Developments to Public Sector Finances - Office for National Statistics

Developments to PSF Statistics – June 2014

Developments to Public Sector Finance Statistics – June 2014 update Introduction On 28 February 2014, the Office for National Statistics (ONS) published a series of articles explaining how the Public Sector Finances would be affected by the introduction of: (i) The new National Accounts and Balance of Payments frameworks (ESA2010 and BPM61); and, (ii) The recommendations of the ONS led 2013 Review of Public Sector Finance Statistics (PSF Review), following the earlier consultation on these proposals. These changes will come into effect in the Public Sector Finances released in September 2014. In this same month the UK National Accounts will adopt the new ESA2010 framework, simultaneously with other European Member States. This article is part of the suite of articles that ONS is producing to describe the improvements to National Accounts which will be made in September 2014. On 16 May 2014, ONS published an article, Latest Developments to National Accounts, summarising the improvements. Articles setting out methodological details of the changes, topic by topic, and an indication of the impact of these changes are being released in batches. The first batch of these articles published on 29 May 2014 described changes not associated with ESA2010 and gave an indication of their impact on current price Gross Domestic Product (GDP). The second batch of articles released on 10 June 2014 did the same for those improvements arising from the new international standards (ESA2010). The batch of articles released on 10 June described two changes of direct relevance to Public Sector Finances, the capitalisation of spending on military weapons and the capitalisation of research and development expenditure. This article builds on the material published on 28 February and provides: • Updated estimates of impact from 1997/98 to 2012/13, including a revised estimate of the impact of capitalising of research and development (R&D) expenditure; • The first estimate of impacts for 2013/14 for ESA2010 and the PSF Review ; and, • A first estimate of debt to GDP ratios under ESA2010 and the PSF Review, up to 2009, using the current price GDP estimates published on 10 June. This article has been produced, with estimates of impacts on the Public Sector Finance statistics up to the latest period, in order to provide a smooth transition for users to the new publication basis. This is possible for Public Sector Finance Statistics as data on an ESA2010 basis is available earlier than for other parts of the National Accounts.

Note 1. In this article the term ‘ESA2010’ will be used to cover the Balance of Payments Manual 6 (BPM6) as well as the European System of Accounts 2010.

Office for National Statistics

1


In addition to the updated estimates in this article, ONS have also today released a table of key aggregates on an ESA2010 and PSF Review basis in the monthly Public Sector Finance Statistics bulletin. These estimates will be updated in the July and August bulletins. When the changes are implemented in September, a table will be included to show the main aggregates on an ESA1995 basis. This will continue to be available until the end of the 2014/15 financial year. Summary The article published today updates the estimates of the impact of moving to ESA2010 and of implementing the PSF review, which were provided in the 28 February 2014 article. The key impacts of implementing ESA2010 on Public Sector Finances are from: • Classification of Network Rail as a Central Government body, which increases both Public Sector Net Debt (PSND) and Public Sector Net Borrowing (PSNB) from 2004/05 onwards; • Change in treatment of funded defined benefit pensions schemes, which increases PSNB; • Capitalisation of Research and Development (R&D) spending, which switches that spending from current budget to net investment without changing PSNB; • Capitalisation of spending on weapons, which also switches spending from current budget to net investment without changing PSNB; • Change to the treatment of receipts from 3G/4G mobile phone licence auctions, which alter the profile of PSNB (see 28 February article); and, • Change to the treatment of the Royal Mail Pension Plan transfer, which increases PSNB in 2012/13 but creates an offsetting decrease over subsequent years (see 28 February article). The key changes from the PSF Review are: • Changing from a measure which excluded temporary impacts of financial interventions to a measure which only excludes Public Sector banks. The main impact of this is the Bank of England Asset Purchase Facility (APF) becomes part of the Public Sector and all transactions between Central Government and the APF consolidate out; and, • Ensuring all shares held by Government are treated in the same way as illiquid assets (i.e. the shares in Lloyds Banking Group and Royal Bank of Scotland will no longer be treated as liquid assets). This article presents the impacts of these changes for financial years from 1997/98 to 2013/14 and updates some of the impacts previously published. Following release of the 10 June article Latest Developments to National Accounts, an estimate of GDP in current prices is available up until 2009. This allows estimates of the ratio of PSND excluding banks to GDP to be produced on an ESA2010 basis for the first time. For 2009, the ratio on an ESA2010 basis is estimated to be around 7% higher than the current measure on an ESA1995 basis.


