GOVERNMENT
EXPENDITURE & REVENUESCOTLAND 2008-2009

GOVERNMENT EXPENDITURE & REVENUE SCOTLAND 2008-2009 JUNE 2010

© Crown copyright 2010
Further copies of this publication can be obtained from:
Office of the Chief Economic Adviser
Scottish Government
St Andrew’s House
Regent Road
Edinburgh
EH1 3DG
This document is also available on the Scottish Government website:www.scotland.gov.uk
ISBN 978-0-7559-9412-0
The text pages of this document are printed on recycled paper
and are 100% recyclable.
APS Group Scotland
DPPAS10118 (06/10)

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JUNE 2010

GOVERNMENT
EXPENDITURE & REVENUESCOTLAND 2008-2009

JUNE 2010

The Scottish Government, Edinburgh© Crown copyright 2010
ISBN 978-0-7559-9412-0
Further copies of this publication can be obtained from:
Office of the Chief Economic Adviser
Scottish Government
St Andrew’s House
Regent Road
Edinburgh
EH1 3DG
This document is also available on the Scottish Government website: www.scotland.gov.uk
The text pages of this document are printed on recycled paper and are 100% recyclable.

APS Group Scotland
DPPAS10118 (06/10)

CONTENTS
Executive Summary

5Preface7

Chapter 1

Introduction And Overview

13

Chapter 2

Fiscal Background17

Chapter 3

Scotland’s Public Sector Accounts

23

Chapter 4

Public Sector Revenue

35

Chapter 5

North Sea Revenue

45

Chapter 6

Public Sector Expenditure

51

Chapter 7

Conclusion

81

Annex A

Revenue Methodology

83

Annex B

Expenditure Methodology

91

Annex C

List Of Abbreviations

101

Annex D

Glossary

103

Government Expenditure and Revenue Scotland 2008-09

1

LIST OF TABLES
Scotland’s Public Sector Accounts
Table 3.1: Scotland: Estimated Share of Financial Stability Expenditures: 2008-09

25

Table 3.2: Current and Capital Budgets Including Financial Sector Interventions: Scotland 2004-05 to 2008-09

26

Table 3.3a: Current and Capital Budgets Including Financial Sector Interventions (Excluding North Sea Revenue) % GDP

27

Table 3.3b: Current and Capital Budgets Including Financial Sector Interventions (Per Capita Share North Sea) % GDP

27

Table 3.3c: Current and Capital Budgets Including Financial Sector Interventions (Geographical Share North Sea) % GDP

28

Table 3.4: Current and Capital Budgets: Scotland (£ Million) Not Including Financial Sector Interventions

29

Table 3.5: Current and Capital Budgets: Scotland (% of GDP) Not Including Financial Sector Interventions

30

Table 3.6: Summary of Total Public Sector Expenditure: Scotland 2004-05 to 2008-09

32

Table 3.7: Summary of Current Revenue by Economic Category: Scotland 2004-05 to 2008-09

34

Public Sector Revenue
Table 4.1: Current Revenue: Scotland 2008-09

36

Table 4.2: Current Revenue: Scotland and UK 2004-05 to 2008-09

41

Table 4.3: Non-North Sea Current Revenue: Scotland/UK Share 2004-05 to 2008-09

42

North Sea Revenue
Table 5.1: Total North Sea Revenue: UK 1981-82 to 2008-09

46

Table 5.2: Composition of North Sea Revenue: UK 2004-05 to 2008-09

46

Table 5.3: Per Capita Share of North Sea Revenue: Scotland 2004-05 to 2008-09

47

Table 5.4: Geographical Share of North Sea Revenue: Scotland 2004-05 to 2008-09

49

Table 5.5: Current Revenue (Per Capita Share of North Sea Revenue): Scotland 2008-09

50

Table 5.6: Current Revenue (Geographical Share of North Sea Revenue): Scotland 2008-09

50

Table 5.7: Hypothetical Shares of North Sea Revenue: Scotland 2004-05 to 2008-09

50

Public Sector Expenditure
Table 6.1: Total Expenditure: Scotland 2008-09

52

Table 6.2: Current and Capital Expenditure Including Financial Sector Interventions: Scotland and UK

53

Table 6.2a: Current and Capital Expenditure Not Including Financial Sector Interventions: Scotland and UK

53

Table 6.3: Current and Capital Expenditure Including Financial Sector Interventions

53(% of Total Expenditure): Scotland 2004-05 to 2008-09

53

Table 6.3a: Current and Capital Expenditure Not Including Financial Sector Interventions (% of Total Expenditure)

53

Table 6.4: Total Expenditure: Scotland 2004-05 to 2008-09

55

Table 6.5: Total Expenditure: UK 2004-05 to 2008-09

56

Table 6.6: Total Expenditure per capita: Scotland and UK 2008-09

58

Table 6.7: Total Expenditure, Identifiable and Non-identifiable: Scotland 2004-05 to 2008-09

63

Table 6.8: Total Identifiable Expenditure: Scotland 2004-05 to 2008-09

65

Table 6.9: Identifiable Expenditure - Scottish Government: Scotland 2004-05 to 2008-09

66

Table 6.10: Identifiable Expenditure - Other UK Government: Scotland 2004-05 to 2008-09

67

Table 6.11: Identifiable Expenditure: Scotland and UK 2008-09

68

Table 6.12: Identifiable Expenditure per capita: Scotland and UK 2008-09

69

Table 6.13: Non-Identifiable Expenditure: Scotland and UK 2004-05 to 2008-09

71

Table 6.14: Non-Identifiable Expenditure: Scotland 2004-05 to 2008-09

72

Table 6.15: Non-Identifiable Expenditure: UK 2004-05 to 2008-09

73

Table 6.16: Non-Identifiable Expenditure: Scotland and UK 2008-09

74

Table 6.17: Non-Identifiable Expenditure Per Capita: Scotland and UK 2008-09

75

Table 6.18: Accounting Adjustment: UK 2004-05 to 2008-09

77

Table 6.19: Accounting Adjustment: Scotland 2004-05 to 2008-09

79

2

Government Expenditure and Revenue Scotland 2008-09

L i st o f tab l es

Revenue Methodology
Table A.1: Apportionment Methodologies and Sources for Public Sector Revenue in Scotland

85

Table A.2: Revision to Estimates of Total Non-North Sea Public Sector Revenue: 2004-05 to 2007-08

87

Table A.3: Revision to Estimates of Public Sector Revenue: Scotland and UK 2007-08

88

Table A.4: Effect of a 1% Change in Revenue (Excluding North Sea Revenue): Scotland 2008-09

89

Expenditure Methodology
Table B.1: Apportionment Methodologies for Non-Identifiable Expenditure: Scotland 2004-05 to 2008-09

92

Table B.2: Revisions to Estimates of Total Public Sector Expenditure from PESA 2010: Scotland 2004-05 to 2008-09

93

Table B.3: Amendments to the 2010 PESA database

94

Table B.4: Re-classification of Expenditure in PESA 2010: Scotland 2004-05 to 2008-09

95

Table B.5: Re-apportionment of Expenditure in PESA 2010: Scotland 2004-05 to 2008-09

96

Table B.6: Revisions to Estimates of Total Expenditure: Scotland 2004-05 to 2007-08

97

Table B.7: Revisions to Estimates of Identifiable Expenditure: Scotland 2004-05 to 2007-08

97

Table B.8: Revisions to Estimates of Total Non-Identifiable Expenditure: Scotland 2004-05 to 2007-08

98

Table B.9: Revisions to Estimates of Total Managed Expenditure: Scotland 2004-05 to 2007-08

98

Table B.10: Effect of a 1% Change in Expenditure: Scotland 2008-09

99

Government Expenditure and Revenue Scotland 2008-09

3

L i st o f T ab l es

4

Government Expenditure and Revenue Scotland 2008-09

EXECUTIVE SUMMARY•

Government Expenditure and Revenue Scotland (GERS) is a National Statistics
publication.

•

GERS follows the current practice of ONS and HM Treasury in incorporating the effectsof the financial sector interventions into the public accounts. The financial crisis has
clearly been a unique event, particularly over the publication period of GERS, andtherefore separating out this particular element helps provide continuity with previous
GERS publications.
Therefore in this edition of GERS, estimates are provided of
Scotland’s public sector finances both including and not including a share of theexpenditure associated with the UK Government’s financial sector interventions.

•

Incorporating a share of the expenditure associated with the UK Government’s financial
sector interventions, in 2008-09, the estimated current budget balance for the public
sector in Scotland was a deficit of £10.5 billion (9.1 per cent of GDP) excluding North
Sea revenue, a deficit of £9.4 billion (8.0 per cent of GDP) including a per capita share of
North Sea revenue or a surplus of £1.3 billion (0.9 per cent of GDP) including an
illustrative geographical share of North Sea revenue. These estimates are comparablewith the estimate of the UK’s current budget balance published in the March 2010 UK
Budget.

•Not including a share of the UK Government’s financial sector interventions, in 2008-09,
the estimated current budget balance for the public sector in Scotland was a deficit of£10.5 billion (9.1 per cent of GDP) excluding North Sea revenue, a deficit of £9.4 billion(8.0 per cent of GDP) including a per capita share of North Sea revenue or a surplus of£1.2 billion (0.9 per cent of GDP) including an illustrative geographical share of North
Sea revenue.

•

Incorporating a share of the expenditure associated with the UK Government’s financial
sector interventions, in 2008-09, the estimated net fiscal balance was a deficit of £15.5
billion (13.5 per cent of GDP) when excluding North Sea revenue, a deficit of £14.5
billion (12.2 per cent of GDP) when including a per capita share of North Sea revenue ora deficit of £3.8 billion (2.6 per cent of GDP) when an illustrative geographical share of
North Sea revenue is included. This is comparable with the estimate of UK net
borrowing published in the March 2010 UK Budget.

•

Not including a share of the UK Government’s financial sector interventions, in 2008-09,
the estimated net fiscal balance in Scotland, that is the estimated current budget balanceplus estimated net capital investment, was a deficit of £14.7 billion (12.8 per cent ofGDP) when excluding North Sea revenue, a deficit of £13.6 billion (11.5 per cent ofGDP) when including a per capita share of North Sea revenue or a deficit of £3.0 billion(2.1 per cent of GDP) when an illustrative geographical share of North Sea revenue isincluded.

•

In 2008-09, total Scottish non-North Sea public sector revenue was estimated at £43.5
billion, equivalent to 8.3 per cent of the comparative total UK non-North Sea public sector
revenue.

•

In 2008-09, total public sector expenditure for Scotland was estimated at £56.5 billion(equivalent to 9.4 per cent of total UK public sector expenditure) when a share of the UK
Government’s financial sector interventions is included, and £55.8 billion (equivalent to
9.4 per cent of total UK public sector expenditure), when these are not included.

Government Expenditure and Revenue Scotland 2008-09

5

E xecu ti ve S u m m ar y

6

Government Expenditure and Revenue Scotland 2008-09

Preface
This report is the sixteenth in the series of official published estimates of expenditure andrevenue balances of the public sector in Scotland.

The aims and objectives
The aim of GERS is to enhance public understanding of fiscal issues in Scotland. The
primary objective is to estimate a set of public sector accounts for Scotland through detailed
analysis of official UK and Scottish Government finance statistics. GERS estimates thecontribution of revenue raised in Scotland toward the goods and services provided for the
benefit of the people of Scotland. The report is designed to allow users to understand andanalyse Scotland’s fiscal position under different scenarios.
GERS captures the entire public sector in Scotland and includes activity by each of theconstituent sub-sectors of the public sector: central government, local government andpublic corporations. In addition to providing an analysis of aggregate expenditure andrevenue, the report contains a detailed breakdown according to individual expenditure andrevenue components.

National Statistics in GERSAll expenditure and revenue data in GERS are classified as UK National Statistics. National
Statistics are those figures which come within the scope of the principles of the National
Statistics Code of Practice. The Code seeks to ensure that National Statistics will be valued
for their relevance, integrity, quality and accessibility. More information about National
Statistics is available on the Office for National Statistics (ONS) web site.1

The approach
Unlike many other countries, the UK fiscal framework does not provide separate detailed
intra-country or intra-regional fiscal accounts. GERS therefore provides estimates of public
sector fiscal accounts for Scotland.
In the absence of formal intra-UK fiscal accounts, estimating a set of equivalent accounts for
Scotland raises two key practical issues:•

Firstly, there is no formally agreed set of accounting concepts and definitions forthe formulation of UK country or regional fiscal accounts.

•

Secondly, a number of key elements of underlying data necessary forconstructing public sector country or regional fiscal accounts, while available atthe UK level, are not available at the UK country or regional level.

In light of this, GERS develops a robust framework for measuring public sector revenue inand expenditure for Scotland. Firstly, public sector balances of expenditure and revenue are
estimated for Scotland on the basis of the national accounting standards adopted by the UK
Government: the European System of Accounts 1995 (ESA 95). Secondly, in the absenceof unique data for Scotland, GERS estimates appropriate expenditure and revenue using thebest available information and best considered apportionment methodologies. However,there are alternative approaches and data sources that could be used in the analysis. As an
acknowledgement of this, the report highlights where there are different options and the1

http://www.statistics.gov.uk

Government Expenditure and Revenue Scotland 2008-09

7

P r eface

sensitivity of the results presented. Furthermore, it should be borne in mind that thesemethodologies are subjective and therefore the figures should be viewed accordingly.

What questions does GERS address?
GERS fundamentally addresses three questions that can be captured from a set of public
sector accounts for a given year:
1. What did the country pay for the full range of public services that were consumed?
2. What tax revenues were raised?
3. To what extent did these revenues raised cover the payments made for these public
services?

The methodology
The headline estimates of Scottish public sector expenditure and revenue in GERS embrace
two key principles:
1. Public sector expenditure is estimated on the basis of spending incurred forthe benefit of residents and enterprises in Scotland;
2. Public sector revenue is estimated for taxes where a financial burden is
imposed on residents and enterprises in Scotland.
Both issues are discussed in detail below.

