Government Expenditure and Revenue Scotland 2011-2012

GOVERNMENT EXPENDITURE & REVENUE SCOTLAND 2011-2012 MARCH 2013
Crown copyright 2013 Further copies of this publication can be obtained from: Office of the Chief Economic Adviser Scottish Government St Andrews House Regent Road Edinburgh EH1 3DG This document is also available on the Scottish Government website: www.scotland.gov.uk ISBN: 978-1-78256-417-1 The text pages of this document are printed on recycled paper and are 100% recyclable.
APS Group Scotland DPPAS13832 (02/13)
The Scottish Government, Edinburgh 2013
Crown copyright 2013 You may re-use this information (excluding logos and images) free of charge in any for mat or medium, under the terms of the Open Government Licence. To view this licence, visit http://www.nationalarchives.gov.uk/doc/open-government-licence/ or e-mail: psi@nationalarchives.gsi.gov.uk. Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned. This document is also available from our website at www.scotland.gov.uk. ISBN: 978-1-78256-417-1 The Scottish Government St Andrews House Edinburgh EH1 3DG Produced for the Scottish Government by APS Group Scotland DPPAS13832 (03/13) Published by the Scottish Government, March 2013 Further copies of this publication can be obtained from: Office of the Chief Economic Adviser Scottish Government St Andrews House Regent Road Edinburgh EH1 3DG The text pages of this document are printed on recycled paper and are 100% recyclable.
CONTENTS
Executive Summary Preface Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Annex A Annex B Annex C Annex D Introduction and Overview Scotlands Public Sector Accounts Public Sector Revenue North Sea Revenue Public Sector Expenditure Conclusion Revenue Methodology Expenditure Methedology List of Abbreviations Glossary 5 7 11 13 25 33 39 63 65 73 83 85
Government Expenditure and Revenue Scotland 2011-12
LIST OF TABLES
Executive Summary E.1: Total Current Revenue: Scotland 2007-08 to 2011-12 E.2: Public Sector Total Expenditure: Scotland 2007-08 to 2011-12 E.3: Current Budget Balance: Scotland and UK 2007-08 to 2011-12 E.4: Net Fiscal Balance: Scotland and UK 2007-08 to 2011-12 Scotland's Public Sector Accounts 2.1: Current and Capital Budgets: Scotland 2007-08 to 2011-12 2.2a: Current and Capital Budgets (Excluding North Sea Revenue) % GDP 2.2b: Current and Capital Budgets (Per Capita Share North Sea Revenue) % GDP 2.2c: Current and Capital Budgets (Geographical Share North Sea Revenue) % GDP 2.3: Summary of Current Revenue: Scotland 2007-08 to 2011-12 2.4: Total Expenditure: Scotland and UK 2007-08 to 2011-12 2.5: Summary of Public Sector Expenditure: Scotland 2007-08 to 2011-12 Public Sector Revenue 3.1: Current Revenue: Scotland 2011-12 3.2: Non-North Sea Current Revenue: Scotland as Share of UK 2007-08 to 2011-12 3.3: Current Revenue: Scotland and UK 2007-08 to 2011-12 3.4: Existing Devolved Taxes Revenue: Scotland 2007-08 to 2011-12 3.5: Stamp Duty Land Tax Revenue: Scotland and UK 2007-08 to 2011-12 3.6: Landfill Tax Revenue: Scotland and UK 2007-08 to 2011-12 3.7: Scottish Rate of Income Tax Liabilities: Scotland 2007-08 to 2011-12 3.8: Devolved Taxes Revenue: Scotland 2007-08 to 2011-12 North Sea Revenue 4.1: Total North Sea Revenue: UK 1980-81 to 2011-12 4.2: Composition of North Sea Revenue: UK 2007-08 to 2011-12 4.3: Per Capita Share of North Sea Revenue: Scotland 2007-08 to 2011-12 4.4: Geographical Share of North Sea Revenue: Scotland 2007-08 to 2011-12 4.5: Current Revenue (Per Capita Share of North Sea Revenue): Scotland 2011-12 4.6: Current Revenue (Geographical Share of North Sea Revenue): Scotland 2011-12 34 34 35 37 37 37 26 28 30 31 31 32 32 32 15 16 16 17 21 22 22 5 5 6 6
List of tables
Public Sector Expenditure 5.1: Total Expenditure: Scotland 2011-12 5.2: Total Current and Capital Expenditure Scotland and UK 2007-08 to 2011-12 5.3: Current and Capital Expenditure (% of Total): Scotland 2007-08 to 2011-12 5.4: Total Expenditure: Scotland 2007-08 to 2011-12 5.5: Total Expenditure: UK 2007-08 to 2011-12 5.6: Total Expenditure Per Capita: Scotland and UK 2007-08 to 2011-12 5.7: Total Expenditure, Identifiable and Non-identifiable: Scotland 2007-08 to 2011-12 5.8: Total Identifiable Expenditure: Scotland 2007-08 to 2011-12 5.9: Identifiable Expenditure - Scottish Government and LAs: 2007-08 to 2011-12 5.10: Identifiable Expenditure - Other UK Government: Scotland 2007-08 to 2011-12 5.11: Identifiable Expenditure: Scotland and UK 2011-12 5.12: Non-Identifiable Expenditure: Scotland and UK 2007-08 to 2011-12 5.13: Non-Identifiable Expenditure: Scotland 2007-08 to 2011-12 5.14: Non-Identifiable Expenditure: UK 2007-08 to 2011-12 Revenue Methodology A.1: Apportionment Methodologies and Sources for Public Sector Revenue in Scotland A.2: Revisions to Estimates of Total Non-North Sea Public Sector Revenue A.3: Revisions to Estimates of Public Sector Revenue: Scotland and UK 2010-11 Expenditure Methodology B.1: Apportionment Methodologies for Non-Identifiable Expenditure: 2007-08 to 2011-12 B.2: Total Accounting Adjustment: Scotland and UK 2007-08 to 2011-12 B.3: Public Sector Finances Accounting Adjustment: UK 2007-08 to 2011-12 B.4: Public Sector Finances Accounting Adjustment: Scotland 2007-08 to 2011-12 B.5: Summary of Amendments to Public Sector Expenditure from PESA 2012 B.6: Amendments to Public Sector Expenditure from PESA 2012 B.7: Revisions to Estimates of Total Expenditure: Scotland 2007-08 to 2010-11 B.8: Revisions to Estimates of TME: Scotland 2007-08 to 2010-11 74 76 77 78 79 79 81 82 67 69 70 41 41 42 43 44 45 48 50 51 52 53 57 58 59
List of Tables
EXECUTIVE SUMMARY
Government Expenditure and Revenue Scotland (GERS) is a National Statistics publication. It estimates the contribution of revenue raised in Scotland toward the goods and services provided for the benefit of Scotland. The estimates in this publication are consistent with the UK Public Sector Finances published in February 2013. Three estimates of Scotlands public sector accounts are presented in GERS, (i) excluding North Sea revenue, (ii) including a per capita share of North Sea revenue and (iii) including an illustrative geographical share of North Sea revenue.
Scottish Public Sector Revenue Table E.1: Total Current Revenue: Scotland 2007-08 to 2011-12
( million) 2007-08 Excluding North Sea revenue Including North Sea revenue (per capita share) Including North Sea revenue (geographical share) 44,815 45,444 51,927 2008-09 43,502 44,591 55,254 2009-10 41,664 42,209 47,573 2010-11 44,287 45,024 52,330 2011-12 46,297 47,239 56,871
(% of Total UK Revenue) Excluding North Sea revenue Including North Sea revenue (per capita share) Including North Sea revenue (geographical share) 8.3% 8.3% 9.5% 8.4% 8.4% 10.4% 8.2% 8.2% 9.3% 8.2% 8.2% 9.5% 8.2% 8.2% 9.9%
In 2011-12, total Scottish non-North Sea public sector revenue was estimated at 46.3 billion, (8.2% of total UK non-North Sea revenue). Including a per capita share of North Sea revenue, total Scottish public sector revenue was estimated at 47.2 billion (8.2% of UK total public sector revenue). When an illustrative geographical share of North Sea revenue is included, total Scottish public sector revenue was estimated at 56.9 billion (9.9% of UK total public sector revenue).
Public Sector Expenditure for Scotland Table E.2: Public Sector Total Managed Expenditure: Scotland 2007-08 to 2011-12
2007-08 Total Public Sector Expenditure for Scotland ( millions) Total Public Sector Expenditure for Scotland (% of UK Total) 55,925 9.6% 2008-09 58,953 9.3% 2009-10 62,049 9.2% 2010-11 64,030 9.2% 2011-12 64,457 9.3%
In 2011-12, total public sector expenditure for Scotland, including a per capita share of UK debt interest payments, was 64.5 billion, 9.3% of UK public sector expenditure.
Scotlands Overall Fiscal Position GERS provides two measures of Scotlands fiscal position, the current budget balance and the net fiscal balance. The current budget balance shows the difference between current revenue and current expenditure. It measures the degree to which taxpayers meet the cost of paying for public services and a contribution to debt interest payments. The net fiscal balance measures the difference between total public sector expenditure (including capital expenditure) and public sector revenue. It therefore includes public sector capital investment, such as the construction of roads, hospitals, and schools, which yields benefits not just to current taxpayers but also to future taxpayers.
Government Expenditure and Revenue Scotland 2011-12 5
Executive Summary
Current Budget Balance Table E.3: Current Budget Balance: Scotland and UK 2007-08 to 2011-12
( million) 2007-08 Scotland - Excluding North Sea revenue Scotland - Including North Sea revenue (per capita share) Scotland - Including North Sea revenue (geographical share) UK -7,565 -6,936 -453 -7,630 2008-09 -10,718 -9,630 1,034 -51,290 2009-10 -15,558 -15,013 -9,649 -110,328 (% of GDP) Scotland - Excluding North Sea revenue Scotland - Including North Sea revenue (per capita share) Scotland - Including North Sea revenue (geographical share) UK -6.6% -5.9% -0.3% -0.5% -9.3% -8.1% 0.7% -3.6% -13.8% -13.0% -7.2% -7.8% -13.1% -12.3% -5.3% -6.9% -11.2% -10.2% -2.3% -6.0% 2010-11 -15,726 -14,989 -7,684 -102,504 2011-12 -13,972 -13,030 -3,398 -92,297
In 2011-12, the estimated current budget balance for the public sector in Scotland was a deficit of 14.0 billion (11.2% of GDP) excluding North Sea revenue, a deficit of 13.0 billion (10.2% of GDP) including a per capita share of North Sea revenue, or a deficit of 3.4 billion (2.3% of GDP) including an illustrative geographical share of North Sea revenue. In 2011-12, the UK as a whole ran a current budget deficit, including 100% of North Sea revenue, of 92.3 billion (6.0% of GDP).
Net Fiscal Balance Table E.4: Net Fiscal Balance: Scotland and UK 2007-08 to 2011-12
( million) 2007-08 Scotland - Excluding North Sea revenue Scotland - Including North Sea revenue (per capita share) Scotland - Including North Sea revenue (geographical share) UK -11,110 -10,480 -3,998 -36,719 2008-09 -15,450 -14,362 -3,699 -97,539 2009-10 -20,385 -19,839 -14,475 -158,922 (% of GDP) Scotland - Excluding North Sea revenue Scotland - Including North Sea revenue (per capita share) Scotland - Including North Sea revenue (geographical share) UK -9.7% -9.0% -2.9% -2.6% -13.4% -12.1% -2.6% -6.9% -18.1% -17.2% -10.7% -11.2% -16.5% -15.6% -8.1% -9.5% -14.6% -13.5% -5.0% -7.9% 2010-11 -19,743 -19,006 -11,700 -140,967 2011-12 -18,159 -17,217 -7,586 -120,963
In 2011-12, Scotlands estimated net fiscal balance was a deficit of 18.2 billion (14.6% of GDP) when excluding North Sea revenue, a deficit of 17.2 billion (13.5% of GDP) when including a per capita share of North Sea revenue, or a deficit of 7.6 billion (5.0% of GDP) when an illustrative geographical share of North Sea revenue is included. In 2011-12, the equivalent UK position including 100% of North Sea revenue, referred to in the UK Public Sector Accounts as net borrowing, was a deficit of 121.0 billion (or 7.9% of GDP).
PREFACE
This report is the nineteenth in the series of official published estimates of expenditure and revenue balances of the public sector in Scotland.
The Aims and Objectives

The aim of GERS is to enhance public understanding of fiscal issues in Scotland. The primary objective is to estimate a set of public sector accounts for Scotland through detailed analysis of official UK and Scottish Government finance statistics. GERS estimates the contribution of revenue raised in Scotland toward the goods and services provided for the benefit of the people of Scotland. The report is designed to allow users to understand and analyse Scotlands fiscal position under different scenarios. GERS captures the entire public sector in Scotland and includes activity by each of the constituent parts of the public sector: central government, local government and public corporations. In addition to providing an analysis of aggregate expenditure and revenue, the report contains a detailed breakdown according to individual expenditure and revenue components.
National Statistics in GERS

All expenditure and revenue data in GERS are classified as UK National Statistics. National Statistics are those figures which come within the scope of the principles of the Code of Practice for Official Statistics. The Code seeks to ensure that National Statistics will be valued for their relevance, integrity, quality and accessibility. More information about National Statistics is available on the Office for National Statistics (ONS) website.1
The Approach
Unlike some countries, the UK fiscal framework does not provide separate detailed intra-country or inter-regional fiscal accounts. GERS therefore provides an estimated set of public sector fiscal accounts for Scotland. In the absence of formal intra-UK fiscal accounts, estimating a set of equivalent accounts for Scotland raises two key practical issues: Firstly, there is no formally agreed set of accounting concepts and definitions for the formulation of UK country or regional fiscal accounts. Secondly, a number of key elements of underlying data necessary for constructing public sector country or regional fiscal accounts, while available at the UK level, are not available at the UK country or regional level.
In light of this, GERS develops a robust framework for measuring public sector revenue raised in Scotland and expenditure for Scotland. Firstly, public sector balances of expenditure and revenue are estimated for Scotland on the basis of the national accounting standards adopted by the UK Government: the European System of Accounts 1995. Secondly, in the absence of direct Scottish data, GERS estimates expenditure and revenue using the best available information and most appropriate apportionment methodologies.
http://www.ons.gov.uk
Preface
What Questions Does GERS Address?

GERS fundamentally addresses three questions about Scotlands public sector accounts for a given year: 1. What tax revenues were raised? 2. How much did the country pay for the full range of public services that were consumed? 3. To what extent did the revenues raised cover the payments made for these public services?
The Methodology
The headline estimates of Scottish public sector revenue and expenditure in GERS embrace two key principles: 1. Public sector revenue is estimated for taxes where a financial burden is imposed on residents and enterprises in Scotland 2. Public sector expenditure is estimated on the basis of spending incurred for the benefit of residents and enterprises in Scotland; Both issues are discussed in detail below.
Revenue
Public sector revenue is estimated for taxes where a financial burden is imposed on residents and enterprises in Scotland. In GERS the estimation of public sector revenues is based on assessment according to the who pays principle. This concerns the identification of the location of the source of public sector revenue. In GERS, the who pays principle is based upon the residential location of where the revenue is raised. For a variety of practical and theoretical reasons, estimating revenue for individual countries and regions of the UK is generally more difficult than estimating expenditure. Revenue is generally collected on a UK basis, whereas the benefits of expenditure are generally targeted on a regional basis. Under current UK budgetary accounting procedures, separately identified revenue figures for each country and region of the UK are not available. As a result, Scottish public sector revenue is estimated by considering each revenue stream separately. Annex A and the more detailed methodology note on the GERS website provide a detailed discussion of the methodologies and datasets used.
Expenditure
Public sector expenditure is estimated on the basis of spending incurred for the benefit of residents and enterprises in Scotland. The estimation of regional public sector expenditure is based on an assessment according to the who benefits principle. That is, a particular public sector expenditure is apportioned to a region if the benefit of the service or transfer derived from the expenditure is thought to accrue to residents and enterprises of that region. Assessing the regional dimension of the who benefits principle is a complex task. This is especially the case in countries with
Preface
closely integrated markets, significant inter-regional spillovers and mobile factors of production. In attempting to determine the regional dimension of public sector expenditure, it is possible to classify each element of expenditure using two approaches: Expenditure for a region: where spending is allocated to a given region if the benefit of the service or transfer derived from the expenditure is thought to accrue to residents and enterprises of that region; Expenditure in a region: where spending is allocated to the region in which the expenditure actually took place.
An example of the difference between the in and for approach can help clarify the distinction. Consider the case of government funding for a national museum. Here the in approach would associate all government spending on the museum with the region in which the museum is located. However, the for approach would consider the beneficiaries of the service provided; that is, it would consider where the visitors and other users of the museum were located, measuring the spending as spread across the regions where the users live. For most elements of expenditure, estimates of who benefits based upon the in and for approaches will yield similar results. For example, the vast majority of health expenditure by NHSScotland occurs in Scotland and is for patients resident in Scotland. Therefore, the in and for approaches should yield virtually identical assessments of who benefits. However, for expenditure where the final impact is more widespread, such as defence, or higher and further education, an assessment of who benefits depends critically upon the nature of the benefit being assessed. The objective of GERS is to estimate a set of public sector accounts for Scotland. On the expenditure side, it therefore identifies the expenditure in a given year that was incurred for the full range of public services that were consumed: that is, those services provided for the people of Scotland. The for approach considers the location of the recipients of services or transfers that government expenditure finances, irrespective of where the expenditure takes place. For example, with respect to defence expenditure, as the service provided is a national public good, the for methodology operates on the premise that the entire UK population benefits from the provision of a national defence service. Accordingly, under the for methodology, national defence expenditure is apportioned across the UK on a per capita basis. An assessment of the more narrow economic benefits of public sector expenditure would concentrate on the production of the good or service and where the expenditure actually took place. The focus of this approach would be on employment levels, procurement costs and local economic multiplier effects. However, the aim of GERS is to provide an estimate of the full range of public services consumed in a given year for the benefit of Scotland. A study of the economic impact of government expenditure is a separate exercise. Therefore GERS uses, wherever possible, the for methodology. Annex B and the more detailed methodology note on the GERS website provide a detailed discussion of the methodologies and datasets used to undertake this task.
Preface
The Data Sources

The primary data source used to estimate Scottish public sector expenditure in GERS is the Country and Regional Analysis (CRA) data published as part of HM Treasurys Public Expenditure Statistical Analyses (PESA) series. Access to the CRA database can be obtained through the HM Treasury website.2 The source of the revenue data in GERS is ONSs Public Sector Finances Statistical Bulletin, which provides disaggregated figures relating to UK public sector revenue. Access to the ONS Public Sector Finance Statistics database can be obtained through the ONS website.3 GERS also makes use of Scottish National Accounts Project (SNAP) estimates of Gross Domestic Product (GDP) in current market prices. Further information on SNAP is available on the Scottish Government website - http://scotland.gov.uk/snap.
Additional Information on the GERS Website

The GERS website is regularly updated with additional analysis of Scotlands public sector finances. In addition to containing copies of the GERS report from 1990-91 onwards, the website also contains the tables underpinning this edition of GERS in excel form and statistics providing a consistent time series of Scotlands public sector finances from 1980-81 to 2011-12. Experimental quarterly fiscal balance estimates for Scotland are also available on the website. These estimates cover the first quarter of 1998 to the first quarter of 2012 on a non-seasonally adjusted basis, consistent with the financial year estimates in this publication. The GERS website can be accessed via http://www.scotland.gov.uk/gers.
Future Work
Feedback from users of the publication is welcome. Please address any comments to Government Expenditure and Revenue Scotland (GERS) Office of the Chief Economic Adviser, Scottish Government, St Andrews House, Regent Road, Edinburgh, EH1 3DG Email: economic.statistics@scotland.gsi.gov.uk
2 3
http://www.hm-treasury.gov.uk/pespub_country_regional_analysis.htm The latest Public Sector Finances dataset is available from
http://www.ons.gov.uk/ons/taxonomy/index.html?nscl=Public+Sector+Finance. As this dataset is updated monthly and subject to minor revision, figures in future data releases may differ from those used in this report.
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INTRODUCTION AND OVERVIEW
Introduction
GERS 2011-12 estimates public sector revenue and expenditure for Scotland for the years 2007-08 to 2011-12. Particular focus is given to 2011-12, the latest fiscal year for which outturns of revenue and expenditure are available for Scotland. All figures are in current prices. The outline below provides a brief overview of the chapters contained in the publication.
Chapter 2: Scotlands Public Sector Accounts

