Government Expenditure and Revenue Scotland 2008-09

3 SCOTLAND'S PUBLIC SECTOR ACCOUNTS

Introduction

This chapter provides a summary of Scotland's public sector accounts for the years 2004-05 to 2008-09. It outlines the latest estimates of public sector revenue in Scotland and expenditure for Scotland, and includes:

• Headline estimates of 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;
• 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 in Scotland and of expenditure for Scotland, not precise financial accounts and should be viewed accordingly.

Financial Sector Interventions

Accounting for the full spectrum of financial sector interventions in the public finances is not straightforward. Indeed, ONS has yet to fully incorporate the various financial accounts of RBS and Lloyds Banking Group into the UK Public Sector Finances ¹¹.

The series of measures undertaken to support the UK financial sector has consisted of three key elements - guarantees, recapitalisation and various loan programmes such as the support provided through the Financial Services Compensation Scheme.

It is important to note that the actual outlay by the government has been much less than the total value of support offered. Many of the provisions, for example the Asset Protection Scheme, would only incur net financial costs if the facility was called upon by participating institutions. Indeed, the full amount would only be realised in a worst case scenario. The stabilisation of markets since these measures were announced has meant that the net outlay from such guarantee schemes is forecast to "not have a material cost on the UK tax payer ¹²".

However other measures, such as the direct recapitalisation of financial institutions, did incur an immediate, but potentially transitory, financial cost and this will be reflected in any assessment of the public finances.

The headline measure of UK public sector net borrowing in the 2009 Pre-Budget Report and the March 2010 Budget, together with the assessment of the public finances undertaken by the Office for Budget Responsibility in June 2010, is referred to as PSNB-ex. This measure classifies the support to the financial sector as a transaction between the public and private sector, even if the transaction involves a financial institution which is deemed to be in the public sector. This reflects the fact that, in time, the government will return ownership of these institutions to the private sector. For example, any programme of recapitalisation is classified as a burden on the public finances, even if the direct result of such an action is to bring this institution into the public sector. Such a measure of net borrowing therefore captures the effects of the various financial interventions on the UK's public finances. In the financial year 2008-09, the net outlay recorded in public sector net borrowing was £8.3 billion, of which, capital expenditure was £9.4 billion and current expenditure -£1.1 billion (a net-revenue). ¹³ These figures include expenditure associated with the recapitalisation of RBS, HBOS and Lloyds TSB, and depositor compensation for Bradford and Bingley, net of all revenues received, including those from fees and payments associated with the various schemes.

This edition of GERS follows two approaches. Firstly, it provides an estimate of Scotland's public sector accounts including a share of the net costs of the various measures to support the financial sector within the estimates of Scotland's current budget and net fiscal balance. These estimates are directly comparable with the headline UK current budget and net borrowing figures presented in the March 2010 Budget. Secondly, it estimates Scotland's public sector accounts without a share of the various interventions to support the financial sector. These estimates are presented to highlight underlying trends in the GERS data from previous years to the latest year, 2008-09. ¹⁴

In tracing the impact of the various financial sector interventions on the public finances, it should be noted that there is an important distinction between the central government net cash requirement ( CGNCR) and net borrowing. CGNCR represents the government's net financing requirement at a given point in time. In contrast, net borrowing is a general assessment of the change in the public sector's net financial indebtedness and is therefore a broader measure of the underlying strength of the public finances. For example, the package of financial recapitalisation for RBS, HBOS and Lloyds TSB is divided into non-financial and financial elements. The financial part represents the value of the equity acquired. The non-financial part, which contributes to government net borrowing, is recorded as the difference between the price paid for the equity and its market price on the day of the purchase. These were worth £6.1 billion in 2008-09 and £6.4 billion in 2009-10. In contrast, the additional outlay to finance the acquisition of equity included a further £30.8 billion in 2008-09 and £23 billion in 2009-10, and it is this full amount which enters the CGNCR.

