Public Finance

House of Lords written question – answered on 15th January 2015.

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Photo of Lord Greaves Lord Greaves Liberal Democrat

To ask Her Majesty’s Government how, for the purposes of official statistics, they define (1) the annual budget deficit, (2) the structural deficit, and (3) the cyclical deficit.

Photo of Lord Deighton Lord Deighton The Commercial Secretary to the Treasury

The annual budget deficit is also referred to as Public Sector Net Borrowing (PSNB). The Office for National Statistics (ONS) defines PSNB as the difference between public sector receipts and expenditure as measured by National Accounts. It also equals the net balance of the public sector’s net acquisition of financial liabilities less its acquisition of financial assets. In December 2009, the ONS defined an alternative measure of PSNB excluding the temporary effects of the financial sector interventions (PSNBex).

Typically PSNB excluding banks (PSNBex) is the measure that is used to describe the public finances. Further information on ONS definitions of the Public Finances can be found in the latest Public Sector Finance (PSF) release from December 2014[1].

The cyclically adjusted deficit and cyclical deficit are not official statistics. These measures are estimates by the Office for Budget Responsibility (OBR) based on assessments of the output gap. Information on how these are derived can be found in the OBR’s Working Paper No. 3: Cyclically Adjusting the Public Finances which can be found on the OBR’s website[2]. november-2014/stb-nov-2014.html paper-No3.pdf

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