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HM Treasury

Pre-Budget Report

ANNEX B3: THE PUBLIC FINANCES

B78   Table B20 gives a breakdown of public sector capital expenditure.

Table B20: Public sector capital expenditure
  £ billion
  Outturn Projections
  2001-02 2002-03 2003-04 2004-05 2005-06
Capital Budget DEL 18.1 21.3 25.2 27.6 30.1
Locally financed expenditure 1.7 1.8 1.7 1.7 1.6
National Lottery 0.9 1.0 1.1 1.0 0.6
Public corporations' own-financed capital expenditure 1.9 2.5 2.8 2.6 2.7
Other capital spending in AME -0.4 1.9 3.3 4.4 5.3
AME margin 0.0 0.0 0.2 0.0 0.1
Public sector gross investment1 22.2 28.4 34.3 37.3 40.3
Less depreciation 13.4 14.1 14.7 15.4 16.2
Public sector net investment 8.8 14.3 19.6 21.9 24.1
Proceeds from the sale of fixed assets2 4.3 3.8 3.8 3.8 3.8
1 This and previous lines are all net of sales of fixed assets.
2 Projections of total receipts from the sale of fixed assets by public sector.


B79  Table B21 shows estimated receipts from loans and sales of assets from 2001-02 to 2005-06. The Government's existing credit facility for British Energy (BE) of £650 million will expire on 29 November 2002. The Secretary of State for Trade and Industry will therefore make an announcement about the outcome of the Government's discussions with the company shortly. The Government expects the loan facility to be managed within the planned totals for Departmental Expenditure Limits and the financial implications of any restructuring to be consistent with the forecast of the public finances and performance against the fiscal rules published in this Pre-Budget Report.

Table B21: Loans and sales of assets
  £ billion
  Outturn Projections
  2001-02 2002-03 2003-04 2004-05 2005-06
Sales of fixed assets
Central government 0.7 1.0 1.0 1.0 1.0
Local authorities 3.6 2.8 2.8 2.8 2.8
Total sales of fixed assets 4.3 3.8 3.8 3.8 3.8
Total loans and sales of financial assets -1.9 -2.8 -2.1 -1.8 -1.3
Total loans and sales of assets 2.4 0.9 1.6 1.9 2.4

FINANCING REQUIREMENT

B80  Table B22 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.

Table B22: Public sector net cash requirement
  £ billion
  2001-02 2002-03
  General government     General government    
  Central Local Public Public Central Local Public Public
  government authorities corporations sector government authorities corporations sector
Net borrowing 1.2 0.5 -0.5 1.2 17.0 1.8 1.3 20.1
Financial transactions
Net lending to private sector and abroad 2.5 0.2 -0.5 2.2 3.0 -0.1 0.0 2.9
Cash expenditure on company securities -0.4 -0.3 0.1 -0.7 -0.1 0.0 0.0 -0.1
Accounts receivable/payable 0.5 -0.4 0.7 0.8 0.5 0.0 0.0 0.5
Adjustment for interest on gilts -0.4 0.0 0.0 -0.4 -1.5 0.0 0.0 -1.5
Miscellaneous financial transactions 0.5 -0.3 0.3 0.5 -0.9 0.0 -0.3 -1.2
Own account net cash requirement 3.9 -0.4 0.1 3.6 17.9 1.7 1.1 20.7
Net lending within the public sector -1.0 0.1 0.8 0.0 0.8 1.5 -2.3 0.0
Net cash requirement1 2.9 -0.3 0.9 3.6 18.7 3.2 -1.2 20.7
1 Market and overseas borrowing for local government and public corporation sectors.


B81  Table B23 updates the financing arithmetic for 2002-03 to allow for the latest forecast of the central government net cash requirement. The Debt and Reserves Management Report 2002-03 (DRMR), published on 14 March 2002, outlined how the Government planned to finance its net financing requirement in 2002-03.

