Government Expenditure and Revenue Scotland 2020-21

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 are discussed in the methodology paper on the GERS website.^[7]

Following the implementation of the Scotland Act 2012 and Scotland Act 2016, an increasing amount of revenue is being devolved to the Scottish Parliament, and direct Scottish measures of these revenues are becoming available. To date, landfill tax, property transaction taxes, and non-savings non-dividend income tax have been devolved. Chapter 4 provides more information on current and future devolved taxes. Note that the income tax figures in this chapter cover all income tax, whilst those in Chapter 4 cover only non-savings and non-dividend income tax.

For taxes where there is no direct measure of Scottish revenue, 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.

GERS reports tax and non-tax revenue separately. Non-tax revenues are primarily non-cash items such as capital consumption, included for accounting purposes in gross operating surplus, and the operating surplus of public corporations such as Scottish Water. These are discussed in more detail below.

Estimated Revenue 2020-21

Table 1.1 reports estimated public sector revenue in Scotland and the preliminary outturn data for the UK in 2020-21. 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. The three largest taxes, income tax, national insurance contributions, and value added tax continue to account for around two thirds of total non-North Sea revenue, despite VAT falling during the pandemic. The support provided to the labour market during the pandemic has meant that income tax and national insurance contributions have been affected to a lesser degree, with income tax continuing to grow.

Overall, Scotland’s share of UK revenue in 2020-21 was 7.9%. This represents a fall from 8.0% in 2019-20, in part due to a weaker performance in income tax. This reflects the latest 2020-21 Pay As You Earn (PAYE) income tax data from HMRC’s Real Time Information system, and weaker self-assessment receipts received in 2020-21, although these relate to the previous tax year.

In order to report revenue on a National Accounts basis, an international reporting standard 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.

Table 1.1:Revenue: Scotland and UK 2020-21

	Scotland		UK £ million	Scotland as % of UK
	£ million	% of total non-North Sea taxes
Income tax	13,117	24.5%	198,131	6.6%
National insurance contributions	11,476	21.4%	144,217	8.0%
Value added tax	9,635	18.0%	118,075	8.2%
Corporation tax (excluding North Sea)	3,174	5.9%	50,915	6.2%
Fuel duties	1,708	3.2%	20,909	8.2%
Non-domestic rates	1,816	3.4%	21,161	8.6%
Council tax	2,600	4.9%	38,454	6.8%
VAT refunds	1,907	3.6%	20,191	9.4%
Capital gains tax	484	0.9%	10,611	4.6%
Inheritance tax	247	0.5%	5,350	4.6%
Reserved stamp duties	301	0.6%	14,636	2.1%
Scottish land & buildings transaction tax	515	1.0%	515	100.0%
Scottish landfill tax	106	0.2%	106	100.0%
Air passenger duty	34	0.1%	326	10.6%
Tobacco duties	1,333	2.5%	9,786	13.6%
Alcohol duties	1,231	2.3%	12,447	9.9%
Insurance premium tax	422	0.8%	6,381	6.6%
Vehicle excise duties	545	1.0%	6,964	7.8%
Environmental levies	747	1.4%	6,296	11.9%
Other taxes1	2,204	4.1%	26,140	8.4%
Total Non-North Sea taxes	53,603	100%	711,611	7.5%
North Sea taxes2
Population share	34		414	8.2%
Geographical share	550		414	132.8%
Other revenue
Interest and dividends	2,095		25,142	8.3%
Gross operating surplus	6,176		56,361	11.0%
Other receipts	414		3,272	12.6%
Total revenue
Excluding North Sea	62,287		796,386	7.8%
Including population share of the North Sea	62,321		796,800	7.8%
Including illustrative geographical share of the North Sea	62,837		796,800	7.9%
of which: revenue accounting adjustments	7,140		72,387	9.9%

¹ A description of the other taxes line is provided in the detailed methodology paper on the GERS website.

² As the receipts for UK Petroleum Revenue Tax are negative, the Scottish share of North Sea revenue appears unusually high in 2020-21. This is discussed in more detail in Chapter 2.

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 is shown at the bottom of Table 1.1 and 1.4. This is a sub-total of revenue, and is not additional to the revenue totals reported in these tables.

Total public sector non-North Sea revenue in Scotland was estimated to be £62.3 billion in 2020-21, a fall of 4.6%. This is equivalent to 7.8% of UK total non-North Sea revenue which is 0.3 percentage points lower than Scotland’s share of the UK population.^[8] In general, Scotland’s share of most large revenues is close to either its population or GDP share. However, there are some exceptions to this, discussed below.

