Government Expenditure & Revenue Scotland 2014-15

B Revisions

This section presents revisions from the previous GERS 2013-14 publication.

Revisions to Non-North Sea Revenue Estimates from GERS 2013-14

Table B.1 summarises the revisions in this edition of GERS. Scotland's share of UK revenues is in general unchanged.

Table B.1: Revision to Estimates of Total Non-North Sea Revenue (£ Millions)

	2010-11	2011-12	2012-13	2013-14
Scotland
Estimates published in GERS 2013-14	45,523	47,279	48,321	49,958
Estimates published in GERS 2014-15	45,530	47,246	48,276	50,051
Revision (£m)	7	-34	-45	93
UK
Estimates published in GERS 2013-14	564,109	582,450	595,223	619,443
Estimates published in GERS 2014-15	564,832	583,267	596,299	620,853
Revision (£m)	723	817	1,076	1,410
Scotland/UK ratio
Estimates published in GERS 2013-14	8.1%	8.1%	8.1%	8.1%
Estimates published in GERS 2014-15	8.1%	8.1%	8.1%	8.1%
Revision (% point)	0.0%	0.0%	0.0%	0.0%

Revisions to Scottish estimates stem from three sources: revisions to UK totals; revisions to apportionment data; and updated apportionment methodologies. The net effect of all of the changes has been to increase the estimate of public sector revenue in Scotland by £93 million, an increase of 0.2%, and the estimate of UK revenue by £1.4 billion.

The impact of the methodological changes is shown in the table below.

Table B.2: Methodological Revisions to Estimates of Non-North Sea Revenue (£ Millions)

	2010-11	2011-12	2012-13	2013-14
Major methodological updates
Onshore corporation tax	-130	-222	-248	-251
VAT1	141	131	185	309
Student loans interest income	-8	-25	-52	-103
Landfill tax	32	36	40	45
Crown Estate	-10	-11	-9	-10
Total methodological updates	25	-91	-85	-10
Other revisions	-18	57	40	102
Total revision	7	-34	-45	93

¹ VAT revision in 2013-14 combines impact of methodological update and latest Family Spending data

Revisions to onshore corporation tax reflects the alignment of the GERS estimate of corporation tax with HMRC's estimate. The approach taken by HMRC apportions corporation tax on a company-by-company basis, using the employment share of each company in Scotland.

VAT has been revised due to updated sector shares. As discussed in more detail in the revenue methodology paper, Scotland's VAT share is a weighted average of its share of household VAT, government VAT, and VAT from exempt businesses, charities, and house building. The weights for these sectors were previously taken from the ONS Supply and Use Tables, but are now taken from the HMRC VAT Theoretical Tax Liability (VTTL) model. In addition, the estimate of Scotland's VAT receipts has been revised up in 2013-14 due to the latest data from the Family Spending publication.

Estimates of Scottish interest and dividend have been revised down, reflecting the incorporation of Scottish specific data relating to interest income from student loans. Previously, Scotland had been allocated a population share of UK student loans interest income.

Estimates of Scottish landfill tax have been revised up, reflecting the outturn data for Scottish landfill tax since April 2015, which suggests that the Scottish share of UK landfill tax revenue is higher than previously estimated in GERS. More detail is provided in the detailed revenue methodology note.

Estimates of Crown Estate revenue are now based on the share of gross surplus reported in the Crown Estate Scotland Report resulting in small revisions. Estimates of expenditure have also been adjusted using the same source.

Revisions to other revenues are shown in Table B.3 below.

Table B.3: Revision to Estimates of Public Sector Revenue: Scotland and UK 2013-14

	(£ million)		%
	Scotland	UK	Scotland	UK
Income tax	-133	-2	-1.2%	0.0%
Corporation tax (excluding North Sea)	-251	0	-8.9%	0.0%
Capital gains tax	-4	0	-1.5%	0.0%
Other taxes on income and wealth	-4	1	-1.3%	0.0%
National insurance contributions	0	0	0.0%	0.0%
VAT	308	-11	3.1%	0.0%
Fuel duties	75	0	3.4%	0.0%
Stamp duties	23	0	3.6%	0.0%
Tobacco duties	-16	0	-1.3%	0.0%
Alcohol duties	12	0	1.2%	0.0%
Betting and gaming and duties	10	0	6.1%	0.0%
Air passenger duty	22	0	8.8%	0.0%
Insurance premium tax	10	0	5.1%	0.0%
Landfill tax	45	0	43.3%	0.0%
Climate change levy	-3	0	-2.1%	0.0%
Aggregates levy	-6	0	-12.2%	0.0%
Inheritance tax	-30	0	-12.7%	0.0%
Vehicle excise duty	0	0	0.0%	0.0%
Non-domestic rates	0	192	0.0%	0.8%
Council tax	16	0	0.8%	0.0%
Other taxes, royalties and adjustments	197	1,815	17.7%	14.3%
Interest and dividends	-67	-117	-14.2%	-2.0%
Gross operating surplus	-127	-638	-3.2%	-1.7%
Rent and other current transfers	15	170	5.7%	5.4%
Total revision	93	1,410	0.2%	0.2%

