0.0 | -1.5 | -1.0 | 0.0 | 0.0 | -1.0 |
| Miscellaneous financial transactions | -1.7 | 0.0 | 0.1 | -1.6 | 0.0 | 0.0 | -0.7 | -0.7 |
| Own account net cash requirement | 23.0 | -0.8 | 0.2 | 22.5 | 33.2 | -0.3 | -0.5 | 32.4 |
| Net lending within the public sector | -1.6 | 1.5 | 0.1 | 0.0 | 2.1 | -0.3 | -1.9 | 0.0 |
| Net cash requirement1 | 21.4 | 0.7 | 0.3 | 22.5 | 35.3 | -0.5 | -2.3 | 32.4 |
1 Market and overseas borrowing for local government and public corporation sectors. |
||||||||
C86 In order to comply with the Code for fiscal stability, the Provisional Debt Management Report 2003-04 (PDMR) was published on 20 March 2003 in advance of Budget 2003. As well as updating the financing arithmetic for 2002-03, it also outlined provisional financing plans for 2003-04. The forecasts for both years' financing arithmetic were based on the public finance forecasts published in the Pre-Budget Report. For 2003-04, the provisional net financing requirement was £51.3 billion. This was to be met by gross gilts issuance of
£40 billion and a £9.8 billion adjustment in the net short-term debt position.
C87 Table C22 updates the financing arithmetic for both 2002-03 and 2003-04 in line with the new forecasts for the public finances. The forecast for the central government net cash requirement for 2002-03 is £21.4 billion, an increase of £2.7 billion from the Pre-Budget Report forecast. Additionally, there have been changes to the level of the Debt Management Office's (DMO's) buy-backs of near maturity stock, their cash deposit at the Bank of England (BoE) and National Savings and Investments' (NS&I's) net contribution. Overall, this means that the net financing requirement for 2002-03 has been revised to £38.3 billion. This was met by gross gilts sales in 2002-03 of £26.3 billion and a net short-term debt adjustment of £12 billion. These changes have resulted in an end-March 2003 level for the DMO's net cash position of £4.5 billion, £2.3 billion lower than forecast in the PDMR.
C88 The forecast for the central government net cash requirement for 2003-04 is £35.3 billion, an increase of £5.1 billion from the forecast published in the PDMR. The net financing requirement is forecast to be £54.8 billion, an increase of £5 billion from the forecast published in the PDMR .
C89 In order to meet this financing requirement, the DMO's remit has been revised such that:
- gross gilt sales have been increased by £7.4 billion to £47.4 billion; and
- net-short term debt sales have decreased by £2.4 billion to £7.4 billion.
C90 Full details of these measures and complete financing tables for 2002-03 and 2003-04 can be found in the Debt and Reserves Management Report 2003-04, which is being published alongside this Budget.
| Table C22: Financing requirement forecast | |||||||
| £ billion | |||||||
| 2002-03 | 2003-04 | ||||||
| Mar-2002 | Apr-2002 | Nov- 2002 |
Mar-2003 | Apr-2003 | Mar-2003 | Apr-2003 | |
| Original remit1 | Budget remit | Pre-Budget Report | PDMR2 | Budget | PDMR2 | Budget | |
| Central government net cash requirement | 13.6 | 13.5 | 18.7 | 18.7 | 21.4 | 30.2 | 35.3 |
| Gilt redemptions | 17.2 | 17.0 | 17.0 | 17.0 | 17.0 | 21.1 | 21.1 |
| Debt buy-backs | 0.0 | 0.0 | 0.3 | 0.3 | 0.4 | 0.0 | 0.0 |
| Gross financing requirement | 30.8 | 30.5 | 36.0 | 36.0 | 38.8 | 51.3 | 56.4 |
| Less assumed net NS&I's contribution | -1.5 | -1.5 | -1.0 | 0.2 | 0.7 | 1.5 | 1.5 |
| Less change in DMO's cash balance at BoE | 0.0 | -0.1 | -0.1 | -0.1 | -0.2 | 0.0 | 0.1 |
| Net financing requirement | 32.3 | 32.1 | 37.1 | 35.9 | 38.3 | 49.8 | 54.8 |
| Financed by | |||||||
| Gross gilt sales | 23.0 | 22.4 | 26.2 | 26.4 | 26.3 | 40.0 | 47.4 |
| Changes in short term debt | 9.3 | 9.7 | 10.9 | 9.5 | 12.0 | 9.8 | 7.4 |
Note: Figures may not sum due to rounding.
|
|||||||
ANALYSIS BY SUBSECTOR AND ECONOMIC CATEGORY
C91 Table C23 shows a breakdown of general government transactions by economic category for 2001-02 to 2005-06. Table C24 shows a more detailed breakdown for public sector transactions by sub-sector and economic category for 2002-03 and 2003-04.
