Accredited official statistics

Public spending statistics: Guidance

Updated 27 October 2021

1. Introduction

The HM Treasury public spending statistics (PSS) release is intended to provide comprehensive information on public spending. The release is classified as National Statistics and conforms to the rules and principles set out in the Code of Practice for Official Statistics overseen by the United Kingdom Statistics Authority.

This guidance document provides further background information about the release. On the main release page, each section contains overview commentary on the statistics being released. All statistical tables are available in ODS format.

All data in the PSS release are National Statistics and are on an outturn basis. Where major revisions to the data for past years have been made we refer to them in the main publication text and footnotes accompanying the tables.

1.1 European System of Accounts 2010 (ESA10)

The Office for National Statistics (ONS) are responsible for producing the National Accounts which measure the economic activity of the whole economy. The UK are legally required to produce these based on a framework specified in the European System of Accounts 2010 (ESA10). Before September 2014 the UK, along with all other Member States, produced accounts using the previous ESA95 framework.

Total Managed Expenditure (TME) is an aggregate drawn from National Accounts that measures the sum of public sector current and capital spending. The move to ESA10 from September 2014 onwards means that the TME aggregate used in the Public Spending Statistics and PESA publications is also now on an ESA 2010 basis.

2. PESA and PSS publications

• The PESA command paper is an annual release, containing plans data for the Spending Review period, alongside the data contained in this release.
• The quarterly Public Spending Statistics update releases update the key series found in this release.

3. Chapter 1: Background to the departmental budgets

Chapter 1 brings together information on public expenditure within the current budgeting and control framework. This comprises departmental budgets, including all control totals, as well as reconciling from the budgetary framework to the fiscal aggregates in the National Accounts.

3.1 The budgeting and reporting framework

• Table 1.1 summarises public expenditure both in terms of the Treasury’s budgeting and control framework, and in terms of the National Accounts aggregate Total Managed Expenditure (TME) and its components. Table 1.2 presents the same information in real terms.
• There is a fuller description of the budgeting and control framework in the Annex C table. This chapter gives a brief overview.
• A clear distinction is made for budgeting between current and capital spending, with departments having separate resource and capital budgets largely based on International Financial Reporting Standards (IFRS). For part of their resource and capital budgets, departments are given firm three year spending limits called Departmental Expenditure Limits (DELs) within which they prioritise resources and plan ahead.
• Spending that cannot reasonably be subject to firm multi-year limits, or that relates to certain non-cash transactions, is included in Annually Managed Expenditure (AME). Table 1.1 sets out the main elements of AME.
• Departmental AME (which is contained in departments’ budgets) includes social security spending, and various other items of departmental expenditure. Outside departments’ budgets, other AME consists of net expenditure transfers to the EU, locally financed expenditure, debt interest, public corporations’ own-financed capital expenditure, and accounting adjustments.

3.2 Reconciliation of budgeting and National Accounts aggregates

• DEL and AME together make up TME, an aggregate that is drawn from the National Accounts, and is defined in National Accounts terms as public sector current expenditure plus public sector gross investment (measured net of sales but gross of depreciation). Note that total public sector depreciation is modelled by the ONS for the National Accounts, while the depreciation referred to in the footnote to Table 1.1 is depreciation in resource DEL, measured on an IFRS basis.
• Table 1.1 shows the reconciliation from the resource and capital budgets to the National Accounts measures of public sector current expenditure and public sector gross investment, respectively. With the deduction of depreciation, the latter reconciles to public sector net investment. Table 1.2 presents the same information in real terms.
• A breakdown of the accounting adjustments used for this reconciliation is shown in Table 1.14 and PESA Annex D resource and capital budgets.
• Table 1.3 shows the resource budget for each departmental group, with Table 1.4 presenting the same information in real terms. Resource DEL is a control total, which means that departments must manage spending to keep within this total.
• Table 1.5 shows resource DEL excluding depreciation as first presented in the Spending Review 2010. The depreciation ring fence is a control total that departments must manage. Table 1.6 presents the same information in real terms.
• Table 1.8 shows the capital budget for each departmental group, with Table 1.9 presenting the same information in real terms. Capital DEL is a control total.

3.3 Administration budgets

• Table 1.7 sets out details of administration expenditure in resource DEL for those central government departments that are subject to administration budgets. Administration budgets are set for most civil service departments and are generally designed to contain most back-office functions. These budgets therefore help to drive economy and efficiency in the running of government. Around 65 per cent of administration costs are accounted for by civil service pay, a further 30 per cent is accounted for by procurement of goods and services (e.g. accommodation, equipment, travel). An analysis of administration budgets by economic category is shown in Table 2.1.

3.4 Total DEL

• Table 1.10 shows Total DEL by departmental group. Total DEL is made up of resource DEL excluding depreciation plus capital DEL. Table 1.10 is consistent with Table 1.5 plus Table 1.8. Note that Total DEL is not a control total. Table 1.11 presents the same information as Table 1.10 in real terms.
• Table 1.12 presents total expenditure, i.e. the sum of Total DEL and departmental AME, by departmental group. Table 1.13 presents the same information as Table 1.12 in real terms.

3.5 Public expenditure spending by sector

• Table 1.15 shows a breakdown of TME, and within it DEL and AME, between the National Accounts public spending sectors (central government, local government and public corporations).
• This breakdown by sector is used in many of the analyses in this publication. In this table current and capital expenditure are added together (net of depreciation).
• To reflect new budgeting arrangements, expenditure by the Scottish Government is presented as AME rather than DEL in Table 1.15. This treatment is explained in more detail in Chapter 2.
• TME is a consolidated measure of public expenditure, i.e. payments from one sector that are used to finance the expenditure of another sector are excluded from TME, as are the corresponding receipts of the counterparty sector. The split by sector of TME presented in PSS records only the ‘own’ expenditure components that relate to an individual sector.

