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Chapter C

The Public Finances

The latest projections of the public finances show that the underlying position remains sound. As a result of a continuing commitment to stability and prudence, the Government remains on track to meet its fiscal rules. This Budget locks in the fiscal tightening over the next two years, to a greater extent than projected in Budget 99, while releasing substantial new resources for the Government's priorities:

  • the current budget surplus is estimated to be £17 billion (nearly 2 per cent of GDP) in 1999-2000. The surplus is projected to be around 1 1/2 per cent of GDP over the two following years, and over 3/4 per cent of GDP thereafter; and
  • public sector net debt is projected to fall to 37.1 per cent of GDP by the end of financial year 1999-2000. It is projected to continue falling steadily as a percentage of GDP over the next three years, and to remain at about 32 1/2 per cent of GDP after March 2003.

Cyclically-adjusted public sector net borrowing is estimated to be a repayment of 1.2 per cent of GDP in 1999-2000, and repayments of 0.5 and 0.3 per cent of GDP in the following two years. Modest deficits are projected from 2002-03, mostly reflecting the rapid growth of public investment.



INTRODUCTION

C1 Chapter 2 outlined the Government's fiscal framework, its fiscal rules, and how the latest projections of the public finances are consistent with meeting these rules. This chapter explains in more detail the Government's performance against the fiscal rules. It includes:

  • five year ahead projections of the current budget surplus and public sector net debt, the key aggregates for assessing performance against the golden rule and the sustainable investment rule, respectively;
  • projections of public sector net borrowing, the fiscal aggregate relevant to assessing the impact of fiscal policy on the economy;
  • consistent projections of the cyclically-adjusted fiscal balances; and
  • detailed analyses of the outlook for government receipts and expenditure.

MEETING THE FISCAL RULES

C2 The Government is on track to meet the fiscal rules throughout the next five years. Table C1 shows latest outturns for the key fiscal aggregates, together with estimates for the current year and projections up to 2004-05. Outturns and projections of other important measures of the public finances, including net borrowing and net worth, are also shown.

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Table C1: Summary of public sector finances1

Per cent of GDP
Outturn Estimate Projections
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
Fairness and prudence
Surplus on current budget 0.9 1.9 1.5 1.6 1.2 0.8 0.7
Cyclically-adjusted surplus on current budget 0.6 1.8 1.3 1.3 1.0 0.7 0.7
Average surplus since 1999-2000 1.9 1.7 1.7 1.5 1.4 1.3
Long-term sustainability
Public sector net debt2 39.7 37.1 35.1 33.6 32.7 32.6 32.6
Net worth2 13.6 15.4 17.1 18.2 18.7 18.8 18.8
Primary balance 3.3 3.8 3.2 2.8 1.9 1.0 0.9
Economic impact
Net investment 0.6 0.6 0.9 1.2 1.5 1.8 1.8
Public sector net borrowing (PSNB) -0.3 -1.3 -0.7 -0.5 0.3 1.0 1.1
Cyclically-adjusted PSNB -0.1 -1.2 -0.5 -0.3 0.5 1.1 1.1
Financing
Central government net cash requirement2 -0.5 -0.6 -0.5 0.0 0.5 1.5 1.4
European commitments
Maastricht deficit3 -0.6 -1.3 -0.6 -0.3 0.3 1.1 1.2
Maastricht debt ratio4 47.0 44.1 42.0 40.2 39.1 38.9 38.7
Memo: Output gap 0.2 0.1 0.4 0.3 0.2 0.1 0.0
1 Excluding windfall tax receipts and associated spending.
2 Including windfall tax receipts and associated spending.
3 General government net borrowing on an ESA95 basis. The Maastricht definition includes the windfall tax and associated spending.
4 General government gross debt.

C3 The current budget balance improved from a deficit of 3 per cent of GDP in 1996-97 to a surplus of nearly 1 per cent of GDP in 1998-99. The surplus is estimated to have risen to nearly 2 per cent of GDP in 1999-2000, despite the fact that non-oil GDP growth has been a little below its trend rate. Current budget surpluses of around 1 1/2 per cent of GDP are projected over the next two years. Thereafter, surpluses are projected to fall gradually to around 3/4 per cent of GDP by 2003-04. Consistent with the need to maintain a cautious approach, this profile shows that the Government is well on track to meet the golden rule over the projection period, with the average surplus on the current budget from 1999-2000 projected to be at least 1 1/4 per cent of GDP throughout the next five years. The average current budget surplus over the period 1997-98 to 1999-2000, which early indications suggest may constitute a complete economic cycle, is estimated to have been 3/4 per cent of GDP, indicating that the Government met the golden rule over this period.

C4 Net borrowing is equal to net investment minus the surplus on the current budget. Public sector net investment is projected to be a little over 1/2 per cent of GDP in 1999-2000, implying a repayment of net borrowing of 1 1/4 per cent of GDP. The ratio of net investment to GDP is projected to more than double to 1 3/4 per cent by 2003-04. The rapid growth of net investment results in declining repayments of net borrowing over the next two years and, in conjunction with the effect of slower economic growth, and the Budget measures, modest deficits over the remainder of the period, consistent with meeting the sustainable investment rule.

C5 The primary balance is equal to net borrowing excluding net debt interest payments - thus abstracting from the implications of past fiscal deficits. If real interest rates exceed trend GDP growth, a primary surplus is required to stabilise the net debt ratio. The primary balance has swung from a deficit of 1/2 per cent of GDP in 1996-97 to an estimated surplus of nearly 4 per cent of GDP in 1999-2000. It is projected to be in surplus by around 3 per cent of GDP during the next two years, and by 1-2 per cent of GDP thereafter.

C6 The central government net cash requirement was a repayment of 1/2 per cent of GDP in 1998-99. Similar repayments are projected in 1999-2000 and the following year. From being in balance in 2001-02, the net cash requirement moves into deficit from 2002-03 onwards, mirroring the profile of public sector net borrowing. The approximate stock counterpart to the net cash requirement is public sector net debt. The projections of net cash repayments over the next two years implies a steady fall in the debt-GDP ratio, from 37.1 per cent in March 2000 to 32.7 per cent in March 2003. The debt-GDP ratio flattens out in 2003-04, as the public sector moves into deficit.

C7 The approximate stock counterpart to the current budget balance is public sector net worth. Current budget surpluses of about 1-2 per cent of GDP a year have begun to raise net worth. This follows a prolonged period in which the poor state of the public finances led to it falling below 15 per cent of GDP, from over 77 per cent of GDP in 1980-81. At present net worth is not used as a key indicator of the public finances, due mainly to the difficulties in measuring accurately many government assets and liabilities.

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C8 Table C2 shows the updated estimates of the cyclically-adjusted current budget and net borrowing as a per cent of GDP, which allow underlying, or structural trends in the indicators to be seen more clearly, after the estimated effects of the economic cycle are removed.

Table C2: Fiscal balances1

Per cent of GDP
Outturn Estimate Projections
1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
Budget balances
Surplus on current budget -0.7 0.9 1.9 1.5 1.6 1.2 0.8 0.7
Average surplus since 1999-2000 1.9 1.7 1.7 1.5 1.4 1.3
Net borrowing 1.2 -0.3 -1.3 -0.7 -0.5 0.3 1.0 1.1
Cyclically-adjusted budget balances
Surplus on current budget -0.6 0.6 1.8 1.3 1.3 1.0 0.7 0.7
Net borrowing 1.2 -0.1 -1.2 -0.5 -0.3 0.5 1.1 1.1
Memo: Output gap2 0.4 0.2 0.1 0.4 0.3 0.2 0.1 0.0
1 Excluding windfall tax receipts and associated spending.
2 Actual less trend output.