| Table C23: General government transactions by sub-sector | |||||
| £ billion | |||||
| Outturn | Projections | ||||
| 2001-02 | 2002-03 | 2003-04 | 2004-05 | 2005-06 | |
| Current receipts | |||||
| Taxes on income and wealth | 145.1 | 143.5 | 152.9 | 168.8 | 184.8 |
| Taxes on production and imports | 136.1 | 143.3 | 149.1 | 157.3 | 166.3 |
| Other current taxes | 18.3 | 19.8 | 22.0 | 23.7 | 25.7 |
| Taxes on capital | 2.4 | 2.4 | 2.4 | 2.7 | 2.8 |
| Social contributions | 63.1 | 63.6 | 76.2 | 80.8 | 85.1 |
| Gross operating surplus | 8.3 | 8.5 | 9.0 | 9.4 | 9.9 |
| Rent and other current transfers | 2.2 | 2.0 | 1.6 | 1.7 | 1.7 |
| Interest and dividends from private sector and abroad | 4.0 | 3.5 | 3.4 | 3.9 | 4.1 |
| Interest and dividends from public sector | 7.2 | 7.0 | 7.6 | 7.8 | 8.0 |
| Total current receipts | 386.6 | 393.7 | 424.1 | 456.0 | 488.5 |
| Current expenditure | |||||
| Current expenditure on goods and services | 196.4 | 212.7 | 232.0 | 247.3 | 264.2 |
| Subsidies | 6.0 | 7.7 | 7.6 | 8.6 | 9.9 |
| Net social benefits | 124.1 | 129.6 | 136.3 | 142.9 | 149.2 |
| Net current grants abroad | -1.9 | 0.5 | -0.2 | -0.9 | -1.6 |
| Other current grants | 19.4 | 23.2 | 23.4 | 23.7 | 26.9 |
| Interest and dividends paid | 22.4 | 21.2 | 22.2 | 23.5 | 24.6 |
| AME margin | 0.0 | 0.0 | 0.9 | 1.2 | 1.9 |
| Total current expenditure | 366.5 | 395.0 | 422.2 | 446.3 | 475.0 |
| Depreciation | 8.3 | 8.5 | 9.0 | 9.4 | 9.9 |
| Surplus on current budget | 11.8 | -9.8 | -7.0 | 0.3 | 3.6 |
| Capital expenditure | |||||
| Gross domestic fixed capital formation | 12.4 | 14.5 | 19.7 | 22.6 | 24.6 |
| Less depreciation | -8.3 | -8.5 | -9.0 | -9.4 | -9.9 |
| Increase in inventories | 0.0 | 0.5 | 0.1 | 0.3 | 0.3 |
| Capital grants (net) within public sector | 1.3 | 1.4 | 0.6 | 0.6 | 0.6 |
| Capital grants to private sector | 6.9 | 7.0 | 9.8 | 10.6 | 11.4 |
| Capital grants from private sector | -0.9 | -0.9 | -1.1 | -1.0 | -1.0 |
| AME margin | 0.0 | 0.0 | 0.1 | 0.8 | 1.1 |
| Net investment | 11.4 | 14.0 | 20.1 | 24.5 | 27.1 |
| Net borrowing1 | -0.4 | 23.8 | 27.1 | 24.2 | 23.5 |
| of which: | |||||
|
|
-0.5 | 24.5 | 27.2 | 23.0 | 23.0 |
|
|
0.1 | -0.7 | -0.1 | 1.3 | 0.5 |
1 Although this is based on the ESA95 definition of general government net borrowing (GGNB), the forecasts are identical to GGNB calculated on a Maastricht definition. |
|||||
| Table C24: Public sector transactions by sub-sector and economic category | ||||
| £ billion | ||||
| 2002-03 | ||||
| General government | ||||
| Central government | Local authorities | Public corporations | Public sector | |
| Current receipts | ||||
| Taxes on income and wealth | 143.5 | 0.0 | -0.1 | 143.5 |
| Taxes on production and imports | 143.1 | 0.1 | 0.0 | 143.3 |
| Other current taxes | 3.2 | 16.6 | 0.0 | 19.8 |
| Taxes on capital | 2.4 | 0.0 | 0.0 | 2.4 |
| Social contributions | 63.6 | 0.0 | 0.0 | 63.6 |
| Gross operating surplus | 4.7 | 3.8 | 9.2 | 17.7 |
| Rent and other current transfers | 2.0 | 0.0 | 0.6 | 2.6 |
| Interest and dividends from private sector and abroad | 2.8 | 0.7 | 0.6 | 4.1 |
| Interest and dividends from public sector | 6.2 | 0.8 | -7.0 | 0.0 |
| Total current receipts | 371.6 | 22.1 | 3.4 | 397.1 |
| Current expenditure | ||||
| Current expenditure on goods and services | 130.3 | 82.5 | 0.0 | 212.7 |
| Subsidies | 6.6 | 1.1 | 0.0 | 7.7 |
| Net social benefits | 117.0 | 12.6 | 0.0 | 129.6 |
| Net current grants abroad | 0.5 | 0.0 | 0.0 | 0.5 |
