Government Expenditure & Revenue Scotland (GERS) 2021-22

Annex B Revisions

This section presents revisions from the previous GERS 2019-20 publication.

Revisions to Non-North Sea Revenue Estimates from GERS 2020-21

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.

There are a number of revisions to UK revenue totals from GERS 2020-21. However these are relatively small, and overall UK revenue for 2020-21 has been revised by 0.3%. The main revisions relate to income tax, corporation tax, and non-domestic rates, where revenue has been affected by the pandemic. This is offset by upward revisions to gross operating surplus, reflecting the incorporation of train operating companies into the public sector as public corporations.

Further detail on all these revisions is available from the UK Public Sector Finances.^[30]

Scottish revisions broadly reflect these UK revisions, the main difference relating to national insurance contributions, where the latest outturn data has resulted in a larger downward revision to Scottish revenue.

A time series of revisions is available in the accompanying spreadsheets online.

Revisions to North Sea Revenue Estimates from GERS 2020-21

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. Revenue has been revised up in 2020-21, reflecting updated both revisions to the UK total but also updates to the assessment of corporation tax paid by fields in Scottish waters. Estimates for previous years are largely unrevised.

Revisions to Expenditure Estimates from GERS 2020-21

Table B.4 sets out the changes in estimates of public expenditure in Scotland and the UK between this report and GERS 2020-21. These reflect revisions to Scottish Government and Scottish local government spending data, revisions to UK spending totals, 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.

The main revisions to spending relate to the coronavirus loan schemes. Scotland was allocated a population share of this expenditure in last year's publication. This has been revised down to be consistent with the shares published in the Country and Regional Analysis publication, which reflect the location of the businesses receiving the loans.

The main methodological change relates to the treatment of tax credits. Scotland's share of this expenditure has been reduced in order to bring it into line with the regional information published in HMRC's Corporate Tax: Research and Development Tax Credits publication:

Corporate tax: Research and Development Tax Credits - GOV.UK (www.gov.uk)

Within GERS, we also assume that the share of research and development tax credits is a good approximation for wider company tax credits paid out by HMRC.

There have also been revisions to estimates of spending associated with student loans, as the methodology for bringing this spending into the public sector has been revised from the initial estimates included last year. The revisions to Scottish spending are broadly in line with those for the UK, apart from public sector interest expenditure, where the methodology change sees higher spending in Scotland. Scotland's share of total public sector expenditure is in general slightly higher in most years as a result of this change. .

The table below shows the revisions to spend in 2020-21 by function, and by Scottish Government, Scottish local government, Scottish public corporations, and Other UK government bodies. Overall, Scottish spend in 2020-21 has been revised down by £737 million, primarily due to revisions to enterprise and economic development expenditure.

Revisions to Estimates of Capital Consumption

Table B.6 sets out the changes to estimates of capital consumption in Scotland and the UK between this report and the previous publication of GERS. 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.

In general, capital consumption in all years has been revised down in all years, reflecting updated data from the ONS.

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 its perpetual inventory model.

Revisions to Fiscal Aggregates

Table B.7 shows revisions to the current budget balance from the previous publication of GERS. The Scottish current budget deficit has increased in all years. This reflects the revisions to public sector interest expenditure discussed above.

Table B.8 shows revisions to the net fiscal balance from the previous publication of GERS. In general, these are similar to the revisions to the current budget balance for Scotland

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. For years prior to 2020-21, estimates are largely unchanged. In 2020-21, estimates of the fiscal aggregate have worsened as a share of GDP for Scotland. These revisions reflect the downward revision to the nominal value GDP made in the Quarterly National Accounts Scotland for 2021Q3. This reflects routine annual update to bring the value of GVA in line with the latest UK regional accounts. Revisions to GDP in 2020-21 are larger than in previous years due to the challenges of measuring the economy during the pandemic.