Treatment of Financial Sector Interventions in GERS

PESA classifies the UK Government's support for the financial sector as UK non-identifiable expenditure - that is HM Treasury has deemed that such interventions are for the benefit of the UK as a whole.

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. This apportionment results in total Scottish expenditure on financial stability measures of £700 million, comprised of £788 million and -£88 million in capital and current expenditure respectively.

Table 3.1: Scotland: Estimated Share of Financial Stability Expenditures: 2008-09

	(£ millions)
	Scotland	UK
Current	-88	-1,049
Capital	788	9,361
Total	700	8,312

These estimates are clearly highlighted in Chapter 5 within expenditure on Enterprise and Economic Development.

Current and Capital Budgets

The following tables set out estimates of public sector revenue and expenditure for Scotland over the financial years 2004-05 to 2008-09. The figures for revenue and expenditure correspond to the estimates contained in Chapters 4, 5 and 6¹⁵.

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 ¹⁶. 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 certain distributive transactions (interest and dividends) payable by 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, the net acquisition of land, and net expenditure through capital grants. Net investment is public sector capital expenditure, net of capital consumption. Capital consumption represents the amount of fixed capital used up each year. It is generally calculated from a model based on assumptions about asset lives and a rolling estimate of the public sector's stock of capital assets derived from annual capital expenditure data.

The term net fiscal balance measures the difference between public sector 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 Scotland's 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 5 contains a discussion of North Sea revenue and the precise definitions used here.

Scotland's Fiscal Balance Including a Share of the UK Government's Financial Sector Interventions

As set out in the Preface, this edition of GERS provides estimates of Scotland's public sector accounts both with and without a share of the expenditure associated with the UK Government's financial sector interventions.

Table 3.2 presents estimates of Scotland's current budget balance and net fiscal balance including a share of the UK Government's financial sector interventions. This is consistent with the methodology used to estimate UK public sector revenue, expenditure and net borrowing in the March 2010 UK Budget and the Pre-Budget Forecasts published by the newly established Office for Budgetary Responsibility in June 2010 ¹⁷.

Table 3.2: Current and Capital Budgets Including Financial Sector Interventions: Scotland 2004-05 to 2008-09

	(£ million)
	2004-05	2005-06	2006-07	2007-08	2008-09
Current Budget
Current revenue
Excluding North Sea revenue	36,983	39,787	42,198	44,966	43,466
Including North Sea revenue (per capita share)	37,422	40,580	42,952	45,627	44,553
Including North Sea revenue (geographical share)	41,515	47,914	49,694	52,417	55,236
Current expenditure	40,814	43,394	45,128	47,962	49,876
Current expenditure accounting adjustment	1,779	2,066	2,261	2,372	2,397
Capital consumption	1,443	1,523	1,518	1,609	1,694
Balance on current budget (surplus is positive, deficit is negative)
Excluding North Sea revenue	-7,053	-7,197	-6,709	-6,976	-10,501
Including North Sea revenue (per capita share)	-6,614	-6,403	-5,955	-6,316	-9,413
Including North Sea revenue (geographical share)	-2,521	931	787	474	1,270
Capital Budget
Capital expenditure	3,704	4,283	4,964	5,243	6,585
Capital expenditure accounting adjustment	321	171	147	85	157
Capital consumption	-1,443	-1,523	-1,518	-1,609	-1,694
Net Investment	2,582	2,931	3,593	3,719	5,047
Net Fiscal Balance (surplus is positive, deficit is negative)
Excluding North Sea revenue	-9,635	-10,127	-10,302	-10,695	-15,548
Including North Sea revenue (per capita share)	-9,195	-9,334	-9,548	-10,035	-14,460
Including North Sea revenue (geographical share)	-5,103	-2,000	-2,806	-3,245	-3,777

Tables 3.3a - 3.3c present the estimates of Scotland's public sector accounts as a percentage of Gross Domestic Product ( GDP), including a share of the UK Government's financial sector interventions. Box 3.2 discusses the process used to estimate Scotland's GDP under the three sets of estimates for North Sea revenue.

