Government Expenditure and Revenue Scotland 2016-2017

Chapter 4: Devolved Taxes and Expenditure

Devolved and Reserved Revenue in Scotland 2016-17

Devolved and Reserved Expenditure in Scotland 2016-17

Introduction

Following the implementation of the Scotland Act 2012 and Scotland Act 2016, the powers of the Scottish Parliament over taxation and expenditure in Scotland are changing. This chapter sets out the amount of public sector revenue and expenditure currently devolved and how this will change with the implementation of the Scotland Act 2016.

Devolved Taxation

The table below sets out revenue raised in Scotland from taxes currently devolved to the Scottish Parliament. Devolved tax revenues increased from £5.2 billion in 2015-16 to approximately £10 billion in 2016-17, largely reflecting the devolution of the Scottish Rate of Income Tax in 2016-17.

Table 4.1: Currently devolved taxes

	£ million
	2012-13	2013-14	2014-15	2015-16	2016-17
Council tax	1,938	1,964	1,995	2,047	2,082
Non-domestic rates	2,347	2,367	2,511	2,579	2,732
Land and buildings transaction tax (devolved from 2015-16)	-	-	-	425	466
Scottish landfill tax (devolved from 2015-16)	-	-	-	147	149
Scottish Rate of Income Tax Liabilities (devolved from 2016-17) 1	-	-	-	-	4,600
Total devolved taxes	4,285	4,331	4,506	5,198	10,029

1 This table shows Scottish Rate of Income Tax liabilities rather than receipts. They are therefore calculated on a different basis to the estimates of total Scottish income tax receipts in Table 1.1.

Further devolution of taxes is due to continue in the next few years, following the Scotland Act 2016. As these taxes are not yet devolved, the table below shows the estimated historical revenues from these taxes

Table 4.2: Revenue devolved under Scotland Act 2016

	£ million
	2012-13	2013-14	2014-15	2015-16	2016-17
Non-savings and non-dividend income tax liabilities (devolved from 2017-18)	10,489	10,881	11,004	11,160	11,313
Air passenger duty (devolved from 2018-19)	213	225	243	247	264
Aggregates levy (date of devolution to be decided)	43	44	55	53	59

Note: this table shows Scottish non-savings and non-dividends income tax liabilities rather than receipts. They are therefore calculated on a different basis to the estimates of total Scottish income tax receipts in Table 1.1.

As well as devolving tax powers to the Scottish Government, the Scotland Act 2016 allows for the first 10p of the standard rate of VAT receipts and the first 2.5p of the reduced rate of VAT receipts in Scotland to be assigned to the Scottish Government, from 2019-20.

Table 4.3 shows the VAT that would have been assigned to Scotland under this approach.

Table 4.3: VAT Assignment: Scotland 2012-13 to 2016-17

	£ million
	2012-13	2013-14	2014-15	2015-16	2016-17
VAT assignment (from 2019-20)	4,166	4,538	4,663	4,890	5,097

Note: Assigned VAT receipts are 50% of total receipts in all years.

Further information on the planned devolution of taxes to the Scottish Government is available in the fiscal framework agreement between the Scottish and UK Governments. ^[27] The net impact on Scottish Government funding will depend in part on how the block grant received by the Scottish Government is adjusted to reflect the devolution of new revenue streams. This adjustment will be based in part on the relative growth in tax per head for each devolved tax in Scotland and the rest of the UK. Table 4.4 below shows tax per head for Scotland and the rest of the UK for each of the relevant taxes. Whilst there are differences in growth in individual taxes between Scotland and the rest of the UK, over the five years to 2016-17, total devolved tax revenue per head in both Scotland and the rest of the UK have grown by 11%.

Table 4.4: Devolved revenue per head: Scotland and rest of UK

	£ per person
	Scotland					Rest of UK
	2012-13	2013-14	2014-15	2015-16	2016-17	2012-13	2013-14	2014-15	2015-16	2016-17
Income tax	1,973	2,040	2,055	2,074	2,093	2,302	2,366	2,373	2,418	2,454
VAT	783	851	871	909	943	790	827	858	891	924
APD	40	42	45	46	49	45	47	50	47	49
LBTT	53	74	92	80	88	113	152	175	174	189
Landfill tax	27	29	28	27	28	17	17	16	15	14
AL	8	8	10	10	11	4	4	5	5	5

Notes: Income tax refers to non-savings non-dividend income tax liabilities
APD: air passenger duty
LBTT: Land and Buildings Transaction Tax for Scotland, compared to LBTT and stamp duties on property for the UK
AL: aggregates levy

Devolved Social Security

The table below shows the expenditure in Scotland from social security benefits devolved to the Scottish Parliament prior to implementation of Scotland Act 2016.

Table 4.5: Social security devolved prior to Scotland Act 2016

	£ million
	2012-13	2013-14	2014-15	2015-16	2016-17
Council Tax Reduction 1	379	360	344	332	327
Scottish Welfare Fund 2	29	29	36	33	35
Discretionary Housing Payments 3	-	32	35	37	36
Total	408	421	415	402	398

Notes:

1 Figures for 2013-14 show council tax benefit administered by the Department for Work and Pensions
2 Figures for 2012-13 are for Community Care Grants and Crisis Loans components of the Social Fund, which the Scottish Welfare Fund Replaced
3 Discretionary housing payments in this table only includes spending by the Scottish Government and excludes Department for Work and Pensions spending

The table below shows the latest available figures for social security benefits which are due to be devolved to the Scottish Government under the Scotland Act 2016.