3.6 Central government own expenditure

Central government own expenditure excludes central government spending in support of local government. Loans and capital grants in support of public corporations are also excluded.
However, subsidies to public corporations are included here, as exceptionally these intra-public sector flows are not consolidated out in the calculation of TME. Central government expenditure includes:

• departments’ own spending;
• spending of agencies and Arms Length Bodies (ALBs) classified to central government;
• spending of the devolved administrations in Scotland, Wales and Northern Ireland.

Central government own expenditure is shown split into DEL, departmental AME, and other AME, including locally financed central government expenditure. This latter category at present only includes expenditure of the Northern Ireland departments financed from regional rates. Further analyses of central government own expenditure are presented in Chapter 6.

3.7 Local government expenditure

Local government expenditure is split according to how it is financed:

• central government support (which can be in either DEL or AME);
• locally financed support in Scotland (the proceeds of non-domestic rates in Scotland that are collected and distributed to local authorities by the Scottish government);
• self-financed expenditure. Further analyses of local government expenditure are presented in Chapter 7.

3.8 Public corporations expenditure

The impact of public corporations on the parent department can be either in DEL or departmental AME. For most public corporations, DEL includes:

• subsidies and capital grants paid;
• interest and dividends received;
• loans and public dividend capital invested.

For self-financing public corporations, grants and subsidies score in DEL and the other items are contained in departmental AME.
Subsidies to public corporations are included in central government own expenditure as they affect central government current expenditure in TME. The total public corporations’ expenditure line in this table shows their contribution to TME, which is capital expenditure plus interest and dividends paid to the private sector. Further analyses for public corporations, including information on subsidies, are presented in Chapter 8.

4. Chapter 2: Background to economic analyses

This chapter provides an economic category analysis of the budgeting aggregates presented in Chapter 1. All data in this chapter fall within the scope of National Statistics.

4.1 Analyses of budgets by economic category of spending

Table 2.1 shows analyses of budgets by economic category of spending, consistent with the budgeting aggregates reported in Chapter 1. The breakdowns of resource DEL and resource departmental AME are consistent with Table 1.3; administration budgets in resource DEL with Table 1.7; and capital budgets with Table 1.8.

4.2 Treatment of Coronavirus funding in departments’ budgets

Following the Coronavirus outbreak in 2020, the government announced it was making additional funding available to provide support for households and businesses. In total, £140.6 billion of RDEL and £8.6 billion of CDEL was provided to departments as COVID-19 funding in 2020-21. In the OSCAR data supplied by departments and used to produce PESA, it is not always possible to separate Coronavirus related expenditure from departments’ day-to-day spend on existing programmes and economic categories (For more information on OSCAR see PESA Annex G). Additional expenditure by the NHS on PPE, for example, will be reflected as a higher total for gross current procurement in resource DEL in 2020-21, but it is not possible to see from the OSCAR data how much of that increase is due to the Coronavirus. Please refer to the main publication text for a breakdown of the treatment within Table 2.1.

Departments’ individual Annual Reports and Accounts should include an analysis of COVID-19 related expenditure, alongside a summary of the impact of the pandemic on departmental activities and outcomes. Further information on measures announced by the government in response to the Coronavirus pandemic, how much has been spent, and how it is treated in the National Accounts may also be found in publications by the National Audit Office and the Office for National Statistics.

Brief descriptions of the largest economic categories are given below, including the main differences from the corresponding economic categories presented against the expenditure on services framework in Tables 5.3 and 6.5.

Staff costs

Staff costs includes wages and salaries, employers’ social contributions, payments of accruing superannuation liability charges for UK staff and locally engaged staff overseas, and amounts that finance employee contributions to pension schemes. It also includes income from the recovery of secondee costs and payments for contract and agency staff that were formerly treated as procurement expenditure.

Gross current procurement

Gross current procurement shows expenditure on goods and services, including accommodation and building management, ICT outsourcing, maintenance and support, travel costs and payments for consultancy and audit services. It also includes the purchase of services from GPs.

Current grants

Current grants include all transfer payments other than subsidies that are not used to fund capital formation. In Table 2.1 these grants are analysed by recipient: local government; persons and non-profit bodies; and overseas recipients. Current grants to local government are intra-public sector payments that consolidate out of Total Managed Expenditure (TME), which is the government’s preferred measure of total public spending. Further information on local government finance is given in Chapter 7. Current grants to persons and non-profit bodies largely comprise social security benefits included in resource departmental AME, as well as funding (usually in DEL) to further and higher education institutions and other non-profit private sector bodies. Current grants abroad are mainly foreign aid, such as programmes to reduce poverty.

Subsidies

Subsidies are current transfer payments to trading businesses (both private sector companies and public corporations) to provide support for current costs, including payments to farmers under the EU’s Common Agricultural Policy as well as subsidies to rail and bus operators. They are given with the objective of influencing their levels of production, their prices, or other factors. Unlike other intra-public sector transactions, subsidies to public corporations are included within TME as the receipt of this funding, and subsequent spending, is included within the calculation of the PC’s gross operating surplus (which scores on the revenue side of the National Accounts).

Rentals

Rentals shows net expenditure on hire and rentals under PFI and non-PFI operating leases.

Depreciation

Depreciation, also termed capital consumption, represents the amount of capital used up in respect of fixed assets measured on the basis of International Financial Reporting Standards (IFRS). The depreciation lines in Table 2.1 also include releases from the donated assets and government grant reserves, as well as impairments and downward revaluations of fixed assets. As mentioned above, depreciation now also includes the grant equivalent element of student lending. This is the subsidy implied in student loans being issued at the inflation rate rather than the market interest rate.

Take-up of provisions

Take-up of provisions are costs in resource budgets recognising that liabilities have been incurred that will more likely than not lead to a future payment, but where the amount and timing of these future payments are uncertain. Upon settling the liability the payment scores to the resource or capital budget according to the economic category of the transaction, whilst an equal and opposite (negative) release of provisions scores as a benefit to the resource budget. These lines do not include pension scheme provisions (see below).

