Government Expenditure & Revenue Scotland 2015-16

Chapter 1: Public Sector Revenue

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 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. ^[12]

Following the implementation of the Scotland Act 2012 and Scotland Act 2016, 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. Chapter 4 provides more information on current and future 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. Table A.5 in Annex A provides analysis of the confidence intervals around revenue estimates based on survey data.

Estimated Revenue 2015-16

Table 1.1 highlights estimated public sector revenue in Scotland and the preliminary outturn data for the UK in 2015-16. 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. In order to report revenue on a National Accounts basis, the international reporting standards used by governments, a number of accounting adjustments are included in the total revenue estimate. These are primarily symmetric adjustments that also form part of expenditure, and therefore have little impact on the net fiscal balance.

Unlike the expenditure accounting adjustments, which are shown in a separate expenditure line, the revenue accounting adjustments are included within different revenue lines, as is set out in Table A.9 in Annex A. In order to aid transparency, a revenue accounting adjustments line has been added to the tables in this chapter. This is a sub-total of revenue, and does not add to the revenue totals reported in the tables.

Total public sector non-North Sea current revenue in Scotland was estimated to be £53.7 billion in 2015‑16. This is equivalent to 7.9% of UK total non-North Sea current revenue which is 0.3 percentage points lower than Scotland's share of the UK population. ^[13] 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.

Table 1.1: Current Revenue: Scotland and UK 2015-16
	Scotland		UK	Scotland as % of UK
	£million	% of total non-North Sea revenue	£ million
Income tax	12,151	22.6%	168,094	7.2%
Corporation tax (excluding North Sea)	3,130	5.8%	42,888	7.3%
Capital gains tax	375	0.7%	7,107	5.3%
Other taxes on income and wealth	234	0.4%	2,791	8.4%
National insurance contributions	9,323	17.4%	113,440	8.2%
VAT	11,228	20.9%	130,414	8.6%
Fuel duties	2,354	4.4%	27,621	8.5%
Stamp duties 1	716	1.3%	14,662	4.9%
Tobacco duties	1,189	2.2%	9,106	13.1%
Alcohol duties	996	1.9%	10,702	9.3%
Betting and gaming duties	225	0.4%	2,153	10.5%
Air passenger duty	275	0.5%	3,040	9.1%
Insurance premium tax	258	0.5%	3,714	7.0%
Landfill tax	147	0.3%	1,044	14.2%
Climate change levy	186	0.3%	1,875	9.9%
Aggregates levy	53	0.1%	348	15.3%
Inheritance tax	278	0.5%	4,720	5.9%
Vehicle excise duty	456	0.9%	5,922	7.7%
Non-domestic rates 2	1,916	3.6%	26,798	7.2%
Council tax	2,122	4.0%	29,122	7.3%
Other taxes, royalties and adjustments 3	1,535	2.9%	17,077	9.0%
Interest and dividends	382	0.7%	6,202	6.2%
Gross operating surplus	3,802	7.1%	44,761	8.5%
Of which, English Housing Associations	-	0.0%	6,847	0.0%
Rent and other current transfers	356	0.7%	4,030	8.8%
Total current revenue (excluding North Sea revenue)	53,689	100%	677,631	7.9%
Of which: revenue accounting adjustments	4,295	8.0%	47,530	9.0%
North Sea Revenue
Population share	6		76	8.2%
Geographical share	60		76	78.5%
Total current revenue (including North Sea revenue)
Population share	53,695		677,707	7.9%
Geographical share	53,748		677,707	7.9%

¹ Includes Land and Buildings Transaction Tax, which replaced UK Stamp Duty Land Tax in Scotland from 1 April 2015. Figures for this tax are shown separately in Chapter 4.
² Excludes non-domestic rates that local authorities pay themselves.
³ This group includes some 11 separate revenues (as set out in the detailed methodology paper on the GERS website). It also contains an accounting adjustment to align the revenue estimates to those in the July 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. ^[14]

Revenues where Scotland has a relatively large share include gross operating surplus ( GOS), which is the operating (or trading) surpluses (or losses) of public bodies. Scotland is estimated to generate approximately 8.5% of UK public sector GOS, slightly higher than Scotland's population share. Scotland's GOS includes 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. ^[15] Scotland's estimated share of UK GOS is lower in this edition of GERS. This is due to the inclusion of English housing associations in the UK figure, as illustrated in Table 1.1.

