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PESA 2002-03
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3.1 The analyses in this chapter attempt to give a picture of changes in government expenditure over recent years, adjusted as far as possible so that figures for outturn years are based on current allocations of responsibilities between departments and on current definitions for the aggregate spending measures. 3.2 Data in this chapter are a mix of cash and resources. All outturn data up until 1999–2000 are on a cash basis. Outturn for 2000–01 and estimated outturn for 2001–02 are on a resource basis, as are plans data, where shown, for 2002–03 and 2002–04. All outturn data (to 2000–01) in the tables in this chapter are National Statistics, except for Tables 3.2a and 3.2b which set out new series for public sector investment that are provisional data at this stage. The box below discusses the implications for resource accounting and budgeting and the switch from cash to accruals measurement for the presentations in this chapter.
3.3 Table 3.1 shows trends in public expenditure over the years 1963-64 to 2003-04 in cash and in real terms and as a percentage of gross domestic product (GDP). The table shows three spending aggregates in this detail: public sector current expenditure, public sector net investment and total managed expenditure (TME). Data for a fourth aggregate, public sector depreciation, are shown in cash only. Data for all these aggregates for the years up to 2000–01 are taken from the national accounts compiled by the Office for National Statistics (ONS). Public sector current expenditure plus public sector net investment plus public sector depreciation is equal to TME – which is total public sector spending in national accounts. Figures for 2001-02 onwards are projections produced by the Treasury. 3.4 The data series in Table 3.1, and other series in national accounts, show, for any given year, the spending of the public sector measured on the basis of its boundaries at that time. Thus public sector net investment includes the capital spending of the now-privatised former nationalised industries up until the point of their privatisation. This needs to be borne in mind when interpreting the time series for these aggregates, especially for the investment series. 3.5 Table 3.2a and 3.2b present some provisional time series for public sector investment on a constant boundaries basis. These are mainly based around present day boundaries of the public sector and its sub-sectors, so investment, by now privatised companies, formerly classified as private corporations, has been removed. There are some exceptions to the present day boundaries rule – for example, NHS trusts, classified as public corporations since their creation in the early 1990s, have been moved to the central government sector so that all health investment spending is consistently classified to central government. And local authority capital spending has been adjusted so as to remove the impact on the numbers of council house sales since the end of the 1970s. The adjustment involves both adding receipts from housing sales back into the gross and net investment series, and also adjusting depreciation so as to include depreciation of the stock of housing disposed of. In effect the adjusted LA investment series shows local authority capital spending measured on the basis of a housing stock maintained at 1970s levels. 3.6 Table 3.2a shows gross investment by the public sector, measured on constant boundaries, both in aggregate and by sub-sector (central government, local authorities, public corporation). Gross investment measures investment gross of (before) depreciation, but net of asset sales. The table also includes for comparison the equivalent national accounts series for general government and total public sector, before making the boundary and other adjustments discussed above. The adjusted series shows smaller falls in public sector investment in the second half of the 1990s, reflecting the removal of investments by privatised companies from the published series'. However the level of public sector investment gross or net, is higher throughout in the adjusted series, reflecting the measurement of LA investment on a 'no-housing-sales' basis. 3.7 Table 3.2b shows some further investment series on a constant boundaries basis. The first column shows adjusted public sector net investment (gross investment less depreciation). The second column shows gross domestic fixed capital formation (GDFCF) alone (gross investment also includes capital grants and small amounts of stockbuilding/destocking). Equivalent national accounts series are given for comparison. The last two series in this table are for asset sales (gross investment is net of asset sales) and for publicly-financed private sector investment under the Private Finance Initiative (PFI). Neither is on a directly comparable basis with the gross and net investment series, so caution needs to be exercised in using the series in conjunction with the earlier series in these tables, eg to compile new aggregates. Asset sales is general government only. The PFI series is for signed deals under PFI in that year, where the resulting capital spending is classified to the private sector. Thus the series measures new commitments for private sector capital spending under PFI, and not net capital expenditure; the consequential capital spending could be spread over several years. This series is not therefore a measure of publicly-financed capital spending under PFI in that year. TOTAL MANAGED EXPENDITURE BY FUNCTION
