Government Expenditure & Revenue Scotland 2015-16

Chapter 3: Public Sector Expenditure

Introduction

This chapter provides detailed estimates of public sector expenditure for Scotland. Expenditure is shown by type of spend, using a presentation based on the UN's Classification of the Functions of Government ( COFOG). Further information is provided in the Glossary in Annex D. Current and capital expenditure are shown separately.

The primary data sources used to estimate Scottish public sector expenditure in GERS are HM Treasury's Public Expenditure Statistical Analyses ^[20] and the supporting Country and Regional Analysis ( CRA). ^[21]

This edition of GERS sees a change in methodology to allow earlier estimates of expenditure to be produced. Whilst expenditure for years prior to 2014-15 continues to be based on the CRA, the 2015-16 estimate is primarily based on data from the Scottish Government accounts system combined with data from HM Treasury's Public Expenditure Statistical Analyses. ^[22] Further information on the methodological change is set out in the detailed expenditure methodology paper available at the link below.
http://www.gov.scot/Topics/Statistics/Browse/Economy/GERS/Methodology.

The presentation of EU Transactions has also changed in this edition of GERS, to align the publication with the presentation used by HM Treasury in Public Expenditure Statistical Analyses. Previously EU Transactions in GERS were included as part of the accounting adjustments line. They are now shown separately.

The EU Transactions line in the tables below shows contributions to the EU, less funding received from the EU by the public sector. Funding received primarily consists of common agricultural policy payments and European regional development funding. The one contribution to the EU which is not included in the EU Transactions line is the traditional own resource contribution. This covers EU customs duties collected by the UK and transferred to the EU. As these are EU duties, neither the revenue nor expenditure is included in the UK Public Sector Finances. However, it is normally included in estimates of the UK's total contribution to the EU budget. This is discussed in Box 3.2.

In order to present expenditure figures on a National Accounts basis, the international reporting standards used by governments, a number of accounting adjustments are included in total expenditure. These are primarily symmetric adjustments that also form part of revenue, and therefore have little impact on the net fiscal balance. Further information is set out in Annex A.

Recent Statistical Classification Decisions

On 30 October 2015, the ONS announced that private providers of registered social housing in England, which includes many housing associations, have been reclassified from the private sector to the public sector. This increases UK capital expenditure (currently included as an accounting adjustment) and UK public sector debt interest in current expenditure. None of this expenditure is apportioned to Scotland in GERS. As a result, Scotland's share of total UK public sector debt interest is lower than a population share in this edition of GERS, as Scotland is apportioned only a population share of UK public sector debt interest excluding English Housing Associations.

The ONS decision only affects bodies in England, and the UK Government has stated its intention to change legislation in this area to return them to the private sector ^[23] . The ONS is currently reviewing the classification of similar bodies in the devolved administrations, with a decision expected later this year. The tables in Chapter 1 show the broad impact on UK revenues as a result of this decision.

As discussed in GERS 2014-15 the ONS reclassified the Special Purpose Vehicle set up to deliver the Aberdeen Western Periphery Route into the public sector. This expenditure has not yet been incorporated into the ONS Public Sector Finances, and as such is not included in either the Scottish or UK expenditure totals in GERS. The treatment of this expenditure is discussed in the Expenditure Accounting Adjustments section in Annex A.

In December 2013, the ONS announced that Network Rail had been reclassified into the public sector. In previous editions of GERS, Network Rail expenditure had been included in the accounting adjustments line. In this edition of GERS, it is included in the accounting adjustments for years 2014-15 and earlier, but included in transport spending in 2015-16. This causes an increase in Other UK Government transport spending in 2015-16, as shown in Table 3.8, with a corresponding reduction in Other UK Government accounting adjustments.

Public Sector Expenditure

Total public sector expenditure for Scotland in 2015-16 is estimated to be £68.6 billion. This is shown by spending category in Table 3.1. This was equivalent to 9.1% of total UK public sector expenditure, shown in Table 3.2.

