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I need to better understand the concept of negative expenditure in UK public spending. The definition says

Receipts classified as negative public expenditure receipts are netted off, and hence reduce levels of total public spending. The most common examples are payments for goods and services. However negative PE receipts also include: royalties, income from insurance payments, guarantee fees and income from rent of buildings (but not land).

More on page 11 of this paper.

For example in the 2015 UK Budget's Total Managed Expenditure is £765bn, where the HM Treasury spending is -£43bn, because HM Treasury earned more than it spent in that period, and the sum of all other departments is 765+43=£808bn. My question is, what do we say is the "size" of the government budget? The government physically spent more than 765, they just did not financed all of it from tax revenue, that is all.

The problem becomes much more exposed if we look at one of the state agencies the Agriculture & Horticulture Development Board. It receives only £1.2M from the government budget but then it "earns" another £57.4M from Levies that enters the budget on the spending side as -57.4 and the total expenditures I see are over £66.3M. But in their annual report they reffer to it as

The total 2014/15 income was £66.746

Apparently Total Income and Total Managed Expenditure are two very different things. What we say is the "size" of the budget? If we nett off the negative expenditures then the budget of this agency is only £1.2M but that is misleading, isn't it? What is the correct terminology?

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There are several issues here, but the three most significant are:

  1. The National Accounts treatment of the public sector, which is set out in international standards and controlled by the Office for National Statistics. This is what you might naturally look to if you wanted to compare the size of the UK's public sector with those of other countries, or its impact on GDP or other macroeconomic indicators. Examples of ONS data include https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes and https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicspending/datasets/esatable2mainaggregatesofgeneralgovernment
  2. Her Majesty's Treasury's control of public expenditure for budget management purposes, which includes passing on money voted by Parliament. The Treasury has a natural tendency to try to minimise this, and so often encourages parts of government to obtain resources in other ways such as levies and fees, and sometimes allows these to be deducted from the control totals it applies in a way not deemed economically meaningful by the Office for National Statistics. Total Managed Expenditure is part of these control totals. Sources of information include https://www.gov.uk/government/statistics/public-expenditure-statistical-analyses-2016
  3. Individual parts of government managing their own budgets, primarily ensuring that money coming in balances money going out. This can include receiving money from or giving money to other parts of government, which as internal transfers would not count as public expenditure from an economic point of view, but do matter to an individual body

The Treasury paper you link to is largely trying to describe some of the differences of treatment between (1) and (2), explaining phases in its analyses such as "Receipts treated as negative DEL [departmental expenditure] but revenue in National Accounts". Meanwhile, in the case of the Agriculture and Horticulture Development Board, it gets its money from the industry either in the forms of levies or commercial income and is an example of (3); in this case the Treasury interest is largely in ensuring the board does not become a burden on public funds and that it operates efficiently, while the ONS is interested because it how it is funded (it is similar to a tax as the levies are compulsory, but it is different in that the board uses this money solely to provide a explicit service to the levy payers)

If you are looking to measure the size of the UK public sector as a whole, you may find the ONS figures in (1) most useful, though they may not give the detail you can find from (2) or (3)

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  • $\begingroup$ Thanks for the comprehensive answer. Maybe I should have be more specific on why I need this info: I am going to present public spending numbers to the public and I am trying to figure out which numbers to present. After learning all this I find the Total Managed Expenditure number somehow misleading. $\endgroup$ – daniel.sedlacek Dec 9 '16 at 8:28

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