Treatment of financial sector interventions in budgets

In the pre-Budget report of December 2009 the use in fiscal policy of new aggregates excluding the temporary effects of financial interventions was introduced. In these aggregates, banks that are classified to the public sector in the National Accounts (Northern Rock, Bradford & Bingley, Dunfermline, Lloyds Banking Group and Royal Bank of Scotland) are treated as if they are outside the public sector, reflecting the Government’s intention to return these banks or their assets to the private sector. Only Royal Bank of Scotland is still classified to the public sector. The treatment of financial sector interventions are outlined in the main PSS release under Table 2.1.

Net public service pensions

Net public service pensions shows the costs of pensions on a National Accounts basis; that is, payments to pensioners less receipts of contributions by employers and employees. It also includes cash payments and receipts associated with bulk and individual transfers into and out of the scheme. Change in pension scheme liabilities shows increases to the liability as measured on an IFRS basis. This includes changes to current service costs, the non-cash impact of bulk or individual transfers in or out, and purchases of added years. Release of provisions covering payments of pension benefits records a reduction equal and opposite to the pension benefits paid, where these are charged to the provision. The unwinding of the discount rate on pension scheme liabilities shows the increase in the liability as future payments move one year closer to being paid (so the effects of discounting reduce). More information on pensions is included in Annex D, and a reconciliation from IFRS pensions in departmental AME to the National Accounts measure is given in Table D.1.

Capital grants

Capital grants are transfer payments that are usually made on the condition that the recipient uses the funds for capital projects. Capital grants in Table 2.1 are analysed by the nature of the recipient: persons and non-profit bodies; private sector companies; and overseas recipients. Capital grants to local government and public corporations are included as part of the respective capital support rows.

Capital support

• Capital support for local government shows central government support for local government capital expenditure, comprising capital grants and Supported Capital Expenditure (Revenue). More information is given in Chapter 7.

• Capital support for public corporations comprises capital grants, net lending (update reference) and public corporations’ market and overseas borrowing where this scores in the parent department’s budget.

Gross capital procurement

Gross capital procurement comprises the acquisition of fixed assets (such as land, buildings and machinery) as well as any net increases in stock (where included in budgets). It is measured gross of depreciation. It includes the pay of civil servants engaged in in-house capital formation that is recorded as capital expenditure, rather than as pay.

Income from sales of capital assets

Income from sales of capital assets records the sale value (book value plus profit/loss) of any assets, such as land, buildings and machinery, disposed of.

Net lending to private sector

Net lending to private sector means lending by government net of any repayments of previous lending. It includes transactions in shares of private companies – so for example privatisation receipts count as negative net lending.

Other

Other includes items that are too small or too uncommon to warrant an individual line. These include certain receipts that are usually treated as part of revenue in the National Accounts and certain financial transactions. Write-offs of stock and loans are also recorded here. In Chapters 5 and 6 they are recorded as capital grants in line with National Accounts.

4.3 Chapter 2: Other tables

• Table 2.2 shows central government gross current procurement expenditure in budgets by departmental group.
• Table 2.3 shows central government own capital procurement, gross of depreciation and before deduction of sales, broken down by departmental group.

5. Chapter 4: Background to the trends of public expenditure

The analyses in this chapter show trends in government spending over a longer time span than presented elsewhere in Public Spending Statistics, adjusted as far as possible so that figures for historical outturn years are based on current definitions. Data in this chapter are a combination of cash and accruals. Data for public sector expenditure on services are on a cash basis up until 1997-98, and on an accruals basis thereafter. All data in this chapter are National Statistics.

5.1 Public spending aggregates

Table 4.1 shows trends in public spending in terms of three spending aggregates: public sector current expenditure; public sector net investment; and Total Managed Expenditure (TME). All aggregates are presented in nominal and in real terms and as a per cent of Gross Domestic Product (GDP). Data for a fourth aggregate, public sector depreciation, are shown in nominal terms only. Outturn data for these aggregates are taken from the public sector accounts compiled by the Office for National Statistics (ONS). The public sector accounts are a part of the National Accounts that are updated monthly.

5.2 Public sector expenditure on services by function

• The public spending by function series uses the Total Expenditure on Services spending aggregate (TES). Expenditure on services covers most expenditure by the public sector that is included in TME.
• Public sector expenditure on services includes central government spending, but excludes the part that is finance to local government and capital finance to public corporations. This central government own expenditure is then combined with actual spending by local government and public corporations to give total public sector expenditure. Expenditure on services excludes non-cash items such as depreciation and provisions. Derivation of expenditure on services from departments’ budgets is available at the end of this release in Table E.1.
• Table 4.2 shows public sector expenditure on services by United Nations Classification Of the Functions Of Government (COFOG) level 1. Tables 4.3 and 4.4 present this in real terms and as a per cent of GDP respectively. These tables cover outturn years up to the last reported outturn year in the latest version of the main PSS release. They also show, in italics, additional Treasury-defined functional divisions that were used prior to the introduction of UN COFOG, but which don’t correspond to COFOG level 1.

5.3 Methods and data quality for expenditure on services long-run table

Our aim is for the functional breakdown of spending to be broadly consistent across all tables.

• Data that precede the most recent five outturn years cease to be ‘live’ and are archived in a summarised form. Data in Tables 4.2, 4.3 and 4.4 for the most recent five outturn years are taken directly from the ‘live’ public expenditure database that is maintained by government departments (see PESA Annex A).
• Historical outturn data are not usually subject to adjustment. However, sometimes reclassifications affect the long run functional series. These include ONS decisions for the National Accounts and decisions taken by the Treasury in conjunction with departments to improve the allocation of spending to functions.
• Only substantial classification changes are reflected in the historical years, based on the change in spending relative to the size of the function or functions concerned. Reclassifications that are reflected in the historical series are based on archived data. The decision as to the procedure used to implement reclassifications for historical years is taken by Treasury officials after discussions with the relevant government departments, and can sometimes entail a simple percentage split based on the best information available.
• It should be noted that the attribution of spending to functions for historical years is less accurate than for live years. In some cases, the presentation of functional numbers as accurate to within £100 million overstates the accuracy of the figures due to rounding. Minor differences in figures or rates of change should be disregarded.

