Government Expenditure & Revenue Scotland 2012-13

ANNEX C REVISIONS

This section presents revisions from the previous GERS 2011-12 publication.

Revisions to Non-North Sea Revenue Estimates from GERS 2011-12

Table C.1 summarises the revisions in this edition of GERS by comparing the estimates contained in this report with last year's publication. Overall, estimated public sector revenue in Scotland for the years 2008-09 to 2011-12 has been revised up. This reflects upward revisions to UK receipts. These UK revisions are due to:

• Incorporation of data from the Whole of Government Accounts for public corporations and revisions to public corporations' capital accounts data; and
• Alignment of the calculation of interest and dividends in the public sector finances with methodologies used within National Accounts.

Both these revisions were made to the UK Public Sector Finances published in June 2013. However, for Scotland, the increase in these receipts in 2010-11 and 2011-12 is partially offset by downward revisions to other taxes, primarily corporation tax and VAT.

Table C.1: Revisions to Estimates of Total Non-North Sea Public Sector Revenue: 2008-09 to 2011-12

	(£ million)
	2008-09	2009-10	2010-11	2011-12
Scotland
Estimates published in GERS 2011-12	43,502	41,664	44,287	46,297
Estimates published in GERS 2012-13	43,772	42,054	44,318	46,315
Revision	270	390	31	18
UK
Estimates published in GERS 2011-12	520,332	506,090	542,601	561,386
Estimates published in GERS 2012-13	523,815	510,118	547,100	565,597
Revision	3,483	4,028	4,499	4,211
Scotland/UK ratio
Estimates published in GERS 2011-12	8.4%	8.2%	8.2%	8.2%
Estimates published in GERS 2012-13	8.4%	8.2%	8.1%	8.2%
Revision (% point)	0.0%	0.0%	-0.1%	-0.1%

Table C.2 illustrates the revisions to individual public sector revenue streams in Scotland and the UK for 2012-13. The revisions to the UK revenue estimates and to the underlying data used to apportion some taxes to Scotland have resulted in revisions to some revenue estimates. The net effect of all of the changes has been to increase the estimate of public sector revenue in Scotland by £18 million and the estimate of UK tax revenue by £4.2 billion.

Table C.2: Revisions to Estimates of Public Sector Revenue: Scotland and UK 2011-12

	(£ million)		(%)
	Scotland	UK	Scotland	UK
Income tax	-14	-40	0%	0%
Corporation tax (excluding North Sea)	-215	-205	-7%	-1%
Capital gains tax	31	0	13%	0%
Other taxes on income and wealth	-4	-2	-2%	0%
National insurance contributions	-109	0	-1%	0%
VAT	-419	-3	-4%	0%
Fuel duties	-20	0	-1%	0%
Stamp duties	5	0	1%	0%
Tobacco duties	38	0	3%	0%
Alcohol duties	-3	0	0%	0%
Betting and gaming and duties	7	0	6%	0%
Air passenger duty	14	0	6%	0%
Insurance premium tax	-46	0	-18%	0%
Landfill tax	-1	0	-1%	0%
Climate change levy	0	0	0%	0%
Aggregates levy	-4	0	-7%	0%
Inheritance tax	65	40	40%	1%
Vehicle excise duty	3	-7	1%	0%
Non-domestic rates	0	12	0%	0%
Council tax	-3	0	0%	0%
Other taxes, royalties and adjustments	-40	-950	-4%	-7%
Interest and dividends	218	2,682	92%	96%
Gross operating surplus	515	2,694	21%	11%
Rent and other current transfers	0	-10	0%	-2%
Total revision	18	4,211	0%	1%

Revisions to the majority of previously published estimates are relatively small and largely explained by revisions to the UK constraining totals for each revenue stream. For other revenues, changes to methodologies, the latest data, or the UK constraining totals have led to changes to the Scottish estimates. These are discussed below.

Revisions to corporation tax, national insurance contributions, and VAT, are due either to updates to the latest apportionment data or methodological changes. For corporation tax, UK receipts are assigned to Scotland in proportion of the country's share of company profits, as estimated from the ONS Regional Accounts. Scotland's share of UK company profits, particularly in financial services, has been revised down in the latest Regional Accounts publication. This is due to a change in methodology within Regional Accounts which attempts to apportion profits in line with company activity, rather than employment, leading to a downward revision in the estimate of Scottish on-shore corporation tax receipts in GERS. The changes to national insurance contributions reflect new 2011-12 accruals data received from HMRC. Changes to VAT receipts are primarily due to a revised methodology for estimating Local Government VAT refunds. There is a corresponding reduction in Local Government expenditure. This change therefore has no effect on the current budget balance or the net fiscal balance.

