Public sector net cash requirement

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Public Sector Net Cash Requirement (PSNCR) is the budget deficit in the UK. It is the difference between Government expenditure and Government income. Government Revenues/Income is mainly derived from taxes. Governments usually plan their budget expenditure based on a forecast the revenue from taxes.

[edit] Overview

If there is a short fall in tax revenue or there is excessive government spending, there will be a budget deficit, therefore the government needs to borrow from the capital market by issuing Debt (Bonds), alternatively, if there is substantial tax revenues generated from corporations as well as high levels of employment (leading to higher PAYE tax revenues), this will lead to a reduction in the budget deficit therefore reducing the Governments’ public sector borrowing.

High PSNCR leads to inflation (as a result of excessive government spending).