Government Expenditure & Revenue Scotland 2013-14

EXECUTIVE SUMMARY

• Government Expenditure and Revenue Scotland (GERS) is a National Statistics publication. It estimates the contribution of revenue raised in Scotland towards the goods and services provided for the benefit of Scotland under the current constitutional arrangements. The estimates are consistent with the UK Public Sector Finances published in January 2015 by the Office of National Statistics (ONS).

Changes to presentation of results

• In line with the changes to UK Public Sector Finances in September 2014, the GERS estimates of Scotland's public sector finances are presented consistent with the European System of Accounts 2010 (ESA10). Figures are therefore not directly comparable with previous publications. This publication provides a consistent time series from 2009-10, and a longer time series is available on the GERS website from 1998-99.
• On the ESA10 basis, public revenue, expenditure, and GDP are all higher than previously estimated. This has led to revisions to Scotland's fiscal aggregates in all years. Similar revisions were made to the UK public sector finances following the move to ESA10 in September 2014.
• In addition, estimates of public spending by Scottish Local Authorities in the Country and Regional Analysis (CRA) published by HM Treasury, a key data source used in GERS, have been revised in line with the latest outturn figures published by the Scottish Government, which were not previously available. This affects spending in 2012-13. HMRC have also revised down their estimates of UK North Sea corporation tax for 2011‑12 and 2012-13. These revisions are unrelated to the ESA10 changes. A detailed description of the revisions contained in this publication is provided in Annex C.

Scotland's revenue and expenditure

• Table E.1 shows the three estimates of Scotland's public sector revenue presented in GERS, (i) excluding North Sea revenue, (ii) including a population share of North Sea revenue and (iii) including an illustrative geographical share of North Sea revenue.
• As a percentage of GDP, non-North Sea revenues fell in 2013-14. The main driver for this was National Insurance Contributions growing more slowly than GDP. This will, in part, reflect recent UK Government policy changes which have reduced the yield from National Insurance Contributions.
• Including an illustrative geographical share of the North Sea, there was a larger fall in revenue as a percentage of GDP. This reflects the decline in North Sea revenue, which fell by 24% in 2013-14 compared to 2012-13. This is driven by higher operating costs, which have reduced North Sea profits, and higher levels of capital investment, which reduces companies' tax liabilities.

Table E.1: Total Revenue: Scotland 2009-10 to 2013-14

• Table E.2 below shows estimates of revenue per person for Scotland and the UK. Excluding North Sea revenue, or including a population share of North Sea revenue, revenue per person in Scotland is lower than in the UK by approximately £200 to £300 per year. Including an illustrative geographical share of North Sea revenue, revenue per person in Scotland is higher than the UK average in all years, with the difference being quite variable.

Table E.2: Revenue Per Person: Scotland and UK 2009-10 to 2013-14

Note: Figures rounded to nearest £100

• Table E.3 below shows estimates of total managed expenditure for Scotland and the UK. Scotland's share of UK expenditure is relatively stable over the period, at between 9.2% and 9.4% of UK expenditure.
• Generally, expenditure as a share of GDP has been declining in Scotland and the UK since 2009-10. However, in 2012-13, there was a one-off increase in expenditure associated with the transfer of the Royal Mail Pension Plan into government. This increased expenditure in this year by £9.5 billion for the UK, with a population share of approximately £800 million for Scotland. As a result, there is then a larger fall in expenditure in 2013-14.

Table E.3: Public Sector Total Managed Expenditure: 2009-10 to 2013-14

• Table E.4 below shows expenditure per person for Scotland and the UK. Expenditure for Scotland has been consistently higher per person than the UK average over the period, by approximately 10% a year.

Table E.4: Total Managed Expenditure per person: Scotland & UK 2009-10 to 2013-14¹

¹ Figures rounded to nearest £100

Scotland's Overall Fiscal Position

• GERS provides two measures of Scotland's 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 excluding capital investment. It is shown in Table E.5 below.
• Excluding North Sea revenue, the current budget balance for Scotland tends to move in line with the figure for the UK, although the deficit is larger by six to seven percentage points. When including an illustrative geographical share of the North Sea, the movement in Scotland's current budget balance is more variable. The relatively small fall in the current budget deficit in 2013-14 under this scenario reflects the decline in North Sea revenue in this year.

Table E.5: Current Budget Balance: Scotland and UK 2009-10 to 2013-14

• The net fiscal balance measures the difference between total public sector 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. It is shown in Table E.6 below.
• The net fiscal balance tends to move in the same way as the current budget balance. This reflects the fact that capital spending is relatively stable as a share of total spending over time.
• However, the net fiscal balance for the UK worsens from 2011-12 into 2012-13, whilst the current budget balance remains broadly unchanged. The same is true for Scotland excluding the North Sea. This reflects the one-off increase in capital spending associated with the Royal Mail Pension Plan discussed above.

Table E.6: Net Fiscal Balance: Scotland and UK 2009-10 to 2013-14