Revenues where Scotland’s share of UK revenue is relatively low are those associated with property or assets, such as capital gains tax (4.6%), and inheritance tax (4.6%). This reflects the fact that properties and assets in Scotland tend to have lower values than the UK average.^[9] Scotland’s share of income tax (6.6%) is also relatively low. In part, this reflects the shifting of income tax onto higher earners, through the introduction of the additional rate of income tax and increases in the personal allowance. Scotland has relatively fewer additional rate tax payers, with only around 4% of the UK total.

Revenues where Scotland has a relatively large share include non-domestic rates (8.6%), and gross operating surplus (GOS), which includes the surpluses of public corporations. Scotland is estimated to generate approximately 11.0% of UK public sector GOS, 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.

Scotland tends to also have relatively high shares of duties associated with tobacco and alcohol. This reflects the greater incidence of smoking in Scotland,^[10] and also the fact that Scotland has higher consumption of spirits than the rest of the UK.^[11] Scotland also has a relatively high share of ‘other receipts’, as for the UK this line nets out refunds of non-domestic rates paid by local authorities. Due to the different structure of reporting non-domestic rates in Scotland, these refunds are not separated out for Scotland.

Table 1.2 below provides a time series of Scotland’s share of the largest UK revenues. In general, Scotland’s share of UK revenue has been broadly stable since 2016-17, at around 7.8%.

Table 1.2: Non-North Sea Revenue: Scotland as share of UK

	per cent of UK revenue
	2016-17	2017-18	2018-19	2019-20	2020-21
Income Tax	6.7%	6.6%	6.6%	6.8%	6.6%
Corporation tax (excl North Sea)	6.6%	6.2%	6.2%	6.2%	6.2%
National insurance contributions	8.0%	8.0%	8.0%	7.9%	8.0%
Value added tax	7.9%	8.4%	8.4%	8.2%	8.2%
Council tax and non-domestic rates	8.0%	8.0%	7.8%	7.7%	7.4%
All other revenue	8.8%	8.7%	9.0%	9.0%	9.1%
Total current non-North Sea revenue	7.8%	7.8%	7.9%	7.9%	7.8%

Estimated Revenue: Scotland and the UK, 2016-17 to 2020-21

Table 1.4 shows estimated revenue in Scotland and the UK between 2016-17 and 2020-21. Non-North Sea revenue in Scotland is estimated to have grown by 5.0% between 2016-17 and 2020-21 in nominal terms, similar to the UK as a whole (4.8%). This weak growth reflects the fall in revenue in 2020-21 as a result of the pandemic.

Table 1.3 shows estimates of revenue per person for Scotland and the UK between 2016-17 and 2020-21. Excluding North Sea revenue, revenue per person in Scotland is lower than in the UK by £477 in 2020-21. Including an illustrative geographical share of North Sea revenue the difference is £382.

Table 1.3: Revenue Per Person: Scotland and UK 2016-17 to 2020-21

	£ per person
	2016-17	2017-18	2018-19	2019-20	2020-21
Scotland
Excluding North Sea revenue	10,962	11,279	11,784	11,953	11,395
Including North Sea revenue (population share)	10,963	11,299	11,802	11,963	11,402
Including North Sea revenue (geographical share)	10,992	11,490	12,034	12,108	11,496
UK
Excluding North Sea revenue	11,557	11,823	12,254	12,388	11,872
Including North Sea revenue	11,557	11,842	12,272	12,398	11,878
Difference (Scotland minus UK)
Excluding North Sea revenue	-595	-544	-470	-435	-477
Including North Sea revenue (population share)	-595	-544	-470	-435	-477
Including North Sea revenue (geographical share)	-566	-353	-238	-290	-382

Box 1.1: Comparison between GERS and ONS 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.

The Office for National Statistics (ONS) now publishes public sector finances for the countries and regions of the UK. The latest estimates covering the period to 2019-20 were published on 21 May 2021.^[12]

The table below compares the estimates in GERS with those published by ONS. There are some differences between the ONS and GERS numbers. For non-North Sea taxes, these primarily relate to VAT. The estimates of VAT in GERS are consistent with those published by HMRC for Scottish Assigned VAT, whilst the ONS use a methodology which produces results for all UK country and regions, which has a higher estimate for Scotland. The ONS, 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

The differences in other non-North Sea receipts are primarily due to using different data sources for interest and dividends, where GERS uses specific data for interest income from Scottish student loans.