B82  The forecast for the central government net cash requirement for the financial year 2002-03 has now been revised up from £13.5 billion to £18.7 billion. In addition, National Savings and Investments have increased their forecast for their net contribution by £0.5 billion to minus £1.0 billion. This means that the net financing requirement for 2002-03 is now £37.1 billion, an increase of £5.0 billion from the forecast published in Budget 2002.

B83  In order to meet this increased financing requirement, the Debt Management Office's gilt remit has been revised and they are now instructed to:

B84  Full details of these measures and a complete financing table for 2002-03 can be found on the Debt Management Office's website (www.dmo.gov.uk).

Table B23: Financing requirement forecast
  2002-03
  Original remit1 Revised remit Pre-Budget
£ billion March 2002 April 2002 Report
Central government net cash requirement 13.6 13.5 18.7
Expected gilt redemptions 17.2 17.0 17.0
Debt buy-backs 0.0 0.0 0.3
Gross financing requirement 30.8 30.5 36.0
Less assumed net National Savings and Investments' contribution -1.5 -1.5 -1.0
Less change in DMO balance at the Bank of England 0.0 -0.1 -0.1
Net financing requirement 32.3 32.1 37.1
Contingencies
Less change in Ways and Means facility 0.0 0.0 0.0
Less increase in planned Treasury bill stock 4.3 4.3 4.3
Less change in other net short-term debt2 5.0 5.4 6.6
Planned gross gilt sales 23.0 22.4 26.2
Gilt sales to date (April-October 2002)     14.2
of which:

Short conventionals (1-7 years)

    3.0

Medium conventionals (7-15 years)

    5.5

Long conventionals (>15 years)

    2.2

Index-linked

    3.5
Further planned gilt sales

Short conventionals (1-7 years)

    5.5

Medium conventionals (7-15 years)

    0.0

Long conventionals (>15 years)

    5.5

Index-linked

    1.0
Note: Figures may not sum due to rounding.
1 The Debt and Reserves Management Report 2002-03 was published on 14 March 2002 in advance of Budget 2002 to comply with the Code for fiscal stability.
2 Excluding DMO cash deposit at the Bank of England.

ANALYSIS BY SUBSECTOR AND ECONOMIC CATEGORY

B85  Table B24 shows a breakdown of general government transactions by economic category for 2001-02 to 2005-06. Table B25 shows a more detailed breakdown for public sector transactions by sub-sector and economic category for 2001-02 to 2003-04.

Table B24: General government transactions by economic category
  £ billion
  Outturn Projections
  2001-02 2002-03 2003-04 2004-05 2005-06
Current receipts
Taxes on income and wealth 145.1 144.4 153.5 170.1 184.2
Taxes on production and imports 136.4 143.9 150.3 158.4 166.9
Other current taxes 18.3 19.7 21.1 22.6 24.3
Taxes on capital 2.4 2.4 2.6 2.9 3.1
Social contributions 63.5 64.5 77.0 81.4 85.8
Gross operating surplus 8.3 8.7 9.1 9.5 10.0
Rent and other current transfers 1.9 2.0 1.6 1.5 1.5
Interest and dividends from private sector and abroad 4.2 3.5 3.4 4.1 4.2
Interest and dividends from public sector 7.0 7.2 7.5 7.9 8.1
Total current receipts 387.2 396.5 426.0 458.5 488.1
Current expenditure
Current expenditure on goods and services 197.8 211.5 227.7 241.4 259.6
Subsidies 6.0 6.1 6.9 6.9 7.6
Net social benefits 125.1 130.2 136.6 142.9 149.2
Net current grants abroad -1.9 -0.4 -0.7 -0.8 -0.5
Other current grants 19.9 22.7 26.4 29.2 30.7
Interest and dividends paid 22.5 21.1 21.9 24.1 24.2
AME margin 0.0 0.1 1.6 0.4 0.3
Total current expenditure 369.5 391.3 420.3 444.2 471.0
Depreciation 8.3 8.7 9.1 9.5 10.0
Surplus on current budget 9.4 -3.5 -3.4 4.8 7.0
Capital expenditure
Gross domestic fixed capital formation 11.6 16.1 20.4 23.5 25.3
Less depreciation -8.3 -8.7 -9.1 -9.5 -10.0
Increase in inventories 0.0 0.7 0.6 0.4 0.6
Capital grants (net) within public sector 1.8 0.6 0.5 0.4 0.4
Capital grants to private sector 6.9 7.0 9.0 9.8 10.6
Capital grants from private sector -0.9 -0.5 -0.7 -0.6 -0.6
AME margin 0.0 0.0 0.2 0.0 0.1
Net investment 11.1 15.2 21.0 24.0 26.4
Net borrowing1 1.7 18.7 24.4 19.2 19.4
of which:
Central government net borrowing 1.2 17.0 22.7 17.5 18.1
Local authority net borrowing 0.5 1.8 1.6 1.7 1.3
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 B25: Public sector transactions by sub-sector and economic category
 