Table 3.3a: Current and Capital Budgets Including Financial Sector Interventions (Excluding North Sea Revenue) % GDP: Scotland 2004-05 to 2008-09

	(per cent of GDP)
	2004-05	2005-06	2006-07	2007-08	2008-09
Current Budget
Current revenue
Excluding North Sea revenue	38.4	39.3	39.1	39.2	37.7
Current expenditure	42.4	42.9	41.8	41.8	43.3
Current expenditure accounting adjustment	1.8	2.0	2.1	2.1	2.1
Capital consumption	1.5	1.5	1.4	1.4	1.5
Balance on current budget (surplus is positive, deficit is negative)
Excluding North Sea revenue	-7.3	-7.1	-6.2	-6.1	-9.1
Capital Budget
Capital expenditure	3.8	4.2	4.6	4.6	5.7
Capital expenditure accounting adjustment	0.3	0.2	0.1	0.1	0.1
Capital consumption	-1.5	-1.5	-1.4	-1.4	-1.5
Net Investment	2.7	2.9	3.3	3.2	4.4
Net Fiscal Balance (surplus is positive, deficit is negative)
Excluding North Sea revenue	-10.0	-10.0	-9.6	-9.3	-13.5

Table 3.3b: Current and Capital Budgets Including Financial Sector Interventions (Per Capita Share North Sea Revenue) % GDP: Scotland 2004-05 to 2008-09

	(per cent of GDP)
	2004-05	2005-06	2006-07	2007-08	2008-09
Current Budget
Current revenue
Including North Sea revenue (per capita share)	38.1	39.2	39.0	38.8	37.7
Current expenditure	41.6	42.0	41.0	40.8	42.2
Current expenditure accounting adjustment	1.8	2.0	2.1	2.0	2.0
Capital consumption	1.5	1.5	1.4	1.4	1.4
Balance on current budget (surplus is positive, deficit is negative)
Including North Sea revenue (per capita share)	-6.7	-6.2	-5.4	-5.4	-8.0
Capital Budget
Capital expenditure	3.8	4.1	4.5	4.5	5.6
Capital expenditure accounting adjustment	0.3	0.2	0.1	0.1	0.1
Capital consumption	-1.5	-1.5	-1.4	-1.4	-1.4
Net Investment	2.6	2.8	3.3	3.2	4.3
Net Fiscal Balance (surplus is positive, deficit is negative)
Including North Sea revenue (per capita share)	-9.4	-9.0	-8.7	-8.5	-12.2

Table 3.3c: Current and Capital Budgets Including Financial Sector Interventions (Geographical Share North Sea Revenue) % GDP: Scotland 2004-05 to 2008-09

	(per cent of GDP)
	2004-05	2005-06	2006-07	2007-08	2008-09
Current Budget
Current revenue
Including North Sea revenue (geographical share)	36.7	39.1	38.5	36.7	38.4
Current expenditure	36.0	35.4	35.0	33.6	34.7
Current expenditure accounting adjustment	1.6	1.7	1.8	1.7	1.7
Capital consumption	1.3	1.2	1.2	1.1	1.2
Balance on current budget (surplus is positive, deficit is negative)
Including North Sea revenue (geographical share)	-2.2	0.8	0.6	0.3	0.9
Capital Budget
Capital expenditure	3.3	3.5	3.9	3.7	4.6
Capital expenditure accounting adjustment	0.3	0.1	0.1	0.1	0.1
Capital consumption	-1.3	-1.2	-1.2	-1.1	-1.2
Net Investment	2.3	2.4	2.8	2.6	3.5
Net Fiscal Balance (surplus is positive, deficit is negative)
Including North Sea revenue (geographical share)	-4.5	-1.6	-2.2	-2.3	-2.6

The current budget surplus is defined as current revenue (including capital taxes) less current expenditure and capital consumption.