| Current grants (net) within public sector | 78.4 | -78.4 | 0.0 | 0.0 |
| Other current grants | 23.2 | 0.0 | 0.0 | 23.2 |
| Interest and dividends paid | 20.8 | 0.3 | 0.1 | 21.3 |
| AME margin | 0.0 | 0.0 | 0.0 | 0.0 |
| Total current expenditure | 376.9 | 18.0 | 0.1 | 395.0 |
| Depreciation | 4.7 | 3.8 | 5.2 | 13.8 |
| Surplus on current budget | -10.0 | 0.2 | -1.9 | -11.7 |
| Capital expenditure | ||||
| Gross domestic fixed capital formation | 5.9 | 8.7 | 4.6 | 19.1 |
| Less depreciation | -4.7 | -3.8 | -5.2 | -13.8 |
| Increase in inventories | 0.5 | 0.0 | 0.0 | 0.5 |
| Capital grants (net) within public sector | 7.3 | -5.9 | -1.4 | 0.0 |
| Capital grants to private sector | 5.9 | 1.1 | 0.3 | 7.3 |
| Capital grants from private sector | -0.4 | -0.5 | 0.0 | -0.9 |
| AME margin | 0.0 | 0.0 | 0.0 | 0.0 |
| Net investment | 14.5 | -0.5 | -1.8 | 12.2 |
| Net borrowing | 24.5 | -0.7 | 0.1 | 24.0 |
| Table C24: Public sector transactions by sub-sector and economic category | ||||
| £ billion | ||||
| 2003-04 | ||||
| General government | ||||
| Central government | Local authorities | Public corporations | Public sector | |
| Current receipts | ||||
| Taxes on income and wealth | 152.9 | 0.0 | -0.1 | 152.8 |
| Taxes on production and imports | 148.9 | 0.1 | 0.0 | 149.1 |
| Other current taxes | 3.4 | 18.6 | 0.0 | 22.0 |
| Taxes on capital | 2.4 | 0.0 | 0.0 | 2.4 |
| Social contributions | 76.2 | 0.0 | 0.0 | 76.2 |
| Gross operating surplus | 4.9 | 4.0 | 10.5 | 19.5 |
| Rent and other current transfers | 1.6 | 0.0 | 0.7 | 2.3 |
| Interest and dividends from private sector and abroad | 2.7 | 0.7 | 0.6 | 4.0 |
| Interest and dividends from public sector | 5.1 | 2.5 | -7.6 | 0.0 |
| Total current receipts | 398.2 | 26.0 | 4.2 | 428.3 |
| Current expenditure | ||||
| Current expenditure on goods and services | 139.7 | 92.3 | 0.0 | 232.0 |
| Subsidies | 6.4 | 1.1 | 0.0 | 7.6 |
| Net social benefits | 123.4 | 12.9 | 0.0 | 136.3 |
| Net current grants abroad | -0.2 | 0.0 | 0.0 | -0.2 |
| Current grants (net) within public sector | 85.3 | -85.3 | 0.0 | 0.0 |
| Other current grants | 23.4 | 0.0 | 0.0 | 23.4 |
| Interest and dividends paid | 21.8 | 0.3 | 0.1 | 22.3 |
| AME margin | 0.9 | 0.0 | 0.0 | 0.9 |
| Total current expenditure | 400.7 | 21.4 | 0.1 | 422.3 |
| Depreciation | 4.9 | 4.0 | 5.5 | 14.4 |
| Surplus on current budget | -7.5 | 0.5 | -1.4 | -8.4 |
| Capital expenditure | ||||
| Gross domestic fixed capital formation | 9.0 | 10.7 | 4.5 | 24.2 |
| Less depreciation | -4.9 | -4.0 | -5.5 | -14.4 |
| Increase in inventories | 0.1 | 0.0 | 0.0 | 0.1 |
| Capital grants (net) within public sector | 7.3 | -6.7 | -0.6 | 0.0 |
| Capital grants to private sector | 8.6 | 1.2 | 0.3 | 10.1 |
| Capital grants from private sector | -0.4 | -0.7 | 0.0 | -1.1 |
| AME margin | 0.1 | 0.0 | 0.0 | 0.1 |
| Net investment | 19.7 | 0.4 | -1.2 | 18.9 |
| Net borrowing | 27.2 | -0.1 | 0.2 | 27.3 |
HISTORICAL SERIES
| Table C25: Historical series of public sector balances, receipts and debt | ||||||||||
| Per cent of GDP | ||||||||||
| Public | Public | Cyclically | Public | General | Net taxes | Public | Public | General | Public | |
| sector | sector | adjusted public | sector | government | and social | sector | sector | government | sector | |
| current | net | sector net | net cash | net | security | current | net | gross | net | |
| budget | borrowing | borrowing | requirement | borrowing1 | contributions | receipts | debt2 | debt3 | worth4 | |
