• The local authority borrowing requirement

• The public corporation borrowing requirement

Central government undertakes some borrowing in order to lend funds on to local authorities and public corporations. This is taken away from the total to avoid double-counting these funds.

Central government borrowing is by far the largest element of the PSBR, especially since the reduction of the fund-raising powers of local authorities who have become increasingly reliant on central government for funding.

Privatisation has also reduced the significance of the public corporation borrowing requirement.

Central government borrowing is the difference between government revenue and government expenditure.

The main components on the revenue side are:

• Income tax receipts

• Value-Added Tax (VAT) receipts

• Corporation taxes

• Excise taxes (cigarettes, alcohol, tobacco)

The expenditure calculations are broken down into net department outlays, interest and dividends and privatisation proceeds.

If the government spends more than it has revenue, there is a Public Sector Borrowing Requirement.

There are strong seasonal patterns due to the following:

• Corporation tax - receipts are received mainly in January, April, July and October.

• Inland Revenue - receipts tend to be highest in January and July.

• VAT receipts - there is some correlation with patterns in retail sales, with a lag of two to three months.

• Net department outlays - there is less seasonality on the spending side, but there is a tendency for it to increase in March as departments spend remaining budget allocations.

Last minute spending usually makes the March PSBR figure the largest, while strong revenues in January often mean that that month shows little borrowing.