Government Expenditure & Revenue Scotland 2015-16

Annex B: Revisions

This section presents revisions from the previous GERS 2014-15 publication.

Revisions to Non-North Sea Revenue Estimates from GERS 2014-15

Table B.1 summarises the revisions in this edition of GERS to total non-North Sea revenue.

Table B.1: Revision to Estimates of Total Non-North Sea Revenue
	£ million
	2011-12	2012-13	2013-14	2014-15
Scotland
Estimates published in GERS 2014-15	47,246	48,276	50,051	51,639
Estimates published in GERS 2015-16	47,328	48,192	50,054	51,765
Revision	82	-84	3	126
UK
Estimates published in GERS 2014-15	583,267	596,299	620,853	645,764
Estimates published in GERS 2015-16	588,602	601,372	627,216	652,691
Revision	5,335	5,073	6,363	6,927
Revision excluding English HAs	476	-528	318	406
Scotland/ UK ratio
Estimates published in GERS 2014-15	8.1%	8.1%	8.1%	8.0%
Estimates published in GERS 2015-16	8.0%	8.0%	8.0%	7.9%
Revision (% point)	-0.1%	-0.1%	-0.1%	-0.1%

Revisions to Scottish estimates can stem from three sources: revisions to UK totals; revisions to apportionment data; and updated apportionment methodologies. There have been no methodological changes to revenue in GERS 2015-16. The net effect of all of the changes has been to increase the estimate of public sector revenue in Scotland by £126 million, an increase of 0.2%. The UK estimate has been revised by £6.9 billion, reflecting the reclassification of Housing Associations which increases UK gross operating surplus and interest and dividends.

The UK total for rent and other current transfers has been revised up in all periods, and this is the main driver of revisions to Scottish revenue in 2011-12. Revisions in 2012-13 and 2013‑14 reflect ONS revisions to public corporation gross operating surplus to better align with data from the Whole of Government Accounts.

The revisions to 2014-15 revenue are shown in Table B.2 below. Most revisions are minor and reflect revisions to UK totals. However, Scottish national insurance contributions have been revised up by £98 million, reflecting updated Scottish data received from HMRC.

Table B.2: Revision to Estimates of Public Sector Revenue: Scotland and UK 2014-15
	£ million		%
	Scotland	UK	Scotland	UK
Income tax	0	0	0.0%	0.0%
Corporation tax (excluding North Sea)	0	0	0.0%	0.0%
Capital gains tax	0	0	0.1%	0.0%
Other taxes on income and wealth	0	0	0.0%	0.0%
National insurance contributions	98	0	1.1%	0.0%
VAT	-1	0	0.0%	0.0%
Fuel duties	20	0	0.9%	0.0%
Stamp duties	0	0	0.0%	0.0%
Tobacco duties	0	0	0.0%	0.0%
Alcohol duties	0	0	0.0%	0.0%
Betting and gaming and duties	0	0	0.0%	0.0%
Air passenger duty	-19	0	-6.1%	0.0%
Insurance premium tax	0	0	0.1%	0.0%
Landfill tax	0	0	-0.3%	0.0%
Climate change levy	-2	0	-1.4%	0.0%
Aggregates levy	1	0	2.3%	0.0%
Inheritance tax	0	0	-0.2%	0.0%
Vehicle excise duty	2	0	0.3%	0.0%
Non-domestic rates	-1	106	-0.1%	0.4%
Council tax	3	0	0.2%	0.0%
Other taxes, royalties and adjustments	-10	-134	-0.7%	-0.8%
Interest and dividends	0	251	-0.1%	4.4%
Gross operating surplus	11	6,446	0.3%	17.1%
Rent and other current transfers	24	258	6.2%	5.9%
Total revision	126	6,927	0.2%	1.1%

Revisions to North Sea Revenue Estimates from GERS 2014-15

Table B.3 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. Estimates are mostly unchanged apart from revisions to 2012-13. This reflects updated assessments issued by HMRC.

Table B.3: Revisions to North Sea Revenue: 2011-12 to 2014-15
	£ million
	2011-12	2012-13	2013-14	2014-15
Scotland (illustrative geographical share)
Estimates published in GERS 2014-15	9,633	5,289	3,999	1,804
Estimates published in GERS 2015-16	9,633	5,306	3,999	1,802
Revision	0	17	0	-2
UK
Estimates published in GERS 2014-15	10,957	6,215	4,764	2,254
Estimates published in GERS 2015-16	10,957	6,234	4,764	2,252
Revision	0	19	0	-2

A discussion of revisions to all taxes between 2011-12 and 2014-15 is provided in the GERS 2015-16 Revenue Methodology note available on the GERS website.