In 2008-09, excluding North Sea revenue, current expenditure exceeded current revenue in Scotland leading to a current budget deficit of £10.5 billion (or 9.1 per cent of GDP) as presented in Table 3.3a. With a per capita share of North Sea revenue, current expenditure exceeded current revenue in Scotland by £9.4 billion (or 8.0 per cent of GDP - see Table 3.3b).

In 2008-09, including an illustrative geographical share of North Sea revenue, total current revenue exceeded current expenditure for Scotland to yield a current budget surplus of £1.3 billion (or 0.9 per cent of GDP - see Table 3.3c). In 2008-09, the equivalent UK current budget position, including 100 per cent of all North Sea revenue, was a deficit of £48.9 billion (or 3.4 per cent of GDP) ¹⁸.

As Tables 3.2 and 3.3 highlight, any estimate of Scotland's current balance depends on assumptions regarding the allocation of North Sea revenue. Over the period 2005-06 to 2008-09, the estimated current budget balance in Scotland including an illustrative geographical share of North Sea revenue was in surplus. Under the assumption of a geographical share of North Sea revenue, the greatest surplus on the current budget over the past five years was £1.3 billion in 2008-09, with a deficit of £2.5 billion in 2004-05.

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 2008-09, excluding North Sea revenue, total revenue was less than total expenditure yielding an estimated negative net fiscal balance of £15.5 billion (or 13.5 per cent of GDP). With a per capita share of North Sea revenue the estimated negative net fiscal balance for Scotland was £14.5 billion (or 12.2 per cent of GDP). Including an illustrative geographical share of North Sea revenue, total revenue was less than total expenditure for Scotland to yield a negative net fiscal balance of £3.8 billion (or 2.6 per cent of GDP). In 2008-09, the equivalent UK position including 100 per cent of all North Sea revenue, referred to in the UK Budget 2010 Report as 'net borrowing', was a deficit of £96.1 billion (or 6.7 per cent of GDP) ¹⁹.

Over the past five years, excluding North Sea revenue, the largest absolute gap between public sector revenue and expenditure in Scotland was observed in 2008-09 when the net fiscal balance was -£15.5 billion. With a per capita share of North Sea revenue the largest gap was also observed in 2008-09. Under the assumption of an illustrative geographical share of North Sea revenue, the largest gap between public sector revenue and expenditure in Scotland was observed in 2004-05 with an estimated deficit of £5.1 billion. This had fallen to £2.0 billion in 2005-06, but started rising again year on year to £3.8 billion in 2008-09. As a proportion of GDP, the largest deficit, both excluding and with a per capita of North Sea revenue, was in 2008-09. However, with an illustrative geographical share of North Sea revenue the largest deficit was in 2004-05.

Scotland's Fiscal Balance Not Including a Share of the UK Government's Financial Sector Interventions

The tables below estimate Scotland's current budget balance and net fiscal balance without a share of the various interventions to support the financial sector. These estimates are presented to highlight underlying trends in the GERS data from previous years to the latest year, 2008-09 ²⁰.

Table 3.4: Current and Capital Budgets: Scotland 2004-05 to 2008-09 (£ Million) Not Including Financial Sector Interventions

	(£ million)
	2004-05	2005-06	2006-07	2007-08	2008-09
Balance on current budget (surplus is positive, deficit is negative)
Excluding North Sea revenue	-7,053	-7,195	-6,708	-6,965	-10,530
Including North Sea revenue (per capita share)	-6,613	-6,402	-5,954	-6,305	-9,443
Including North Sea revenue (geographical share)	-2,520	933	788	485	1,240
Net Fiscal Balance (surplus is positive, deficit is negative)
Excluding North Sea revenue	-9,636	-10,128	-10,303	-10,732	-14,728
Including North Sea revenue (per capita share)	-9,196	-9,335	-9,550	-10,071	-13,640
Including North Sea revenue (geographical share)	-5,103	-2,000	-2,808	-3,281	-2,957