Scotland tends to also have relatively high shares of duties associated with tobacco and alcohol. This reflects the greater incidence of smoking in Scotland, ^[16] and also the fact that Scotland has higher consumption of spirits than the rest of the UK. ^[17]

Table 1.2 below provides a time series of Scotland's share of the largest UK revenues.

Table 1.2: Non-North Sea Current Revenue: Scotland as share of UK
	per cent of UK revenue
	2011-12	2012-13	2013-14	2014-15	2015-16
Income Tax	7.4%	7.3%	7.2%	7.2%	7.2%
Corporation tax (excl North Sea)	7.3%	7.3%	7.2%	7.3%	7.3%
National insurance contributions	8.1%	8.2%	8.2%	8.2%	8.2%
VAT	8.5%	8.5%	8.6%	8.6%	8.6%
Local authority revenue	7.8%	7.5%	7.3%	7.2%	7.2%
All other revenue	8.6%	8.4%	8.3%	8.2%	8.1%
Total current non-North Sea revenue	8.0%	8.0%	8.0%	7.9%	7.9%
Excluding English HAs	8.1%	8.1%	8.1%	8.0%	8.0%

Note: Local authority revenue consists of non-domestic rates and council tax

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 ( ONS). The ONS ran a consultation on producing public sector finances estimates for the UK country and regions earlier in the year. The report of this consultation has been published, ^[18] and as a result, ONS intend to produce initial estimates during the course of 2017.

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 these 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. While some differences remain, the aim is to ensure a clear understanding of 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 2012-13 and 2014-15, the difference in non-North Sea revenue is primarily due to taxes where GERS has taken on data updates that were not available when HMRC published in October 2015. These include updates to estimates of income tax, national insurance contributions, and VAT.

Estimates of Total Scottish Revenues 2011-12 to 2015-16
	£ million
	2011-12	2012-13	2013-14	2014-15	2015-16
Cash estimates: non-North Sea revenues
GERS	47,328	48,192	50,054	51,765	51,639
HMRC 1	47,165	47,777	49,542	51,313	n/a
Difference	163	416	512	452	n/a
Difference (% GDP)	0.1%	0.3%	0.4%	0.3%	n/a
Cash estimates: geographical share of North Sea revenues
GERS	9,633	5,306	3,999	1,802	60
HMRC 1	9,055	4,887	3,793	1,678	n/a
Difference	578	419	206	125	n/a
Difference (% GDP)	0.4%	0.3%	0.1%	0.1%	n/a
Share of UK total: non-North Sea revenues
GERS	8.0%	8.0%	8.0%	7.9%	7.9%
HMRC 1	8.0%	7.9%	7.9%	7.9%	n/a
Difference (% point)	0.0%	0.0%	0.0%	0.0%	n/a
Share of UK total: geographical share of North Sea revenues
GERS	87.9%	85.1%	84.0%	80.0%	78.5%
HMRC	82.6%	78.4%	79.6%	74.5%	n/a
Difference (% point)	5.3%	6.7%	4.3%	5.5%	n/a

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, 2011-12 to 2015-16

Table 1.4 overleaf shows estimated current revenue in Scotland and the UK between 2011‑12 and 2015-16. Current non-North Sea revenue in Scotland is estimated to have grown by 13.4% between 2011-12 and 2015-16 in nominal terms, less than for the UK as a whole (15.1%). This difference 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 2011-12 and 2015-16. Excluding North Sea revenue, revenue per person in Scotland has been lower than in the UK by approximately £400 per year. Including an illustrative geographical share of North Sea revenue, revenue per person in Scotland is lower than the UK average in 2015‑16 by £400. Prior to 2014-15, Scottish revenue per person including North Sea revenue has been higher than in the UK as a whole, with the difference being quite variable.

The inclusion of English Housing Associations in the UK figures broadly increases revenue per person for the UK by £100 a year.