Table 3.1: Total Expenditure: Scotland 2015-16
	Scotland
	£ million	% of total expenditure
General public services
Public and common services	1,395	2.0%
International services	839	1.2%
Public sector debt interest	2,802	4.1%
Defence	3,030	4.4%
Public order and safety	2,834	4.1%
Economic affairs
Enterprise and economic development	1,042	1.5%
Science and technology	499	0.7%
Employment policies	228	0.3%
Agriculture, forestry and fisheries	839	1.2%
Transport	3,226	4.7%
Environment protection	1,233	1.8%
Housing and community amenities	1,363	2.0%
Health	12,176	17.8%
Recreation, culture and religion	1,430	2.1%
Education and training	7,990	11.7%
Social protection	23,591	34.4%
EU transactions	211	0.3%
Accounting adjustments	3,854	5.6%
Total Expenditure	68,581	100%

Total public sector expenditure for Scotland is estimated to have increased to £68.6 billion in 2015-16, an increase of 1.0% compared to 2014-15. UK public expenditure grew at a similar rate, 0.9%.

Table 3.2: Total Current and Capital Expenditure: Scotland and UK
	£ million
	Scotland					UK
	2011-12	2012-13	2013-14	2014-15	2015-16	2011-12	2012-13	2013-14	2014-15	2015-16
Current	58,734	59,560	60,213	60,961	61,958	645,965	656,120	666,426	673,287	679,528
Capital	7,024	7,935	6,822	6,917	6,623	69,140	74,702	69,487	73,324	73,499
Total	65,758	67,495	67,035	67,879	68,581	715,105	730,822	735,913	746,611	753,027
Of which English HAs	0	0	0	0	0	9,412	8,705	9,654	10,245	10,800

Table 3.3 shows the split of total expenditure between current and capital for Scotland. The capital spending share is quite variable between 2011-12 and 2015-16. This reflects a number of factors, such as the transfer of the Royal Mail Pension Plan into the public sector in 2011-12.

Table 3.3: Current and Capital Expenditure (% of Total Expenditure): Scotland
	per cent
	2011-12	2012-13	2013-14	2014-15	2015-16
Current	89.3%	88.2%	89.8%	89.8%	90.3%
Capital	10.7%	11.8%	10.2%	10.2%	9.7%

Table 3.4 below shows estimates of Scottish and UK public sector expenditure as a share of GDP. This provides an illustration of the relative size of public spending between countries and over time. It is not an estimate of the contribution of public spending to the economy as much of this spending consists of transfers from government to individuals and businesses. Excluding North Sea GDP, public spending in Scotland has been declining, as a share of GDP, since 2011-12. This follows the same trend for the UK as a whole. Including a geographical share of North Sea GDP, public spending as a share of GDP has increased over the five years since 2011-12, reflecting the fall in North Sea GDP over this period.

Table 3.4: Total Managed Expenditure as a Share of GDP
	per cent of GDP
	2011-12	2012-13	2013-14	2014-15	2015-16
Scottish TME as a Share of GDP:
Excluding North Sea GDP	50.6%	50.5%	47.9%	46.9%	46.6%
Including population share of North Sea GDP	49.7%	49.8%	47.2%	46.4%	46.3%
Including geographical share of North Sea GDP	42.9%	44.3%	42.3%	43.1%	43.7%
UK TME as a share of GDP:
100% of North Sea GDP	43.8%	43.2%	41.8%	40.7%	40.1%

Table 3.5 shows estimated total public sector expenditure for Scotland and the UK per person. Since 2011-12, spending per head in Scotland has been between 9.7% and 10.8% higher than the UK average. Around one percentage point of this difference is due to water and sewerage services being provided by the public sector in Scotland, and therefore included in Scottish expenditure, whilst in England and Wales they are operated by the private sector and therefore excluded from UK expenditure. Tables 3.6 and 3.7 show current, capital, and total expenditure for Scotland and the UK respectively.

Table 3.5: Total Expenditure Per Person
	£ per person
	2011-12	2012-13	2013-14	2014-15	2015-16
Scotland	12,400	12,700	12,600	12,700	12,800
UK	11,300	11,500	11,500	11,500	11,500
Difference (Scotland minus UK)	1,100	1,200	1,100	1,100	1,200
Relative Expenditure for Scotland ( UK = 100)	109.9	110.8	109.7	109.9	110.5

Note: Figures rounded to the nearest £100

Box 3.1 Social protection spending in Scotland

Social protection spending is the largest single spending line in GERS, and covers a range of different spend types.

The largest spending element within social protection is expenditure on the state pension by the Department for Work and Pensions ( DWP). This is followed by DWP's spending on other social security such as disability and incapacity related benefits, income support, jobseekers allowance, and housing benefit. Tax credits and child benefit are part of HMRC spending, which also includes universal credit. Scottish Government social security spend includes the Scottish Welfare Fund, Council Tax Reduction Scheme, and Scottish Government expenditure on Discretionary Housing Payments, all of which are administered by Local Authorities.