Table 3.5: Current and Capital Budgets: Scotland 2004-05 to 2008-09 (% of GDP) Not Including Financial Sector Interventions

	(per cent of GDP)
	2004-05	2005-06	2006-07	2007-08	2008-09
Balance on current budget (surplus is positive, deficit is negative)
Excluding North Sea revenue	-7.3	-7.1	-6.2	-6.1	-9.1
Including North Sea revenue (per capita share)	-6.7	-6.2	-5.4	-5.4	-8.0
Including North Sea revenue (geographical share)	-2.2	0.8	0.6	0.3	0.9
Net Fiscal Balance (surplus is positive, deficit is negative)
Excluding North Sea revenue	-10.0	-10.0	-9.6	-9.4	-12.8
Including North Sea revenue (per capita share)	-9.4	-9.0	-8.7	-8.6	-11.5
Including North Sea revenue (geographical share)	-4.5	-1.6	-2.2	-2.3	-2.1

In 2008-09, when a share of the UK Government's financial sector interventions are not included, Scotland is estimated to have a current budget deficit of £10.5 billion (9.1 per cent of GDP) excluding North Sea revenue, and a current budget deficit of £9.4 billion (8.0 per cent of GDP) when a per capita share of North Sea revenue is assigned to Scotland. In 2008-09, including an illustrative geographical share of North Sea revenue, Scotland is estimated to have a current budget surplus of £1.2 billion (0.9 per cent of GDP) when the impact of the UK Government's financial sector interventions are not included. ²¹

Not including a share of the UK Government's financial sector interventions, Scotland's net fiscal balance is estimated to have been a deficit of £14.7 billion (12.8 per cent of GDP) in 2008-09 excluding North Sea revenue, and a deficit of £13.6 billion (11.5 per cent of GDP) including a per capita share of North Sea revenue. When an illustrative geographical share of North Sea revenue is included, Scotland is estimated to have a net fiscal deficit of £3.0 billion (2.1 per cent of GDP), not including a share of the UK Government's financial sector interventions.

Box 3.1 - Current Budget Balance and Net Fiscal Balance

Scotland's current budget balance illustrates the difference between current revenue and current expenditure, including capital consumption and an accounting adjustment. 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 important indicator of intertemporal fairness and indicates the sustainability of current policies. National governments typically aim to manage current surpluses and deficits to ensure balance over the longer term and that any systematic excess of total expenditure over and above revenue is used only for capital expenditure, which will accrue benefits to future tax payers. This capital expenditure must itself be managed responsibly.

Box 3.2: Scotland's GDP with and without North Sea GDP

When calculating Scotland's capital and current budgets as a percentage of GDP, the measure of GDP used must adopt the same assumptions made in the corresponding budget calculations. When Scotland's public sector accounts are presented excluding North Sea revenue, they are expressed as a percentage of Scotland's GDP excluding the amount of GDP arising from North Sea activities. Scottish GDP Including and Excluding North Sea GDP: 2004-05 to 2008-09 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 per cent of North Sea revenue is included in the Scottish estimate, then 100 per cent of North Sea GDP will be included in Scotland's corresponding GDP figure. Scotland's GDP figures under the three sets of estimates presented above are reflected in the following table. (£ million) 2004-05 2005-06 2006-07 2007-08 2008-09 Scottish GDP Excluding North Sea GDP 96,258 101,136 107,871 114,747 115,286 Including per capita share of North Sea GDP 98,096 103,440 110,148 117,544 118,189 Including geographical share of North Sea GDP 113,259 122,599 128,929 142,725 143,834 Estimates of Gross Domestic Product at current market prices used in the GERS publication are calculated using an income approach in which estimates of Compensation of Employees, Gross Operating Surplus and Taxes, less subsidies, on production are added to an estimate of taxes, less subsidies, on products (final consumption taxes) to form a headline estimate for Scotland. As part of the Scottish National Accounts Project ( SNAP), a programme of work designed to improve the collection and reporting of economic statistics in Scotland, these estimates are now released quarterly (in experimental form). Further information can be obtained from the SNAP website - http://www.scotland.gov.uk/snap22.