6. Chapter 5: Background to the public sector spending by function

The analyses in this chapter present public sector expenditure for the most recent five outturn years onwards, adjusted so that figures for all years are based on current definitions. All data are National Statistics and are based on the expenditure on services framework (explained in Annex E).

6.1 Relationship between functional series and departments

Tables 5.1, 5.1a and 5.1b show public sector expenditure on services by function split across the different government departmental groups for the most recent outturn year. Departmental spending can be spread across a variety of functions, particularly in the case of the devolved administrations.

6.2 Public sector expenditure on services by sub-function

Table 5.2 provides the most detailed functional analysis of public sector expenditure on services. The tables are presented in a format generally consistent with the level 2 breakdown of the United Nations’ Classification Of the Functions Of Government (UN COFOG). The table also shows, in italics, additional Treasury-defined sub-functional divisions that were used prior to the introduction of UN COFOG, but which do not map directly to COFOG level 2. Further information on COFOG has been made available by the International Monetary Fund (IMF).
The sub-function analysis of health is presented against HM Treasury’s own sub-functional classification. This is because the NHS in England and Wales (not applicable to Scotland or Northern Ireland) is neither financed nor organised along the lines of COFOG level 2, so capturing the required additional information is not currently possible.

6.3 Public sector expenditure on services by economic category

The economic significance of public spending, such as its impact on GDP, depends on its nature; firstly whether it is current or capital, but also whether it is, for example, a transfer payment or expenditure on goods and services. Table 5.3 breaks down expenditure on services into its component economic categories.
The presentation of economic categories in Table 5.3 is broadly consistent with the economic categories used by the Office for National Statistics for the National Accounts. Brief descriptions of each category within expenditure on services are given below. Except where specifically stated, these categories are consistent with the definitions of the corresponding economic categories presented against the budgeting framework in Table 2.1:

Pay

Pay includes wages and salaries, employers’ social contributions, payments of accruing superannuation liability charges for UK staff and locally engaged staff overseas, and amounts that finance employee contributions to pension schemes. It also includes income from the recovery of secondee costs. Unlike Chapter 2, it does not include payments for contract and agency staff which are treated as procurement instead.

Gross current procurement

Gross current procurement includes expenditure on goods and services, including payments for contract and agency staff, and payments for consultancy and audit services. Expenditure on hire and rentals under PFI and non-PFI operating leases, shown as Rentals in Chapter 2, are included here. Income from the sales of goods and services is now shown separately.

Current grants to persons and non-profit bodies

Current grants to persons and non-profit bodies are payments to these recipients that do not fund capital formation. They are mainly social security payments but also comprise grants to further and higher education institutions and other non-profit private sector bodies.

Current grants abroad

Current grants abroad are mainly foreign aid, such as programmes to reduce poverty. They also include the EU transactions set out in Table 5.2.

Subsidies

Subsidies are payments by government to trading businesses (both private sector and public corporations) to provide support for current costs, including payments to farmers under the EU’s Common Agricultural Policy as well as subsidies to rail and bus operators. They are given with the objective of influencing their levels of production, their prices, or other factors.

Net public service pensions

Net public service pensions are the costs of pensions on a National Accounts basis; that is, payments to pensioners less receipts of contributions by employers and employees. More information on pensions is included in Annex D.

Public sector debt interest

Public sector debt interest reflects the debt interest payments to the private sector, so it excludes intra-public sector payments. These payments do not form part of departmental budgets so are not included within Table 2.1.

Capital grants

Capital grants are transfer payments to the private sector that are usually made on the condition that the recipient uses the funds for capital projects.

Gross capital procurement

Gross capital procurement comprises the acquisition of fixed assets (such as land, buildings and machinery) as well as any increases in stock. It is measured gross of depreciation.

Income from sales of capital assets

Income from sales of capital assets is the sale value of any assets, such as land, buildings and machinery, disposed of.

6.4 Public sector expenditure on services split by current and capital spending

Table 5.4 gives a functional (COFOG level 1) breakdown of the current and capital expenditure of the public sector for the years for the most recent five outturn years. A functional split by sector is available in Chapter 6 (central government), Chapter 7 (local government) and Chapter 8 (public corporations). Totals in Chapter 5 in addition include expenditure by the Bank of England. The split between capital and current follows the National Accounts definition.

6.5 Public sector gross procurement by function

Table 5.5 shows public sector gross current procurement by COFOG level 1 function. This is a breakdown of the figure shown in Table 5.3 and is defined on a National Accounts basis, as described above. Procurement of goods and services by one public sector body from another are included in this table.
Table 5.6 shows public sector gross capital procurement by COFOG level 1 function, and receipts from sales of fixed assets. These are defined on a National Accounts basis, as described above. Figures for asset sales are shown separately for central government, local government and public corporations, as well as for general government, which comprises central government and local government. Receipts, which are at sales value (i.e. book value plus profit or loss), are split between fixed and intangible asset classes, and exclude receipts from sales of financial assets, which are not included within expenditure on services. Sales of assets between public sector bodies are included in this table.

7. Chapter 6: Background to central government own expenditure

This section provides summary analyses of central government own expenditure, which comprises the expenditure of government departments and other central government bodies on their own activities. Central government, as defined by the Office for National Statistics (ONS) for the National Accounts, includes the devolved administrations, executive agencies and Arms Length Bodies (ALBs), health trusts and academies.
In addition to staff pay and procurement, central government own expenditure includes grants and subsidies paid to individuals and enterprises in the private sector and subsidies to public corporations. It excludes central government support for local government and support for the capital expenditure of public corporations. These data are shown in Chapters 7 and 8.
Central government own expenditure accounts for about 78 per cent of Departmental Expenditure Limits (DEL) and about 93 per cent of departmental Annually Managed Expenditure (AME).
Tables 6.1 to 6.3 are presented against the budgeting framework, Tables 6.4 to 6.6 are presented against the expenditure on services framework.