Gross operating surplus has been revised down for both Scotland and the UK. For the UK, this reflects downward revision to the estimates of central government gross operating surplus made by the ONS. For Scotland, the revision reflects both the reduction in the UK estimate, and a reduction in the share of central government capital consumption estimated to arise in Scotland in the latest ONS Regional Accounts. Central government gross operating surplus is an accounting concept equal to central government capital consumption, which is included in expenditure. As such, these revisions do not affect the net fiscal balance estimates.

Estimates of Scottish income tax have been revised down reflecting updated apportionment data from the Survey of Personal Incomes for 2013-14.

Revisions to other taxes, royalties, and adjustments primarily reflect revisions to the UK accounting adjustment.

Revisions to the majority of previously published estimates are relatively small and largely explained by revisions made by the ONS to the UK constraining totals for each revenue stream.

Revisions to North Sea Revenue Estimates from GERS 2013-14

Table B.4 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. There are small revisions to Scottish and UK estimates in all years. The Scottish revisions reflect small changes to the estimates of Scotland's illustrative geographical share.

Table B.4: Revisions to North Sea Revenue: 2010-11 to 2013-14

	2010-11	2011-12	2012-13	2013-14
Scotland (illustrative geographical share)
Estimates published in GERS 2013-14	7,459	9,668	5,235	3,996
Estimates published in GERS 2014-15	7,466	9,633	5,289	3,999
Revision	7	-35	55	3
UK
Estimates published in GERS 2013-14	8,406	10,958	6,214	4,766
Estimates published in GERS 2014-15	8,402	10,957	6,215	4,764
Revision	-4	-1	1	-2

A discussion of revisions to all taxes between 2010-11 and 2013-14 is provided in the GERS 2014-15 Revenue Methodology note available on the GERS website.

Revisions to Expenditure Estimates from GERS 2013-14

Table B.5 sets out the changes in estimates of public expenditure in Scotland and the UK between this report and GERS 2013-14. 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 to the total expenditure on services (TES) measure in the HM Treasury CRA database are specified separately.

Total public sector expenditure has been revised up for both Scotland and the UK in all years. For the UK, this primarily reflects upward revisions to the TES to TME accounting adjustments. For the years 2010-11 to 2012-13, these revisions are small, around 0.2% of TME. In 2013-14 the revision is larger.

For Scotland, there a number of reasons for revisions to the data. Firstly, HM Treasury have corrected their estimates of Scottish Local Government spend to include capital expenditure financed from the revenue budget and to exclude inter- and intra-authority charges. Overall these changes reduce spending by £450 million in 2012-13 and £420 million in 2013-14, with smaller amounts in previous years. This primarily affects spending on public and common services and transport.

Secondly, estimates of EU transactions have been adjusted to remove elements of double‑counting. This broadly cancels out the changes to Local Government expenditure described above in 2012‑13 and 2013-14, but leads to an increase in expenditure in earlier years.

In 2011‑12 expenditure on social protection has increased due to a revision to the relevant Scottish Local Government Financial Statistics publication, where some third party payments for social care were misclassified as transfer payments. This increases spending for Scotland by approximately £280 million.

Finally, estimates of Scottish spending on science and technology have increased, following the alignment of estimates of research council spending in GERS with those in the CRA. This change increases spending by approximately £100 million per year.

In 2013-14, Scottish and UK expenditure have both been revised up due to revisions to the TES to TME accounting adjustment. This largely reflects changes to the estimate of UK expenditure which is classed as expenditure on services, and therefore has a regionally identified element of spend. In CRA 2014, expenditure on services in 2013-14 was estimated at £667 billion (94.0% of total expenditure); in CRA 2015 this was revised to £669 billion (92.3% of total expenditure). This revision results in an increase in the amount of UK spend which cannot be identified to a region, and a population share of this non‑identifiable expenditure is allocated to Scotland. The use of a population share is a change from GERS 2013-14, when a spending share was used, but brings the treatment
of non-identifiable expenditure in the accounting adjustment into line with the treatment of non‑identifiable expenditure in the CRA.