Revisions to Expenditure Estimates from GERS 2014-15

Table B.4 sets out the changes in estimates of public expenditure in Scotland and the UK between this report and GERS 2014-15. These reflect revisions to Scottish Government and Scottish Local Government spending data, revisions to UK spending totals, revisions to the GERS methodology and revisions to the data sources used to apportion expenditure to Scotland. Revisions to public expenditure that can be traced to changes to the total expenditure on services ( TES) measure are specified separately.

In 2016, HM Treasury have incorporated a number of definitional changes which affect the size of the TES to TME accounting adjustment. For education, student loans impairments were previously included in TES spending, but were removed as part of the TES to TME adjustments. They have now been removed from TES, and so the TES to TME adjustments are no longer required. This change reduces Scottish education spending by £50 million in 2014‑15. For social protection, some expenditure associated with personal tax credits was included as part of the TES to TME adjustment. This has now been included within social protection TES, so again a TES to TME adjustment is no longer required. This change increases Scottish social protection spending by £191 million in 2014-15.

Total public sector expenditure has been revised down for Scotland in all years. This generally reflects improvements to the estimation of the TES to TME accounting adjustments. Previously, spending associated with Crossrail in London was not separately identified within the accounting adjustments, meaning that Scotland was apportioned a population share of the spend. This spend is now separated out, and none of the expenditure is apportioned to Scotland, reducing Scottish expenditure in all years.

Table B.4: Revisions to Estimates of Total Managed Expenditure: 2011-12 to 2014-15
	£ million
	2011-12	2012-13	2013-14	2014-15
Scotland
Estimates published in GERS 2014-15	66,125	67,746	67,482	68,377
Estimates published in GERS 2015-16	65,758	67,495	67,035	67,879
Revision	-367	-251	-447	-498
Of which revisions to TES	571	185	274	37
Of which revisions to TES to TME accounting adjustment	-938	-436	-721	-535
UK
Estimates published in GERS 2014-15	707,742	722,081	726,506	737,119
Estimates published in GERS 2015-16	715,105	730,822	735,913	746,611
Revision	7,363	8,741	9,407	9,492
Of which revisions to TES	8,355	4,663	4,100	8,838
Of which English Housing Associations	9,412	8,705	9,654	10,245
Of which revisions to TES to TME accounting adjustment (excl HAs)	-10,404	-4,627	-4,347	-9,591
Scotland/ UK Ratio
Estimates published in GERS 2014-15	9.3%	9.4%	9.3%	9.3%
Estimates published in GERS 2015-16	9.2%	9.2%	9.1%	9.1%
Revision (% point)	-0.1%	-0.1%	-0.2%	-0.2%

The table below shows the revisions to spend in 2014-15 by function, and by Scottish Government, Local Government, and Public Corporations. UK public sector debt interest has been revised up due to the inclusion of English Housing Associations in the UK total. This has no effect on the Scottish estimate.

In 2014-15, revisions primarily reflect revisions to Scottish Local Government expenditure, which has been revised down by £307 million following the move from provisional outturn budget estimates to final outturn estimates. The main revisions occur to spending on social protection (-£130 million), housing and community amenities (-£104 million), education and training (-£53 million), environment protection (-£67 million), and public and common services (+£58 million).

Scottish Government expenditure for 2014-15 has been revised up by approximately £90 million. This primarily reflects the inclusion of expenditure associated with NPD projects into transport TES. As shown in Table A.8, this increase is currently offset as part of the accounting adjustments.

Excluding spending moved from the accounting adjustments to TES, Other UK Government expenditure in Scotland has been revised down by approximately £70 million. This primarily reflects down revisions to UK spending for science and technology, defence, international services, and public and common services.