Some UK social security expenditure, mostly associated with the state pension, is paid to non- UK residents. Scotland is allocated a population share of this expenditure in GERS.

Social protection spending for Scotland (£ million)
	2011-12	2012-13	2013-14	2014-15	2015-16
Social security spending in Scotland
State pension	6,328	6,791	7,051	7,324	7,552
Housing benefit	1,728	1,789	1,770	1,776	1,772
Other DWP social security	5,749	5,795	5,621	5,659	5,734
HMRC child benefit and tax credits	3,173	3,134	3,019	2,957	2,917
Scottish Government social security	418	408	409	412	401
Social security spending in Scotland	17,396	17,917	17,461	17,716	17,975
Share of benefit spending outside UK and corporate spend	479	518	458	545	665
Other social protection
Public sector pensions	732	866	881	961	961
Social care for the elderly	2,096	2,249	2,263	2,230	2,304
Other	954	916	1,265	1,451	1,686
Total social protection	21,657	22,465	22,328	22,903	23,591

Other social protection spending consists primarily of Local Authority expenditure on social care to families and children.

A more detailed breakdown of social security spending is published by DWP, available at the link below.
https://www.gov.uk/government/collections/benefit-expenditure-tables

Spending by different parts of the Public Sector

Table 3.8 below provides a breakdown of Scottish expenditure by the Scottish Government, Local Authorities and Public Corporations and Other UK GoveArnment departments.

Table 3.6: Total Expenditure: Scotland 2011-12 to 2015-16
	£ million
	Current					Capital					Total
	2011-12	2012-13	2013-14	2014-15	2015-16	2011-12	2012-13	2013-14	2014-15	2015-16	2011-12	2012-13	2013-14	2014-15	2015-16
General public services
Public and common services	1,288	1,149	1,268	1,275	1,204	181	145	201	199	191	1,470	1,294	1,469	1,474	1,395
International services	597	598	761	692	675	50	46	52	177	164	647	644	813	869	839
Public sector debt interest	3,520	3,146	3,071	2,760	2,802	0	0	0	0	0	3,520	3,146	3,071	2,760	2,802
Defence	2,412	2,260	2,286	2,270	2,295	821	766	734	765	735	3,233	3,026	3,020	3,035	3,030
Public order and safety	2,666	2,652	2,413	2,679	2,740	216	204	139	123	93	2,883	2,857	2,552	2,802	2,834
Economic affairs
Enterprise and economic development	592	696	803	736	790	250	244	196	182	253	842	941	999	919	1,042
Science and technology	31	20	24	45	113	342	308	370	389	386	373	329	394	434	499
Employment policies	281	244	320	296	226	8	7	7	3	2	289	251	327	299	228
Agriculture, forestry and fisheries	826	770	795	740	694	146	152	168	196	145	972	922	962	936	839
Transport	1,456	1,544	1,565	1,335	1,442	1,266	1,429	1,355	1,470	1,784	2,721	2,973	2,920	2,805	3,226
Environment protection	922	888	909	941	945	234	299	363	299	288	1,156	1,187	1,271	1,241	1,233
Housing and community amenities	218	75	123	125	211	1,506	1,541	1,527	1,575	1,151	1,724	1,616	1,649	1,700	1,363
Health	10,469	10,657	10,866	11,145	11,658	644	682	635	487	518	11,113	11,339	11,501	11,633	12,176
Recreation, culture and religion	1,177	1,290	1,203	1,430	1,166	339	332	243	194	264	1,516	1,622	1,446	1,624	1,430
Education and training	6,854	6,867	6,920	6,981	7,246	688	655	636	634	744	7,542	7,522	7,555	7,615	7,990
Social protection	21,592	22,379	22,310	22,868	23,527	65	87	18	35	64	21,657	22,466	22,328	22,903	23,591
EU Transactions	-83	158	120	250	211	0	0	0	0	0	-83	158	120	250	211
Accounting adjustments	3,914	4,166	4,457	4,392	4,013	270	1,037	179	189	-159	4,184	5,202	4,636	4,582	3,854
Total	58,734	59,560	60,213	60,961	61,958	7,024	7,935	6,822	6,917	6,623	65,758	67,495	67,035	67,879	68,581