Chapter 2 provides a summary of estimated public sector revenue in and expenditure for Scotland between 2007-08 and 2011-12. It contains an estimate of total current and capital expenditure by the public sector for Scotland and an estimate of total revenue raised. It also includes an estimate of the current budget balance (i.e. current revenue less current expenditure less capital consumption) and the overall net fiscal balance (i.e. the current budget balance less net investment).
Chapter 3: Public Sector Revenue

Chapter 3 presents a detailed discussion of public sector revenue raised in Scotland and compares the estimated figures for Scotland with those for the UK. As Chapter 4 provides a detailed discussion of North Sea revenue, the focus of this chapter is on all other elements of public sector revenue. The revenue analysis in GERS is consistent with the ONS Public Sector Finance Statistics.
Chapter 4: North Sea Revenue

Chapter 4 discusses the treatment of fiscal revenue from the North Sea. A range of estimates of Scotlands share of North Sea revenue are provided, together with their impact on total public sector revenue in Scotland.
Chapter 5: Public Sector Expenditure

Chapter 5 presents a detailed discussion of public sector expenditure for Scotland and compares and contrasts the estimated figures for Scotland with those for the UK. The expenditure analysis in GERS is consistent with the approach HM Treasury takes to estimate public sector expenditure in the UK. Total expenditure is divided into current and capital expenditure. Current expenditure includes items such as public sector wages and social security payments. Capital expenditure largely comprises the development of public sector infrastructure, either new construction or significant renovation to existing infrastructure, such as schools and hospitals. In GERS, expenditure is also divided into two categories: identifiable expenditure and nonidentifiable expenditure. Identifiable expenditure is expenditure that can be directly identified as having been spent for the benefit of a country or region within the UK. Non-identifiable expenditure is expenditure that is considered to occur on behalf of the UK as a whole and which cannot be apportioned to an individual country or region.
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Introduction and Overview
A number of enhancements have been made to the reporting of public sector expenditure in this edition of GERS. Previously the estimates of total public spending in Chapter 5 of GERS reported Total Expenditure on Services (TES). This is the measure of total public spending used in PESA. However, it is produced on a different basis to Total Managed Expenditure (TME) which is the principle measure of public sector expenditure used in both the UK National Accounts and in Chapter 2 of GERS. A separate accounting adjustment was therefore provided in previous editions of GERS such that the estimates of total public spending in Chapter 5 plus the accounting adjustment equalled TME. The presentation of public spending has been simplified in this edition of GERS. The elements of public expenditure that were previously reported separately in the accounting adjustment are now included in all the tables in Chapter 5 under a new spending category accounting adjustments. As a result of this change, all the estimates of total public expenditure in this chapter now report TME. They are therefore consistent with the estimates of total public sector expenditure in Chapter 2. This change does not affect the estimates of total public spending or Scotlands net fiscal balance or current budget balance published in GERS. Nor does it affect the estimates of expenditure on individual spending categories in this chapter. A detailed discussion of how the accounting adjustments spending category is calculated is provided in Annex B.
Chapter 6: Conclusion
Chapter 6 provides a short summary of the key results.
Annex A: Revenue Methodology

Annex A provides a brief summary of the various methodologies that have been applied to estimate public sector revenue in Scotland and summarises the extent and nature of the revisions to the revenue estimates between this edition of GERS and GERS 2010-11. A more detailed revenue methodology paper is available on the GERS website which provides a full discussion of the estimation techniques applied for each revenue source.4
Annex B: Expenditure Methodology

Annex B provides a brief summary of the various methodologies that have been applied to estimate public sector expenditure for Scotland. Annex B also highlights where the data contained in GERS differ from that in the underlying PESA CRA database. More detailed analysis is also available on the GERS website.5
4 5
http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/GERS http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/GERS
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SCOTLANDS PUBLIC SECTOR ACCOUNTS
Introduction
This chapter provides a summary of Scotlands public sector accounts for the years 2007-08 to 2011-12. It outlines the latest estimates of public sector revenue in Scotland and expenditure for Scotland, and includes: Headline estimates of total public sector revenue in Scotland and of expenditure for Scotland, the key aggregates for assessing the strength of public finances in Scotland; Five-year estimates of current and capital expenditure for Scotland and key elements of public sector revenue in Scotland; and Estimates of the current budget balance and net fiscal balance of the public sector in Scotland.
As discussed in the preface, within the present constitutional arrangements there is no formal requirement for a comprehensive compilation of UK country and regional budgetary accounts. Therefore, the results presented in this section are statistical estimates of public sector revenue raised in Scotland and of public sector expenditure for Scotland
Current and Capital Budgets

The following tables set out estimates of public sector revenue and expenditure for Scotland for the financial years 2007-08 to 2011-12. The figures for revenue and expenditure correspond to the estimates contained in Chapters 3, 4 and 5.6 Current revenue, as defined in the UK National Accounts, is the sum of all revenue raised in a particular year by the entire public sector.7 In Scotland, this consists of the Scottish Government, the UK Government, Local Authorities and public corporations. The main component is tax revenues. Public sector current expenditure is the sum of the current expenditure of general government for Scotland and public corporations. Current expenditure includes items such as wages and salaries, social security payments and day to day health expenditure. Public sector capital expenditure includes capital formation and the net acquisition of land. Net investment is public sector capital expenditure, net of capital consumption (i.e. depreciation). The current budget balance illustrates the difference between current revenue and current expenditure. It measures the degree to which current taxpayers meet the cost of paying for the public services they use and a contribution to debt interest payments. It is therefore an
All figures in GERS are in current prices (i.e. nominal terms) and in most tables figures are presented as rounded to the In the UK National Accounts, local authority user charges are classified as negative expenditures and therefore do not enter
nearest million. Components of tables may not therefore sum exactly to the published totals.
7
the revenue calculations in GERS.
13
Scotlands Public Sector Accounts
important indicator of intergenerational fairness and indicates the sustainability of current policies. The net fiscal balance measures the difference between total public sector expenditure (including capital expenditure) and revenue. In Scotland, the gap between public sector revenue and expenditure is not directly reflected in borrowing (or saving) and instead, is part of the overall fiscal stance of the UK public sector. In GERS, three estimates of Scotlands public sector accounts are presented, (i) an estimate excluding North Sea revenue, (ii) an estimate including a per capita share of North Sea revenue and (iii) an estimate including an illustrative geographical share of North Sea revenue. Chapter 4 contains a discussion of North Sea revenue and the precise definitions used here. Estimates of Scotlands current and capital budgets under each of these assumptions are provided in Tables 2.1 and 2.2. Comparable estimates of the UKs current and capital budgets are provided in Box 2.1. The Office for Budget Responsibilitys (OBR) Economic and Fiscal Outlook,8 headline estimates of the UKs public sector finances include the permanent effects of the UK Governments financial sector interventions in 2008-09, but exclude the temporary effects. GERS adopts the same approach. Further information on the treatment of the financial sector interventions in GERS is provided in Annex B. The expenditure and revenue estimates, and the estimates of Scotlands current budget balance and overall fiscal position in GERS are therefore directly comparable to the equivalent UK estimates published by the OBR.
This document is available at: http://budgetresponsibility.independent.gov.uk/economic-and-fiscal-outlook-december-2012/
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Table 2.1: Current and Capital Budgets: Scotland 2007-08 to 2011-129

( million) 2007-08 Current Budget Current revenue Excluding North Sea revenue Including North Sea revenue (per capita share) Including North Sea revenue (geographical share) Current expenditure Capital consumption Balance on current budget (surplus is positive, deficit is negative) Excluding North Sea revenue Including North Sea revenue (per capita share) Including North Sea revenue (geographical share) Capital Budget Capital expenditure Capital consumption Net Investment Net Fiscal Balance (surplus is positive, deficit is negative) Excluding North Sea revenue Including North Sea revenue (per capita share) Including North Sea revenue (geographical share) -11,110 -10,480 -3,998 -15,450 -14,362 -3,699 -20,385 -19,839 -14,475 -19,743 -19,006 -11,700 -18,159 -17,217 -7,586 5,229 -1,684 3,544 6,481 -1,748 4,732 6,660 -1,833 4,826 5,928 -1,912 4,017 6,193 -2,006 4,188 -7,565 -6,936 -453 -10,718 -9,630 1,034 -15,558 -15,013 -9,649 -15,726 -14,989 -7,684 -13,972 -13,030 -3,398 44,815 45,444 51,927 50,696 1,684 43,502 44,591 55,254 52,472 1,748 41,664 42,209 47,573 55,389 1,833 44,287 45,024 52,330 58,102 1,912 46,297 47,239 56,871 58,263 2,006 2008-09 2009-10 2010-11 2011-12
Tables 2.2a 2.2c present the estimates of Scotlands public sector accounts as a percentage of Gross Domestic Product (GDP). Box 2.2 discusses the process used to estimate Scotlands GDP under the three sets of estimates for North Sea revenue.
In previous editions of GERS the budget balance tables reported both Current Expenditure and the Current Expenditure In this edition of GERS both items have been combined into a single line reporting Current
Accounting Adjustment.
Expenditure. Likewise, the previous Capital Expenditure and Capital expenditure accounting adjustment spending lines have been combined into a single Capital expenditure line. Further discussion of this change is provided in Chapter 5 and in Annex B.
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Table 2.2a: Current and Capital Budgets (Excluding North Sea Revenue) % GDP: Scotland 2007-08 to 2011-12
(per cent of GDP) 2007-08 Current Budget Current revenue (Excluding North Sea revenue) Current expenditure Capital consumption Balance on current budget (surplus is positive, deficit is negative) Excluding North Sea revenue Capital Budget Capital expenditure Capital consumption Net Investment Net Fiscal Balance (surplus is positive, deficit is negative) Excluding North Sea revenue -9.7% -13.4% -18.1% -16.5% -14.6% 4.6% -1.5% 3.1% 5.6% -1.5% 4.1% 5.9% -1.6% 4.3% 5.0% -1.6% 3.4% 5.0% -1.6% 3.4% -6.6% -9.3% -13.8% -13.1% -11.2% 39.2% 44.4% 1.5% 37.6% 45.4% 1.5% 37.0% 49.1% 1.6% 37.0% 48.6% 1.6% 37.1% 46.7% 1.6% 2008-09 2009-10 2010-11 2011-12
Table 2.2b: Current and Capital Budgets (Per Capita Share North Sea Revenue) % GDP: Scotland 2007-08 to 2011-12
(per cent of GDP) 2007-08 Current Budget Current revenue (Including per capita share of North Sea revenue) Current expenditure Capital consumption Balance on current budget (surplus is positive, deficit is negative) Including North Sea revenue (per capita share) Capital Budget Capital expenditure Capital consumption Net Investment Net Fiscal Balance (surplus is positive, deficit is negative) Including North Sea revenue (per capita share) -9.0% -12.1% -17.2% -15.6% -13.5% 4.5% -1.4% 3.0% 5.5% -1.5% 4.0% 5.8% -1.6% 4.2% 4.9% -1.6% 3.3% 4.9% -1.6% 3.3% -5.9% -8.1% -13.0% -12.3% -10.2% 38.9% 43.4% 1.4% 37.7% 44.3% 1.5% 36.7% 48.1% 1.6% 36.9% 47.6% 1.6% 37.1% 45.8% 1.6% 2008-09 2009-10 2010-11 2011-12
16
Table 2.2c: Current and Capital Budgets (Geographical Share North Sea Revenue) % GDP: Scotland 2007-08 to 2011-12
(per cent of GDP) 2007-08 Current Budget Current revenue (Including geographical share of North Sea revenue) Current expenditure Capital consumption Balance on current budget (surplus is positive, deficit is negative) Including North Sea revenue (geographical share) Capital Budget Capital expenditure Capital consumption Net Investment Net Fiscal Balance (surplus is positive, deficit is negative) Including North Sea revenue (geographical share) -2.9% -2.6% -10.7% -8.1% -5.0% 3.8% -1.2% 2.5% 4.6% -1.2% 3.3% 4.9% -1.4% 3.6% 4.1% -1.3% 2.8% 4.1% -1.3% 2.8% -0.3% 0.7% -7.2% -5.3% -2.3% 37.3% 36.4% 1.2% 39.1% 37.1% 1.2% 35.3% 41.1% 1.4% 36.4% 40.4% 1.3% 37.7% 38.6% 1.3% 2008-09 2009-10 2010-11 2011-12
Box 2.1 UK Public Sector Accounts

The tables below provide estimates of the UKs Public Sector Accounts over the period 2007-08 to 2011-12, as set out in the ONS Public Sector Finances Statistical Bulletin published in February 2013. They are prepared on a consistent basis with the estimates in Tables 2.1 and 2.2. The figures show that, in 2011-12, the estimated current budget balance for the UK public sector was a deficit of 92.3 billion (6.0% of GDP). For the same year, the estimated UK public sector net fiscal balance, referred to in the UK Public Sector Accounts as net borrowing, was a deficit of 121.0 billion (7.9% of GDP). Current and Capital Budgets: UK 2007-08 to 2011-12 ( million)
2007-08 Current Budget Current revenue Current expenditure Capital consumption Balance on current budget Capital Budget Capital expenditure Capital consumption Net Investment Net Fiscal Balance 46,772 -17,683 29,089 -36,719 64,898 -18,649 46,249 -97,539 67,944 -19,350 48,594 -158,922 58,778 -20,315 38,463 -140,967 49,800 -21,134 28,666 -120,963 546,968 536,915 17,683 -7,630 533,257 565,898 18,649 -51,290 512,581 603,559 19,350 -110,328 551,387 633,576 20,315 -102,504 572,636 643,799 21,134 -92,297 2008-09 2009-10 2010-11 2011-12
17
Current and Capital Budgets: UK 2007-08 to 2011-12 (% of GDP)

2007-08 Current Budget Current revenue Current expenditure Capital consumption Balance on current budget Capital Budget Capital expenditure Capital consumption Net Investment Net Fiscal Balance 3.3% -1.2% 2.0% -2.6% 4.6% -1.3% 3.3% -6.9% 4.8% -1.4% 3.4% -11.2% 4.0% -1.4% 2.6% -9.5% 3.3% -1.4% 1.9% -7.9% 38.2% 37.5% 1.2% -0.5% 37.5% 39.8% 1.3% -3.6% 36.2% 42.6% 1.4% -7.8% 37.3% 42.8% 1.4% -6.9% 37.5% 42.2% 1.4% -6.0% 2008-09 2009-10 2010-11 2011-12
Current Budget Balance In 2011-12, excluding North Sea revenue, current expenditure exceeded current revenue in Scotland leading to a current budget deficit of 14.0 billion, or 11.2% of GDP as presented in Table 2.2a. With a per capita share of North Sea revenue, current expenditure exceeded current revenue in Scotland by 13.0 billion (or 10.2% of GDP), as illustrated in Table 2.2b. In 2011-12, including an illustrative geographical share of North Sea revenue, total current expenditure for Scotland exceeded current revenue to yield a current budget deficit of 3.4 billion (or 2.3% of GDP as illustrated in Table 2.2c). In 2011-12, the equivalent UK current budget position, including 100% of all North Sea revenue, was a deficit of 92.3 billion (or 6.0% of GDP), as illustrated in Box 2.1. As Tables 2.1 and 2.2 highlight, any estimate of Scotlands current balance varies according to the allocation of North Sea revenue. Over the period 2007-08 to 2011-12, the estimated cumulative current budget balance in Scotland when North Sea revenue is excluded was a deficit of 63.5 billion. When an illustrative geographical share of North Sea revenue is assigned to Scotland, the estimated cumulative current budget balance over the same period was a deficit of 20.2 billion. The cumulative current budget balance for the UK over this period, including 100% of North Sea revenue, was a deficit of 364.0 billion. Net Fiscal Balance The net fiscal balance is equal to public sector current and capital revenue less public sector current and capital expenditure. A positive figure, i.e. a surplus, in any given year is obtained if total public sector revenue in Scotland is greater than total public sector expenditure. In 2011-12, excluding North Sea revenue, total revenue was less than total expenditure yielding a net fiscal deficit of 18.2 billion (or 14.6% of GDP). With a per capita share of North Sea revenue the estimated net fiscal deficit for Scotland was 17.2 billion (or 13.5% of GDP). Including an illustrative geographical share of North Sea revenue, Scotlands net fiscal deficit was 7.6 billion (or 5.0% of GDP). In 2011-12, the equivalent UK position including 100% of all North Sea revenue, referred to in the UK Public Sector Accounts as net borrowing, was a deficit of 121.0 billion (or 7.9% of GDP).
18
Over the past five years, the largest net fiscal deficit in Scotland under all three assumptions about North Sea revenue occurred in 2009-10. This reflects the effect of the global financial crisis and subsequent recession, which resulted in a significant deterioration in the strength of the public finances across many countries. For example, the UKs net fiscal deficit in 2009-10 represented the largest annual deficit, as a proportion of GDP, since 1945. The net fiscal balance improved in 2010-11 and 2011-12 in both Scotland and the UK, although the deficits remain high relative to their pre-crisis levels. The improvement in Scotland and the UKs fiscal positions in 2011-12 reflected two trends. Firstly, total public spending for Scotland grew by less than 1% in cash terms between 2010-11 and 2011-12. This is slower than the growth in spending observed over recent years. It reflects the start of a period of fiscal consolidation which it is projected may see real terms cuts in public spending from 2011-12 to 2017-18. Secondly, tax receipts continued to grow in 2011-12 due to both the effect of the economic recovery and the introduction of a number of tax changes. Non-North Sea revenues in Scotland grew by 4.5% between 2010-11 and 2011-12, primarily due to growth in VAT and national insurance receipts. This is, in part, a result of the increase in both employee and employer national insurance contribution rates in April 2011 and the increase in the standard rate of VAT to 20% in January 2011. Scotlands deficit fell most under the scenario where it is assigned an illustrative geographical share of North Sea revenue. This is because overall North Sea receipts grew by 31.5% in 2011-12 from the previous year, reflecting the fact that oil prices increased by a third over this period. Including a geographical share of North Sea revenue, Scotlands net fiscal deficit as a share of GDP is now 5.6 percentage points below its 2009-10 peak. The UKs deficit in 2011-12 was 3.3 percentage points below its peak.
19
Box 2.2: Scotlands GDP with and without North Sea GDP
When calculating Scotlands capital and current budgets as a percentage of GDP, the measure of GDP used should adopt the same assumptions made in the corresponding budget calculations. When Scotlands public sector accounts are presented excluding North Sea revenue, they are expressed as a percentage of Scotlands GDP excluding the amount of GDP arising from offshore North Sea activities. When a proportion of North Sea revenue is included in the Scottish public sector revenue estimates, the same share is included in Scottish GDP. For example, if 100% of North Sea revenue were to be included in the Scottish estimate, then 100% of North Sea GDP would be included in Scotlands corresponding GDP figure. Scotlands GDP figures under the three sets of estimates presented above are reflected in the following table. These are produced as part of the Scottish National Accounts Project (SNAP). Scottish GDP Including and Excluding North Sea GDP: 2007-08 to 2011-12
( million) 2007-08 Scottish GDP Excluding North Sea GDP Including per capita share of North Sea GDP Including geographical share of North Sea GDP 114,230 116,773 139,385 115,665 118,315 141,477 112,887 115,126 134,886 119,655 122,075 143,751 124,676 127,273 150,884 2008-09 2009-10 2010-11 2011-12
Source: Scottish National Accounts Project (SNAP), http://www.scotland.gov.uk/snap
Comparable estimates of UK GDP, including 100% of North Sea GDP are provided in the table below. UK GDP: 2007-08 to 2011-12
( million) 2007-08 UK GDP Source: ONS 1,432,887 2008-09 1,422,290 2009-10 1,415,654 2010-11 1,479,819 2011-12 1,525,746
20
Current Revenue
Table 2.3 provides estimates of Scottish public sector current revenue by economic category for the years 2007-08 to 2011-12. A more detailed discussion and breakdown of revenue is provided in Chapters 3 and 4 and in Annex A. Table 2.3: Summary of Current Revenue by Economic Category: Scotland 2007-08 to 2011-12
( million) 2007-08 Taxes on income and wealth National insurance contributions Taxes on production and imports Other current taxes Taxes on capital Gross operating surplus Rent and other current transfers Interest and dividends from private sector and abroad Total current non-North Sea revenue North Sea revenue Per capita share Geographical share Total current revenue (including North Sea revenue) Per capita share Geographical share 45,444 51,927 44,591 55,254 42,299 47,662 45,024 52,330 47,239 56,871 630 7,112 1,088 11,752 546 5,909 737 8,043 942 10,573 15,338 7,840 15,388 2,521 269 2,634 58 767 44,815 2008-09 14,306 7,992 14,544 2,605 178 3,186 83 608 43,502 2009-10 13,420 7,915 14,755 2,765 146 2,455 65 233 41,753 2010-11 14,225 7,978 16,297 2,903 159 2,479 46 201 44,287 2011-12 14,277 8,393 17,645 3,037 164 2,498 47 237 46,297
In 2011-12, total current revenue, excluding revenue from the North Sea was estimated to be approximately 46.3 billion. This represented a nominal increase of 4.5% on the previous year, driven by an 8.3% rise in receipts from taxes on production and imports (which includes VAT, fuel duties and non-domestic rates) and a 5.2% rise in receipts from national insurance contributions. As Table 2.3 highlights, Scotlands geographical share of North Sea revenue increased by 65.2% between 2007-08 and 2008-09. However, between 2008-09 and 2009-10, North Sea revenue fell by 49.7% to 5.9 billion reflecting the significant drop in global oil and gas prices as the global recession sharply reduced demand. North Sea revenue recovered in subsequent years, growing by 36.1% in 2010-11 and 31.5% in 2011-12.
Public Sector Expenditure

