Government Expenditure and Revenue Scotland 2020-21

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 Scottish Government spending reported on the UK Government’s public spending system, OSCAR, and HM Treasury’s Public Expenditure Statistical Analyses (PESA)^[17] and the supporting Country and Regional Analysis (CRA).^[18]

Spending by the Scottish Government is provided directly by the Scottish Government Directorate for Financial Management. Scottish Local Government spending in all years is taken from HM Treasury’s PESA publication. Spending by other UK government departments spending is based on PESA for 2020-21 and on the CRA for earlier years. Further information on the methodology is set out in the expenditure methodology paper available at the link below.

https://www.gov.scot/collections/economy-statistics/#governmentexpenditureandrevenuescotland(gers)

GERS also includes some transactions between Scotland and the EU. These can be reported in a number of different ways, and are discussed in more detail later in the chapter.

GERS expenditure figures are presented on a National Accounts basis, an international reporting standard used by governments. This requires a number of accounting adjustments to be 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.

Public Sector Expenditure

Total public sector expenditure for Scotland in 2020-21 is estimated to be £99.2 billion, an increase of 21.0% from 2019-20, compared to growth of 23.5% for the UK as a whole. This large increase in spending, the largest increase on record, reflects the impact of the coronavirus pandemic, which has led to large increases in spending, particularly on health, social security, and enterprise and economic development. This final category includes support paid to businesses and workers such as the Coronavirus Job Retention Scheme. Further information on reserved spending in response to the pandemic is set out in Box 3.1. Overall, the increase in spending in Scotland was £17.2 billion, or 8.2% of the increase for the UK, broadly in line with Scotland’s population share. This is shown by spending category in Table 3.1.

Table 3.1: Total Expenditure: Scotland 2020-21

	Scotland
	£ million	% of total expenditure
General public services
Public and common services	2,410	2.4%
International services	924	0.9%
Reserved public sector debt interest	2,347	2.4%
Local government pension fund interest expenditure	1,514	1.5%
Defence	3,637	3.7%
Public order and safety	3,392	3.4%
Economic affairs
Enterprise and economic development	11,219	11.3%
Science and technology	589	0.6%
Employment policies	208	0.2%
Agriculture, forestry and fisheries	881	0.9%
Transport	4,485	4.5%
Environment protection	1,532	1.5%
Housing and community amenities	2,259	2.3%
Health	18,026	18.2%
Recreation, culture and religion	1,571	1.6%
Education and training	9,485	9.6%
Social protection	26,017	26.2%
EU transactions	278	0.3%
Accounting adjustments	8,403	8.5%
Total Expenditure	99,176	100%

Table 3.2 below shows growth in current and capital spend in Scotland by organization in 2020-21, compared to the UK. Spending increased more slowly in Scotland than the UK as a whole in 2020-21. This is primarily due to the fact that there was a higher initial level of spend in Scotland before the pandemic, so the additional spending associated with the pandemic was smaller in percentage terms.

Box 3.1: Additional reserved spending associated with the coronavirus pandemic

The coronavirus pandemic has seen an unprecedented increase in public spending, spread across a range of areas. In the devolved sphere, there has been an increase in health expenditure in response to treating COVID-19 patients and delivering the vaccination programme. There have also been a range of other measures, particularly business support grants paid via local authorities. The Scottish Government spent around £9 billion in 2020-21 in response to the health, economic, and social challenges caused by the coronavirus pandemic.^[19] Whilst this is captured in the Scottish Government spending figures in GERS, it is not separately identifiable from non-pandemic related spend.

In the reserved sphere, there have been a number of interventions, the most significant of which have been the Coronavirus Job Retention Scheme, the Self-Employment Income Support Scheme, and changes to the value and eligibility criteria for Universal Credit. These schemes have all aimed to support household incomes and businesses during the pandemic.

• Coronavirus Job Retention Scheme: commonly referred to as the furlough scheme, this sees employees who are unable to work their usual hours continue to receive at least 80% of their usual earnings, up to £2,500 per month. The amount contributed by businesses has varied over the course of the year, depending on the level of public health restrictions in place.