Expenditure

This section presents summary results of estimates of public sector expenditure for Scotland (excluding accounting adjustments) for the years 2004-05 to 2008-09. Table 3.6 provides estimates for the six largest functions of public sector expenditure. The share of the UK Government's expenditure on financial sector interventions assigned to Scotland is also separately identified. Total public sector expenditure for Scotland is reported with and without Scotland's estimated share of the UK Government's financial sector interventions. For a discussion and more detailed breakdown of expenditure, refer to Chapter 6 and Appendix B.

Table 3.6: Summary of Total Public Sector Expenditure: Scotland 2004-05 to 2008-09

	(£ million)
	2004-05	2005-06	2006-07	2007-08	2008-09
Social protection	15,329	15,847	16,087	17,110	18,571
Health	7,758	8,606	9,102	9,810	10,244
Education and training	6,145	6,570	7,137	7,360	7,563
General public services	3,954	4,366	4,346	4,584	4,856
Defence	2,524	2,613	2,714	2,832	3,078
Public order and safety	2,115	2,285	2,279	2,354	2,509
Financial sector interventions	0	0	0	0	700
Other	6,693	7,389	8,428	9,156	8,938
Total
With financial sector interventions	44,518	47,677	50,093	53,205	56,460
Without financial sector interventions	44,518	47,677	50,093	53,205	55,761

In 2008-09, total public sector expenditure for Scotland was estimated to be £56.5 billion when a share of the UK Government's financial sector interventions is included, and £55.8 billion not including this share. This represented nominal increases of 26.8 per cent and 25.3 per respectively since 2004-05. Health and education and training expenditure experienced the greatest relative increases, rising by approximately 32.1 per cent and 23.1 per cent respectively in nominal terms over these five years.

Box 3.3: Total Managed Expenditure as a Share of GDP23

In 2008-09 aggregate public expenditure for Scotland, as measured by Total Managed Expenditure ( TME) was £59 billion, when a share of the UK Government's financial sector interventions is included. This measure of expenditure is comparable to the headline measures of UKTME published in the March 2010 UK Budget, and the Office for Budgetary Responsibility's June 2010 Pre-Budget Forecasts. Total Managed Expenditure for Scotland Including Financial Sector Interventions: 2004-05 to 2008-09 (£ million) 2004-05 2005-06 2006-07 2007-08 2008-09 Current expenditure 40,814 43,394 45,128 47,962 49,876 Current expenditure accounting adjustment 1,779 2,066 2,261 2,372 2,397 Capital expenditure 3,704 4,283 4,964 5,243 6,585 Capital expenditure accounting adjustment 321 171 147 85 157 Total Managed Expenditure With Financial Interventions 46,617 49,914 52,500 55,661 59,014 The table below presents the estimates of TME as a share of GDP under the three sets of estimates of GDP. In 2008-09, the ratio of TME for Scotland to GDP was 51.2 per cent excluding North Sea GDP and 49.9 per cent including a per capita share. This ratio falls to 41.0 per cent when an illustrative geographical share of North Sea GDP is included. Such statistics provide a useful illustration of the relative size of public spending between countries by controlling for the size of the economy. They should not, 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 for Scotland Including Financial Sector Interventions as a Share of GDP: 2004-05 to 2008-09 (per cent of GDP) 2004-05 2005-06 2006-07 2007-08 2008-09 Share of GDP: Excluding North Sea GDP 48.4% 49.4% 48.7% 48.5% 51.2% Including per capita share of North Sea GDP 47.5% 48.3% 47.7% 47.4% 49.9% Including geographical share of North Sea GDP 41.2% 40.7% 40.7% 39.0% 41.0% Not including a share of the UK Government's financial sector interventions, TME for Scotland was estimated to be £58.2 billion in 2008-09, as illustrated in the tables below. This is equivalent to 50.5 per cent of Scottish GDP when North Sea GDP is excluded, and 49.3 per cent of GDP when Scotland is assigned a population share of North Sea GDP. Including an illustrative geographical share of North Sea GDP the ratio falls to 40.5 per cent. Total Managed Expenditure for Scotland Not Including Financial Sector Interventions: 2004-05 to 2008-09 (£ million) 2004-05 2005-06 2006-07 2007-08 2008-09 Current expenditure 40,814 43,394 45,128 47,962 49,964 Current expenditure accounting adjustment 1,782 2,070 2,268 2,385 2,383 Capital expenditure 3,704 4,283 4,964 5,243 5,797 Capital expenditure accounting adjustment 322 173 149 126 86 Total Managed Expenditure Without Financial Interventions 46,622 49,919 52,509 55,716 58,229 Total Managed Expenditure for Scotland Not Including Financial Sector Interventions as a Share of GDP: 2004-05 to 2008-09 (per cent of GDP) 2004-05 2005-06 2006-07 2007-08 2008-09 Share of GDP: Excluding North Sea GDP 48.4% 49.4% 48.7% 48.6% 50.5% Including per capita share of North Sea GDP 47.5% 48.3% 47.7% 47.4% 49.3% Including geographical share of North Sea GDP 41.2% 40.7% 40.7% 39.0% 40.5%

