«Financial Statistics Explanatory Handbook 2011 ISBN 978-230-24552-5 Copyright and reproduction ISSN 1469-0373 © Crown copyright 2010 A National ...»
Edition No.: 2011
Editor: Emma Howley
Office for National Statistics
Financial Statistics Explanatory Handbook 2011
Copyright and reproduction
© Crown copyright 2010
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The Financial Statistics publication is in two parts:
Series appearing in this part II may also appear in part I of the publication. In such cases the data may differ slightly due to the periodicity of the series.
Part I (chapters 1–7) contains tables that are updated monthly as and when the information becomes available.
Part II (chapters 8–14) contains tables that are updated quarterly, and is a consistent set of financial and other sectoral accounts. The latter form part of the integrated quarterly national economic accounts and is consistent with the estimates of gross domestic product and the balance of payments.
From October 1998 the Financial Statistics publication has presented the UK accounts in line with the European System of Accounts 1995 (ESA95).
Part 1: General financial statistics
The tables are arranged in the following chapters:
Chapter 1 – Public sector finances This chapter includes public sector summary balances, public sector net borrowing, central government surplus on current budget and net borrowing, and public sector net debt. Also included are details of the financing of the net cash requirements of central government, of local government and of public corporations. UK international reserves are also included here.
Chapter 2 – Central government revenue and expenditure In this chapter, details are given of the receipts and expenditures leading to the central government net cash requirement. The relationship between national accounts data and the public expenditure control total is spelled out. Public sector aggregates are also included in this chapter.
Chapter 3 – Money supply and credit This chapter contains data on the money supply as compiled by the Bank of England, together with details of specific types of credit and loans for house purchase.
Chapter 4 – Monetary financial institutions (MFIs) This chapter contains data on the MFIs consolidated balance sheet, Bank of England liabilities and assets and industrial analysis of MFIs deposits and lending.
Chapter 5 – Other financial intermediaries This chapter contains data on the financial activities of other financial intermediaries (insurance companies, pension funds and trusts). Securities dealers’ income, expenditure and transactions are also included in this chapter.
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Chapter 6 – Companies and capital issuance This chapter presents data on companies and corporate financing – in particular insolvencies, company securities, acquisitions and mergers, liquidity of large non-financial corporations, and capital issuance.
Chapter 7 – Exchange rates, interest rates, security prices and RPI The data in this chapter covers exchange rates, interest rates, security prices and Retail Prices Index (RPI).
Part II: Financial and sector accounts
The tables are arranged in the following chapters:
Chapter 8 UK summary financial accounts ESA95.
Chapter 9 UK summary financial balance sheets ESA95.
Chapter 10 Not used.
Chapter 11 New financial accounts ESA95 – flows by sector.
Chapter 12 New financial balance sheets ESA95 – by sector.
Chapter 13 Not used.
Chapter 14 Balance of Payments and other key economic indicators, including income and capital accounts.
The data held in part II of the Financial Statistics publication are presented within a comprehensive national accounting framework, which is described in this section.
Further explanations can be found in:
• United Kingdom National Accounts: The Blue Book
• United Kingdom National Accounts Concepts, Sources and Methods (TSO, 1998) Overview of the accounts In the UK, priority is given to the production of a single estimate of gross domestic product (GDP) using the income, production and expenditure data. The income analysis is available at current prices, expenditure is available at both current prices and chained volume measures, and value added on a quarterly basis is compiled in chained volume measures only. Income, capital and financial accounts are also produced for each of the institutional sectors: non-financial corporations, financial corporations, general government, and the households and non-profit institutions serving households sectors. The accounts are fully integrated, but with a statistical discrepancy, known as the statistical adjustment, shown for each sector account (reflecting the difference between the sector net borrowing or lending from the capital account, and the identified borrowing or lending in the financial accounts which should theoretically be equal). Financial transactions and balance sheets are also produced for the rest of the world sector in respect of its dealings with the UK.