Table B.5: Revisions to Estimates of Public Sector Expenditure: Scotland and UK 2014-15
	£ million				%
	Scotland			UK	Scotland	UK
	Scottish Govt, LAs, PCs	Other UK Govt departments	Total
General public services
Public and common services	57	-14	43	-65	3.0%	-0.6%
International services	0	-27	-27	-333	-3.0%	-3.1%
Public sector debt interest	0	0	0	3,145	0.0%	9.4%
Defence	0	16	16	199	0.5%	0.5%
Public order and safety	-1	0	-1	-288	-0.1%	-1.0%
Economic affairs
Enterprise and economic development	-63	0	-62	313	-6.3%	6.6%
Science and technology	2	-44	-43	-461	-9.0%	-9.3%
Employment policies	0	0	0	-7	-0.1%	-0.2%
Agriculture, forestry and fisheries	40	0	40	35	4.5%	0.7%
Transport	31	0	32	-337	1.1%	-1.6%
Environment protection	-66	0	-66	-115	-5.1%	-1.0%
Housing and community amenities	-104	0	-104	-480	-5.8%	-4.5%
Health	41	0	42	-72	0.4%	-0.1%
Recreation, culture and religion	2	0	2	455	0.1%	3.8%
Education and training	-76	0	-76	1,344	-1.0%	1.6%
Social protection	-129	191	62	3,003	0.3%	1.2%
EU Transactions 1	0	183	183	2,502	272.7%	67.2%
Accounting adjustments	-59	-477	-535	3,156	-9.3%	5.1%
Total revision	-327	-172	-498	9,492	-0.3%	1.3%

¹ Scottish EU Transactions in 2014-15 have been revised up by £183 million, 7.3% of the UK revision. This reflects the move to bring VAT-based payments to the EU into from the accounting adjustments into the EU Transactions line, as part of the implementation of ESA10. As the previous Scottish figure for 2014-15 is relatively close to zero (£67 million) the percentage change in the UK. Revisions to Estimates of Capital Consumption from GERS 2014-15

Table B.6 sets out the changes to estimates of capital consumption in Scotland and the UK between this report and GERS 2014-15. 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.6: Revisions to capital consumption: 2011-12 to 2014-15
	£ million
	2011-12	2012-13	2013-14	2014-15
Scotland
Estimates published in GERS 2014-15	3,783	3,741	4,070	4,143
Estimates published in GERS 2015-16	3,780	3,641	3,856	4,137
Revision	-3	-100	-214	-6

Capital consumption in 2012-13 and 2013-14 has been revised down reflecting revisions to Scottish public corporation gross operating surplus in these years. This reflects refinements to the compilation methodologies used by ONS for a number of public corporations, as discussed in the revisions to gross operating surplus.

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 2014-15

Table B.7 shows revisions to the current budget balance from the previous publication of GERS. In general, both the UK and Scotland's current budget balances have improved in all years apart from 2012-13. This reflects the revisions to expenditure discussed above, combined with the final implementation of expenditure reclassification from current to capital associated with the European System of Accounts 2010. The final implementation has resulted in a larger amount of defence spend being reclassified from current to capital, improving the current budget balance.

Table B.7: Revisions to Estimates of the Current Budget Balance: 2011-12 to 2014‑15
	£ million
	2011-12	2012-13	2013-14	2014-15
Estimates published in GERS 2014-15
Excluding North Sea revenue	-15,339	-14,911	-14,332	-13,741
Including North Sea revenue (per capita share)	-14,423	-14,393	-13,936	-13,555
Including North Sea revenue (geographical share)	-5,707	-9,622	-10,332	-11,937
UK	-83,473	-84,760	-73,754	-59,777
Estimates published in GERS 2015-16
Excluding North Sea revenue	-15,186	-15,008	-14,015	-13,333
Including North Sea revenue (per capita share)	-14,269	-14,489	-13,619	-13,147
Including North Sea revenue (geographical share)	-5,553	-9,703	-10,015	-11,531
UK	-81,426	-84,681	-72,008	-56,925
Difference (£ million) (positive shows improvement)
Excluding North Sea revenue	153	-97	317	408
Including North Sea revenue (per capita share)	154	-96	317	408
Including North Sea revenue (geographical share)	154	-81	317	406
UK	2,047	79	1,746	2,852

Table B.8 shows revisions to the net fiscal balance from the previous publication of GERS. For Scotland, the revisions pattern is similar to that for the current budget balance. For the UK, the reclassification of English housing associations into the public sector has worsened the net fiscal balance in all years.