| 1970-71 | 6.7 | -0.6 | -0.8 | 1.2 | -2.1 | 43.3 | ||||
| 1971-72 | 4.2 | 1.1 | 0.5 | 1.4 | -0.7 | 41.4 | ||||
| 1972-73 | 2.0 | 2.8 | 2.7 | 3.6 | 2.2 | 39.0 | ||||
| 1973-74 | 0.3 | 4.9 | 5.7 | 5.9 | 4.4 | 39.5 | ||||
| 1974-75 | -1.1 | 6.6 | 7.2 | 9.0 | 4.1 | 42.3 | 52.1 | 60.4 | ||
| 1975-76 | -1.6 | 7.0 | 6.5 | 9.3 | 4.8 | 42.9 | 53.9 | 58.7 | ||
| 1976-77 | -1.2 | 5.5 | 4.8 | 6.4 | 4.1 | 43.3 | 52.4 | 59.1 | ||
| 1977-78 | -1.4 | 4.3 | 3.8 | 3.7 | 3.6 | 41.5 | 49.0 | 57.1 | ||
| 1978-79 | -2.6 | 5.0 | 4.8 | 5.2 | 4.3 | 33.3 | 40.2 | 47.1 | 56.2 | |
| 1979-80 | -1.9 | 4.1 | 4.0 | 4.7 | 3.0 | 33.8 | 40.7 | 43.9 | 51.8 | |
| 1980-81 | -3.0 | 4.9 | 2.9 | 5.2 | 3.8 | 35.8 | 42.4 | 46.1 | 52.9 | |
| 1981-82 | -1.4 | 2.3 | -1.7 | 3.3 | 3.3 | 38.5 | 45.8 | 46.1 | 51.7 | |
| 1982-83 | -1.5 | 3.0 | -1.1 | 3.2 | 3.1 | 38.7 | 45.5 | 44.8 | 50.4 | |
| 1983-84 | -2.0 | 3.8 | 0.6 | 3.2 | 3.8 | 38.3 | 44.5 | 45.3 | 50.4 | |
| 1984-85 | -2.2 | 3.7 | 1.0 | 3.1 | 3.3 | 38.9 | 44.4 | 45.2 | 50.3 | |
| 1985-86 | -1.2 | 2.4 | 0.9 | 1.6 | 2.6 | 38.1 | 43.1 | 43.4 | 49.5 | |
| 1986-87 | -1.4 | 2.1 | 1.9 | 0.9 | 2.3 | 37.8 | 42.0 | 41.1 | 48.9 | |
| 1987-88 | -0.3 | 1.0 | 2.1 | -0.7 | 1.3 | 37.6 | 41.1 | 36.8 | 46.5 | 75.8 |
| 1988-89 | 1.7 | -1.3 | 1.2 | -3.0 | -0.9 | 36.9 | 40.7 | 30.6 | 40.6 | 81.8 |
| 1989-90 | 1.4 | -0.2 | 2.5 | -1.3 | 0.3 | 36.2 | 39.9 | 27.7 | 35.5 | 73.5 |
| 1990-91 | 0.4 | 1.0 | 2.6 | -0.1 | 1.4 | 35.9 | 39.0 | 26.2 | 33.3 | 62.3 |
| 1991-92 | -1.9 | 3.8 | 3.2 | 2.3 | 3.7 | 34.7 | 38.6 | 27.4 | 34.4 | 54.5 |
| 1992-93 | -5.6 | 7.6 | 5.5 | 5.9 | 7.4 | 33.7 | 36.6 | 32.0 | 40.6 | 42.1 |
| 1993-94 | -6.2 | 7.8 | 5.4 | 7.1 | 7.8 | 33.0 | 35.8 | 37.1 | 45.9 | 27.9 |
| 1994-95 | -4.8 | 6.3 | 4.9 | 5.3 | 6.5 | 34.0 | 36.9 | 40.8 | 49.4 | 26.7 |
| 1995-96 | -3.4 | 4.8 | 4.1 | 4.3 | 5.0 | 34.8 | 37.8 | 42.8 | 51.9 | 18.6 |
| 1996-97 | -3.0 | 3.7 | 3.1 | 2.9 | 3.9 | 34.9 | 37.4 | 43.7 | 52.1 | 14.7 |
| 1997-98 | -0.2 | 0.8 | 0.8 | 0.1 | 0.9 | 36.0 | 38.5 | 41.4 | 49.1 | 10.6 |
| 1998-99 | 1.2 | -0.5 | -0.2 | -0.8 | -0.5 | 36.5 | 38.8 | 39.2 | 46.3 | 10.2 |
| 1999-00 | 2.2 | -1.7 | -1.4 | -0.9 | -1.7 | 36.6 | 39.1 | 36.3 | 43.2 | 15.1 |
| 2000-01 | 2.2 | -1.7 | -1.2 | -3.9 | -1.7 | 37.4 | 39.8 | 31.2 | 39.8 | 21.3 |
| 2001-02 | 1.0 | 0.0 | 0.1 | 0.3 | 0.0 | 36.8 | 38.8 | 30.2 | 37.9 | 26.2 |
1 UK National Accounts definition.
|
||||||||||
| Table C26: Historical series of government expenditure | ||||||||||
| £ billion (2001-02 prices) | Per cent of GDP | |||||||||
| Public | Public | Public | Public | Public | Public | |||||
| sector | sector | sector | Total | sector | sector | sector | Total | |||
| current | net | gross | Managed | current | net | gross | Managed | |||
| expenditure | investment | investment1 | Expenditure | expenditure | investment | investment1 | Expenditure | |||