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C9 The cyclically-adjusted current balance has moved from a deficit of over 2 per cent of GDP in 1996-97 to a surplus of 1/2 per cent of GDP in 1998-99. It is estimated to have risen further in 1999-2000, to an estimated surplus of nearly 2 per cent of GDP. With the economy projected to be slightly above trend during most of the next five years, the cyclically-adjusted current budget surpluses are a little smaller than the unadjusted projections.

C10 There has been a corresponding improvement in cyclically-adjusted net borrowing, which is used to measure the fiscal stance. From a deficit of over 1 per cent of GDP in 1997-98, cyclically-adjusted net borrowing is estimated to be a repayment of 1 1/4 per cent of GDP in 1999-2000. Repayments of around 1/2 per cent of GDP and 1/4 per cent of GDP, respectively, are projected in the following two years. Modest deficits are projected from 2002-03 onwards, as the share of net investment in GDP rises.

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Forecast errors and risks

C11 The fiscal balances represent the difference between two large aggregates of spending and receipts, and forecasts of them are inevitably subject to wide margins of error. Over the past five years, the average absolute error (ie the average error irrespective of whether the errors have been positive or negative) for one-year ahead forecasts of net borrowing has been over 1 per cent of GDP, or plus or minus £9 billion at today's prices. The error tends to grow as the forecast horizon lengthens. (See Table B13 on page 122 of the November 1998 PBR.) Much of this error arises from errors in the forecasts of GDP.

C12 Short-term forecasts of the public finances are critically dependent on the path of the economy, as most tax revenues and some public expenditure (notably social security) vary directly with the economic cycle. If GDP growth were 1 per cent higher or lower than assumed over the coming year, net borrowing might be lower or higher by 0.4 per cent of GDP in the first year (equivalent to about £4 billion) and lower or higher by a further 0.3 per cent (£2 billion) in the second year.

C13 Errors in short-term growth forecasts may have only a temporary effect on the public finances. For a given path of trend output, higher or lower growth in the short-term will be followed by lower or higher growth later on, and the public finances may be little affected on average over the cycle. However, errors in estimating the cyclical position of the economy in relation to its trend - the output gap - will have a permanent effect on prospects.

C14 It is for this reason that projections in Chapter 2, and above, illustrate the effect of uncertainty over the cyclical position of the economy by showing a cautious case in which the output gap is 1 per cent higher than the central view.

C15 The fiscal projections are based on prudent and cautious assumptions (see paragraphs C16 to C19). Chart C2 above illustrates a still more cautious case, in which the level of trend output is assumed to be 1 per cent lower than in the central projection above. This scenario would imply that a greater proportion of the projected surplus on current budget was due to cyclical strength of the economy: a 1 per cent larger output gap reduces the structural surplus on current budget by about 3/4 per cent of GDP a year. Even in this more cautious case, the cyclically-adjusted current budget is estimated to have been in balance in 1998-99, and is projected to remain comfortably in surplus or in balance over the forecast horizon.

ASSUMPTIONS

C16 The fiscal projections assume:

  • the economy follows the path described in Chapter B. As always, and in the interests of caution, the fiscal projections are based on the lower end of the GDP growth ranges (which is based on a trend growth rate of 21/4 per cent a year);
  • firm overall spending limits for the period of the 2000 Spending Review allowing:
    • current spending to increase by 21/2 per cent a year in real terms, in the three years to 2003-04, in line with the Government's neutral view of the economy's trend rate of growth; and
    • a more than doubling in net investment to 1.8 per cent of GDP by 2003-04. This makes a significant contribution to tackling the legacy of under-funding of Britain's public infrastructure while remaining consistent with the sustainable investment rule, with the debt to GDP ratio remaining well below 40 percent in the medium term.
  • there are no tax changes beyond those already announced in or before this Budget and the future indexation of rates and allowances.

Table C3: Economic assumptions for public finance projections

Percentage changes on previous year
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
Output (GDP) 13/4 21/2 23/4 21/4 21/4 21/4 21/4
Prices
RPIX 23/4 21/4 21/4 21/2 21/2 21/2 21/2
GDP deflator 31/4 21/2 21/4 21/2 21/2 21/2 21/2
RPI (September1) 31/4 11/4 31/2 23/4 21/2 21/4 21/4
Rossi2 (September1) 21/4 13/4 11/2 2 21/4 21/4 2
Money GDP (£ billion) 857 901 946 990 1037 1086 1138
1 Used for projecting social security expenditure over the following financial year.
2 RPI excluding housing costs, used for uprating certain social security benefits.

C17 The key assumptions underlying the fiscal projections have been audited by the National Audit Office (NAO). The Chancellor of the Exchequer has asked the NAO to undertake a review of previously audited assumptions for the fiscal projections from this Budget onwards, on a three-year rolling basis. For this Budget the NAO was asked to review the assumptions on privatisation proceeds, trend GDP growth and interest rates and Spend to Save programmes which were last audited in July 1997. For the first three, the NAO concluded that the assumptions had "provided a reasonable basis for the elements of the fiscal projections to which they relate, and that they should continue to do so for future projections". However, as the Spend to Save programmes cover three years from 1997-98 to 1999-2000, the NAO concluded that they could not assess the reasonableness of the programmes until they had actual expenditure and revenue data for all three years. They will examine the outcome of the Spend to Save programme in their next report.

C18 The NAO was also asked to audit a new assumption for the Budget: that the additional revenue resulting from anti-tobacco smuggling measures announced in the Pre-Budget Report and the further measures the Government will be announcing on 22 March, should allow for the direct effect of these measures, including the deterrent effect of fiscal marks, but should exclude their indirect effects. The NAO concluded that the approach adopted is reasonably cautious.

C19 As a result of these reviews the key assumptions and conventions used for the Budget public finance projections are unchanged. In accordance with these assumptions and conventions, trend GDP growth is assumed to be 21/4 per cent a year. Details are given in Box C1.

Box C1: Key assumptions audited by the NAO

* Privatisation proceeds1, 6 Credit is taken only for proceeds from sales that have been announced.
* Trend GDP growth1, 6 21/4 per cent a year.
* UK claimant unemployment1, 4 Constant at recent levels, 1.16 million.
* Interest rates1, 6 3 month market rates change in line with market expectations (as of March 14).
* Equity prices2 FT-All share index rises from 3,126 in line with money GDP.
* VAT2 Ratio of VAT to consumption falls by 0.05 percentage points a year.
* GDP deflator and RPI2 Projections of price indices used to plan public expenditure are consistent with RPIX.
* Composition of GDP3 Shares of labour income and profits in national income are broadly constant in the medium term.
* Funding3 Funding assumptions used to project debt interest are consistent with the public finances forecast and with financing policy.
* Oil prices5 $22.40 a barrel in 2000, the average of independent forecasts, and then constant in real terms.
* Anti-tobacco smuggling measures6 Only direct effects, including deterrent effects of fiscal marks, are allowed for.
1 See Audit of Assumptions for the July 1997 Budget Projections, 19 June 1997 (HC3693)
2 Audit of Assumptions for the Pre-Budget Report, 25 November 1997 (HC361)
3 Audit of Assumptions for the Budget, 19 March 1998 (HC616)
4 Audit of the Unemployment Assumption for the March 1999 Budget Projections, 9 March 1999 (HC294)
5 Audit of the Oil Price Assumption for the Pre-Budget Report November 1999 (HC873)
6 Audit of Assumptions for the March 2000 Budget 21 March 2000 (HC348)

FISCAL AGGREGATES

C20 Tables C4 and C5 provide more detail on the projections of the current and capital budgets, in £ billion and as a per cent of GDP respectively. The tables show the current surplus and net borrowing, both including and excluding windfall tax receipts and associated spending. The latter gives a clearer picture of underlying trends. Latest estimates of associated spending are given in Table 4.1.

