Public finance bulletin: May 2012

Rowena Crawford, a Senior Research Economist at the IFS, said: "Today’s figures suggest that the public sector borrowed about £1.6 billion less in 2011-12 than suggested by the provisional outturns published a month ago. This is mainly because of an upward revision to receipts of income tax and national insurance contributions and slightly lower spending on net social benefits, partially offset by higher net investment spending.

"The transfer of Royal Mail Pension assets to the public sector this month has had the short term effect of reducing public sector net debt. However, this positive effect will ultimately be more than offset by the liabilities which have also been transferred, the estimated value of which exceeds the assets by £10 billion.

"Figures for April 2012 suggest that spending grew at broadly the same rate as was forecast by the Office for Budget Responsibility back in March for the year as a whole. Receipts grew less quickly than forecast for the year as a whole, primarily due to weak corporation tax receipts. However, as this is only the first month of the financial year, these figures on their own give us little clue as to how borrowing will compare to the OBR’s Budget forecasts for the year as a whole.”

Headline Comparisons

• Public sector current budget in 2011-12 is now estimated to have been in deficit by £94.8bn compared to the initial estimated outturn published last month of a deficit of £97.3bn and the Office for Budget Responsibility's (OBR's) forecast from the March 2012 Budget of a £98bn deficit.
• Public sector net borrowing in 2011-12 is now estimated to have been £124.4bn compared to the initial estimated outturn published last month of £126.0bn and the OBR's Budget 2012 forecast of £126.0bn.
• Public sector net debt at the end of 2011-12 is now estimated to have been £1022.6bn, or 66% of national income.
• Central government current receipts in April were 1.3% higher than in the same month last year. The OBR's forecast at the time of the March 2012 Budget implied that central government current receipts for the whole of 2012-13 would be 3.8% above 2011-12 levels.
• Central government current spending in April was 4.0% higher than in the same month last year. The OBR's forecast at the time of the March 2012 Budget implied that central government current spending for the whole of 2012-13 would be 3.2% above 2011-12 levels.
• Public sector net investment in April was -£28.9bn. This is largely explained by the transfer of assets from the Royal Mail Pension Plan to the public sector, which had the effect of reducing net investment in April 2012 by £28 billion, and the closure of the Special Liquidity Scheme, which reduced net investment by £2.3 billion. Removing the effect of this suggests that underlying public sector net investment was £1.4billion, compared to £1.0 billion in April 2011. The OBR's forecast at the time of the March 2012 Budget predicted that net investment over the whole of 2012-13 would be −£3bn including the impact of the transfer of Royal Mail assets and the closure of the SLS. Excluding these the forecast would be £27.3 billion, which is 8% below last year's level.