Expenditure
Public sector expenditure is estimated on the basis of spending incurred for the benefit ofresidents and enterprises in Scotland.
The estimation of regional public sector expenditure is based on an assessment according tothe ‘who benefits’ principle. That is, a particular public sector expenditure is apportioned to agiven region if the benefit of the service or transfer derived from the expenditure is thought toaccrue to residents and enterprises of that region. Assessing the regional dimension of the‘who benefits’ principle is a difficult and complex task. This is especially the case in countries
with closely integrated markets, significant inter-regional spillovers and mobile factors of
production.
In attempting to determine the regional dimension of public sector expenditure, it is possible
to classify each element of expenditure using two approaches:

8•

Expenditure for a region: where spending is allocated to a given region if thebenefit of the service or transfer derived from the expenditure is thought to accrue
to residents and enterprises of that region;•

Expenditure in a region: where spending is allocated to the region in which theexpenditure actually took place.

Government Expenditure and Revenue Scotland 2008-09

P r eface

An example of the difference between the in and for approach can help clarify the distinction.
Consider the case of government funding for a national museum. Here the in approach
would associate all government spending on the museum with the region in which themuseum is located. However, the for approach would consider the beneficiaries of theservice provided; that is, it would consider where the visitors and other users of the museum
were located, measuring the spending as spread across the regions where the users live.
For most elements of expenditure, estimates of ‘who benefits’ based upon the in and forapproaches will yield similar results. For example, the vast majority of health expenditure by
NHS Scotland occurs in Scotland and is for patients resident in Scotland. Therefore, the in
and for approaches should yield virtually identical assessments of ‘who benefits’. However,for expenditure where the final impact is more widespread, such as defence, or higher andfurther education, an assessment of ‘who benefits’ depends critically upon the nature of thebenefit being assessed.
The objective of GERS is to estimate a set of public sector accounts for Scotland. On the
expenditure side, it therefore identifies the expenditure in a given year that was incurred forthe full range of public services that were consumed: that is, those services provided for thepeople of Scotland.
The for approach considers the location of the recipients of services or transfers thatgovernment expenditure finances, irrespective of where the expenditure takes place. For
example, with respect to defence expenditure, as the service provided is a national ‘public
good’, the for methodology operates on the premise that the entire population benefits fromthe provision of a national defence service. Accordingly, under the for methodology, national
defence expenditure is apportioned across the UK on a per capita basis.
An assessment of the more narrow economic benefits of public sector expenditure would
concentrate on the production of the good or service and where the expenditure actually
took place. The focus of this approach would be on employment levels, procurement costs
and local economic multiplier effects.
However, the aim of GERS is to provide an estimate of the full range of public services
consumed in a given year for the benefit of Scotland. A study of the economic impact ofgovernment expenditure is a separate exercise. Therefore GERS uses, wherever possible,
the for methodology.
Appendix B provides a detailed discussion of the methodologies and datasets used toundertake this task.

Financial Sector Interventions
In 2008 and 2009, the global financial system experienced a significant shock. What began
as a localised crisis in the US sub-prime mortgage market developed into a full scaleinternational credit crunch and recession. Across the world, financial institutions came undersignificant pressure following the collapse of the investment bank Lehman Brothers and, inorder to prevent a systemic collapse, governments intervened. This action took a number offorms. For example, deposit insurance schemes were extended in at least 40 countries tomitigate the risk of bank runs and mechanisms were established to buy ‘toxic’ assets, and toinsure against excessive losses. In addition, many governments provided direct financial
support in the form of capital injections in a number of institutions. In the USA, the insurancecompany AIG and bank Citigroup received capital funding, as did UBS and Credit Suisse in
Switzerland, ING in the Netherlands and Fortis received joint support from the Benelux
countries. In the UK, capital injections were made in the Royal Bank of Scotland, Lloyds TSB
and HBOS.
Government Expenditure and Revenue Scotland 2008-09

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P r eface

Accounting for the full spectrum of financial sector interventions in the public finances is notstraightforward. Indeed, ONS have yet to fully incorporate the various financial accounts of
RBS and Lloyds Banking Group into the UK National Accounts 2.
GERS follows the current practice of ONS and HM Treasury in incorporating the effects ofthe financial sector interventions into the public accounts. It should be noted that as thisremains work in progress at the UK level, the GERS estimates should be viewed
accordingly.
In this edition of GERS, estimates are provided of Scotland’s public sector accounts bothincluding and not including a share of the expenditure associated with the UK Government’s
financial sector interventions. Estimates not including the effects of the financial interventions
are presented to help highlight underlying trends in the GERS data from previous years to
the latest year, 2008-09. The financial crisis has clearly been a unique event, particularly
over the publication period of GERS, and therefore separating out this particular element
helps provide continuity with previous GERS publications. It should be noted that the GERS
estimates of Scotland’s fiscal accounts which include the effects of the UK Government’s
financial sector interventions are directly comparable with the data presented in Tables C3and C4 in the March 2010 UK Budget.
A discussion of the current methodologies undertaken in this edition of GERS, and thevarious alternative approaches, is provided in Chapter 3.

Revenue
Public sector revenue is estimated for taxes where a financial burden is imposed onresidents and enterprises in Scotland
Corresponding to the ‘who benefits’ principle is the ‘who pays’ principle, which concerns theidentification of the location of the source of public sector revenue. In GERS, the ‘who pays’
principle is based upon the residential location of where the revenue is raised.
For a variety of practical and theoretical reasons, estimating revenue for individual countries
and regions of the UK is generally more difficult than estimating expenditure. Revenue isgenerally collected on a UK basis, whereas the benefits of expenditure are generally
targeted on a regional basis. Under current UK Budgetary accounting procedures,
separately identified revenue figures for each country and region of the UK are not available.
As a result, Scottish public sector revenue is estimated by considering each revenue stream
separately. Appendix A provides a detailed discussion of the methodologies and datasets
used.

2

A full discussion of the approach that is currently being taken by ONS can be accessed in the publication ‘Public Sector

Excluding Financial Sector Interventions’ http://www.statistics.gov.uk/cci/article.asp?ID=2380.

10

Government Expenditure and Revenue Scotland 2008-09

P r eface

The data sources
The primary data source used to estimate Scottish public sector expenditure is the Public
Expenditure Statistical Analyses (PESA) data published by HM Treasury. Within PESA,
tables relating to a Country and Regional Analysis (CRA) are available, together with a
database in which UK Government departments and devolved administrations allocate
expenditure programmes to Scotland, Wales, Northern Ireland and English regions. Accessto the CRA database can be obtained through the HM Treasury website3.
The source of the revenue data is ONS Public Sector Finance Statistics, which provides
disaggregated figures relating to UK public sector revenue. Access to the ONS Public Sector
Finance Statistics database can be obtained through the ONS website.4

Future WorkThe development of GERS is an ongoing process and feedback from users of the
publication is welcome. Please address any comments toGovernment Expenditure and Revenue Scotland (GERS)
Office of the Chief Economic Adviser,
Scottish Government,
St Andrew’s House,
Regent Road,
Edinburgh, EH1 3DG3

http://www.hm-treasury.gov.uk/pesp_cra.htm

4

The latest Public Sector Finances dataset is available fromhttp://www.statistics.gov.uk/downloads/theme_economy/PSF_Supplementary_Data.xls

As this dataset is updated monthly,

figures contained in the more recent data releases will differ from those used in this report.

Government Expenditure and Revenue Scotland 2008-09

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P r eface

12

Government Expenditure and Revenue Scotland 2008-09

1

INTRODUCTION AND OVERVIEWIntroduction
The aim of GERS is to enhance public understanding of fiscal issues in Scotland. The
primary objective is to estimate a detailed set of public sector accounts for Scotland throughan in-depth analysis of official UK and Scottish Government finance statistics.
The report estimates public sector expenditure and revenue for Scotland for the years 200405 to 2008-09. Particular focus is given to 2008-09, the latest fiscal year for which outturns ofexpenditure and revenue are available for Scotland. Comparable data for the years 2002-03
and 2003-04 can be found in the previous two GERS publications. The data used are asnapshot of the UK public finance dataset at the time of the March 2010 UK Budget. All
figures are in current prices.
Full discussion of the methodologies used to estimate the figures for Scotland are containedin the document and in the detailed appendices on the Scottish Government GERS website5.
The figures within this report are estimates and should therefore be viewed accordingly.
Sensitivity analysis is conducted to highlight how the headline analysis contained within thereport can be expected to change in light of variation in the estimates of particularexpenditures and revenues. These results are presented in the detailed appendices.

Structure of report
The structure of the report follows that of GERS 2007-08. The outline below provides a brief
overview of the chapters contained in the publication.

Chapter 2: Fiscal background
This chapter provides a brief background to the fiscal framework in which the public sector
operates in Scotland and the UK.

Chapter 3: Scotland’s public sector accounts
This chapter provides a summary of estimated public sector revenue in and expenditure for
Scotland between 2004-05 and 2008-09. It contains an estimate of total current and capital
expenditure by the public sector for Scotland and an estimate of the revenue raised. It also
includes an estimate of the current budget balance (i.e. current revenue less current
expenditure less capital consumption) and the overall net fiscal balance (i.e. the current
budget balance less net investment). As the figures in this chapter cover the whole of the
public sector in Scotland, and use National Accounts definitions, they are not directly
reconcilable with departmental budget reports.

5

http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/GERS

Government Expenditure and Revenue Scotland 2008-09

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I n tr o d u cti o n an d O ver vi ew

Chapter 4: Public sector revenue
Chapter 4 presents a detailed discussion of public sector revenue raised in Scotland andcompares the estimated figures for Scotland with those for the UK. As Chapter 5 provides adetailed discussion of North Sea revenue, the focus of this chapter is on all other elementsof public sector revenue. While the report covers the fiscal years 2004-05 to 2008-09,
special attention is given to 2008-09, the latest fiscal year for which the outturn data of public
sector revenue are available for Scotland.
The revenue analysis in GERS is consistent with ONS’s Public Sector Finance Statistics.
The majority of public sector revenue raised in the UK is collected centrally by the UK
Government and corresponding figures for Scotland have to be estimated. Appendix A andthe detailed revenue methodology paper on the GERS website discuss the approach taken
to estimate each particular component of public sector revenue.

Chapter 5: North Sea revenue
Chapter 5 discusses the treatment of fiscal revenue from the North Sea. For many years,
there has been considerable debate on how the delineation of North Sea output andrevenue might be determined. In this chapter, a range of estimates of Scotland’s share of
North Sea revenue are provided, together with their impact on total public sector revenue in
Scotland.

Chapter 6: Public sector expenditure
Chapter 6 presents a detailed discussion of public sector expenditure for Scotland andcompares and contrasts the estimated figures for Scotland with those for the UK. While thereport covers the fiscal years 2004-05 to 2008-09, special attention is given to 2008-09, thelatest fiscal year for which outturns of public sector expenditure are available for Scotland.
The expenditure analysis in GERS is consistent with the approach HM Treasury takes toestimate public sector expenditure in the UK. Total expenditure is divided into current andcapital expenditure. Current expenditure includes items such as public sector wages andsocial security payments. Capital expenditure largely comprises the development of public
sector infrastructure, either new construction or significant renovation to existing
infrastructure, such as schools and hospitals.
In GERS, expenditure is also divided into three categories: identifiable expenditure; nonidentifiable expenditure; and accounting adjustments. Identifiable expenditure is expenditurethat can be directly identified as having been spent for the benefit of a country or region
within the UK. Non-identifiable expenditure is expenditure that is considered to occur onbehalf of the UK as a whole and which cannot be apportioned on an individual country or
regional basis. Finally, an accounting adjustment is required to bring the estimate of
expenditure in line with current National Accounts conventions.

14

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I n tr o d u cti o n an d O ver vi ew

1

In the main, expenditure for Scotland is sourced from the PESA CRA database. Estimates ofidentifiable expenditure are taken directly from this database, though a number of important
modifications were made before being used in the GERS report. These are highlighted in thechapter. Scotland’s share of non-identifiable expenditure, accounting adjustments and UK
Government expenditure on activities and services outside the UK, are estimated according
to a variety of apportionment methodologies. Appendix B, which is also available on the
GERS website, discusses the approach taken to estimate each element of public sector
expenditure.

Chapter 7: Conclusion
Chapter 7 provides a short summary of the key results.

Appendix A: Revenue methodology
Appendix A provides a brief summary of the various methodologies that have been applied
to estimate public sector revenue in Scotland and summarises the extent and nature of therevisions to the revenue estimates between this edition of GERS and GERS 2007-08.
A more detailed revenue methodology paper is available on the GERS website which
provides a full discussion of the estimation techniques applied for each revenue source 6.

Appendix B: Expenditure methodology
Appendix B provides a brief summary of the various methodologies that have been applied
to estimate public sector expenditure for Scotland.
Appendix B also highlights where the data contained in GERS differ from that in theunderlying PESA CRA database. The appendix also discusses the key apportionment
methodologies that have been applied to estimate Scotland’s share of UK non-identifiable
expenditure, identifiable expenditure outside the UK and accounting adjustments.
This appendix is also available on the GERS website 7.

6

http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/GERS

7

http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/GERS

Government Expenditure and Revenue Scotland 2008-09

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1

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I n tr o d u cti o n an d O ver vi ew

Government Expenditure and Revenue Scotland 2008-09

2

FISCAL BACKGROUNDThis chapter outlines the institutional framework in which Scottish public sector expenditureand revenue is set.

PUBLIC SECTOR EXPENDITURE FOR SCOTLAND
Total Managed Expenditure in the United Kingdom
In the current UK public finance framework, the key expenditure aggregate is Total Managed
Expenditure (TME)8. TME comprises public sector current expenditure, net investment, andcapital consumption. TME covers the entire public sector, including central government, local
government, and public corporations.

