Government Expenditure and Revenue Scotland 2016-2017

Annex B: Revisions

This section presents revisions from the previous GERS 2015-16 publication.

Revisions to Non-North Sea Revenue Estimates from GERS 2015-16

Table B.1 summarises the revisions in this edition of GERS to total non-North Sea revenue. Revisions to Scottish estimates can stem from three sources: revisions to UK totals; revisions to apportionment data; and updated apportionment methodologies. The only methodological changes to non-North Sea revenue in GERS 2016-17 relates to air passenger duty, and the main source of revisions is revisions to UK totals. The main revision to apportionment data relates to corporation tax.

There are three major revisions to UK revenue totals from GERS 2015-16. These reflect the adoption of changes that ONS have made to the reporting of the UK public finances over the past year. Firstly, the reclassification of housing associations in Scotland and the other devolved administrations into the public sector leads to an increase in revenue for Scotland and the UK in all years since 2008-09. Secondly, the ONS has changed the reporting of corporation tax, both onshore and offshore, moving from reporting cash revenue to reporting accruals. This in general revises up corporation tax in all years, although it has been revised down in 2007-08 and 2008-09. Finally, the ONS has corrected the estimates for non‑domestic rates figures for Scotland and Wales in the UK public sector finances, which leads to upward revisions for Scotland and the UK since 2009-10.

Table B.1: Revision to Estimates of Total Non-North Sea Revenue

	£ million
	2012-13	2013-14	2014-15	2015-16
Scotland
Estimates published in GERS 2015-16	48,192	50,054	51,765	53,689
Estimates published in GERS 2016-17	48,912	50,805	52,640	54,446
Revision	720	751	875	757
Of which, non-domestic rates	417	435	597	663
Of which, housing associations	363	366	469	477
Of which, corporation tax	-6	35	95	11
UK
Estimates published in GERS 2015-16	601,372	627,216	652,691	677,631
Estimates published in GERS 2016-17	604,069	629,982	655,909	681,878
Revision	2,697	2,766	3,218	4,247
Of which, non-domestic rates	-135	-163	-156	523
Of which, housing associations	727	692	932	962
Of which, corporation tax	1,537	1,561	1,592	1,509
Scotland/ UK ratio
Estimates published in GERS 2015-16	8.0%	8.0%	7.9%	7.9%
Estimates published in GERS 2016-17	8.1%	8.1%	8.0%	8.0%
Revision (% point)	0.1%	0.1%	0.1%	0.1%

The net effect of all of the changes has been to increase the estimate of public sector revenue in Scotland by £757 million in 2015-16, an increase of 1.4%. This is primarily driven by the revisions to non-domestic rates and the reclassification of housing associations. The UK estimate has been revised up by £4.2 billion. The increase in estimated Scottish corporation tax is proportionately smaller than for the UK as a whole, reflecting revisions to the apportionment data made by HMRC. This change allocates interest income to the location of a company's head office, rather than allocating it to regional branches.

The revisions to individual revenue lines for 2015-16 are shown in Table B.2 below. As discussed in Chapter 1, there have been changes to the presentation of revenues in GERS 2016-17 to better align with the presentation used by the Office for Budget Responsibility ( OBR). The revisions below are shown on a like-for-like basis, using the latest presentation.

Other than the revisions discussed above, most revisions are minor and reflect revisions to UK totals (the revision to housing associations is reflected in gross operating surplus). However, there are a number of revisions that reflect updates to apportionment data. The differential movement in income tax reflects the latest Survey of Personal Incomes data, and the downward revision to VAT and other indirect taxes reflects the latest Living Costs and Food survey data. The revisions to capital gains tax and inheritance tax reflect updated data for Scotland from HMRC. Finally, the revisions to air passenger duty reflect a refined methodology to better account for different class of tickets and exempt passengers.

Table B.2: Revision to Estimates of Public Sector Revenue: Scotland and UK 2015-16

