The amount by which UK government expenditure exceeds its income (i.e. the budget deficit); this must be financed by borrowing (e.g. by selling gilt-edged securities) or by printing money. As an indicator of government fiscal policy the PSNCR has acquired increased status since the late 1970s. By that time many economists had come to accept that a high PSNCR is inflationary or leads to the crowding out of private expenditure; this remains a widely held view. While printing money simply causes prices to rise, selling gilts has the effect of raising interest rates, reducing private investment, and curbing private expenditure. The PSNCR was formerly known as the Public Sector Borrowing Requirement ( PSBR).
Subjects: Financial Institutions and Services.