• Self-Employment Income Support Scheme: this similarly aims to support self-employment incomes, again up to £2,500, via the payment of grants. The eligibility criteria require self-employed workers to have filed tax returns in 2019-20, and must have had earnings less than £50,000.
• Welfare spending: This primarily relates to Universal Credit. The standard allowance of Universal Credit and the basic element of Working Tax Credit has been increased by £20 a week during the pandemic. Eligibility criteria were also changed, which allowed self-employed to claim Universal Credit more easily.
• Health spending: While most elements of the health pandemic have been devolved, parts of the health response, primarily elements of the testing programme and bodies such as the Joint Biosecurity Centre, have been delivered on a UK-wide basis.

The table below summarises the costs for Scotland associated with the schemes above in this edition of GERS. This is not an exhaustive list of reserved coronavirus interventions, and some interventions include, such as the loan guarantee schemes, are not yet included in the UK Public Sector Finances or GERS. As such, this initial estimate of reserved spending will be reviewed in future publications, and is likely to increase as more schemes are included in the UK Public Sector Finances.

Major reserved coronavirus spending for Scotland (2020-21, £ millions)

	Scotland	UK	Scottish share
Coronavirus Job Retention Scheme1,	4,728	58,029	8.1%
Self-employment Income Support Scheme1	1,191	19,716	6.0%
Welfare spending2	1,423	17,142	8.3%
Health Spending3	945	11,593	8.1%
Total	8,287	106,479	7.8%

Sources: ¹ HMRC Tax Receipts and National Insurance Contributions for the UK, Scottish Government calculations

² OBR Economic and Fiscal Outlook March 2021, Scottish Government calculations

³ National Audit Office Coronavirus cost tracker, Scottish Government calculations

Table 3.2: Expenditure growth: 2019-20 to 2020-21 (£ million)

	Scotland
	2019-20	2020-21	Growth	UK growth
Current expenditure	73,175	89,372	22.1%	24.7%
Scottish Government	28,348	36,398	28.4%	28.4%
Local Government	13,373	13,633	1.9%	19.7%
Public Corporations	-	-	-	-
Other UK Government bodies	31,454	39,341	25.1%	27.1%
Capital expenditure	8,802	9,804	11.4%	13.4%
Scottish Government	3,031	3,983	31.4%	31.4%
Local Government	2,368	1,964	-17.1%	-8.2%
Public Corporations	1,438	1,162	-19.2%	3.3%
Other UK Government bodies	1,966	2,696	37.1%	22.7%
Total expenditure	81,977	99,176	21.0%	23.5%
Scottish Government	31,379	40,381	28.7%	28.7%
Local Government	15,741	15,597	-0.9%	16.5%
Public Corporations	1,438	1,162	-19.2%	3.3%
Other UK Government bodies	33,420	42,037	25.8%	26.7%

Notes:

1. Public corporation line for Scotland shows spending by Scottish public corporations only. UK figure shows spending by all public corporations

2. Public corporations have no current expenditure as this is netted off against their income to provide their gross operating surplus in the revenue calculations. Consistent with the CRA, interest expenditure by public corporations is recorded as spending by HM Treasury.

3. Consistent with the CRA, interest expenditure by public sector pension funds is shown as spending by HM Treasury. This makes Scottish and UK local government spending comparable in this table, but introduces a slight discrepancy between Scottish and Local Government spending above and that shown in Table 3.8.

4. Spend by Other UK Government departments for Scotland and the UK are not directly comparable, as spending for the UK as a whole includes spending on functions which are devolved to the Scottish Government.

Table 3.3 shows the split of total expenditure between current and capital for Scotland. With the increased current expenditure in response to the pandemic, the capital spending share fell in 2020-21 to 9.9%, the lowest level since 2001-02.

Table 3.3: Current and Capital Expenditure (% of Total Expenditure): Scotland

	per cent
	2016-17	2017-18	2018-19	2019-20	2020-21
Current	88.3%	88.3%	89.0%	89.3%	90.1%
Capital	11.7%	11.7%	11.0%	10.7%	9.9%

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 sector spending as a share of GDP has increased to 64.0% in 2020-21, the highest ever level, as public spending increased and GDP fell during the pandemic.