7.1 Central government own expenditure by department

Table 6.1 gives a departmental breakdown of central government own expenditure. Expenditure in DEL is shown separately from expenditure in departmental AME. DEL expenditure in this table is shown on a full resource budgeting basis, which is given by resource DEL plus capital DEL less depreciation (including impairments) in DEL. In a number of areas, for example education, transport, and law and order, a relatively large proportion of expenditure is by local government, with only a relatively small proportion spent directly by central government - some of which will be recorded by Scotland, Wales or Northern Ireland. Other AME includes locally financed expenditure in Northern Ireland that by convention is classified as central government.

7.2 Central government own resource and capital expenditure by department

Tables 6.2 and 6.3 show the resource and capital elements of Table 6.1, respectively. Expenditure for each departmental group is therefore shown on a budgeting basis, while the final line in each table shows total central government own expenditure on a National Accounts basis. The lower section of each table shows the adjustments required to move from the budgeting framework to the National Accounts framework.

7.3 Central government own expenditure on services by sub-function

Table 6.4 shows central government own expenditure by sub-function, within the expenditure on services framework. Expenditure on services is an overall measure of public spending that is close to TME, and so broadly represents total current and capital expenditure as in the National Accounts. Full details are available in Annex E of PESA.

7.4 Central government own expenditure on services by economic category

Table 6.5 shows central government own expenditure by economic category, set within the framework of expenditure on services. An explanation of the different economic categories is available in Chapter 5.

7.5 Central government own current and capital expenditure on services by function

Table 6.6 shows central government own current and capital expenditure on services by function. This shows the capital and current split on a National Accounts basis.

8. Chapter 7: Background to local government financing and expenditure

This chapter describes central government support for local government within budgets (Tables 7.1 to 7.3) and local government expenditure on services (Tables 7.4 to 7.8). It deals primarily with Great Britain - most equivalent spending in Northern Ireland is central government spending carried out by Northern Ireland departments. Where relevant, district council spending in Northern Ireland is included in this chapter.

• All data are covered by National Statistics protocols.
• Central government support data for all years are final outturn figures.
• Local government spending data for the first four years all years are final outturn. Data for the latest year are based on budget plans and provisional outturns, where the latter are available.

8.1 The financing of local government expenditure

Central government support for local government expenditure is provided in two main forms: capital and current grants and the redistribution of non-domestic rate payments. Grant support may be non-specific, e.g. Revenue Support Grant, or related to specific services, e.g. schools grant. From April 2013 in England a non-domestic rates retention scheme was introduced allowing local authorities to keep a proportion of the rates they collect along with growth in the revenue that is generated in their area. Local government expenditure can also be financed by Supported Capital Expenditure (Revenue), equivalent to supported borrowing in Scotland. However, this was discontinued in England as of 31 March 2011.

Local authorities also raise finance locally, largely through council tax, receipts from sales of assets, contributions from developers, sales, fees and charges and borrowing. By convention, Scottish Non-Domestic Rates Income (NDRI) is shown in Public Spending Statistics (PSS) as locally financed central government support in other AME, as it is raised in Scotland rather than funded by Whitehall.

Funding provided to local government by the EU is channelled through departmental budgets but is not treated as central government support in PSS. This is because the receipts from the EU offset in budgets against the subsequent payment to local government, so this funding forms part of the accounting and other adjustments that are required to reconcile the departmental budgeting data to an aggregate drawn from the National Accounts.

Table 7.1 shows current and capital support provided to local government within each country in the UK, according to whether support is in DEL or AME. As noted above, further adjustments are made to these budgeting aggregates to reconcile with total local government expenditure in the National Accounts.

8.2 Support for local government current spending

Central government support for current expenditure on local services is largely provided through: Revenue Support Grant (RSG) – a non ring-fenced grant paid to local government in England, Scotland and Wales; non-domestic (business) rate payments – the proceeds of national non-domestic rates (NNDR) are pooled separately in England and Wales, and then redistributed. As noted above, equivalent payments in Scotland are considered to be locally financed rather than central government support. From 1 April 2013 local authorities in England will retain a proportion of this income; Also, from 2015-16 Welsh non-domestic rates move from central government DEL support to locally raised finance, and other specific and special grants such as the schools grant and police grant, which fund part of the current expenditure on a specific service or activity. Table 7.2 shows the above support by country, departmental group and grant.

8.3 Support for local government capital programmes

Central government support for local government capital expenditure comprises capital grants and Supported Capital Expenditure (Revenue) up to 31 March 2011 in England, equivalent to supported borrowing in Scotland. The latter enables local authorities to borrow or use other forms of credit to finance capital expenditure, with central government providing a revenue stream to support repayment of principal and interest. This is distinct from prudential borrowing where local authorities finance any additional borrowing from their own available resources. Table 7.3 shows the components of central government capital support within the United Kingdom by country and department.

8.4 Data sources and data quality

The central government support for local government shown in Tables 7.1 to 7.3 is taken from finance data loaded onto the Treasury spending database by departments, consistent with their resource accounts. Tables 7.1 to 7.3 show central government support for local government allocated by territory. There are several instances where support or grant payments cover more than one territory, for example Home Office grants that cover England and Wales. In these circumstances the grant or support has been allocated entirely to the majority territory, namely England.

