Public sector finances produced a surprisingly big £11.02 billion deficit in March, up from February's larger revised £8.60 billion but well short of the £15.71 billion posted a year ago. Excluding public sector banks (PSNB-X), the red ink stood at £11.94 billion following February's £9.52 billion and the £16.64 billion in March 2023.

Central government receipts rose £6.6 billion versus March 2023 courtesy of gains in income tax, corporation tax and VAT of £3.1 billion, £1.5 billion and £0.8 billion respectively. At the same time, expenditure was down £0.4 billion despite a £0.4 billion rise in interest payable on government debt. As a result, net debt was 98.3 percent of GDP, 2.6 percentage points more than at the end of March 2023 and in line with the levels last seen in the early 1960s.

The March data provisionally put the full financial year PSNB-X at £120.7 billion, some £7.6 billion less than in the previous year but still fully £6.6 billion more than forecast by the Office for Budgetary Responsibility. Even so, Chancellor Jeremy Hunt is still thought to be considering cuts in stamp duty and national insurance before an expected general election later this year. The UK RPI now stands at 4 and the RPI-P at minus 3, both close enough to zero to show overall economic activity performing much as expected.

Government finances are seen remaining deep in the red in March with overall net borrowing (PSNB) forecast at £8.9 billion and, after excluding public sector banks (PSNB-X), at £9.8 billion.

The public sector net borrowing requirement (PSNB) is the difference between the sector's receipts and expenditure and so provides a simple measure of government fiscal policy. In response to the global economic crisis in 2008/09 the UK government introduced a number of measures designed to show the underlying state of public sector finances by omitting temporary distortions caused by financial interventions. It bases its fiscal policy on these measures. To this end, the underlying gauge of government borrowing watched most closely by financial markets is the PSNB-X which takes overall net borrowing (PSNB) but excludes public sector banks.

Changes in public sector finances can be used to determine the thrust of the government's fiscal policy. Generally speaking when the government has a rising deficit (or falling surplus) it is loosening its fiscal stance with a view to boosting economic activity. When its deficit is falling (or surplus rising), fiscal policy is being tightened in order to slow economic growth. However, sometimes changes in government financial positions can be due to factors outside of the government's control and do not signal an explicit shift in policy. This means that great care is needed in interpreting the data.