While not a statutory obligation of the OBR, the publication of monthly profiles for the public sector finances consistent with our most recent EFO is something we started doing in May 2020, shortly after presenting our initial Covid reference scenario in the early weeks of the pandemic. Given the extraordinary pressures that the pandemic was placing on the economy, public finances, and financial markets, we felt a more detailed, high-frequency estimate of what revenue, spending, borrowing, and debt were likely to be in each month of the current financial year would provide a useful reference point against which to track incoming information about the economic and fiscal impact of an unprecedented and rapidly evolving crisis. We updated these profiles periodically through 2020 as our scenarios and the Government’s policy response evolved.
As the immediate pressures of the pandemic abated, we continued to publish monthly profiles shortly after each new EFO. Feedback from the ONS, policymakers, markets, journalists, and commentators was that they valued the more informed, ‘bottom-up’ projection of receipts, spending, and borrowing over the course of the year. In particular, they found it to be a more useful benchmark against which to interpret monthly outturn data relative to our most recent annual forecast than simple ‘run rate’ calculations that typically infer full-year prospects by extrapolating from year-on-year percentage changes in year-to-date outturns.
Our Monthly profiles publication draws on historical monthly patterns for receipts and spending as they evolve in the ONS’s outturn data throughout the year and use that to generate a profile for the full-year forecast of public sector net borrowing. Where we know there are unusual timing effects, for example a time-limited spending programme coming to an end or new tax measure coming into effect part-way through the year, we adjust those historical profiles to take this into account. But, as we make clear in the publication itself, the profiles are relatively broad-brush and illustrative, and there is considerable uncertainty around them.
Our most recent monthly profiles for 2022-23 were published on 21 December 2022 and based on the annual receipts, spending, borrowing, and debt forecast including in our November 2022 EFO. While the annual figures in the profiles were correctly aligned to our November forecast, the borrowing figure for January included an error that overstated the forecast level of borrowing in that month by £9.6 billion. The correction of this error affected the monthly distribution of borrowing over the financial year, but did not affect our forecast for total borrowing for the financial year as a whole – i.e. it was confined to the Monthly profiles rather than reflecting a problem in our November EFO forecast.
We spotted the error on 16 February as we commenced preparation of our monthly commentary and published a corrected set of figures on 20 February, the day before the ONS published its monthly Public Sector Finances release for the month of January on 21 February. In our monthly Commentary on the public sector finances issued the same day, we drew people’s attention to the correction of this error. We also received some media enquiries about the error and explained the background and where to find the updated figures.
The error that we corrected was a relatively simple and unfortunate spreadsheet error regarding the transfer from the Treasury to the Bank of England’s Asset Purchase Facility (APF) we expected to take place in the month of January. Transfers between the Treasury and the Bank of England relating to gains or losses from the APF do not increase or decrease overall net borrowing because payments go from the central government sector (the Treasury) to public corporations (the Bank of England) to honour the Treasury’s financial indemnity of APF losses.
The error that was corrected had assigned the positive monthly central government transfer from the Treasury to the Bank of England correctly, but the offsetting reduction in public corporations borrowing by the Bank was not fed through correctly. This overstated public corporations, and therefore total public sector, borrowing by £9.6 billion in January. Correcting this error reduced the estimate of both public corporations and public sector net borrowing in the monthly profile for January.
This correction flowed through to the monthly borrowing numbers across the financial year in the Monthly profiles but did not affect our forecast for total borrowing of £177.0 billion for 2022-23 in the November forecast. The total borrowing lines for each of the sectors (central government, local authority and public corporations) are also unchanged and this has not affected any of the official forecast that is published in the EFO and laid in Parliament. Any misunderstandings for users of our outputs as a result of this error would therefore have been limited to those deriving expectations of monthly borrowing in individual months of the year, and particularly for January.
The error was identified as part of the process for the publication of our monthly commentary on the public finances and corrected as soon as practicably possible. We highlighted the lines that had been corrected to make the changes obvious to users and included a note in explanation beneath the main table. While it is regrettable to have found such an error at all, we do have processes in place to ensure they are acknowledged and addressed as quickly as possible. We are now reviewing the process for finalising and quality-assuring our Monthly profiles publication to reduce the scope for future errors.
In reviewing this episode, we have reflected that the Monthly profiles publication is a detailed and technical process that requires analysts to redouble their efforts immediately after an EFO forecast. The November 2022 profiles were originally published on 21 December, between and around periods of leave and after a particularly turbulent forecast process, so that users could interpret the November monthly public finances data on the same day. We will review our processes with this in mind.