Table C4: Current and capital budgets

£ billion
Outturn Estimate Projections
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
Current budget
Current receipts 335.9 356.2 376 395 412 428 448
Current expenditure 312.5 325.6 348 366 384 404 423
Depreciation 13.6 14.1 14 15 15 16 17
Surplus on current budget
(including WTAS1) 9.8 16.5 13 14 13 8 8
Surplus on current budget2 7.5 17.1 14 16 13 8 8
Capital budget
Gross investment 22.8 24.1 26 30 35 39 41
less asset sales -4.3 -4.5 -4 -4 -4 -4 -4
less depreciation -13.6 -14.1 -14 -15 -15 -16 -17
Net investment 5.0 5.5 8 11 16 20 20
Net borrowing
(including WTAS1) -4.9 -11.0 -5 -3 3 11 13
Net borrowing2 -2.8 -11.9 -6 -5 3 11 13
Public sector net debt - end year 348.6 342.6 340 340 347 363 379
Memos:
General government net borrowing3
ESA79 -7.3 -12.8 -9 -5 0 11 10
ESA95 -5.1 -11.4 -5 -3 3 12 13
General government gross debt4 403.2 396.8 397 398 406 422 440
1 Windfall tax receipts and associated spending.
2 Excluding windfall tax receipts and associated spending.
3 Maastricht measures of the government deficit and debt. From February 2000, the Maastricht measures moved from being reported under ESA79 to ESA95 accounting conventions.
4 The stock of gross debt is not affected by the move to ESA95 accounting conventions.



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Table C5: Current and capital budgets

Per cent of GDP
Outturn Estimate Projections
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
Current budget
Current receipts 39.2 39.6 39.7 39.9 39.8 39.4 39.3
Current expenditure 36.5 36.2 36.8 36.9 37.1 37.2 37.2
Depreciation 1.6 1.6 1.5 1.5 1.5 1.5 1.5
Surplus on current budget
(including WTAS1) 1.1 1.8 1.4 1.5 1.2 0.8 0.7
Surplus on current budget2 0.9 1.9 1.5 1.6 1.2 0.8 0.7
Capital budget
Gross investment 2.7 2.7 2.8 3.0 3.4 3.6 3.6
less asset sales -0.5 -0.5 -0.4 -0.4 -0.4 -0.3 -0.3
less depreciation -1.6 -1.6 -1.5 -1.5 -1.5 -1.5 -1.5
Net investment 0.6 0.6 0.9 1.2 1.5 1.8 1.8
Net borrowing
(including WTAS1) -0.6 -1.2 -0.5 -0.3 0.3 1.0 1.1
Net borrowing2 -0.3 -1.3 -0.7 -0.5 0.3 1.0 1.1
Public sector net debt - end year 39.7 37.1 35.1 33.6 32.7 32.6 32.6
Memos:
General government net
borrowing3
ESA79 -0.9 -1.4 -0.9 -0.5 0.0 1.0 0.9
ESA95 -0.6 -1.3 -0.6 -0.3 0.3 1.1 1.2
General government gross debt3, 4
ESA79 47.8 44.8 42.7 40.9 39.8 39.5 39.3
ESA95 47.0 44.1 42.0 40.2 39.1 38.9 38.7
1 Windfall tax receipts and associated spending.
2 Excluding windfall tax receipts and associated spending.
3 Maastricht measures of the government deficit and debt. From February 2000, the Maastricht measures moved from being reported under ESA79 to ESA95 accounting conventions.
4 The move to ESA95 accounting conventions does not affect the stock of gross debt, but it does increase money GDP, by about £8 billion in 1998-99. C21 The current budget surplus in 1999-2000 is estimated to be over £17 billion. Net investment is estimated to be £5 1/2 billion, giving a repayment of net borrowing of nearly £12 billion.

C22 The current budget surplus is projected to fall slightly in 2000-01, to £14 billion, reflecting the relatively strong growth of current expenditure. Together with the planned rapid increase in net investment, this reduces the repayment of net borrowing to £6 billion in 2000-01.

C23 The current budget surplus is projected to rise to £16 billion in 2001-02, but to decline slightly thereafter, to about £8 billion from 2003-04 onwards. The profile of a modest decline in the current budget surplus from 2001-02 reflects the planned real increase in current expenditure of 2 1/2 per cent a year, together with receipts projections that are based on a cautious projection of real GDP growth of 2 1/4 per cent a year. Together with a rising ratio of net investment to GDP, this results in a projection of net borrowing rising to 1 per cent of GDP in 2003-04, well within the limit on public sector net borrowing set by the sustainable investment rule.

C24 The profile of significant repayments of net borrowing up to 2001-02 results in a declining net debt-GDP ratio. Public sector net debt falls from 37.1 per cent of GDP in March 2000, to 32.7 per cent of GDP in March 2003. The debt-GDP ratio stabilises at around this level in the remainder of the projection period.

C25 The Maastricht Treaty and stability and growth pact provide reference values for general government net borrowing (3 per cent of GDP) and general government gross debt (60 per cent of GDP). Table C5 shows the Maastricht measures of the deficit and debt used in the Excessive Deficits Procedure of the Maastricht Treaty, as a per cent of GDP. From February 2000, the Maastricht measures moved from being reported under ESA79 to ESA95 accounting conventions, and are thus now fully consistent with the UK national accounts, which moved to being on an ESA95 basis in September 1998. Table C5 shows the Maastricht measures under both the ESA79 and ESA95 accounting conventions. The reference levels of 3 per cent of GDP for the deficit and 60 per cent of GDP for debt are achieved comfortably throughout the projection period, on either definition.

C26 Table C6 shows the latest projections of the main fiscal aggregates, and projections made in the November 1999 Pre-Budget Report (PBR) and March 1999 Budget. The table shows that the projected current budget surplus and repayment of net borrowing in 1999-2000 increased by £7 1/2 billion and £6 1/2 billion respectively between Budget 99 and the PBR last November. Much of this improvement reflected a stronger than expected economy: whereas the projected current budget surplus increased from 0.3 per cent of GDP at Budget time to 1.1 per cent of GDP in the PBR, the cyclically-adjusted projections showed an improvement of just 0.3 per cent of GDP between the Budget and the PBR. The public finances have improved further since November. Latest estimates of the current budget surplus and the repayment of net borrowing are at least £7 1/2 billion higher than in the PBR. But, unlike the improvement between Budget 99 and PBR99, much of this seems to reflect structural factors. The cyclically-adjusted current budget surplus has risen by 0.9 per cent of GDP since the PBR, slightly more than the rise in the unadjusted surplus.

C27 The increase in the current budget in 1999-2000 since the projection last March is largely carried forward over the next two years. This reflects both an upward revision to economic prospects over the next two years since last March, together with an underlying, structural improvement in the public finances: the cyclically-adjusted current budget surplus is about 1/4 per cent of GDP higher over the next two years than projected a year ago. A similar improvement is projected for cyclically-adjusted net borrowing over the next two years.

