Government Expenditure and Revenue Scotland (GERS) 2023-24

Frequently Asked Questions

Below is a summary of some of the most frequently asked questions and their answers.

Q: Who produces GERS?

A: GERS is produced by Scottish Government statisticians. It is designated as an Accredited Official Statistics product, which means that it is produced independently of Scottish Ministers and has been assessed by the Office for Statistics Regulation (OSR) and confirmed to comply with the standards of trustworthiness, quality and value in the Code of Practice for Statistics.

Q: How does GERS relate to the finances of the Scottish Government?

A: GERS does not directly relate to the finances of the Scottish Government, which has limited borrowing powers. The fiscal balances in GERS compare total public sector spending to total public sector revenue. They do not correspond to a deficit of any particular part of the public sector. Separate reports are available on Scottish Government and Scottish Local Government finances. In 2023-24, the devolved public sector borrowed £2.3 billion.

Q: Why is public sector spending per person higher for Scotland in GERS?

A: Public sector spending in Scotland consists of spending on devolved services by the Scottish Government and local authorities, and spending on reserved services by the UK Government. For reserved spending such as public sector debt interest, international services, and defence, Scotland is allocated a population share of UK spending, and so spending per person on these areas is the same.

As such, spending per person for Scotland is higher primarily due to spending on devolved services. While there are no official estimates of how spending on devolved services compares in Scotland to other parts of the UK, analysis by bodies such as the Institute of Fiscal Studies^[1] suggest that it is between 25% and 30% higher per person in Scotland. This is as a result of the Barnett formula, and slower population growth in Scotland.

Q: Why is non-North Sea public sector revenue per person lower in Scotland?

Excluding North Sea revenue, revenue per person is lower in Scotland. While for many revenues, revenue per person will be similar in Scotland to the UK, there are some exceptions to this. Revenues where Scotland’s share of UK revenue is relatively low are those associated with property or assets, such as capital gains tax (3.5%), and inheritance tax (4.3%), reflecting that in particular properties prices tend to be lower than the UK average.^[2] Scotland’s share of income tax (6.8%) 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.

Q: Is GERS a description of the whole Scottish economy?

A: No. GERS reports only on public sector revenue and expenditure. Although these may be affected by economic performance, GERS does not directly report on Scotland’s wider economy. If users are interested in the measurement of the economy as a whole, they should refer to other economic statistics products, such as the quarterly Gross Domestic product figures or Quarterly National Accounts Scotland (QNAS) (Economy statistics - gov.scot (www.gov.scot)).

Q: How much interest expenditure does Scotland have in GERS?

A: GERS includes two categories of interest spending. The first is reserved UK debt interest, and Scotland is allocated a population share of this, amounting to £8.4 billion in 2023-24. The second is interest spending associated with public sector pension funds. These funds also generate interest income, and in 2022-23 Scotland has £2.1 billion of interest expenditure associated with public sector pensions and £2.0 billion of interest income.

Q: How much spending occurs in Scotland?

A: As set out in the Preface, GERS shows spending for Scotland, rather than spending in Scotland. This shows that around 9.1% of UK spending is undertaken for Scotland, slightly higher than a population share. While direct estimates of spend in Scotland are not available, this is consistent with broader indicators of public sector activity in Scotland, which show that the public sector plays a larger role in Scotland than the UK as a whole. For example, around 10% of UK public sector employees are based in Scotland. Data from HMRC’s Real Time Information system suggests that 9.2% of paybill across public administration and defence, education, health and social care was spent in Scotland in 2022-23.

As GERS shows spending for Scotland, not all spending that occurs in Scotland is included in the GERS spending figures. For example, around £100 million of Scottish Government expenditure is not included GERS, as it is assumed to benefit residents outside of Scotland, such as spending on museums in Scotland which benefits visitors from the rest of the UK.

Q: What are accounting adjustments and why do they feature in the GERS estimates?

A: Accounting adjustments are used to present revenue and expenditure on a National Accounts basis, an international reporting standard used by governments. They normally reflect non-cash items, such as depreciation or pensions liabilities. In general, these adjustments do not affect the net fiscal balance or current budget balance, as they are added to both revenue and expenditure. In 2023-34, accounting adjustments added £9.2 billion to the estimate of Scottish public sector revenue and £10.7 billion to the estimate of Scottish public sector spending. For more information on accounting adjustments and where they appear in the revenue tables, see Table A.9.

Q: Do you use company headquarters to assign corporation tax or taxes like VAT or insurance?

A: No. Corporation tax on trading profits is estimated on a company-by-company basis, depending on the economic activity each company has in Scotland, not simply on the location of company headquarters. VAT, and other taxes such as those related to insurance activity, are related to expenditure, and are therefore estimated based on expenditure that occurs in Scotland, rather than the location of a company’s head office.

Q: How do taxes from the whisky industry feature in the GERS estimates?

A: Like any industry, the whisky industry’s activity in Scotland generates tax revenue through a range of sources, such as corporation tax on profits, income tax and national insurance contributions on staff earnings, and non-domestic rates payments on business premises. These are all captured in the estimates of Scottish public sector receipts reported in GERS.

In addition, whisky consumed in the UK is subject to VAT and alcohol duty. This is assigned to Scotland on the basis of how much is consumed in Scotland. Whisky which is exported does not generate UK VAT or alcohol duty. There is no export duty in the UK.

Q: Why have the numbers been revised since last year?

A: Revisions are a normal part of statistical publications. There are a number of reasons why the numbers have changed from the previous publication. In order to produce a timely initial estimate of Scotland’s fiscal position, the latest GERS numbers are based on a number of provisional data sources, for example provisional Scottish Government accounts. These numbers will change as part of the move to final outturn data. In addition, methodological changes or changes to the scope of the public sector can result in revisions to previous years’ data. This year, revisions include changes to VAT revenue, which reflect changes to estimates of VAT associated with domestic tourism by HMRC.

Q: What population data is used in GERS?

A: GERS uses estimates of financial year populations based on Mid-Year Estimates produced by the National Records of Scotland. Currently, there are no Mid-Year Estimates for 2023, and the projections of the 2023 population do not yet incorporate the results of the Scottish Census. As a result, the 2022-23 population estimates for Scotland and the UK have been rolled forward in to 2023-24, to give a constant Scottish population share.