Table 3.7: Total Expenditure: UK 2011-12 to 2015-16
	£ million
	Current					Capital					Total
	2011-12	2012-13	2013-14	2014-15	2015-16	2011-12	2012-13	2013-14	2014-15	2015-16	2011-12	2012-13	2013-14	2014-15	2015-16
General public services
Public and common services	10,091	9,722	9,502	9,891	10,336	1,415	1,586	1,825	1,775	1,510	11,506	11,308	11,327	11,666	11,846
International services	7,138	7,177	9,170	8,357	8,157	593	546	621	2,133	1,978	7,731	7,723	9,791	10,490	10,135
Public sector debt interest	44,476	40,354	39,703	36,473	36,724	0	0	0	0	0	44,476	40,354	39,703	36,473	36,724
Defence	28,854	27,142	27,564	27,443	27,772	9,801	9,198	8,838	9,240	8,876	38,655	36,340	36,402	36,683	36,648
Public order and safety	30,486	29,861	28,296	28,370	28,818	1,585	1,410	1,258	1,251	1,367	32,071	31,271	29,554	29,621	30,185
Economic affairs
Enterprise and economic development	3,395	4,079	4,517	4,215	4,606	1,376	942	1,178	862	723	4,771	5,021	5,695	5,077	5,329
Science and technology	370	272	363	496	836	3,253	3,061	3,838	3,983	3,951	3,623	3,333	4,201	4,479	4,787
Employment policies	3,143	2,786	3,573	3,115	2,393	84	79	77	32	21	3,227	2,865	3,650	3,147	2,414
Agriculture, forestry and fisheries	5,507	4,970	4,962	4,690	4,121	270	307	409	516	421	5,777	5,277	5,371	5,206	4,542
Transport	8,197	7,675	7,666	6,616	10,825	11,216	10,864	11,414	13,683	17,236	19,413	18,539	19,080	20,299	28,061
Environment protection	7,743	7,376	7,608	7,813	8,037	2,757	3,288	3,575	3,753	3,572	10,500	10,664	11,183	11,566	11,609
Housing and community amenities	2,725	3,088	2,987	2,855	2,992	7,428	6,869	6,820	7,340	7,019	10,153	9,957	9,807	10,195	10,011
Health	115,347	117,944	121,968	127,651	133,018	5,907	6,358	7,421	6,402	5,685	121,254	124,302	129,389	134,053	138,703
Recreation, culture and religion	9,634	10,666	9,573	10,425	9,379	2,854	2,044	1,837	2,022	2,048	12,488	12,710	11,410	12,447	11,427
Education and training	77,120	76,007	76,508	76,299	75,908	9,359	8,219	8,838	9,450	8,117	86,479	84,226	85,346	85,749	84,025
Social protection	244,248	252,988	254,373	261,015	263,819	596	450	-402	-107	332	244,844	253,438	253,971	260,908	264,151
EU transactions	4,311	6,705	7,210	6,225	7,671	0	0	0	0	0	4,311	6,705	7,210	6,225	7,671
Accounting adjustments	43,180	47,308	50,883	51,338	44,116	10,646	19,481	11,940	10,989	10,643	53,826	66,789	62,823	62,327	54,759
Total	645,965	656,120	666,426	673,287	679,528	69,140	74,702	69,487	73,324	73,499	715,105	730,822	735,913	746,611	753,027

