Fiscal Indicators

There are a large number of different ways of assessing a government’s fiscal position. Here are the most commonly used:

Current Budget Deficit: The difference between public sector current expenditure and receipts each year, i.e. public sector net borrowing excluding borrowing to finance investment.

Primary Balance: Government net borrowing excluding net interest payments. The graph shows the behaviour of this measure as a percentage of GDP for a group of countries over the period 2007-2014.

Public sector net borrowing: The difference between total public sector receipts and expenditure on an accrued basis each year. This is the most quoted ‘headline’ measure of the deficit.

Cyclically adjusted measures: these are all adjusted for the position in the economic cycle and so represent the ‘structural’ element of each aggregate, i.e. the value they would be if the ‘output gap’ were zero. The output gap is the difference between the current level of output and the potential level that is consistent with no upward or downward pressure on inflation.

Public sector net debt: The measure of the public sector’s net liability position, i.e. its liabilities minus its liquid assets. It is the key measure of the government’s overall debt and is the fiscal measure the UK government currently uses as its supplementary fiscal target.

Public sector current receipts: revenue relating to activities in the current year, comprising mainly direct and indirect taxes but also social security contributions, interest, dividends, capital taxes and profits from trading activities.

Total managed expenditure: the sum of public sector current expenditure, public sector net investment and public sector depreciation i.e. the decrease in the capital value of assets.

Public sector current expenditure: public sector spending on items that are ‘consumed’ in the year of purchase, such as public sector salaries.

Public sector net investment: gross public sector spending on investment less depreciation.