2


Latest Estimates of the Impact on Key Aggregates The article published today broadly confirms the previously announced impact on debt and deficit, from the introduction of ESA2010 and the recommendations of the PSF Review. • PSND excluding banks is estimated to be around £129 billion (10%) higher at the end of 2013/14 than the previous measure; • PSND excluding banks as a proportion of GDP is estimated to be around 7% higher at the end of 20091 compared with the previous measure; • PSNB excluding banks is estimated to be around £4 billion (4%) higher than the previous estimate in 2013/14; and, • Capitalisation of spending on military weapons and R&D are now estimated to result in a reduction in current budget and balanced increase in net investment of between £3 billion and £6 billion a year, with no impact on overall PSNB. The impact of the ESA2010 and PSF Review changes on PSND and PSNB are shown in Charts 1 and 2 with more detail available in Annexes A, B, and C. The estimates in this article are based on the data published in the Public Sector Finances statistical bulletin on 20 June 2014. The article only presents the impact of methodological changes that are taking place due to the implementation of ESA2010 and the PSF Review. In line with ONS revision policies, in September 2014, there will be other data changes not related to ESA 2010 or the PSF Review. These revisions will either relate to updated data sources or improved statistical methodology. Work on implementing these data changes is still ongoing and so it is not possible to indicate the magnitude of revisions but the revisions will mainly impact recent years and it is not expected that the revisions will substantially change the year-on-year picture presented here. Impact on Public Sector Net Debt (PSND) For 2013/14, PSND excluding banks is £128.6 billion higher than the previous measure. The main impacts on PSND in implementing ESA10 and moving to the new excluding banks measure are: • Classification of Network Rail as part of Central Government under ESA2010 increases PSND by £32.7 billion; and, • From the PSF Review o Consistent treatment of illiquid assets increases PSND by £51.4 billion; and, o Including the net debt of the Bank of England APF and Special Liquidity Scheme’s net debt increases PSND by £44.5 billion.

Note 1. This comparison can only be made up to 2009, since the GDP estimates for later years have not yet been released


3


Chart 1: Comparison of PSND excluding financial interventions on an ESA1995 basis with PSND excluding banks on an ESA2010 basis 1,600 £billion 1,400 Current PSND ex (ESA1995) 1,200

1,000

New PSND ex (ESA2010 and PSF Review)

800

600

400

200

0

1. Figures based on data published in Public Sector Finances on 20 June 2014

Impact on Public Sector Net Borrowing (PSNB) In 2013/14 PSNB excluding banks is £3.8 billion higher than PSNB excluding temporary interventions from the financial crisis. The main impacts in implementing ESA2010 and moving to the new excluding banks measure are. • Under ESA2010: o Classification of Network Rail as part of Central Government increases PSNB by £4.6 billion; o New treatment of the Local Government Pensions Scheme increases PSNB by £2.1billion; and, o Changes to the treatment of Royal Mail Pension Plan (RMPP) and mobile phone licence receipts reduce PSNB by £2.5 billion. • From the PSF Review: o Including the Bank of England APF decreases PSNB by £0.4 billion.


4


Chart 2: Comparison of PSNB Measures on an ESA1995 basis with PSNB excluding banks on an ESA2010 basis 180 £billion 160 140 120 100 80

Current PSNB ex (ESA1995) Current PSNB ex (excluding RMPP & APF transfers) (ESA1995) New PSNB ex banks (ESA2010 & PSF Review) APF (PSF Review) and RMPP (ESA2010)

60 40 20 0 -20 -40 3G/4G Licences (ESA2010)

-60

1. Figures based on data published in Public Sector Finances on 20 June 2014 2. RMPP = Royal Mail Pension Plan; APF = Asset Purchase Facility

Many users currently look at a measure of PSNB excluding temporary interventions and also excluding the transfer of the RMPP and the transfers from the Bank of England APF. Under ESA2010 and the PSF Review, there is no equivalent measure. This is because the RMPP transfer now impacts over many years, and the treatment of the APF means that flows between the APF and Government no longer impact on borrowing. Comparing the new measure of PSNB excluding banks with the ESA1995 measure that excluded the RMPP and APF transfers (see table 1), the main impacts are: • For ESA2010, the impacts are as described above, except that the impact of the new treatment of the RMPP is only £8.3 billion in 2012/13 rather than £36.3 billion; • For the PSF Review, including the Bank of England APF decreases borrowing by around £12 billion, as under the new excluding banks measure the interest payments to and from the APF no longer impact on borrowing.