Table 3.8: Total Expenditure: Scottish Government, Local Authorities, Public Corporations, and Other UK Government: Scotland 2011-12 to 2015-16
	£ million
	Scottish Government, LAs and Public Corporations					Other UK Government					Total
	2011-12	2012-13	2013-14	2014-15	2015-16	2011-12	2012-13	2013-14	2014-15	2015-16	2011-12	2012-13	2013-14	2014-15	2015-16
General public services
Public and common services	989	855	1,016	1,009	964	481	439	453	465	431	1,470	1,294	1,469	1,474	1,395
International services	0	0	0	0	0	647	644	813	869	839	647	644	813	869	839
Public sector debt interest	0	0	0	0	0	3,520	3,146	3,071	2,760	2,802	3,520	3,146	3,071	2,760	2,802
Defence	3	3	3	3	0	3,230	3,023	3,016	3,032	3,030	3,233	3,026	3,020	3,035	3,030
Public order and safety	2,601	2,597	2,307	2,567	2,605	282	260	245	235	229	2,883	2,857	2,552	2,802	2,834
Economic affairs
Enterprise and econ development	773	743	782	743	773	69	197	217	175	270	842	941	999	919	1,042
Science and technology	5	5	5	5	5	368	324	390	430	494	373	329	394	434	499
Employment policies	0	0	0	0	0	289	251	327	299	228	289	251	327	299	228
Agriculture, forestry and fisheries	961	912	948	918	824	11	11	15	18	15	972	922	962	936	839
Transport	2,573	2,804	2,750	2,623	2,799	148	169	170	181	427	2,721	2,973	2,920	2,805	3,226
Environment protection	935	944	1,013	950	958	221	242	259	291	275	1,156	1,187	1,271	1,241	1,233
Housing and community amenities	1,724	1,616	1,649	1,700	1,363	0	0	0	0	0	1,724	1,616	1,649	1,700	1,363
Health	10,916	11,184	11,354	11,483	12,002	197	155	147	149	173	11,113	11,339	11,501	11,633	12,176
Recreation, culture and religion	1,088	1,119	1,066	1,142	1,004	428	504	380	482	426	1,516	1,622	1,446	1,624	1,430
Education and training	7,519	7,503	7,541	7,587	7,971	23	19	14	28	19	7,542	7,522	7,555	7,615	7,990
Social protection	5,300	5,513	5,481	5,659	5,805	16,356	16,953	16,848	17,244	17,785	21,657	22,466	22,328	22,903	23,591
EU transactions	0	0	0	0	0	-83	158	120	250	211	-83	158	120	250	211
Accounting adjustments	3,660	3,680	3,743	3,647	3,465	523	1,522	893	934	389	4,184	5,202	4,636	4,582	3,854
Total	39,046	39,477	39,658	40,036	40,536	26,712	28,018	27,377	27,842	28,045	65,758	67,495	67,035	67,879	68,581

Box 3.2: Scotland's Notional Contributions to the European Union Budget

As a member of the European Union ( EU) the UK contributes to the EU budget and receives funding from the EU via a number of programmes.

As discussed at the beginning of this Chapter, the EU Transactions lines in the tables above are produced on a National Accounts basis, and exclude traditional own resource contributions to the EU. These are normally included when reporting on the UK's net contribution to EU budgets. The tables in this box show net payments to the EU including these contributions.

Although contributions to the EU are made by the public sector, funding from the EU is received by both public and non-public sector bodies. Both the EU Transactions line in the above tables and the figures in this box report only on transactions with the EU by the public sector, in common with the presentation used by HM Treasury. EU payments to Higher Education Institutions, which are not part of the public sector, are discussed further below.

Funding the EU Budget

There are three key sources of funding for the EU, which come from each member state:

• Traditional own resource ( TOR) - Agriculture duties and customs duties levied on agriculture and non-agriculture products from outside the EU.
• VAT based own resource - Calculated as a percentage of countries' VAT tax base.
• Gross National Income ( GNI) based own resource - Calculated as a percentage of countries' GNI. This is the EU's single largest source of revenue.

UK Correction (Rebate, or Abatement)

Since 1985, the UK has received a rebate. The UK rebate is broadly equal to 66% of the UK's net contribution (in the previous year). Further detail is available from HM Treasury's European Union Finances 2015 publication.
https://www.gov.uk/government/statistics/european-union-finances-2015

Scotland's contribution to the EU Budget

Scotland does not contribute directly to the EU budget. In this analysis, Scotland is therefore assigned a share of the UK's contribution based on various apportionment methodologies. Scotland's share of the UK's GNI based contribution is estimated using the ratio of Scottish to UK GDP, both including and excluding the North Sea (the non-North Sea share is used in headline GERS estimates). VAT based own resource is assigned to Scotland using Scotland's share of UK VAT receipts, and a population share is used to assign TOR.

Receipts from the EU

Receipts received from the EU are broken down into two categories: public sector receipts and external assistance. Scottish public sector receipts reflect expenditure specifically for Scotland as reported in the Scottish Government's Consolidated Accounts, and include as payments under the Common Agricultural Policy, European Structural Funds, and European Regional Development Funding.

The EU's external assistance budget provides aid to states outside the EU. A share of this expenditure is attributed to the UK based on its contribution to the EU budget. This is shown in the other attributed costs line in the tables below. A population share of this expenditure is assigned to Scotland.