This section presents summary estimates of total public sector expenditure for Scotland for the years 2007-08 to 2011-12. The estimates of total public sector expenditure provided in GERS are based on the National Accounts aggregate Total Managed Expenditure (TME) which is equal to the sum of total current and capital expenditure. This ensures that the estimates in this report are produced on the same basis as the estimates of total public expenditure for the UK in the National Accounts.
21
In 2011-12 total public sector expenditure for Scotland was 64.5 billion. As outlined in Table 2.4, Scotland accounted for 9.3% of total UK public spending in 2011-12. This is slightly higher than its share of the UK population (8.4%). Table 2.4: Total Managed Expenditure: Scotland and UK 2007-08 to 2011-12
( million) 2007-08 Total Managed Expenditure for Scotland Total Managed Expenditure for the UK Total Managed Expenditure for Scotland as share of UK (%) 55,925 583,687 9.6% 2008-09 58,953 630,796 9.3% 2009-10 62,049 671,503 9.2% 2010-11 64,030 692,354 9.2% 2011-12 64,457 693,599 9.3%
Table 2.5 provides estimates for the six largest functions of public sector expenditure. Over the five year period since 2007-08, total public sector expenditure grew by 15.3% in nominal terms. Social protection expenditure, which includes social transfers through the benefit system, and health are the two largest categories of spending in Scotland. They grew by 25.1% and 12.8% respectively between 2007-08 and 2011-12. Table 2.5: Summary of Public Sector Expenditure: Scotland 2007-08 to 2011-12
( million) 2007-08 Social protection Health Education and training General public services Defence Public order and safety Other Total Managed Expenditure 17,315 9,806 7,372 4,597 2,839 2,401 11,595 55,925 2008-09 18,653 10,254 7,581 4,890 3,096 2,549 11,930 58,953 2009-10 20,193 10,679 7,751 4,868 3,170 2,618 12,769 62,049 2010-11 20,848 10,945 7,694 6,201 3,293 2,761 12,287 64,030 2011-12 21,656 11,066 7,703 6,299 3,281 2,558 11,895 64,457
Across all the spending categories listed, there was a reduction in spending growth in 2011-12. For example, social protection expenditure increased by 5.8% a year on average between 2007-08 and 2010-11, but grew by just 3.9% in 2011-12. For a more detailed breakdown of expenditure, refer to Chapter 5 and Annex B.
Box 2.3: Total Public Sector Expenditure as a Share of GDP

The table below presents the estimates of Scottish and UK total public sector expenditure as a share of GDP. In 2011-12, the ratio of TME for Scotland to GDP was 51.7% excluding North Sea GDP and 50.6% including a per capita share. This ratio falls to 42.7% when an illustrative geographical share of North Sea GDP is included. In comparison, UK TME was equivalent to 45.5% of GDP in 2011-12, including 100% of North Sea GDP. Such statistics provide a useful illustration of the relative size of public spending between countries and over time by controlling for the size of the economy. They should not,
22
however, be viewed as an estimate of the relative contribution of public spending (or the public sector) to the economy as a significant proportion of such spending is on transfers from government to individuals and businesses. Total Managed Expenditure as a Share of GDP: 2007-08 to 2011-12-11
(per cent of GDP) 2007-08 Scottish TME as a Share of GDP: Excluding North Sea GDP Including per capita share of North Sea GDP Including geographical share of North Sea GDP UK TME as a share of GDP: 100% of North Sea GDP 40.7% 44.4% 47.4% 46.8% 45.5% 49.0% 47.9% 40.1% 51.0% 49.8% 41.7% 55.0% 53.9% 46.0% 53.5% 52.5% 44.5% 51.7% 50.6% 42.7% 2008-09 2009-10 2010-11 2011-12
Box 2.4 Historic Estimates of Scotlands Fiscal Balance

This edition of GERS provides detailed information on Scotlands public finances between 200708 and 2011-12. As with all national statistics, GERS is subject to on-going methodological improvements. As such, not all the results in this publication are consistent with those published in earlier editions of the GERS report. Following requests from users of GERS, a dataset has been published on the GERS website providing a consistent time series of Scotlands public finances from 1980-81 to 2011-12. The dataset is classified as an official statistic and has not yet received national statistics accreditation. The development of the dataset is on-going and users should therefore consider it experimental. However, the dataset still provides the most detailed estimates currently available of Scotlands historic public finances. The dataset and accompanying explanatory notes are available on the GERS website, as are the original publications themselves.10 As an illustration of the contents of the dataset, the figure below presents estimates of Scotlands overall net fiscal balance as a proportion of GDP from 1980-81 to 2011-12. The equivalent figures for the UK as a whole are also provided. Across the period 1980-81 to 2011-12 as a whole Scotlands average annual net fiscal deficit is estimated to have been equivalent to 9.2% of GDP excluding North Sea revenue and 7.9% of GDP including a population share of North Sea revenue. When Scotland is assigned an illustrative geographical share of North Sea revenue, its average annual net fiscal balance between 1980-81 and 2011-12 is estimated to have been equivalent to a surplus of approximately 0.2% of GDP.
10
http://scotland.gov.uk/Topics/Statistics/Browse/Economy/GERS/RelatedAreas
23
The UK, including 100% of North Sea revenue, is estimated to have run an average annual net fiscal deficit equivalent to 3.2% of GDP over the same period.
Historic Net Fiscal Balance: Scotland and UK 1980-81 to 2011-12
Note The historic time-series in this chart is not a national statistic.
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PUBLIC SECTOR REVENUE
Introduction
This chapter provides detailed estimates of Scottish public sector revenue. A new section has been included in this edition of GERS which provides detailed analysis of the tax revenues which are currently devolved, and those which will be devolved via the Scotland Act 2012. As Chapter 4 discusses the treatment of North Sea revenue in detail, the focus of this chapter is on non-North Sea elements of public sector revenue. The majority of public sector revenue payable by Scottish residents and enterprises is collected at the UK level. Generally it is not possible to identify separately the proportion of that revenue receivable from Scotland. GERS therefore uses a number of different methodologies to apportion revenue to Scotland. These methods are discussed in Annex A and in the detailed revenue methodology paper on the GERS website.11 GERS makes use of the best data sources and methodologies available and therefore represents as accurate a reflection of public sector revenue in Scotland as is currently possible. In some cases, a variety of methodologies could be applied, each leading to different estimates of public sector revenue in Scotland.
Estimated Revenue 2011-12

Table 3.1 highlights estimated public sector revenue in Scotland and the outturn data for the UK in 2011-12 The contribution of each element of taxation to the total estimated tax yield in Scotland, and the proportion of UK revenue raised in Scotland, are also included in the table. On the basis of the assumptions and methodologies described in this report, in 2011-12, total public sector non-North Sea current revenue in Scotland was 46.3 billion. This is equivalent to 8.2% of UK total non-North Sea current revenue which is broadly in line with Scotlands share of the UK population.12
11 12
http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/GERS Scotlands share of the UK population in 2011-12 was 8.4%. Scotlands share of UK less extra-regio GVA was 8.1%
(National Records of Scotland (NRS), Scottish National Accounts Project (SNAP) and UK Economics Accounts).
25
Public Sector Revenue
Table 3.1: Current Revenue: Scotland 2011-12

Scotland million Income tax Corporation tax (excl North Sea) Capital gains tax Other taxes on income and wealth National insurance contributions VAT Fuel duties Stamp duties Tobacco duties Alcohol duties Betting and gaming and duties Air passenger duty Insurance premium tax Landfill tax Climate change levy Aggregates levy Inheritance tax Vehicle excise duty Non-domestic rates Council tax Other taxes, royalties and adjustments Interest and dividends Gross operating surplus Rent and other current transfers Total current revenue (excluding North Sea revenue) North Sea revenue
3 2 1
UK Scotland as % million 146,588 32,900 4,336 2,976 101,597 109,803 26,798 8,919 9,878 10,180 1,221 2,637 3,002 1,075 678 283 2,915 5,937 23,968 25,964 12,831 2,807 23,564 529 561,386 of UK 7.4% 9.0% 5.7% 8.9% 8.3% 8.7% 8.6% 5.7% 11.4% 9.6% 9.4% 8.1% 8.4% 9.0% 9.5% 18.4% 5.6% 8.0% 8.1% 7.7% 8.0% 8.4% 10.6% 8.8% 8.2%
% of total non-North Sea revenue 23.3% 6.4% 0.5% 0.6% 18.1% 20.6% 5.0% 1.1% 2.4% 2.1% 0.2% 0.5% 0.5% 0.2% 0.1% 0.1% 0.4% 1.0% 4.2% 4.3% 2.2% 0.5% 5.4% 0.1% 100%
10,790 2,976 246 265 8,393 9,554 2,296 506 1,129 981 115 213 251 97 64 52 164 475 1,933 1,987 1,028 237 2,498 47 46,297
Per capita share Geographical share Total current revenue (including North Sea revenue) Per capita share
942 10,573
11,250 11,250
8.4% 94.0%
47,239
572,636
8.2%
Geographical share 56,871 572,636 9.9% 1. Excludes non-domestic rates that local authorities pay themselves. 2. Although this group includes some 11 separate revenues (as set out in the detailed methodology paper on the GERS website), the two largest TV Licences and National Lottery Distribution Fund - account for 43.2% (444 million) of this estimate for Scotland. This group also contains a small accounting adjustment to align the revenue estimates to those in the February 2013 UK Public Sector Finances Statistical Bulletin. This adjustment is apportioned to Scotland on a population share basis. 3. A full discussion of North Sea revenue is provided in Chapter 4.
26
Income tax was the single largest source of public sector revenue in Scotland. In 2011-12, income tax revenue was estimated at 10.8 billion approximately a quarter of all public sector revenue in Scotland (excluding revenue from the North Sea). VAT represented the second largest revenue source in Scotland, and was the largest source of revenue from indirect taxes, raising an estimated 9.6 billion in 2011-12 20.6% of total non-North Sea revenues. National insurance contributions represented the third largest source of revenue, accounting for 18.1% of total non-North Sea revenues. Corporation tax (excluding that from the North Sea) represented the fourth largest revenue source in Scotland in 2011-12 with receipts of 3.0 billion. This was equivalent to 6.4% of total non-North Sea current revenue.13 Gross operating surplus (GOS) refers to the operating (or trading) surpluses (or losses) of central government, local government and public corporation trading activity. It was the fifth largest revenue source in Scotland during 2011-12, generating approximately 2.5 billion in revenue, 5.4% of total non-North Sea revenue in Scotland. Scotland accounted for 10.6% of the total UK GOS in 2011-12. Scotlands relatively large share of the UK GOS is partly due to Scottish Water which is one of the largest contributors to UK public corporations GOS. The equivalent water companies in England and Wales are outside the public sector and hence do not contribute to their GOS.14 After these five main categories, all other types of tax listed each individually accounted for 5.0%, or less, of total non-North Sea revenue in Scotland in 2011-12. The Scottish share of total UK revenue for each element of revenue varies according to the particular tax being estimated. For income tax, Scotlands share of UK revenue was lower than its share of the UK population. For national insurance contributions, Scotlands share of UK revenue was broadly in line with its per capita share. For VAT and corporation tax (excluding North Sea), Scotlands share of UK revenue was slightly higher than its share of the UK population. Revenue from duties on betting and gaming, alcohol and tobacco were also higher than Scotlands share of the UK population. Table 3.2 shows estimates of Scotlands share of UK revenue for five key tax groups between 2007-08 and 2011-12. In each year during this period, total non-North Sea revenue in Scotland has accounted for between 8.2% and 8.4% of UK non-North Sea revenue, broadly in line with Scotlands share of the UK population.
13
In GERS, corporation tax revenue is allocated on the basis of the profits generated in Scotland. A full discussion of the
methodology used to estimate corporation tax revenue is presented in the detailed revenue methodology paper on the GERS website.
14
A more detailed discussion of GOS is provided in the detailed revenue methodology paper on the GERS website.
27
Table 3.2: Non-North Sea Current Revenue: Scotland as Share of UK 2007-08 to 2011-12
(per cent of UK revenue) 2007-08 Income tax Corporation tax (excluding North Sea revenue) National Insurance contributions Value added tax Local authority revenue All other revenue Total non-North Sea current revenue 1. Council tax and non-domestic rates
1
2008-09 7.4% 8.7% 8.3% 8.7% 7.9% 9.4% 8.4%
2009-10 7.4% 8.9% 8.2% 8.7% 7.9% 9.0% 8.2%
2010-11 7.3% 9.0% 8.2% 8.6% 8.0% 8.8% 8.2%
2011-12 7.4% 9.0% 8.3% 8.7% 7.9% 8.8% 8.2%
7.4% 8.7% 8.2% 8.8% 8.3% 9.0% 8.3%
Box 3.1 Air Passenger Duty

Air passenger duty is paid on passengers departing from UK airports on both domestic and international flights. The level of duty varies depending on the length of flight and the class of travel. Higher duties are imposed on longer distances and higher classes of travel. For flights of multiple legs, duty is determined by the final destination of the journey, rather than the destination of the initial flight. In previous editions of GERS, Scotland was apportioned a population share of UK air passenger duty receipts. This edition of GERS utilises data provided by the Civil Aviation Authority (CAA) to link directly the estimates of Scottish APD receipts to departures from Scottish airports. The Civil Aviation Authority conducts annual surveys of passengers departing UK airports. Scottish airports are included in the survey every four years, most recently in 2005 and 2009. These surveys have been used to identify the final destinations of Scottish passengers. This allows Scotlands share of passenger numbers to be calculated for each duty band, to build up a more accurate estimate of Scotlands share of overall receipts. Further discussion of the methodology used is available from the detailed revenue methodology note on the GERS website.15 The results of the new methodology are shown in the box below. The change in Scotlands receipts is less than 20 million compared to the previous population share. Scotland is now estimated to have accounted for 9.3% of UK air passenger duty receipts in 2007-08, slightly higher than its per capita share. This reflects the proportionately larger number of UK domestic flights departing from Scotland. Since 2007-08, Scotlands share of UK APD receipts has declined, falling to 8.1% in 2011-12. This reflects changes to the structure and levels of the duty which came into effect in November 2009 and which impose higher duty on longer distance flights. As a smaller proportion of Scottish departures are to long-haul destinations, the shift toward generating revenue from these flights has decreased Scotlands share of UK APD receipts.
15
http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/GERS
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Air Passenger Duty: 2007-08 to 2011-12

( million) 2007-08 UK Scotland GERS 2010-11 Scotland GERS 2011-12 Change Scotland as % of the UK GERS 2010-11 GERS 2011-12 8.4% 9.3% 8.4% 9.2% 8.4% 8.7% 8.4% 7.8% N/A 8.1% 1,949 164 182 18 2008-09 1,835 154 168 14 2009-10 1,870 157 162 5 2010-11 2,183 183 171 -12 2011-12 2,637 N/A 213 N/A
Estimated Revenue: Scotland and the UK, 2007-08 to 2011-12

Table 3.3 shows estimated current revenue in Scotland and the UK between 2007-08 and 2011-12. Current non-North Sea revenue in Scotland is estimated to have grown by 3.3% between 2007-08 and 2011-12 in nominal terms, slightly lower than for the UK as a whole (4.1%). The effect of the recession on public finances is clearly visible, with non-North Sea revenues falling in both Scotland and the UK during 2008-09 and 2009-10. From 2009-10, receipts recovered and have started to grow again, and in 2011-12 they exceeded their 2007-08 pre-recession peak in cash terms.
29
3
( million) Scotland 2008-09 10,642 2,841 572 250 7,992 7,438 2,063 594 891 774 104 168 191 82 64 53 178 455 1,736 1,960 575 608 3,186 83 43,502 41,664 65 46 44,287 2,366 2,479 233 201 762 891 1,961 1,968 1,822 1,891 1,933 1,987 1,028 237 2,498 47 46,297 464 467 475 146 159 164 54 59 52 61 62 64 705 339 3,890 5,412 20,414 23,635 5,359 8,934 23,074 631 539,504 85 99 97 897 190 211 251 2,302 162 171 213 1,949 106 97 115 961 891 888 981 8,215 8,598 994 1,835 2,271 863 711 321 2,931 5,602 21,972 24,700 6,379 7,099 25,318 919 520,332 986 1,056 1,129 8,031 8,358 516 573 506 14,122 8,002 2,196 2,300 2,296 24,905 24,615 7,264 8,343 9,554 89,896 85,350 83,710 26,197 7,904 9,125 9,246 1,029 1,870 2,261 944 687 276 2,431 5,692 22,639 25,213 8,728 2,737 22,589 715 506,090 7,915 7,978 8,393 95,437 96,613 96,638 212 365 265 2,717 2,741 2,360 164 201 246 5,267 7,851 2,504 2,680 3,115 2,976 40,384 32,498 29,989 10,364 10,668 10,790 152,028 143,791 140,606 146,627 34,681 3,590 6,134 97,747 97,277 27,256 8,931 9,305 9,434 1,069 2,183 2,511 1,094 660 292 2,722 5,789 22,712 25,729 10,573 2,371 23,403 511 542,601 2009-10 2010-11 2011-12 2007-08 2008-09 2009-10 2010-11 11,267 3,525 301 246 7,840 7,917 2,073 989 895 746 109 182 194 90 66 58 269 433 1,724 1,934 500 767 2,634 58 44,815 UK 2011-12 146,588 32,900 4,336 2,976 101,597 109,803 26,798 8,919 9,878 10,180 1,221 2,637 3,002 1,075 678 283 2,915 5,937 23,968 25,964 12,831 2,807 23,564 529 561,386
Table 3.3: Current Revenue: Scotland and UK 2007-08 to 2011-12
2007-08
Income tax
Corporation tax (excl North Sea)
Capital gains tax
Other taxes on income and wealth
National insurance contributions
VAT
Fuel duties
Stamp duties
Tobacco duties
Alcohol duties
Betting and gaming and duties
Air passenger duty
Insurance premium tax
Landfill tax
Climate change levy
Aggregates levy
Inheritance tax
Vehicle excise duty
Non-domestic rates
Council tax
Other taxes, royalties and adjustments
Interest and dividends
Gross operating surplus
Rent and other current transfers
Total current revenue (excluding North Sea revenue) 630 7,112 11,752 1,088 546 5,909
North Sea revenue 737 8,043 942 10,573 7,464 7,464 12,925 12,925 6,491 6,491 8,786 8,786 11,250 11,250
Per capita share
Geographical share
Total current revenue (including North Sea revenue) 45,444 51,927 55,254 44,591 42,209 47,573 45,024 52,330 47,239 56,871 546,968 546,968 533,257 533,257 512,581 512,581 551,387 551,387 572,636 572,636
Per capita share
Geographical share
30
Devolved Taxation
Council Tax and Non-domestic Rates are the only two taxes which are currently set and administered by the Scottish Government and Scottish Local Authorities. Collectively the two taxes raised 3.9 billion during 2011-12 as outlined in the table below. This is equivalent to 8.5% of Scottish onshore tax revenue in this year. Table 3.4: Existing Devolved Taxes Revenue: Scotland 2007-08 to 2011-12
( million) 2007-08 Council Tax Non Domestic Rates Total 1,934 1,724 3,658 2008-09 1,960 1,736 3,696 2009-10 1,961 1,822 3,783 2010-11 1,968 1,891 3,859 2011-12 1,987 1,933 3,920
The Scotland Act 2012 gives the Scottish Parliament new powers over taxation and borrowing. From April 2015, Stamp Duty Land Tax (SDLT), which is levied by the UK Government on the conveyances and transfers of land and property, will be withdrawn in Scotland. The Scottish Parliament is currently scrutinising a Bill which sets out the framework for the Land and Buildings Transaction Tax (LBTT). LBTT bands and rates will be determined by Scottish Ministers and subject to the scrutiny of the Scottish Parliament. Further information on the reforms is provided on the Scottish Government website.16 The table below sets out the revenue raised by SDLT in Scotland and the UK as a whole between 2007-08 and 2011-12. In 2011-12, SDLT raised 275 million in Scotland, equivalent to 4.5% of total UK SDLT receipts. SDLT receipts have been volatile in recent years. Scottish receipts peaked at 650 million in 2007-08 before falling to 250 million in 2009-10. Whilst receipts increased in subsequent years, they remain 375 million below their 2007-08 level. Table 3.5: Stamp Duty Land Tax Revenue: Scotland and UK 2007-08 to 2011-12
( million) 2007-08 Scotland UK Scotland as % of the UK 650 9,956 6.5% 2008-09 320 4,797 6.7% 2009-10 250 4,885 5.1% 2010-11 330 5,961 5.5% 2011-12 275 6,125 4.5%
Landfill Tax, which is levied on the disposal of waste to landfill, will also be withdrawn in Scotland from April 2015. It will be replaced by a new Scottish specific tax on waste disposal which will be set and administered by the Scottish Government. Landfill Tax is estimated to have raised 97 million in Scotland during 2011-12, as outlined in the table below. This is equivalent to 9.0% of total UK landfill tax receipts. Landfill Tax revenue in both Scotland and the UK as a whole have been on an upward trend since 2007-08. This reflects a decision to increase annually the rate of tax on active waste sent to landfill during this period.
16
Scottish Government Land and Building Transaction Tax
http://www.scotland.gov.uk/Topics/Government/Finance/scottishapproach/lbtt
31
Table 3.6: Landfill Tax Revenue: Scotland and UK 2007-08 to 2011-12