Estimates of Total Scottish Revenues 2016-17 to 2020-21

	£ million
	2016-17	2017-18	2018-19	2019-20	2020-21
Non-North Sea taxes
GERS	50,819	52,844	55,581	56,336	53,603
ONS	51,419	52,481	55,444	56,382	n/a
Difference	-600	363	137	-46	n/a
Other non-North Sea receipts
GERS	8,484	8,381	8,577	8,977	8,685
ONS	9,106	9,020	9,356	9,786	n/a
Difference	-622	-639	-779	-809	n/a
Geographical share of North Sea revenues
GERS	159	1,142	1,358	844	550
ONS	109	1,141	1,340	863	n/a
Difference	50	1	18	-19	n/a

Table 1.4: Revenue: Scotland and UK 2016-17 to 2020-21

	£ million
	Scotland					UK
	2016-17	2017-18	2018-19	2019-20	2020-21	2016-17	2017-18	2018-19	2019-20	2020-21
Income tax	11,808	11,970	12,768	13,069	13,117	177,247	180,593	192,366	193,430	198,131
National insurance contributions	10,014	10,470	10,939	11,502	11,476	125,852	131,627	137,534	144,708	144,217
Value added tax	9,655	10,609	11,177	10,956	9,635	122,035	126,374	133,589	133,852	118,075
Corporation tax (excluding North Sea)	3,526	3,336	3,430	3,099	3,174	53,184	53,978	55,065	49,708	50,915
Fuel duties	2,274	2,299	2,290	2,248	1,708	27,937	27,878	27,993	27,572	20,909
Non-domestic rates	2,731	2,762	2,847	2,761	1,816	29,418	30,444	31,531	31,744	21,161
Council tax	2,077	2,257	2,349	2,456	2,600	30,361	32,131	34,820	36,346	38,454
VAT refunds	1,587	1,572	1,666	1,794	1,907	17,448	17,272	18,214	18,879	20,191
Capital gains tax	363	311	444	448	484	8,380	7,793	9,190	9,826	10,611
Inheritance tax	288	281	252	238	247	4,897	5,277	5,450	5,150	5,350
UK stamp duties	336	297	293	296	301	15,762	17,212	16,699	16,972	14,636
Scottish land & buildings transaction tax	484	557	554	597	515	484	557	554	597	515
Scottish landfill tax	149	148	149	119	106	149	148	149	119	106
Air passenger duty	256	274	290	273	34	3,211	3,360	3,632	3,655	326
Tobacco duties	1,070	1,138	1,253	1,316	1,333	8,681	8,766	9,152	9,693	9,786
Alcohol duties	1,076	1,122	1,175	1,134	1,231	11,117	11,585	12,097	11,535	12,447
Insurance premium tax	315	389	417	429	422	4,907	5,898	6,306	6,480	6,381
Vehicle excise duties	468	498	520	548	545	5,997	6,378	6,667	7,000	6,964
Environmental levies	577	674	752	746	747	5,067	5,850	6,487	6,397	6,296
Other taxes	1,764	1,880	2,018	2,307	2,204	21,897	23,923	24,509	27,588	26,140
Total Non-North Sea taxes	50,819	52,844	55,581	56,336	53,603	674,031	697,044	732,004	741,251	711,611
North Sea taxes
Population share of North Sea revenue	3	106	98	53	34	36	1,297	1,196	643	414
Illustrative geographical share of North Sea revenue	159	1,142	1,358	844	550	36	1,297	1,196	643	414
Other receipts
Interest and dividends	2,019	2,022	2,106	2,204	2,095	23,018	23,810	25,040	26,687	25,142
Gross operating surplus	6,028	5,930	6,028	6,336	6,176	59,278	57,731	54,592	56,911	56,361
Other receipts	437	428	443	437	414	3,487	3,365	3,557	3,509	3,272
Total revenue (excl North Sea revenue)	59,303	61,225	64,158	65,312	62,287	759,814	781,950	815,193	828,358	796,386
Total revenue (incl pop share North Sea revenue)	59,306	61,331	64,256	65,365	62,321	759,850	783,247	816,389	829,001	796,800
Total revenue (incl geog share North Sea revenue)	59,461	62,367	65,516	66,157	62,837	759,850	783,247	816,389	829,001	796,800
Of which, revenue accounting adjustment	6,203	6,364	6,607	6,898	7,140	62,952	64,778	67,519	69,775	72,387