System of Public Expenditure and Data Sources
The primary source of public sector expenditure data across the four countries of the UK is
the Public Expenditure Statistical Analyses (PESA) database published by HM Treasury.
Expenditure figures in PESA are net expenditure (e.g. expenditure net of any receipts).
Included in PESA is an analysis of Total Expenditure on Services (TES) by country andregion (CRA). HM Treasury request that UK departments and devolved administrations
apportion spending between countries and regions on the basis of ‘who benefits’, using thefor methodology. Guidance on how this should be done is provided by HM Treasury and
ONS. HM Treasury then collates departments’ returns and combines these with the known
spending of local authorities. The results for 2004-05 to 2008-09 are published in Chapters
9 and 10 of PESA.
The data in PESA and CRA are presented according to the Classification of the Functions ofGovernment (COFOG), a United Nations based code for functional analysis of government
expenditure9.
It is important to note that expenditure allocated to Scotland in PESA includes expenditureby the Scottish Government, expenditure by Scottish local authorities, expenditure by public
corporations for Scotland and expenditure by the UK Government on goods and services forthe benefit of Scotland.

8

Total Managed Expenditure is a measure of public sector expenditure drawn from components in National Accounts producedby the Office for National Statistics (ONS).
9

Further information on COFOG is available on the UN’s website http://unstats.un.org/unsd/cr/registry/regcst.asp?Cl=4

Government Expenditure and Revenue Scotland 2008-09

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F i scal B ackg r o u n d

In this context, the term ‘central government’ comprises: parliaments; government
departments and their executive agencies; government funds such as the national loans
fund; the official foreign exchange reserves; non-departmental public bodies; NHS trusts andvarious other non-market public bodies controlled by the public sector. Central government
does not include some non-profit institutions that receive significant government funding, but
are not controlled by government. These are classified in the private or third sector: forexample, universities, further education colleges, and housing associations.
Local government comprises all local government administrations in the UK. Scotland has
32 local authorities operating over the period of this edition of GERS.
Public corporations are publicly controlled entities that are deemed to operate in the market
based on a test of their sales to operating costs. A body that fails this test, such as the BBC
where the majority of its income is from the licence fee rather than sales, is deemed nonmarket and will hence be classified as either central or local government.
A number of significant improvements have been made to the PESA CRA database inrecent years to apportion expenditure more accurately to countries and regions. While
many anomalies in previous editions of PESA CRA have been addressed and are now
reflected in both PESA CRA 2010 and this GERS report, a number of supplementary
amendments to the PESA CRA 2010 dataset were made in producing this GERS. The aimof these refinements was to ensure that the public sector expenditure figure for Scotland
captures as accurately as possible expenditure for the benefit of Scotland. As part of the
preparation of GERS, Scottish Government statisticians have scrutinised the published April
2010 PESA CRA data to identify any remaining issues. From 1,400 programme object
groups in PESA CRA 2010, a small number were identified and, in these cases, GERS uses
different data to those in the underlying PESA CRA database. All such amendments are set
out in Chapter 6 and Appendix B.
The refinements made to the CRA database have also improved the apportionment ofexpenditure between COFOG categories. Therefore, the estimates of expenditure by
COFOG category in this edition of GERS are not directly comparable to those in GERS
2006-07.
Although every effort has been made when compiling this report to verify the credibility andaccuracy of the data contained in PESA, it is inevitable that minor anomalies will remain.
Work to improve the quality of PESA is an ongoing objective of HM Treasury and UK
Government departments and Scottish Government officials will continue to liaise with UK
Government colleagues to improve further the quality of the PESA data.

The Framework for the Management of Expenditure by the Scottish
Government
Scottish Government spending programmes fall into two categories: those within the
Scottish Departmental Expenditure Limit (DEL) and those within Annually Managed
Expenditure (AME), as set out in Box 2.1.

18•

Departmental Expenditure Limit (DEL) expenditure is expenditure that is planned andcontrolled across the period of each spending review; and,•Annually Managed Expenditure (AME) is expenditure that cannot reasonably besubject to firm, multi-year limits in the same way as DEL.

Government Expenditure and Revenue Scotland 2008-09

F i scal B ackg r o u n d2

DEL is significantly larger than AME. DEL plus AME plus an ‘accounting adjustment’ sum to
TME.
The Scottish Government’s DEL encompasses most administrative budgets and all
programme expenditures. Programmes outside the Scottish Government’s DEL are mainly
those where expenditure cannot be planned far ahead and has to be adjusted annually; forexample, expenditure on the capital costs relating to motorways and trunk roads.
For programmes within DEL, Scotland (like the other devolved administrations) receives a
direct funding allocation from the UK Government. Expenditure limits are raised according
to the population-related proportion of spending increases on comparable expenditure by
Whitehall departments (this process is known as the "Barnett Formula"). For the years
contained within this publication, such expenditure has, by and large, been determined by
the UK Government as part of the UK Comprehensive Spending Review process.

The Framework for the Management of Expenditure for Scotland by
the UK Government
UK Government expenditure for Scotland falls into the same two categories: DEL and AME.
This expenditure is governed by the same rules and accounting procedures as those for the
Scottish Government.
The single largest element of identifiable public sector expenditure for Scotland by aWhitehall Department is social security expenditure, which is administered by the
Department for Work and Pensions (DWP).

The Framework for the Management of Local Government
Expenditure for Scotland
Scotland’s local government ‘net revenue expenditure’ is supported through a combinationof funding from central government, known as total revenue support, and resources raised
locally by local authorities themselves through council tax. Total revenue support comprises
three elements: the amount which Scottish Ministers have estimated will be payable to local
authorities as specific revenue grants; the distributable amount of non-domestic rate income(NDRI); and General Revenue Grant (GRG). The total amount of revenue support is
distributed to local authorities using an agreed needs-based methodology, known as theclient group approach. Statistical data describing the ‘clients’ – i.e. those who ‘benefit’ fromparticular services – are used to re-distribute resources between local authorities in
Scotland.

The Framework for the Management of Expenditure by Public
Corporations for Scotland
Expenditure by public corporations for Scotland is set out within DEL and AME. Individual
public corporations are responsible for their own expenditure. The largest public corporationin Scotland is Scottish Water. The expenditure incurred by public corporations in producing
goods and services for sale is not included in public sector current expenditure. Instead, it isdeducted from their sales and the net position is recorded in public sector revenue.

Government Expenditure and Revenue Scotland 2008-09

19

2

F i scal B ackg r o u n d

Box 2.1 – Aggregate Scottish Public Sector ExpenditureThis box outlines the two key measures of aggregate public sector expenditure in UK publicfinances, Total Managed Expenditure (TME) and Total Expenditure on Services (TES),
which are used in GERS.
Total Managed Expenditure
TME is an aggregate measure of public sector expenditure derived from the UK National
Accounts. It encompasses all current and capital spending by the public sector and includes
the activities of central and local governments and public corporations. In GERS, TME is theexpenditure side of the equation used to derive Scotland’s net fiscal balance.
TME is comprised of a number of different sub measures. For example, TME can be broken
down into public sector current expenditure, public sector net investment and public sector
capital consumption, as set out in the chart below. The estimates below include a share of
the UK Government’s financial sector interventions.
Total Managed Expenditure, Scotland 2008-09
     
#(*$ !
    
#(&' !

   

#($ !

     #%) !

TME can also be expressed as the sum of Annually Managed Expenditure (AME) and
Departmental Expenditure Limits (DEL).
AME covers current and capital spending
programmes which are generally less predictable and are not easily subject to firm multiyear limits. Key elements of AME include debt interest payments and social transfers suchas tax credits and unemployment benefit. In contrast, DEL covers spending which is plannedand controlled across the period of a spending review period and generally incorporates
administrative budgets and all programme expenditures, such as most spending on healthand education. The vast majority of expenditure by the Scottish Government is DEL
expenditure.
Total Expenditure on Services
The detailed COFOG analysis of public sector expenditure in GERS (Chapter 6) focuses on
TES. TES is an alternative aggregate of public sector expenditure in the UK provided in
PESA which can be used to analyse a detailed breakdown of public sector capital andcurrent spending by government department. TES accounts for approximately 95% of TME
and there are a number of minor differences between TES and TME. The main differences
are that TES does not include general government capital consumption and does notreverse the deduction of certain VAT refunds from budget based expenditure data. TES
also contains a number of items that are in departmental budgets but are not included in
TME, for example the hidden benefit contained within student loans, which are granted with

20

Government Expenditure and Revenue Scotland 2008-09

F i scal B ackg r o u n d2

a concessional interest rate.
An accounting adjustment reconciles TES and TME such that TES plus the accounting
adjustment equals TME as summarised in the figure below. The accounting adjustment
used in GERS is set out in more detail in Chapter 6. The estimates provided in theillustration below include a share of the UK Government’s financial sector interventions.
Total Managed Expenditure, Scotland 2008-09
        "%-0 ( #      "%-. - #   "%* . # !         "%,/ + #"%/ ) #   

PUBLIC SECTOR REVENUE IN SCOTLAND
UK Fiscal Revenues
The vast majority of fiscal revenue raised by the public sector in Scotland is controlled by the
UK Government with collection the responsibility of HM Revenue and Customs. Changes to
UK taxation are typically announced in the UK Budget or Pre-Budget Reports (PBR). Taxes
on income and wealth and on production are the two largest sources of tax revenue in theUK.
The primary source of UK revenue data is the ONS’s Public Sector Finance statistics.

Devolved Fiscal Revenues
Under The Scotland Act, the Scottish Parliament has the power to vary the UK basic rate ofincome tax by up to 3 pence for Scottish residents. To date, this power has not been used.
For 2008-09, the potential change in revenue from the full use of this power wasapproximately £1.1 billion10.
Local government ‘own-source’ revenues stem from council tax, non-domestic rates (alsoknown as business rates) and non-tax revenues such as user charges, fees and fines.
Council tax and non-tax revenues are controlled and administered by individual local
authorities.
Since 1 April 1993, all non-domestic rates income (NDRI) in Scotland has been placed in anational ‘pool’ and shared between local authorities pro rata to their population. Although
the poundage rate is set nationally by the Scottish Government, local authorities are
10

HM Treasury – UK Budget 2008, page 113

Government Expenditure and Revenue Scotland 2008-09

21

2

F i scal B ackg r o u n dresponsible for the local collection of NDRI. Any over-estimation of NDRI is compensated forby a reduction in the General Revenue Grant (GRG) and vice versa.

Government Borrowing
The borrowing powers of the Scottish Government are strictly limited. The Scotland Act
provides for short term borrowing sufficient to cover 'a temporary excess of sums paid out of
the Scottish Consolidated Fund over sums paid into that Fund' or for 'providing a working
balance in the Fund'. Any such borrowings must only be from the UK Government. In effect,
this means that the Scottish Government has very limited authority to raise extra resource byborrowing or sanctioning borrowing. Local authorities have wider borrowing powers. The
Scottish Government funds the debt servicing costs of some of this borrowing, known as"supported borrowing", via the GRG whilst the unsupported borrowing element, arranged
under the Prudential Regime, is financed through local authorities’ own general resources.
The UK Government is able to borrow to fund public sector expenditure across the UK,
including the Scottish Government block grant.
Box 2.2 – Whole of Government Accounts
GERS captures the entire public sector in Scotland and includes activity by each of theconstituent sub-sectors of the public sector: central government, local government and public
corporations.
Following a recommendation by the Public Accounts Committee, a key goal in thepresentation of financial accounts for the public sector in the UK, is to make greater use of asystem which provides a full and comprehensive record of expenditure and revenue and thetransfer of resources between elements of the public sector. This has led to a commitment toproduce commercial-style accounts for the entire public sector known as Whole ofGovernment Accounts (WGA). The tables below present a summary of aggregate levels of
expenditure in Scotland by each element of the public sector in Scotland. The estimates
below include a share of the UK Government’s financial sector interventions.
Total Public Sector Expenditure for Scotland: 2008-09
  
 
   "'( '  
 
"$& & 

22 
 
"$) $ 

Government Expenditure and Revenue Scotland 2008-09

 
 "%% ) 

3

SCOTLAND’S PUBLIC SECTOR ACCOUNTS

Introduction
This chapter provides a summary of Scotland’s public sector accounts for the years 2004-05
to 2008-09. It outlines the latest estimates of public sector revenue in Scotland andexpenditure for Scotland, and includes:•

Headline estimates of public sector revenue in Scotland and of expenditure for
Scotland, the key aggregates for assessing the strength of public finances in
Scotland;•Five-year estimates of current and capital expenditure for Scotland and key elementsof public sector revenue in Scotland;•

Estimates of the current budget balance and net fiscal balance of the public sector in
Scotland.

As discussed in the preface, within the present constitutional arrangements there is noformal requirement for a comprehensive compilation of UK country and regional budgetaryaccounts. Therefore, the results presented in this section are statistical estimates of public
sector revenue in Scotland and of expenditure for Scotland, not precise financial accounts
and should be viewed accordingly.

Financial Sector Interventions
Accounting for the full spectrum of financial sector interventions in the public finances is notstraightforward. Indeed, ONS has yet to fully incorporate the various financial accounts of
RBS and Lloyds Banking Group into the UK Public Sector Finances 11.
The series of measures undertaken to support the UK financial sector has consisted of three
key elements - guarantees, recapitalisation and various loan programmes such as the
support provided through the Financial Services Compensation Scheme.
It is important to note that the actual outlay by the government has been much less than the
total value of support offered. Many of the provisions, for example the Asset Protection
Scheme, would only incur net financial costs if the facility was called upon by participating
institutions. Indeed, the full amount would only be realised in a worst case scenario. The
stabilisation of markets since these measures were announced has meant that the net outlay
from such guarantee schemes is forecast to “not have a material cost on the UK tax payer 12”.
However other measures, such as the direct recapitalisation of financial institutions, did incur
an immediate, but potentially transitory, financial cost and this will be reflected in any
assessment of the public finances.
The headline measure of UK public sector net borrowing in the 2009 Pre-Budget Report andthe March 2010 Budget, together with the assessment of the public finances undertaken by
the Office for Budget Responsibility in June 2010, is referred to as PSNB-ex. This measure
11

A full discussion of the approach that is currently being taken by ONS can be accessed in the publication “Public Sector

finances excluding financial interventions” - http://www.statistics.gov.uk/cci/article.asp?ID=2380 .
12

HM Treasury (2010) – March 2010 UK Budget Pg 213.