£ billion
 
 
2001-02
 
  General government    
  Central Local Public Public
  government authorities corporations sector
Current receipts
Taxes on income and wealth 145.1 0.0 -0.1 145.1

 

 

136.3 0.2 0.0 136.4
Other current taxes 3.0 15.3 0.0 18.3
Taxes on capital 2.4 0.0 0.0 2.4
Social contributions 63.5 0.0 0.0 63.5
Gross operating surplus 4.6 3.7 9.4 17.7
Rent and other current transfers 1.9 0.0 0.6 2.5
Interest and dividends from private
sector and abroad 3.4 0.7 0.5 4.7
Interest and dividends from public sector 5.7 1.3 -7.0 0.0
Total current receipts 366.0 21.2 3.5 390.7
Current expenditure
Current expenditure on goods and
services 120.5 77.2 0.0 197.8
Subsidies 5.1 0.9 0.0 6.0
Net social benefits 113.2 11.9 0.0 125.1
Net current grants abroad -1.9 0.0 0.0 -1.9
Current grants (net) within public sector 72.4 -72.4 0.0 0.0
Other current grants 19.9 0.0 0.0 19.9
Interest and dividends paid 22.2 0.3 0.1 22.6
AME margin 0.0 0.0 0.0 0.0
Total current expenditure 351.5 18.0 0.1 369.6
Depreciation 4.6 3.7 5.1 13.4
Surplus on current budget 9.8 -0.4 -1.7 7.7
Capital expenditure
Gross domestic fixed capital formation 4.6 7.0 4.3 15.9
Less depreciation -4.6 -3.7 -5.1 -13.4
Increase in inventories 0.0 0.0 0.1 0.0
Capital grants (net) within public sector 5.7 -3.9 -1.8 0.0
Capital grants to private sector 5.8 1.1 0.3 7.2
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 11.0 0.1 -2.3 8.8
Net borrowing 1.2 0.5 -0.5 1.2