| 1970-71 | 161.9 | 30.4 | 49.7 | 211.6 | 32.6 | 6.1 | 10.0 | 42.7 | ||
| 1971-72 | 169.3 | 26.8 | 46.6 | 215.9 | 33.3 | 5.3 | 9.2 | 42.5 | ||
| 1972-73 | 177.0 | 25.8 | 46.6 | 223.6 | 33.1 | 4.8 | 8.7 | 41.8 | ||
| 1973-74 | 194.5 | 29.0 | 52.3 | 246.8 | 35.0 | 5.2 | 9.4 | 44.4 | ||
| 1974-75 | 215.1 | 30.6 | 55.6 | 270.7 | 38.8 | 5.5 | 10.0 | 48.8 | ||
| 1975-76 | 219.8 | 30.0 | 55.3 | 275.1 | 39.9 | 5.5 | 10.0 | 49.9 | ||
| 1976-77 | 225.9 | 24.5 | 50.6 | 276.5 | 39.9 | 4.3 | 8.9 | 48.8 | ||
| 1977-78 | 222.5 | 16.6 | 42.7 | 265.2 | 38.4 | 2.9 | 7.4 | 45.8 | ||
| 1978-79 | 229.2 | 14.5 | 41.1 | 270.3 | 38.4 | 2.4 | 6.9 | 45.2 | ||
| 1979-80 | 234.9 | 13.4 | 40.5 | 275.3 | 38.2 | 2.2 | 6.6 | 44.8 | ||
| 1980-81 | 241.7 | 10.8 | 38.1 | 279.9 | 40.8 | 1.8 | 6.4 | 47.3 | ||
| 1981-82 | 252.7 | 5.5 | 32.7 | 285.4 | 42.6 | 0.9 | 5.5 | 48.1 | ||
| 1982-83 | 258.5 | 9.1 | 35.5 | 293.9 | 42.7 | 1.5 | 5.9 | 48.5 | ||
| 1983-84 | 266.7 | 11.2 | 37.5 | 304.2 | 42.3 | 1.8 | 5.9 | 48.3 | ||
| 1984-85 | 274.2 | 9.9 | 34.8 | 309.0 | 42.6 | 1.5 | 5.4 | 48.1 | ||
| 1985-86 | 274.1 | 8.3 | 30.6 | 304.7 | 41.0 | 1.2 | 4.6 | 45.5 | ||
| 1986-87 | 278.1 | 5.0 | 27.5 | 305.6 | 40.1 | 0.7 | 4.0 | 44.1 | ||
| 1987-88 | 281.8 | 4.8 | 25.6 | 307.4 | 38.6 | 0.7 | 3.5 | 42.1 | ||
| 1988-89 | 275.4 | 2.7 | 24.3 | 299.7 | 36.2 | 0.4 | 3.2 | 39.4 | ||
| 1989-90 | 277.2 | 9.3 | 31.0 | 308.2 | 35.7 | 1.2 | 4.0 | 39.7 | ||
| 1990-91 | 279.0 | 11.2 | 30.1 | 309.1 | 36.1 | 1.4 | 3.9 | 40.0 | ||
| 1991-92 | 295.8 | 14.2 | 30.2 | 325.9 | 38.4 | 1.8 | 3.9 | 42.3 | ||
| 1992-93 | 310.5 | 15.5 | 30.4 | 340.9 | 40.3 | 2.0 | 3.9 | 44.2 | ||
| 1993-94 | 320.8 | 12.7 | 27.3 | 348.1 | 40.1 | 1.6 | 3.4 | 43.6 | ||
| 1994-95 | 332.0 | 12.5 | 27.6 | 359.6 | 39.9 | 1.5 | 3.3 | 43.2 | ||
| 1995-96 | 337.1 | 12.0 | 27.3 | 364.4 | 39.4 | 1.4 | 3.2 | 42.6 | ||
| 1996-97 | 340.5 | 6.0 | 20.2 | 360.7 | 38.7 | 0.7 | 2.3 | 41.0 | ||
| 1997-98 | 337.9 | 5.4 | 19.1 | 356.9 | 37.2 | 0.6 | 2.1 | 39.3 | ||
| 1998-99 | 337.7 | 6.5 | 20.0 | 357.7 | 36.2 | 0.7 | 2.1 | 38.4 | ||
| 1999-00 | 342.3 | 4.6 | 17.9 | 360.2 | 35.6 | 0.5 | 1.9 | 37.4 | ||
| 2000-01 | 357.3 | 5.3 | 18.7 | 376.0 | 36.2 | 0.5 | 1.9 | 38.1 | ||
| 2001-02 | 366.6 | 9.6 | 23.0 | 389.6 | 36.5 | 1.0 | 2.3 | 38.8 | ||
1 Net of sales of fixed assets. |
||||||||||
CONVENTIONS USED IN PRESENTING THE PUBLIC FINANCES
|
FORMAT FOR THE PUBLIC FINANCES The June 1998 Economic and Fiscal Strategy Report (EFSR), set out a new format for presenting the public finances that corresponded more closely to the two fiscal rules. The three principle measures are:
These measures are based on the National Accounts and are consistent with the European System of Accounts 1995 (ESA95). Estimates and forecasts of the public sector net cash requirement (formerly called the public sector borrowing requirement) are still shown in the FSBR, but they are given less prominence. The fiscal rules are similar to the criteria for deficits and debt laid down in the Treaty but there are important definitional differences:
From February 2000 the Treaty deficit moved to being reported on an ESA95 basis. |
CONVENTIONS USED IN PRESENTING THE PUBLIC FINANCES
|
FORMAT FOR THE PUBLIC FINANCES The June 1998 Economic and Fiscal Strategy Report (EFSR), set out a new format for presenting the public finances that corresponded more closely to the two fiscal rules. The three principle measures are:
These measures are based on the National Accounts and are consistent with the European System of Accounts 1995 (ESA95). Estimates and forecasts of the public sector net cash requirement (formerly called the public sector borrowing requirement) are still shown in the FSBR, but they are given less prominence. The fiscal rules are similar to the criteria for deficits and debt laid down in the Treaty but there are important definitional differences:
From February 2000 the Treaty deficit moved to being reported on an ESA95 basis. |
NATIONAL ACCOUNTS
The National Accounts record most transactions, including most taxes (although not corporation tax), on an accruals basis, and impute the value of some transactions where no money changes hands (for example, non-trading capital consumption). The principle measures drawn from the National Accounts are described below.
The current budget (formerly known as the current balance) measures the balance of current account revenue over current expenditure. The definition of the current budget presented in this chapter is very similar to the National Accounts concept of net saving. It differs only in that it includes taxes on capital (mainly inheritance tax) in current rather than capital receipts.
Public sector net borrowing (formerly known as the financial deficit in the UK National Accounts) is the balance between expenditure and income in the consolidated current and capital accounts. It differs from the public sector net cash requirement in that it is measured on an accruals basis and because certain financial transactions (notably net lending and net acquisition of other financial assets, which affect the level of borrowing but not the public sector's net financial indebtedness) are excluded from public sector net borrowing but included in the public sector net cash requirement.
General government net borrowing, which excludes net borrowing of public corporations, is the most internationally comparable measure of the budget deficit. It was established as the European Commission's reported measure under the Maastricht Treaty, although its definition has since been slightly modified to depart from that in ESA95.