Government Expenditure and Revenue Scotland 2008-09

23

3

S co tl an d ’ s P u b l i c S ecto r A cco u n ts

classifies the support to the financial sector as a transaction between the public and private
sector, even if the transaction involves a financial institution which is deemed to be in the
public sector. This reflects the fact that, in time, the government will return ownership ofthese institutions to the private sector. For example, any programme of recapitalisation isclassified as a burden on the public finances, even if the direct result of such an action is tobring this institution into the public sector. Such a measure of net borrowing therefore
captures the effects of the various financial interventions on the UK’s public finances. In thefinancial year 2008-09, the net outlay recorded in public sector net borrowing was £8.3
billion, of which, capital expenditure was £9.4 billion and current expenditure -£1.1 billion (anet-revenue).13 These figures include expenditure associated with the recapitalisation of
RBS, HBOS and Lloyds TSB, and depositor compensation for Bradford and Bingley, net of
all revenues received, including those from fees and payments associated with the various
schemes.
This edition of GERS follows two approaches. Firstly, it provides an estimate of Scotland’s
public sector accounts including a share of the net costs of the various measures to support
the financial sector within the estimates of Scotland’s current budget and net fiscal balance.
These estimates are directly comparable with the headline UK current budget and net
borrowing figures presented in the March 2010 Budget. Secondly, it estimates Scotland’s
public sector accounts without a share of the various interventions to support the financial
sector. These estimates are presented to highlight underlying trends in the GERS data fromprevious years to the latest year, 2008-09.14
In tracing the impact of the various financial sector interventions on the public finances, it
should be noted that there is an important distinction between the central government net
cash requirement (CGNCR) and net borrowing. CGNCR represents the government’s net
financing requirement at a given point in time. In contrast, net borrowing is a general
assessment of the change in the public sector’s net financial indebtedness and is therefore abroader measure of the underlying strength of the public finances. For example, the packageof financial recapitalisation for RBS, HBOS and Lloyds TSB is divided into non-financial andfinancial elements. The financial part represents the value of the equity acquired. The nonfinancial part, which contributes to government net borrowing, is recorded as the difference
between the price paid for the equity and its market price on the day of the purchase. These
were worth £6.1 billion in 2008-09 and £6.4 billion in 2009-10. In contrast, the additional
outlay to finance the acquisition of equity included a further £30.8 billion in 2008-09 and £23
billion in 2009-10, and it is this full amount which enters the CGNCR.
Treatment of Financial Sector Interventions in GERSPESA classifies the UK Government’s support for the financial sector as UK non-identifiable
expenditure – that is HM Treasury has deemed that such interventions are for the benefit of
the UK as a whole.
There are various methods that can be applied to apportion a share of such non-identifiable
expenditure to Scotland. The method used in this edition of GERS assigns a population
share to Scotland of the total UK expenditure, on the basis that all areas of the UK havebenefited equally from the resulting stabilisation of the UK financial system.
This
apportionment results in total Scottish expenditure on financial stability measures of £700

13

Extract from PESA 2010 - http://www.hm-treasury.gov.uk/pesa2010_section4.htm
An alternative methodology would be to fully incorporate the publically controlled financial institutions into the public sector
accounts. Such a measure may be volatile once ONS has fully incorporated all the financial institutions into the Public Sector
Finances as all transactions between these publically controlled financial institutions and private households, businesses andother financial institutions will feed into this measure of the public finances.
14

24

Government Expenditure and Revenue Scotland 2008-09

S co tl an d ’ s P u b l i c S ecto r A cco u n ts

3

million, comprised of £788 million and -£88 million in capital and current expenditure
respectively.
Table 3.1: Scotland: Estimated Share of Financial Stability
Expenditures: 2008-09(£ millions)
ScotlandUK

Current-88-1,049

Capital

788

9,361

Total

700

8,312

These estimates are clearly highlighted in Chapter 5 within expenditure on Enterprise andEconomic Development.

Current and Capital Budgets
The following tables set out estimates of public sector revenue and expenditure for Scotland
over the financial years 2004-05 to 2008-09. The figures for revenue and expenditurecorrespond to the estimates contained in Chapters 4, 5 and 6 15.
Current revenue, as defined in the UK National Accounts, is the sum of all revenue raised ina particular year by the entire public sector16. In Scotland, this consists of the Scottish
Government, the UK Government, local authorities and public corporations. The main
component is tax revenues.
Public sector current expenditure is the sum of the current expenditure of general
government for Scotland and certain distributive transactions (interest and dividends)
payable by public corporations. Current expenditure includes items such as wages andsalaries, social security payments and day to day health expenditure.
Public sector capital expenditure includes capital formation, the net acquisition of land, andnet expenditure through capital grants. Net investment is public sector capital expenditure,
net of capital consumption. Capital consumption represents the amount of fixed capital used
up each year. It is generally calculated from a model based on assumptions about asset
lives and a rolling estimate of the public sector’s stock of capital assets derived from annual
capital expenditure data.
The term net fiscal balance measures the difference between public sector expenditure andrevenue. In Scotland, the gap between public sector revenue and expenditure is not directlyreflected in borrowing (or saving) and instead, is part of the overall fiscal stance of the UK
public sector.
In GERS, three estimates of Scotland’s public sector accounts are presented, (i) an estimate
excluding North Sea revenue, (ii) an estimate including a per capita share of North Sea
revenue and (iii) an estimate including an illustrative geographical share of North Sea
revenue. Chapter 5 contains a discussion of North Sea revenue and the precise definitions
used here.

15

All figures in GERS are in market prices (i.e. nominal terms) and in most tables figures are presented as rounded to thenearest £ million. Components of tables may not therefore sum exactly to the published totals.
16

In the UK National Accounts, local authority user charges are classified as negative expenditures and therefore do not enter

the revenue calculations in GERS.

Government Expenditure and Revenue Scotland 2008-09

25

3

S co tl an d ’ s P u b l i c S ecto r A cco u n ts

Scotland’s Fiscal Balance Including a ShareGovernment’s Financial Sector Interventions

of

the

UK

As set out in the Preface, this edition of GERS provides estimates of Scotland’s public sector
accounts both with and without a share of the expenditure associated with the UK
Government’s financial sector interventions.
Table 3.2 presents estimates of Scotland’s current budget balance and net fiscal balance
including a share of the UK Government’s financial sector interventions. This is consistent
with the methodology used to estimate UK public sector revenue, expenditure and net
borrowing in the March 2010 UK Budget and the Pre-Budget Forecasts published by the
newly established Office for Budgetary Responsibility in June 2010 17.
Table 3.2: Current and Capital Budgets Including Financial Sector Interventions:
Scotland 2004-05 to 2008-09(£ million)
2004-05

2005-06

2006-072007-08

2008-09

Excluding North Sea revenue

36,98339,78742,19844,966

43,466

Including North Sea revenue (per capita share)

37,42240,58042,952

45,62744,553

Including North Sea revenue (geographical share)

41,51547,914

49,69452,41755,23640,814

43,394

45,12847,962

49,876

Current Budget
Current revenue

Current expenditure
Current expenditure accounting adjustment

1,779

2,066

2,261

2,372

2,397

Capital consumption

1,443

1,523

1,518

1,609

1,694

Excluding North Sea revenue-7,053-7,197-6,709-6,976-10,501

Including North Sea revenue (per capita share)-6,614-6,403-5,955-6,316-9,413

Including North Sea revenue (geographical share)-2,521

931

787

474

1,270

3,704

4,283

4,964

5,243

6,585

321

171

147

85

157

Capital consumption-1,443-1,523-1,518-1,609-1,694Net Investment

2,582

2,931

3,593

3,719

5,047

Excluding North Sea revenue-9,635-10,127-10,302-10,695-15,548

Including North Sea revenue (per capita share)-9,195-9,334-9,548-10,035-14,460

Including North Sea revenue (geographical share)-5,103-2,000-2,806-3,245-3,777

Balance on current budget(surplus is positive, deficit is negative)

Capital Budget
Capital expenditure
Capital expenditure accounting adjustment

Net Fiscal Balance (surplus is positive, deficit is negative)

Tables 3.3a – 3.3c present the estimates of Scotland’s public sector accounts as apercentage of Gross Domestic Product (GDP), including a share of the UK Government’s

17

The Budget and OBR report refer to this measure as excluding the temporary effects of the financial sector interventions.

This is because once the publically owned banks are fully incorporated into the public sector accounts, this measure will
exclude the effect of transactions between these banks and the private sector when reporting the public sector finances, as set
out on pages 23 and 24

26

Government Expenditure and Revenue Scotland 2008-09

S co tl an d ’ s P u b l i c S ecto r A cco u n ts

3

financial sector interventions. Box 3.2 discusses the process used to estimate Scotland’s
GDP under the three sets of estimates for North Sea revenue.
Table 3.3a: Current and Capital Budgets Including Financial Sector Interventions(Excluding North Sea Revenue) % GDP: Scotland 2004-05 to 2008-09(per cent of GDP)
2004-05

2005-06

2006-072007-08

2008-09

38.4

39.3

39.1

39.2

37.7

Current expenditure

42.4

42.9

41.8

41.8

43.3

Current expenditure accounting adjustment

1.8

2.0

2.1

2.1

2.1

Capital consumption

1.5

1.5

1.4

1.4

1.5

-7.3

-7.1

-6.2

-6.1

-9.1

Capital expenditure

3.8

4.2

4.6

4.6

5.7

Capital expenditure accounting adjustment

0.3

0.2

0.1

0.1

0.1

Capital consumption

-1.5

-1.5

-1.4

-1.4

-1.5

Net Investment

2.7

2.9

3.3

3.2

4.4

-10.0

-10.0

-9.6

-9.3

-13.5

Current Budget
Current revenue
Excluding North Sea revenue

Balance on current budget(surplus is positive, deficit is negative)
Excluding North Sea revenue
Capital Budget

Net Fiscal Balance (surplus is positive, deficit is negative)
Excluding North Sea revenue

Table 3.3b: Current and Capital Budgets Including Financial Sector Interventions (Per
Capita Share North Sea Revenue) % GDP: Scotland 2004-05 to 2008-09(per cent of GDP)
2004-05

2005-06

2006-072007-08

2008-09

38.1

39.2

39.0

38.8

37.7

Current expenditure

41.6

42.0

41.0

40.8

42.2

Current expenditure accounting adjustment

1.8

2.0

2.1

2.0

2.0

Capital consumption

1.5

1.5

1.4

1.4

1.4

-6.7

-6.2

-5.4

-5.4

-8.0

Capital expenditure

3.8

4.1

4.5

4.5

5.6

Capital expenditure accounting adjustment

0.3

0.2

0.1

0.1

0.1

Capital consumption

-1.5

-1.5

-1.4

-1.4

-1.4

Net Investment

2.6

2.8

3.3

3.2

4.3

-9.4

-9.0

-8.7

-8.5

-12.2

Current Budget
Current revenue
Including North Sea revenue (per capita share)

Balance on current budget(surplus is positive, deficit is negative)
Including North Sea revenue (per capita share)
Capital Budget

Net Fiscal Balance (surplus is positive, deficit is negative)
Including North Sea revenue (per capita share)

Government Expenditure and Revenue Scotland 2008-09

27

3

S co tl an d ’ s P u b l i c S ecto r A cco u n ts

Table 3.3c: Current and Capital Budgets Including Financial Sector Interventions(Geographical Share North Sea Revenue) % GDP: Scotland 2004-05 to 2008-09(per cent of GDP)
2004-05

2005-06

2006-072007-08

2008-09

36.7

39.1

38.5

36.7

38.4

Current expenditure

36.0

35.4

35.0

33.6

34.7

Current expenditure accounting adjustment

1.6

1.7

1.8

1.7

1.7

Capital consumption

1.3

1.2

1.2

1.1

1.2

-2.2

0.8

0.6

0.3

0.9

Current Budget
Current revenue
Including North Sea revenue (geographical share)

Balance on current budget(surplus is positive, deficit is negative)
Including North Sea revenue (geographical share)
Capital Budget
Capital expenditure

3.3

3.5

3.9

3.7

4.6

Capital expenditure accounting adjustment

0.3

0.1

0.1

0.1

0.1

Capital consumption

-1.3

-1.2

-1.2

-1.1

-1.2

Net Investment

2.3

2.4

2.8

2.6

3.5

-4.5

-1.6

-2.2

-2.3

-2.6

Net Fiscal Balance (surplus is positive, deficit is negative)
Including North Sea revenue (geographical share)

The current budget surplus is defined as current revenue (including capital taxes) lesscurrent expenditure and capital consumption.
In 2008-09, excluding North Sea revenue, current expenditure exceeded current revenue in
Scotland leading to a current budget deficit of £10.5 billion (or 9.1 per cent of GDP) as
presented in Table 3.3a. With a per capita share of North Sea revenue, current expenditureexceeded current revenue in Scotland by £9.4 billion (or 8.0 per cent of GDP – see Table
3.3b).
In 2008-09, including an illustrative geographical share of North Sea revenue, total current
revenue exceeded current expenditure for Scotland to yield a current budget surplus of £1.3
billion (or 0.9 per cent of GDP – see Table 3.3c). In 2008-09, the equivalent UK current
budget position, including 100 per cent of all North Sea revenue, was a deficit of £48.9 billion(or 3.4 per cent of GDP)18.
As Tables 3.2 and 3.3 highlight, any estimate of Scotland’s current balance depends on
assumptions regarding the allocation of North Sea revenue. Over the period 2005-06 to
2008-09, the estimated current budget balance in Scotland including an illustrative
geographical share of North Sea revenue was in surplus. Under the assumption of ageographical share of North Sea revenue, the greatest surplus on the current budget overthe past five years was £1.3 billion in 2008-09, with a deficit of £2.5 billion in 2004-05.
The ‘net fiscal balance’ is equal to public sector current and capital revenue less public
sector current and capital expenditure. A positive figure, i.e. a surplus, in any given year is
obtained if total public sector revenue in Scotland is greater than total public sector
expenditure.
18

HM Treasury (March 2010) – Budget 2010, Tables C3 and C4

28

Government Expenditure and Revenue Scotland 2008-09

S co tl an d ’ s P u b l i c S ecto r A cco u n ts

3

In 2008-09, excluding North Sea revenue, total revenue was less than total expenditureyielding an estimated negative net fiscal balance of £15.5 billion (or 13.5 per cent of GDP).
With a per capita share of North Sea revenue the estimated negative net fiscal balance for
Scotland was £14.5 billion (or 12.2 per cent of GDP). Including an illustrative geographicalshare of North Sea revenue, total revenue was less than total expenditure for Scotland toyield a negative net fiscal balance of £3.8 billion (or 2.6 per cent of GDP). In 2008-09, theequivalent UK position including 100 per cent of all North Sea revenue, referred to in the UK
Budget 2010 Report as ‘net borrowing’, was a deficit of £96.1 billion (or 6.7 per cent ofGDP)19.
Over the past five years, excluding North Sea revenue, the largest absolute gap between
public sector revenue and expenditure in Scotland was observed in 2008-09 when the net
fiscal balance was -£15.5 billion. With a per capita share of North Sea revenue the largest
gap was also observed in 2008-09. Under the assumption of an illustrative geographicalshare of North Sea revenue, the largest gap between public sector revenue and expenditurein Scotland was observed in 2004-05 with an estimated deficit of £5.1 billion. This had fallen
to £2.0 billion in 2005-06, but started rising again year on year to £3.8 billion in 2008-09. As
a proportion of GDP, the largest deficit, both excluding and with a per capita of North Sea
revenue, was in 2008-09. However, with an illustrative geographical share of North Sea
revenue the largest deficit was in 2004-05.