Table 1.3: Current Revenue Per Person: Scotland and UK 2011-12 to 2015-16
	£ per person
	2011-12	2012-13	2013-14	2014-15	2015-16
Scotland
Excluding North Sea revenue	8,900	9,100	9,400	9,700	10,000
Including North Sea revenue (population share)	9,100	9,200	9,500	9,700	10,000
Including North Sea revenue (geographical share)	10,700	10,100	10,100	10,000	10,000
UK
Excluding North Sea revenue	9,300	9,400	9,800	10,100	10,400
Including North Sea revenue	9,500	9,500	9,800	10,100	10,400
Difference (Scotland minus UK)
Excluding North Sea revenue	-400	-400	-400	-400	-400
Including North Sea revenue (population share)	-400	-400	-400	-400	-400
Including North Sea revenue (geographical share)	1,300	500	300	-100	-400

¹ Figures rounded to nearest £100

Table 1.4: Current Revenue: Scotland and UK 2011-12 to 2015-16
	£ million
	Scotland					UK
	2011-12	2012-13	2013-14	2014-15	2015-16	2011-12	2012-13	2013-14	2014-15	2015-16
Income tax	11,127	11,022	11,277	11,735	12,151	151,262	150,713	156,009	162,342	168,094
Corporation tax (excluding North Sea)	2,430	2,557	2,571	2,920	3,130	33,287	35,040	35,716	39,987	42,888
Capital gains tax	277	321	240	293	375	4,336	3,926	3,907	5,559	7,107
Other taxes on income and wealth	238	253	329	215	234	2,901	3,121	4,119	2,654	2,791
National insurance contributions	8,271	8,588	8,826	9,067	9,323	101,597	104,483	107,306	110,260	113,440
VAT	9,516	9,750	10,364	10,733	11,228	112,057	114,428	120,167	124,846	130,414
Fuel duties	2,275	2,257	2,289	2,314	2,354	26,798	26,571	26,881	27,155	27,621
Stamp duties	511	464	662	735	716	8,919	9,140	12,481	13,779	14,662
Tobacco duties	1,208	1,278	1,242	1,211	1,189	9,878	9,590	9,556	9,251	9,106
Alcohol duties	969	946	972	961	996	10,180	10,139	10,308	10,449	10,702
Betting and gaming duties	122	122	173	185	225	1,221	1,228	1,645	1,776	2,153
Air passenger duty	228	244	270	290	275	2,637	2,818	3,003	3,205	3,040
Insurance premium tax	204	202	211	206	258	3,002	3,033	3,018	2,973	3,714
Landfill tax	131	139	150	147	147	1,075	1,116	1,179	1,125	1,044
Climate change levy	63	61	117	161	186	678	663	1,200	1,626	1,875
Aggregates levy	48	43	44	55	53	283	261	294	357	348
Inheritance tax	170	175	210	229	278	2,955	3,150	3,541	3,879	4,720
Vehicle excise duty	477	481	488	458	456	5,930	6,003	6,121	5,910	5,922
Non-domestic rates	1,954	1,930	1,932	1,914	1,916	23,950	25,047	25,885	26,267	26,798
Council tax	1,919	1,940	1,963	2,011	2,122	25,925	26,306	27,528	28,304	29,122
Other taxes, royalties and adjustments	1,038	1,143	1,290	1,441	1,535	11,948	13,073	14,348	16,188	17,077
Interest and dividends	478	455	418	374	382	6,176	6,091	6,151	6,012	6,202
Gross operating surplus	3,528	3,489	3,695	3,696	3,802	39,839	41,555	43,137	44,139	44,761
Of which: English HAs	0	0	0	0	0	4,859	5,601	6,045	6,521	6,847
Rent and other current transfers	148	331	323	414	356	1,768	3,877	3,717	4,648	4,030
Total current revenue excluding North Sea	47,328	48,192	50,054	51,765	53,689	588,602	601,372	627,216	652,691	677,631
Of which: revenue accounting adjustments	3,754	3,844	3,979	4,042	4,295	41,321	42,522	44,112	45,426	47,530
Population share of North Sea revenue	917	519	395	186	6	10,957	6,234	4,764	2,252	76
Geographical share of North Sea revenue	9,633	5,306	3,999	1,802	60	10,957	6,234	4,764	2,252	76
Total revenue (incl pop share North Sea revenue)	48,245	48,712	50,449	51,951	53,695	599,559	607,606	631,980	654,943	677,707
Total revenue (incl geog share North Sea revenue)	56,961	53,498	54,053	53,567	53,748	599,559	607,606	631,980	654,943	677,707