Table C6: Fiscal balances comparison with PBR 99 and Budget 991

Outturn2 Estimate3 Projections
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
Fiscal balances (£ billion)
Surplus on current budget - Budget 99 4.1 2 4 8 9 11
Surplus on current budget - PBR 99 7.2 9.5 11 13 13 12 11
Surplus on current budget - Budget 2000 7.5 17.1 14 16 13 8 8
Net borrowing - Budget 99 -1.0 3 3 1 3 4
Net borrowing - PBR 99 -2.5 -3.5 -3 -3 1 4 6
Net borrowing - Budget 2000 -2.8 -11.9 -6 -5 3 11 13
Cyclically-adjusted budget balances (per cent of GDP)
Surplus on current budget - Budget 99 0.2 0.6 1.0 1.1 0.9 1.0
Surplus on current budget - PBR 99 0.6 0.9 1.0 1.2 1.2 1.1 1.0
Surplus on current budget - Budget 2000 0.6 1.8 1.3 1.3 1.0 0.7 0.7
Net borrowing - Budget 99 0.1 0.0 -0.2 -0.1 0.3 0.4
Net borrowing - PBR 99 0.0 -0.2 -0.2 -0.2 0.1 0.4 0.5
Net borrowing - Budget 2000 -0.1 -1.2 -0.5 -0.3 0.5 1.1 1.1
1 Excluding windfall tax receipts and associated spending.
2 The 1998-99 figures were estimates in Budget 99.
3 The 1999-2000 figures were projections in Budget 99.



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RECEIPTS

C28 Table C7 gives projections of receipts as a percentage of GDP. Changes in the receipts projections since the November PBR and March Budget are shown in Table C8. A more detailed breakdown of receipts, in £ billion, for 1999-2000 and 2000-01 is given in Table C9. Table C10 sets out the projections of the tax-GDP ratio.

Table C7: Current receipts

Per cent of GDP
Outturn Estimate Projections
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
Income tax (gross of tax credits) 10.3 10.6 10.7 10.8 10.9 11.0 11.2
Income tax credits1 -0.2 -0.3 -0.5 -0.8 -0.8 -0.8 -0.8
of which:
Working Families' Tax Credit -0.1 -0.5 -0.5 -0.5 -0.5 -0.5
Corporation tax 3.5 3.8 3.6 3.9 3.8 3.6 3.5
Windfall tax 0.3
Value added tax 6.1 6.3 6.3 6.3 6.2 6.2 6.1
Excise duties2 4.2 3.8 3.9 3.9 3.9 3.8 3.7
Social security contributions 6.4 6.3 6.2 6.2 6.1 6.1 6.1
Other taxes and royalties3 6.5 6.6 6.8 6.9 6.9 6.8 6.8
Net taxes and social security contributions4 37.1 37.0 36.9 37.3 37.1 36.7 36.6
Accrual adjustments on taxes 0.1 0.4 0.3 0.1 0.1 0.1 0.1
less own resources contribution to EU budget -0.7 -0.6 -0.6 -0.5 -0.4 -0.4 -0.3
Income tax credits5 0.2 0.3 0.5 0.6 0.6 0.6 0.6
Other receipts 2.5 2.4 2.5 2.4 2.4 2.4 2.3
Current receipts (including windfall tax)6 39.2 39.6 39.7 39.9 39.8 39.4 39.3
Current receipts (excluding windfall tax)6 38.9 39.6 39.7 39.9 39.8 39.4 39.3
Memo:
Current receipts (£bn) 335.9 356.2 376 395 412 428 448
1 Mainly MIRAS and tax reliefs under the Working Families' Tax Credit and Children's Tax Credit schemes.
2 Fuel, alcohol and tobacco duties.
3 Includes Council Tax and money paid into the National Lottery Distribution Fund, as well as other central government taxes.
4 Includes VAT and 'own resources' contributions to EU budget. Net of income tax credits. Cash basis.
5 Excludes Children's Tax Credit, which scores as a tax repayment in the national accounts.
6 Accruals basis.

C29 Excluding the windfall tax, total receipts are estimated to rise by nearly 7 per cent in 1999-2000, and by 51/2 per cent in 2000-01. This compares with projected money GDP growth of just over 5 per cent in both years. The relative buoyancy of receipts in 1999-2000 was highlighted in the PBR last November (see paragraph B23 on page 148 of the 1999 PBR). At that time, it appeared that the composition of GDP had been more favourable than expected for tax revenues. Recent developments have reinforced that analysis. While money GDP growth this year may be a little over 1/2 per cent higher than expected in November, income tax and VAT receipts have both been higher than expected by around 13/4 per cent.

Table C8: Changes in current receipts since Budget 99 and PBR 99

£ billion
1999-00 2000-01
Budget 99 PBR99 Budget 99 PBR 99
Income tax (gross of tax credits) 4.4 1.2 5.1 1.0
Income tax credits -0.1 0.4 -0.1 -0.1
Non-North Sea corporation tax 3.8 0.5 0.1 0.9
North Sea revenues 1.4 0.1 3.0 0.9
Capital taxes1 -0.8 -0.1 -0.2 0.4
Stamp duty 0.9 0.5 1.1 1.1
Value added tax 2.7 1.0 2.8 1.6
Excise duties2 -1.9 0.0 -2.9 0.2
Social security contributions 0.6 0.2 1.3 -0.1
Other taxes and royalties3 0.8 0.6 -0.4 -0.5
Net taxes and social security contributions 11.8 4.3 9.8 5.4
Other receipts and accounting adjustments -0.4 -0.1 1.7 0.2
Current receipts 11.4 4.2 11.5 5.6
1 Capital gains tax and inheritance tax.
2 Fuel, alcohol and tobacco duties.
3 Includes Council Tax and money paid into the National Lottery Distribution Fund, as well as other central government taxes.

Income tax

C30 Income tax receipts (net of tax credits) are expected to be about £92 1/4 billion in 1999-2000, about £4 1/4 billion higher than in the Budget 99 forecast. Most of the increase stems from higher PAYE (Pay as you Earn) which in turn reflects higher than expected growth in wages and salaries. Receipts are also higher than in the PBR, by about £1 1/2 billion. This is again mainly due to higher PAYE and especially to tax on the high bonus payments of recent months. Income tax receipts in 2000-01 increase to £96 billion but fall slightly as a share of GDP. This is mainly a result of measures announced in this Budget and earlier. These measures lead to a further fall in the share of GDP in 2001-02, but there are small increases in subsequent years as a result of real fiscal drag.

Corporation tax

C31 Receipts of corporation tax in 1999-2000 are expected to be just over £34 billion, about £0.6 billion higher than forecast in the PBR. Receipts in January 2000 of mainstream tax on profits in 1998 of industrial and commercial companies were higher than expected and repayments of surplus advance corporation tax (ACT) paid with foreign income dividends have been lower than forecast.

C32 Corporation tax receipts in 1999-2000 exceeded the Budget 99 forecast for several reasons:

  • profits of companies in both the financial and the industrial and commercial sectors in 1998 were higher than forecast leading to higher tax payments by about £1.7 billion in 1999-2000;
  • similarly profits in 1999 have been above forecast leading to the first year's instalment payments by large companies exceeding expectations by £1.4 billion, including £0.3 billion higher payments by oil extraction companies which are attributed to the rise in the oil price; and
  • the yield of ACT was £1.1 billion higher than forecast because many companies with foreign parents paid dividends before the date of abolition, in order to benefit from tax credits which were reduced from the same date. On the other hand, the number of companies delaying dividends to avoid ACT was less than forecast. Also, repayments of ACT on foreign income dividends have been lower than expected.