Scotland’s Fiscal Balance Not Including a Share of the UK
Government’s Financial Sector Interventions
The tables below estimate Scotland’s current budget balance and net fiscal balance withouta share of the various interventions to support the financial sector. These estimates arepresented to highlight underlying trends in the GERS data from previous years to the latest
year, 2008-0920.
Table 3.4: Current and Capital Budgets: Scotland 2004-05 to 2008-09 (£ Million)
Not Including Financial Sector Interventions(£ million)
2004-05

2005-06

2006-072007-08

2008-09

Excluding North Sea revenue-7,053-7,195-6,708-6,965-10,530

Including North Sea revenue (per capita share)-6,613-6,402-5,954-6,305-9,443

Including North Sea revenue (geographical share)-2,520

933

788

485

1,240

Excluding North Sea revenue-9,636-10,128-10,303-10,732-14,728

Including North Sea revenue (per capita share)-9,196-9,335-9,550-10,071-13,640

Including North Sea revenue (geographical share)-5,103-2,000-2,808-3,281-2,957

Balance on current budget(surplus is positive, deficit is negative)

Net Fiscal Balance (surplus is positive, deficit isnegative)

19

HM Treasury (March 2010) – Budget 2010, Tables C3 and C4

20

Small variations between the estimates of the current budget balance and net fiscal balance for the years 2004-05 to 2007-08

with and without the effect of the UK Government’s interventions reflect differences in the estimates of the accounting
adjustments due to the treatment of depreciation relating to public corporation financial institutions in the PSAT2 database.

Government Expenditure and Revenue Scotland 2008-09

29

3

S co tl an d ’ s P u b l i c S ecto r A cco u n ts

Table 3.5: Current and Capital Budgets: Scotland 2004-05 to 2008-09 (% of GDP)
Not Including Financial Sector Interventions(per cent of GDP)
2004-05

2005-06

2006-072007-08

2008-09

Excluding North Sea revenue

-7.3

-7.1

-6.2

-6.1

-9.1

Including North Sea revenue (per capita share)

-6.7

-6.2

-5.4

-5.4

-8.0

Including North Sea revenue (geographical share)

-2.2

0.8

0.6

0.3

0.9

Excluding North Sea revenue

-10.0

-10.0

-9.6

-9.4

-12.8

Including North Sea revenue (per capita share)

-9.4

-9.0

-8.7

-8.6

-11.5

Including North Sea revenue (geographical share)

-4.5

-1.6

-2.2

-2.3

-2.1

Balance on current budget(surplus is positive, deficit is negative)

Net Fiscal Balance (surplus is positive, deficit isnegative)

In 2008-09, when a share of the UK Government’s financial sector interventions are notincluded, Scotland is estimated to have a current budget deficit of £10.5 billion (9.1 per centof GDP) excluding North Sea revenue, and a current budget deficit of £9.4 billion (8.0 per
cent of GDP) when a per capita share of North Sea revenue is assigned to Scotland. In
2008-09, including an illustrative geographical share of North Sea revenue, Scotland isestimated to have a current budget surplus of £1.2 billion (0.9 per cent of GDP) when theimpact of the UK Government’s financial sector interventions are not included.21
Not including a share of the UK Government’s financial sector interventions, Scotland’s net
fiscal balance is estimated to have been a deficit of £14.7 billion (12.8 per cent of GDP) in
2008-09 excluding North Sea revenue, and a deficit of £13.6 billion (11.5 per cent of GDP)
including a per capita share of North Sea revenue. When an illustrative geographical shareof North Sea revenue is included, Scotland is estimated to have a net fiscal deficit of £3.0
billion (2.1 per cent of GDP), not including a share of the UK Government’s financial sector
interventions.

Box 3.1 – Current Budget Balance and Net Fiscal Balance
Scotland’s current budget balance illustrates the difference between current revenue andcurrent expenditure, including capital consumption and an accounting adjustment. It
measures the degree to which current taxpayers meet the cost of paying for the public
services they use and a contribution to debt interest payments. It is therefore an important
indicator of intertemporal fairness and indicates the sustainability of current policies.
National governments typically aim to manage current surpluses and deficits to ensurebalance over the longer term and that any systematic excess of total expenditure over andabove revenue is used only for capital expenditure, which will accrue benefits to future tax
payers. This capital expenditure must itself be managed responsibly.

21

As the entry for the current expenditures associated with the various financial sector interventions is negative (i.e. revenues

received from fees etc), the estimate of Scotland’s current budget balance, including a share of the UK Government’s financial
sector interventions, will report a larger surplus/lower deficit than the equivalent estimate when these effects are not included.

30

Government Expenditure and Revenue Scotland 2008-09

S co tl an d ’ s P u b l i c S ecto r A cco u n ts

3

Box 3.2: Scotland’s GDP with and without North Sea GDP
When calculating Scotland’s capital and current budgets as a percentage of GDP, themeasure of GDP used must adopt the same assumptions made in the corresponding budget
calculations.
When Scotland’s public sector accounts are presented excluding North Sea revenue, they
are expressed as a percentage of Scotland’s GDP excluding the amount of GDP arisingfrom North Sea activities.
When a proportion of North Sea revenue is included in the Scottish public sector revenue
estimates, the same share is included in Scottish GDP. For example, if 100 per cent of North
Sea revenue is included in the Scottish estimate, then 100 per cent of North Sea GDP will be
included in Scotland’s corresponding GDP figure. Scotland’s GDP figures under the threesets of estimates presented above are reflected in the following table.
Scottish GDP Including and Excluding North Sea GDP: 2004-05 to 2008-09(£ million)
2004-05

2005-06

2006-072007-08

2008-09

Excluding North Sea GDP

96,258101,136

107,871

114,747

115,286

Including per capita share of North Sea
GDP98,096

103,440

110,148

117,544

118,189

Including geographical share of North
Sea GDP113,259

122,599

128,929

142,725

143,834

Scottish GDP

Estimates of Gross Domestic Product at current market prices used in the GERS publication
are calculated using an income approach in which estimates of Compensation of
Employees, Gross Operating Surplus and Taxes, less subsidies, on production are added toan estimate of taxes, less subsidies, on products (final consumption taxes) to form aheadline estimate for Scotland. As part of the Scottish National Accounts Project (SNAP), a
programme of work designed to improve the collection and reporting of economic statistics in
Scotland, these estimates are now released quarterly (in experimental form). Further
information can be obtained from the SNAP website - http://www.scotland.gov.uk/snap22.

ExpenditureThis section presents summary results of estimates of public sector expenditure for Scotland(excluding accounting adjustments) for the years 2004-05 to 2008-09. Table 3.6 provides
estimates for the six largest functions of public sector expenditure. The share of the UK
Government’s expenditure on financial sector interventions assigned to Scotland is also
separately identified. Total public sector expenditure for Scotland is reported with andwithout Scotland’s estimated share of the UK Government’s financial sector interventions.
For a discussion and more detailed breakdown of expenditure, refer to Chapter 6 andAppendix B.

22

Further details of the methodology underpinning these estimates can be found in an article in the 2008 edition of Scottish

Economic Statistics and can be downloaded fromhttp://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/papers/SES2008A1

Government Expenditure and Revenue Scotland 2008-09

31

3

S co tl an d ’ s P u b l i c S ecto r A cco u n ts

Table 3.6: Summary of Total Public Sector Expenditure: Scotland 2004-05 to 2008-09(£ million)
2004-05

2005-06

2006-072007-08

Social protection

15,32915,847

16,087

17,11018,571

Health

7,758

8,606

9,102

9,810

10,244

Education and training

6,145

6,570

7,137

7,360

7,563

General public services

3,954

4,366

4,346

4,584

4,856

Defence

2,524

2,613

2,714

2,832

3,078

Public order and safety

2,115

2,285

2,279

2,354

2,509

0

0

0

0

700

6,693

7,389

8,428

9,156

8,938

With financial sector interventions

44,51847,67750,09353,20556,460Without financial sector interventions

44,51847,67750,09353,20555,761

Financial sector interventions
Other

2008-09

Total

In 2008-09, total public sector expenditure for Scotland was estimated to be £56.5 billion
when a share of the UK Government’s financial sector interventions is included, and £55.8
billion not including this share. This represented nominal increases of 26.8 per cent and25.3 per respectively since 2004-05. Health and education and training expenditureexperienced the greatest relative increases, rising by approximately 32.1 per cent and 23.1
per cent respectively in nominal terms over these five years.

Box 3.3: Total Managed Expenditure as a Share of GDP

23

In 2008-09 aggregate public expenditure for Scotland, as measured by Total Managed
Expenditure (TME) was £59 billion, when a share of the UK Government’s financial sector
interventions is included. This measure of expenditure is comparable to the headline
measures of UK TME published in the March 2010 UK Budget, and the Office for Budgetary
Responsibility’s June 2010 Pre-Budget Forecasts.
Total Managed Expenditure for Scotland
Interventions: 2004-05 to 2008-09

Including Financial Sector(£ million)

2004-05

2005-06

2006-072007-08

2008-09

Current expenditure

40,814

43,394

45,12847,962

49,876

Current expenditure accounting adjustment

1,779

2,066

2,261

2,372

2,397

Capital expenditure

3,704

4,283

4,964

5,243

6,585

321

171

147

85

157

46,61749,91452,50055,66159,014

Capital expenditure accounting adjustment
Total Managed Expenditure With
Financial Interventions

23

Small variations between the estimates of the accounting adjustments for the years 2004-05 to 2007-08 with and without theeffect of the UK Government’s interventions reflect differences in the treatment of depreciation relating to public corporation
financial institutions in the PSAT2 database.

32

Government Expenditure and Revenue Scotland 2008-09

S co tl an d ’ s P u b l i c S ecto r A cco u n ts

3

The table below presents the estimates of TME as a share of GDP under the three sets of
estimates of GDP.
In 2008-09, the ratio of TME for Scotland to GDP was 51.2 per cent excluding North Sea
GDP and 49.9 per cent including a per capita share. This ratio falls to 41.0 per cent when an
illustrative geographical share of North Sea GDP is included.
Such statistics provide a useful illustration of the relative size of public spending between
countries by controlling for the size of the economy. They should not, however, be viewed as
an estimate of the relative contribution of public spending (or the public sector) to theeconomy as a significant proportion of such spending is on transfers from government to
individuals and businesses.
Total Managed Expenditure for Scotland Including Financial Sector
Interventions as a Share of GDP: 2004-05 to 2008-09(per cent of GDP)
2004-05

2005-06

2006-072007-08

2008-09

Excluding North Sea GDP

48.4%

49.4%

48.7%

48.5%

51.2%

Including per capita share of North Sea GDP

47.5%

48.3%

47.7%

47.4%

49.9%

Including geographical share of North Sea GDP

41.2%

40.7%

40.7%

39.0%

41.0%

Share of GDP:

Not including a share of the UK Government’s financial sector interventions, TME for
Scotland was estimated to be £58.2 billion in 2008-09, as illustrated in the tables below.
This is equivalent to 50.5 per cent of Scottish GDP when North Sea GDP is excluded, and49.3 per cent of GDP when Scotland is assigned a population share of North Sea GDP.
Including an illustrative geographical share of North Sea GDP the ratio falls to 40.5 per cent.
Total Managed Expenditure for Scotland Not Including Financial Sector
Interventions: 2004-05 to 2008-09(£ million)
2004-05

2005-06

2006-072007-08

2008-09

Current expenditure

40,814

43,394

45,12847,962

49,964Current expenditure accounting adjustment

1,782

2,070

2,268

2,385

2,383

Capital expenditure

3,704

4,283

4,964

5,243

5,797

322

173

149

126

86

46,622

49,91952,50955,71658,229

Capital expenditure accounting adjustment
Total Managed Expenditure Without
Financial Interventions

Total Managed Expenditure for Scotland Not Including Financial Sector
Interventions as a Share of GDP: 2004-05 to 2008-09(per cent of GDP)
2004-05

2005-06

2006-072007-08

2008-09

Excluding North Sea GDP

48.4%

49.4%

48.7%

48.6%

50.5%

Including per capita share of North Sea GDP

47.5%

48.3%

47.7%

47.4%

49.3%

Including geographical share of North Sea GDP

41.2%

40.7%

40.7%

39.0%

40.5%

Share of GDP:

Government Expenditure and Revenue Scotland 2008-09

33

3

S co tl an d ’ s P u b l i c S ecto r A cco u n ts

Current Revenue
This section summarises the estimates of public sector revenue in Scotland for the years
2004-05 to 2008-09. Table 3.7 provides estimates of Scottish public sector current revenue
by economic category. A more detailed discussion and breakdown of revenue is provided in
Chapters 4, 5 and in Appendix A.
Table 3.7: Summary of Current Revenue by Economic Category: Scotland 2004-05 to
2008-09(£ million)
2004-05

2005-06

2006-072007-08

2008-09

Taxes on income and wealth

11,55012,911

14,153

15,255

14,320National insurance contributions

6,533

6,925

7,304

7,873

7,988

Taxes on production and imports

13,482

13,875

14,58815,25014,678Other current taxes

2,225

2,369

2,485

2,594

2,647

Taxes on capital

164

198

227

269

178

2,103

2,492

2,505

2,566

2,613

388

413

382

395

381

Gross operating surplus
Rent and other current transfers
Interest and dividends from private sector andabroad

537

602

554

766

659

36,98339,78742,19844,966

43,466

440

793

754

660

1,088

4,532

8,128

7,496

7,450

11,771

Per capita share

37,42240,58042,952

45,62744,553

Geographical share

41,51547,914

49,69452,41755,236

Total current non-North Sea revenue
North Sea revenue
Per capita share
Geographical share
Total current revenue(including North Sea revenue)

In 2008-09, total current revenue, excluding revenue from the North Sea was estimated tobe approximately £43.5 billion. This represented a nominal increase of 17.5 per cent fromthe £37.0 billion estimated to have been raised in 2004-05. This was largely a consequenceof increased revenue from taxes on income and wealth, national insurance contributions,gross operating surplus and interest and dividends from the private sector and abroad. It isinteresting to note that for a number of key taxes, the cash value raised in 2008-09 was
lower than in 2007-08. This reflects the impact of the credit crunch on economic activity andcorresponding fall in tax revenues. A detailed discussion of these effects is provided in Box
4.3.
As Table 3.7 highlights, there was a significant increase in revenue from the North Sea from2005-06 onwards. In 2004-05, Scotland’s estimated geographical share of North Sea
revenue was estimated at approximately £4.5 billion, but in 2008-09, this figure had
increased to £11.8 billion. A similar relative increase was observed under a per capita
apportionment though the overall impact was much smaller.

