Government Expenditure & Revenue Scotland 2014-15

Chapter 1: Public Sector Revenue

Total Public Sector Revenue: Scotland 2014-15

Introduction

This chapter provides detailed estimates of Scottish 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 the methodology paper on the GERS website.^[8]

Following the implementation of the Scotland Act 2012 and the recommendations of the Smith Commission, an increasing amount of revenue is set to be devolved to the Scottish Parliament, whereby direct Scottish measures of these revenues will be available. The first revenues which have been devolved are landfill tax and property transaction taxes, with Scottish revenue collected for these taxes from 2015-16 onwards. Revenues associated with these taxes are presented in Summary Table J of Quarterly National Accounts Scotland and will be presented in GERS 2015-16.^[9] Supplementary tables in Annex A provide more information on current and proposed devolved taxes.

GERS uses a set of data sources and methodologies developed over a number of years following consultation with, and feedback from, users. In some cases, a variety of methodologies could be applied, each leading to different estimates of public sector revenue in Scotland. As discussed in the Preface, HMRC publish estimates of the taxes they collect for the four countries in the UK. Box 1.1 compares the HMRC estimates for Scotland with those in this publication.

Estimated Revenue 2014-15

Table 1.1 highlights estimated public sector revenue in Scotland and the outturn data for the UK in 2014-15. The contribution of each element of revenue to the Scottish total, 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, total public sector non-North Sea current revenue in Scotland was estimated to be £51.6 billion in 2014‑15. This is equivalent to 8.0% of UK total non-North Sea current revenue which is broadly in line with Scotland's share of the UK population.^[10] In general, Scotland's share of most large revenues is close to either its population or GVA share. However, there are some exceptions to this, discussed below.

Gross operating surplus (GOS) is the operating (or trading) surpluses (or losses) of public bodies. It was the fourth largest revenue source in Scotland during 2014-15, and Scotland is estimated to generate approximately 9.8% of UK GOS. Scotland's relatively large share of UK GOS is primarily due to Scottish Water, which is a large contributor to UK public corporations' GOS. The equivalent water companies in England and Wales are outside the public sector and hence do not contribute to UK GOS.^[11]

Table 1.1: Current Revenue: Scotland and UK 2014-15

	Scotland		UK	Scotland as % of UK
	£million	% of total non-North Sea revenue	£ million
Income tax	11,735	22.7%	162,342	7.2%
Corporation tax (excluding North Sea)	2,920	5.7%	39,987	7.3%
Capital gains tax	293	0.6%	5,559	5.3%
Other taxes on income and wealth	215	0.4%	2,654	8.1%
National insurance contributions	8,969	17.4%	110,260	8.1%
VAT	10,734	20.8%	124,846	8.6%
Fuel duties	2,294	4.4%	27,155	8.4%
Stamp duties	735	1.4%	13,779	5.3%
Tobacco duties	1,211	2.3%	9,251	13.1%
Alcohol duties	961	1.9%	10,449	9.2%
Betting and gaming duties	185	0.4%	1,776	10.4%
Air passenger duty	309	0.6%	3,205	9.7%
Insurance premium tax	206	0.4%	2,973	6.9%
Landfill tax	147	0.3%	1,125	13.0%
Climate change levy	163	0.3%	1,626	10.0%
Aggregates levy	54	0.1%	357	15.1%
Inheritance tax	229	0.4%	3,879	5.9%
Vehicle excise duty	456	0.9%	5,910	7.7%
Non-domestic rates1	1,915	3.7%	26,161	7.3%
Council tax	2,008	3.9%	28,304	7.1%
Other taxes, royalties and adjustments2	1,451	2.8%	16,322	8.9%
Interest and dividends	374	0.7%	5,761	6.5%
Gross operating surplus	3,685	7.1%	37,693	9.8%
Rent and other current transfers	390	0.8%	4,390	8.8%
Total current revenue (excluding North Sea revenue)	51,639	100.0%	645,764	8.0%
North Sea Revenue
Population share	187		2,254	8.3%
Geographical share	1,804		2,254	80.0%
Total current revenue (including North Sea revenue)
Population share	51,826		648,018	8.0%
Geographical share	53,443		648,018	8.2%