PUBLIC SECTOR CURRENT RECEIPTS
Net taxes and social security contributions (NTSSC) is a measure of net cash payments made to UK government and differs in several respects from the National Accounts measure of total public sector current receipts (PSCR). A reconciliation between the two aggregates is given in the lower half of Table C8. The main adjustments are:
- accruals adjustments, mainly on income tax, national insurance contributions and VAT, are added to change the basis of figures from cash to National Accounts accruals;
- some tax payments that are collected by the government, but then paid to the EC, are subtracted as they do not score as government receipts in the National Accounts;
- tax paid by public corporations is also subtracted, as it has no impact on overall public sector receipts;
- an adjustment is made for tax credits. In NTSSC, all tax credits are scored as negative tax to the extent that they are less than or equal to the tax liability of the household, and as public expenditure where they exceed the liability, in line with OECD Revenue Statistics guidelines. Although the Office for National Statistics (ONS) have adopted this treatment for the Working Tax Credit and Child Tax Credit, due to be introduced in April 2003, they have continued to treat the Working Families' Tax Credit (WFTC), the Disabled Person's Tax Credit (DPTC) and enhanced and payable company tax credits entirely as public expenditure in the National Accounts. Those parts of WFTC, DPTC and company tax credits that offset tax liability in NTSSC are added back into current receipts in Table C8; and
- interest and other non-tax receipts, which are excluded from NTSSC, are added. This excludes oil royalties, as they are already included in NTSSC, even though the National Accounts treat them as non-tax receipts.
TOTAL MANAGED EXPENDITURE
Public expenditure is measured across the whole of the public sector using the aggregate Total Managed Expenditure (TME). TME is the sum of public sector current expenditure, public sector net investment and public sector depreciation. These aggregates are based on National Accounts definitions defined under ESA95.
Public sector current expenditure is the sum of expenditure on pay, and related costs, plus spending on goods and services, and current grants made to the private sector. Current expenditure is net of receipts from sales of goods and services.
Public sector capital expenditure is shown in Table C16. It includes:
- gross domestic fixed capital formation (i.e. expenditure on fixed assets such as schools and hospitals, roads, computers, plant and machinery and intangible assets) net of receipts from sales of fixed assets (e.g. council houses and surplus land);
- grants in support of capital expenditure in the private sector; and
- the value of the physical increase in stocks (for central government, primarily agricultural commodity stocks).
Public sector net investment: in Table C1 nets off depreciation of the public sector's stock of fixed assets.
Public sector depreciation: is the annual charge that is made in relation to the reduction in value of the public sector's capital assets over a particular financial year.
For budgeting purposes, TME is further split into:
Departmental Expenditure Limits (DEL) are firm three-year spending limits for departments. In general DEL will cover all running costs and all programme expenditure except that spending that is included in departmental Annually Managed Expenditure due to it not being reasonably subject to close control over the three year period. DEL has distinct resource and capital budgets, as shown in Table C13.
Annually Managed Expenditure (AME) is spending that cannot be reasonably subject to firm multi-year limits. AME components are shown in Table C11 and are defined as follows:
Social security benefits in AME expenditure covers contributory, non-contributory and income-related benefits for children, people of working age and pensioners. Broadly, benefits are paid in respect of retirement, unemployment, incapacity or disability, caring responsibilities and bereavement, as well as housing costs for all groups. Some expenditure on housing-related benefits is, however, covered by the Housing Revenue Account subsidies and locally financed expenditure categories.
Tax credits scored as expenditure includes spending on the Working Families' Tax Credit
and Disabled Person's Tax Credit and that element of the Working Tax Credit and the Child
Tax Credit that is classified as public expenditure under National Accounts definitions. For 2001-02 to 2004-05, expenditure related to the child allowances in Income Support and Jobseekers' Allowance, which, from 2003-04, are paid as part of the Child Tax Credit, have been included in the tax credit line rather than in the social security benefits line in order to present figures on a consistent definition over the period shown.
Housing Revenue Account subsidies relates to two main areas of public expenditure: Housing Benefit paid to tenants of local authority-owned social housing; and subsidy to meet deficits on local authority Housing Revenue Accounts as part of a national redistributive system.
Common Agriculture Policy expenditure comprises direct payments to farmers and market price supports (intervention purchases and export refunds).
Net public service pensions. The main unfunded public service pension schemes, following FRS17, report any increase in liabilities accrued in the period less contributions received from employers, employees and inward transfers. This line does not include an amount for the unwinding of the discount rate on the liability (which scores elsewhere in AME). For some small unfunded schemes, information is not available on an FRS17 basis, and these schemes report the difference between the cash paid out during the year and any contributions received.
National Lottery expenditures relate to the distribution of the money received from the National Lottery for good causes. Funds are drawn down by Distributor Bodies and directed towards Lottery funded projects.