34

Government Expenditure and Revenue Scotland 2008-09

4

PUBLIC SECTOR REVENUE

Introduction
This chapter provides detailed estimates of Scottish public sector revenue. As Chapter 5
discusses the treatment of North Sea revenue in detail, the focus of this chapter is on nonNorth Sea elements of public sector revenue.
The majority of public sector revenue payable by Scottish residents and enterprises iscollected at the UK level. Generally it is not possible to identify separately the proportion ofthat revenue receivable from Scotland. GERS therefore uses a number of different
methodologies to apportion revenue to Scotland. These methods are discussed in Appendix
A and in the detailed revenue methodology paper on the GERS website24 .
For certain revenue sources, there are theoretical and practical challenges in determining anappropriate share to allocate to Scotland. In some cases, a variety of methodologies could
be applied, each leading to different estimates of public sector revenue in Scotland. GERS
makes use of the best data sources and methodologies available and therefore represents
as accurate a reflection of public sector revenue in Scotland as is currently possible. The
effect that any change to the revenue estimates contained in this chapter would have on theestimate of total public sector revenue due to alternative methodologies is discussed inAppendix A. The appendix highlights that there are only a small number of taxes for which
variations in the proportion assigned to Scotland will have a significant impact on theestimate of total public sector revenue in Scotland.

Estimated Revenue 2008-09
Table 4.1 highlights estimated public sector revenue in Scotland and the outturn data for the
UK in 2008-09. The contribution of each element of taxation to the total estimated tax yield in
Scotland, and the proportion of UK revenue raised in Scotland, are also included in the table.
On the basis of the assumptions and methodologies described in this report, in 2008-09,
total public sector non-North Sea current revenue in Scotland was £43.5 billion. This isequivalent to 8.3 per cent of UK total non-North Sea current revenue which is in line with
Scotland’s share of the UK population25.

24

http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/GERS

25

Scotland’s share of the UK population in 2008-09 was 8.4 per cent. Scotland’s share of UK less extra-regio GVA was 8.2 percent (General Registers for Scotland and ONS Regional Accounts).

Government Expenditure and Revenue Scotland 2008-09

35

4

P u b l i c S ecto r R even u eTable 4.1: Current Revenue: Scotland 2008-09
ScotlandUK£ million% of total
non-North
Sea revenue£ million

Scotland as %of UK

Income tax

10,71724.6%

144,451

7.4%

Corporation tax (excl North Sea)

2,791

6.4%

32,493

8.6%

Capital gains tax

547

1.3%

7,851

7.0%

Other taxes on income and wealth

265

0.6%

2,889

9.2%

National insurance contributions

7,988

18.4%

96,961

8.2%

VAT

7,481

17.2%

85,3508.8%

Fuel duties

2,055

4.7%

24,615

8.3%

Stamp duties

593

1.4%

8,002

7.4%

Tobacco duties

940

2.2%

8,358

11.3%

Alcohol duties

784

1.8%

8,598

9.1%

Betting and gaming and duties

113

0.3%

994

11.4%

Air passenger duty

154

0.4%

1,835

8.4%

Insurance premium tax

191

0.4%

2,271

8.4%

Landfill tax

85

0.2%

863

9.9%

Climate change levy

66

0.2%

711

9.2%

Aggregates levy

53

0.1%

321

16.6%

Inheritance tax

178

0.4%

2,931

6.1%

446

1.0%

5,602

8.0%

1,736

4.0%

21,924

7.9%

1,961

4.5%

24,5438.0%

Vehicle excise duty
Non-domestic rates

1

Council tax
Other taxes and royalties

2

667

1.5%

7,178

9.3%

Interest and dividends

659

1.5%

7,723

8.5%

Gross operating surplus

2,613

6.0%

22,662

11.5%

381

0.9%

1,530

24.9%

43,466100.0%

520,656

8.3%

Rent and other current transfers
Total current revenue (excluding North Sea revenue)
North Sea revenue

3

Per capita share

1,088

12,925

Geographical share

11,771

12,92544,553

533,581

Total current revenue (including North Sea revenue)
Per capita share

8.3%

Geographical share
533,581
10.4%
55,236
1. Excludes non-domestic rates that local authorities pay themselves
2. Although this group includes some 13 separate revenues (as set out in the detailed methodology paper on the GERS
website), the two largest – TV Licences and National Lottery Distribution Fund - account for 63.6% (£424 million) of thisestimate for Scotland.
3. A full discussion of North Sea revenue is provided in Chapter 5.

36

Government Expenditure and Revenue Scotland 2008-09

P u b l i c S ecto r R even u e

4Income tax is the single largest source of public sector revenue in Scotland. In 2008-09,
income tax revenue was estimated at £10.7 billion – approximately a quarter of all public
sector revenue in Scotland (excluding revenues from the North Sea). Scottish income tax
revenue is estimated on the basis of residence of the tax-payer. A full discussion of themethodology used to estimate Scottish income tax receipts is provided in the revenue
methodology paper on the GERS website.

Box 4.1 – Income Tax
Income tax is a tax paid on an individual’s income. Taxable income includes earnings from
employment, earnings from self employment, earnings from non-incorporated businesses(e.g. partnerships) most pension income, interest on most savings, income from shares(dividends), rental income and income paid from trusts.
The table below provides a breakdown of estimated income tax receipts in Scotland and the
UK by source of income. The estimated number of taxpayers by source is also listed. The
results show that in both Scotland and the UK, income from employment accounts for justunder three quarters of income tax receipts. Self employed income is the second largest
source in both Scotland and the UK. It accounts for approximately 11 per cent of income tax
receipts in Scotland and 12 per cent of receipts in the UK.
Total income tax receipts in Scotland in 2008-09 accounted for approximately 7.4 per cent of
total UK income tax receipts, while Scotland’s share of UK taxpayers was 8.6 per cent.
2008-09 Income Tax Revenue By Source of Income(£ million)(Thousands)

UK
Revenue

Scottish
Revenue

Scottish
Share ofUK
Revenue

Self employed

17,533

1,192

6.8%

Employed

105,023

7,984

7.6%

Pensions

9,790

779

8.0%

Investment

12,105

762

Savings

3,213

Dividends
Property
Other Incomes
Total Income Tax Receipts

Number of
UK TaxpayersNumber of
ScottishTax payers

Scottish
Share ofUK
Taxpayers

2,690

183

6.8%

22,900

2,050

9.0%

5,290

452

8.5%

6.3%

1,570

93

5.9%

219

6.8%

n/a

n/a

n/a

6,766

427

6.3%

n/a

n/a

n/a

1,152

54

4.7%

n/a

n/a

n/a

974

62

6.4%

n/a

n/a

n/a

144,451

10,7177.4%

32,500

2,780

8.6%

Note: Non National Statistics: Estimates based upon the 2007-08 Survey of Personal Incomes (latest year of survey). This table depicts income tax revenue by source ofincome and the number of taxpayers for which each classification is their largest source of income. Figures relating to the number of taxpayers may not add due torounding.

Taxable income is subject to different tax rates depending upon the source of income andthe value of income. The table below present estimates of the revenue raised from income
tax in Scotland and the UK from each tax band in 2008-09. The total number of taxpayers
liable for tax under each band is also listed.

Government Expenditure and Revenue Scotland 2008-09

37

4

P u b l i c S ecto r R even u e

2008-09 Income Tax Revenue By Tax Band(£ million)(Thousands)

UK
Revenue

Scottish
Revenue

Scottish
Share ofUK
Revenue

Number of
UK TaxpayersNumber of
ScottishTax payers

Scottish
Share ofUK
Taxpayers

Starting Rate

628

45

7.2%

3,440

283

8.2%

Savers Rate

968

61

6.3%

1,070

73

6.8%

Basic Rate (Earnings, savingsand dividends)

60,108

5,400

9.0%

24,100

2,140

8.9%

Higher Rate (Earnings, savingsand dividends)

82,748

5,211

6.3%

3,870

288

7.4%

Total Income Tax Receipts

144,451

10,7177.4%

32,500

2,780

8.6%

Note: Non National Statistics: Estimates based upon the 2007-08 Survey of Personal Incomes (latest year of survey). Figures relating to the number of taxpayers may not
sum due to rounding.

In Scotland, 50 per cent of income tax revenue is raised from the basic rate, whilst in the UK
as a whole the comparable figure is 42 per cent. Revenue paid at the higher rate accounted
for 49 per cent of the income tax revenue raised in Scotland during 2008-09, compared to 57
per cent of the revenue raised in the UK as a whole. In total, there were approximately 2.8
million income tax payers during 2008-09, equivalent to 8.6 per cent of the UK total. 10 per
cent of Scottish tax payers are estimated to pay higher rate income tax, compared to 12 percent of tax payers in the UK as a whole.
National insurance contributions represented the second largest revenue source in Scotland,an estimated £8.0 billion in 2008-09 – 18.4 per cent of total non-North Sea revenues. VAT
represented the third largest source of revenue and was the largest source of revenue fromindirect taxes – accounting for 17.2 percent of total non-North Sea revenues.
Corporation tax revenue (excluding that from the North Sea) was estimated at £2.8 billion in
Scotland during 2008-09, 6.4 per cent of total non-North Sea current revenue collected in
Scotland. In GERS, corporation tax revenue is allocated on the basis of the profits
generated in Scotland. A full discussion of the methodology used to estimate corporation tax
revenue is presented in the detailed revenue methodology paper on the GERS website.
Gross operating surplus (GOS) refers to the operating (or trading) surpluses (or losses) ofcentral government, local government and public corporation trading activity. It is the fifthlargest revenue source in Scotland generating £2.6 billion in revenue during 2008-09, 6.0
per cent of total non-North Sea revenue in Scotland.
Scotland accounted for 11.5 per cent of the total UK GOS in 2008-09. Scotland’s large
share of the UK GOS is partly due to Scottish Water which is one of the greatest contributors
to UK public corporations’ GOS. The equivalent water companies in England and Wales areoutside the public sector and hence do not contribute to their GOS. A more detailed
discussion of GOS is provided in the detailed revenue methodology paper on the GERS
website.
After these five main categories, all other types of tax listed each accounted for less than 5
per cent of total non-North Sea revenue in Scotland in 2008-09. Together, council tax andnon-domestic rates raised £3.7 billion (8.5 per cent of total non-North Sea revenue) while
fuel duties raised £2.1 billion.

38

Government Expenditure and Revenue Scotland 2008-09

P u b l i c S ecto r R even u e

4

The Scottish share of total UK revenue for each element of revenue varies according to theparticular tax being estimated. For income tax, the Scottish percentage was slightly lessthan both a per capita share and a GVA share26. For national insurance contributions the
Scottish percentage was slightly less than a per capita share but in line with a GVA share.
For VAT and corporation tax (excluding North Sea), the Scottish percentage was broadly inline with a per capita share. In contrast, revenue from duties on betting and gaming, alcoholand tobacco were considerably higher than Scotland’s share of the UK population or GVA.
The estimated Scottish share of revenue from stamp duties and capital gains tax were lower
than both a GVA share and a per capita share. This is largely explained by the lower valueof asset sales relative to other parts of the UK, and in particular London and the South Eastof England.
Environmental taxes, such as aggregates levy, climate change levy and landfill tax
contribute relatively small amounts of revenue to the overall total with each contributing lessthan 0.5 per cent of revenue in Scotland and the UK.

