ICAEW chart of the week: Home Office financial statements 2022/23

The Home Office spent £24.5bn in 2022/23 according to its recently published annual financial report, funded by £5.4bn in income and £19.2bn in net parliamentary funding.

Column chart showing main components of the Home Office financial statements 2022/23.

Column 1: Net parliamentary funding £19.2bn

Column 2: Income £5.4bn = Customer contracts £3.7bn + Other income £1.7bn 

Column 3: Expenditure (£24.5bn) = Police grants (£9.2bn) + Other grants (£5.6bn) + Goods and services (£4.3bn) + Staff costs (£2.4bn) + Other operating costs (£3.0bn)

21 Sep 2023.
Chart by Martin Wheatcroft FCA. Design by Sunday.
Source: Home Office, 'Annual Report and Accounts 2022/23'.

The Home Office published its Annual Report and Accounts for the year ended 31 March 2023 on 19 September 2023. 

Net expenditure in 2022/23 was £19.1bn, comprising expenditure of just over £24.5bn net of income of £5.4bn, while parliamentary funding net of other items amounted to £19.2bn.

The Home Office breaks down its income for the year of £5.4bn between revenue from contracts with customers of £3.7bn and other income of £1.7bn. The former includes £2.2bn from visa and immigration charges, £0.6bn in passport fees, £217m for the disclosure and barring service (DBS), and £0.7bn from other sources. Other income is primarily comprised of immigration health surcharges payable by foreign residents and visitors for the use of the National Health Service, a proportion of which is transferred to the Department of Health and Social Care and the devolved administrations.

As our chart this week illustrates, the majority of the Home Office’s spending is in the form of grants. The largest grants, totalling £9.2bn, are to local police forces across England to supplement the council tax precepts they raise locally. Other grants include £1.7bn to top up police pensions, £0.4bn to top up fire and rescue services pensions, £3.3bn in other operating grants (many of which also go to police forces, in addition to transfers to other government departments) and £209m in capital grants.

Purchases of goods and services of £4.3bn is dominated by the £3.1bn paid in relation to asylum and detention, together with £287m in facilities management and staff services, £229m on professional fees, £219m for media and IT, £169m for passport printing and stationery and £120m for visa and immigration commercial partners amongst other costs.

Staff costs of £2.4bn cover the costs of employing full-time equivalent averages of 41,607 permanent staff, seven ministers, seven special advisers, and 6,489 other staff during 2022/23. Wages and salaries amounted to £1.8bn, equivalent to an average full-time equivalent salary of £37,900. 

At 31 March 2023 there were 345 senior civil servants on salaries in excess of £70,000, of which 251 were between £70,000 and £100,000, 86 between £100,000-£150,000 and eight between £150,000 and £190,000. The average of seven government ministers who served during the year (a total of 22 different individuals!) earned the equivalent of an average annual salary not including pension entitlements of around £49,000 in addition to their parliamentary salary or House of Lords attendance allowances.

Other operating costs of £3.0bn include £1.6bn on IT and accommodation-related service charges, £0.7bn for depreciation and amortisation of assets, and £113m in asset recovery costs together with other costs.

Parliamentary funding net of other items of £19.2bn is reported in the consolidated statement of taxpayers’ equity and comprised £19.4bn in drawn-down parliamentary funding, £0.3bn in deemed funding less £0.5bn in amounts repayable.

Not shown in the chart is the Home Office’s consolidated balance sheet, which comprised £2.6bn in non-current assets, trade and other receivables of £0.7bn and cash and cash equivalents of £0.6bn less trade and other payables of £3.7bn, £0.6bn in lease liabilities and £0.5bn in provisions to give net liabilities of £0.9bn. 

Reported in the notes to the accounts are £0.8bn in capital additions, of which £374m was incurred on software and other intangible assets.

Find out more: Home Office annual report and accounts: 2022 to 2023.

This chart was originally published by ICAEW.

ICAEW chart of the week: Public sector segments 2022/23

Our chart this week illustrates just how centralised the UK is by looking at the disparity between receipts and expenditure between central and local government.

Step chart for the financial year 2022/23, showing receipts of £1,018bn (first column) less expenditure £1,155bn (middle column) and deficit £137bn (last column).

Central government: £931bn receipts - £919bn expenditure = £12bn surplus before intra-government transfers. 

Local government: £59bn receipts - £204bn = £145bn shortfall before transfers.

Other public sector: £28bn receipts - £32bn expenditure = £4bn shortfall before transfers.

Most people living in the UK would be surprised to discover just how big a gap there is between the council taxes and other income received by local councils, police and fire authorities, and the amount that they spend on public services.

Our chart of the week illustrates this disparity by looking at public sector segments in 2022/23 and how receipts and expenditure match up, before taking account of intra-government transfers.

Fiscal reporting in the National Accounts is broken down into five segments, of which the two largest are central government and local government. The former includes UK government departments, the devolved administrations in Scotland, Wales and Northern Ireland, and several hundred government agencies and other public bodies. Local government principally consists of local authorities across the UK, the Greater London Authority and regional combined authorities in England, police and fire authorities in England and Wales, and local public transport bodies (the largest of which is Transport for London). The other three segments are public corporations (comprising publicly owned businesses plus social housing), funded pension schemes (mostly local authority schemes as central government schemes are generally unfunded), and the Bank of England.

The latest provisional numbers for the financial year ended 31 March 2023 reported that the UK public sector generated £1,018bn in receipts and incurred expenditure of £1,155bn, giving rise to a deficit of £137bn – a shortfall that has been funded by central government borrowing.

Central government raised £931bn in 2022/23 and spent £919bn, a net £12bn surplus before intra-government transfers. Local government received £59bn and spent £204bn, a shortfall of £145bn. And the three remaining fiscal segments together generated £28bn in receipts, and recorded £32bn in expenditure, a net shortfall of £4bn.

By excluding transfers in this way, the chart highlights just how centralised the UK state is, with local government dependent on central government largesse to pay for 69% of its spending in 2022/23. 

Local authorities received £41bn in council taxes and £18bn in non-tax receipts, with intra-government transfers amounting to £141bn, comprising £127bn in revenue grants and £14bn in capital grants. Transfers included a redistribution of £25bn in business rates, which although collected by local authorities are national taxes whose disposition is determined by central government. The rest came from a combination of block grants, subsidies, and specific grants (some of which councils need to bid for) as part of a complex and complicated web of funding arrangements for local authorities that makes them highly dependent on the decisions of government ministers.

After transfers there was a reported deficit of £137bn in central government and £4bn in local government, while £8bn in net transfers converted a £4bn shortfall between receipts and expenditure in the three other segments into a net £4bn surplus.

The big picture is of the most centralised state among medium and large economies in the developed world, with local authorities almost entirely dependent on the largesse of central government to fund the essential public services they deliver.

Distributing power to the devolved administrations in Scotland, Wales and Northern Ireland has started to see a share of national taxes dispersed (such as income tax in Scotland and Wales) and some limited tax-raising powers. This contrasts with the debate about devolution in England, which has primarily focused on structures with the partial creation of a regional tier of local government in the form of combined authorities, rather than on more fundamental questions of whether this very centralised system of funding for local authorities needs reform.

This chart was originally published by ICAEW.