8.5 Local government expenditure

Total local government expenditure is defined as the contribution of local government to Total Managed Expenditure (TME). TME is a consolidated measure in the sense that most transactions between parts of the public sector are excluded. For example, total local government expenditure defined here excludes capital grants paid to public corporations and interest paid to central government. Local government expenditure accounts for around one quarter of TME. Local government have considerable discretion to determine the level, pattern, and standard of the main services - subject to the financial resources available, including the implications for local taxation, and in some cases subject also to central government regulation and inspection of the service provided.

8.6 Local government expenditure on services

The measure of local government spending that is analysed by function and economic category in PSS is local government expenditure on services. It is largely equivalent to the National Accounts measure of local government expenditure, which is also shown in the tables. Annex E gives more information on expenditure on services. The functional categories in Tables 7.4 to 7.7 are based on the UN Classification Of the Functions Of Government (COFOG) and are consistent with the functional categories used in other PSS chapters:

• Table 7.4 presents total local government expenditure by function;
• Table 7.5 shows local government current expenditure by country and function;
• Table 7.6 shows gross capital expenditure, split by country and function. Gross indicates that it is before sales of capital assets and depreciation;
• Table 7.7 shows local government capital receipts within the United Kingdom, again by country and function.
• Table 7.8 shows local government expenditure by country and economic category. The economic categories are broadly consistent with those used by the ONS for the National Accounts. These are described in Chapter 5.

8.7 Data sources and data quality

The local government expenditure shown in Tables 7.4 to 7.8 is based on revenue (current) and capital data collections completed by local authorities and sent to the Ministry of Housing, Communities and Local Government (MHCLG) and devolved administrations. These departments carry out quality assurance on the data received, produce aggregate results for publication, and supply this information to the Treasury. Information is sought from all local authorities, who derive the material from the accounting records used to produce audited accounts. However, detailed expenditure breakdowns may be of lower quality because of inconsistencies of classification by respondents and resource constraints on quality assurance. Spending information received from local government is described in terms of local authority services (education, roads etc). The Treasury assign spending to the COFOG functional categories used in PSS. In general the read across from service categories to COFOG categories is relatively clear, but in some cases it is less straightforward and assumptions are applied. Although the quality of the local government expenditure data in PSS is good enough to provide a broad picture of local government spending, the quality is likely to be lower than the quality of the central government data in PSS. Figures are shown to the nearest £1 million so that users performing calculations on the numbers do not introduce errors due to working on rounded numbers. The Treasury are working with MHCLG and the ONS to improve the quality and timeliness of local government spending data.

More information on local government finance and spending is available from the following sources:

England – Ministry of Housing, Communities and Local Government

• https://www.gov.uk/government/collections/local-authority-revenue-expenditure-and-financing
• https://www.gov.uk/government/collections/local-authority-capital-expenditure-receipts-and-financing

Scotland – Scottish Government

Wales – Welsh Government

9. Chapter 8: Background to public corporations

This chapter sets out what public corporations are, recent developments affecting them, how they are controlled, and how they are scored in public expenditure. All data in this chapter to the latest outturn year are National Statistics.

9.1 Definition of public corporations

Public corporation is a term from National Accounts, which are based on the European System of Accounts (ESA10). The Office for National Statistics (ONS) therefore determines which bodies are public corporations. A body will be classified as a public corporation where:

• it is classified as a market body - a body that derives more than 50 per cent of its production cost from the sale of goods or services at economically significant prices. Some charge for regulatory activities, where these provide a significant benefit to the person paying the fee, for example through quality testing;
• it is controlled by central government, local government or other public corporations;
• it has substantial day to day operating independence so that it should be seen as an institutional unit separate from its parent departments.

9.2 Self financing public corporations (SFPCs)

The Treasury has designated some public corporations SFPCs. To be classified as an SFPC, the public corporation must normally trade mainly with non-government customers and not perform regulatory functions. In other words, its income must be from selling goods and services into a competitive market rather than from regulatory fees. It must trade profitably and not require subsidies or other financial support from its parent department.

SFPCs normally score in departmental AME rather than in DEL – though any subsidies and grants exceptionally paid to them would score in DEL. They also have greater and more individually tailored financial flexibilities. Some SFPCs are also trading funds.

9.3 Trading funds

Where activities of a government department generate income from the supply of goods and services, those parts of the department may be designated trading funds by Parliament on the application of the government. Trading funds may keep unspent funds from one year to the next without having to surrender surpluses to the Exchequer at the end of each year. Most trading funds are classified by ONS as public corporations in the National Accounts. DVLA is the only trading fund that is treated as a central government body in the National Accounts, and therefore in PSS. Trading funds are not directly subject to central government administration costs controls. The budgeting treatment of trading funds that are public corporations is normally the same as that of other public corporations.

9.4 The budgeting control framework

The following transactions with and in respect of public corporations accountable to Ministers are normally included in departmental budgets:

• subsidies paid to the public corporation by the department (in resource DEL);
• capital grants paid to the public corporation by the department (in capital DEL);
• interest and dividends received from the public corporation (resource DEL, or resource AME if an SFPC);
• equity purchase in and withdrawals from public corporations (capital DEL, or capital AME if an SFPC) – included with net lending in Table 8.1;
• loans and public dividend capital (PDC) invested in the public corporation (capital DEL, or capital AME if an SFPC) – also included with net lending in Table 8.1;
• public corporations’ market and overseas borrowing (PCMOB) where, exceptionally, it is permitted (capital DEL, or capital AME if an SFPC).

The Crown Estate is an SFPC. Uniquely the routine subsidy that is paid to it to cover administration costs is in AME rather than DEL, and the dividends that the Treasury receives from it are recorded outside budgets.

When PCs are government departments in their own right, as is the case for some trading funds, they will normally be assigned a parent department for budgeting purposes, and the budgetary scoring described above will apply, including the cost of capital charge.