Table B.8: Revisions to Estimates of the Net Fiscal Balance: 2011-12 to 2014-15
	£ million
	2011-12	2012-13	2013-14	2014-15
Estimates published in GERS 2014-15
Excluding North Sea revenue	-18,879	-19,470	-17,431	-16,738
Including North Sea revenue (per capita share)	-17,963	-18,952	-17,036	-16,551
Including North Sea revenue (geographical share)	-9,247	-14,181	-13,432	-14,934
UK	-113,518	-119,567	-100,889	-89,101
Estimates published in GERS 2015-16
Excluding North Sea revenue	-18,430	-19,303	-16,981	-16,171
Including North Sea revenue (per capita share)	-17,513	-18,783	-16,586	-15,985
Including North Sea revenue (geographical share)	-8,797	-13,997	-12,982	-14,369
UK	-115,546	-123,216	-103,933	-91,668
Difference (£ million) (positive shows improvement)
Excluding North Sea revenue	449	167	450	567
Including North Sea revenue (per capita share)	450	169	450	566
Including North Sea revenue (geographical share)	450	184	450	565
UK	-2,028	-3,649	-3,044	-2,567

In addition to revisions to the fiscal aggregates in cash terms, there are also changes to the fiscal aggregates expressed as a share of GDP due to revisions to GDP estimates. These are shown in Tables B.9 and B.10 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 would generally have improved by between 0.2% points and 0.5% points in all years. This reflects upward revisions to the nominal value of GDP in all years made in the latest Quarterly National Accounts Scotland, following the annual publication of updated Supply and Use Tables for 1998-2013 in July.

The revision to GDP is primarily due to improvements to data sources and methods for estimating imputed rental, in line with similar developments in the UK. As a result of this, Scotland's share of UK GDP has been revised up. This means that revisions to GDP in Scotland have a greater impact on fiscal aggregates than for the UK as a whole.

Table B.9: Impact of Revisions to GDP on Estimates of the Current Budget Balance
	2011-12	2012-13	2013-14	2014-15
Estimates published in GERS 2014-15	% of GDP
Excluding North Sea revenue	-12.0%	-11.5%	-10.6%	-9.8%
Including North Sea revenue (population share)	-11.0%	-10.9%	-10.2%	-9.5%
Including North Sea revenue (geographical share)	-3.7%	-6.5%	-6.7%	-7.8%
UK	-5.2%	-5.1%	-4.2%	-3.3%
GERS 2014-15 estimate with latest GDP estimates	% of GDP
Excluding North Sea revenue	-11.8%	-11.2%	-10.2%	-9.5%
Including North Sea revenue (population share)	-10.9%	-10.6%	-9.8%	-9.3%
Including North Sea revenue (geographical share)	-3.7%	-6.3%	-6.5%	-7.6%
UK	-5.1%	-5.0%	-4.2%	-3.3%
Change (positive denotes improvement)	% point difference)
Excluding North Sea revenue	0.2%	0.3%	0.4%	0.3%
Including North Sea revenue (population share)	0.2%	0.3%	0.3%	0.3%
Including North Sea revenue (geographical share)	0.0%	0.2%	0.2%	0.2%
UK	0.1%	0.1%	0.0%	0.0%

Table B.10: Impact of Revisions to GDP on Estimates of the Net Fiscal Balance
	2011-12	2012-13	2013-14	2014-15
Estimates published in GERS 2014-15	% of GDP
Excluding North Sea revenue	-14.7%	-15.0%	-12.9%	-11.9%
Including North Sea revenue (population share)	-13.8%	-14.3%	-12.4%	-11.6%
Including North Sea revenue (geographical share)	-6.1%	-9.5%	-8.8%	-9.7%
UK	-7.0%	-7.2%	-5.8%	-4.9%
GERS 2014-15 estimate with latest GDP estimates	% of GDP
Excluding North Sea revenue	-14.5%	-14.6%	-12.4%	-11.6%
Including North Sea revenue (population share)	-13.6%	-14.0%	-12.0%	-11.3%
Including North Sea revenue (geographical share)	-6.0%	-9.3%	-8.5%	-9.5%
UK	-6.9%	-7.1%	-5.7%	-4.9%
Change (positive denotes improvement)	% point difference
Excluding North Sea revenue	0.2%	0.4%	0.5%	0.3%
Including North Sea revenue (population share)	0.2%	0.3%	0.4%	0.3%
Including North Sea revenue (geographical share)	0.1%	0.2%	0.3%	0.2%
UK	0.1%	0.1%	0.1%	0.0%