Current Revenue

This section summarises the estimates of public sector revenue in Scotland for the years 2004-05 to 2008-09. Table 3.7 provides estimates of Scottish public sector current revenue by economic category. A more detailed discussion and breakdown of revenue is provided in Chapters 4, 5 and in Appendix A.

Table 3.7: Summary of Current Revenue by Economic Category: Scotland 2004-05 to 2008-09

	(£ million)
	2004-05	2005-06	2006-07	2007-08	2008-09
Taxes on income and wealth	11,550	12,911	14,153	15,255	14,320
National insurance contributions	6,533	6,925	7,304	7,873	7,988
Taxes on production and imports	13,482	13,875	14,588	15,250	14,678
Other current taxes	2,225	2,369	2,485	2,594	2,647
Taxes on capital	164	198	227	269	178
Gross operating surplus	2,103	2,492	2,505	2,566	2,613
Rent and other current transfers	388	413	382	395	381
Interest and dividends from private sector and abroad	537	602	554	766	659
Total current non-North Sea revenue	36,983	39,787	42,198	44,966	43,466
North Sea revenue
Per capita share	440	793	754	660	1,088
Geographical share	4,532	8,128	7,496	7,450	11,771
Total current revenue (including North Sea revenue)
Per capita share	37,422	40,580	42,952	45,627	44,553
Geographical share	41,515	47,914	49,694	52,417	55,236

In 2008-09, total current revenue, excluding revenue from the North Sea was estimated to be approximately £43.5 billion. This represented a nominal increase of 17.5 per cent from the £37.0 billion estimated to have been raised in 2004-05. This was largely a consequence of increased revenue from taxes on income and wealth, national insurance contributions, gross operating surplus and interest and dividends from the private sector and abroad. It is interesting to note that for a number of key taxes, the cash value raised in 2008-09 was lower than in 2007-08. This reflects the impact of the credit crunch on economic activity and corresponding fall in tax revenues. A detailed discussion of these effects is provided in Box 4.3.

As Table 3.7 highlights, there was a significant increase in revenue from the North Sea from 2005-06 onwards. In 2004-05, Scotland's estimated geographical share of North Sea revenue was estimated at approximately £4.5 billion, but in 2008-09, this figure had increased to £11.8 billion. A similar relative increase was observed under a per capita apportionment though the overall impact was much smaller.