1. Excludes non-domestic rates that local authorities pay themselves.

2. This group includes some 11 separate revenues (as set out in the detailed methodology paper on the GERS website). The largest revenue is from Renewable Energy Obligation certificates, which is an imputed tax from electricity suppliers. This accounted for an estimated £364 million of the revenue. It is also included as an imputed expenditure, and so has no impact on the current budget or net fiscal balances for Scotland. This group also includes TV Licences and National Lottery Distribution Fund revenue, which together account for a further £460 million of this estimate for Scotland. It also contains a small accounting adjustment to align the revenue estimates to those in the January 2016 UK Public Sector Finances Statistical Bulletin. This adjustment is apportioned to Scotland on a population share basis.

Revenues where Scotland's share of UK revenue is relatively low are those associated with property or assets, such as stamp duties, capital gains tax, and inheritance tax. This reflects the fact that properties and assets in Scotland tend to have lower prices than the UK average.

Scotland tends to have relatively high shares of duties associated with tobacco and alcohol. This reflects the greater incidence of smoking in Scotland, ^[12] and also the fact that Scotland has higher consumption of spirits than the rest of the UK.^[13]

Note that, for most consumption taxes, Scotland's estimated share of UK revenue is based upon data relating to UK residents. This is because there is a lack of data on taxes paid by tourists. As such, GERS assigns Scotland a share of consumption receipts from tourists, in proportion to Scotland's share of UK domestic household consumption.

Table A.12 in Annex A provides analysis of the confidence intervals around revenue estimates based on survey data.

Table 1.2: Non-North Sea Current Revenue: Scotland as share of UK

	(per cent of UK revenue)
	2010-11	2011-12	2012-13	2013-14	2014-15
Income Tax	7.2%	7.4%	7.3%	7.2%	7.2%
Corporation tax (excl North Sea)	7.4%	7.3%	7.3%	7.2%	7.3%
National insurance contributions	8.2%	8.1%	8.1%	8.1%	8.1%
VAT	8.5%	8.5%	8.5%	8.6%	8.6%
Local authority revenue	7.4%	7.4%	7.4%	7.1%	7.1%
All other revenue	8.8%	8.8%	8.8%	8.7%	8.5%
Total current non-North Sea revenue	8.1%	8.1%	8.1%	8.1%	8.0%

Box 1.1: Comparison between GERS and HMRC estimates

Any analysis of public sector receipts in Scotland relies on estimation, and as such alternative estimates are possible. As discussed in the Preface, GERS estimates revenue using a set of apportionment methodologies, refined over a number of years following consultation with and feedback from users.

Further work in this area is also being undertaken by the Office for National Statistics, which is currently consulting on the production of estimates of public sector revenue for each of the Countries and Regions of the UK as part of wider work on public sector finances. The consultation is available at https://www.ons.gov.uk/aboutus/whatwedo/statistics/consultationsandsurveys/allconsultationsandsurveys/consultationoncountryandregionalpublicsectorfinances

Since 2013, HMRC have published estimates of the breakdown of taxes they collect in the four countries of the UK. The latest set of estimates for 2014-15 were published in October 2015.

In most cases, the estimates in GERS and the HMRC publication are very similar. For some taxes, there are definitional differences which mean that the figures in the two publications should not be directly compared. For example, within GERS gross VAT receipts are shown before the deduction of government VAT refunds, whilst HMRC figures present net VAT receipts after the deduction of VAT refunds. For other taxes, notably revenues from oil and gas production, there are methodological differences between the two publications.

HMRC and the devolved administrations are working together to reconcile, and where possible, align methodologies for estimating tax receipts for the UK countries and regions. Estimates of VAT and corporation tax have been more closely aligned in this year's GERS publication. While some differences remain, the aim is to ensure a clar understanding eof the reasons for any differences and highlight these to users and the impact that this may have on any results.

The table below compares the estimates in GERS with those implied by the HMRC publication, both in cash terms and as a share of GDP. In 2013-14 and 2014-15, the difference in onshore revenue is almost entirely due to differences in estimates of VAT. This difference arises from GERS having incorporated the 2013 data from Family Spending published in December 2015, which showed an increase in Scotland's share of UK household spending, and which was not available to HMRC for their October publication.

