One of the ONS’s most watched figures is the level of public sector debt. Complied jointly with HM Treasury, this number is often compared with the overall size of the UK economy (GDP) and presented as a “debt to GDP ratio” to give it proper context. As this figure has recently been hovering around the 100% level, it has received more attention than normal. Jessica Barnaby explains why our initial estimates can sometimes get revised.
Today we show that total debt of the UK public sector has – for the first time since the 1960s – become larger than the value of UK economic output in a whole year. But eagle-eyed readers will note we said exactly the same thing last month.
How could this be, you cry? Well, one part of our ratio is compiled using figures reported by public sector bodies for the amount of debt, which includes gilts, for example. But to create a ratio with GDP, for the other part of that ratio, we use information on how the economy has behaved over the last six months but also Office for Budget Responsibility projections of how GDP will perform over the next six months. This is to ensure both parts of the ratio are comparable.
As these projections for growth are replaced by published ONS figures, our estimates of ratio of debt to GDP naturally evolve. If the size of the economy in cash terms grows faster than forecast (which may be partly due to rising prices) and the amount of debt stays the same, then debt as a ratio of GDP will be revised down. This is what we’ve seen happen recently. On the other hand, if the economy grows slower than the forecast and debt is the same, then debt as a ratio of GDP will be revised up. These revisions are a perfectly normal part of our statistics and are usually small (last month’s figures were revised by only 0.2% of GDP). However, at times such as these, where the figures are hovering around a particularly closely-watched number, small revisions will seem more noticeable, but they are no more significant.
In the coming months, we at the ONS will continue to update our economic statistics using the latest available data. Revisions are normal and necessary as part of this process. But thanks to those revisions, you will always have the best possible estimates of public sector debt described in the context of economic output.
This post was edited on 23 August 2023 to clarify some of the terminology used.