Table 4.6: Devolved social security under Scotland Act 2016

	£ million
	2012-13	2013-14	2014-15	2015-16	2016-17
Disability Living Allowance	1,450	1,473	1,473	1,399	1,208
Attendance Allowance	489	481	485	487	487
Carer's Allowance	169	182	203	222	234
Winter Fuel Payment	187	186	184	181	180
Personal Independence Payment	-	20	164	318	547
Industrial Injuries Disablement Benefit	89	88	89	87	87
Severe Disablement Allowance	97	91	77	51	26
Discretionary Housing Payments 1	4	18	15	13	15
Cold Weather Payment	8	1	7	3	1
Funeral Payment	4	4	4	3	3
Sure Start Maternity Grant	3	3	3	3	2
Total expenditure on social security to be devolved	2,500	2,547	2,704	2,767	2,790

1 Discretionary Housing Payments above only includes spending by the Department for Work and Pensions, and excludes spending by the Scottish Government

The fiscal framework agreement discussed above also covers the devolution of social security expenditure to the Scottish Government. The Scotland Act 2016 sets out that the final impact on the Scottish Government budget of devolution of these benefits will be determined through an adjustment to the Scottish block grant. As with devolved revenue, the adjustment made to the Scottish Government's budget to reflect this additional spending responsibility will depend in part on the relative growth in expenditure per head for each newly devolved benefit in Scotland and the rest of GB.

Table 4.7 below shows expenditure per head for each of the relevant benefits for Scotland and the rest of Great Britain. For the majority of social security, expenditure per head is higher in Scotland than the rest of Great Britain, although overall the rate of growth in expenditure per head has been faster in the rest of Great Britain since 2012-13.

Table 4.7: Devolved social security expenditure per head: Scotland and rest of GB

	£ per person
	Scotland					Rest of GB
	2012-13	2013-14	2014-15	2015-16	2016-17	2012-13	2013-14	2014-15	2015-16	2016-17
Disability living allowance	273	276	275	260	224	212	216	215	204	177
Attendance allowance	92	90	91	91	90	88	86	86	86	86
Carer's allowance	32	34	38	41	43	31	33	37	40	42
Winter fuel payment	35	35	34	34	33	35	34	34	33	32
Personal Independence Payments	0	4	31	59	101	0	2	24	46	79
Industrial Injuries disability benefit	17	17	17	16	16	14	14	14	14	13
Severe disablement allowance	18	17	14	9	5	14	14	11	7	4
Discretionary housing payments	1	3	3	2	3	1	3	3	3	3
Cold weather payment	2	0	1	1	0	2	0	0	0	0
Funeral expenses payments	1	1	1	1	1	1	1	1	1	1
Sure Start maternity grant	1	1	1	1	0	1	1	1	0	0

Note: An error was identified in the Personal Independence Payments figures in this table, which was corrected on 1st September 2017.
No other figures or tables in the publication are affected by this change.

Summary of current and proposed devolved powers

The table below shows estimates of devolved receipts and expenditure before and after the implementation of the Scotland Act 2016.

Table 4.8: Fiscal powers before and after Scotland Act 2016, 2016-17 (£ million)

	Before Scotland Act 2016	After Scotland Act 2016
Non Saving Non Dividend Income Tax Liabilities (devolved from 2016-17)	4,600	11,313
Stamp Duties (Land and Buildings) (devolved from 2015-16)	466	466
Air Passenger Duty (devolved from 2018-19)		264
Landfill Tax (devolved from 2015-16)	149	149
Aggregates Levy (date to be decided)		59
Council Tax	2,082	2,082
Non-domestic Rates	2,732	2,732
Total devolved taxes	10,029	17,065
Devolved taxes as % of non-North Sea Scottish revenue	17%	30%
as % of revenue incl geographical share of North Sea revenue 1	17%	29%
Assigned VAT 2 (assigned from 2019-20)		5,097
Total devolved and assigned taxes	10,029	22,162
Devolved and assigned taxes as % of non-North Sea Scottish revenue	17%	38%
as % of taxes incl geographical share of North Sea revenue 1	17%	38%
Devolved expenditure including housing benefit 3 ( HB)	42,103	44,893
Devolved taxes as % of estimated devolved expenditure incl HB	24%	38%
Devolved and Assigned taxes as % of estimated devolved expenditure incl HB	24%	49%

1 Figures for the shares of devolved taxes as a share of total taxes including a population share of North Sea revenue are the same as the share when excluding North Sea taxes.
2 Assigned VAT is shown on a gross basis, consistent with the National Accounts presentation. If net VAT were to be used, devolved expenditure would also need to be adjusted, as set out in Table A.9. In this case, devolved revenue as a share of estimated devolved expenditure would be 39% excluding housing benefit and 38% including housing benefit. Other Scotland Bill 2015-16 percentages are unchanged.
3 In GERS and the CRA, housing benefit is included in Scottish local government spending, as they make the payments to recipients, although it is set centrally and funded by the Department for Work and Pensions. Depending on definitions adopted, it could either be excluded or included in devolved expenditure.