Non-cash items in AME. Under the 2002 Spending Review resource budgeting regime, a department's spending budget includes certain items that do not have a cash component at the time when the expense is recorded. Examples include depreciation, cost of capital charges and provisions.
Other departmental expenditure aggregates all other expenditure made by departments that is not separately identified in the AME table.
Net Payments to EC (European Communities) institutions is the balance between the UK's gross contribution to the EC Budget minus the UK abatement and public sector receipts from the EC Budget (net contribution to EC budget). For domestic public expenditure planning purposes part of the UK's contribution to the EC budget is attributed to the overseas aid programme and excluded from the net payments to EC institutions figures.
Locally financed expenditure consists of local authority self-financed expenditure (LASFE) and Scottish spending financed by local taxation (non-domestic rates and, if and when levied, the Scottish variable rate of income tax). LASFE is the difference between total local authority expenditure, including most gross debt interest but net of capital receipts, and central government support to local authorities (i.e. Aggregate External Finance (AEF), specific grants and credit approvals).
Central government debt interest is shown gross - only interest paid within the public sector is netted off. All other receipts of interest and dividends are included in current receipts. The capital uplift on index-linked gilts is also scored here as interest at the time it accrues as is the amortisation of discounts on gilts at issue.
Public corporations' own-financed capital expenditure. This is the amount of capital expenditure by public corporations that is not financed by general government.
AME margin is an unallocated margin on total AME spending and is included as a measure of caution against AME expenditure exceeding its forecast levels.
The accounting adjustments include various items within TME but outside DEL, which are not shown separately in Table C11. The definition of each line is as follows:
Removal of non-cash spending in DEL4 and AME pertain to a number of non-cash expenditure items recorded as DEL and AME expenditure that are not consistent with TME defined under a National Accounts basis.
Financial transactions in DEL and in AME are deducted. This is because TME measures the current and capital expenditure of the public sector, as defined in the National Accounts. This excludes expenditure on the acquisition of financial assets since in the National Accounts these are classified as financial transactions, not capital expenditure. Departmental budgets include the net acquisition of certain types of financial assets. These are assets acquired for policy purposes rather than cash flow management and typically refer to transactions in shares and lending to businesses and individuals.
Adjustments for public corporations. Under the 2002 Spending Review, departments' budgets score transactions with their public corporations. These adjustments remove those transactions and move the scoring of public corporations' spending onto a National Accounts basis.
Central government non-trading capital consumption (i.e. depreciation) as measured by ONS for National Accounts is added.
VAT refunded on general government expenditure is added back and covers refunds obtained by central government departments, local authorities and certain public corporations. DEL and AME programme expenditure are measured net of these refunds, while TME is recorded with VAT paid.
EC contribution deducts traditional own resources (i.e. payments of Customs duties and agricultural and sugar levies) and VAT contributions to European Community, which are included in the net payments to EC institutions line in AME but excluded from TME.
Tax credits are only added back if they score as public expenditure under National Accounts conventions but are not included as expenditure in AME. This includes Mortgage Interest Relief, Life Assurance Premium Relief, Private Medical Insurance Premium Relief, Vocational Training Relief (part up to 1998-99; all from 1999-2000), Working Families' Tax Credit and Disabled Person's Tax Credit (from 1999-2000) and the Research and Development Tax Credit (from 2001-02).
Intra-general government debt interest is deducted as it removes intra-public sector debt interest and dividend payments and receipts, which are included elsewhere in DEL and AME. The reason for this is that TME is consolidated public sector expenditure; so it records only those distributive transactions that are paid outside the public sector. Payments of grants and interest that are within the public sector do not score in TME. So it is necessary to deduct any interest payments to the public sector included in DEL or the debt interest figures in AME in other AME.
Other accounting adjustments shows other adjustments and includes, among others, the deduction of grants paid to local authorities by non-departmental public bodies classified to the central government sector, loan and debt write-offs and loan guarantees.
DEBT AND WEALTH
Public sector net debt is approximately the stock analogue of the public sector net cash requirement. It measures the public sector's financial liabilities to the private sector and abroad, net of short-term financial assets such as bank deposits and foreign exchange reserves.
General government gross debt, the Treaty debt ratio, is the measure of debt used in the European Union's Excessive Deficit Procedure. As a general government measure, it excludes the debt of public corporations. It measures general government's total financial liabilities before netting off short-term financial assets.
Public sector net worth represents the public sector's overall net balance sheet position. It is equal to the sum of the public sector's financial and non-financial assets less its total financial liabilities. The estimates of tangible assets are subject to wide margins of error, because they depend on broad assumptions, for example about asset lives, which may not be appropriate in all cases. The introduction of resource accounting for central government departments will lead in time to an improvement in data quality, as audited information compiled from detailed asset registers becomes available.