Government Expenditure and Revenue in Scotland (GERS): 2018 to 2019

Chapter 4: Devolved Revenue and Expenditure

Devolved and Reserved Revenue in Scotland 2018-19

Devolved and Reserved Expenditure in Scotland 2018-19

Introduction

Following the implementation of Scotland Act 2012 and Scotland Act 2016, the powers of the Scottish Parliament over taxation and expenditure in Scotland are changing. This chapter sets out the amount of public sector revenue and expenditure currently devolved and how this is changing with the implementation of the Scotland Act 2016.

Devolved Revenue

The table below sets out revenue raised in Scotland from taxes currently devolved to the Scottish Parliament. Total devolved tax revenue in 2018-19 was estimated to reach £17,392 million.

Since 2017-18, power over non-saving non-dividend income tax has been devolved to the Scottish Parliament. HMRC has put in place new infrastructure to identify Scottish income tax payers and tax revenue since 2016-17, and this provides an important new statistical source in GERS. However, it also creates a discontinuity in the income tax series in Table 4.1 as comparable data are not available for earlier years. As a result, the income tax estimates for 2014-15 to 2015-16 in the shaded cells are not comparable to the estimates for later years. Similarly, there is a discontinuity in the estimates of Scottish landfill tax and land and building transaction tax following the creation of Revenue Scotland, which is now responsible for collecting these taxes.

Table 4.1: Currently devolved taxes

	£ million
	2014-15	2015-16	2016-17	2017-18	2018-19
Council tax	2,011	2,042	2,070	2,257	2,360
Non-domestic rates	2,511	2,579	2,732	2,762	2,847
Land and buildings transaction tax1 (devolved from 2015-16)	488	425	484	557	557
Scottish landfill tax (devolved from 2015-16)2	149	147	149	148	143
Non-savings and non-dividend income tax liabilities (devolved from 2016-17)3	10,887	10,948	10,719	10,916	11,486
Total devolved taxes	16,046	16,141	16,153	16,640	17,392

¹ Figures for 2015-16 onwards are from Revenue Scotland. Previous years are based on HMRC estimates

² Figures for 2015-16 onwards are from Revenue Scotland. Previous years are based on ONS estimates

³ This table shows Scottish Rate of Income Tax liabilities rather than receipts. They are therefore calculated on a different basis to the estimates of total Scottish income tax receipts in Table 1.1. Figures for 2015-16 and earlier are based on the Survey of Personal Incomes. Figures for 2016-17 and 2017-18 are from HMRC accounts, and the figure for 2018-19 is the SFC forecast from May 2019.

Note: Shaded cells represent estimates for years when tax devolution has not occurred. These are not directly comparable to outturn data in other cells.

Further devolution of taxes is due to continue in the next few years, following the Scotland Act 2016. As these taxes are not yet devolved, the table below shows the estimated historical revenues from these taxes.

Table 4.2: Revenue to be devolved under Scotland Act 2016

	£ million
	2014-15	2015-16	2016-17	2017-18	2018-19
Air passenger duty (date of devolution to be decided)	282	299	301	313	338
Aggregates levy (date of devolution to be decided)	55	53	63	57	57

As well as devolving tax powers to the Scottish Government, the Scotland Act 2016 allows for the first 10p of the standard rate of VAT receipts and the first 2.5p of the reduced rate of VAT receipts in Scotland to be assigned to the Scottish Government. The transition period for VAT assignment began on 1 April 2019.

Table 4.3 shows the VAT that would have been assigned to Scotland under this approach, consistent with the latest published estimates of Scottish Assigned VAT (see Box 1.2).

Table 4.3: VAT Assignment: Scotland 2014-15 to 2018-19

	£ million
	2014-15	2015-16	2016-17	2017-18	2018-19
VAT assignment (from 2019-20)	4,735	4,929	4,968	5,204	5,577

Note: Assigned VAT receipts are 50% of total receipts in all years.

Further information on the planned devolution of taxes to the Scottish Government is available in the fiscal framework agreement between the Scottish and UK Governments.^[26] The net impact on Scottish Government funding will depend in part on how the block grant received by the Scottish Government is adjusted to reflect the devolution of new revenue streams. This adjustment will be based in part on the relative growth in tax per head for each devolved tax in Scotland and the rest of the UK. Table 4.4 below shows tax per head for Scotland and the rest of the UK for each of the relevant taxes.

Table 4.4: Devolved revenue per head: Scotland and rest of UK

	£ per person
	Scotland					Rest of UK
	2014-15	2015-16	2016-17	2017-18	2018-19	2014-15	2015-16	2016-17	2017-18	2018-19
Income tax	2,033	2,035	1,981	2,007	2,112	2,375	2,422	2,481	2,540	2,690
VAT	884	916	918	959	1,025	857	892	927	948	996
APD	53	56	56	58	62	49	46	49	50	54
LBTT	92	80	91	104	103	175	181	198	215	198
Landfill tax	28	27	28	27	26	16	15	14	12	11
AL	10	10	12	11	11	5	5	6	5	5

Notes: Income tax refers to non-savings non-dividend income tax liabilities

Shaded cells represent estimates for years when tax devolution has not occurred. These are not directly comparable to figures in other cells.

Income tax figures for 2018-19 for Scotland and the rest of the UK, are based on official forecasts from the Scottish Fiscal Commission and Office for Budget Responsibility respectively.