5


Table 1: Transition from PSNB ex (ex RMPP/APF) ESA1995 basis to PSNB ex banks ESA2010 basis £billion

2012/13 2013/14

ESA1995

ESA 2010

Public Sector Net Borrowing ex (PSNB ex RMPP1 & APF2)

All ESA 2010 changes other than those related to transfer of the RMPP1

115.1 107.0

PSF Review Changes related to new ESA 2010 treatment of the transfer of the RMPP1 6.1 8.3 5.5 -1.3

ESA2010 + PSF Review

Changes related to new treatment for APF2 interest payments -12.1 -12.5

Changes related to new treatment for SLS3

Public Sector Net Borrowing excluding banks (PSNB ex) 2.3 0.0

119.7 98.7

1. RMPP = Royal Mail Pension Plan 2. APF = Asset Purchase Facility Fund 3. SLS = Special Liquidity Scheme

ESA 2010 GDP impacts on Public Sector Finances On 10 June 2014, the Office for National Statistics (ONS) published an article, Impact of ESA2010 Changes on Current Price GDP Estimates, explaining how the introduction of ESA 2010 will impact the current price measurement of GDP. A table in the article provides estimates of the level current price GDP for each year between 1997 and 2009. The average change in the level of GDP during the period is an increase of 3.6% a year. An important measure in Public Sector Finances is ‘PSND as a percentage of GDP’. The increase in GDP under ESA2010 would lead to a reduction in PSND as a percentage of GDP if PSND itself was unchanged. However, as shown in this article, PSND will increase as a result of ESA2010 and the PSF Review. Prior to 2008, the increase in GDP is expected to more than offset the increase in PSND and so there will be a reduction in PSND as a percentage of GDP. However, from 2008 onwards the PSND increases are larger than the expected increases in GDP. At the end of 2009, it is expected that PSND as a percentage of GDP will increase by around 7 percentage points from 51% to 58%. Changes from the PSF Review do not affect General Government Gross Debt (GGGD), although the ESA2010 change to the classification of Network Rail does. Therefore, there will be a reduction in the ratio of GGGD to GDP back to 2004 (i.e. the point at which the reclassification takes effect). There are currently no published estimates of GDP under ESA 2010 for any years after 2009. However, if we were to assume the average increase in GDP of 3.6% then at the end of 2013 PSND as a percentage of GDP would increase by around 7 percentage points (from 76% to 83 %).


6


Table 2: Impact of ESA 2010 GDP Estimates on PSND ex as a percentage of GDP ESA1995

1997 4 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1. 2. 3. 4.

Change

PSND ex (PSND ex)1

ESA2010 and PSF Review PSND ex banks (PSND ex)2

(£billion)

(£billion)

(£billion)

364.0 361.2 360.2 327.6 328.5 357.5 393.1 435.1 475.0 509.2 545.3 612.3 741.0

364.0 361.2 360.2 327.6 328.5 357.5 393.1 450.3 492.7 527.4 564.6 686.3 884.5

0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.2 17.7 18.2 19.3 74.0 143.5

ESA1995

Change

PSND ex (PSND ex) 1

ESA2010 and PSF Review PSND ex banks (PSND ex)2

(% of GDP) 3

(% of GDP)

(% pts)

42.2 39.5 37.3 32.4 31.2 32.1 33.3 35.0 36.2 36.7 37.3 42.9 51.0

40.5 38.3 36.1 31.4 30.3 31.0 32.1 34.9 36.1 36.6 37.2 46.2 58.2

-1.7 -1.2 -1.2 -1 -0.9 -1.1 -1.2 -0.1 -0.1 -0.1 -0.1 3.3 7.2

Figures based on data published in Public Sector Finances on 20 June 2014 Includes both impacts from ESA2010 and PSF Review recommendations GDP figures used are 12 month rolling totals of nominal current price GDP Figures are presented in this table on a calendar year basis as National Accounts balances using calendar years and so the only available estimates of GDP under ESA2010 are in calendar years