C33 Corporation tax receipts in 2000-01 are expected to be slightly lower than in 1999-2000. The yield from Budget 98 tax changes (the transition to instalments and the rate cuts) is expected to be less than in 1999-2000. The yield will also depend on how close instalments paid by large companies are to the 18 per cent set for the second year of transition. Receipts are forecast to grow rapidly in 2001-02 as a result of substantial profit growth and the yield from the third year of transition to instalments. Receipts may decline slightly in 2003-04 as the transition to instalments finishes.

North Sea revenues

C34 Receipts from companies engaged in North Sea oil and gas extraction are estimated to be £2.5 billion in 1999-2000, slightly up on the PBR estimate. Receipts in 2000-01 are projected to rise to £4.3 billion, nearly £1 billion higher than the PBR forecast. This reflects both higher oil prices (the audited assumption is for oil prices of $22.40 a barrel in 2000, compared with the PBR assumption of $18.70 ) and higher production levels. Receipts are projected to rise to over £5 billion in the following two years, but to decline a little thereafter, as North Sea production levels begin to fall.

Capital taxes

C35 Current year receipts for capital gains and inheritance tax are much as expected in the PBR. However, receipts in 2000-01 and subsequent years are higher than in the PBR mainly because of higher assumptions for equity and house prices and transaction volumes.

Stamp duty

C36 Stamp duty receipts in 1999-2000 are about £1/2 billion higher than expected in the PBR and £1 billion higher than in the Budget 99 forecast. This reflects the buoyancy of the equity and housing markets. Stamp duty receipts are expected to rise further in 2000-01 reflecting both the continuing strength of the equity and housing markets and the effects of Budget measures; the forecast level is some £1 billion above that in the PBR.

VAT receipts

C37 VAT receipts in 1999-2000 are expected to be £1 billion higher than in the PBR and £23/4 billion higher than in the Budget 99 forecasts. Some of the increase is due to higher consumer spending, but VAT receipts are estimated to grow by 8 1/2 per cent this year, compared with growth in nominal consumer spending of around 6 1/4 per cent. This implies a significant increase in the VAT effective tax rate in 1999-2000, the causes of which are not yet clear. While the composition of consumer spending may have increased the tax base, it seems unlikely that this could account fully for the current strength of VAT receipts. The forecast continues to assume a steady fall in the effective tax rate of 0.5 per cent a year, in line with the National Audit Office audited assumption. Compared with a flat VAT ratio, this cautious assumption reduces receipts by about £1 1/2 billion by 2004-05.

Excise duties

C38 Cash receipts from fuel, tobacco and alcohol duties are estimated to be about £34.4 billion in 1999-2000, little changed since the PBR. Cash receipts are projected to grow strongly (up 8 1/2 per cent to £37.4 billion) in 2000-01. This reflects additional tobacco duty receipts, which have been depressed temporarily in 1999-2000 by changes to the timing of forestalling activity by cigarette manufacturers after the Budget 99 measures. (Accruals of tobacco duty have not been affected by these timing effects. These developments were explained in more detail in paragraph B27 on page 156 of the 1999 FSBR.) Thereafter, excise duties fall slightly as a proportion of GDP largely reflecting the relatively slow growth in the demand for excise goods. The tobacco forecast takes into account the impact on revenues of the direct effects of additional anti-smuggling measures, including the deterrent effects of fiscal marks (as reviewed by the NAO), to be announced on 22 March 2000.

Social security contributions

C39 Social security (national insurance) contributions are estimated to be nearly £56 1/2 billion in 1999-2000, little changed from the PBR estimate. Receipts are projected to grow relatively strongly in 2000-01, in part reflecting the effects of real fiscal drag. Thereafter, the ratio of social security contributions to GDP is projected to fall, in part reflecting assumed higher rates of contracting out of the state pension scheme, as individuals increasingly make use of stakeholder pensions.

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Table C9: Public sector current receipts

£ billion
Outturn Estimate Projection
1998-99 1999-00 2000-01
Inland Revenue
Income tax (gross of tax credits) 88.4 95.2 101.0
Income tax credits -2.0 -2.9 -5.1
Corporation tax1 30.0 34.1 33.8
Windfall tax 2.6
Petroleum revenue tax 0.5 0.9 1.2
Capital gains tax 1.8 2.4 3.4
Inheritance tax 1.8 2.0 2.3
Stamp duties 4.6 6.6 7.2
Total Inland Revenue (net of tax credits) 127.7 138.2 143.8
Customs and Excise
Value added tax 52.3 56.7 59.6
Fuel duties 21.6 22.3 23.3
Tobacco duties 8.2 5.7 7.4
Spirits duties 1.6 1.8 1.8
Wine duties 1.5 1.6 1.7
Beer and cider duties 2.8 2.9 3.1
Betting and gaming duties 1.5 1.5 1.4
Air passenger duty 0.8 0.9 1.0
Insurance premium tax 1.2 1.4 1.6
Landfill tax 0.3 0.4 0.4
Customs duties and levies 2.1 2.0 2.0
Total Customs and Excise 94.0 97.4 103.3
Vehicle excise duties 4.7 4.9 4.9
Oil royalties 0.3 0.4 0.5
Business rates2 15.3 15.5 16.2
Social security contributions 55.1 56.4 58.8
Council Tax 12.1 12.8 13.6
Other taxes and royalties3 8.3 8.0 8.2
Net taxes and social security contributions4 317.7 333.6 349.4
Accrual adjustments on taxes 1.2 3.8 3.0
less own resources contribution to EU budget -6.2 -5.5 -5.4
less PC corporation tax payments -0.4 -0.4 -0.4
Income tax credits5 2.0 2.9 5.1
Interest and dividends 4.3 3.2 4.4
Other receipts6 17.3 18.7 19.6
Current receipts 335.9 356.2 375.6
Memo:
North Sea revenues7 2.5 2.5 4.3
1Includes advance corporation tax (net of repayments): 11.0 1.8 -0.2
1 Also includes North Sea corporation tax after ACT set off, and corporation tax on gains.
2 Includes district council rates in Northern Ireland.
3 Includes money paid into the National Lottery Distribution Fund.
4 Includes VAT and 'traditional own resources' contributions to EU budget. Net of income tax credits. Cash basis.
5 Excludes Children's Tax Credit, which scores as a tax repayment in the national accounts.
6 Mainly gross operating surpluses and rent.
7 North Sea corporation tax (before ACT set-off), petroleum revenue tax and royalties.

Total taxes

C40 Chart C3 and Table C10 show the tax-GDP ratio, measured as net taxes and social security contributions, as a percentage of GDP. The tax ratio is estimated to fall both in 1999-2000 and the following year. The increase in the tax ratio projected for 2001-02 largely reflects the timing effects on receipts of the new corporation tax system. The tax ratio is projected to fall in each year after 2001-02, and is lower on average over the next five years than the estimate for the current year. By April 2001, when personal tax and benefit measures from this and previous Budgets have come into effect, the tax burden on a typical family with two children will fall to its lowest level since 1972.

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Table C10: Net taxes and social security contributions1

Per cent of GDP
Outturn Estimate Projections
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
Budget 99 37.2 36.6 36.7 37.0 37.0 37.1
PBR 99 37.4 37.0 36.8 37.2 37.2 37.0 36.8
Budget 2000 37.1 37.0 36.9 37.3 37.1 36.7 36.6
1 Net of income tax credits; cash basis.