Although overall spending in Scotland grew more slowly than for the UK in 2020-21, spending as a share of GDP increased faster. This reflects weaker nominal GDP growth in Scotland in 2020-21.

Table 3.4: Total Managed Expenditure as a Share of GDP

	per cent of GDP
	2016-17	2017-18	2018-19	2019-20	2020-21
Scottish TME as a Share of GDP:
Excluding North Sea GDP	49.7%	49.2%	48.3%	49.0%	64.0%
Including population share of North Sea GDP	49.4%	48.7%	47.9%	48.6%	63.7%
Including geographical share of North Sea GDP	47.0%	45.7%	44.4%	45.7%	61.1%
UK TME as a share of GDP:
100% of North Sea GDP	40.4%	40.2%	39.5%	39.8%	52.1%

Table 3.5 shows total public sector expenditure per person for Scotland and the UK. The relative gap between Scottish and UK spending per person fell in 2020-21, with spend per person 11.2% points higher. This fall reflects the fact that spending in response to the coronavirus pandemic has been broadly equally spread across the UK, although the gap increased slightly in cash terms. Slightly less than 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
	2016-17	2017-18	2018-19	2019-20	2020-21
Scotland	13,996	14,282	14,555	15,003	18,144
UK	12,379	12,654	12,846	13,250	16,316
Difference (Scotland minus UK)	1,617	1,628	1,710	1,754	1,828
Difference between Scottish and UK	13.1%	12.9%	13.3%	13.2%	11.2%

Box 3.2 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 universal credit disability and incapacity related benefits, and housing benefit. Tax credits and child benefit are part of HMRC spending. 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. From 2018-19, it also includes spending on newly devolved social security, as set out in Chapter 4.

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)

	2016-17	2017-18	2018-19	2019-20	2020-21
Social security spending in Scotland
State pension	8,064	8,243	8,146	8,321	8,517
Housing benefit	1,733	1,671	1,588	1,442	1,380
Universal credit	163	323	787	1,504	3,170
Other DWP social security	5,677	5,750	6,018	5,804	2,593
HMRC child benefit and tax credits	2,761	2,686	2,422	2,382	1,864
Scottish Government social security	418	419	745	826	3,897
Social security spending in Scotland	18,817	19,092	19,706	20,281	21,420
Share of benefit spending outside UK and corporate spend	556	586	376	381	368
Other social protection
Net public sector pensions	895	830	1033	355	221
Social care for the elderly	2,216	2,178	2,290	2,601	2,706
Other	598	596	802	540	1,301
Total social protection	23,082	23,281	24,206	24,158	26,017

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, Scottish local government and public corporations, and other UK government bodies.

Table 3.6: Total Expenditure: Scotland 2016-17 to 2020-21

	£ million
	Current					Capital					Total
	2016-17	2017-18	2018-19	2019-20	2020-21	2016-17	2017-18	2018-19	2019-20	2020-21	2016-17	2017-18	2018-19	2019-20	2020-21
General public services
Public and common services	1,251	1,298	1,353	1,900	2,027	246	350	265	248	383	1,498	1,648	1,617	2,147	2,410
International services	735	762	744	822	747	158	103	236	144	177	893	865	980	966	924
Public sector interest expenditure	5,147	5,605	5,181	5,162	3,861	0	0	0	0	0	5,147	5,605	5,181	5,162	3,861
Defence	2,296	2,332	2,408	2,562	2,629	762	844	885	886	1,007	3,057	3,176	3,293	3,448	3,637
Public order and safety	2,660	2,716	2,845	3,013	3,174	78	130	140	158	218	2,738	2,845	2,985	3,171	3,392
Economic affairs
Enterprise and economic development	906	959	1,110	1,296	9,061	342	366	500	486	2,157	1,248	1,325	1,610	1,782	11,219
Science and technology	146	181	186	182	204	349	304	333	348	386	494	485	519	529	589
Employment policies	212	228	242	177	202	5	8	4	0	6	217	237	246	177	208
Agriculture, forestry and fisheries	816	790	813	810	788	116	122	112	94	93	932	911	925	904	881
Transport	1,640	1,675	1,703	1,846	2,453	1,748	1,890	1,723	1,879	2,033	3,388	3,565	3,426	3,725	4,485
Environment protection	873	891	905	904	935	336	330	354	524	597	1,209	1,221	1,259	1,428	1,532
Housing and community amenities	112	159	213	137	363	1,476	1,689	2,012	2,184	1,896	1,588	1,848	2,225	2,321	2,259
Health	12,036	12,328	12,596	13,301	17,371	626	475	486	466	656	12,662	12,803	13,082	13,767	18,026
Recreation, culture and religion	1,092	1,062	1,169	1,123	1,378	310	255	235	238	193	1,403	1,317	1,404	1,361	1,571
Education and training	7,299	7,499	7,883	8,388	8,389	972	995	765	870	1,096	8,272	8,494	8,648	9,257	9,485
Social protection	23,012	23,223	24,120	24,047	25,912	71	58	86	111	105	23,082	23,281	24,206	24,158	26,017
EU Transactions	156	207	269	199	278	0	0	0	0	0	156	207	269	199	278
Accounting adjustments	6,472	6,574	6,768	7,308	9,603	1,261	1,119	602	168	-1,199	7,733	7,693	7,370	7,475	8,403
Total	66,860	68,487	70,508	73,175	89,372	8,856	9,038	8,738	8,802	9,804	75,716	77,525	79,246	81,977	99,176