( million) 2007-08 Scotland UK Scotland as % of the UK 90 897 10.0% 2008-09 82 863 9.5% 2009-10 85 944 9.0% 2010-11 99 1,094 9.0% 2011-12 97 1,075 9.0%
From April 2016 the basic, higher and top rates of income tax levied on earned income by the UK Government in Scotland will be reduced by 10p. They will be replaced by a new Scottish Rate of Income Tax (SRIT) which will be set by the Scottish Government. The revenue collected from the SRIT will then form part of the Scottish budget. If the Scottish Government chooses to set the SRIT at 10p; the basic, higher and top rates of income tax in Scotland will remain at the same levels as in the rest of the UK. The table below illustrates the revenue which would have been raised by the SRIT since 2007-08 assuming it was set at 10p in each year, therefore leaving the overall income tax rates unchanged. The table shows that in 2011-12 the SRIT would have generated approximately 4.5 billion. Table 3.7: Scottish Rate of Income Tax Liabilities: Scotland 2007-08 to 2011-12
( million) 2007-08 Scottish Rate of Income Tax Liabilities 4,570 2008-09 4,412 2009-10 4,390 2010-11 4,581 2011-12 4,480
This table shows Scottish Rate of Income Tax liabilities rather than receipts. They are therefore calculated on a different basis to the estimates of total Scottish income tax receipts in Table 3.1
Collectively, existing devolved taxes (council tax and non-domestic rates), and the taxes which will be devolved under the Scotland Act generated an estimated 8.8 billion in revenue during 201112. This corresponds to approximately 18.9% of non-North Sea revenue in this year and 15.4% of total Scottish receipts when an illustrative geographical share of North Sea revenue is included. Table 3.8: Devolved Taxes Revenue: Scotland 2007-08 to 2011-12
( million) 2007-08 Council Tax Non Domestic Rates Stamp Duty Land Tax Landfill Tax Scottish Rate of Income Tax Liabilities Total Devolved Taxes as % of non-North Sea Revenue Devolved Taxes as % Total Revenue (Including a population share of North Sea) Devolved Taxes as % Total Revenue (Including a geographical share of North Sea) 1,934 1,724 650 90 4,570 8,968 20.0% 19.7% 17.3% 2008-09 1,960 1,736 320 82 4,412 8,510 19.6% 19.1% 15.4% 2009-10 1,961 1,822 250 85 4,390 8,509 20.4% 20.1% 17.9% 2010-11 1,968 1,891 330 99 4,581 8,869 20.0% 19.7% 16.9% 2011-12 1,987 1,933 275 97 4,480 8,772 18.9% 18.6% 15.4%
32
NORTH SEA REVENUE
Introduction
This chapter provides a discussion of North Sea revenue and sets out the methodologies adopted in this publication.
The North Sea Fiscal Regime

North Sea revenue stems from three key sources: petroleum revenue tax, corporation tax and license fees. For the period 2007-08 and 2011-12, the taxation or charging regime for each of these three elements was as follows: 1. Petroleum revenue tax (PRT): PRT was charged at a rate of 50% on field-based profits from oil and gas extraction on fields given development approval prior to March 1993 at which time it was abolished for all new fields. There were deductions for all exploration, appraisal, and development costs on 100% first year basis with an uplift of 35% for field investment costs prior to field payback. There were also volume and safeguard allowances. 2. Corporation tax (CT): Ring-fenced corporation tax was charged at a rate of 30% on profits net of any PRT payments. A Supplementary Charge (SC) is levied on top of CT. Between 2007-08 and 2010-11 this made the effective corporation tax rate (CT + SC) 50%. The supplementary charge was increased to 32% in March 2011 resulting in an overall corporation tax rate of 62%. 3. License Fees: The UK Government grants licenses for operators to "search and bore for and get"17 petroleum in specified areas for a set period of time. Operators pay an annual fee for holding these licenses. License fees are charged at an escalating rate on each square kilometre that the licence covers. However, licence fees were gradually phased out over the period and, by 2008-09, no revenue was raised from this source.
17
Petroleum Act 1998 - http://www.opsi.gov.uk/ACTS/acts1998/ukpga_19980017_en_1
33
North Sea Revenue
North Sea revenue has fluctuated over the last two decades. Table 4.1 shows the North Sea revenue collected by the UK Exchequer since 1980-81. Table 4.1: Total North Sea Revenue: UK 1980-81 to 2011-12 1, 2
Year 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 million 3,861 6,395 7,867 8,788 12,326 11,217 4,701 Year 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 million 3,301 2,502 2,342 1,017 1,338 1,266 1,673 Year 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 million 3,351 3,330 2,511 2,564 4,455 5,426 5,097 Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 million 5,183 9,384 8,924 7,464 12,925 6,491 8,786
1987-88 4,736 1995-96 2,341 2003-04 4,284 2011-12 11,250 1. Source: ONS Public Finance Statistics and HMRC 2. Note: Gas levies are not included in total public sector revenue from the UK continental shelf because it is categorised as a tax on expenditure rather than an income from oil and gas production. Gas levies were abolished from 1 April 1998.
Table 4.2 shows the levels of revenue raised from the three key components of North Sea revenue since 2007-08. Total North Sea revenue increased by 73.2% in nominal terms between 2007-08 and 200809, reflecting the increase in wholesale oil and gas prices over this period. However, between 2008-09 and 2009-10, North Sea revenue fell from 12.9 billion to 6.5 billion (49.8%), as wholesale oil and gas prices fell as a result of the global economic downturn. Revenue then rose again in 2010-11 and 2011-12, increasing by 73.3% in nominal terms between 2009-10 and 2011-12, as wholesale oil and gas prices recovered. Table 4.2: Composition of North Sea Revenue: UK 2007-08 to 2011-12
( million) 2007-08 Licence fees North Sea corporation tax Petroleum revenue tax Total 56 5,728 1,680 7,464 2008-09 0 10,358 2,567 12,925 2009-10 0 5,568 923 6,491 2010-11 0 7,328 1,458 8,786 2011-12 0 9,218 2,032 11,250
Scotlands Share of North Sea Revenue

In the ONS Regional Accounts, the convention is for the UK Continental Shelf (UKCS) to be included as a (notional) separate region of the UK (the extra-regio territory) and not to allocate this to specific geographic regions within the UK mainland. A number of different approaches can be used to allocate a share of North Sea revenue to Scotland. Three key estimates of Scotlands share of North Sea revenue are adopted in the GERS report: 1. Zero share 2. Per capita share 3. An illustrative geographical share
34
North Sea Revenue
These are the figures which are used in the headline estimates of total public sector revenue in Chapters 2 and 3. As the situation under option 1 is the same as the revenue estimates for all non-North Sea revenues, the discussion below focuses on per capita and geographical shares.
Per Capita Share

One interpretation of North Sea revenue is to view it as a non-identifiable UK revenue, in which case a per capita share may be apportioned to Scotland. Table 4.3 provides an estimate of Scotlands share of North Sea revenue under this approach. Table 4.3: Per Capita Share of North Sea Revenue: Scotland 2007-08 to 2011-12
( million) 2007-08 Total North Sea revenue Scotlands per capita share Scotlands percentage share of North Sea revenue 7,464 630 8.4% 2008-09 12,925 1,088 8.4% 2009-10 6,491 546 8.4% 2010-11 8,786 737 8.4% 2011-12 11,250 942 8.4%
An Illustrative Geographical Share

An alternative approach is to apportion a geographic share of North Sea revenue to Scotland. In order to estimate this share, GERS draws upon academic research carried out by Professor Alex Kemp and Linda Stephen from the University of Aberdeen. Kemp and Stephen estimate Scotlands share of North Sea revenue based on a detailed financial model of the North Sea oil and gas industry and an assessment of Scotlands geographical share of the North Sea. In their analysis, the researchers base the Scottish boundary of the UKCS on the median line principle as employed in 1999 to determine the boundary between Scotland and the rest of the UK for fishery demarcation purposes. Other alternatives are possible. Scotlands estimated geographical share of the North Sea sector, used in this report, is highlighted in the following diagram. Demarcation by the median line is highlighted by the dark shaded area in Figure 4.1. All oil and gas fields located in this region were apportioned to Scotland under the assumption of an illustrative geographical share.
35
North Sea Revenue
Figure 4.1 UK Continental Shelf and Scottish Boundary
Source: Scottish Government Marine Directorate
Based on a detailed database of North Sea oil and gas fields, Kemp and Stephen estimated the tax revenue raised in each field. Their detailed modelling took account of production levels and a range of costs including research and development, and decommissioning. Taking the median line as the line of demarcation, the authors assigned revenue from each field to Scotland and the rest of the UK. The authors most recent estimates show that Scotlands geographical share of oil production stood at 96.0% in 2011, while its geographical share of gas production remained at 52.4%. Scotlands share of total hydrocarbon production was 78.4% in 2011, down from 81.0% in 2010. The authors estimate that Scotlands illustrative geographical share of North Sea tax revenue was 94.0% in 2011. This is higher than Scotlands estimated share of production, reflecting differences in the relative profitability of oil fields which are more prevalent in Scottish waters. Details of the methodology used by Kemp and Stephen are provided in the paper Kemp and Stephen (2008), The Hypothetical Scottish Shares of Revenues and Expenditures from the UK Continental Shelf 2000-2013 which is available from the weblink below.18 Using estimates of Scotlands geographical share of total North Sea revenue, it is possible to apportion the total UK revenue figure from the ONS Public Sector Finances Statistical
18
http://www.scotland.gov.uk/Publications/2008/06/UKContinentalShelfRevenue
36
North Sea Revenue
Bulletin to Scotland. Table 4.4 provides estimates of Scotlands share of North Sea revenue using this methodology.19 Table 4.4: Geographical Share of North Sea Revenue: Scotland 2007-08 to 2011-12
( million) 2007-08 Total North Sea revenue Scotlands geographical share Scotlands percentage share of North Sea revenue 7,464 7,112 95.3% 2008-09 12,925 11,752 90.9% 2009-10 6,491 5,909 91.0% 2010-11 8,786 8,043 91.5% 2011-12 11,250 10,573 94.0%
Contribution to Current Revenue

Tables 4.5 and 4.6 show the estimated contribution to total Scottish current fiscal revenue from the North Sea in 2011-12, using a per capita and geographical share respectively. Table 4.5: Current Revenue (Per Capita Share of North Sea Revenue): Scotland 201112
Scotland million Total current revenue (excluding North Sea revenue) North Sea revenue Total current revenue 46,297 942 47,239 % of total revenue 98.0% 2.0% 100.0% UK Scotland as % million 561,386 11,250 572,636 of UK revenue 8.2% 8.4% 8.2%
Table 4.6: Current Revenue (Geographical Share of North Sea Revenue): Scotland 2011-12
Scotland million Total current revenue (excluding North Sea revenue) North Sea revenue Total current revenue 46,297 10,573 56,871 % of total revenue 81.4% 18.6% 100.0% UK million 561,386 11,250 572,636 Scotland as % of UK revenue 8.2% 94.0% 9.9%
As Tables 4.5 and 4.6 highlight, the estimated size of current revenue in Scotland alters significantly depending on whether a per capita or an illustrative geographical share of North Sea revenue is apportioned to Scotland. Assuming a per capita share, Scotlands estimated share of total UK current revenue remains at the same level as the share assuming the exclusion of North Sea revenue, that is, 8.2% in 2011-12. In contrast, under an illustrative geographical share, Scotlands estimated share of total UK current revenue increased to 9.9% in the same year.
19
It should be noted that the figures provided by Kemp and Stephen are on a calendar year basis. The estimates for financial
years are calculated by first estimating the quarterly proportions using a cubic spline interpolation. These are applied to the quarterly revenue data, and summed to form the financial year estimates.
37
North Sea Revenue
38
PUBLIC SECTOR EXPENDITURE
Introduction
This chapter provides detailed estimates of public sector expenditure for Scotland. The primary data source used to estimate Scottish public sector expenditure is the November 2012 Country and Regional Analysis (CRA) contained in the National Statistics publication Public Expenditure Statistical Analyses (PESA) published by HM Treasury.20 This chapter divides public sector expenditure into two categories: identifiable expenditure and non-identifiable expenditure. Identifiable expenditure is expenditure that can be clearly allocated to Scotland in terms of having been spent for the benefit of Scottish residents and enterprises. Examples of identifiable expenditure include unemployment benefits, local economic development expenditure and most education and health expenditure. Non-identifiable expenditure is expenditure that cannot be allocated to a particular country of the UK but is instead incurred on behalf of the UK as a whole. The largest elements of non-identifiable expenditure are defence expenditure and public sector debt interest payments.21 For total expenditure and each expenditure component, a detailed breakdown according to current and capital is provided. Each element of expenditure is discussed in detail below. Annex B discusses the revisions from previous reports and the relevant apportionment methodologies applied. Financial Sector Interventions As outlined in Chapter 2, the estimates in GERS include a share of the permanent effects of the financial sector interventions by the UK Government in 2008-09. This is consistent with the methodology used by HM Treasury and the OBR. The UK Government's net financial sector interventions are classified as non-identifiable and are recorded in the Enterprise and Economic Development (EED) expenditure programme lines in both PESA and GERS. The outlays by the UK Government are recorded as a capital expenditure, whilst the fees received are recorded as a negative current expenditure (i.e. revenue received). Further information on the financial sector interventions, and their treatment in GERS is provided in Box B.1 in Annex B.
20 21
Available from http://www.hm-treasury.gov.uk/pespub_country_regional_analysis.htm The estimates in GERS include a share of the permanent effects of the UK Governments financial sector interventions. The
UK Governments net financial sector interventions are classified as non-identifiable and are recorded in the Enterprise and Economic Development (EED) expenditure programme lines in both PESA and GERS. The outlays by the UK Government are recorded as a capital expenditure, whilst the fees received are recorded as a negative current expenditure (i.e. revenue received). The scale of the financial sector interventions, relative to other spending on EED, means that there is a significant increase in expenditure within this category between 2007-08 and 2008-09. Further information on the treatment of the UK Government's financial sector interventions is provided in Annex B.
39
Update to the Presentation of Public Expenditure in GERS Previously the estimates of total public spending in Chapter 5 of GERS reported Total Expenditure on Services (TES). This is the measure of total public spending used in PESA. However, it is produced on a different basis to Total Managed Expenditure (TME) which is the principle measure of public sector expenditure used in both the UK National Accounts and in Chapter 2 of GERS. A separate accounting adjustment was therefore provided in previous editions of GERS such that the estimates of total public spending in Chapter 5 plus the accounting adjustment equalled TME. The presentation of public spending has been simplified in this edition of GERS. The elements of public expenditure that were previously reported separately in the accounting adjustment are now included in all the tables in Chapter 5 under a new spending category accounting adjustments. The accounting adjustments category also includes the aspects of EU transactions which were previously reported separately in GERS under the heading EU transactions. This has been replaced with a more detailed discussion of EU transactions in Box 5.2. As a result of this change, all the estimates of total public expenditure in this chapter now report TME. They are therefore consistent with the estimates of total public sector expenditure in Chapter 2. This change does not affect the estimates of total public spending or Scotlands net fiscal balance or current budget balance published in GERS. Nor does it affect the estimates of expenditure on individual spending categories in this chapter. A detailed discussion of how the accounting adjustments are calculated is provided in Annex B.