PUBLIC EXPENDITURE

C41 Table C11 shows the projections for public expenditure for the three years covered by the Comprehensive Spending Review (CSR). These projections cover the whole public sector, using the aggregate Total Managed Expenditure (TME). TME is split into Departmental Expenditure Limits (DEL) and Annually Managed Expenditure (AME). In 2001-02 TME is derived by assuming 2.5 per cent real growth in current expenditure and net investment at 1.2 per cent of GDP, forming the envelope for the first year of the Spending Review. The additional spending this implies, over and above the existing DEL plans and AME projections, is shown separately in the table.

Table C11: Total Managed Expenditure 1998-99 to 2001-02

£ billion
Estimated
Outturn Outturn Projections Changes since Budget 99
1998-99 1999-00 2000-01 2001-02 1999-00 2000-01 2001-02
Departmental Expenditure Limits 167.2 178.9 193.7 202.6 -0.3 4.0 3.1
Annually Managed Expenditure
Social Security Benefits 93.3 97.1 99.6 104.5 -2.1 -2.0 -1.9
Housing Revenue Account subsidies 3.5 3.4 3.3 3.3 -0.1 -0.1 -0.2
Common Agricultural Policy 2.7 2.6 2.5 2.6 0.1 -0.2 -0.3
Export Credits Guarantee Department -0.2 0.9 0.3 0.4 0.4 -0.5 -0.5
Net Payment to EC Institutions1 3.6 2.6 2.7 2.5 -0.1 0.1 -0.4
Self-financing Public Corporations -0.2 0.2 0.2 -0.1 0.4 0.4 0.3
Locally Financed Expenditure 16.1 17.2 18.1 19.1 0.2 -0.2 -0.7
Net Public Service Pensions 4.7 5.6 5.7 5.6 -0.5 -0.3 -0.5
National Lottery 1.6 2.0 2.3 2.0 -0.6 -0.4 -0.8
Central government gross debt interest 29.5 25.5 27.8 27.1 -0.5 0.1 0.0
Accounting and other adjustments 9.1 9.3 13.7 14.5 0.1 2.0 1.7
AME Margin 0.0 0.0 1.0 2.0 -1.0 -1.0 -1.0
Annually Managed Expenditure 163.8 166.3 177.2 183.6 -3.7 -1.9 -4.2
Budget 2000 addition 5.9 5.9
Total Managed Expenditure 331.0 345.2 370.9 392.1 -4.0 2.1 4.8
of which:
Public sector current expenditure 312.5 325.6 348.2 365.8 -3.3 2.1 3.8
Public sector net investment 5.0 5.5 8.2 11.4 0.0 0.7 1.8
Public sector depreciation 13.6 14.1 14.5 15.0 -0.7 -0.7 -0.7
1 Net payments to EC institutions exclude the UK's contribution to the cost of EC aid to non-Member States (which is attributed to the aid programme). Net payments therefore differ from the UK's net contribution to the EC Budget, latest estimates for which are (in £ billion).
1998-99 1999-00 2000-01 2001-02
Figures from 2000-01 are trend estimates 4.1 3.0 3.3 3.4



C42 There have been a number of changes to DEL since Budget 99. The underspend in 1998-99 on DEL items of £0.7 billion was carried forward into 1999-2000 under the End Year Flexibility arrangements. It is now estimated that the revised DEL total for 1999-2000 will be underspent by £1.0 billion. The tables assume that this underspend is carried forward into the 2000-01 DEL, together with additional allocations of £3.0 billion. These additional allocations are described in Chapter 5. The 2001-02 DEL has increased with new allocations to health expenditure of £3.1 billion. Plans for 2001-02 for other departments will be reviewed in the Spending Review.

C43 The components of AME were reviewed at the time of the PBR and have been reviewed again for this Budget. Table C11 shows the detailed changes since Budget 99 for the current year and the next two years. The AME margin has been set to zero in 1999-2000, to £1 billion in 2000-01 and to £2 billion in 2001-02.

C44 Total AME for the years 1999-2000 to 2001-02 is now nearly £10 billion lower than in Budget 99. The biggest reductions have been on social security. This is forecast to be lower by around £2 billion in each year. This is due primarily to lower unemployment in 1999-2000 than assumed at Budget 99 and a lower unemployment assumption for the next two years. The lower assumption reflects lower recent levels of unemployment (see Box C1).

C45 Chart C4 shows the ratio of TME to GDP. The ratio rises over the next two years, to just under 40 per cent.

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C46 Central government gross debt interest is estimated at £25.5 billion, or 2.8 per cent of GDP, for 1999-00. It is expected to rise next year reflecting projections of higher short-term interest rates and RPI inflation increasing from its unusually low level in 1999-2000. The estimate for 1999-2000 is lower than was forecast at Budget 99 due to improvements in government borrowing. Forecasts of debt interest for the next two years remain broadly unchanged as predicted lower borrowing is offset by the effects of higher interest rate and RPI projections.

C47 Other significant changes to the AME projections since the PBR include lower projections for Export Credit Guarantee Department and National Lottery expenditure. The former is due to a revised profile of lending by ECGD over future years. The latter reflects new information on planned expenditure by the Lottery Distribution Bodies.

C48 The main accounting adjustments, those items within TME but outside DEL and AME main programmes, are shown in Table C12. There have been small increases across a number of adjustments since Budget 99. The adjustments increase over the next two years mainly because of the introduction of the Working Families' Tax Credit.

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Table C12: Accounting and other adjustments

£ billion
1998-99 1999-00 2000-01 2001-02
1 Non-trading capital consumption 7.0 7.1 7.3 7.6
2 VAT refunded on general government expenditure 5.3 5.4 5.7 6.0
3 EC contributions -6.0 -5.5 -5.4 -5.1
4 Income tax credits 2.0 2.9 5.3 5.8
of which Working Families' Tax Credit and Disabled Persons' Tax Credit: 0.0 0.9 4.9 5.4
5 Other programme spending in AME 0.2 0.6 0.4 0.5
6 Adjustments for public corporations 3.1 3.4 4.0 3.9
7 Intra-public sector debt interest -2.3 -2.1 -1.6 -2.1
8 Financial transactions in DEL and AME 0.0 -2.4 -2.2 -2.2
9 Other accounting adjustments -0.3 -0.1 0.3 0.2
Total 9.1 9.3 13.7 14.5

C49 Table C13 gives a breakdown of public sector net investment. Compared to Budget 99, reductions in expected capital expenditure by Lottery distribution bodies have been more than offset by additional allocations elsewhere.

Table C13: Public sector capital expenditure

£ billion
1998-99 1999-00 2000-01 2001-02
CG spending and LA support in DEL 10.7 12.0 15.1 16.6
Locally financed spending 0.8 0.8 0.7 0.7
National Lottery 1.4 1.5 1.4 1.2
Public corporations1 4.4 4.7 4.7 5.2
Other capital spending in AME 1.2 0.5 0.5 0.5
Reserve allocation and Budget 2000 addition 0.0 0.0 0.2 2.1
Public sector gross investment2 18.5 19.6 22.7 26.4
Less depreciation -13.6 -14.1 -14.5 -15.0
Public sector net investment2 5.0 5.5 8.2 11.4
Proceeds from the sale of fixed assets3 4.3 4.5 3.8 3.8
1 Public corporations' capital expenditure is partly within DEL and partly within AME.
2 This and previous lines are all net of sales of fixed assets.
3 Projections of total receipts from the sale of fixed assets by public sector. These receipts are taken into account in arriving at public sector gross and net investment, which are net of sales of fixed assets.