Table B25: Public sector transactions by sub-sector and economic category
£ billion    
2002-03    
General government      
Central Local Public Public  
government
authorities corporations sector  
Current receipts
144.4 0.0 -0.2 144.3
Taxes on income and wealth
143.7 0.2 0.0 143.9
Taxes on production and imports
3.1 16.6 0.0 19.7
Other current taxes
2.4 0.0 0.0 2.4
Taxes on capital
64.5 0.0 0.0 64.5
Social contributions
4.9 3.8 9.4 18.1
Gross operating surplus
2.0 0.0 0.7 2.7
Rent and other current transfers
2.9 0.6 0.6 4.1
Interest and dividends from private sector and abroad
6.0 1.3 -7.2 0.0
Interest and dividends from public sector
374.0 22.5 3.2 399.7
Total current receipts
Current expenditure
128.9 82.6 0.0 211.5
Current expenditure on goods and services
5.2 0.9 0.0 6.1
Subsidies
118.0 12.2 0.0 130.2
Net social benefits
-0.4 0.0 0.0 -0.4
Net current grants abroad
77.4 -77.4 0.0 0.0
Current grants (net) within public sector
22.7 0.0 0.0 22.7
Other current grants
20.8 0.3 0.1 21.2
Interest and dividends paid
0.1 0.0 0.0 0.1
AME margin
372.6 18.6 0.1 391.4
Total current expenditure
4.9 3.8 5.4 14.1
Depreciation
-3.5 0.0 -2.2 -5.7
Surplus on current budget
Capital expenditure
5.7 10.3 5.1 21.2
Gross domestic fixed capital formation
-4.9 -3.8 -5.4 -14.1
Less depreciation
0.7 0.0 0.0 0.7
Increase in inventories
6.1 -5.5 -0.6 0.0
Capital grants (net) within public sector
5.8 1.2 0.0 7.0
Capital grants to private sector
0.0 -0.5 0.0 -0.5
Capital grants from private sector
0.0 0.0 0.0 0.0
AME margin
13.5 1.7 -0.9 14.3
Net investment
17.0 1.8 1.3 20.1
Net borrowing


Table B25: Public sector transactions by sub-sector and economic category
£ billion
2003-04
General government
Central Local Public Public
government authorities corporations sector
Current receipts
Taxes on income and wealth 153.5 0.0 -0.2 153.3
Taxes on production and imports 150.1 0.2 0.0 150.3
Other current taxes 3.4 17.8 0.0 21.1
Taxes on capital 2.6 0.0 0.0 2.6
Social contributions 77.0 0.0 0.0 77.0
Gross operating surplus 5.1 4.0 10.5 19.6
Rent and other current transfers 1.6 0.0 0.7 2.3
Interest and dividends from private sector and abroad 2.8 0.6 0.7 4.1
Interest and dividends from public sector 5.1 2.4 -7.5 0.0
Total current receipts 401.1 24.9 4.3 430.3
Current expenditure
Current expenditure on goods and services 138.3 89.4 0.0 227.7
Subsidies 5.9 1.0 0.0 6.9
Net social benefits 123.7 12.9 0.0 136.6
Net current grants abroad -0.7 0.0 0.0 -0.7
Current grants (net) within public sector 83.5 -83.5 0.0 0.0
Other current grants 26.4 0.0 0.0 26.4
Interest and dividends paid 21.6 0.3 0.1 22.0
AME margin 1.6 0.0 0.0 1.6
Total current expenditure 400.2 20.2 0.1 420.5
Depreciation 5.1 4.0 5.6 14.7
Surplus on current budget -4.1 0.7 -1.5 -4.9
Capital expenditure
Gross domestic fixed capital formation 8.2 12.2 4.7 25.2
Less depreciation -5.1 -4.0 -5.6 -14.7
Increase in inventories 0.6 0.0 0.0 0.6
Capital grants (net) within public sector 7.0 -6.5 -0.5 0.0
Capital grants to private sector 7.7 1.3 0.0 9.0
Capital grants from private sector 0.0 -0.7 0.0 -0.7
AME margin 0.2 0.0 0.0 0.2
Net investment 18.6 2.4 -1.4 19.6
Net borrowing 22.7 1.6 0.1 24.5