Revisions to other taxes, royalties and adjustments, interest and dividends, and gross operating surplus reflect changes in the UK constraining data. The reasons for the revisions to the UK data for gross operating surplus have been discussed above, as have part of the revisions for interest and dividends. However, interest and dividends has also increased due to the reclassification of Northern Rock Asset Management and Bradford & Bingley from public financial corporations to central government. This was incorporated into UK public sector finances in January 2013, but was not incorporated into the ONS PSAT2 database in time for the 2013 GERS publication. As such, these revenues were captured through the revenue accounting adjustment in the GERS 2013 publication, but are now reported against interest and dividends. This results in a reduction in the other taxes, royalties and adjustments line and a corresponding increase in the interest and dividends line, with no change on overall revenues.

Revisions to North Sea Revenue Estimates from GERS 2011-12

Table C.3 summarises the revisions to North Sea revenues in this edition of GERS by comparing the estimates contained in this report with last year's publication. As revenues from the Emissions Trading Scheme were not reported in last year's publication, they are excluded from this comparison.

Overall, North Sea revenues in the UK for the years 2008-09 to 2011-12 have been revised down between 2008-09 and 2010-11 and up in 2011-12. This reflects downward revisions to North Sea Corporation Tax revenue made by HMRC. Receipts for 2008-09 were revised down by £469 million in April 2013, and receipts for 2009-10 and 2010-11 were revised down in August 2013. These revisions are due to final assessments being made to the proportion of companies' overall tax liabilities that fall within the ring fenced North Sea corporation tax regime, and the onshore corporation tax regime.^[38]

Table C.3: Revisions to UK North Sea Revenue: 2008-09 to 2011-12

	(£ million)
	2008-09	2009-10	2010-11	2011-12
Licence fees
Estimates published in GERS 2010-11	0	0	0	0
Estimates published in GERS 2011-12	63	67	70	67
Revision	63	67	70	67
North Sea Corporation Tax
Estimates published in GERS 2010-11	10,358	5,568	7,328	9,218
Estimates published in GERS 2011-12	9,826	4,998	6,864	9,218
Revision	-532	-570	-464	0
Petroleum Revenue Tax
Estimates published in GERS 2010-11	2,567	923	1,458	2,032
Estimates published in GERS 2011-12	2,567	923	1,458	2,032
Revision	0	0	0	0
Total revisions	-469	-503	-394	67

Licence fees have been revised up in all years. This reflects an error in the UK public sector finances, whereby licence fees income was not being reported from 2008-09 onwards. Following advice from DECC, ONS have now revised up this series in the UK Public Sector Finances by between £60 million and £70 million a year.

Table C.4 below summarises the revisions to the estimate of Scotland's illustrative geographical share of the North Sea tax revenues since the previous publication. The estimated share of tax revenues has been revised upward in the years 2008-09 and 2009-10 and downwards in the years 2010-11 to 2011-12. These reflect updates to the data used by Kemp and Stephen to estimate Scotland's illustrative geographical share of North Sea revenues.

Table C.4: Revisions to geographical share of North Sea Revenue: 2008-09 to 2011-12

	(£ million)
	2008-09	2009-10	2010-11	2011-12
Estimates published in GERS 2011-12	90.9%	91.0%	91.5%	94.0%
Estimates published in GERS 2012-13	92.9%	94.8%	88.7%	88.2%
Difference (% point)	2.0%	3.8%	-2.9%	-5.8%

A discussion of revisions to all taxes between 2008-09 and 2011-12 is provided in the GERS 2012-13 Revenue Methodology note available on the GERS website.

Revisions to Expenditure Estimates from GERS 2011-12

Table C.5 sets out the changes in estimates of public expenditure in Scotland and the UK between this report and GERS 2011-12. These revisions reflect changes in the underlying CRA data, revisions to the GERS methodology and revisions to the data sources used to apportion non identifiable expenditure to Scotland. Revisions to public expenditure that can be traced to changes in the CRA database are specified separately.

Total public sector expenditure for Scotland in 2011-12 has been revised up by £412 million, 0.6% of the previous estimate. For the UK as a whole, total expenditure has been revised up by £716 million in 2011-12, 0.1% of the previous estimate.