Estimated total public sector expenditure for Scotland by spending category for 2011-12 is shown in Table 5.1. In 2011-12, total public sector expenditure for Scotland was estimated to be 64.5 billion, this was equivalent to 9.3% of comparable total UK public sector expenditure in 2011-12, shown in Table 5.2. Social protection was the largest Scottish expenditure programme. Together with health expenditure, it accounted for over half of total public sector expenditure for Scotland in 2011-12.
40
Table 5.1: Total Expenditure: Scotland 2011-12

Scotland million General public services Public and common services International services Public sector debt interest Defence Public order and safety Economic affairs Enterprise and economic development Science and technology Employment policies Agriculture, forestry and fisheries Transport Environment protection Housing and community amenities Health Recreation, culture and religion Education and training Social protection Accounting adjustments Total Expenditure 894 335 130 988 2,648 1,237 1,719 11,066 1,608 7,703 21,656 2,337 64,457 1.4% 0.5% 0.2% 1.5% 4.1% 1.9% 2.7% 17.2% 2.5% 11.9% 33.6% 3.6% 100% 1,477 750 4,072 3,281 2,558 2.3% 1.2% 6.3% 5.1% 4.0% % of total expenditure
Total public sector expenditure for Scotland is estimated to have increased from 55.9 billion in 2007-08 to 64.5 billion in 2011-12, an increase of 15.3% in nominal terms. Over the same period, equivalent UK public sector expenditure increased from 583.7 billion to 693.6 billion, an increase of 18.8% in nominal terms. Table 5.2: Total Current and Capital Expenditure Scotland and UK 2007-08 to 2011-12
( million) Scotland 2007-08 Current Capital Total 50,696 5,229 55,925 2008-09 52,472 6,481 58,953 2009-10 55,389 6,660 62,049 2010-11 58,102 5,928 64,030 2011-12 58,263 6,193 64,457 2007-08 536,915 46,772 583,687 2008-09 565,898 64,898 630,796 UK 2009-10 603,559 67,944 671,503 2010-11 633,576 58,778 692,354 2011-12 643,799 49,800 693,599
Table 5.3 shows the share of total expenditure between current and capital for Scotland. Between 2007-08 and 2008-09, capital expenditure for Scotland increased from approximately 9.3% to 11.0% of total expenditure. This is due in part to the UK Governments financial sector interventions in 2008-09, these are discussed further in Annex B. Capital expenditure fell as a share of total expenditure in the two subsequent years to 9.3% of total expenditure in 2010-11, and rose slightly to 9.6% in 2011-12.
41
Table 5.3: Current and Capital Expenditure (% of Total Expenditure): Scotland 2007-08 to 2011-12
(per cent) 2007-08 Current Capital 90.7% 9.3% 2008-09 89.0% 11.0% 2009-10 89.3% 10.7% 2010-11 90.7% 9.3% 2011-12 90.4% 9.6%
Tables 5.4 and 5.5 provide a more detailed breakdown of total public sector expenditure by current and capital split for Scotland and the UK.
42
Table 5.4: Total Expenditure: Scotland 2007-08 to 2011-12

( million) Current 2009-10 2010-11 2011-12 2007-08 2008-09 2009-10 2010-11 2011-12 2007-08 2008-09 2009-10 Capital Total 2010-11 2011-12
2007-08
2008-09
General public services 1,305 570 2,681 2,804 2,323 2,373 2,522 2,359 165 226 245 239 199 2,832 2,935 2,967 214 292 338 358 314 2,839 2,401 2,614 3,857 4,072 0 0 0 0 0 2,666 618 683 700 34 37 50 62 50 562 1,504 1,402 1,250 45 298 82 197 227 1,369 1,603 607 2,681 3,096 2,549 1,586 668 2,614 3,170 2,618 1,599 745 3,857 3,293 2,761 1,477 750 4,072 3,281 2,558
Public and common services
1,324
International services
529
Public sector debt interest
2,666
Defence
2,625
Public order and safety
2,237
Economic affairs 534 304 141 722 1,519 865 281 9,741 1,126 6,932 18,556 2,069 52,472 55,389 58,102 2,299 2,707 2,081 58,263 20,073 20,747 21,542 7,088 7,097 6,900 696 92 27 5,229 1,191 1,162 1,240 239 10,142 10,355 10,566 447 512 276 649 97 15 6,481 261 296 292 1,413 1,521 977 988 1,007 190 196 1,510 1,580 1,473 1,242 1,114 1,331 199 1,709 537 284 664 120 247 6,660 764 775 814 71 100 111 217 236 129 -1 0 2 1 152 1,071 242 1,324 590 262 597 101 429 5,928 329 248 281 119 104 76 32 598 511 589 236 1,044 665 272 304 54 1 173 1,175 230 1,427 500 368 802 114 257 6,193 1,027 441 133 771 2,781 1,020 1,739 9,806 1,359 7,372 17,315 2,323 55,925 1,578 408 141 822 2,633 1,061 1,802 10,254 1,401 7,581 18,653 2,084 58,953 1,263 405 219 874 2,841 1,176 1,970 10,679 1,475 7,751 20,193 2,546 62,049 783 280 237 927 2,650 1,230 1,621 10,945 1,424 7,694 20,848 3,135 64,030 894 335 130 988 2,648 1,237 1,719 11,066 1,608 7,703 21,656 2,337 64,457
Enterprise and economic development
791
Science and technology
321
Employment policies
134
Agriculture, forestry and fisheries
700
Transport
1,540
Environment protection
830
Housing and community amenities
326
Health
9,359
Recreation, culture and religion
1,120
Education and training
6,675
Social protection
17,223
Accounting adjustments
2,296
Total
50,696
43
5
( million) Current 2008-09 2009-10 2010-11 2011-12 2007-08 2008-09 2009-10 2010-11 2011-12 2007-08 2008-09 2009-10 Capital Total 2010-11
Table 5.5: Total Expenditure: UK 2007-08 to 2011-12
2007-08
2011-12
General public services 11,915 6,769 31,830 33,319 30,924 31,432 30,917 30,630 2,022 2,746 2,698 2,003 1,689 33,655 34,929 35,374 2,539 3,467 4,027 4,270 3,745 33,663 31,699 31,091 45,970 48,613 0 0 0 0 0 31,596 7,350 8,144 8,360 422 441 596 743 592 6,693 11,916 11,195 11,045 1,102 2,014 1,726 1,459 1,654 12,469 13,928 7,210 31,830 36,786 33,670 13,643 7,946 31,091 37,682 34,129 12,654 8,887 45,970 39,199 32,919 12,699 8,951 48,613 39,119 32,318
11,366
6,272
31,596
Defence
31,124
29,677
Economic affairs 4,129 2,538 1,848 5,451 9,061 7,090 3,835 104,623 10,033 74,692 204,221 23,620 565,898 603,559 633,576 25,976 28,696 24,965 643,799 223,519 230,829 241,397 78,475 82,552 83,687 6,924 794 1,379 46,772 10,382 10,124 10,539 2,046 112,063 115,913 117,012 4,725 4,083 3,156 2,721 9,095 11,398 5,347 2,404 8,298 774 639 64,898 8,204 8,188 8,568 2,304 2,626 9,792 8,808 8,357 10,739 11,981 13,211 2,777 12,294 6,179 2,926 9,910 1,157 2,788 67,944 5,545 5,150 5,524 292 378 288 2,332 3,097 1,764 338 425 353 2,754 2,768 2,983 780 625 732 503 309 333 12,647 3,227 9,905 5,395 2,659 9,244 1,176 3,634 58,778 4,989 3,140 2,262 1,271 11,337 6,282 1,272 1,058 600 195 315 11,848 2,650 7,685 4,274 2,659 7,963 894 1,980 49,800 6,794 3,260 2,401 4,296 20,605 9,554 12,989 102,346 11,938 78,659 188,583 26,140 583,687 15,466 3,163 2,273 5,829 21,042 9,716 15,233 109,970 12,437 82,990 204,996 24,259 630,796 11,271 3,487 2,685 5,832 23,003 10,982 16,377 118,242 13,308 88,385 224,676 28,764 671,503 4,412 3,270 3,407 5,482 21,456 11,415 13,061 121,307 12,784 91,796 232,006 32,330 692,354 3,320 3,584 1,959 5,838 20,205 11,218 10,406 121,287 13,197 91,649 242,290 26,945 693,599
5,523
2,480
Employment policies
2,064
4,004
Transport
9,867
7,250
3,894
Health
97,622
9,892
71,735
Social protection
187,789
24,762
Total
536,915
44
Table 5.6 shows estimated total public sector expenditure for Scotland and the UK on a per capita basis from 2007-08 to 2011-12. The table also highlights the absolute per capita difference between Scotland and the UK and Scottish expenditure relative to the UK level. Total expenditure per capita for Scotland is estimated to have been 12,134 in 2011-12, 1,197 higher than the UK average. The relative difference in public spending per capita between Scotland and the UK has been on a downward trend. In 2007-08 public spending per capita for Scotland was 13.6% higher than the UK average, by 2011-12 this gap had fallen to 10.9%. Table 5.6: Total Expenditure Per Capita: Scotland and UK 2007-08 to 2011-12
2007-08 Scotland () UK () Difference (Scotland minus UK) () Relative Expenditure for Scotland (UK = 100) 10,786 9,497 1,289 113.6 2008-09 11,302 10,184 1,118 111.0 2009-10 11,829 10,764 1,065 109.9 2010-11 12,133 11,008 1,125 110.2 2011-12 12,134 10,937 1,197 110.9
There are number of reasons why public expenditure per capita for Scotland is above the UK average. In some cases, it reflects the lower population density in Scotland relative to the UK which increases the cost of providing the same level of public service activity, particularly in areas such as education, health and transport. The scope and remit of the public sector also differs in Scotland compared to the UK. For example, water and sewage services are a public sector responsibility in Scotland, and are therefore included in Scottish public expenditure, whilst in England they are operated by the private sector. In other instances, the higher Scottish expenditure often observed reflects greater demand for Scottish-based providers. For example, the strength of Scottish universities has created a net inflow of students from other parts of the UK. Additionally, Scottish university courses are typically longer - the honours degree course takes four years, compared with a typical three year course in England and Wales. Therefore, expenditure on education and training for Scotland will be relatively higher than the rest of the UK. However, this benefits the UK as a whole. Scottish universities have also been able to attract above average levels of research funding which has contributed to the high level of public expenditure for science and technology in Scotland22. Finally, higher public expenditure also reflects Scotlands greater need for some public services such as in health and housing relative to the rest of the UK.
22
http://www.universities-scotland.ac.uk/uploads/WhatisHE2012.pdf. This indicates that 13% of research funding goes to
Scottish universities.
45
Box 5.1 Private Finance Initiative and Non-Profit Distributing Financing

The Private Finance Initiative (PFI) is a method to provide financial support for Public Private Partnerships (PPPs) between the public and private sectors. PFI projects are long-term contracts for services that include the provision of associated facilities or properties. Under the contract, the private sector is generally responsible for various roles including designing and constructing a building or facility and maintaining and servicing it throughout the contract term. The public sector retains accountability for the main public services. The private sector is responsible for financing the project up front and only receives payment from the public sector once construction has been completed and the services have commenced.
There was also another model of revenue finance in operation over this period called Non-Profit Distributing (NPD). The NPD model is 100% debt funded and there is no dividend bearing equity. Payments for both PFI and NPD projects take the form of a unitary charge which is usually paid annually over the lifetime of the contract. Public sector unitary charges paid on PFI and NPD projects in Scotland between 2007-08 and 2011-12 are presented in the table below. Public Sector Unitary Charge Expenditure in Scotland 2007-08 to 2011-12
( million) 2007-08 Scottish Public Sector Unitary Charges
1
2008-09 592 23 615
2009-10 735 23 758
2010-11 825 26 851
2011-12 909 26 935
516 20 536
Other UK Government Departments PFI Unitary Charges for Projects in Scotland Total Unitary Charges in Scotland
Source: Scottish Government and HM Treasury PFI Signed Project List (March 2012). 1. Includes both PFI and NDP figures.
Identifiable and Non-identifiable Expenditure

GERS classifies public sector expenditure for Scotland as either identifiable expenditure or non-identifiable expenditure. In the vast majority of cases, GERS uses the data on identifiable expenditure contained in PESA CRA directly. It is a fundamental principle of PESA that the apportionment of UK expenditure adheres to the who benefits principle whereby spending is allocated to a given region if the benefit of the service derived from the expenditure is thought to accrue to residents and enterprises of that region. As highlighted in the PESA publication, there are limitations in the ability to capture precisely who benefits from a given item of expenditure: There are practical difficulties. For example, schools are not used solely by the residents of a region in which the facility is located and roads serve the needs of more than the geographical area through which they pass. Definitional and border problems become increasingly significant the smaller the geographical unit considered; There are also significant definitional problems associated with assessing who benefits. For example, agricultural support is treated as benefiting the farmers who receive subsidies rather than the broader economy; and
46
There are also issues around collecting accurate country and regional data in a cost efficient way. UK government departments are encouraged but not required to allocate all expenditure on the basis of who benefits. If spending is not significant (less than 20 million on capital or current) and/or relevant data for allocating this to regions are not available, departments may use some statistical proxy instead. For example: using straight per capita shares, or using the regional allocation proportions for related spending. Further, it is not practical or cost effective to collect local government spending data on the basis of who benefits. Instead, local government spending is assumed to benefit the area where the expenditure occurs.
Following a detailed review of all 1,256 programme object groups in PESA CRA 2012, a number of important modifications have been made to a small number of programme expenditures before being used for the GERS report. These changes reflect the fact that in certain circumstances, officials in the Scottish Government believe a more accurate assessment of who benefits is thought possible than is currently presented in PESA. The principal changes relate to the treatment of expenditure on nuclear decommissioning by the UK Atomic Energy Authority (UKAEA), and the expenditure on the London Olympics. Annex B contains a detailed list of all amendments to PESA made in this report. As with all statistical products, developments in PESA continue and any further refinements to the regional apportionment of public sector expenditure will be reflected in future GERS reports. In 2011-12 UK identifiable expenditure covered 83.9% of UK total public expenditure. The remaining spending cannot be attributed to individual locations, for example, because it is spent for the benefit of the UK as a whole. A proportion of such UK non-identifiable expenditure is allocated to the public sector for Scotland either on the basis of Scotlands share of the UK population, GVA or a more specific apportionment variable. Information on the methodologies used to apportion each element of expenditure is provided in Annex B. Table 5.7 illustrates the estimated level of identifiable and non-identifiable expenditure assigned to Scotland for each year between 2007-08 and 2011-12. Identifiable expenditure was estimated to be 55.5 billion in 2011-12. In comparison, non-identifiable expenditure was 9.0 billion in 2011-12, approximately 13.9% of estimated total public sector expenditure for Scotland. Across most programme categories, the level of non-identifiable expenditure is relatively modest. Debt interest payments and defence are typically the largest elements of non-identifiable expenditure. Collectively, these two elements of expenditure accounted for 81.8% of total non-identifiable expenditure for Scotland in 2011-12.
47
5
( million) Identifiable 2009-10 2010-11 2011-12 2007-08 2008-09 2009-10 2010-11 2011-12 2007-08 2008-09 2009-10 Non-identifiable Total 2010-11 2011-12
Table 5.7: Total Expenditure, Identifiable and Non-identifiable: Scotland 2007-08 to 2011-12
2007-08
2008-09
General public services 1,156 15 0 9 2,433 2,612 2,416 175 176 185 149 142 11 12 2,832 3,091 3,162 3,282 3,270 2,839 2,401 0 0 2,666 2,681 2,614 3,857 4,072 2,666 20 17 550 589 653 726 732 562 607 2,681 3,096 2,549 1,192 1,064 418 461 430 407 412 1,369 1,603 1,586 668 2,614 3,170 2,618 1,599 745 3,857 3,293 2,761 1,477 750 4,072 3,281 2,558
Public and common services 17 0 5
951
1,142
13
Defence
2,227
2,373
Economic affairs 767 360 140 822 2,814 1,016 1,970 10,593 1,137 7,748 19,899 2,535 53,617 54,432 2,893 2,999 55,481 20,542 21,323 7,694 7,702 1,097 1,224 329 4 247 -105 7,492 10,838 10,989 78 1,621 1,719 0 0 75 322 3 276 -484 8,174 1,037 1,056 119 96 2,626 2,623 24 28 874 927 988 0 0 0 27 160 0 85 337 3 294 12 8,432 217 237 130 1 1 2 359 234 275 50 48 46 46 0 0 25 192 0 107 327 0 306 242 9,598 841 852 945 106 811 421 -69 -51 60 0 0 25 181 0 77 384 0 333 -662 8,976 1,027 441 133 771 2,781 1,020 1,739 9,806 1,359 7,372 17,315 2,323 55,925 1,578 408 141 822 2,633 1,061 1,802 10,254 1,401 7,581 18,653 2,084 58,953 1,263 405 219 874 2,841 1,176 1,970 10,679 1,475 7,751 20,193 2,546 62,049 783 280 237 927 2,650 1,230 1,621 10,945 1,424 7,694 20,848 3,135 64,030 894 335 130 988 2,648 1,237 1,719 11,066 1,608 7,703 21,656 2,337 64,457
922
391
Employment policies
133
771
Transport 965
2,758
2,605
901
1,739
1,802
Health
9,727
10,179
1,030
1,079
7,368
7,577
Social protection
17,068
18,377
2,428
2,568
Total
48,432
50,779
48
Analysis of Identifiable Expenditure

This section provides a more detailed analysis of identifiable expenditure for Scotland. Table 5.8 disaggregates identifiable expenditure for Scotland into expenditure by the Scottish Government and by other UK Government departments for the years 2007-08 to 2011-12.23 Tables 5.9 and 5.10 provide a similar disaggregation but with an additional split for current and capital expenditure. Finally, Table 5.11 provides an assessment of the contribution of each expenditure programme to overall identifiable expenditure for Scotland and the UK as a whole. The Scottish Government accounted for over two thirds of total Scottish identifiable public expenditure in each year between 2007-08 to 2011-12 with the majority of such expenditure on health and education. It should be noted that the figures presented for Scottish Government expenditure in GERS do not reconcile directly with Scottish Government budget statements. The identifiable expenditure figures contained in GERS include expenditure by non-ministerial departments, such as the National Records of Scotland (NRS), and by public corporations. They also exclude a small expenditure by the Scottish Government on services outside Scotland. Furthermore, the figures presented in GERS are consistent with the National Accounts framework for public sector expenditure and will therefore differ from the Scottish Government budget documents in their treatment of certain cash and non-cash items. There are also important differences in classification of expenditure. UK Government departments accounted for the remaining Scottish identifiable expenditure. Their spending is dominated by expenditure on social protection i.e. welfare payments and unemployment benefits. Social protection is the only function where the majority of identifiable expenditure is not undertaken by the Scottish Government. In the five years since 2007-08, UK Government departments have accounted for about a third of total identifiable current expenditure. In contrast, in most years over the same period these departments were typically responsible for less than 3.0% of identifiable capital expenditure in Scotland, with expenditure in this area instead being almost solely directed by the Scottish Government. As Table 5.11 highlights, the pattern of identifiable expenditure for Scotland was broadly similar to that for the UK as a whole, with social protection and health being the dominant expenditure components. It should be noted that some of the differences in the composition of spending between Scotland and the UK will reflect variations in the classification of expenditure between spending categories.
23
Expenditure by Scottish Government in the tables in Chapter 5 incorporates expenditure by Scottish Local Authorities and
Public Corporations
49
5
( million) Other UK Government 2007-08 2008-09 2009-10 2010-11 2011-12 2007-08 2008-09 Total 2009-10 2010-11
Table 5.8: Total Identifiable Expenditure: Scotland 2007-08 to 2011-12
Scottish Government and Local Authorities 2009-10 2010-11 2011-12
2007-08
2008-09
2011-12
General public services 1,085 0 0 9 2,355 2,555 2,315 62 67 79 57 101 11 11 0 0 0 0 1 0 0 0 0 0 0 0 0 7 2,227 0 0 13 17 15 20 17 13 1,136 1,012 77 64 71 56 52 951 1,142 17 0 5 2,373 1,156 15 0 9 2,433 1,192 20 0 11 2,612 1,064 17 0 12 2,416
873
1,079
Defence
2,165
2,306
Economic affairs 734 110 3 864 2,768 978 1,970 10,545 1,058 7,725 4,865 2,535 37,603 38,021 2,893 2,999 38,624 5,054 5,409 7,674 7,676 1,019 1,132 85 24 12,804 0 13,647 10,789 10,920 39 1,621 1,719 0 0 48 80 31 13,899 0 14,724 986 1,006 39 38 2,595 2,592 62 6 919 979 11 11 10 45 38 0 49 79 23 15,033 0 16,014 4 0 132 136 214 6 5 196 223 249 228 233 8 31 51 0 49 77 20 15,488 0 16,411 758 849 103 103 107 94 95 270 130 9 31 50 0 69 92 26 15,914 0 16,856 922 391 133 771 2,758 901 1,739 9,727 1,030 7,368 17,068 2,428 48,432 767 360 140 822 2,605 965 1,802 10,179 1,079 7,577 18,377 2,568 50,779 841 359 217 874 2,814 1,016 1,970 10,593 1,137 7,748 19,899 2,535 53,617 852 234 237 927 2,626 1,037 1,621 10,838 1,097 7,694 20,542 2,893 54,432 945 275 130 988 2,623 1,056 1,719 10,989 1,224 7,702 21,323 2,999 55,481
Enterprise and econ development
818
664
Science and technology 4
195
137
Employment policies
759
811
Transport
2,696
2,599
862
927
1,739
1,802
Health
9,689
10,130
945
999
7,344
7,546
Social protection
4,264
4,479
2,428
2,568
Total
34,785
36,055
50
Table 5.9: Identifiable Expenditure - Scottish Government and Local Authorities: Scotland 2007-08 to 2011-12
( million) Current 2008-09 2009-10 2010-11 2011-12 2007-08 2008-09 2009-10 Capital 2010-11 2011-12
2007-08
General public services 837 0 0 7 2,100 2,136 2,337 2,135 152 206 5 9 11 11 0 0 0 0 0 0 0 0 0 0 0 0 0 0 827 1,036 969 813 36 252 49 0 0 0 218 167 0 0 0 218 199 0 0 0 181
Defence
2,012
Economic affairs 627 110 1 689 1,505 841 281 9,626 755 6,898 4,413 2,392 30,896 2,362 32,165 4,805 7,062 811 10,013 10,213 793 7,077 5,005 2,699 33,134 261 296 885 899 1,456 1,539 1,435 895 292 10,436 811 6,875 5,325 2,796 33,200 711 754 767 806 4 3 4 0 68 80 6 5 85 0 70 1,219 90 1,413 439 203 694 65 177 4,835 470 492 518 566 192 194 69 0 100 1,094 85 1,521 504 244 648 65 176 5,159 242 30 0 111 1,312 93 1,709 532 247 663 61 172 5,439 241 0 0 152 1,056 87 1,324 576 226 596 49 194 4,887 284 0 0 173 1,157 111 1,427 483 321 801 84 203 5,424
Employment policies
Transport 772 326
1,476
Health 742
9,250
6,650
Social protection
4,198
2,252
Total
29,950
51
Table 5.10: Identifiable Expenditure - Other UK Government: Scotland 2007-08 to 2011-12

