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The Chancellor of the Exchequer has announced that the Government will use a broader definition of debt for its fiscal target, Public Sector Net Financial Liabilities (PSNFL), referred to by government as ‘net financial debt’. Jessica Barnaby explains how that statistic is defined and how it differs from the metric used before.  

One of the main fiscal targets of the government has been to reduce the level of debt. Debt can be defined in different ways and estimates of these definitions are presented every month in our Public Sector Finances publication. This includes estimates of the public sector balance sheet, which shows the financial position at a single point in time and sets out the liabilities (amounts owed) and the assets (amounts owned) of the public sector, in line with international statistical guidance. 

The previous main debt measure used as a fiscal target was ‘public sector net debt excluding public sector banks and excluding the Bank of England’ (‘PSND ex BoE’ for short), as a proportion of GDP. This measure covers not just the debt of central government but also local councils and state-controlled companies (such as Network Rail or the BBC).  This is also a ‘net’ measure because the public sector’s liquid assets (effectively money in the bank) are netted off against liabilities. It largely reflects the stock of outstanding gilts (bonds issued by HM Treasury) that have funded past spending, and PSND ex BoE currently stands at around £2.6 trillion (equivalent to around 91% of GDP). It is typically expressed as a ratio to nominal GDP, so is affected both by changes in debt levels as well as the pace of economic growth. 

However, beyond the scope of PSND ex BoE, the public sector has both many more liabilities and many more assets. For example, it owns financial assets such as shares (for example, the Government’s remaining shareholding in the NatWest Group) and money is owed to it, (such as from student loans expected to be repaid).  

A wider balance sheet measure that the ONS already produced and which the government has chosen to target today is known as ‘public sector net financial liabilities excluding public sector banks’ (‘PSNFL ex’). It includes the Bank of England and looks at a broader range of financial assets than PSND ex BoE, including the illiquid financial assets such as the examples listed above. 

This broader statistic also captures a wider range of financial liabilities, such as liabilities for public sector funded pensions and those known as ‘accounts payable’, which covers payments that are owed but haven’t yet been paid by government. 

PSNFL ex, currently £2.4 trillion or equivalent to around 84% of GDP, is £0.2 trillion smaller than PSND ex BoE, as the extra assets included in this measure are larger than the extra liabilities. You can read more about this wider metric in this article. 

The ONS will continue to publish both these and other fiscal metrics, all produced independently and in line with international statistical guidance.


See Also: Construction Industry Budget Response


Recently published figures show that overall construction output in the North West is up 15% – 10 times the national average.

According to the Office of National Statistics, total construction output across the region is up to more than £4.6 billion in the 3 months to August 2018 compared to the same period last year.

Overall construction output in Great Britain for this period is up 1.5% compared to the same period last year meaning the North West’s increase is 10 times the national average.

The value of construction work on new housing in the North West has increased by £386 million this quarter compared to the same quarter in 2017 and output of new infrastructure projects has also risen during this period.

Northern Powerhouse Minister, Jake Berry MP, said “It’s wonderful to see how the Northern Powerhouse is driving investment in the North West and helping grow the construction industry to the tune of over £600 million.

“Anyone visiting the North West can see the huge number of construction projects underway and these figures show just how valuable they are.

“This construction boom is helping build new homes, new infrastructure and a stronger economy in the region.”