Table C.5: Revisions to Estimates of Total Managed Expenditure: 2008-09 to 2011-12

	(£ million)
	2008-09	2009-10	2010-11	2011-12
Scotland
Estimates published in GERS 2011-12	58,953	62,049	64,030	64,457
Estimates published in GERS 2012-13	59,440	62,087	64,095	64,869
Revision	487	38	65	412
Of which revisions to TES made in CRA 2013	-53	-83	-147	-326
UK
Estimates published in GERS 2011-12	630,796	671,503	692,354	693,599
Estimates published in GERS 2012-13	635,626	673,402	694,705	694,315
Revision	4,830	1,899	2,351	716
Of which revisions to TES made in CRA 2013	-1,631	-1,901	-1,816	-7,488
Scotland/UK Ratio
Estimates published in GERS 2011-12	9.3%	9.2%	9.2%	9.3%
Estimates published in GERS 2012-13	9.4%	9.2%	9.2%	9.3%
Revision (% point)	0.0%	0.0%	0.0%	-0.1%

There have been revisions to the estimates of total expenditure on services (TES) in the latest CRA, particularly in 2011-12. This follows the replacement of the previous cross government public spending database, the Combined Online Information System (COINS), with the Online System for Central Accounting and Reporting (OSCAR). This change has resulted in a smaller amount of expenditure being classified as identifiable to a UK region or country. HM Treasury note that whilst great efforts have been made to ensure that data are on a comparable basis to the previous year, differences exist in data at the lowest level. This is evident in Table C.6. As such, caution should be used in interpreting revisions from the previous publication.

Table C.6: Revisions to Estimates of Public Sector Expenditure: Scotland and UK 2011-12

	(£ million)		(%)
	Scotland	UK	Scotland	UK
General public services
Public and common services	145	-954	9.8%	-7.5%
International services	-84	-993	-11.2%	-11.1%
Public sector debt interest	27	371	0.7%	0.8%
Defence	-44	-457	-1.3%	-1.2%
Public order and safety	302	-284	11.8%	-0.9%
Economic affairs
Enterprise and economic development	-41	1,521	-4.6%	45.8%
Science and technology	-72	-21	-21.5%	-0.6%
Employment policies	115	809	88.5%	41.3%
Agriculture, forestry and fisheries	-11	-49	-1.1%	-0.8%
Transport	69	-163	2.6%	-0.8%
Environment protection	-60	-754	-4.9%	-6.7%
Housing and community amenities	-95	-545	-5.5%	-5.2%
Health	-20	-39	-0.2%	0.0%
Recreation, culture and religion	-53	-360	-3.3%	-2.7%
Education and training	-213	-4,752	-2.8%	-5.2%
Social protection	-497	-1,814	-2.3%	-0.7%
Accounting adjustments	947	9,199	40.5%	34.1%
Total revision	412	716	0.6%	0.1%

Revisions to Fiscal Aggregates from GERS 2011-12

Table C.7 shows revisions to the current budget balance from the previous publication of GERS.

Table C.7: Revisions to Estimates of the Current Budget Balance: 2008-09 to 2011-12

	(£ million)
	2008-09	2009-10	2010-11	2011-12
Estimates published in GERS 2011-12
Excluding North Sea revenue	-10,718	-15,558	-15,726	-13,972
Including North Sea revenue (per capita share)	-9,630	-15,013	-14,989	-13,030
Including North Sea revenue (geographical share)	1,034	-9,649	-7,684	-3,398
UK	-51,290	-110,328	-102,504	-92,297
Estimates published in GERS 2012-13
Excluding North Sea revenue	-10,695	-15,235	-15,753	-14,632
Including North Sea revenue (per capita share)	-9,647	-14,732	-15,049	-13,684
Including North Sea revenue (geographical share)	883	-9,556	-8,299	-4,632
UK	-50,808	-108,900	-100,546	-88,663
Difference (£ million) (positive shows improvement)
Excluding North Sea revenue	23	323	-27	-660
Including North Sea revenue (per capita share)	-17	280	-59	-654
Including North Sea revenue (geographical share)	-151	93	-615	-1,234
UK	482	1,428	1,958	3,634

Scotland's current budget balance excluding North Sea revenue in the years 2008-09 and 2009-10 is broadly unchanged, or changed in line with the UK. In 2010-11 and 2011-12, Scotland's position worsens whilst the UK position improves. In 2010-11 this is driven by downward revisions to the estimates of corporation tax in Scotland. In 2011-12 this reflects the upward revisions to expenditure discussed above. Including a share of the North Sea, Scotland's current budget balance has worsened in all years other than 2009-10, reflecting the downward revision to the estimates of Scotland's illustrative geographical share of North Sea revenues.

Table C.7 shows revisions to the net fiscal balance from the previous publication of GERS. The revisions here follow the same patterns as those for the current budget surplus.