( million) Current 2008-09 2009-10 2010-11 2011-12 2007-08 2008-09 2009-10 Capital 2010-11 2011-12
2007-08
General public services 70 12 0 0 61 66 77 57 99 1 1 0 0 0 1 0 0 0 0 0 0 0 0 17 14 19 17 1 0 57 57 53 47 8 6 14 0 0 0 2 3 1 0 0 1 5 0 0 0 1
Defence
Economic affairs 102 180 132 11 47 32 0 35 58 22 13,867 0 14,622 0 15,854 14,975 30 23 59 55 46 47 47 54 20 15,437 0 16,270 0 0 0 32 31 32 -5 35 24 23 46 0 58 66 25 15,885 0 16,730 10 10 8 9 136 212 232 129 203 219 207 232 16 -1 0 15 7 0 3 27 2 27 0 107 103 98 82 93 1 0 20 0 0 10 6 0 2 22 1 32 0 102 9 31 2 0 10 7 0 2 25 1 58 0 159 12 21 1 0 7 19 0 2 23 0 51 0 141 2 38 1 0 8 4 0 11 26 1 29 0 127
Employment policies
Transport
Health
Social protection 0
12,778
Total
13,540
52
Table 5.11: Identifiable Expenditure: Scotland and UK 2011-12

Scotland Other UK Government Expenditure ( million) ( million) ( million) Expenditure Expenditure Total Total UK
Scottish Government and Local Authorities
Expenditure
( million)
Share of identifiable expenditure
General public services 1.8% 0.0% 0.0% 0.0% 4.2% 101 0.2% 2,416 1 0.0% 12 0 0.0% 0 17 0.0% 17 0.0% 0.0% 0.0% 4.4% 52 0.1% 1,064 1.9% 7,743 212 0 87 30,625 1.3% 0.0% 0.0% 0.0% 5.3%
1,012
Defence
2,315
Economic affairs 849 5 0 979 4.7% 1.8% 3.1% 19.7% 2.0% 13.8% 9.7% 5.4% 69.6% 15,914 0 16,856 26 92 69 0 50 0.1% 0.0% 0.1% 0.2% 0.0% 28.7% 0.0% 30.4% 31 0.1% 1.8% 9 0.0% 0.0% 130 0.2% 0.0% 270 0.5% 275 130 988 2,623 1,056 1,719 10,989 1,224 7,702 21,323 2,999 55,481 1.5% 95 0.2% 945 1.7% 0.5% 0.2% 1.8% 4.7% 1.9% 3.1% 19.8% 2.2% 13.9% 38.4% 5.4% 100% 3,903 2,864 1,958 5,838 19,888 9,062 10,406 120,366 8,599 91,647 238,108 30,409 581,716 0.7% 0.5% 0.3% 1.0% 3.4% 1.6% 1.8% 20.7% 1.5% 15.8% 40.9% 5.2% 100%
Employment policies
Transport
2,592
1,006
1,719
Health
10,920
1,132
7,676
Social protection
5,409
2,999
Total
38,624
53
Box 5.2 EU Transactions

As a member of the European Union (EU) the UK contributes to the EU budget and receives funding from the EU via a number of programmes. The methodology used in GERS to apportion a share of the UKs EU contributions and receipts to Scotland is set out below. Contributions to the EU Budget EU members contribute to the EU budget through three sources:
GNI based own resource: Each member state makes a contribution in proportion to their GNI, in 2010 this was approximately 0.68% their GNI. VAT based own resource: Each member state contributes 0.3% of their harmonised VAT base. Traditional Own Resource (TOR): Consists of agriculture duties and customs duties levied on agriculture and non-agriculture products from outside the EU.
Under the current fiscal framework, Scotland does not contribute directly to the EU budget. In GERS, Scotland is therefore assigned a share of the UKs contribution based on various apportionment methodologies. Scotlands share of the UKs GNI based contribution is calculated using the ratio of Scottish to UK onshore GDP. VAT based own resource and TOR are assigned to Scotland using Scotland's share of UK VAT receipts. Since 1985, the UK has received a rebate broadly equal to 66% of the UKs net contribution in the previous year where the net contribution is the difference between the UKs share of VAT contributions and its share of expenditure allocated to Member States. A population share of the rebate is assigned to Scotland. Receipts from the EU Budget Within GERS, receipts received from the EU are broken down into two categories, public sector receipts and external assistance. Public sector receipts reflect expenditure specifically for Scotland as reported in the Scottish Governments Consolidated Accounts such as payments under the Common Agricultural Policy. They are therefore recorded in GERS as identifiable expenditures for Scotland. The EUs external assistance budget provides aid to states outside the EU. A share of this expenditure is attributed to the UK based on its contribution to the EU budget. This is consistent with the UK Governments accounting approach. GERS classifies this expenditure as non-identifiable and assigns Scotland a population share. Two measures are generally used to illustrate the UKs net contribution to the EU:
The primary measure is the UKs net contribution to the EU budget this is calculated as the difference between the UKs gross contribution to the EU budget (less the rebate) and public sector EU receipts A secondary measure is the UKs net payment to EU institutions - this is equal to the UKs net contribution to the EU Budget less its share of the EUs external assistance aid budget.
54
Estimates of both measures are provided for Scotland in the table below. The table also demonstrates the impact of assigning the UKs GNI based contributions to Scotland using different measures of Scottish GDP. Scotlands Estimated Notional Net Contributions to the EU
( million) 2007-08 Total Contributions with: GNI contribution estimated based on Scottish onshore GDP share GNI contribution estimated based on Scottish GDP including a per capita share of North Sea GDP GNI contribution estimated based on Scottish including a geographical share of North Sea GDP 1,135 1,151 1,299 1,096 1,112 1,253 1,116 1,133 1,282 1,278 1,296 1,459 1,304 1,323 1,496 2008-09 2009-10 2010-11 2011-12
Rebate
-334
-471
-355
-225
-295
Total Contribution after rebate with: GNI contribution estimated based on Scottish onshore GDP share GNI contribution estimated based on Scottish GDP including a per capita share of North Sea GDP GNI contribution estimated based on Scottish including a geographical share of North Sea GDP 801 817 965 625 641 782 762 779 927 1,053 1,071 1,234 1,009 1,028 1,202
Public Sector EU Receipts
-574
-622
-619
-724
-800
Net Contribution to the EU Budget GNI contribution estimated based on Scottish onshore GDP share GNI contribution estimated based on Scottish GDP including a per capita share of North Sea GDP GNI contribution estimated based on Scottish including a geographical share of North Sea GDP 227 243 391 3 19 160 143 160 308 329 347 510 209 228 402
Less payments to EU Budget attributed to the EU aid programme
60
63
76
75
85
Net payments to EU institutions with: GNI contribution estimated based on onshore GDP share GNI contribution estimated based on including a per capita share of North Sea GDP GNI contribution estimated based on including a geographical share of North Sea GDP 166 183 367 -60 -44 136 67 84 284 254 272 486 124 143 378
55
Analysis of Non-Identifiable Expenditure

This section provides a more detailed analysis of non-identifiable expenditure. There are a number of possible ways in which to allocate a share of UK non-identifiable expenditure to Scotland including Scotlands share of UK GVA or population. The methodologies used to apportion each element of non-identifiable expenditure are discussed in Annex B. In addition to non-identifiable expenditure, PESA also includes a small amount of UK Government expenditure which is classified as identifiable but for programmes outside the UK. This includes expenditure on international development programmes. This category is included in GERS within non-identifiable expenditure for both Scotland and the UK. This treatment is consistent with the view that expenditure outside the UK is non-identifiable from the perspective of the UK's constituent countries, as the benefits are shared between them. To make the Scottish non-identifiable expenditure comparable with UK data, this category is therefore included in UK non-identifiable expenditure. Table 5.12 presents total non-identifiable expenditure for Scotland and the UK between 2007-08 and 2011-12. Tables 5.13 and 5.14 decompose Scottish and UK non-identifiable expenditure into their current and capital components. Total non-identifiable expenditure for Scotland was estimated to be 9.0 billion in 2011-12, 8.0% of the UK total. Defence and debt interest payments comprise the largest components. As Tables 5.13 and 5.14 highlight, current expenditure was the major component of non-identifiable expenditure for both Scotland and the UK in 2011-12. As outlined in Chapter 2 and Box B.1 in Annex B the UK Governments financial sector interventions in 2008-09 are classified as non-identifiable expenditure and are recorded in the Enterprise and Economic Development (EED) expenditure programme lines. The scale of the financial sector interventions, relative to other spending on this category, means that total non-identifiable expenditure on EED for Scotland is estimated to have increased from 106 million in 2007-08 to 811 million in 2008-09, before falling to -51 million in 2011-12. The negative values for 2010-11 and 2011-12 are due to the fact that the fees received from the various schemes are recorded as a negative current expenditure (i.e. revenue received). As shown in Table 5.13, these fees exceeded the current expenditure on other elements of EED in 2008-09, 2010-11 and 2011-12. As such, total current expenditure on non-identifiable EED is negative in these three years.
56
Table 5.12: Non-Identifiable Expenditure: Scotland and UK 2007-08 to 2011-12

( million) Scotland 2007-08 2008-09 2009-10 2010-11 2011-12 2007-08 2008-09 2009-10 UK 2010-11 2011-12
General public services 418 550 2,666 2,832 175 176 185 149 142 2,073 2,090 3,091 3,162 3,282 3,270 33,573 36,704 2,681 2,614 3,857 4,072 31,596 31,830 589 653 726 732 6,518 6,998 461 430 407 412 4,977 5,495 5,144 7,767 31,091 37,601 2,200 4,877 8,651 45,970 39,117 1,774 4,956 8,739 48,613 39,032 1,693
Defence
Economic affairs 106 50 1 0 24 119 0 78 329 4 247 -105 7,492 8,174 -484 12 8,432 276 294 3 3 322 337 75 85 107 327 0 306 242 9,598 0 0 0 96 160 192 28 27 25 25 181 0 77 384 0 333 -662 8,976 0 0 0 0 1 2 0 0 48 46 46 60 598 9 1 396 1,422 0 943 3,958 43 3,078 911 91,377 811 421 -69 -51 1,282 9,662 570 14 1 362 1,144 0 904 3,881 41 3,434 -2,414 100,718 5,040 556 21 0 343 1,913 0 1,018 4,054 41 3,675 2,925 103,389 -797 552 2 0 308 2,299 0 1,275 3,921 3 3,840 6,419 118,212 -584 720 1 0 317 2,156 0 921 4,598 3 4,182 -3,464 111,883
Employment policies
Transport
Health
Social protection
Total
57
5
( million) Current 2007-08 2008-09 2009-10 2010-11 2011-12 2007-08 2008-09 2009-10 Capital 2010-11 2011-12
Table 5.13: Non-Identifiable Expenditure: Scotland 2007-08 to 2011-12
General public services 417 517 2,666 2,618 163 158 160 129 125 12 18 2,799 2,823 2,924 2,955 214 292 2,681 2,614 3,857 4,072 0 0 553 603 664 683 33 36 50 0 338 25 420 410 380 389 1 40 20 26 62 0 358 20 23 49 0 314 17
Defence
Economic affairs 62 32 1 0 16 26 0 74 320 4 247 44 7,206 6,954 -323 -64 7,370 275 293 3 3 311 325 315 0 305 7 8,698 69 82 96 0 0 0 -9 61 57 66 0 72 363 0 332 -715 8,334 19 18 17 16 0 0 0 0 1 2 0 0 33 30 35 44 18 0 0 7 93 0 5 10 0 0 -150 287 -38 8 -89 -70 43 849 15 0 0 9 105 0 6 11 0 0 -160 1,220 413 16 0 0 9 99 0 3 13 0 1 75 1,061 20 11 0 0 8 136 0 11 12 0 1 235 900 19 16 0 0 10 114 0 6 21 0 1 53 642
Employment policies
Transport
Health
Social protection
Total
58
Table 5.14: Non-Identifiable Expenditure: UK 2007-08 to 2011-12

( million) Current 2007-08 2008-09 2009-10 2010-11 2011-12 2007-08 2008-09 2009-10 Capital 2010-11 2011-12
General public services 4,963 6,124 31,596 31,036 1,933 1,876 1,904 1,534 1,490 140 33,239 33,575 34,849 35,280 2,537 3,465 214 31,830 31,091 45,970 48,613 0 0 6,565 7,174 7,916 8,154 394 433 5,018 4,909 4,562 4,678 14 478 235 593 0 4,026 297 315 735 0 4,268 241 278 586 0 3,752 203
Defence
Economic affairs 768 384 9 1 241 316 0 889 3,832 43 3,075 1,515 86,724 85,618 -1,119 3,431 3,664 1,971 90,688 41 41 3,747 3,894 837 981 1,143 3,773 3 3,829 4,847 108,701 0 0 0 -99 729 677 266 240 210 200 793 0 854 4,351 2 4,172 -3,261 105,050 1 0 0 0 14 21 2 1 394 368 422 531 -423 126 -1,037 -809 514 215 0 0 155 1,106 0 54 125 0 4 -603 4,653 10,085 176 0 0 96 1,243 0 67 134 0 3 -1,295 15,099 4,913 189 0 0 103 1,184 0 37 160 0 11 954 12,701 240 130 0 0 98 1,622 0 132 147 0 11 1,572 9,511 225 189 0 0 117 1,363 0 67 247 0 10 -203 6,833
Employment policies
Transport
Health
Social protection
Total
59
Box 5.3 Debt Interest Payments and the Current Primary Balance
The debt interest payment expenditure in the above tables refers to payments to cover interest on outstanding UK Government debt. As there is no separate identification of Scotlands share of UK public sector net debt in UK public financial accounts they do not provide a separate Scottish debt interest expenditure. In GERS, such expenditure is classified as non-identifiable. For each year, a per capita share of UK Government debt interest expenditure is allocated for Scotland. The allocation on a per capita basis is based on the assumption that residents across the UK bear an equal burden of UK Government liabilities. Debt interest payments can also be viewed as payments related to past UK public sector net borrowing and government expenditure. Current expenditure excluding debt interest payments represents expenditure on public services consumed within the current financial year. The difference between this estimate and estimated current revenue represents the current budget fiscal position for public services provided at a given point in time (the primary current balance). In GERS, an estimate of debt interest payments is then deducted from this balance to obtain the current budget balance which is presented in Chapter 2. The table below, illustrates the current primary balance on public services consumed for Scotland between 2007-08 and 2011-12. Current Primary Balance: Scotland 2007-08 to 2011-12
( million) 2007-08 Current revenue Excluding North Sea revenue Including North Sea revenue (per capita share) Including North Sea revenue (geographical share) 44,815 45,444 51,927 43,502 44,591 55,254 41,664 42,209 47,573 44,287 45,024 52,330 46,297 47,239 56,871 2008-09 2009-10 2010-11 2011-12
Current expenditure incl capital consumption Less debt interest payments Current expenditure on services Current Primary balance Excluding North Sea revenue Including North Sea revenue (per capita share) Including North Sea revenue (geographical share)
52,380 2,666 49,714
54,220 2,681 51,540
57,222 2,614 54,608
60,013 3,857 56,156
60,269 4,072 56,197
-4,900 -4,270 2,212
-8,037 -6,949 3,714
-12,945 -12,399 -7,035
-11,869 -11,132 -3,827
-9,900 -8,957 674
60
The table below present the estimates of Scottish and UK current primary balances as a share of GDP. Current Primary Balance: Scotland & UK 2007-08 to 2011-12 (% GDP)
2007-08 Scotland - Excluding North Sea revenue Scotland - Including North Sea revenue (per capita share) Scotland - Including North Sea revenue (geographical share) UK -4.3% -3.7% 1.6% 4.1% 2008-09 -6.9% -5.9% 2.6% 1.3% 2009-10 -11.5% -10.8% -5.2% -2.9% 2010-11 -9.9% -9.1% -2.7% -1.1% 2011-12 -7.9% -7.0% 0.4% -0.1%
61
62
CONCLUSION
The aim of GERS is to enhance public understanding of fiscal issues in Scotland. The primary objective is to estimate a detailed set of public sector accounts for Scotland through an analysis of official UK and Scottish Government financial statistics. The key results for 2011-12 are as follows: In 2011-12, total Scottish non-North Sea public sector revenue was estimated at 46.3 billion, (8.2% of total UK non-North Sea revenue). Including a per capita share of North Sea revenue, total Scottish public sector revenue was estimated at 47.2 billion (8.2% of UK total public sector revenue). When an illustrative geographical share of North Sea revenue is included, total Scottish public sector revenue was estimated at 56.9 billion (9.9% of UK total public sector revenue). In 2011-12, total public sector expenditure for the benefit of Scotland by the UK Government, Scottish Government and all other parts of the public sector, including a per capita share of UK debt interest payments, was 64.5 billion. This is equivalent to 9.3% of total UK public sector expenditure. In 2011-12, the estimated current budget balance for the public sector in Scotland was a deficit of 14.0 billion (11.2% of GDP) excluding North Sea revenue, a deficit of 13.0 billion (10.2% of GDP) including a per capita share of North Sea revenue or a deficit of 3.4 billion (2.3% of GDP) including an illustrative geographical share of North Sea revenue. In 2011-12, the UK as a whole ran a current budget deficit, including 100% of North Sea revenue, worth 92.3 billion (6.0% of GDP). In 2011-12, Scotlands estimated net fiscal balance was a deficit of 18.2 billion (14.6% of GDP) when excluding North Sea revenue, a deficit of 17.2 billion (13.5% of GDP) when including a per capita share of North Sea revenue or a deficit of 7.6 billion (5.0% of GDP) when an illustrative geographical share of North Sea revenue is included. In 2011-12, the equivalent UK position including 100% of North Sea revenue, referred to in the UK Public Sector Accounts as net borrowing, was a deficit of 121.0 billion (or 7.9% of GDP).
Feedback from users of the publication is welcome. Please address any comments to Government Expenditure and Revenue Scotland (GERS) Office of the Chief Economic Adviser, Scottish Government, St Andrews House, Regent Road, Edinburgh, EH1 3DG
63
Conclusion
64
REVENUE METHODOLOGY
This annex outlines the methodologies used to estimate public sector revenue in Scotland. As the issue of North Sea revenue has been discussed extensively in Chapter 4, this annex focuses on all other elements of public sector revenue. In contrast to public sector expenditure, there is no one generic approach to estimating public sector revenue in Scotland; instead each revenue stream is estimated using a separate methodology. This annex discusses these techniques. It should be noted that, as the underlying datasets used in GERS have been subject to revision and update, estimates may differ from previous editions of GERS even if the methodology has remained unchanged.
Methodology
As highlighted in Chapter 3, the vast majority of public sector revenue raised in Scotland is collected at the UK level by HM Revenue and Customs. In some cases, revenue figures can be obtained for Scotland directly. Examples include local government revenue and particular elements of public corporation revenue. Such revenues are the exception and separate identification of most other revenue streams for Scotland is not possible. GERS therefore uses a number of different methodologies to apportion revenues to Scotland. In doing so, there are often theoretical and practical challenges in determining an appropriate share to allocate to Scotland. In certain cases, a variety of alternative methodologies could be applied each leading to different estimates. Obtaining an estimate of public sector revenue in Scotland is a two-stage process. In the first stage, the UK outturn figure for each element of revenue is obtained from ONS Public Sector Finances Statistical Bulletin. In the second stage, Scotlands share of the UK figure is estimated according to a specific apportionment methodology. The methodology used differs for each element of revenue. The detailed Revenue Methodology paper on the GERS website contains a discussion of the apportionment methodology used for each revenue stream and highlights the sensitivity of the results to changes in the underlying assumptions.24
UK Revenue Figures
The basis for estimating public sector revenue for Scotland is National Statistics outturn figures for UK fiscal revenue taken from ONS Public Sector Finances Statistical Bulletin. The detailed components, revenue by revenue, are taken from an ONS database (PSAT2) which is produced on a quarterly basis. The fiscal balance calculations in GERS are constrained to the UK Public Sector Finances Statistical Bulletin published in February 2013. An accounting adjustment is applied to both the expenditure and revenue totals so that both sides of the fiscal balance calculations are presented on a consistent basis. The revenue accounting adjustment is very small and has been included in other taxes, royalties and adjustments.
24
http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/GERS
65
Revenue Methodology
These data are presented on an accruals basis and separately identify revenue attributed to central government, local government and public corporations. The international standards for National Accounts and Government Finance Statistics use the accruals basis rather than a cash approach. This is because accruals accounting reflects a more accurate picture of when revenue is due and spending occurs than the more volatile alternative of cash, which, for example, records when bills are settled rather than when the expenditure occurs.
Summary of Apportionment Methodologies