APD: air passenger duty

LBTT: Land and Buildings Transaction Tax for Scotland, compared to LBTT and stamp duties on property for the UK

AL: aggregates levy

Devolved Social Security

The table below shows the expenditure in Scotland from social security benefits devolved to the Scottish Parliament prior to implementation of Scotland Act 2016.

Table 4.5: Social security devolved prior to Scotland Act 2016

	£ million
	2014-15	2015-16	2016-17	2017-18	2018-19
Council tax reduction	360	344	332	327	336
Scottish welfare fund	36	33	35	33	33
Discretionary housing payments	51	49	52	59	62
Total	446	426	418	419	431

The table below shows the latest available figures for social security spending which is due to be devolved to the Scottish Government under the Scotland Act 2016.

Table 4.6: Devolved social security under Scotland Act 2016

	£ million
	2014-15	2015-16	2016-17	2017-18	2018-19
Disability living allowance	1,467	1,400	1,219	999	893
Attendance allowance	485	487	487	492	506
Carer's allowance1	203	222	234	249	266
Winter fuel payment	184	181	178	176	173
Personal independence payment	163	318	552	930	1,138
Industrial injuries disablement benefit	89	87	84	82	82
Severe disablement allowance	77	51	22	12	10
Cold weather payment	7	3	1	22	10
Funeral payment	6	5	5	5	5
Sure Start maternity grant2	3	3	3	2	2
Total expenditure on social security to be devolved	2,684	2,757	2,785	2,969	3,084

Notes:

¹ Carer's Allowance was devolved to the Scottish Government on 3 September 2018. The 2018-19 figure shows total spending in the year as a whole, of which £152 million was spent by the Scottish Government and £101 million by the Department for Work and Pensions.

² Sure Start maternity grant was replaced in Scotland by the Scottish Government's Best Start Grant on 10 December 2018. Spending on Best Start Grant is not included.

The fiscal framework agreement discussed above also covers the devolution of social security expenditure to the Scottish Government. The Scotland Act 2016 sets out that the final impact on the Scottish Government budget of devolution of these benefits will be determined through an adjustment to the Scottish block grant. For the Sure Start maternity grant and Funeral payments, a one-off adjustment will be made to the Scottish Government budget when they are devolved. For the other benefits. the adjustment made to the Scottish Government's budget to reflect this additional spending responsibility will depend in part on the relative growth in expenditure per head for each newly devolved benefit in Scotland and the rest of GB.

Table 4.7 below shows expenditure per head for each of the relevant benefits for Scotland and the rest of Great Britain. For the majority of social security, expenditure per head is higher in Scotland than the rest of Great Britain, although overall the rate of growth in expenditure per head has been similar between Scotland and the rest of Great Britain since 2014-15 for each individual benefit.

Table 4.7: Devolved social security expenditure per head: Scotland and rest of GB

	£ per person
	Scotland					Rest of GB
	2014-15	2015-16	2016-17	2017-18	2018-19	2014-15	2015-16	2016-17	2017-18	2018-19
Disability living allowance	274	260	225	184	164	214	204	176	142	122
Attendance allowance	91	91	90	91	93	86	86	85	86	87
Carer's allowance	38	41	43	46	49	37	40	42	44	49
Winter fuel payment	34	34	33	32	32	34	33	32	31	31
Personal independence payments	30	59	102	171	209	3	46	79	131	160
Industrial Injuries disability benefit	17	16	16	15	15	14	14	13	13	13
Severe disablement allowance	14	9	4	2	2	11	7	4	2	1
Cold weather payment	1	1	0	4	2	3	3	3	3	2

Summary of current and proposed devolved powers

The table below shows estimates of devolved receipts and expenditure before and after the implementation of the Scotland Acts 2012 and 2016.

Table 4.8: Fiscal powers before and after Scotland Act 2016, 2018-19 (£ million)

	Before Scotland Acts 2012 and 2016	After Scotland Acts 2012 and 2016
Non-saving non-dividend income tax liabilities (devolved from 2016-17)	-	11,486
Council tax	2,360	2,360
Non-domestic rates	2,847	2,847
Land and buildings transaction tax) (devolved from 2015-16)	-	557
Scottish landfill tax (devolved from 2015-16)	-	143
Air passenger duty (date to be decided)	-	338
Aggregates levy (date to be decided)	-	57
Total devolved taxes	5,207	17,787
Devolved taxes as % of non-North Sea Scottish revenue	8%	29%
as % of revenue incl geographical share of North Sea revenue1	8%	28%
Assigned VAT (in transition from 2019-20)	-	5,577
Total devolved and assigned taxes	5,207	23,364
Devolved and assigned taxes as % of non-North Sea Scottish revenue	8%	38%
as % of taxes incl geographical share of North Sea revenue1	8%	37%
Devolved expenditure including housing benefit2 (HB)	44,717	47,801
Devolved taxes as % of estimated devolved expenditure	12%	37%
Devolved and Assigned taxes as % of estimated devolved expenditure	12%	49%

¹ Figures for the shares of devolved taxes as a share of total taxes including a population share of North Sea revenue are the same as the share when excluding North Sea taxes.

² In GERS and the CRA, housing benefit is included in Scottish local government spending, as they make the payments to recipients, although it is set centrally and funded by the Department for Work and Pensions. Depending on definitions adopted, it could either be excluded or included in devolved expenditure.