	£ million		%
	Scotland	UK	Scotland	UK
Income tax	8	-447	0.1%	-0.3%
National insurance contributions	60	621	0.6%	0.5%
Value added tax	-185	114	-1.9%	0.1%
Corporation tax (excluding North Sea)	0	1,509	0.0%	3.4%
Fuel duties	-21	0	-0.9%	0.0%
Non-domestic rates	663	523	34.6%	1.9%
Council tax	-75	-133	-3.5%	-0.5%
VAT refunds	-18	-14	-1.4%	-0.1%
Capital gains tax	-65	-24	-17.3%	-0.3%
Inheritance tax	-9	-8	-3.2%	-0.2%
Reserved stamp duties	-21	-490	-6.9%	-3.4%
Scottish Land & Buildings transaction tax	9	9	2.1%	2.1%
Scottish landfill tax	0	0	0.0%	0.0%
Air passenger duty	-28	0	-10.2%	0.0%
Tobacco duties	-34	0	-2.9%	0.0%
Alcohol duties	0	-5	0.0%	0.0%
Insurance premium tax	-2	3	-0.8%	0.1%
Vehicle excise duties	2	0	0.5%	0.0%
Environmental levies	-3	-37	-0.5%	-0.8%
Other taxes	20	686	1.3%	3.7%
Total Non-North Sea taxes	301	2,307	0.6%	0.4%
Other Revenue
Interest and dividends	36	391	9.4%	6.3%
Gross operating surplus	368	1,588	9.7%	3.5%
Other receipts	52	-39	14.6%	-1.5%
Total non-North Sea revenue	757	4,247	1.4%	0.6%

Revisions to North Sea Revenue Estimates from GERS 2015-16

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 revised down in all years shown. This reflects the move by the ONS from reporting corporation tax on a cash basis to an accruals basis, discussed in Chapter 2. There are upward revisions to North Sea corporation tax in earlier years. In addition, the Scottish share of North Sea revenue has been revised down in 2012-13 and 2013-14 and up in 2014-15 and 2015-16, reflecting the alignment with the estimates used by the ONS in their recent Country and Regional Public Sector Finances publication. This change follows a public consultation, and is discussed in more detail in the GERS 2016-17 Consultation Response. ^[30]

Table B.3: Revisions to North Sea Revenue: 2012-13 to 2015-16

	£ million
	2012-13	2013-14	2014-15	2015-16
Scotland (illustrative geographical share)
Estimates published in GERS 2015-16	5,306	3,999	1,802	60
Estimates published in GERS 2016-17	4,643	3,448	1,374	56
Revision	-663	-551	-428	-4
of which, methodology change	-480	-332	21	118
UK
Estimates published in GERS 2015-16	6,234	4,764	2,252	76
Estimates published in GERS 2016-17	6,020	4,499	1,691	-80
Revision	-214	-265	-561	-156

A discussion of revisions to all taxes between 2012-13 and 2015-16 is provided in the GERS 2016-17 Revenue Methodology note available on the GERS website.

Revisions to Expenditure Estimates from GERS 2015-16

Table B.4 sets out the changes in estimates of public expenditure in Scotland and the UK between this report and GERS 2015-16. 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.

Total public sector expenditure has been revised up for Scotland in all years. This primarily reflects the incorporation of housing associations into the public sector. Other factors affecting spend in all years include: improved estimates associated with Network Rail; improved treatment of student loan impairments; and improved estimates of Scottish Water capital spend.

Table B.4: Revisions to Estimates of Total Managed Expenditure: 2012-13 to 2015-16

	£ million
	2012-13	2013-14	2014-15	2015-16
Scotland
Estimates published in GERS 2015-16	67,495	67,035	67,879	68,581
Estimates published in GERS 2016-17	68,094	67,581	68,487	69,048
Revision	599	546	608	467
Of which revisions to TES	137	175	75	-58
Of which, housing associations ( HAs)	693	567	745	400
Of which revisions to accounting adjustment (excl HAs)	10	53	65	407
UK
Estimates published in GERS 2015-16	730,822	735,913	746,611	753,027
Estimates published in GERS 2016-17	731,993	736,555	751,988	753,917
Revision	1,171	642	5,377	890
Of which revisions to TES	1,922	1,752	2,375	964
Of which housing associations ( HAs)	-1,353	-1,573	-1,028	-3,602
Of which revisions to accounting adjustment (excl HAs)	-665	-881	2,553	2,227
Scotland/ UK Ratio
Estimates published in GERS 2015-16	9.2%	9.1%	9.1%	9.1%
Estimates published in GERS 2016-17	9.3%	9.2%	9.1%	9.2%
Revision (% point)	0.1%	0.1%	0.0%	0.1%

The table below shows the revisions to spend in 2015-16 by function, and by Scottish Government, Scottish local government, Scottish public corporations, and Other UK government bodies. Overall, Scottish spend in 2015-16 has been revised up by £467 million. This is primarily driven by the incorporation of Scottish housing associations into the public sector, which increase total spend by £400 million, in the form of increased public sector debt interest payments, and additional capital expenditure, which is currently reported in accounting adjustments.

Scottish local government spending has been revised down by £404 million as part of the move from provisional to final outturn.