PRIVATE FINANCE INITIATIVE

C50 Table C15 shows a forecast of the estimated payments for services flowing from new private investment over the next twenty five 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 either the supplier's failure to make the service available or a 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 contacts. Payments may also vary as a result of the early termination of a contract triggering contractual arrangements for compensation on termination.

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Table C14: Private Finance Initiative: estimated capital spending by the private sector-signed deals

£ million
1999-00 2000-01 2001-02 2002-03
Defence 319 177 0 0
FCO and International Development 0 33 4 7
Agriculture1 0 0 0 0
Trade and Industry 0 54 34 33
Environment, Transport and Regions2,3 0 793 636 706
Education and Employment4 0 28 32 9
Home Office 73 90 35 4
Legal Departments 8 13 32 26
Culture, Media and Sport 0 0 13 1
Health 177 320 468 336
Social Security 0 69 26 39
Scotland 51 69 205 293
Wales 0 89 50 19
Northern Ireland 12 36 74 52
Chancellor's Departments 0 125 20 21
Local authorities5,6 800 1200 1200 1200
Total 1432 2971 2829 2746
1 Includes Forestry Commission
2 Includes the private sector capital investment in Channel-Tunnel Rail Link.
3 In addition, substantial private investment is levered in through housing, urban regeneration and other programmes.
4 Excludes PPP/PFI activity in the further and higher education (FHE) sectors, which are classified to the private sector. For FHE, the total estimated capital value of major PPP/ PFI projects which have signed or expected to sign is £65 million for 1999-2000 and £165 million for 2000-2001. Includes projects in VA schools only: schools projects funded through Revenue Support Grant are included in the Local Authority figures.
5 Figures represent spending on projects signed, and expected to be signed, up to the end of 1998-99 only.
6 PFI activity in local authority schools is included in the local authorities line.

Table C15: Estimated payments under PFI contracts- March 2000

£ million £ million
1998-99 1030 2012-13 2568
1999-00 1650 2013-14 2451
2000-01 2060 2014-15 2362
2001-02 2054 2015-16 2234
2002-03 2478 2016-17 2227
2003-04 2922 2017-18 2216
2004-05 3152 2018-19 2185
2005-06 3254 2019-20 1786
2006-07 3183 2020-21 1754
2007-08 3139 2021-22 1758
2008-09 3145 2022-23 1696
2009-10 2986 2023-24 1704
2010-11 2935 2024-25 1588
2011-12 2671 2025-26 1583

Table C16: Private Finance Initiative: estimated capital spending by the private sector-preferred bidder

£ million
1998-99 1999-00 2000-01 2001-02
Defence 0 374 415 273
FCO and International Development 0 20 30 0
Agriculture1 0 3 18 0
Trade and Industry6 0 0 0 0
Environment, Transport and Regions2,3 0 63 65 50
Education and Employment4 0 330 0 0
Home Office 146 161 50 0
Legal Departments 0 11 26 38
Culture, Media and Sport 0 2 10 0
Health6 0 0 0 0
Social Security 0 0 0 7
Scotland 70 360 540 300
Wales 0 0 0 0
Northern Ireland 1 48 62 21
Chancellor's Departments6 0 0 0 0
Local authorities5,6,7 0 0 0 0
Total 217 1372 1216 689
1 Includes Forestry Commission
2 Includes the private sector capital investment in Channel Tunnel Rail Link
3 In addition, substantial private investment is levered in through housing, urban regeneration and other programmes.
4 Excludes PPP/PFI activity in the further and higher education (FHE) sectors, which are classified to the private sector. For FHE, the total estimated capital value of major PPP/ PFI projects which have signed or expected to sign is £65 million for 1999-2000 and £165 million for 2000-2001. Includes projects in VA schools only: schools projects funded through Revenue Support Grant are included in the Local Authority figures.
5 Figures represent spending on projects signed and expected to be signed, up to the end of 1998-99 only.
6 Preferred bidder information cannot be disaggregated from the information in the signed-deals tables as it refers solely to RSG payments.
7 PFI activity in local authority schools is included in the local authorities line.



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C51 Table C17 shows receipts from asset and loan sales from 1998-99 to 2001-02. Planned sales of fixed assets by central government remain on course to reach £1 billion in each of the three years to 2001-02.

Table C17: Loans and sales of assets

£ billion
Outturn Estimate Projections
1998-99 1999-00 2000-01 2001-02
Sales of fixed assets
Central Government 1.5 1.1 1.0 1.0
Local Authorities 2.8 3.4 2.8 2.8
Total sales of fixed assets 4.3 4.5 3.8 3.8
Loans and sales of financial assets
Sale of student loans portfolio 1.0
Other loans and sales of financial assets -2.0 -2.5 -2.3 -2.7
Total loans and sales of financial assets -1.0 -2.5 -2.3 -2.7
Total loans and sales of assets 3.3 1.9 1.4 1.0

C52 The figures for sales of financial assets include proceeds from the sale of British Energy debt and from the Public Private Partnerships for National Air Traffic services, the Defence Evaluation and Research Agency and Belfast Port.

C53 Table C18 shows a full analysis of public sector receipts and expenditure by economic category, with a breakdown between central government, local authorities and public corporations.

Table C18: Public sector transactions by sub-sector and economic category

£ billion
1999-00
General government
Central Local Public Public
Line government authorities Total corporations sector
Current receipts
Taxes on income and wealth 1 133.4 0.0 133.4 -0.4 133.0
Taxes on production and imports 2 126.3 0.1 126.4 0.0 126.4
Other current taxes 3 3.4 12.8 16.2 0.0 16.2
Taxes on capital 4 2.0 0.0 2.0 0.0 2.0
Social contributions 5 56.4 0.0 56.4 0.0 56.4
Gross operating surplus 6 4.4 8.7 13.0 4.6 17.6
Rent and other current transfers 7 0.8 0.0 0.8 0.6 1.4
Interest and dividends from private sector and abroad 8 2.3 0.6 2.9 0.2 3.2
Interest and dividends from public sector 9 6.2 -3.9 2.3 -2.3 0.0
Total current receipts 10 335.1 18.3 353.4 2.8 356.2
Current expenditure
Current expenditure on goods and services 11 100.9 63.6 164.5 0.0 164.5
Subsidies 12 4.4 0.8 5.2 0.0 5.2
Net social benefits 13 98.6 13.8 112.3 0.0 112.3
Net current grants abroad 14 -0.9 0.0 -0.9 0.0 -0.9
Current grants (net) within public sector 15 63.7 -63.7 0.0 0.0 0.0
Other current grants 16 18.9 0.0 18.9 0.0 18.9
Interest and dividends paid 17 25.5 0.4 25.9 -0.3 25.6
Apportionment of DEL reserve and AME margin 18 0.0 0.0 0.0 0.0 0.0
Total current expenditure 19 311.0 14.8 325.9 -0.3 325.6
Depreciation 20 3.9 6.2 10.0 4.0 14.1
Surplus on current budget 21 20.2 -2.7 17.5 -1.0 16.5
Capital expenditure
Gross domestic fixed capital formation 22 4.5 5.8 10.4 4.7 15.1
Less depreciation 23 -3.9 -6.2 -10.0 -4.0 -14.1
Increase in inventories 24 -0.2 0.0 -0.2 0.0 -0.1
Capital grants (net) within public sector 25 4.6 -3.3 1.3 -1.3 0.0
Capital grants to private sector 26 3.9 1.2 5.1 0.0 5.1
Capital grants from private sector 27 0.0 -0.4 -0.4 0.0 -0.4
Apportionment of DEL reserve 28 0.0 0.0 0.0 0.0 0.0
Net capital expenditure 29 9.0 -2.9 6.1 -0.6 5.5
Net borrowing 30 -11.2 -0.2 -11.4 0.4 -11.0