Table B.5: Revisions to Estimates of Total Managed Expenditure: 2010-11 to 2013-14

	(£ million)
	2010-11	2011-12	2012-13	2013-14
Scotland
Estimates published in GERS 2013-14	65,112	65,768	67,848	66,388
Estimates published in GERS 2014-15	65,705	66,125	67,746	67,482
Revision	593	357	-102	1,094
Of which revisions to TES	787	668	145	231
Of which revisions to TES to TME accounting adjustment	-194	-311	-247	863
UK
Estimates published in GERS 2013-14	706,520	706,190	720,836	721,489
Estimates published in GERS 2014-15	707,991	707,742	722,081	726,506
Revision	1,471	1,552	1,245	5,017
Of which revisions to TES	447	184	-446	-7,820
Of which revisions to TES to TME accounting adjustment	1,024	1,368	1,691	12,837
Scotland/UK Ratio
Estimates published in GERS 2013-14	9.2%	9.3%	9.4%	9.2%
Estimates published in GERS 2014-15	9.3%	9.3%	9.4%	9.3%
Revision (% point)	0.1%	0.0%	0.0%	0.1%

The table below shows the revisions to spend in 2013-14 by function.

Table B.6: Revisions to Estimates of Public Sector Expenditure: Scotland and UK 2013-14

	(£ million)
	£ million		%
	Scotland	UK	Scotland	UK
General public services
Public and common services	-154	-1,140	-9.5%	-9.4%
International services	0	2	0.0%	0.0%
Public sector debt interest	3	57	0.1%	0.2%
Defence	-5	-21	-0.2%	-0.1%
Public order and safety	-5	-624	-0.2%	-2.1%
Economic affairs
Enterprise and economic development	-49	254	-4.6%	4.8%
Science and technology	82	-2	24.7%	0.0%
Employment policies	-2	1	-0.5%	0.0%
Agriculture, forestry and fisheries	0	-76	0.0%	-1.4%
Transport	-129	-1,341	-4.2%	-6.6%
Environment protection	-6	-523	-0.5%	-4.5%
Housing and community amenities	30	-1,928	1.9%	-16.4%
Health	36	-152	0.3%	-0.1%
Recreation, culture and religion	-40	-249	-2.7%	-2.1%
Education and training	-36	-1,521	-0.5%	-1.7%
Social protection	-183	-557	-0.8%	-0.2%
Accounting adjustments	1,553	12,836	41.0%	25.8%
Total revision	1,094	5,017	1.6%	0.7%

Revisions to Estimates of Capital Consumption from GERS 2013-14

Table B.7 sets out the changes to estimates of capital consumption in Scotland and the UK between this report and GERS 2013-14. Capital consumption, which represents the capital stock consumed to provide services within the year, is included alongside current expenditure when calculating the current budget balance. It does not affect the estimate of the net fiscal balance.

Table B.7: Revisions to capital consumption: 2010-11 to 2013-14

	£ million
	2010-11	2011-12	2012-13	2013-14
Scotland
Estimates published in GERS 2013-14	3,777	3,746	3,818	4,142
Estimates published in GERS 2014-15	3,770	3,783	3,741	4,070
Revision	-6	37	-78	-72

Unlike for public corporations' expenditure and operating surplus, detailed capital consumption data are not available on a public corporation basis from the ONS, as they are not separately identified within their perpetual inventory model. The Scottish Government is investigating the potential to use public corporation data from the Whole of Government Accounts, which may provide a more stable estimate of Scottish public corporation capital consumption.

Revisions to Fiscal Aggregates from GERS 2013-14

Table B.8 shows revisions to the current budget balance from the previous publication of GERS. Both the UK and Scotland's current budget balances have worsened in all years. This reflects the changes to expenditure discussed above.

Table B.8: Revisions to Estimates of the Current Budget Balance: 2010-11 to 2013-14

	£ million
	2010-11	2011-12	2012-13	2013-14
Estimates published in GERS 2013-14
Excluding North Sea revenue	-16,030	-14,732	-14,851	-13,837
Including North Sea revenue (per capita share)	-15,325	-13,815	-14,334	-13,441
Including North Sea revenue (geographical share)	-8,571	-5,064	-9,616	-9,840
UK	-93,756	-81,921	-83,848	-71,490
Estimates published in GERS 2014-15
Excluding North Sea revenue	-16,598	-15,339	-14,911	-14,332
Including North Sea revenue (per capita share)	-15,893	-14,423	-14,393	-13,936
Including North Sea revenue (geographical share)	-9,132	-5,707	-9,622	-10,332
UK	-94,961	-83,473	-84,760	-73,754
Difference (£ million) (positive shows improvement)
Excluding North Sea revenue	-568	-607	-60	-495
Including North Sea revenue (per capita share)	-568	-608	-60	-496
Including North Sea revenue (geographical share)	-561	-642	-5	-492
UK	-1,205	-1,552	-912	-2,264

Table B.9 shows revisions to the net fiscal balance from the previous publication of GERS. In most years, the revisions pattern is similar to that for the current budget balance.