3.8 Table 3.6 gives a detailed analysis of TME by function for the years 1996-97 to 2001-02, allocating expenditure for which the devolved administrations in Scotland, Wales and Northern Ireland are responsible and expenditure by local authorities to the appropriate function. The key concept in this and subsequent tables in this chapter is expenditure on services, which is the spending aggregate allocated by function. This covers most expenditure by the public sector that is included in TME – central government's own current and capital expenditure, local authorities current and capital expenditure, public corporations capital expenditure. But it excludes net public service pension payments in AME, debt interest payments and most of the accounting adjustments in Table 1.12. The definition is fully detailed in Appendix F. 3.9 However, the definition of expenditure on services has some particular implications for measurement of expenditure on health services. Under the present institutional arrangements, public health services are mostly provided by NHS trusts, classified as public corporations, who receive payment for services provided from the health authorities (in central government). TME, and expenditure on services, includes both spending by the health authorities on the purchase of health services from trusts (part of central government current expenditure) and the capital spending and interest and dividend payments of the trusts (part of public corporations expenditure). But part of trusts capital spending is funded out of their gross operating surpluses (the rest is financed by public dividend capital and loans), and thus in effect from trusts revenues from charges for services. So there is an element of double counting of health expenditure in TME. This double counting has been removed in the measures of health spending presented in Tables 3.3 through to 3.6, though it remains in total expenditure of services (except for Tables 3.3, 3.4 and 3.5) and in the figures for spending on health and personal social services by country and region presented in Chapter 8. 3.10 The different measures of public spending on health are discussed in more detail in a box in this chapter. 3.11 Table 3.3 shows a longer time series, from 1984- 85 to 2001-02, for TME by function, at a higher level of aggregation. Tables 3.4 and 3.5 present the material in Table 3.3 in real terms and as a percentage of GDP. These tables cover outturn years and give estimated outturns for 2001-02.
TOTAL MANAGED EXPENDITURE BY ECONOMIC CATEGORY 3.12 The economic significance of components of public spending depends on their nature, for example whether they are transfer payments or expenditure on goods and services, current or capital. Table 3.7 breaks down total expenditure on services into the following economic categories:
(ii) Other current expenditure on goods and services – including general administrative expenses and purchases of other goods and services which are not of a capital nature; (iii) Subsidies – payments to producers designed to reduce their prices; (iv) Current grants to the private sector – including grants to persons, such as social security benefits, and grants towards the current expenditure of non – profit making bodies outside the public sector; (v) Current transfers abroad – including net payments to European Union institutions, payments from the UK's development assistance, subscriptions to international organisations and pensions paid to overseas residents; (vi) Net capital expenditure on assets – comprising expenditure on new construction, the purchase of land, buildings and other physical assets, less proceeds from sales of similar assets and the value of net changes in the level of stocks; (vii) Capital grants – grants to the private sector, nationalised industries and other public corporations; (viii) Lending and other financial transactions – comprising net lending to the private sector and public corporations, net lending and investment abroad from the UK's Aid Programme. As in Tables 3.3 to 3.6, debt interest payments, net public service pensions in AME and most accounting adjustments are not allocated by economic category and are shown separately. CAPITAL SPENDING3.13 Capital expenditure is undertaken by all levels of the public sector: ie. central and local government, and public corporations, including nationalised industries. Table 3.8 gives a functional breakdown of the capital expenditure of central and local government and public corporations for outturn years (1996-97 to 2001-02), and for central government and public corporation spending for the plans years (2002-03 and 2003-04). The figures for central government and public corporations capital spending for 2002-03 onwards reflect departments' capital budgets and detailed decisions on the allocation of expenditure. A functional split of local authority capital spending is not available for future years as the allocation of spending between services is a matter for determination by individual local authorities, and there are no plans at this level of detail. 3.14 Capital spending in Table 3.8 follows the national accounts definition of which the main components are:-
ASSET SALES3.15 Table 3.9 shows actual and planned general government receipts from asset sales from 1996-97 through to 2003-04. Significant one-off items that are included in department spending totals are identified separately. These need to be taken into account in looking at trends in departmental spending. Table 3.1 Public expenditure aggregates, 1963–64 to 2002–03 Table 3.2a Public sector gross investment on current sectoral boundaries, 1978-79 to 2000–01 Table 3.2b Other public sector investment series, 1978–79 to 2000–01 Table 3.3 Total Managed Expenditure by function, 1984–85 to 2001–02 Table 3.4 Total Managed Expenditure by function in real terms, 1984–85 to 2001–02 Table 3.5 Total Managed Expenditure as a percentage of GDP, 1984–85 to 2001–02 Table 3.6 Total Managed Expenditure by function, 1996–97 to 2001–02 Table 3.7 Total Managed Expenditure by economic category, 1996–97 to 2001–02 Table 3.8 Public Sector capital by spending sector and function, 1996–97 to 2003–04 Table 3.9 General government receipts from sales of assets, 1996–97 to 2003–04 Contents of tables can be copied and pasted into spreadsheets using widely available software packages |
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