Table C18: Public sector transactions by sub-sector and economic category

£ billion
2000-01
General government
Central Local Public Public
Line government authorities Total corporations sector
Current receipts
1 140.5 0.0 140.5 -0.4 140.1 Taxes on income and wealth
2 131.8 0.1 131.9 0.0 131.9 Taxes on production and imports
3 3.4 13.6 17.0 0.0 17.0 Other current taxes
4 2.2 0.0 2.2 0.0 2.2 Taxes on capital
5 60.1 0.0 60.1 0.0 60.1 Social contributions
6 4.6 8.9 13.5 4.8 18.3 Gross operating surplus
7 1.0 0.0 1.0 0.6 1.6 Rent and other current transfers
Interest and dividends from private
8 3.6 0.6 4.2 0.2 4.4 sector and abroad
9 5.6 -3.4 2.2 -2.2 0.0 Interest and dividends from public sector
10 352.8 19.8 372.6 3.0 375.6 Total current receipts
Current expenditure
11 107.7 67.0 174.8 0.0 174.8 Current expenditure on goods and services
12 3.9 0.8 4.7 0.0 4.7 Subsidies
13 103.2 14.6 117.7 0.0 117.7 Net social benefits
14 -1.3 0.0 -1.3 0.0 -1.3 Net current grants abroad
15 66.6 -66.6 0.0 0.0 0.0 Current grants (net) within public sector
16 21.4 0.0 21.4 0.0 21.4 Other current grants
17 27.8 0.4 28.1 -0.2 27.9 Interest and dividends paid
Apportionment of DEL reserve
18 3.0 0.0 3.0 0.0 3.0 and AME margin
19 332.3 16.2 348.5 -0.2 348.2 Total current expenditure
20 4.0 6.3 10.3 4.2 14.5 Depreciation
21 16.5 -2.6 13.8 -0.9 12.9 Surplus on current budget
Capital expenditure
22 6.3 6.7 13.1 4.7 17.7 Gross domestic fixed capital formation
23 -4.0 -6.3 -10.3 -4.2 -14.5 Less depreciation
24 0.1 0.0 0.1 0.0 0.1 Increase in inventories
25 4.0 -3.3 0.6 -0.6 0.0 Capital grants (net) within public sector
26 3.9 1.3 5.2 0.0 5.2 Capital grants to private sector
27 0.0 -0.5 -0.5 0.0 -0.5 Capital grants from private sector
28 0.2 0.0 0.2 0.0 0.2 Apportionment of DEL reserve
29 10.5 -2.1 8.3 -0.1 8.2 Net capital expenditure
30 -6.0 0.5 -5.5 0.8 -4.7 Net borrowing

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Table C19: Departmental Expenditure Limits - Current and Capital Budgets

£ billion
Estimated
Outturns Outturn Plans
1997-98 1998-99 1999-00 2000-01 2001-02
Current Budget
Education and Employment 14.0 13.6 14.8 16.6 17.1
Health 35.1 37.5 40.5 44.2 47.4
of which: NHS 34.5 36.8 39.9 43.5 46.6
DETR - Main programmes 4.1 4.0 4.6 4.7 4.9
DETR - Local Government and Regional Policy 31.1 32.4 33.9 35.3 36.6
Home Office 6.2 6.5 7.3 7.6 7.7
Legal Departments1 2.6 2.6 2.7 2.8 2.7
Defence 20.1 20.8 21.6 21.3 21.4
Foreign and Commonwealth Office 1.0 1.0 1.1 1.0 1.0
International Development 1.8 2.1 2.2 2.5 2.7
Trade and Industry2 2.7 2.6 3.0 3.2 3.2
Agriculture, Fisheries and Food3 1.4 1.2 1.2 1.1 1.0
Culture, Media and Sport 0.8 0.8 0.9 0.9 1.0
Social Security (administration) 3.2 3.3 3.3 3.2 3.2
Scotland1,4 11.5 11.6 12.3 13.0 13.4
Wales4 5.6 5.9 6.4 6.9 7.2
Northern Ireland4 4.9 5.1 5.5 5.5 5.6
Chancellor's Departments 2.6 3.1 3.5 3.6 3.5
Cabinet Office 1.0 1.0 1.1 1.1 1.1
Welfare to Work5 0.0 0.3 0.5 0.8 1.0
Invest to Save Budget 0.0 0.0
Capital Modernisation Fund
Reserve6 2.0 2.1
Allowance for Shortfall -1.4
Total Current Budget 149.7 155.3 165.1 177.3 184.1
Capital Budget
Education and Employment 0.7 0.8 1.1 1.7 2.1
Health 0.2 -0.1 0.2 0.8 1.4
of which: NHS7 0.1 -0.2 0.2 0.7 1.3
DETR - Main programmes 5.5 5.0 5.7 6.2 6.9
DETR - Local Government and Regional Policy 0.3 0.4 0.3 0.0 0.0
Home Office 0.5 0.4 0.4 0.5 0.5
Legal Departments1 0.1 0.1 0.0 0.1 0.1
Defence 0.9 1.6 1.2 1.5 1.5
Foreign and Commonwealth Office 0.1 0.1 0.1 0.1 0.1
International Development 0.2 0.2 0.3 0.3 0.4
Trade and Industry2 0.4 0.3 0.4 0.5 0.5
Agriculture, Fisheries and Food3 0.3 0.1 0.2 0.2 0.2
Culture, Media and Sport 0.1 0.1 0.1 0.1 0.1
Social Security (administration) 0.0 -0.3 0.0 0.0 0.0
Scotland1,4 1.4 1.4 1.7 1.9 2.1
Wales4 0.9 0.8 0.8 0.8 0.8
Northern Ireland4 0.5 0.5 0.5 0.7 0.7
Chancellor's Departments 0.1 0.1 0.1 -0.1 0.1
Cabinet Office 0.2 0.2 0.3 0.2 0.2
Welfare to Work5 0.1 0.3 0.3 0.6 0.3
Invest to Save Budget 0.0 0.0
Capital Modernisation Fund 0.0 0.2 0.3
Reserve6 0.2 0.2
Total Capital Budget 12.6 12.0 13.8 16.5 18.5
Departmental Expenditure Limits 162.3 167.2 178.9 193.7 202.6
Total education spending 37.2 38.4 41.1 45.8 48.0



1 The Crown Office is included in the Lord Chancellor's Department figures up to 1998-99, and in the Scotland figures from 1999-2000, reflecting a machinery of government change. See Chapter 22 of the CSR White Paper for further details.
2 Includes the capital expenditure of the Export Credits Guarantee Department.
3 Includes spending on BSE related programmes.
4 For Scotland and Wales, the split between current and capital budgets is decided by the respective Executives. For Northern Ireland, during any period when the Assembly ceases to operate, this is a matter for the Secretary of State.
5 Expenditure financed by the Windfall Tax.
6 Reserve has been arbitrarily apportioned between current and capital, with 10% allocated to capital.
7 Excludes the element of NHS trust capital expenditure which is funded through charges to health purchasers. Plans for total net capital spending on health are £1.5 billion in 1999-2000, £2.0 billion in 2000-01 and £2.9 billion in 2001-02.

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