The basic framework of the UK National Accounts The accounting framework provides for a systematic and detailed description of the UK economy.
It includes the sector accounts, which provide, by institutional sector, a description of the different stages of the economic process from production through income generation, distribution and use of income to capital accumulation and financing; and the Input-Output framework, which describes the production process in more detail. It contains all the elements required to compile aggregate measures such as GDP, gross national income (previously known as gross national product), saving and the current external balance (the balance of payments). The economic accounts provide the framework for a system of volume and price indices, so that chained volume measures of aggregates such as GDP can be produced. It should be noted that in this system, value added, from the production approach, is measured at basic prices (including other taxes less subsidies on production but not on products) rather than at factor cost (which excludes all taxes less subsidies on production). The system also encompasses measures of population and employment.
The whole economy is subdivided into institutional sectors. For each sector, current price accounts run in sequence from the production account through to the balance sheet.
The accounts for the whole UK economy and its counterpart, the rest of the world, follow a similar structure to the UK sectors, although several of the rest of the world accounts are collapsed into a single account because they can never be complete when viewed from a UK perspective.
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The ESA95 code for each series is shown in the left-hand column. The ESA95 codes use the prefix ‘S’ for the classification of institutional sectors. The ESA95 classification of transactions and other flows comprises transactions in products (prefix P), distributive transactions (prefix D), transactions in financial instruments (prefix F), and other accumulation entries (prefix K). Balancing items are classified using the prefix B. Within the financial balance sheets, financial assets/liabilities are classified using the prefix AF and non-financial assets/liabilities using the prefix AN.
What is an account? What is its purpose?
An account records and displays all of the flows and stocks for a given aspect of economic life. The sum of resources is equal to the sum of uses, with a balancing item to ensure this equality.
Normally the balancing item will be an economic measure which is itself of interest.
By employing a system of economic accounts we can build up accounts for different areas of the economy which highlight, for example, production, income and financial transactions. In many cases these accounts can be elaborated and set out for different institutional units and groups of units (or sectors). Usually a balancing item has to be introduced between the total resources and total uses of these units or sectors and, when summed across the whole economy, these balancing items constitute significant aggregates. Figure 1 below provides the structure of the accounts and shows how GDP estimates are derived as the balancing items.
The integrated economic accounts The integrated economic accounts of the UK provide an overall view of the economy. The sequence of accounts is shown in Figure 1 below. Figure 1 presents a summary view of the accounts, balancing items and main aggregates and shows how they are expressed.
The accounting structure is uniform throughout the system and applies to all units in the economy, whether they are institutional units, sub-sectors, sectors or the whole economy, though some accounts (or transactions) may not be relevant for some sectors.
The accounts are grouped into four main categories: goods and services account, current accounts, accumulation accounts and balance sheets.
The goods and services account (Account 0) The goods and services account is a transactions account which balances total resources, from output and imports, against the uses of these resources in consumption, investment, inventories and exports. Because the resources are simply balanced with the uses, there is no balancing item.
The goods and services account is discussed in detail in chapters 3 and 12 of United Kingdom National Accounts Concepts, Sources and Methods (TSO, 1998) The good and services account is not shown in the Financial Statistics publication.
Current accounts: the production accounts and the distribution of income accounts Current accounts deal with production, distribution of income and use of income.
The production account (Account I)
The production account displays the transactions involved in the generation of income by the activity of producing goods and services. In this case the balancing item is value added (B.1). For the nation’s accounts, the balancing item (the sum of value added for all industries) is, after the addition of taxes less subsidies on products, gross domestic product (GDP) at market prices or net domestic product when measured net of capital consumption. The production accounts are also shown for each institutional sector.
The production accounts are discussed in detail in Chapters 4 and 13 of United Kingdom National Accounts Concepts, Sources and Methods (TSO, 1998) The good and services account is not shown in the Financial Statistics publication.