Box 4.2 – Stamp Duty
Stamp duty is levied on two types of transactions – i) conveyances and transfers of land andproperty (stamp duty land tax) and ii) share and marketable security transactions (stamp
duty reserve tax). The revenue raised from both sources is reported jointly as aconsolidated estimate in Table 4.1.
Property or Land – Stamp Duty Land Tax
Stamp Duty Land Tax (SDLT) is generally payable on transactions above a certain thresholdvalue. In 2008-09, this rate was set at £125,000 for residential properties or land (or£150,000 if in an area has been designated as 'disadvantaged') and £150,000 for nonresidential properties. If the property or land value is above this threshold, SDLT is charged
on the entire value. SDLT is calculated on a sliding scale, with charges of between 1 percent and 4 per cent. The table below estimates the revenue raised from SDLT in Scotland
and the UK for each year between 2004-05 and 2008-09. In 2008-09, SDLT raised £319
million in Scotland, 6.6 per cent of the UK total. This is lower than Scotland’s share of the
UK population and GVA and reflects the lower average price of property in Scotland relative
to other parts of the UK, such as London and the South East.
Over the period 2004-05 to 2007-08, SDLT both in Scotland and UK grew significantly innominal terms, with growth of 78.5 percent and 59.3 percent respectively. Both Scotland
and the UK recording significant drops in SDLT revenue between 2007-08 and 2008-09.
This reflects a fall in average house prices and the number of transactions over the year.
Stamp Duty Land Tax 2004-05 to 2008-09(£ million)
2004-05

2005-06

2006-072007-08

2008-09

311

284

423

555

319

UK

6,250

7,454

9,637

9,958

4,798

Scotland as % of the UK

5.0%

3.8%

4.4%

5.6%

6.6%

Scotland26

Scotland’s share of the UK population in 2008-09 was 8.4 per cent. Scotland’s share of UK less extra-regio GVA was 8.2 per

cent. (General Register Office for Scotland and ONS Regional Accounts).

Government Expenditure and Revenue Scotland 2008-09

39

4

P u b l i c S ecto r R even u e

Stocks and Shares – Stamp Duty Reserve Tax
Stamp duty reserve tax (SDRT) is charged on the transfer of stocks, shares, units in unit
trusts and shares in open-ended investment companies. It is payable at a flat rate of 0.5%of the value of the financial transactions. The table below estimates the revenue raised fromSDLT in Scotland and the UK for each year between 2004-5 and 2008-09.
Stamp Duty Reserve Tax 2004-05 to 2008-09(£ million)
2004-05

2005-06

2006-072007-08

2008-09

208

259

286

339

274

UK

2,716

3,464

3,756

4,165

3,204

Scotland as % of the UK

7.7%

7.5%

7.6%

8.1%

8.5%

ScotlandThe results show that in 2008-09, SDRT raised £274 million in Scotland. This is equivalent
to 8.5 per cent of total UK SDRT receipts in that year, broadly in line with Scotland’s share of
the UK population. Over the period 2004-05 to 2007-08, SDRT revenue both in Scotland
and UK grew significantly in nominal terms, with growth of 63.0 per cent and 53.4 per centrespectively. As with SDLT revenue, SDRT revenue fell significantly in 2008-09 both in
Scotland and the UK.

Estimated Revenue: Scotland and the UK, 2004-05 to 2008-09
Table 4.2 shows estimated current revenue in Scotland and the UK between 2004-05 and2008-09.
Current non-North Sea revenue in Scotland and the UK are estimated to have both grown by
approximately 17.5 percent and 16.4 per cent respectively since 2004-05 in nominal terms.
In general, tax revenue in Scotland and the UK are estimated to have followed similar
patterns of growth between 2004-05 and 2008-09. Income tax revenue in Scotland grew by
22.0 per cent in nominal terms between 2004-05 and 2008-09 compared to growth of 19.1
per cent at the UK level, while VAT rose by 10.4 per cent in Scotland and 6.7 per cent in the
UK. National insurance contributions increased by approximately 22.3 per cent in Scotlandand 19.8 per cent in the UK.
Among some of the smaller taxes, there was greater variation in the growth rates between
Scotland and the UK. The greatest variation was in stamp duties and inheritance tax where
Scottish revenue rose considerably faster than the UK average. In contrast, other taxes androyalties and non domestic rates increased faster in the UK than they did in Scotland.

40

Government Expenditure and Revenue Scotland 2008-09

1,924
519

1,041
717

Fuel duties

Stamp duties

Tobacco duties

Alcohol duties

Per capita share

37,422

41,515

Geographical share

4,532

Per capita share

Total current revenue(including North Sea revenue)

Geographical share

440

36,983

North Sea revenue

388

Total current revenue(excluding North Sea revenue)

2,103

Gross operating surplus

Rent and other current transfers

537Interest and dividends

1,663

Council tax
536

1,622

Non-domestic rates

Other taxes and royalties

164
365

Vehicle excise duty

50

Aggregates levy

Inheritance tax

62
68

Climate change levy

200

Landfill tax

Insurance premium tax

74

6,778

VAT

Air passenger duty

6,533

National insurance contributions

89

180

Other taxes on income and wealth

Betting and gaming and duties

119

2,463

Corporation tax (excl North Sea)

Capital gains tax

8,788

2004-05

Income tax

47,914

40,5808,128

793

39,787

413

2,492

602

485

1,773

1,736

389

198

50

65

68

198

77

95

723

1,023

543

1,945

7,074

6,925

221

175

2,910

9,605

2005-06

49,69442,952

7,496

754

42,198

382

2,505

554

524

1,862

1,741

400

227

50

63

78

195

94

106

722

964

709

1,967

7,599

7,304

262

230

3,217

10,444

2006-07

Scotland

52,41745,6277,450

660

44,966

395

2,566

766

578

1,935

1,724

425

269

57

65

89

194

164

110

750

896

893

2,079

7,883

7,873

252

305

3,432

11,266

2007-08

Table 4.2: Current Revenue: Scotland and UK 2004-05 to 2008-09

452,509452,509

5,183

5,183

447,326

1,743

17,891

6,142

5,710

20,05417,800

4,737

2,931

326

750

673

2,353

872

876

7,889

8,113

8,966

23,313

79,97980,923

2,016

2,278

29,720121,271

2004-05

486,533

486,533

9,384

9,384

477,149

1,760

21,038

6,847

5,641

21,226

18,816

4,950

3,276

323

741

753

2,347

906

884

7,876

7,952

10,91823,43881,50585,559

2,512

3,041

34,278130,562

2005-06

518,983

518,983

8,924

8,924

510,059

1,627

21,991

6,469

6,072

22,34019,846

5,139

3,618

324

696

825

2,304

1,112

961

7,914

8,146

13,393

23,58587,73990,916

2,996

3,812

37,307140,927

2006-07UK

548,452

548,452

7,831

7,831

540,6211,557

22,759

8,925

6,386

23,504

20,357

5,412

3,890

339

705

897

2,302

1,949

961

8,215

8,031

14,12324,90589,891

95,437

2,764

5,267

40,017152,028

2007-084

41

533,581533,581

12,925

12,925

520,656

1,530

22,662

7,723

7,178

24,54321,924

5,602

2,931

321

711

863

2,271

1,835

994

8,598

8,358

8,002

24,61585,35096,961

2,889

7,851

32,493

144,451

2008-09

Government Expenditure and Revenue Scotland 2008-09

55,23644,553

11,771

1,088

43,466

381

2,613

659

667

1,961

1,736

446

178

53

66

85

191

154

113

784

940

593

2,055

7,481

7,988

265

547

2,791

10,717

2008-09(£ million)

P u b l i c S ecto r R even u e

4

P u b l i c S ecto r R even u eTable 4.3 shows estimates of Scotland’s share of UK revenue for five key taxes between
2004-05 and 2008-09. Over this period, Scotland’s share of UK revenue has remained
relatively stable.
Between 2004-05 and 2008-09 total non-North Sea revenue in Scotland accounted for 8.3
per cent of UK non-North Sea revenue, broadly in line with Scotland’s share of the UK
population and slightly higher than a GVA share. Scotland’s share of UK income tax,
corporation tax and VAT both increased over this period but this was offset by a decline in
Scotland’s share of both local authority revenue and the ‘other revenue’ categories(however, in 2008-09 the latter grew back to its 2004-05 share of UK revenues).
Table 4.3: Non-North Sea Current Revenue: Scotland/UK Share 2004-05 to 2008-09(per cent of UK revenue)
2004-05

2005-06

2006-072007-08

2008-09

7.2%

7.4%

7.4%

7.4%

7.4%

(excluding North Sea revenue)

8.3%

8.5%

8.6%

8.6%

8.6%

National Insurance contributions

8.1%

8.1%

8.0%

8.2%

8.2%

Value added tax

8.5%

8.7%

8.7%

8.8%

8.8%

8.7%

8.8%

8.5%

8.3%

8.0%

9.4%

9.3%

9.0%

9.1%

9.4%

8.3%

8.3%

8.3%

8.3%

8.3%

Income tax
Corporation tax

Local authority revenue

1

All other revenue
Total non-North Sea current revenue
1. Includes council tax and non-domestic rates only

27

27

Other local authority revenues that are included in UK Public Sector Finances are (1) Interest and dividends paid to local
authorities from the private sector – included along with central government and public corporations interest etc. as part of thetotal interest and dividend revenue figure, (2) Local government capital consumption – included as part of gross operating
surplus, (3) Local authority trading services – again included as part of gross operating surplus, (4) Rents and other current
transfers – included as part of total public sector rents and other current transfers. It should be noted that the terminology andpresentation used in Scottish Local Government Financial Statistics will differ from that used here. This is because the former
uses terms and presentation devised by CIPFA for local authority accounting practice, based on the equivalent commercial
accounting standards, whereas the Budgetary and fiscal framework are based on the National Accounts framework.

42

Government Expenditure and Revenue Scotland 2008-09

P u b l i c S ecto r R even u e4

Box 4.3: Scottish Tax Receipts and the Recession
From 2004-05 to 2007-08, most tax receipts in Scotland grew year on year, in line with thegrowth of the wider economy. Both Scotland and the UK entered recession in mid 2008.
This had a corresponding impact on tax revenue, with receipts from many taxes falling in
nominal terms between 2007-08 and 2008-09. The table below summarises the changes intotal Scottish tax revenue, and in selected individual receipts.
The estimates show a nominal drop in total Scottish tax revenue, excluding North Sea
revenue, of £1.5 billion (3.5%) between 2007-08 and 2008-09. Income tax receipts fell by
4.9 per cent in 2008-09, while corporation tax was down 18.7 per cent compared to theprevious year. Inheritance tax and stamp duty saw the greatest relative fall, with eachdeclining by 33.7 per cent from the previous year.
Summary of Scottish Tax Receipts: 2007-08 & 2008-09(£ million)
2007-08

2008-09

Difference

Difference
in % terms

Income Tax

11,266

10,717

-549

-4.9%

Corporation Tax (excl North Sea)

3,432

2,791

-641

-18.7%

Inheritance Tax

269

178

-90

-33.7%

Stamp Duty

893

593

-301

-33.7%

7,883

7,481

-402

-5.1%

44,966

43,466-1,501

-3.5%

660

1,088

+428

+64.8%

7,450

11,771+4,321+58.0%Per capita share

45,62744,553-1,074-2.4%

Geographical share

52,41755,236+2,819+5.4%

VAT
Total current Revenue(excluding North Sea revenue)
North Sea revenue

3

Per capita share
Geographical share
Total current revenue (including North Sea
revenue)

Whilst total onshore tax receipts fell during 2008-09, total UK North Sea revenues increasedby almost two thirds compared to the previous year. This growth was driven by a rapid
increase in oil prices during the first six months of 2008. Prices peaked at over $140 a barrel
in July 2008, a record high in nominal terms, before falling back. Scotland’s population
share of North Sea revenue is estimated to have increased by 64.8 per cent between 200708 and 2008-09 whilst Scotland’s illustrative geographical share of North Sea revenue isestimated to have grown by 58%.
Total current revenue in Scotland, including a per capita share of North Sea revenue isestimated to have fallen by £1.1 billion (2.4%) between 2007-08 and 2008-09. Including an
illustrative geographical share of North Sea revenue, Scottish tax revenue is estimated tohave grown by £2.8 billion (5.4%).

Government Expenditure and Revenue Scotland 2008-09

43

4

44

P u b l i c S ecto r R even u eGovernment Expenditure and Revenue Scotland 2008-09

5

NORTH SEA REVENUE

Introduction
This chapter provides a discussion of North Sea revenue and sets out the methodologies
adopted in this publication.

The North Sea Fiscal Regime
North Sea revenue stems from three key sources: petroleum revenue tax, corporation tax
and license fees.
For the period 2004-05 to 2008-09, the taxation or charging regime for each of these threeelements was as follows –1. Petroleum revenue tax (PRT): PRT was charged at a rate of 50% on field-based
profits from oil and gas extraction on fields given development approval prior to
March 1993 at which time it was abolished for all new fields. There were deductions
for all exploration, appraisal, and development costs on 100% first year basis with an
uplift of 35% for field investment costs prior to field payback. There were also
volume and safeguard allowances.
2. Corporation tax (CT): Ring-fenced corporation tax was charged at a rate of 30%.
There were deductions for exploration, appraisal and development costs on a 100%
first year basis. In 2002, a Supplementary Charge (SC) of 10% was introduced. This
made the effective corporation tax rate (CT + SC) 40%. From January 2006, the SC
was increased to 20% making the overall tax rate 50%.
3. License Fees: The UK Government grants licenses for operators to "search andbore for and get"28 petroleum in specified areas for a set period of time. Operators
pay an annual fee for holding these licenses. License fees are charged at an
escalating rate on each square kilometre that the licence covers. However, licencefees were gradually phased out over the period and, by 2008-09, no revenue wasraised from this source.

28

Petroleum Act 1998 - http://www.opsi.gov.uk/ACTS/acts1998/ukpga_19980017_en_1

Government Expenditure and Revenue Scotland 2008-09

45

5

N o r th S ea R even u e

North Sea revenue has been relatively volatile over the last two decades. Table 5.1 shows
the North Sea revenue collected by the UK Exchequer since 1980-81.
Table 5.1: Total North Sea Revenue: UK 1981-82 to 2008-09 1, 2Year£ millionYear£ millionYear£ millionYear£ million

1981-82

6,395

1988-89

3,301

1995-96

2,341

2002-03

5,097

1982-83

7,867

1989-90

2,502

1996-97

3,351

2003-04

4,284

1983-84

8,788

1990-91

2,342

1997-98

3,330

2004-05

5,183

1984-85

12,326

1991-92

1,017

1998-99

2,511

2005-06

9,384

1985-86

11,217

1992-93

1,338

1999-00

2,564

2006-078,924

1986-87

4,701

1993-94

1,266

2000-01

4,455

2007-08

7,831

1987-88

4,736

1994-95

1,673

2001-025,426

2008-0912,925

1. Source ONS Public Finance Statistics
2. Note: gas levies are not included in total public sector revenue from the UK continental shelf because it is categorised as a
tax on expenditure rather than an income from oil and gas production. Gas levies were abolished from 1 April 1998.

