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Public debt reduces in April despite higher deficit

Author: ICAEW Insights

Published: 23 May 2024

Net debt fell by £7bn from £2,694bn to £2,687bn, despite a shortfall of £20.5bn between receipts and spending in the first month of the government’s financial year.

The monthly public sector finances for April 2024 released by the Office for National Statistics (ONS) on Wednesday 22 May 2024 reported a provisional deficit for the first month of the 2024/25 financial year of £20.5bn – £1.2bn more than the £19.3bn predicted by the OBR and £1.5bn higher than in April 2023.

Alison Ring OBE FCA, ICAEW Director for Public Sector and Taxation, says: “Today’s data shows that more money went into the Treasury than expected, causing public sector net debt to fall slightly by £7bn from £2,694bn in March to £2,687bn in April, providing comfort to a Chancellor who is looking for every crumb of tax cutting capacity that he can find.

“However, the unsustainable debt burden is still equivalent to around £39,000 for each and every person living in the UK. The Chancellor will be disappointed that April’s deficit of £20.5bn is worse than the OBR’s most recent forecast of £19.3bn for the first month of the financial year, although this is a relatively tiny variance in the context of the overall public finances.

“The International Monetary Fund’s warning that taxes will need to increase to cover the cost implications of the postponed Spending Review will not be welcome news either.”

Table 1: Summary receipts and spending

Month of  Apr 2024 (£bn)  Apr 2023 (£bn) Change
 Income tax  19.8  19.0  +4%
 VAT  17.2  16.8  +2%
 National insurance  12.7  14.2  -11%
 Corporation tax  8.3  7.5  +11%
 Other taxes  17.9  17.5  +2%
 Other receipts  9.8  9.1  +8%
 Total receipts  85.7  84.1  +2%
 Public services  (53.4)  (51.0)  +5%
 Welfare  (27.4)  (25.6)  +7%
 Subsidies  (2.5)  (4.1)  -39%
 Debt interest  (10.7)  (12.0)  -11%
 Gross investment  (12.2)  (10.4)  +17%
 Total spending  (106.2)  (103.1)  +3%
 Deficit  (20.5)  (19.0)  +8%

Total receipts in April 2024 of £85.7bn were 2% higher than in the same month last year, with the effect of cuts in employee national insurance rates more than offset by higher income tax, corporation tax receipts and non-tax receipts.

Table 1 also shows how total managed expenditure of £106.2bn was up 3% compared with April 2023, with higher spending on public services and welfare offset by lower subsidies and lower debt interest. The latter was primarily because much lower indexation on inflation-linked debt more than offset higher interest payable on variable rate and refinanced fixed-rate debt. 

Gross investment was significantly higher than last year, driven by a combination of higher construction costs and timing.

Table 2: Public sector net debt

Month ended Apr 2024 (£bn) Apr 2024 (£bn)
Deficit  (20.5)  (19.0)
Other borrowing  27.4  16.1
Debt movement  6.9  (2.9)
Opening net debt  (2,694.3)  (2,539.7)
Closing net debt  (2,687.4)  (2,542.6)
Net debt/GDP  97.9%  95.4%

Public sector net debt as of 30 April 2024 was £2,687bn or 97.9% of GDP, just under £7bn lower than at the start of the month. This reduction occurred as cash inflows from loan repayments and working capital movements exceeded cash outflows to fund lending to students, businesses and others by £27.5bn, more than covering the £20.5bn needed to meet the shortfall between receipts and spending in April.

This still meant public sector net debt was £145bn or 6% higher than a year previously, and 2.5 percentage points higher in relation to the size of the economy.

Public sector net debt is £872bn more than the £1,815bn reported for 31 March 2020 at the start of the pandemic and £2,152bn more than the £535bn number as of 31 March 2007 before the financial crisis, reflecting the huge sums borrowed over the last couple of decades.

Public sector net worth, the new balance sheet metric launched by the ONS in 2023, was -£703bn on 30 April 2024, comprising £1,596bn in non-financial assets and £1,055bn in non-liquid financial assets minus £2,687bn of net debt (£307bn liquid financial assets - £2,994bn public sector gross debt) and other liabilities of £667bn. This is a £6bn improvement from the -£709bn reported for 31 March 2024, but a £93bn deterioration compared with the -£610bn reported for 30 April 2023.

Revisions and other matters

Caution is needed with respect to the numbers published by the ONS, which are expected to be repeatedly revised as estimates are refined and gaps in the underlying data are filled. 

The latest release saw the ONS revise the reported deficit for the year to March 2024 up by £0.8bn from £120.6bn to £121.4bn as estimates of tax receipts and expenditure were updated for better data.

Per capita calculations are based on a projected population of approximately 69.0m on 30 April 2024. 

For further information, read the public sector finances release for April 2024.

The IMF’s Staff Concluding Statement of their recent mission to the UK can be found here.

ICAEW has recently published an in-depth Fiscal Insight on the Spring Budget 2024. Further coverage of the Spring Budget 2024 can be found at icaew.com/budget.

Supporting public finances

In its Manifesto, ICAEW sets out its vision for the next UK government, including the need for a long-term fiscal strategy for the public sector.

Manifesto 2024: ICAEW's vision for a renewed and resilient UK

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