Table 3.7: Total Expenditure: UK 2016-17 to 2020-21

	£ million
	Current					Capital					Total
	2016-17	2017-18	2018-19	2019-20	2020-21	2016-17	2017-18	2018-19	2019-20	2020-21	2016-17	2017-18	2018-19	2019-20	2020-21
General public services
Public and common services	9,660	10,098	10,220	11,809	13,980	2,827	2,381	2,576	2,657	3,545	12,487	12,479	12,796	14,466	17,524
International services	8,889	9,176	8,998	9,954	9,124	1,918	1,255	2,879	1,759	2,167	10,807	10,431	11,877	11,713	11,291
Public sector interest expenditure	55,185	60,525	55,092	54,664	41,469	0	0	0	0	0	55,185	60,525	55,092	54,664	41,469
Defence	27,881	28,399	29,422	31,358	32,240	9,250	10,271	10,816	10,887	12,317	37,131	38,670	40,238	42,245	44,557
Public order and safety	28,954	29,437	30,438	32,253	35,621	1,117	2,032	1,975	2,272	3,012	30,071	31,469	32,413	34,525	38,633
Economic affairs
Enterprise and economic development	6,585	7,300	9,382	13,894	106,122	1,671	2,687	3,777	3,312	21,164	8,256	9,987	13,159	17,206	127,285
Science and technology	978	1,126	1,011	1,020	1,147	3,510	3,920	5,422	5,787	6,433	4,488	5,046	6,433	6,807	7,580
Employment policies	2,347	2,512	2,632	2,253	2,542	60	105	47	2	76	2,407	2,617	2,679	2,255	2,618
Agriculture, forestry and fisheries	4,770	4,783	5,344	5,405	5,859	433	394	390	398	497	5,203	5,177	5,734	5,803	6,356
Transport	9,868	9,967	11,963	13,030	22,108	18,953	20,365	20,713	21,566	23,026	28,821	30,332	32,676	34,596	45,134
Environment protection	7,264	7,260	7,365	7,909	8,198	3,782	4,529	3,685	3,912	4,381	11,046	11,789	11,050	11,821	12,579
Housing and community amenities	2,943	2,979	3,086	3,257	3,934	7,359	8,377	8,961	10,901	9,933	10,302	11,356	12,047	14,158	13,867
Health	136,978	141,033	145,899	156,509	206,597	5,611	6,304	7,019	7,630	12,839	142,589	147,337	152,918	164,139	219,436
Recreation, culture and religion	9,382	9,306	9,267	9,400	10,133	2,224	2,173	2,119	2,534	2,171	11,606	11,479	11,386	11,934	12,304
Education and training	77,319	77,088	79,051	82,255	86,407	7,586	8,967	8,999	8,365	9,647	84,905	86,055	88,050	90,620	96,054
Social protection	264,975	268,245	274,262	275,349	296,584	451	483	551	468	657	265,426	268,728	274,813	275,817	297,241
EU transactions	4,723	5,360	7,852	5,828	5,808	0	0	0	0	0	4,723	5,360	7,852	5,828	5,808
Accounting adjustments	66,516	67,622	69,855	75,345	99,438	21,889	20,443	13,497	12,028	-4,681	88,406	88,065	83,352	87,373	94,757
Total	725,217	742,216	761,139	791,492	987,310	88,641	94,686	93,426	94,479	107,184	813,858	836,902	854,565	885,971	1,094,494