Overall Impact of ESA2010 As described in the article, Transition to ESA2010: Update to Impact on Public Sector Finances, the key changes for public sector finances caused by adoption of ESA2010 are: • PSND is only affected by the reclassification of Network Rail (from private sector to central government). This is still thought likely to increase net debt by around £30bn in 2012/13 although some of the estimates for earlier years have been revised. • The reclassification of Network Rail is also still thought likely to increase PSNB by nearly £3.0 billion in 2012/13. The first estimate for net borrowing of Network Rail in 2013/14 is £4.6 billion. • The changes to the treatment of liabilities in underfunded pension schemes will still increase PSNB but by slightly less than estimated in February. In 2012/13, for example, the February estimate was an increase of £2.5 billion, but this has been reduced to £2.0 billion. • Revised guidance on permits to use natural resources will spread the profile of receipts from sales of mobile phone licences and subsequently revise PSNB in all years from 2000/01 onwards. There have been some small revisions to the original Office for National Statistics

7


•

•

estimates since February but the impact remains that in most years (other than 2000/01 and 2012/13) PSNB will reduce by around £1 billion. As previously announced, the effect of the one-off transfer of the RMPP is expected to increase PSNB by around £36 billion in 2012/13. The increase will be around £8 billion when comparing against the PSNB measure that excludes transfers related to the RMPP and the APF (PSNB ex RM & APF). Changes to the ESA rules on whether spending should be capitalised will move some spending from current to capital but with minimal impact on overall PSNB. This change includes capitalisation of R&D expenditure, which is an area where additional work has been completed since publication of the article in February. The major change here is that current transfers related to R&D have now been moved to record them as investment grants, whereas in the February article they were left as current transfers (i.e. a switch from current to capital expenditure).

The impact of the major ESA2010 changes on PSND and PSNB (including surplus on current budget and net investment) are shown in Annexes A, B, and C. The largest revisions made to estimates, since the February article, are to the estimated impacts for the reclassification of Network Rail and the capitalisation of R&D. These two changes are described below in additional detail. There are a number of smaller changes to the previous impact estimates, particularly in the period 2011 to 2013. These are as a result of further national accounts processing. The new estimates are shown in the annexes. Network Rail In December ONS announced that, from 2004/05, Network Rail would be classified as a central government body under ESA2010 rules. This decision was explained in Treatment of Network Rail under ESA2010 Guidance. An updated assessment of the impact of this reclassification from private sector to government has now been completed. This has been based on regulatory accounts and financial reports, with advice from HM Treasury and Network Rail. As described in the previous article, the reclassification of network rail is the only ESA2010 change, which materially affects the calculation of PSND. The impact of Network Rail on PSND is still expected to be around £30 billion at the end of 2012/13, but Network Rail liabilities in some earlier years have been revised upwards from the initial estimates with the impact on PSND at the end of 2004/05 now expected to be around £16 billion instead of the £9 billion previously estimated. The reclassification of Network Rail is still expected to increase PSNB in each year since 2004/05. The previous estimates have been updated but the impact is still expected to be between £2 billion and £3 billion in most years.


8


Capitalisation of R&D expenditure ESA2010 requires significant change in the capitalisation of non-financial assets. This affects current budget and net investment in the public sector finances rather than the level of overall borrowing. In the previous articles, ONS announced that under ESA2010 R&D activity is required to be capitalised for the first time. For R&D purchased or created by government, the assessment of impact provided in February (moving around £0.1 billion between current budget and net investment) is broadly unchanged. However, communications with stakeholders earlier in the year have highlighted a number of cases where government departments transfer grant funding to universities and other private sector non-profit institutions, and to overseas bodies, to finance R&D projects. ONS has reviewed the treatment of these transactions, and concluded that the ESA2010 change on capitalisation of R&D means that this spending now qualifies as provision of an investment grant. This moves spending of around £3 billion a year from current budget to net investment but without changing the overall level of public sector net borrowing. Overall Impact of PSF Review As described in the article, Developments to Public Sector Finance Statistics – February 2014 update, the key changes to the public sector finance aggregates caused by adoption of the PSF Review recommendations are: • new ‘ex measures’ that only exclude the debt and borrowing of the public sector banks (and not the other ‘temporary affects of the financial crisis’); • new ‘ex measures’ that no longer record any illiquid government assets (such as shares in public sector banks) as liquid assets (in order to recognise them as related to “temporary” financial interventions); and, • a change in sign of current budget balance to report Current Budget Deficit instead of Surplus on Current Budget. There have been no significant revisions to the estimates of the impact of the PSF Review, since the February article. Alignment of Public Sector Finance Statistics and National Accounts Since 1997 the Public Sector Finance Statistics and National Accounts have been, as far as possible, aligned. However, Public Sector Finance Statistics has an Open Revisions policy for historic revisions (meaning revisions can be taken on as soon as possible) whereas for National Accounts, revisions for early periods can only be taken on at the time of each Blue Book. This means that at each Blue Book, ONS brings the National Accounts as far into line as possible with classification decisions that have already been implemented in the Public Sector Finances. Office for National Statistics