Scottish Government spending on transport has been revised down by £451 million. This primarily reflects the a transfer of reporting of Network Rail spending from the Scottish Government to the Department for Transport, with a largely offsetting increase in other UK government spending. Scottish Government accounting adjustments have been revised up by £409 million, primarily reflecting the removal of £364 million negative adjustments associated with Scottish Non-Profit Distributing Programme projects, which was discussed in more detail in GERS 2015-16.

Scottish public corporation spending has been revised up by £446 million. This reflects three factors. Spending by local authorities on housing, which is conducted by public corporations, has been revised up as part of the move from provisional to final outturn accounts. There is also a revision to Scottish Water capital spending, which was previously reported on a regulatory accounts basis, and has now been changed to be reported on an IFRS basis. Further detail on the differences is available from Scottish Water's Annual Report and Accounts. ^[31] Finally, the incorporation of Scottish housing associations into the figures increases spend by £118 million.

Other UK government bodies' expenditure in Scotland has been revised up by £536 million, primarily reflecting the transfer of reporting of Network Rail spend to the Department for Transport. In addition to this, there is an increase in public sector debt interest associated with housing associations, which consistent with the CRA is presented as spending by HM Treasury. There are a number of smaller revisions, which reflect the incorporation of data from the Country and Regional Analysis 2015-16 publication.

Table B.5: Revisions to Estimates of Public Sector Expenditure: Scotland and UK 2015-16

	£ million
	Scotland					UK
	Scottish Government	Local Government	Scottish Public Corporations	Other UK Government Bodies	Total
General public services
Public and common services	7	78	0	36	120	-653
International services	0	0	0	21	21	294
Public sector debt interest	0	0	0	291	291	759
Defence	0	4	0	-12	-8	-21
Public order and safety	-13	0	0	2	-11	22
Economic affairs
Enterprise and economic development	37	-178	0	38	-103	-27
Science and technology	-5	0	0	-4	-8	32
Employment policies	0	0	0	-8	-8	14
Agriculture, forestry and fisheries	2	-7	0	-11	-16	-72
Transport	-451	-30	0	324	-157	-284
Environment protection	1	-10	0	13	4	26
Housing and community amenities	-1	-123	328	0	204	19
Health	0	0	0	7	7	-204
Recreation, culture and religion	0	-4	0	-71	-76	-531
Education and training	-97	-60	0	6	-151	762
Social protection	0	-74	0	-147	-221	828
EU Transactions	0	0	0	54	54	0
Accounting adjustments	409	0	118	-3	524	-74
Total revision	-111	-404	446	536	467	890
Of which, HAs	0	0	118	282	400	-3,602

Revisions to Estimates of Capital Consumption from GERS 2015-16

Table B.6 sets out the changes to estimates of capital consumption in Scotland and the UK between this report and GERS 2015-16. 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: 2012-13 to 2015-16

	£ million
	2012-13	2013-14	2014-15	2015-16
Scotland
Estimates published in GERS 2015-16	3,641	3,856	4,137	4,418
Estimates published in GERS 2016-17	3,931	4,066	4,276	4,294
Revision	290	210	139	-124

In general, capital consumption in all years has been revised up, reflecting the incorporation Scottish housing associations into the public sector, which increases estimates in all years since 2008-09. However, the estimate for 2015-16 has been revised down, due to downward revisions to central government capital consumption following the latest data from ONS Regional Accounts.

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 2015-16

Table B.7 shows revisions to the current budget balance from the previous publication of GERS. The UK current budget balances has improved in all years apart from 2014-15, whilst the Scottish current budget balance excluding the North Sea has improved in all years. This reflects a number of factors. Firstly, it reflects the incorporation of Scottish housing associations into the public sector, which increases revenue by more than current expenditure. This has a relatively larger effect on the Scottish figures than the UK figures. Secondly, the upward revisions to non-domestic rates also improve the current budget balance. For the current budget balance including a geographical share of the North Sea, the downward revision to North Sea revenues discussed above offset these positive impacts between 2012-13 and 2014-15.

Table B.7: Revisions to Estimates of the Current Budget Balance: 2012-13 to 2015‑16

	£ million
	2012-13	2013-14	2014-15	2015-16
Estimates published in GERS 2015-16
Excluding North Sea revenue	-15,008	-14,015	-13,333	-12,688
Including North Sea revenue (per capita share)	-14,489	-13,619	-13,147	-12,681
Including North Sea revenue (geographical share)	-9,703	-10,015	-11,531	-12,628
UK	-84,681	-72,008	-56,925	-41,498
Estimates published in GERS 2016-17
Excluding North Sea revenue	-14,796	-13,792	-12,989	-11,983
Including North Sea revenue (per capita share)	-14,295	-13,419	-12,849	-11,990
Including North Sea revenue (geographical share)	-10,153	-10,345	-11,615	-11,927
UK	-82,786	-70,094	-57,440	-40,491
Difference (£ million) (positive shows improvement)
Excluding North Sea revenue	212	223	344	705
Including North Sea revenue (per capita share)	194	200	298	691
Including North Sea revenue (geographical share)	-450	-330	-84	701
UK	1,895	1,914	-515	1,007

Table B.8 shows revisions to the net fiscal balance from the previous publication of GERS. The revisions pattern is quite similar to that for the current budget balance.