Table 3.8: Total Expenditure: Scottish Government, Local Authorities, Public Corporations, and Other UK Government: Scotland 2016-17 to 2020-21

	£ million
	Scottish Government, LAs and Public Corporations					Other UK Government					Total
	2016-17	2017-18	2018-19	2019-20	2020-21	2016-17	2017-18	2018-19	2019-20	2020-21	2016-17	2017-18	2018-19	2019-20	2020-21
General public services
Public and common services	1,002	1,089	1,075	1,523	1,683	496	559	542	624	726	1,498	1,648	1,617	2,147	2,410
International services	0	1	1	1	1	893	864	979	965	923	893	865	980	966	924
Public sector interest expenditure	1,761	1,837	1,940	2,037	1,514	3,386	3,768	3,241	3,125	2,347	5,147	5,605	5,181	5,162	3,861
Defence	4	3	3	3	4	3,053	3,173	3,290	3,445	3,633	3,057	3,176	3,293	3,448	3,637
Public order and safety	2,515	2,626	2,756	2,911	3,020	223	219	228	259	371	2,738	2,845	2,985	3,171	3,392
Economic affairs
Enterprise and econ development	831	851	971	930	1,376	417	475	639	852	9,842	1,248	1,325	1,610	1,782	11,219
Science and technology	3	3	2	2	1	492	482	516	528	589	494	485	519	529	589
Employment policies	0	0	0	0	0	217	237	246	177	208	217	237	246	177	208
Agriculture, forestry and fisheries	922	901	915	875	848	11	11	11	29	33	932	911	925	904	881
Transport	2,397	2,518	2,466	2,765	3,406	990	1,047	960	960	1,079	3,388	3,565	3,426	3,725	4,485
Environment protection	938	925	998	1,158	1,236	271	295	262	270	296	1,209	1,221	1,259	1,428	1,532
Housing and community amenities	1,588	1,848	2,225	2,321	2,259	0	0	0	0	0	1,588	1,848	2,225	2,321	2,259
Health	12,508	12,660	13,002	13,686	16,980	155	143	80	81	1,046	12,662	12,803	13,082	13,767	18,026
Recreation, culture and religion	971	914	999	925	1,113	431	403	406	436	458	1,403	1,317	1,404	1,361	1,571
Education and training	8,247	8,467	8,632	9,236	9,463	25	27	16	22	23	8,272	8,494	8,648	9,257	9,485
Social protection	5,420	5,295	5,815	5,570	8,889	17,662	17,987	18,391	18,588	17,128	23,082	23,281	24,206	24,158	26,017
EU transactions	0	0	0	0	0	156	207	269	199	278	156	207	269	199	278
Accounting adjustments	6,409	6,568	6,543	6,654	6,860	1,325	1,124	827	821	1,543	7,733	7,693	7,370	7,475	8,403
Total	45,514	46,505	48,344	50,595	58,654	30,202	31,020	30,902	31,382	40,523	75,716	77,525	79,246	81,977	99,176

Scotland’s Notional Contributions to the European Union Budget

While a member of the European Union (EU), the UK contributed to the EU budget and receives funding from the EU via a number of programmes. Although the UK left the EU on 31 January 2020, it continued to make payments to, and receive funding from, the EU in 2020-21 under transitional arrangements.

Scotland does not contribute directly to the EU budget. In GERS, Scotland is assigned an estimated share of the UK contribution. In contrast, Scotland receives funding directly from the EU, through the Common Agricultural Policy, European Structural Funds, and European Regional Development Funding. Actual amounts are used for these items.