9


For Blue Book 2014, in order to meet the publication timetable, only classifications announced by the 30 November 2013 with full data available could be processed into the National Accounts. For Blue Book 2014, the key areas where National Accounts will be brought in line with Public Sector Finance Statistics are: • •

Classification of Northern Rock Asset Management and Bradford & Bingley as Central Government bodies Treatment of two environmental levies: the EU Emissions Trading System; and, the UK Carbon Reduction Commitments Energy Efficiency Scheme

In addition, for Blue Book 2014 ONS undertook further alignment of methods which had not been reviewed in National Accounts for a number of years including: • •

Updating the way interest is calculated on financial assets and liabilities for Central and Local Government A small component of the calculation of final consumption expenditure for Scottish local authorities.

There were some aspects of the implementation of ESA2010 where full alignment could not be achieved between National Accounts and Public Sector Finance Statistics. These will all be fully implemented into the Public Sector Finance Statistics in September. However, they will be brought into alignment for National Accounts in Blue Book 2015: •

•

•

The classification of Network Rail, and the change in treatment of mobile phone licences was only confirmed on 17 December 2013 and so could not be processed into Blue Book 2014. The change in treatment of R&D investment grants to Universities etc. has been incorporated into Blue Book 2014. However, the associated change to treatment of grants to overseas bodies will not be incorporated into National Accounts until Blue Book 2015 because of difficulties integrating with the Balance of Payments statistics. The unaligned portion of R&D grants is relatively small – for example, around £0.5 billion out of £3.0 billion total grants in 2012/13. Blue Book 2014 includes an important change in the valuation of imputed contributions into local authority funded pension schemes. ONS has already announced that Blue Book 2015 will include further developments to this method. The public sector finances will be based on the Blue Book 2015 method.


10


Conclusion Adoption of ESA2010 and the PSF Review recommendations causes significant changes to the Public Sector Finances. This article provides an update on how the key public sector finance aggregates are impacted by the change. At this stage, the assessment of impacts can be considered much firmer than they were in February. However, impacts in later periods could be affected by better estimates, particularly for the 2012/13 and 2013/14 periods. The Public Sector Finances, May 2014 bulletin includes a table with annual, quarterly and monthly estimates of what the public sector net debt and net borrowing figures will be once ESA2010 and the PSF Review are implemented in September 2014. The figures in that table are wholly consistent with those in this article.


11


Annex A: Overall Impact on Public Sector Net Debt of ESA2010 and PSF Review Changes £billion4

1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 1. 2. 3. 4.

ESA1995

ESA2010

PSF Review

PSF Review

Public Sector Net Debt ex (PSND ex)

Plus Network Rail net debt

Plus Bank of England Schemes (APF and SLS)1 net debt

Plus Impact of Reclassifying Liquid Assets to Illiquid Assets (e.g. RBS/LBG shares)2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 66.9 86.6 61.4 59.5 58.1 51.4

358.6 357.8 349.1 316.4 323.1 354.9 393.6 431.8 470.7 507.5 537.8 633.0 828.5 1,005.0 1,106.4 1,185.2 1,273.3

0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.9 18.4 18.2 19.6 21.1 23.3 24.9 27.2 30.0 32.7