Table C.8: Revisions to Estimates of the Net Fiscal Balance: 2008-09 to 2011-12

	(£ million)
	2008-09	2009-10	2010-11	2011-12
Estimates published in GERS 2011-12
Excluding North Sea revenue	-15,450	-20,385	-19,743	-18,159
Including North Sea revenue (per capita share)	-14,362	-19,839	-19,006	-17,217
Including North Sea revenue (geographical share)	-3,699	-14,475	-11,700	-7,586
UK	-97,539	-158,922	-140,967	-120,963
Estimates published in GERS 2012-13
Excluding North Sea revenue	-15,668	-20,033	-19,777	-18,553
Including North Sea revenue (per capita share)	-14,620	-19,530	-19,072	-17,605
Including North Sea revenue (geographical share)	-4,091	-14,354	-12,322	-8,554
UK	-99,355	-157,293	-139,199	-117,382
Difference (£ million) (positive shows improvement)
Excluding North Sea revenue	-218	352	-34	-394
Including North Sea revenue (per capita share)	-258	309	-66	-388
Including North Sea revenue (geographical share)	-392	121	-622	-968
UK	-1,816	1,629	1,768	3,581

In addition to revisions to the fiscal aggregates themselves, there are also revisions to the fiscal aggregates expressed as a share of GDP due to changes in GDP estimates. These are shown in Tables C.9 and C.10 for the current budget balance and the net fiscal balance respectively. If there had been no revisions to estimates of the current budget balance or net fiscal balance in cash terms, previous estimates of Scotland's fiscal aggregates excluding the North Sea would have improved since the previous publication. This reflects upward revisions to onshore GDP following the update of the Input-Output benchmark year from 2007 to 2009 in May 2013. This is broadly offset by downward revisions to Scotland's geographical share of North Sea GDP made in February 2014. As such, Scotland's fiscal aggregates including a geographical share of the North Sea are largely unchanged.

Table C.9: Impact of Revisions to GDP on Estimates of the Current Budget Balance: 2008-09 to 2011-12

	2008-09	2009-10	2010-11	2011-12
Estimates published in GERS 2011-12	(% of GDP)
Excluding North Sea revenue	-9.3%	-13.8%	-13.1%	-11.2%
Including North Sea revenue (per capita share)	-8.1%	-13.0%	-12.3%	-10.2%
Including North Sea revenue (geographical share)	0.7%	-7.2%	-5.3%	-2.3%
UK	-3.6%	-7.8%	-6.9%	-6.0%
GERS 2011-12 estimate with latest GDP estimates	(% of GDP)
Excluding North Sea revenue	-9.0%	-13.4%	-12.8%	-11.1%
Including North Sea revenue (per capita share)	-7.9%	-12.7%	-12.0%	-10.2%
Including North Sea revenue (geographical share)	0.7%	-7.2%	-5.3%	-2.3%
UK	-3.6%	-7.7%	-6.8%	-6.0%
Change (positive denotes improvement)	(% point difference)
Excluding North Sea revenue	0.2%	0.4%	0.3%	0.1%
Including North Sea revenue (per capita share)	0.2%	0.3%	0.3%	0.1%
Including North Sea revenue (geographical share)	0.0%	0.0%	0.1%	-0.1%
UK	0.0%	0.1%	0.1%	0.1%

Table C.10: Impact of Revisions to GDP on Estimates of the Net Fiscal Balance: 2008-09 to 2011-12

	2008-09	2009-10	2010-11	2011-12
Estimates published in GERS 2011-12	(% of GDP)
Excluding North Sea revenue	-13.4%	-18.1%	-16.5%	-14.6%
Including North Sea revenue (per capita share)	-12.1%	-17.2%	-15.6%	-13.5%
Including North Sea revenue (geographical share)	-2.6%	-10.7%	-8.1%	-5.0%
UK	-6.9%	-11.2%	-9.5%	-7.9%
GERS 2011-12 estimate with latest GDP estimates	(% of GDP)
Excluding North Sea revenue	-13.0%	-17.5%	-16.1%	-14.4%
Including North Sea revenue (per capita share)	-11.9%	-16.8%	-15.2%	-13.4%
Including North Sea revenue (geographical share)	-2.6%	-10.8%	-8.1%	-5.2%
UK	-6.8%	-11.1%	-9.4%	-7.8%
Change (positive denotes improvement)	(% point difference)
Excluding North Sea revenue	0.3%	0.5%	0.4%	0.1%
Including North Sea revenue (per capita share)	0.3%	0.4%	0.3%	0.1%
Including North Sea revenue (geographical share)	0.0%	0.0%	0.1%	-0.1%
UK	0.1%	0.1%	0.1%	0.1%