Estimates of Total Scottish Revenues 2010-11 to 2014-15

	£ million
	2010-11	2011-12	2012-13	2013-14	2014-15
Cash estimates: onshore revenues
GERS	45,530	47,246	48,276	50,051	51,639
HMRC 1	45,810	47,091	48,050	49,865	51,384
Difference	-280	155	226	185	255
Difference (% GDP)	-0.2%	0.1%	0.2%	0.1%	0.2%
Cash estimates: geographical share of North Sea revenues
GERS	7,466	9,633	5,289	3,999	1,804
HMRC1	7,202	9,055	4,872	3,793	1,679
Difference	263	578	417	206	125
Difference (% GDP)	0.2%	0.4%	0.3%	0.1%	0.1%
Share of UK total: onshore revenues
GERS	8.1%	8.1%	8.1%	8.1%	8.0%
HMRC1	8.1%	8.1%	8.1%	8.0%	8.0%
Difference (% point)	0.0%	0.0%	0.0%	0.0%	0.0%
Share of UK total: geographical share of North Sea revenues
GERS	88.9%	87.9%	85.1%	84.0%	80.0%
HMRC	85.7%	82.6%	78.4%	79.6%	74.5%
Difference (% point)	3.1%	5.3%	6.7%	4.3%	5.5%

¹ For revenues not estimated by HMRC, the GERS estimate has been included in the HMRC figure to allow the totals to be comparable

Further information on the HMRC results and methodology is available at: https://www.gov.uk/government/publications/disaggregation-of-hmrc-tax-receipts

Estimated Revenue: Scotland and the UK, 2010-11 to 2014-15

Table 1.4 overleaf shows estimated current revenue in Scotland and the UK between 2010‑11 and 2014-15. Current non-North Sea revenue in Scotland is estimated to have grown by 13.4% between 2010‑11 and 2014-15 in nominal terms, less than for the UK as a whole (14.3%). This primarily reflects the fact that capital gains tax, stamp duties, and inheritance tax have grown more slowly in Scotland than in the UK. In general, revenue in Scotland would be expected to grow more slowly than in the UK as Scotland's population, and therefore tax base, has been growing more slowly.

Table 1.3 shows estimates of revenue per person for Scotland and the UK between 2010-11 and 2014‑15. Excluding North Sea revenue, revenue per person in Scotland is lower than in the UK by approximately £200 to £400 per year. Including an illustrative geographical share of North Sea revenue, revenue per person in Scotland is slightly lower than the UK average in 2014-15, but with the difference not notable when rounded to the nearest £100. In earlier years, Scottish revenue per person including North Sea revenue has been higher than in the UK as a whole, with the difference being quite variable.

Table 1.3: Current Revenue Per Person: Scotland and UK 2010-11 to 2014-15

	2010-11	2011-12	2012-13	2013-14	2014-15
Scotland
Excluding North Sea revenue	8,600	8,900	9,100	9,400	9,600
Including North Sea revenue (population share)	8,800	9,100	9,200	9,500	9,700
Including North Sea revenue (geographical share)	10,100	10,700	10,100	10,100	10,000
UK
Excluding North Sea revenue	9,000	9,200	9,300	9,700	10,000
Including North Sea revenue	9,100	9,400	9,400	9,700	10,000
Difference (Scotland minus UK)
Excluding North Sea revenue	-400	-300	-200	-300	-400
Including North Sea revenue (population share)	-300	-300	-200	-200	-300
Including North Sea revenue (geographical share)	1,000	1,300	700	400	0