Table B.9: Revisions to Estimates of the Net Fiscal Balance: 2010-11 to 2013-14

	£ million
	2010-11	2011-12	2012-13	2013-14
Estimates published in GERS 2013-14
Excluding North Sea revenue	-19,589	-18,489	-19,527	-16,430
Including North Sea revenue (per capita share)	-18,885	-17,572	-19,010	-16,034
Including North Sea revenue (geographical share)	-12,130	-8,821	-14,293	-12,434
UK	-134,005	-112,782	-119,399	-97,280
Estimates published in GERS 2014-15
Excluding North Sea revenue	-20,175	-18,879	-19,470	-17,431
Including North Sea revenue (per capita share)	-19,471	-17,963	-18,952	-17,036
Including North Sea revenue (geographical share)	-12,710	-9,247	-14,181	-13,432
UK	-134,757	-113,518	-119,567	-100,889
Difference (£ million) (positive shows improvement)
Excluding North Sea revenue	-586	-391	57	-1,002
Including North Sea revenue (per capita share)	-586	-391	58	-1,002
Including North Sea revenue (geographical share)	-579	-426	112	-999
UK	-752	-736	-168	-3,609

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 B.10 and B.11 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 generally have been largely unchanged.

Table B.10: Impact of Revisions to GDP on Estimates of the Current Budget Balance

	2010-11	2011-12	2012-13	2013-14
Estimates published in GERS 2013-14	(% of GDP)
Excluding North Sea revenue	-13.1%	-11.5%	-11.5%	-10.3%
Including North Sea revenue (population share)	-12.3%	-10.6%	-10.9%	-9.8%
Including North Sea revenue (geographical share)	-5.9%	-3.4%	-6.5%	-6.4%
UK	-5.9%	-5.0%	-5.0%	-4.1%
GERS 2013-14 estimate with latest GDP estimates	(% of GDP)
Excluding North Sea revenue	-13.0%	-11.5%	-11.4%	-10.2%
Including North Sea revenue (population share)	-12.2%	-10.6%	-10.8%	-9.8%
Including North Sea revenue (geographical share)	-5.8%	-3.3%	-6.4%	-6.4%
UK	-6.0%	-5.0%	-5.0%	-4.1%
Change (positive denotes improvement)	(% point difference)
Excluding North Sea revenue	0.1%	0.0%	0.1%	0.0%
Including North Sea revenue (population share)	0.1%	0.0%	0.1%	0.0%
Including North Sea revenue (geographical share)	0.1%	0.0%	0.1%	0.0%
UK	0.0%	0.0%	0.0%	0.1%

Table B.11: Impact of Revisions to GDP on Estimates of the Net Fiscal Balance

	2009-10	2010-11	2011-12	2012-13
Estimates published in GERS 2013-14	(% of GDP)
Excluding North Sea revenue	-16.0%	-14.5%	-15.1%	-12.2%
Including North Sea revenue (population share)	-15.1%	-13.5%	-14.5%	-11.7%
Including North Sea revenue (geographical share)	-8.4%	-5.9%	-9.7%	-8.1%
UK	-8.5%	-6.9%	-7.2%	-5.6%
GERS 2013-14 estimate with latest GDP estimates	(% of GDP)
Excluding North Sea revenue	-15.8%	-14.4%	-15.0%	-12.1%
Including North Sea revenue (population share)	-15.0%	-13.5%	-14.4%	-11.7%
Including North Sea revenue (geographical share)	-8.3%	-5.8%	-9.6%	-8.1%
UK	-8.5%	-6.9%	-7.1%	-5.5%
Change (positive denotes improvement)	(% point difference)
Excluding North Sea revenue	0.1%	0.0%	0.1%	0.0%
Including North Sea revenue (population share)	0.1%	0.0%	0.1%	0.0%
Including North Sea revenue (geographical share)	0.1%	0.0%	0.2%	0.0%
UK	0.0%	0.0%	0.1%	0.1%