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.9 16.3 8.9 -2.4 25.3 44.5

ESA2010 and PSF Review Public Sector Net Debt excluding banks (PSND ex)3 358.6 357.8 349.1 316.4 323.1 354.9 393.6 447.6 489.1 525.7 557.4 723.9 954.7 1,100.2 1,190.7 1,298.6 1,401.9

APF = Asset Purchase Facility; SLS = Special Liquidity Scheme RBS = Royal Bank of Scotland; LBG = Lloyds Banking Group Includes both impacts from ESA2010 and PSF Review recommendations Figures based on data published in Public Sector Finances on 20 June 2014


12


Annex B: Overall Impact on Public Sector Net Borrowing of ESA2010 and PSF Review Changes £billion4

1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 1. 2. 3. 4.

ESA1995

ESA2010

PSF Review

Public Sector Current Budget Deficit ex1

Plus ESA2010 impacts2

Plus Bank of England Schemes (APF and SLS)3 impact 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.4 -6.4 -7.9 -8.9 -3.4 -0.4

0.5 -10.8 -21.7 -23.2 -11.7 11.6 17.0 19.7 13.3 6.8 6.5 50.8 108.9 100.5 89.0 85.3 70.1

-1.9 -2.2 -2.3 -3.3 -3.8 -3.4 -3.3 -1.3 -1.7 -2.2 -1.2 -1.5 -1.0 -1.3 -0.3 -0.2 -0.2

ESA2010 and PSF Review Public Sector Current Budget Deficit ex1 -1.4 -13.0 -23.9 -26.5 -15.5 8.2 13.7 18.4 11.6 4.6 5.3 48.9 101.5 91.4 79.7 81.7 69.5

ESA1995

ESA2010

Public Sector Net Investment ex


5.8 6.7 6.8 -16.1 13.9 16.2 17.9 22.8 25.7 28.0 31.4 48.5 48.4 38.7 29.0 -4.6 24.7

2.6 2.9 3.0 25.8 3.6 3.8 3.4 4.5 4.6 3.4 2.9 3.9 3.3 4.2 3.5 42.6 4.5

ESA2010 (and PSF Review) Public Sector Net Investment ex

8.5 9.6 9.8 9.8 17.5 19.9 21.3 27.3 30.3 31.5 34.3 52.4 51.7 42.9 32.5 38.0 29.2

ESA1995

ESA2010

PSF Review

Public Sector Net Borrowing ex (PSNB ex)


Plus Bank of England Schemes (APF and SLS)3 impact 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.4 -6.4 -7.9 -8.9 -3.4 -0.4

6.3 -4.1 -14.9 -39.2 2.2 27.8 34.9 42.6 39.0 34.8 38.0 99.4 157.3 139.2 118.0 80.7 94.9

0.8 0.7 0.8 22.5 -0.2 0.4 0.1 3.2 2.9 1.2 1.6 2.4 2.3 2.9 3.1 42.4 4.2

ESA2010 and PSF Review Public Sector Net Borrowing excluding banks (PSNB ex) 7.1 -3.4 -14.1 -16.7 2.0 28.1 35.1 45.7 41.9 36.1 39.6 101.3 153.2 134.2 112.2 119.7 98.7

Public Sector Finances currently reports Surplus on Current Budget, but as part of the PSF Review recommendations the sign will be changed to report Current Budget Deficit ESA2010 impacts include the reclassification of Network Rail, capitalisation of military expenditure and research & development and the new treatment of the Local Government Pension Scheme, the sale of 3G/4G mobile phone spectra and the transfer of the Royal Mail Pension Plan APF = Asset Purchase Facility; SLS = Special Liquidity Scheme Figures based on data published in Public Sector Finances on 20 June 2014 Office for National Statistics

13


Annex C: Impact of ESA2010 on Current Budget Deficit, Net Investment, and Public Sector Net Borrowing ESA2010 Changes to Public Sector Current Budget Deficit £billion2

1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 1. 2.