Table A.1 provides a summary of the apportionment methodologies used for each element of revenue and highlights whether or not the methodology has changed since the previous edition of GERS. In some instances ONSs Public Sector Finances Statistical Bulletin estimates of UK revenue for some taxes have also been revised since the last edition of GERS, these changes will affect the estimates of Scottish tax revenue. In addition, there have been revisions to some of the data sources used to apportion tax revenues to Scotland. This means that there have been small changes in the share of some UK taxes apportioned to Scotland since GERS 2010-11. More detailed information on the methodologies used and the changes introduced can be found in the Revenue Methodology paper on the GERS website.
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Revenue Methodology
Table A.1: Apportionment Methodologies and Sources for Public Sector Revenue in Scotland (Excluding North Sea Revenue)
Source Survey of Personal Income (SPI): HMRC and Scottish Government analysis No No Yes No No Data on overall spend on tax credits: HMRC Regional Accounts: ONS Supplied directly by HMRC Various (see web annex) Supplied directly by HMRC Living Costs and Food Survey: ONS Public Sector Finances: ONS ONS and NRS PESA PESA Fuel consumption statistics: DECC Land and property stamp duty: HMRC Stocks and shares: Family Resources Survey (DWP) Living Costs and Food Survey: ONS Living Costs and Food Survey: ONS Living Costs and Food Survey: ONS Civil Aviation Authority and HMRC ONS and NRS Scottish Environment Protection Agency, Environment Agency, Dept. of Environment in Northern Ireland Electricity: DECC Gas: DECC Solid and other fuels: Regional Accounts: ONS United Kingdom Minerals Yearbook 2011: British Geological Survey Yes Yes No No No No No Yes No No Revised
Revenue
Apportionment Methodology
Income tax
Scottish share of UK income tax liabilities applied to income tax gross of tax credits. Negative expenditure on tax credits estimated using Scot/UK share of overall spend on tax credits (negative tax plus benefits)
Corporation tax (excl. North Sea)
Scotlands share of profits (less holding gains) of UK corporations
Capital gains tax
Actual outturns for Scotland
Other taxes on income and wealth
Various (see web annex)
National insurance contributions
Estimates of employer, employee, class 2 and class 3 NIC revenue in UK and Scotland
VAT net of LG and CG refunds: Scotlands share of UK household VAT expenditure
VAT NHS: Scotland/UK TES for Health Other Gov depts: Scotland/UK total TES (Excluding NHS/MOD)
LG refunds: Scotlands share of UK LG current expenditure on goods and services
No
CG Refunds MOD: Scotland/UK populations
Fuel duties
Scotlands share of road traffic fuel consumption
Stamp duties
Land and property stamp duty: Actual outturns for Scotland
Stocks and shares: - Scotland/UK ratio of adults owning shares
Tobacco duties
Spend on tobacco in Scotland/UK
Alcohol duties
Spend on alcohol in Scotland/UK
Betting and gaming duties
Spend on betting and gaming in Scotland/UK
Air passenger duty
Scotlands share of passengers by air passenger duty band
Insurance premium tax
Scotland/UK population
Landfill tax
Scotlands share of UK tonnage of waste sent to landfill
Electricity: Scotlands share of UK electricity consumption by commercial and industrial users
Climate change levy
Gas: Scotlands share of UK gas sales to commercial and industrial users
Solid and other fuels: Scotlands share of UK (less extra-regio) GVA
Aggregates levy
Scotlands share of UKs aggregate production
67
A
Supplied directly by HMRC DVLA Scottish Local Government Finance Statistics Scottish Local Government Finance Statistics Various (see web annex) Regional Accounts: ONS CG: ONS Regional Accounts LG: ONS Regional Accounts PC: Supplied by Public Sector Finance team: ONS, and Regional Accounts: ONS Various (see web annex) See Chapter 4 No No No No No No Yes No
Revenue Methodology
Table A.1: Apportionment Methodologies and Sources for Public Sector Revenue in Scotland (Excluding North Sea Revenue) (Cont)
Inheritance tax
Actual outturns for Scotland
Vehicle excise duty
Scotlands share of total value of UK vehicle licences issued (less refunds)
Non-domestic rates
Actual Data
Council tax
Actual Data
Other taxes, royalties and adjustments
Interest and dividends
For PC receipts: Scotlands share of public sector UK GVA
For LG and CG receipts: Scotland/UK population
CG: Scottish/UK share of central government NMCC
LG: Scottish/UK share of local government NMCC
Gross operating surplus
Public corporations individual data for Scottish PCs data for UK-wide PCs based on relevant industry GVA and actual data for Local Authority housing rentals
Rent and other current transfers (excluding oil royalties and licence fees)
North Sea revenue
See Chapter 4
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Revenue Methodology
Table A.2 summarises the revisions in this edition of GERS by comparing the estimates contained in this report with last years publication. Overall, estimated public sector revenue in Scotland for the years 2007-08, 2009-10 and 2010-11 has been revised down by 0.8%, 0.6% and 2.0% respectively. The estimate of public sector revenue for Scotland in 2008-09 has been revised upwards by 0.3%. Table A.2: Revisions to Estimates of Total Non-North Sea Public Sector Revenue: 2007-08 to 2010-11
( million) 2007-08 Scotland Estimates published in GERS 2010-11 Estimates published in GERS 2011-12 Revision UK Estimates published in GERS 2010-11 Estimates published in GERS 2011-12 Revision Scotland/UK ratio Estimates published in GERS 2010-11 Estimates published in GERS 2011-12 Revision (% point) 8.3% 8.3% 0.0% 8.3% 8.4% 0.0% 8.3% 8.2% 0.0% 8.3% 8.2% -0.2% 541,435 539,504 -1,931 519,805 520,332 527 506,847 506,090 -757 542,877 542,601 -276 45,167 44,815 -352 43,391 43,502 111 41,916 41,664 -253 45,177 44,287 -890 2008-09 2009-10 2010-11
Table A.3 illustrates the revisions to individual public sector revenue streams in Scotland and the UK for 2010-11. The revisions to the UK revenue estimates and to the underlying data used to apportion some taxes to Scotland have resulted in minor revisions to some revenue estimates. The net effect of all of the changes has been to reduce the estimate of public sector revenue in Scotland by 890 million and the estimate of UK tax revenue by 276 million.
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Revenue Methodology
Table A.3: Revisions to Estimates of Public Sector Revenue: Scotland and UK 2010-11
( million) Scotland Income tax Corporation tax (excluding North Sea) Capital gains tax Other taxes on income and wealth National insurance contributions VAT Fuel duties Stamp duties Tobacco duties Alcohol duties Betting and gaming and duties Air passenger duty Insurance premium tax Landfill tax Climate change levy Aggregates levy Inheritance tax Vehicle excise duty Non-domestic rates Council tax Other taxes, royalties and adjustments Interest and dividends Gross operating surplus Rent and other current transfers Revision 35 1 -42 3 -40 -217 -39 -22 71 -7 -16 -12 0 0 1 5 0 -3 0 -18 197 18 -455 -349 -890 UK -1 20 1 -43 -8 0 0 0 174 0 0 0 0 0 0 0 0 0 30 -1 2,500 220 -1,968 -1,200 -276
Revisions to most previously published estimates are relatively small and largely explained by revisions to the UK constraining totals for each revenue stream. Revised estimates of Household Consumption in Scotland from the Living Costs and Food Survey have led to revisions to VAT and duties levied on the consumption of fuel, tobacco and alcohol. The revisions to rent and other current transfers are due to a reclassification of receipts from the auction of 3G licences in 2000. Previously the revenue raised from the auction was recorded in the UK National Accounts as a series of accrued annual receipts in each year to 2021, reflecting the period covered by the leases. The ONS reclassified these receipts in the Public Sector Finances published in March 2012. They are now shown as a single one-off receipt in 2000-01, the year the auction occurred. This revision has been adopted in GERS. It has led to an increase in receipts in 2000-01, and a reduction in receipts in subsequent years. As GERS assigns Scotland a geographical share of the 3G receipts (32%), the revision therefore has a proportionately larger impact on public sector receipts for Scotland.
70
Revenue Methodology
The revisions to gross operating surplus reflect revisions by ONS to the public corporations data in the PSAT2 database made at the time of the publication of the UK Economic Accounts for the first quarter of 2012. The revisions to other taxes, royalties and adjustments reflect an accounting adjustment made to reconcile differences between the Public Sector Finances published in February 2013 and the PSAT2 database from the UK Economic Accounts for the third quarter of 2012.
71
Revenue Methodology
72
EXPENDITURE METHODOLOGY
This annex outlines the methodologies used to estimate public sector expenditure for Scotland and highlights where these methodologies differ from those used in previous editions of GERS.
Methodology
Figures for UK and Scottish public sector expenditure are taken directly from official UK Government sources. The primary data source used to estimate Scottish public sector expenditure is the Public Expenditure Statistical Analyses (PESA) database, published by HM Treasury.25 Within PESA, tables relating to a Country and Regional Analysis (CRA) are available in which UK Government departments and devolved administrations have allocated expenditure programmes to Scotland, Wales, Northern Ireland and the English regions. GERS separates total public spending into two components: Identifiable expenditure: that is expenditure that can be clearly allocated to a country or region in terms of having been spent for the benefit of that country or region; and Non-identifiable expenditure: that is expenditure that cannot be identified as benefiting a particular country or region of the UK but is instead incurred on behalf of the UK as a whole.
Methodologies for Apportioning Non-identifiable Expenditure

In GERS, the methodology to apportion non-identifiable expenditure and identifiable expenditure which occurs outside the UK to Scotland varies according to the particular expenditure estimated.
25
http://www.hm-treasury.gov.uk/pespb_natstats_oct2011.htm
73
Expenditure Methodology
The methodologies used are listed in Table B.1. Each reflects the approach that is thought to capture most appropriately the who benefits principle. None of the methods used to apportion non-identifiable expenditure to Scotland have changed from the previous edition of GERS. Further discussion of the method used to apportion the UK Governments financial sector interventions to Scotland is provided in Box B.1 below. Table B.1: Apportionment Methodologies for NonIdentifiable Expenditure: Scotland 2007-08 to 2011-121, 2
Non-Identifiable Expenditure General public services Public and common services International services Public sector debt interest Defence Public order and safety Economic affairs Enterprise and econ development Science and technology Employment policies Agriculture, forestry and fisheries Transport Environment protection
3
Outside the UK
Population Population Population Population Population
n/a Population n/a n/a n/a
Population GVA n/a n/a GVA GVA & Population n/a n/a Population n/a n/a Various (see section below)
Population Population Population n/a Population Population n/a Population Population Population Population Various (see section below)
Housing and community amenities Health Recreation, culture and religion Education and training Social protection Accounting adjustments
1: Where there is no UK non-identifiable expenditure this is entered as not applicable (n/a). 2: Identifiable expenditure outside the UK, except EU transactions, is primarily apportioned on a per capita basis. 3: All environment protection expenditure is apportioned on a GVA basis, except UKAEA and BNF expenditure on nuclear decommissioning, which is apportioned on a per capita basis.
74
Box B.1 The UK Governments Financial Sector Interventions

The most significant change in the UK Public Sector Finances in recent years has been the inclusion of the UK Governments interventions to support the banking sector at the height of the global financial crisis. In PESA the net outlays associated with the UK Governments financial sector interventions are recorded as a capital expenditure, whilst the fees received from the various schemes are recorded as a negative current expenditure (i.e. revenue received).26 PESA classifies the permanent effects of the UK Governments financial sector interventions as UK non-identifiable expenditure that is HM Treasury has deemed that the cost of such interventions cannot be assigned to particular countries or regions. There are various methods that can be applied to apportion a share of such non-identifiable expenditure to Scotland. The method used in this edition of GERS assigns a population share to Scotland of the total UK expenditure, on the basis that all areas of the UK have benefited equally from the resulting stabilisation of the UK financial system. The expenditure assigned to Scotland under this apportionment methodology is summarised in the table below. Scotland: Estimated Share of UK Governments Financial Stability Expenditure
( millions) 2008-09 Current Capital Total -88 788 700 2009-10 -30 381 351 2010-11 -128 0 -128 2011-12 -111 0 -111
A discussion paper providing further information on the treatment of the financial sector interventions in GERS is provided on the GERS website.27 Supplementary analysis is also provided which includes an estimate of Scotlands public sector finances when both the permanent and temporary effects of the financial sector interventions are incorporated.
Methodology for Estimating the Accounting Adjustment

The presentation of public spending has been simplified in this edition of GERS. The elements of public expenditure that were previously reported separately in the expenditure accounting adjustment are now included in the expenditure tables in Chapter 5 under a new spending category accounting adjustments. This spending category also includes the
26
The net cash outlay incurred as part of the UK Governments financial sector interventions represents the difference between
the price paid for the equity in institutions such as RBS and Lloyds Banking Group, and the market price on the day of purchase. This outlay was worth 6.1 billion in 2008-09 and 6.4 billion in 2009-10. The additional cash outlay to finance the acquisition of equity included a further 30.8 billion in 2008-09 and 23.0 billion in 2009-10 (UK Budget 2010). This enters the UK Central Governments Net Cash Requirement. Only the net outlay is included in UK Public Sector Net Borrowing. 27 Scottish Government (2011) - Treatment of the Financial Sector Interventions in GERS http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/GERS/GERSfinanceinterventions
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aspects of EU transactions which were reported separately in previous editions of GERS, and in PESA, under the expenditure category EU transactions. Table B.2 provides estimates of the two aspects of expenditure which form the accounting adjustment category reported in Chapter 5. It is important to note that the expenditure reported in the EU Transaction line in Table B.2 is a balancing item. It does not report Scotlands total EU receipts or notional contribution. Users interested in the public sector income and expenditure flows between Scotland and the EU should refer to Box 5.2 in Chapter 5. Table B.2: Total Accounting Adjustment: Scotland and UK 2007-08 to 2011-12
( million) 2007-08 Scotland Public Sector Finances accounting adjustment EU transactions Total Scottish accounting adjustment UK Public Sector Finances accounting adjustment EU transactions Total UK accounting adjustment 27,671 -1,531 26,140 27,190 -2,931 24,259 28,693 71 28,764 29,557 2,773 32,330 25,751 1,194 26,945 2,566 -243 2,323 2,575 -491 2,084 2,784 -237 2,546 3,315 -180 3,135 2,650 -313 2,337 2008-09 2009-10 2010-11 2011-12
Further information on how the accounting adjustment line in Table B.2 is estimated is provided in the section below. Public Sector Finances Accounting Adjustment The primary data source used to estimate Scottish public sector expenditure is the Public Expenditure Statistical Analyses (PESA) database, published by HM Treasury. The estimates of public spending published in PESA are calculated on the basis of Total Expenditure on Services (TES). TES is produced on a different basis to Total Managed Expenditure (TME), which is the primary measure of total public spending reported in the ONS National Accounts and the UK Public Sector Finances. The main difference between TES and TME is that TES does not include general government capital consumption and does not reverse the deduction of certain VAT refunds in the budget-based expenditure data. It also contains a number of items that are in budgets but not in TME, for example the grant equivalent element of student loans. An accounting adjustment is therefore introduced into GERS to ensure that the estimates of total public spending for Scotland and the UK are reported on the basis on TME. UK Accounting Adjustment The accounting adjustments required to reconcile UK TME and TES are set out in Table B.3 The largest component of the UK accounting adjustment is general government capital consumption. It is a measure of the amount of fixed capital resources used up in the process of the provision of public services. In 2011-12, the UK general government capital consumption of 16.0 billion represented 62.2% of the total UK accounting adjustment. Table B.3 shows the component disaggregation of the UK accounting adjustment. The total UK accounting adjustment was estimated at 25.8 billion in 2011-12.
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Table B.3: Public Sector Finances Accounting Adjustment: UK 2007-08 to 2011-12

( million) 2007-08 UK total managed expenditure (TME) UK total expenditure on services (TES) UK accounting adjustment Current expenditure: Central government capital consumption Local government capital consumption Current VAT refunds Student loans subsidy
1
2008-09 630,796 603,606 27,190 6,488 7,164 9,952 -814 1,477 472 1,812 1,934 -1,295
2009-10 671,503 642,810 28,693 6,682 7,550 9,448 -1,468 1,323 470 1,901 1,834 954
2010-11 692,354 662,797 29,557 7,193 8,037 11,186 -4,242 1,203 472 2,073 2,062 1,572
2011-12 693,599 667,848 25,751 7,487 8,524 11,789 -640 594 472 -4,455 2,183 -203
583,687 556,016 27,671 6,125 6,774 9,701 -1,430
Imputed subsidy from Local Authorities to the Housing Revenue Account Certificates
3 4 2
1,535 542 3,046 1,982
Imputed flows for Renewable Obligation Current expenditure residual Capital expenditure: Capital VAT refunds Capital expenditure residual
1 4
-603
TES includes the subsidy implied in student loans being issued at lower than market rate. This is not included in TME the
National Accounts measures (in the current balance) the difference between interest received from students and the amount of interest paid by the government on the debt incurred to make the loans.
2
The Housing Revenue Account (HRA) is classified as a Public Corporation by the ONS, which means that they pay
dividends on their profits to local authorities. To ensure that these dividends are non-negative, the ONS impute a subsidy from local authorities to HRAs to cover any shortfall (offset in Public Corporation gross operating surplus, which scores on the revenue side of the account).
3
Renewable Obligation Certificates are bought and sold by energy companies. The ONS have decided that these flows The residuals for the UK in 2011-12 is largely explained by a timing adjustment. The TES figure used in GERS is
should be channelled through central government and so impute offsetting amounts of spending and income.
4
consistent with the latest CRA analysis, which is from November 2012. The TME figure in GERS is consistent with the public sector finances statistical bulletin published in February 2013.
Scottish Accounting Adjustment The accounting adjustment required to reconcile TES and TME for Scotland is set out in Table B.4. The total Scottish public sector accounting adjustment was estimated at 2.7 billion in 2011-12, or 10.3% of the total UK accounting adjustment. The estimate of an accounting adjustment for Scotland is calculated using a variety of apportionment methodologies. Firstly, estimates of capital consumption from the ONS Regional Accounts, together with data from UK local government returns, have been used to estimate capital consumption for Scotland. In 2011-12, capital consumption for Scotland was estimated at 1.6 billion (9.8% of the UK total). This calculation is identical to that underpinning the estimates of general government gross operating surplus on the revenue side. These two elements cancel out when calculating Scotlands net fiscal balance. VAT refunds have been allocated to Scotland using the apportionments derived in the revenue calculations (see Annex A), and therefore cancel out in the calculation of net borrowing. The figures for Scottish student loan subsidies were provided by HM Treasury. The imputed subsidy from local authorities to HRA adopt the same apportionment allocation as in the gross operating surplus calculations on the revenue side, and the imputed flows for Renewable Obligation Certificates adopts the same methodology used in other taxes,
77
royalties and adjustments. These items cancel in the net borrowing calculations. current and capital residuals are allocated to Scotland on a per capita basis.
The
Table B.4: Public Sector Finances Accounting Adjustment: Scotland 2007-08 to 2011-12
( million) 2007-08 Current expenditure: Central government capital consumption Local government capital consumption Current VAT refunds Student loans subsidy
2 1
2008-09
2009-10
2010-11
2011-12
591 657 864 -58
628 696 904 -17 125 56 167 176 -160 2,575 9.5%
647 733 887 -63 104 55 174 172 75 2,784 9.7%
699 782 1,051 26 87 56 187 194 235 3,315 11.2%
732 839 1,098 28 42 56 -402 203 53 2,650 10.3%
Imputed subsidy from Local Authorities to the Housing Revenue Account Certificates
4 3
146 52 287 177 -150 2,566 9.3%
Imputed flows for Renewable Obligation Current expenditure residual Capital expenditure: Capital VAT refunds Capital expenditure residual Total accounting adjustment Percentage of UK accounting adjustment
1 2
Public Corporations capital consumption is included in gross operating surplus. TES includes the subsidy implied in student loans being issued at lower than market rate. This is not included in TME
the National Accounts measures (in the current balance) the difference between interest received from students and the amount of interest paid by the government on the debt incurred to make the loans.
3
The Housing Revenue Account (HRA) is classified as a Public Corporation by the ONS, which means that they pay
dividends on their profits to local authorities. To ensure that these dividends are non-negative, the ONS impute a subsidy from local authorities to HRAs to cover any shortfall (offset in Public Corporations gross operating surplus, which scores on the revenue side of the account).
4
Renewable Obligation Certificates are bought and sold by energy companies. The ONS have decided that these flows
should be channelled through central government and so impute offsetting amounts of spending and income
The tables in Chapter 5 split expenditure into identifiable and non-identifiable expenditure. When reporting accounting adjustments, the current residual, the capital residual, and EU transactions are classified as non-identifiable. All other aspects of the accounting adjustment are classified as identifiable expenditure for both Scotland and the UK.
Amendments to PESA CRA Data