The EU Transactions lines in the tables above are produced on a National Accounts basis, and exclude traditional own resource payments. These are payments collected by the UK on behalf of the EU, and therefore are excluded from the UK Public Sector Finances. However, they are normally included when reporting on the UK’s net contribution to EU budgets. Table 3.9 shows 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. The EU Transactions line in the GERS tables report only on transactions with the EU by the public sector. EU payments to Higher Education Institutions, which are not part of the public sector, are discussed in Box 3.2.

Funding the EU Budget

There are three key sources of funding for the EU, which come from each member state:^[20]

• 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.

Since 1985, the UK has received a rebate on its contribution, broadly equal to 66% of its net contribution in the previous year. Scotland is apportioned a population share of the rebate.

Net Contribution to the EU

The UK’s net contribution to the EU is calculated as the difference between the UK’s gross contribution to the EU budget (less the rebate) and public sector EU receipts.

The table below sets out these transactions for Scotland and the UK.

Table 3.9: Transactions with the institutions of the EU, 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
GNI based contribution	927	945	1,173	1,045	875	11,440	11,761	14,599	13,003	10,892
UK abatement	-392	-374	-397	-339	-279	-4,757	-4,547	-4,846	-4,149	-3,429
VAT-based contribution to the EU	204	244	257	220	187	2,477	2,974	3,138	2,696	2,246
Expenditure transfers to the EU	739	816	1,034	926	783	9,160	10,188	12,892	11,549	9,709
Receipts to cover collection costs of TOR	-29	-57	-54	-54	-39	-357	-698	-664	-663	-482
TOR	277	280	270	271	196	3,366	3,413	3,304	3,320	2,410
Gross contribution to the EU budget	987	1,039	1,250	1,143	941	12,169	12,903	15,531	14,206	11,636
Public sector EU receipts	-554	-552	-711	-673	-467	-4,081	-4,130	-4,375	-5,059	-3,419
Net contributions to the EU budget	433	487	539	471	474	8,088	8,773	11,156	9,147	8,218
EU transactions (net contributions to EU institutions less TOR)	156	207	269	199	277	4,722	5,360	7,852	5,827	5,808

Box 3.3: EU Payments to Higher Education Institutions

The figures above covered the transactions that the Scottish and UK public sector have 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 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 2015-16 to 2019-20, 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 2015-16 to 2019-20

	£ million
	2015-16	2016-17	2017-18	2018-19	2019-20
Scotland	97.4	104.8	116.3	111.1	104.5
UK	840.6	877.2	924.6	993.7	881.6

Note: The HEI financial reporting period runs from 1 August to 31 July

Box 3.4: 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. This analysis uses sources of publicly available data, all brought together into an accompanying spreadsheet. The spreadsheet is available from the GERS website.

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 2015-16 to 2019-20 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.

Scotland: Unitary charge payments, 2016-17 to 2020-21

	£ million
	2016-17	2017-18	2018-19	2019-20	2020-21
By scheme type
Private Finance Initiative	998	1,013	1,027	1,046	1,060
Non-Profit Distributing models1	107	189	262	330	353
Total Unitary Charge payments	1,106	1,202	1,289	1,376	1,413
By procuring authority
Further Education	27	35	35	35	35
Local Government	514	548	585	606	640
NHS	258	273	298	327	340
Other Scottish Government	133	169	191	224	213
Ministry of Defence	25	26	26	24	22
Scottish Water	148	151	155	160	162
Total Unitary Charge payments	1,106	1,202	1,289	1,376	1,413
By sector of project
Energy	5	5	-	-	-
Further Education	27	35	35	35	35
Health	258	273	298	327	340
IT	-	-	-	-	-
Ministry of Defence	25	26	26	24	22
Offices	3	3	3	3	3
Police	4	4	5	5	5
Prisons	47	47	48	50	52
Schools	469	502	545	565	599
Transport	102	138	158	190	177
Waste	165	169	172	178	180
Total Unitary Charge payments	1,106	1,202	1,289	1,376	1,413
UK Total Unitary Charge Payments	10,528	10,773	10,158	10,212	10,045
Scotland as % UK	10.5%	11.2%	12.7%	13.5%	14.1%

¹ 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