UK's Net Contribution to the EU

Two measures are generally used to illustrate the UK's net contribution to the EU:

• The primary measure is the UK's net contribution to the EU budget - this is calculated as the difference between the UK's gross contribution to the EU budget (less the rebate) and public sector EU receipts.
• A secondary measure is the UK's net payment to EU institutions - this is equal to the UK's net contribution to the EU Budget less its share of the EU's external assistance aid budget.

The table below sets out the latest UK figures, as contained in Table C.1 of Public Expenditure Statistical Analyses, published July 2016.

UK : Transactions with the institutions of the EU, 2011-12 to 2015-16
	£ million
	2011-12	2012-13	2013-14	2014-15	2015-16
GNI based contribution	11,218	12,303	13,845	14,154	12,570
UK abatement	-3,516	-3,172	-4,130	-4,811	-4,068
VAT-based contribution to the EU	2,276	2,398	2,163	2,316	2,751
Expenditure transfers to the EU	9,978	11,529	11,879	11,658	11,253
Receipts to cover collection costs of TOR	-735	-720	-733	-743	-771
TOR	2,940	2,891	2,933	3,006	3,085
Gross contribution to the EU budget	12,184	13,699	14,079	13,921	13,567
Public sector EU receipts	-4,771	-4,022	-3,856	-4,690	-2,811
Net contributions to the EU budget	7,413	9,678	10,223	9,231	10,756
less other attributed costs	163	82	79	0	0
Net payments to EU institutions	7,250	9,595	10,143	9,231	10,756

Source: Public Expenditure Statistical Analyses (July 2016), Table C.1
https://www.gov.uk/government/statistics/public-expenditure-statistical-analyses-2016

Scotland's Net Contribution to the EU

Estimates are provided for Scotland in the table below, showing the GNI contribution assigned using Scotland's share excluding and including the North Sea. As discussed at the beginning of this Chapter, the difference between Scotland's net payments to EU institutions (based on GDP excluding the North Sea) in the table below and the EU Transactions line in Tables 3.6 and 3.8 is Scotland's share of UK TOR.

Scotland: Estimated transactions with the institutions of the EU 2011-12 to 2015-16
	£ million
	2011-12	2012-13	2013-14	2014-15	2015-16
GNI based contribution ( GDP exc North Sea ( NS))	893	972	1,102	1,116	984
GNI based contribution ( GDP inc NS)	1,053	1,110	1,243	1,211	1,046
UK abatement (Population share)	-294	-264	-343	-398	-335
VAT-based payments to the EU	193	204	187	199	237
Expenditure transfers to the EU ( GDP exc NS)	792	912	946	917	885
Expenditure transfers to the EU ( GDP inc NS)	953	1,050	1,087	1,012	948
Receipts to cover collection costs of TOR	-61	-60	-61	-61	-64
TOR	246	241	244	249	254
Gross contribution to the EU budget ( GDP exc NS)	976	1,093	1,128	1,104	1,076
Gross contribution to the EU budget ( GDP inc NS)	1,137	1,230	1,270	1,200	1,138
Public sector EU receipts	-800	-687	-758	-606	-610
Net contributions to the EU budget ( GDP exc NS)	176	406	370	498	465
Net contributions to the EU budget ( GDP inc NS)	337	543	512	594	528
less other attributed costs	14	7	7	0	0
Net payments to EU institutions ( GDP exc NS)	163	399	364	498	465
Net payments to EU institutions ( GDP inc NS)	323	537	505	594	528

EU Payments to Higher Education Institutions

This box has covered the transactions that the Scottish and UK public sector has with the EU. However, the EU also makes payments to bodies outside the public sector, such as Higher Education Institutions ( HEIs), which are considered private sector not-for-profit institutions. The Higher Education Statistics Agency ( HESA) produces statistics on these payments. These payments are not included in the tables shown above as they are not transactions with the public sector and are therefore out of the scope of public sector finances.

Payments to HEIs from the EU include:

• Payments from EU government bodies
• Payments from EU-based charities through an open competitive process
• Payments from EU industry, commerce and public corporations
• Payments from other EU bodies

To illustrate the size of these payments, the table below shows research grants and contracts income from the EU to HEIs for Scotland and the UK for academic years 2010-11 to 2014-15, which is the latest year for which figures are available. This spending is outside the public sector, and therefore has no impact on the figures reported in GERS.