Public corporations controlled by local government include the businesses reporting to Transport for London and local authority airports such as Manchester. DEL and departmental AME include central government support to local government (in Chapter 7), some of which may be used by them to support public corporations. However, this is not identified in PSS as relating to public corporations. Therefore the whole of their capital expenditure is included in the public corporations’ own financed capital expenditure line in other AME. They are also included in the bottom line of Tables 8.1, 8.3, 8.4 and 8.5, which show the total contribution of all public corporations’ own expenditure to Total Managed Expenditure (TME).

Table 8.1 shows the impact on departmental budgets (DEL and departmental AME) of public corporations accountable to Ministers. It also shows a reconciliation to the impact of all public corporations, including those accountable to local government, on TME. In this presentation PC gross investment in TME is shown to be the sum of:

• government capital support in budgets (investment grants and net lending to PCs);
• PCMOB in budgets;
• public corporations’ own financed capital expenditure.

Grants and subsidies in budgets also include those paid to public corporations under schemes that are generally available to the private sector. Any loans between departments and their PCs that are written off by mutual consent will also be shown here.

Table 8.2 shows the budgetary information in Table 8.1 split by department group.

9.5 The National Accounts

TME measures the current and capital expenditure of the public sector as a whole. It is taken from National Accounts compiled by the ONS. In relation to public corporations, TME includes:

• subsidies paid to public corporations;
• the capital expenditure of public corporations, net of sales of assets;
• changes in public corporations’ stocks;
• interest and dividends paid by public corporations to the private sector and abroad.

TME is a consolidated measure of public expenditure and so most transactions between different sectors are excluded. This applies to capital grants and net lending paid by central government to public corporations, and interest and dividend flows between general government and public corporations. However, payments of subsidies to, and purchases of goods and services from, public corporations form part of TME as the use of this funding feeds into the calculation of public corporations’ gross trading surplus, which scores as an income (or revenue) item in the public sector accounts.

Grants and subsidies given by public corporations to the private sector and overseas, including debt write-offs by mutual consent, are imputed to general government expenditure in National Accounts, as grant-giving is not held to be a normal function of a commercial body.

Note that the impact of public corporations on departmental budgets differs from their impact on TME. Accounting adjustments are used to move from DEL plus departmental AME plus own financed capital expenditure (other AME) to TME (see Annex D of PESA for a full explanation of the accounting adjustments).

Table 8.3 shows the capital expenditure of each major public corporation sponsored by a central government department, and of the biggest public corporations accountable to local government. It also identifies those that are self-financing public corporations or trading funds. The table does not identify separately small public corporations controlled by central government departments nor most public corporations under local authority control – their capital expenditure is included in the accounting adjustments. The figures include the purchase of assets, less sales, plus any capital grants paid by a public corporation net of any received from the private sector or abroad.

Tables 8.4 and 8.5 show the capital expenditure from Table 8.3 broken down by function and economic category respectively. They also include the debt interest payments to the private sector, which is the only public corporation current spending that forms part of TME.

9.6 Sources of data and data quality

Information in Tables 8.1 and 8.2 forms part of departments’ budgets and so should be of good quality. Annex A of PESA has more information.
Information on public corporations’ capital expenditure is largely sourced from public corporations by departments who in turn supply the data to the Treasury. Our aim is to publish capital spending data for all public corporations accountable to Ministers. However, information is provided by departments primarily for PESA and the PSS and does not form part of a control total. The only appearance in a departmental publication will normally be within the regional expenditure tables in departmental reports. Information in Tables 8.3 to 8.5 may therefore not be as up to date or accurate as the information in the other tables in this chapter.

10. Data sources

10.1 OSCAR

The main data source for Public Spending National Statistics is OSCAR (Online System for Central Accounting and Reporting). This is the database used by the Treasury to collect financial data from across the public sector to support fiscal management, enable the production of Parliamentary Supply Estimates and public expenditure statistics and the preparation of Whole of Government Accounts (WGA) and to meet data requirements of the Office for National Statistics (ONS).

OSCAR is a consolidation system rather than an accounts application, and so it does not hold details of individual financial transactions by departments. Data are recorded on OSCAR against a complex coding structure that is used to produce the publications issued by the Treasury and the ONS. Departments supply data throughout the year to meet the internal timetables for the different data streams.

Data are provided by central government departments, who retain ownership of their data on OSCAR. They do not include individual transactions, such as invoice payments, but aggregate transactions for reporting to Treasury. The way in which individual transactions are aggregated is largely a matter for each department, as long as they meet the minimum requirements defined by the Treasury in the coding structures used to produce publications. The level of detail of the data can, therefore, vary between departments particularly in terms of the purpose of spending. Departments will generally provide the level of detail that maps most conveniently from their accounting systems, and those used by other members of the departmental family. Work continues to standardise account code level reporting across departments in line with the Common Chart of Accounts guidance.

In addition to this, the Treasury loads onto OSCAR data that cannot be directly loaded by entities because they do not have access to OSCAR, for example local government data and data relating to other aggregates (e.g. central government debt interest) that are required for publications. As part of the Transparency agenda the government now publishes the full details of the OSCAR database for outturn periods including both annual and monthly data.

This means that users can access the underlying details of the figures contained in PSS releases, however in some cases it may not be possible to recreate exactly the details of aggregates as published due to the use of a limited amount of data not contained on OSCAR.

10.2 Non-OSCAR data sources

Local government expenditure data are sourced from outturn statistics published by Department for Communities and Local Government and spending data published by the devolved administrations. Figures for Total Managed Expenditure and central government debt interest are sourced from the Office for National Statistics.

10.3 Coverage

All data in the Public Spending National Statistics relates to the UK as a whole unless otherwise stated.

10.4 Data quality and how we produce our statistics

As information is recorded on OSCAR it is checked according to a range of criteria to ensure compliance with various data standards. These checks are intended to ensure:

• Complies with the budgeting guidance
• Is within overall control totals set out by HM Treasury;
• Has been correctly classified according to the COFOG framework and National Accounts (ESA 10) definitions;
• Meets other statistical data quality checks for consistency.