Table B26: 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 33.9 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 37.8 45.8 46.1 51.7  
1982-83 -1.5 3.0 -1.1 3.2 3.1 38.0 45.5 44.8 50.4  
1983-84 -2.0 3.8 0.6 3.2 3.8 38.2 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 36.3 39.0 26.2 33.3 62.3
1991-92 -1.9 3.8 3.3 2.3 3.7 35.0 38.6 27.4 34.4 54.5
1992-93 -5.6 7.6 5.5 5.9 7.4 34.0 36.6 32.0 40.6 42.1
1993-94 -6.2 7.8 5.5 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 34.1 36.9 40.8 49.4 26.7
1995-96 -3.4 4.8 4.1 4.3 5.0 34.9 37.8 42.8 51.9 18.6
1996-97 -3.0 3.7 3.2 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 36.1 38.5 41.5 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 36.5 39.1 36.2 43.2 15.1
2000-01 2.2 -1.7 -1.2 -3.9 -1.7 37.4 39.8 31.2 39.9 21.3
2001-02 0.8 0.1 0.2 0.4 0.2 37.1 39.2 30.4 38.2 26.5
1 UK National Accounts definition.
2 At end-March; GDP centred on end-March.
3 Maastricht measure from 1993.
4 At end-December; GDP centred on end-December.

Table B27: 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
1970-71 161.2 30.3 49.5 210.8 32.6 6.1 10.0 42.7
1971-72 168.6 26.7 46.4 215.0 33.3 5.3 9.2 42.5
1972-73 176.3 25.7 46.4 222.7 33.1 4.8 8.7 41.8
1973-74 193.8 28.9 52.1 245.9 35.0 5.2 9.4 44.4
1974-75 214.2 30.5 55.4 269.6 38.8 5.5 10.0 48.8
1975-76 219.0 29.9 55.0 274.0 39.9 5.5 10.0 49.9
1976-77 225.0 24.4 50.4 275.4 39.9 4.3 8.9 48.8
1977-78 221.6 16.6 42.5 264.2 38.4 2.9 7.4 45.8
1978-79 228.3 14.4 41.0 269.3 38.4 2.4 6.9 45.2
1979-80 234.0 13.4 40.3 274.3 38.2 2.2 6.6 44.8
1980-81 240.8 10.7 38.0 278.8 40.8 1.8 6.4 47.3
1981-82 251.7 5.5 32.6 284.3 42.6 0.9 5.5 48.1
1982-83 257.5 9.0 35.3 292.8 42.7 1.5 5.9 48.5
1983-84 265.7 11.2 37.3 303.1 42.3 1.8 5.9 48.3
1984-85 273.1 9.8 34.7 307.9 42.6 1.5 5.4 48.1
1985-86 273.1 8.3 30.4 303.5 41.0 1.2 4.6 45.5
1986-87 277.0 4.9 27.4 304.5 40.1 0.7 4.0 44.1
1987-88 280.7 4.8 25.6 306.3 38.6 0.7 3.5 42.1
1988-89 274.4 2.7 24.2 298.5 36.2 0.4 3.2 39.4
1989-90 276.2 9.2 30.8 307.0 35.7 1.2 4.0 39.7
1990-91 277.9 11.1 30.0 307.9 36.1 1.4 3.9 40.0
1991-92 294.6 14.1 30.1 324.7 38.4 1.8 3.9 42.3
1992-93 309.3 15.4 30.3 339.6 40.3 2.0 3.9 44.2
1993-94 319.6 12.6 27.2 346.8 40.1 1.6 3.4 43.6
1994-95 330.8 12.5 27.5 358.3 39.9 1.5 3.3 43.2
1995-96 335.9 12.0 27.2 363.0 39.4 1.4 3.2 42.6
1996-97 339.2 6.0 20.1 359.3 38.7 0.7 2.3 41.0
1997-98 336.6 5.4 19.0 355.6 37.2 0.6 2.1 39.3
1998-99 336.5 6.4 19.9 356.4 36.2 0.7 2.1 38.4
1999-00 341.0 4.6 17.8 358.8 35.6 0.5 1.9 37.4
2000-01 356.1 5.5 18.8 375.0 36.3 0.6 1.9 38.2
2001-02 369.6 8.8 22.2 391.8 37.0 0.9 2.2 39.3
1 Net of sales of fixed assets.

  1. Fiscal policy: public finances and the cycle, HM Treasury, March 1999.
  2. Audit of Assumptions for the 2002 Pre-Budget Report, 27 November 2002
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