EU Payments to Higher Education Institutions, Academic Year 2010-11 to 2014-15
	£ million
	2010-11	2011-12	2012-13	2013-14	2014-15
Scotland	64.1	74.7	81.4	88.8	94.1
UK	513.0	599.7	690.3	789.2	836.1

Note: The academic year runs from 1 August to 31 July
These figures have been reproduced with the permission of the Higher Education Statistics Agency ( HESA). More details on these statistics can be found on the HESA website ( www.hesa.ac.uk ).

Box 3.3: Private Finance Initiative and Non-Profit Distributing Financing support for Public Private Partnerships ( PPPs)

This box gives an introduction to Public Private Partnerships ( PPPs) and the funding models that have been used in Scotland. It also breaks down unitary charge payments by scheme type, by type of procuring authority and by the sector of the project.

The recent GERS consultation highlighted user interest in data on PPPs, and the Private Finance Initiative ( PFI) funding model. Following this response, the information previously provided in Table A.11 in GERS 2014-15 has been expanded in this box to provide more detail on the unitary charge payments associated with PPPs. This analysis uses sources of publically available data, all brought together into an accompanying spreadsheet for users to examine further if they wish. The spreadsheet is available from the GERS website:
http://www.gov.scot/Topics/Statistics/Browse/Economy/GERS/RelatedAreas

Introduction to PFI, PPPs, and NPD

Public Private Partnerships ( PPPs) are long-term contracts for services that include the provision of associated facilities or properties. Under the contract, the private sector is generally responsible for various roles, including designing and constructing a building or facility, and maintaining and servicing it throughout the contract term. The public sector retains accountability for the main public services. The private sector is responsible for financing the project up front and only receives payment from the public sector once construction has been completed and the services have commenced.

The Private Finance Initiative ( PFI) used to be the UK's preferred form of PPP. In Scotland, the Non-Profit Distributing ( NPD) model has been the Scottish Government's preferred procurement option since 2007. For more information on these schemes, and the data sources used in this box, please see the Scottish Government website:
http://www.gov.scot/Topics/Government/Finance/18232/12308

Unitary Charge Payments

Payments for both PFI and NPD projects take the form of a unitary charge which is usually paid annually over the lifetime of the contract. It is worth emphasising that these payments are already fully reflected in the GERS spending figures. In addition, the table below includes Ministry of Defence projects in Scotland which are procured by and entirely funded by the Ministry of Defence. Scotland is assigned a population share of this expenditure in GERS. Unitary charge payments cover repayment of capital, interest payments and in some cases service charge payments. Figures are shown here for the years 2011-12 to 2015-16 to be consistent with other tables in this report. The underlying spreadsheets on the GERS website have data covering the period back to 1998-99 as well as estimated payments into the 2040s. Additional information about the individual procuring authority (e.g. individual local authority and health board information) and comparisons with the UK are also provided.

Unitary charge payments, 2011-12 to 2015-16
	£ millions
	2011-12	2012-13	2013-14	2014-15	2015-16
By scheme type
Private Finance Initiative	889	924	944	969	1,004
Non-Profit Distributing models 1	39	52	55	59	75
Total Unitary Charge payments	928	977	999	1,028	1,079
By procuring authority
Further Education	2	2	2	2	10
Local Government	459	478	488	496	508
NHS	200	227	235	242	249
Other Scottish Government	105	105	109	118	136
Ministry of Defence	22	23	22	24	25
Scottish Water	139	142	143	146	151
Total Unitary Charge payments	928	977	999	1,028	1,079
By sector of project
Energy	4	4	4	5	5
Further Education	2	2	2	2	10
Health	200	227	235	242	249
IT	1	1	-	-	-
Ministry of Defence	22	23	22	24	25
Offices	3	3	3	3	3
Police	4	4	4	4	4
Prisons	47	45	46	49	49
Schools	419	436	446	453	465
Transport	71	75	78	84	102
Waste	154	157	158	162	168
Total Unitary Charge payments	928	977	999	1,028	1,079
UK Total Unitary Charge Payments	8,504	9,257	9,740	10,189	10,545
Scotland as % UK	10.9%	10.6%	10.3%	10.1%	10.2%

Note: Non-profit distributing models includes projects delivered by the hub model and projects commissioned prior to 2010. Further detail is available at: http://www.gov.scot/Topics/Government/Finance/18232/12308
Source: HM Treasury and Scottish Government figures. See the accompanying spreadsheet for full details of all sources