¹ Figures rounded to nearest £100

Table 1.4: Current Revenue: Scotland and UK 2010-11 to 2014-15

	(£ million)
	Scotland					UK
	2010-11	2011-12	2012-13	2013-14	2014-15	2010-11	2011-12	2012-13	2013-14	2014-15
Income tax	11,012	11,127	11,022	11,277	11,735	152,167	151,262	150,713	156,009	162,342
Corporation tax (excluding North Sea)	2,598	2,424	2,551	2,566	2,920	35,134	33,207	34,958	35,651	39,987
Capital gains tax	201	277	321	240	293	3,590	4,336	3,926	3,907	5,559
Other taxes on income and wealth	337	238	253	329	215	6,050	2,901	3,121	4,119	2,654
National insurance contributions	7,968	8,270	8,501	8,730	8,969	97,747	101,597	104,483	107,306	110,260
VAT	8,507	9,517	9,754	10,368	10,734	99,523	112,067	114,465	120,215	124,846
Fuel duties	2,304	2,259	2,240	2,271	2,294	27,256	26,798	26,571	26,881	27,155
Stamp duties	577	511	464	662	735	8,931	8,919	9,140	12,481	13,779
Tobacco duties	1,058	1,208	1,278	1,242	1,211	9,305	9,878	9,590	9,556	9,251
Alcohol duties	913	969	946	972	961	9,434	10,180	10,139	10,308	10,449
Betting and gaming duties	98	122	122	173	185	1,069	1,221	1,228	1,645	1,776
Air passenger duty	185	228	243	273	309	2,183	2,637	2,818	3,003	3,205
Insurance premium tax	174	204	202	211	206	2,509	3,002	3,033	3,018	2,973
Landfill tax	129	131	139	150	147	1,094	1,075	1,116	1,179	1,125
Climate change levy	61	63	61	117	163	660	678	663	1,200	1,626
Aggregates levy	55	48	43	43	54	294	283	261	294	357
Inheritance tax	175	170	175	210	229	2,722	2,955	3,150	3,541	3,879
Vehicle excise duty	470	477	481	488	456	5,789	5,930	6,003	6,121	5,910
Non-domestic rates	1,863	1,954	1,930	1,927	1,915	22,664	23,934	25,031	25,756	26,161
Council tax	1,904	1,917	1,935	1,957	2,008	25,706	25,925	26,285	27,533	28,304
Other taxes, royalties and adjustments	874	1,033	1,182	1,305	1,451	9,668	11,911	13,556	14,492	16,322
Interest and dividends	419	444	416	404	374	5,163	5,611	5,446	5,664	5,761
Gross operating surplus	3,522	3,532	3,705	3,846	3,685	34,673	35,455	36,968	37,643	37,693
Rent and other current transfers	124	124	309	288	390	1,501	1,505	3,635	3,331	4,390
Total current revenue (excluding North Sea revenue)	45,530	47,246	48,276	50,051	51,639	564,832	583,267	596,299	620,853	645,764
North Sea revenue
Population share	704	917	518	395	187	8,402	10,957	6,215	4,764	2,254
Geographical share	7,466	9,633	5,289	3,999	1,804	8,402	10,957	6,215	4,764	2,254
Total current revenue (including North Sea revenue)
Population share	46,234	48,162	48,794	50,446	51,826	573,234	594,224	602,514	625,617	648,018
Geographical share	52,996	56,878	53,565	54,050	53,443	573,234	594,224	602,514	625,617	648,018

Box 1.2: Comparison of Scottish revenue estimates with other parts of the UK (Experimental Statistics)

The chart below provides experimental estimates of public sector receipts for each of the UK countries and regions using the GERS methodology. Full details of the methodology is available on the GERS website: http://www.gov.scot/Topics/Statistics/Browse/Economy/GERS/RelatedAreas

We welcome user feedback about this analysis, including comments on the methods used. Please feedback to economic.statistics@gov.scot.

The chart below shows estimates of public sector revenue per person for each of the UK countries and regions relative to the UK average. Scotland is estimated to raise the joint fourth most onshore revenue per person of the UK countries and regions. When an illustrative geographical share of North Sea revenue is included, revenue per person in Scotland is estimated to be the fourth highest of the UK countries and regions, behind London, the South East, and East England. Scotland and Northern Ireland have some revenue associated with the gross operating surpluses of their public sector water and sewerage bodies.

The ONS is currently consulting on the production of Public Sector Finance statistics for the Countries and Regions of the UK. The consultation is available at https://www.ons.gov.uk/aboutus/whatwedo/statistics/consultationsandsurveys/allconsultationsandsurveys/consultationoncountryandregionalpublicsectorfinances

Revenue per person, 2014-15

Note: Relative revenue per person when a population share of the North Sea is assigned to each country and region is the same as onshore revenue.