Table B.8: Revisions to Estimates of the Net Fiscal Balance: 2012-13 to 2015-16

	£ million
	2012-13	2013-14	2014-15	2015-16
Estimates published in GERS 2015-16
Excluding North Sea revenue	-19,303	-16,981	-16,114	-14,892
Including North Sea revenue (per capita share)	-18,783	-16,586	-15,927	-14,886
Including North Sea revenue (geographical share)	-13,997	-12,982	-14,311	-14,833
UK	-123,216	-103,933	-91,668	-75,320
Estimates published in GERS 2016-17
Excluding North Sea revenue	-19,181	-16,776	-15,847	-14,602
Including North Sea revenue (per capita share)	-18,680	-16,403	-15,707	-14,609
Including North Sea revenue (geographical share)	-14,538	-13,329	-14,473	-14,546
UK	-121,904	-102,074	-94,388	-72,119
Difference (£ million) (positive shows improvement)
Excluding North Sea revenue	122	205	267	290
Including North Sea revenue (per capita share)	103	183	220	277
Including North Sea revenue (geographical share)	-541	-347	-162	287
UK	1,312	1,859	-2,720	3,201

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 fiscal aggregates in cash terms, previous estimates would generally have worsened by around 0.2 percentage points in 2012-13 and 2014-15, although less in more recent years. This reflects downward revisions to the nominal value of GDP in these years made in the latest Quarterly National Accounts Scotland, following the annual publication of updated Supply and Use Tables for 1998-2014 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 down. 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

	2012-13	2013-14	2014-15	2015-16
Estimates published in GERS 2015-16	% of GDP
Excluding North Sea revenue	-11.2%	-10.0%	-9.2%	-8.6%
Including North Sea revenue (population share)	-10.7%	-9.6%	-9.0%	-8.6%
Including North Sea revenue (geographical share)	-6.4%	-6.3%	-7.3%	-8.1%
UK	-5.0%	-4.1%	-3.1%	-2.2%
GERS 2015-16 estimate with latest GDP estimates	% of GDP
Excluding North Sea revenue	-11.4%	-10.2%	-9.3%	-8.7%
Including North Sea revenue (population share)	-10.9%	-9.7%	-9.0%	-8.6%
Including North Sea revenue (geographical share)	-6.5%	-6.4%	-7.3%	-8.1%
UK	-5.0%	-4.1%	-3.1%	-2.2%
Change (positive denotes improvement)	% point difference
Excluding North Sea revenue	-0.2%	-0.2%	-0.1%	-0.1%
Including North Sea revenue (population share)	-0.2%	-0.2%	0.0%	-0.1%
Including North Sea revenue (geographical share)	-0.1%	-0.1%	0.0%	0.0%
UK	0.0%	0.0%	0.0%	0.0%

Table B.10: Impact of Revisions to GDP on Estimates of the Net Fiscal Balance

	2012-13	2013-14	2014-15	2015-16
Estimates published in GERS 2015-16	% of GDP
Excluding North Sea revenue	-14.5%	-12.1%	-11.1%	-10.1%
Including North Sea revenue (population share)	-13.9%	-11.7%	-10.9%	-10.0%
Including North Sea revenue (geographical share)	-9.2%	-8.2%	-9.1%	-9.5%
UK	-7.3%	-5.9%	-5.0%	-4.0%
GERS 2015-16 estimate with latest GDP estimates	% of GDP
Excluding North Sea revenue	-14.7%	-12.3%	-11.2%	-10.2%
Including North Sea revenue (population share)	-14.1%	-11.9%	-10.9%	-10.1%
Including North Sea revenue (geographical share)	-9.4%	-8.3%	-9.1%	-9.5%
UK	-7.3%	-5.9%	-5.0%	-4.0%
Change (positive denotes improvement)	% point difference
Excluding North Sea revenue	-0.2%	-0.2%	-0.1%	-0.1%
Including North Sea revenue (population share)	-0.2%	-0.2%	-0.1%	-0.1%
Including North Sea revenue (geographical share)	-0.2%	-0.1%	0.0%	0.0%
UK	0.0%	0.0%	0.0%	0.0%