After a deadline for departments to submit data on OSCAR, statisticians and staff within central teams in Treasury work on the data to make sure it complies with the standards in place and there have been no other errors. In cases where there is doubt statisticians in Treasury will liaise directly with departments to determine the correct classification of an item of spending. Once the data has been quality assured a “snapshot” of the data is taken and the statistical tables are prepared for publication.

By using the details of a particular snapshot it is possible to recreate the details of any previous Statistical release over recent years. External users can obtain this data from the OSCAR raw data transparency release

11. Concepts and classifications

11.1 Budgeting statistics

There are two main presentations within this section:

• departmental budgets - the key central government departmental budgets that the government uses to control spending. Departments have separate resource and capital budgets. Each of these is divided into Departmental Expenditure Limits (DEL) and Annually Managed Expenditure (AME). Resource DEL is further divided into administration and programme;

• budgets by economic category – this shows spending in budgets against categories such as pay, procurement and grants.

11.2 Expenditure on services statistics

This section uses the expenditure on services framework to show spending by the whole of the public sector. There are two main presentations of public sector spending in this section (but also see the country and regional analysis section below):

• by function/sub-function – public spending is shown against ten functions (education, health, defence etc.) that are then further divided into more detailed sub-functions (education is split into primary, secondary etc.). These classifications are based on the UN’s classification of the functions of government (COFOG), which is explained further in the FAQ section below and in Annex A of PESA;

• by economic category – as in the budgets section, spending by the public sector is divided into pay, procurement etc. The main difference between this and the budgeting breakdown is that the latter shows the grants paid to local authorities whereas this analysis shows how local authorities subsequently spend this funding.

11.3 Data in the public spending national statistics (quarterly)

Key series are updated three times a year. These are:

• Total Managed Expenditure, by budgetary category (PESA, Table 1.1);

• resource and capital elements of Departmental Expenditure Limits and Annually Managed Expenditure by departmental group (PESA 2021, Tables 1.3 and 1.8);

• public sector expenditure on services by function (PESA 2021, Table 4.2);

• public sector expenditure on services by economic category (PESA, Table 5.3).

Further updates will take place in November, February and April. Most series in PESA are only published annually.

11.4 What are departmental groups?

The departments are grouped broadly in line with ministerial responsibility. Further details are contained in Annex B of the PESA command paper.

12. How are the functions defined?

The functional breakdowns of spending are intended to enable comparisons over time without distortions caused by changes in the way departments are organized. Further details on the COFOG framework can be found in this IMF Annex.

13. Other related data

A number of related national statistics and other data releases are published by HM Treasury and other government departments. These include:

• Public Sector Finances (PSF) (ONS/HMT, published monthly)

• OSCAR raw data release (HMT, published annually)

• Quarterly data summaries (each government department, published quarterly)

• Estimates Publications (HM Treasury)

• Resource accounts (each government department, published annually)

• National accounts (ONS, published quarterly)

• Government Expenditure and Revenue Scotland (GERS)

14. Revisions and reliability

All of the data contained in the public spending national statistics release is classed as outturn, however the data contained within the release at any point in time is of varying levels of completeness or finality. Central government outturn data is first recorded on OSCAR in June of each year and is published in the main PESA national statistics release shortly after. The data may be subsequently revised in later releases throughout the year, however in the main departmental data only moves by relatively small amounts after initial publication. Local government data is on a slower timetable, and in the July and October public spending releases much of the Local government data will still be on an estimated/forecast basis.

15. Standards and policies

15.1 Revisions policy

In line with the HM Treasury revisions policy in each public spending release all periods are open and potentially subject to revisions. Typically revisions will only affect the most recent year unless there have been classification changes or other related changes affecting the breakdowns.

15.2 Scheduled revisions

Some of the changes to National Statistics releases are known in advance as part of pre-announced changes to the frameworks used in our publications or reclassifications of bodies. In some cases the magnitude of changes will be known well in advance of the implementation of the change. Where this is the case we will announce the details of the change in the preceding release.

16. Formats

Public spending national statistics are published as PDF documents which include:

• Statistical tables setting out the detail of the latest numbers

• Charts showing visualizations of some of the key trends in the data

• Explanatory text giving commentary on the data

Alongside each release, ODS files containing the statistical tables in the release are published separately.

17. Suggested uses

The public spending national statistics releases are intended to give a broad overview of overall trends in spending as well as information on specific areas of interest. Known users include academics, parliament, media, financial institutions, other government departments and the general public. Examples of the types of questions that can be answered using our national statistics are shown below.

17.1 How much did the government spend on X?

The answer varies depending on which levels of government you are interested in, and what sort of spending. The list of tables below takes transport as an example. The chapter text gives a more precise definition of the contents of each table:

• Table 4.2 shows the total UK public sector spending for a long run of years. This includes spending by devolved administrations, local government and public corporations (details of the departments included in this group are given in Annex B in PESA). Tables 4.3 and 4.4 show spending in real terms and as a percentage of GDP;

• Table 1.3 shows the total DEL spending of each departmental group.

17.2 How can I compared spending on X to previous years?

Tables 4.2, 4.3 and 4.4 contain long run series for public sector expenditure on services by function. Historic long run series of the budgeting aggregates are not available, due to the restructuring of government departments and the movement of spending programmes between departments. These changes do not impact on the expenditure on services framework.

17.3 How do I get real terms numbers/proportion of GDP?

Table 4.3 in this publication is in real terms. Real terms figures are the actual (known as nominal) spend adjusted to exclude the effect of general inflation, as measured by the GDP deflator at market prices. The most up-to-date deflators and GDP numbers are available on the HMT website.

18. Contact

Requests for further information or ad-hoc comments on our statistics should be directed to: pesa@hmtreasury.gsi.gov.uk

19. Further Information

More information is available in the departmental reports of government departments and in the annual reports and accounts of individual public corporations. A fuller list of public corporations is available on the ONS website in Public Sector Classification Guide.