ESA1995 Public Sector Network Rail Current Budget Deficit ex1 0.5 0.0 -10.8 0.0 -21.7 0.0 -23.2 0.0 -11.7 0.0 11.6 0.0 17.0 0.0 19.7 2.2 13.3 2.2 6.8 1.9 6.5 1.8 50.8 2.5 108.9 3.0 100.5 3.3 89.0 3.0 85.3 3.3 70.1 3.1

ESA2010 Changes 3G/4G Royal Mail Licences Pension Plan

Local Authority Pension Scheme 0.6 0.7 0.8 0.8 0.9 0.9 1.1 1.2 1.4 1.5 1.6 1.5 1.6 1.8 1.9 2.0 2.1

0.0 0.0 0.0 -0.8 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 -1.1 -1.2

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -1.2 -1.3

Other Changes

Non financial Assets -2.7 -3.0 -3.2 -3.7 -3.7 -3.4 -3.5 -3.8 -4.4 -4.6 -3.7 -4.6 -4.8 -5.5 -4.4 -3.5 -3.3

0.2 0.1 0.1 0.4 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.3 0.3

ESA2010 Public Sector Current Budget Deficit ex1 -1.4 -13.0 -23.9 -26.5 -15.5 8.2 13.7 18.4 11.6 4.6 5.3 49.3 107.9 99.3 88.6 85.1 69.9

Public Sector Finances currently reports Surplus on Current Budget, but as part of the PSF Review recommendations the sign of this will be changed to instead report Current Budget Deficit Figures based on data published in Public Sector Finances on 20 June 2014


14


ESA2010 Changes to Public Sector Net Investment £billion1

1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 1.

ESA1995 Public Sector Network Net Rail Investment ex 5.8 6.7 6.8 -16.1 13.9 16.2 17.9 22.8 25.7 28.0 31.4 48.5 48.4 38.7 29.0 -4.6 24.7

Local Authority Pensions 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 0.3 -1.1 -0.7 -0.6 -1.3 -1.2 -0.9 -0.4 1.5

3G/4G Licences

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 22.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.3 0.0

ESA2010 Changes Royal Mail Non financial Assets Pension Plan of which total R&D 0.0 2.8 0.9 0.0 3.0 1.0 0.0 3.2 1.5 0.0 3.7 1.5 0.0 3.7 1.8 0.0 3.9 1.9 0.0 3.5 1.8 0.0 3.9 1.9 0.0 4.4 2.0 0.0 4.6 2.2 0.0 3.7 2.5 0.0 4.7 3.0 0.0 4.8 3.5 0.0 5.6 4.2 0.0 4.6 3.2 37.5 3.5 3.1 0.0 3.3 3.2

Other Changes of which SUME 1.9 2.0 1.7 2.2 1.9 2.0 1.8 2.0 2.4 2.4 1.2 1.8 1.4 1.4 1.4 0.4 0.1

-0.2 -0.1 -0.1 -0.4 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.2 -0.2 -0.2 -0.2 -0.3 -0.3

ESA2010 Public Sector Net Investment ex 8.5 9.6 9.8 9.8 17.5 19.9 21.3 27.3 30.3 31.5 34.3 52.4 51.7 42.9 32.5 38.0 29.2

Figures based on data published in Public Sector Finances on 20 June 2014


15


ESA2010 Changes to Public Sector Net Borrowing (PSNB) £billion1

1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 1.

ESA1995 Public Sector Net Borrowing ex (PSNB ex)

6.3 -4.1 -14.9 -39.2 2.2 27.8 34.9 42.6 39.0 34.8 38.0 99.4 157.3 139.2 118.0 80.7 94.9

Network Rail

0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.9 2.5 0.8 1.1 1.8 1.8 2.1 2.1 2.8 4.6

ESA2010 Changes 3G/4G Royal Mail Licences Pension Plan

Local Authority Pensions

0.6 0.7 0.8 0.8 0.9 0.9 1.1 1.2 1.4 1.5 1.6 1.5 1.6 1.8 1.9 2.0 2.1

0.0 0.0 0.0 21.7 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 1.3 -1.2

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 36.3 -1.3

Non financial Assets

0.1 0.0 0.0 0.0 0.0 0.5 0.1 0.1 0.0 0.0 0.0 0.1 0.0 0.1 0.2 0.0 0.0

Other Changes

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

ESA2010 Public Sector Net Borrowing excluding banks (PSNB ex) 7.1 -3.4 -14.1 -16.7 2.0 28.1 35.1 45.7 41.9 36.1 39.6 101.7 159.6 142.1 121.1 123.1 99.1

Figures based on data published in Public Sector Finances on 20 June 2014


16