A number of significant improvements have been made to the PESA CRA database in recent years to apportion expenditure more accurately to countries and regions. While many anomalies in previous editions of PESA CRA have been addressed and are now reflected in both PESA CRA 2012 and this GERS report, a small number of supplementary amendments to the PESA CRA 2012 dataset were made in producing GERS. The aim of these refinements was to ensure that the public sector expenditure figure for Scotland captures as accurately as possible expenditure for the benefit of Scotland. The total amendment made to PESA in producing this edition of GERS is shown in Table B.5 below. In the financial year 2011-12, the figure of total expenditure on services attributed to Scotland in GERS is 323 million lower than the corresponding PESA figure (using default apportionments for non-identifiable expenditure without further consideration). Table B.6 sets out in detail the sources of these revisions.
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Table B.5: Amendments to Estimates of Total Public Sector Expenditure on Services from PESA 2012: Scotland 2007-08 to 2011-12
( million) 2007-08 Total Expenditure in Scotland (PESA)
28
2008-09 56,663 56,378 -284
2009-10 59,633 59,265 -368
2010-11 61,060 60,715 -346
2011-12 62,129 61,806 -323
53,657 53,359 -299
Total Expenditure in Scotland (GERS) Total revision to expenditure in Scotland
Table B.6: Amendments to Estimates of Total Public Sector Expenditure on Services from PESA 2012: 2007-08 to 2011-12
( million) 2007-08 Nuclear-related expenditure Cross-border policing Railways expenditure London Olympics Pensions revisions Public sector debt interest Other minor revisions Total -133 -59 -85 -18 -4 20 -19 -299 2008-09 -76 -64 -119 -38 -10 44 -22 -284 2009-10 -124 -72 -104 -61 -14 27 -20 -368 2010-11 -148 -58 -98 -61 -20 78 -39 -346 2011-12 -140 -70 -96 -48 -32 87 -24 -323
Nuclear Decommissioning and Related Expenditures In PESA CRA 2012, expenditure on nuclear decommissioning was classified as identifiable to the region where nuclear facilities are located. However, as discussed in previous editions of GERS,29 it is believed that this expenditure is best captured as a non-identifiable expenditure. This has been amended and nuclear decommissioning expenditure has been apportioned on a per capita basis. Other associated nuclear expenditure, such as security at nuclear facilities, has also been reapportioned on a per capita basis. Cross-Border Policing PESA CRA 2012 assigns a population share of the expenditure associated with the Serious and Organised Crime Agency (SOCA) and the Assets Recovery Agency (ARA). However a transfer from the Scottish Government to these organisations is already included in PESA to pay for the activities these organisations undertake in Scotland. Any further attribution of expenditure to Scotland would therefore double count the expenditure occurred on behalf of Scotland. As a result, the additional population share of expenditure assigned to Scotland in PESA CRA 2012 has been re-allocated to the rest of the UK.
28
In this analysis, an estimate of total expenditure from PESA has been calculated as the sum of all identifiable expenditure
plus a proportion of non-identifiable expenditure/outside UK expenditures using the default apportionments noted in table B.1 above. This figure therefore excludes all amendments documented in this annex.
29
See Box 5.3 in GERS 2010: http://www.scotland.gov.uk/Publications/2010/06/22160331/9
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Railways Expenditures As discussed in previous editions of GERS,30 railways expenditure, alongside expenditure on roads, is apportioned to Scotland on an in basis. This means that expenditure in Scotland on railways is apportioned to Scottish public sector expenditure while, where possible, a zero share is allocated to Scotland for all expenditure on rail across the rest of the UK. This required a number of modifications to the underlying PESA data which affected the expenditure by London and Continental Railways, the Channel Tunnel Rail link, and Network Rail. 2012 Olympics Although some Olympics expenditures were assigned to London in the latest PESA not all were identified in that way. Consequently, as discussed in previous editions of GERS,31 all capital expenditure associated with the Olympics has been assigned to the rest of the UK, primarily London and surrounding area, on the basis that Scotland will not receive a lasting benefit from the infrastructure and regeneration associated with the games. Current expenditure on the Olympics has been assigned across the countries and regions of the UK using the estimated regional distribution of the associated increase in tourism expenditure. Public Sector Pensions In PESA CRA 2012, expenditure for the Scottish Office Pension Agency, NHS and Teacher pensions was allocated only to Scotland. In contrast, expenditure by comparable pension agencies across the rest of the UK was allocated to the countries and regions of the UK based on the residence of the recipient of the pension. To correct this asymmetry, information from the Scottish Office Pension Agency was used to re-apportion these pension expenditures across the UK according to residence. As some elements of the pension expenditure were negative this change has resulted in a slight increase in expenditure assigned to Scotland in one of the years. Public Sector Debt Interest As GERS is consistent with the Public Sector Finances published in February 2013, the public sector debt interest payments in PESA have been updated to be consistent with those in the most recent Public Sector Finances publication. Other Amendments A number of other minor amendments have been made to PESA to correct asymmetries in the regional attribution of expenditures related to consumer protection, civil aviation, tourism and libraries amongst others. These are discussed further in previous editions of GERS.
Revisions to Expenditure Estimates from GERS 2010-11

Tables B.7 and B.8 set out the changes in estimates of public expenditure in Scotland and the UK between this report and GERS 2010-11. These revisions reflect changes in the underlying PESA CRA data, revisions to the GERS methodology and revisions to the data sources used to apportion non identifiable expenditure to Scotland. Revisions to public
30 31
See Box 5.1 in GERS 2009: http://www.scotland.gov.uk/Publications/2009/06/18101733/8 See Box 6.3 in GERS 2010-11: http://www.scotland.gov.uk/Publications/2011/06/21144516/8
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expenditure that can be traced to changes in the PESA CRA database are specified separately. Revisions to Total Expenditure Table B.7 displays the difference between the estimates of total expenditure in GERS 201011 and those contained in Chapter 5 of this publication. Total public sector expenditure for Scotland in 2010-11 has been revised down by 910 million (1.5% of total expenditure on services). For the UK as a whole, total expenditure has been revised down by 2.3 billion in 2010-11 (0.4% of total expenditure on services). Almost all of this revision reflects changes made in the estimates of total UK public sector expenditure reported in PESA 2012 which have a corresponding impact on the estimates for the UK in this edition of GERS. Table B.7: Revisions to Estimates of Total Expenditure on Services: Scotland 2007-08 to 2010-11
( million) 2007-08 Scotland GERS 2010-11 GERS 2011-12 Revision Of which revisions made in PESA 2012 UK GERS 2010-11 GERS 2011-12 Revision Of which revisions made in PESA 2012 Scotland/UK Ratio GERS 2010-11 GERS 2011-12 Revision (% point) -14.4% 9.6% 0.0% 9.4% 9.3% 0.0% 9.2% 9.2% 0.0% 9.3% 9.2% -0.1% 555,283 556,016 733 500 603,431 603,606 175 -351 643,153 642,810 -343 -673 665,132 662,797 -2,335 -3,423 53,464 53,359 -105 -243 56,507 56,378 -129 -443 59,427 59,265 -162 -446 61,625 60,715 -910 -1,421 2008-09 2009-10 2010-11
All other revisions are net changes between GERS 2010-11 and GERS 2011-12.
Total Revision to Expenditure (including accounting adjustment) The overall change in Total Managed Expenditure (TME) between GERS 2010-11 and GERS 2011-12 is highlighted in Table B.8 below. The revision is equal to the sum of revisions to Total Expenditure on Services (TES) and the Public Sector Finances accounting adjustment. For all years, the absolute revisions to TME are less than 0.4%.
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Table B.8: Revisions to Estimates of Total Managed Expenditure: Scotland 2007-08 to 2010-11
( million) 2007-08 Total Expenditure on Services GERS 2010-11 GERS 2011-12
1
2008-09
2009-10
2010-11
53,464 53,359
56,507 56,378
59,427 59,265
61,625 60,715
Public Sector Finances Accounting Adjustment GERS 2010-11 GERS 2011-12 Total Managed Expenditure GERS 2010-11 GERS 2011-12 Revision to Total Managed Expenditure 55,969 55,925 -45 58,866 58,953 87 62,025 62,049 23 63,807 64,030 223 2,506 2,566 2,358 2,575 2,598 2,784 2,182 3,315
1. TES in this edition of GERS is calculated by removing the public sector finances accounting adjustment (Table B.2) from TME. This allows TES for GERS 2011-12 to be compared with TES in GERS 2010-11 on the same basis.
82
C
BNF CGT CG COFOG CRA CT DECC DCMS DEL DVLA DWP EED EU GDP GERS GOS GVA HMRC HMT LG NDRI NPD NHS NRS NIC NMCC MOD OBR ONS PC PFI PPP PESA PRT PSAT2 PSNB SC SNAP SPI TES TME
LIST OF ABBREVIATIONS
British Nuclear Fuels Capital Gains Tax Central Government UN Classification of Functions of Government Country and Regional Analysis Corporation Tax Department of Energy and Climate Change Department for Culture, Media and Sport Departmental Expenditure Limit Driver and Vehicle Licensing Agency Department for Work and Pensions Enterprise and Economic Development European Union Gross Domestic Product (at market prices) Government Expenditure and Revenue Scotland Gross Operating Surplus Gross Value Added (GDP at basic prices) HM Revenue and Customs HM Treasury Local Government Non-Domestic Rate Income Non-Profit Distributing National Health Service National Records of Scotland National Insurance Contributions Non-Market Capital Consumption Ministry of Defence Office for Budget Responsibility Office for National Statistics Public Corporations Private Finance Initiative Public Private Partnerships Public Expenditure Statistical Analyses Petroleum Revenue Tax Public Sector Accounts Table 2 Public Sector Net Borrowing Supplementary Charge Scottish National Accounts Project Survey of Personal Incomes Total Expenditure on Services Total Managed Expenditure
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List of Abbreviations
UK UKAEA UKCS VAT
United Kingdom UK Atomic Energy Authority UK Continental Shelf Value Added Tax
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GLOSSARY
Accounting Adjustment: the adjustment required to reconcile Total Expenditure on Services (TES) provided in PESA with Total Managed Expenditure (TME), the principal measure of public sector expenditure in UK public finance publications. The largest element of the accounting adjustment is capital consumption. Accruals: the accounting convention whereby an expenditure or revenue is recorded (recognised) at the time when it has been incurred or earned rather than when the money is paid or received. Annually Managed Expenditure (AME): spending that does not fall within Departmental Expenditure Limits (DEL). Expenditure in AME is generally less predictable than expenditure in DEL and cannot be reasonably be subject to firm, multi-year limits. Capital Consumption: also called Consumption of Fixed Capital; the amount of fixed assets used up in an accounting period as a result of normal wear and tear, foreseeable obsolescence, and losses from accidental damage. Has been referred to as depreciation in some documents, although this is not recommended to avoid confusion with the same term used with a different definition for tax and business accounting purposes. Capital Expenditure: includes capital formation, the net acquisition of land, and expenditure on capital grants. Fixed assets are assets that can be used repeatedly to produce goods and services and generally have an economic life of more than one year. capital expenditure includes the value of assets acquired under finance leases. in-house development of assets such as computer software and databases can be capitalised in government accounts provided certain conditions are met. It is sometimes called own account capital formation. Central Government: comprises parliaments; government departments (including Scottish Government) and their executive agencies; government funds such as the national loans fund; the foreign exchange official reserves; non-departmental public bodies; NHS trusts and various other non-market public bodies controlled by central government. Country and Regional Analysis (CRA): Analysis in PESA showing public expenditure identifiable to Scotland, Wales, Northern Ireland and the English regions. Current Budget: the difference between current revenues (including capital taxes) and current expenditure (including capital consumption) Current Expenditure: the sum of the current expenditure of general government (i.e. the Scottish Government, the UK Government in Scotland and Scottish local authorities) and certain distributive transactions (interest and dividends) payable by public corporations to the private sector and abroad. Public sector current expenditure is defined to be net of certain revenue items, such as some sales of goods and services by general government. As it is defined at the public sector level, any transactions and transfers between parts of the public sector are also excluded. Current expenditure includes items such as public sector wages and salaries and transfer payments. Current Revenue: all revenue raised by the public sector from tax and non-tax revenues except the sale of assets or interest received.
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Glossary
Departmental Expenditure Limits (DELs): spending which is planned and controlled across the period of each spending review. In general, DEL will cover all administration budgets and all programme expenditure. The vast majority of Scottish Government expenditure is DEL. European System of Accounts 1995 (ESA95): the system used by the Office for National Statistics for producing and presenting UK National Accounts. The system is a legal requirement for EU member states reporting economic statistics to the EU Commission. Extra-regio: the part of UK economic activity that is not allocated to a specific region. Extraregio includes continental shelf activity relating to offshore oil and gas extraction, UK embassies overseas and armed forces stationed abroad. General Government: Central and local government. Gross Domestic Product (at market prices): a measure of the value of goods and services produced in the UK before providing for capital consumption. It is equal to gross value added at basic prices plus taxes (less subsidies) on products. Alternatively, it is equal to the sum of total final domestic consumption expenditures less imports of goods and services. Gross Operating Surplus: the surplus generated by operating activities after the labour factor input has been recompensed. Gross Value Added: the contribution to the economy of each individual producer, industry or sector in Scotland or the UK. It is a measure of GDP in basic prices. Holding Gains (or losses): either profit or loss obtained by holding assets whose price changes within the period of account. This represents that part of the change in the book value of inventories and work-in-progress during the year, which arises from increases in the prices at which inventories and work-in-progress are valued. Identifiable Expenditure: expenditure that can be directly identified as having been spent for the benefit of a country or region within the UK. Local Government: all 32 Local Authorities in Scotland. National Accounts: a statistical system that represents the economic activity and transactions between sectors in a national economy. Net Fiscal Balance: the difference between estimated total public sector spending for Scotland and estimated total public sector revenue raised in Scotland. Net Investment: public sector capital expenditure, net of capital consumption. Non-departmental bodies: a body which has a role in the processes of government, but is not a government department or part of one, and which accordingly operates to a greater or lesser extent at arms length from Ministers. Non-Identifiable Expenditure: expenditure that is considered to occur on behalf of the UK as a whole and which cannot be decomposed on an individual country or regional basis.
86
Glossary
Outturn: expenditure (revenue) actually incurred (received) to date and been subject to audit. Public Corporations: a sector from National Accounts consisting of publicly controlled market entities. To be classed as market their sales must be at least 50% of their operating costs. Public Expenditure Statistical Analysis (PESA): the primary source of outturn data on public expenditure in the UK. The country and regional analysis, (CRA), presents public expenditure identifiable for Scotland, Wales, Northern Ireland and the English regions. Public Sector Finances: the monthly statistics on the public sector produced jointly by the Office for National Statistics and HM Treasury. Total Expenditure on Services (TES): an aggregate used in PESA to analyse capital and current spending of the public sector. It includes current expenditure on services and capital expenditure on services. Total Managed Expenditure (TME): a definition of aggregate public spending derived from National Accounts. TME captures total public expenditure in the UK. UK Public Sector Net Borrowing: the difference between the sum of UK public sector current and capital revenues and UK public sector expenditure as measured in the Public Sector Finances according to the National Accounts framework. Who Benefits Principle: the approach used to estimate expenditure for Scotland. It identifies the expenditure in a given year that was incurred for the full range of public services that were consumed: that is, those services provided for the people of Scotland. Who Pays Principle: the approach used to estimate public sector revenue in Scotland. It is based upon the residential location of where the revenue is raised.
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Ref no. Title Gross Domestic Product for Scotland for the third quarter of 2012 Scottish Manufactured Exports Estimates for the third quarter of 2012 Scotlands Global Connections 2011 Scottish National Accounts Project for the third quarter of 2012 Last published 01/02/2013 15/02/2013 23/01/2013 20/02/2013 Price Free Free Free Free
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Government Expenditure and Revenue Scotland 2011-2012

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Government Expenditure and Revenue Scotland 2011-2012

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GOVERNMENT EXPENDITURE & REVENUE SCOTLAND 2011-2012 MARCH 2013

GOVERNMENT EXPENDITURE & REVENUE SCOTLAND 2011-2012 MARCH 2013

GOVERNMENT EXPENDITURE & REVENUE SCOTLAND 2011-2012 MARCH 2013

The Scottish Government, Edinburgh 2013

Government Expenditure and Revenue Scotland 2011-12

Government Expenditure and Revenue Scotland 2011-12

Government Expenditure and Revenue Scotland 2011-12

Government Expenditure and Revenue Scotland 2011-12

Government Expenditure and Revenue Scotland 2011-12

The Aims and Objectives

National Statistics in GERS

Government Expenditure and Revenue Scotland 2011-12

What Questions Does GERS Address?

Government Expenditure and Revenue Scotland 2011-12

Government Expenditure and Revenue Scotland 2011-12

The Data Sources

Additional Information on the GERS Website

http://www.hm-treasury.gov.uk/pespub_country_regional_analysis.htm The latest Public Sector Finances dataset is available from

Government Expenditure and Revenue Scotland 2011-12

INTRODUCTION AND OVERVIEW

Chapter 2: Scotlands Public Sector Accounts

Chapter 3: Public Sector Revenue

Chapter 4: North Sea Revenue

Chapter 5: Public Sector Expenditure

Government Expenditure and Revenue Scotland 2011-12

Introduction and Overview

Annex A: Revenue Methodology

Annex B: Expenditure Methodology

Government Expenditure and Revenue Scotland 2011-12

SCOTLANDS PUBLIC SECTOR ACCOUNTS

Current and Capital Budgets

the revenue calculations in GERS.

Government Expenditure and Revenue Scotland 2011-12

Scotlands Public Sector Accounts

This document is available at: http://budgetresponsibility.independent.gov.uk/economic-and-fiscal-outlook-december-2012/

Government Expenditure and Revenue Scotland 2011-12

Scotlands Public Sector Accounts

Table 2.1: Current and Capital Budgets: Scotland 2007-08 to 2011-129

Government Expenditure and Revenue Scotland 2011-12

Scotlands Public Sector Accounts

Government Expenditure and Revenue Scotland 2011-12

Scotlands Public Sector Accounts

Box 2.1 UK Public Sector Accounts

Government Expenditure and Revenue Scotland 2011-12

Scotlands Public Sector Accounts

Current and Capital Budgets: UK 2007-08 to 2011-12 (% of GDP)

Government Expenditure and Revenue Scotland 2011-12

Scotlands Public Sector Accounts

Government Expenditure and Revenue Scotland 2011-12

Scotlands Public Sector Accounts

Source: Scottish National Accounts Project (SNAP), http://www.scotland.gov.uk/snap

Government Expenditure and Revenue Scotland 2011-12

Scotlands Public Sector Accounts

Public Sector Expenditure

Government Expenditure and Revenue Scotland 2011-12

Scotlands Public Sector Accounts

Box 2.3: Total Public Sector Expenditure as a Share of GDP

Government Expenditure and Revenue Scotland 2011-12

Scotlands Public Sector Accounts

Box 2.4 Historic Estimates of Scotlands Fiscal Balance

Government Expenditure and Revenue Scotland 2011-12

Scotlands Public Sector Accounts

Historic Net Fiscal Balance: Scotland and UK 1980-81 to 2011-12

Note The historic time-series in this chart is not a national statistic.