Table 5.2 shows the levels of revenue raised from the three key components of North Sea
revenue since 2004-05.
Total North Sea revenue has increased by 149.4 per cent in nominal terms since 2004-05.
This reflects the increase in wholesale oil and gas prices over this period and the higher
supplementary corporation tax introduced in January 2006. Licence fees were graduallyphased out over the period, so that by 2008-09 no revenues were raised from this source.
Table 5.2: Composition of North Sea Revenue: UK 2004-05 to 2008-09(£ million)
2004-05
Licence fees

2005-06

2006-072007-08

2008-09

68

61

60

56

0

North Sea corporation tax

3,831

7,307

6,709

6,095

10,358Petroleum revenue tax

1,284

2,016

2,155

1,680

2,567

Total

5,183

9,384

8,924

7,831

12,925In the ONS Regional Accounts, the convention is for the UK Continental Shelf (UKCS) to be
included as a (notional) separate region of the UK (the extra-regio territory) and not toallocate this to specific geographic regions within the UK mainland.
A number of different approaches can be used to allocate a share of North Sea revenue to
Scotland.
The following section presents a range of estimates of North Sea revenue that could beallocated to Scotland under various assumptions about the apportionment of the oil and gas
industry.

46

Government Expenditure and Revenue Scotland 2008-09

5

N o r th S ea R even u e

Scotland’s Share of North Sea Revenue
For many years, there has been considerable debate on how the delineation of North Sea oil
and gas output might be determined.
Three key estimates of Scotland’s share of North Sea revenue are adopted in the GERS
report 1. Zero share
2. Per capita share
3. An illustrative geographical share
These are the figures which are used in the headline estimates of total public sector revenue
in Chapters 3 and 4.
As the situation under option 1 is dealt with in the revenue estimates for all non-North Sea
revenues, the discussion below focuses on per capita and geographical shares.

Per capita share
One interpretation of North Sea revenue is to view it as a non-identifiable UK revenue, inwhich case a per capita share may be apportioned to Scotland.
Table 5.3 provides an estimate of Scotland’s share of North Sea revenue under thisapproach.
Table 5.3: Per Capita Share of North Sea Revenue: Scotland 2004-05 to 2008-09(£ million)
2004-05

2005-06

2006-072007-08

2008-09

Total North Sea revenue

5,183

9,384

8,924

7,831

12,925

Scotland’s per capita share

440

793

754

660

1,088

Scotland’s percentage share of
North Sea revenue

8.5%

8.5%

8.4%

8.4%

8.4%

An Illustrative Geographical ShareAn alternative approach is to apportion a geographic share of North Sea revenue to
Scotland. In order to estimate this share, GERS draws upon academic research carried out
by Professor Alex Kemp and Linda Stephen from the University of Aberdeen29 . Kemp andStephen (2008) estimate Scotland’s share of North Sea revenue based on a detailed
financial model of the North Sea oil and gas industry and an assessment of Scotland’sgeographical share of the North Sea.
In their analysis, the researchers base the Scottish boundary of the UKCS on the medianline principle as employed in 1999 to determine the boundary between Scotland and the restof the UK for fishery demarcation purposes. Other alternatives are possible. Scotland’s
estimated geographical share of the North Sea sector, used in this report, is highlighted in
the following diagram. Demarcation by the median line is highlighted by the dark shaded29

Kemp and Stephen (2008), ‘The Hypothetical Scottish Shares of Revenues and Expenditures from the UK Continental Shelf

2000-2013’

Government Expenditure and Revenue Scotland 2008-09

47

5

N o r th S ea R even u earea in Figure 5.1. All oil and gas fields located in this region were apportioned to Scotland
under the assumption of an illustrative geographical share.

Figure 5.1 UK Continental Shelf and Scottish Boundary

Source: Scottish Government Marine Directorate

Based on a detailed database of North Sea oil and gas fields, Kemp and Stephen estimatedthe tax revenue raised in each field. Their detailed modelling took account of productionlevels and a range of costs including research and development, and decommissioning.
Taking the median line as the line of demarcation, the authors assigned revenue from eachfield to Scotland and the rest of the UK. The authors’ most recent estimates show that
Scotland’s geographical share of oil production remained at 96% in 2009, while its
geographical share of gas production fell to 58% from 61% in the previous year. Scotland’s
share of total hydrocarbon production stood at 80% falling marginally from 81% in both 2007
and 2008.
Details of the methodology used by Kemp and Stephen are provided in the paper Kemp andStephen (2008), ‘The Hypothetical Scottish Shares of Revenues and Expenditures from the
UK Continental Shelf 2000-2013’ which is available from the weblink below.30 Using
estimates of Scotland’s geographical share of total North Sea revenue, it is possible toapportion the total UK revenue figure from the ONS Public Sector Finance statistics to
Scotland.
30

http://www.scotland.gov.uk/Publications/2008/06/UKContinentalShelfRevenue

48

Government Expenditure and Revenue Scotland 2008-09

5

N o r th S ea R even u eTable 5.4 provides estimates of Scotland’s share of North Sea revenue using thismethodology. It should be noted that the figures provided in Kemp and Stephen are on acalendar year basis. The estimates for financial years are calculated by first estimating thequarterly proportions using a cubic spline methodology. These are applied to the quarterly
revenue data, and summed to form the financial year estimates.
Table 5.4: Geographical Share of North Sea Revenue: Scotland 2004-05 to 2008-09(£ million)
2004-05

2005-06

2006-072007-08

2008-09

Total North Sea revenue

5,183

9,384

8,924

7,831

12,925

Scotland’s geographical share

4,532

8,128

7,496

7,450

11,771

Scotland’s percentage share of
North Sea revenue

87.4%

86.6%

84.0%

95.1%

91.1%

Box 5.1 – Evolution of North Sea Revenues Since 1980/81
Between 1981-80 and 2008-09, the North Sea has generated approximately £147.1 billion inrevenue for the UK Exchequer. Revenues peaked in the mid 1980s before declining in the early
1990s. More recently, North Sea revenues have followed an upward trend.
Using the estimates provided in Kemp and Stephen (1999 and 2008) it is possible to estimate
Scotland’s illustrative geographical share of North Sea revenue for each year from 1981-82
onwards31. The results are illustrated in cash terms in the table below. They suggest that overthe period 1981-82 to 2008-09, Scotland’s illustrative geographical share of North Sea revenue
was £130.4 billion, this equates to approximately 89% of total UK North Sea revenue over theperiod.
Scotland’s Geographical Share of North Sea Revenue: 1981-82 to 2008-09% of Total UK
revenue£(million)% of Total
UK revenue£(million)% of Total
UK revenue£(million)

1981-82

97.9

6,263

1991-92

63.3

644

2001-02

83.1

4,507

1982-83

97.6

7,681

1992-93

62.7

838

2002-03

87.8

4,473

1983-84

96.0

8,437

1993-94

72.4

916

2003-04

86.9

3,725

1984-85

93.0

11,467

1985-86

93.5

10,488

1994-95

82.3

1,377

2004-05

87.4

4,532

1995-96

79.5

1,862

2005-06

86.6

8,128

1986-87

94.3

4,432

1996-97

80.5

2,697

2006-07

84.0

7,496

1987-88

89.7

4,249

1997-98

74.7

2,487

2007-08

95.1

7,450

1988-89

88.9

2,935

1998-99

78.0

1,958

2008-0991.1

11,771

1989-90

82.2

2,057

1999-00

81.3

2,083

1990-91

70.0

1,640

2000-01

84.4

3,759

Year

31

Year

Year

Kemp and Stephen (2008) - The Hypothetical Scottish Shares of Revenues and Expenditures from the UK Continental Shelf

2000-2013
Kemp and Stephen (1999) - Expenditures and Revenues from the UKCS – Estimating the Hypothetical Shares 1970 – 2003

Government Expenditure and Revenue Scotland 2008-09

49

5

N o r th S ea R even u eContribution to current revenue
Tables 5.5 and 5.6 show the estimated contribution to total Scottish current fiscal revenue
from the North Sea in 2008-09, using a per capita and geographical share respectively.
Table 5.5: Current Revenue (Per Capita Share of North Sea Revenue): Scotland 200809
ScotlandUK£ million% of total
revenue£ million

Scotland as %of UK revenue

Total current revenue (excluding North Sea revenue)

43,466

97.6%

520,656

8.3%

North Sea revenue

1,088

2.4%

12,925

8.4%

Total current revenue

44,553100.0%

533,581

8.3%

Table 5.6: Current Revenue (Geographical Share of North Sea Revenue): Scotland
2008-09
ScotlandUK£ million% of total
revenue£ million

Scotland as %of UK revenue

Total current revenue (excluding North Sea revenue)

43,466

78.7%

520,656

8.3%

North Sea revenue

11,771

21.3%

12,925

91.1%

Total current revenue

55,236100.0%

533,581

10.4%

As tables 5.5 and 5.6 highlight, the estimated size of current revenue in Scotland alters
significantly depending on whether a per capita or an illustrative geographical share of North
Sea revenue is apportioned to Scotland.
Assuming a per capita share, Scotland’s estimated share of total UK current revenue
remains at the same level as the share assuming the exclusion of North Sea revenue, thatis, 8.3 per cent in 2008-09. In contrast, under an illustrative geographical share, Scotland’s
estimated share of total UK current revenue increased to 10.4 per cent in the same year.

Sensitivity analysis
Prior to 2006-07, earlier GERS reports presented illustrative figures to show North Sea
revenue allocated to Scotland under various assumptions. For consistency, Table 5.7 shows
estimated North Sea revenue under these various percentage allocations.
Table 5.7: Hypothetical Shares of North Sea Revenue: Scotland 2004-05 to 2008-09(£ million)
2004-05

2005-06

2006-072007-08

2008-09

5,183

9,384

8,924

7,831

12,925

66%

3,421

6,193

5,990

5,168

8,617

75%

3,887

7,038

6,806

5,873

9,694

90%

4,665

8,446

8,168

7,048

11,633

Total North Sea Revenue
Hypothetical shares

50

Government Expenditure and Revenue Scotland 2008-09

6

PUBLIC SECTOR EXPENDITURE

Introduction
This chapter provides detailed estimates of public sector expenditure for Scotland.
The primary data source used to estimate Scottish public sector expenditure is the Country
and Regional Analysis (CRA) contained in the National Statistics publication Public
Expenditure Statistical Analyses (PESA) published by HM Treasury32.
In GERS, public sector expenditure is divided into three categories: identifiable expenditure,
non-identifiable expenditure and an accounting adjustment. Identifiable expenditure isexpenditure that can be clearly allocated to Scotland in terms of having been spent for the
benefit of Scottish residents and enterprises. Examples of identifiable expenditure include
unemployment benefits, local economic development expenditure and most education andhealth expenditure.
Non-identifiable expenditure is expenditure that cannot be allocated to a particular country of
the UK or English region but is instead incurred on behalf of the UK as a whole. The largest
element of non-identifiable expenditure is defence expenditure.
Finally, an accounting adjustment ensures that public sector expenditure reported in PESA isconsistent with Total Managed Expenditure (TME), the UK Government’s principal measureof public sector expenditure used in the UK Public Finance Accounts.
For total expenditure and each expenditure component, a detailed breakdown according tocurrent and capital is provided.
Each element of expenditure is discussed in detail below. Appendix B discusses therevisions from previous reports and the relevant apportionment methodologies applied.
As discussed in Chapter 3, the UK Government’s net financial sector interventions areclassified as non-identifiable expenditure in PESA. The outlays by the UK Government arerecorded as a capital expenditure, whilst the fees received are recorded as a negative
current expenditure. In PESA and GERS, these elements appear in the Enterprise andEconomic Development (EED) expenditure programmes.
The scale of the financial sector interventions, relative to other spending on EED, means that
there is a significant increase in expenditure within this category between 2007-08 and 200809. GERS therefore separates these two elements of spending.

Total Public Sector Expenditure
Estimated total public sector expenditure for Scotland by spending category for 2008-09 isshown in Table 6.1. On the basis of the assumptions and methodologies described in thisreport, in 2008-09, total public sector expenditure for Scotland was £56.5 billion when an
estimated share of the UK Government’s financial sector interventions is included, and £55.8
billion when this share is not included. Under both measures, this was equivalent to 9.4 percent of comparable total UK public sector expenditure in 2008-09. Social protection was the32

The most recent edition of PESA is available from http://www.hm-treasury.gov.uk/national_statistics.htm

Government Expenditure and Revenue Scotland 2008-09

51

6

P u b l i c S ecto r E xp en d i tu r elargest Scottish expenditure programme. Together with health expenditure, it accounts forapproximately 50% of total public sector expenditure for Scotland in 2008-09.
Table 6.1: Total Expenditure: Scotland 2008-09
Scotland£ million% of total
expenditure incl.
financial sector
interventions% of total
expenditure excl.
financial sector
interventions

1,597

2.8%

2.9%

602

1.1%

1.1%

2,658

4.7%

4.8%

Defence

3,078

5.5%

5.5%

Public order and safety

2,509

4.4%

4.5%

700

1.2%

N/A

1,006

1.8%

1.8%

Science and technology

420

0.7%

0.8%

Employment policies

261

0.5%

0.5%

Agriculture, forestry and fisheries

799

1.4%

1.4%

General public services
Public and common services
International services
Public sector debt interest

Economic affairs
Enterprise and economic development
Financial sector interventions
Other enterprise and economic development

2,629

4.7%

4.7%

Environment protection

Transport

1,037

1.8%

1.9%

Housing and community amenities

1,799

3.2%

3.2%

Health10,244

18.1%

18.4%

Recreation, culture and religion

1,490

2.6%

2.7%

Education and training

7,563

13.4%

13.6%

Social protection

18,571

32.9%

33.3%

EU transactions

-502

-0.9%

-0.9%

With financial sector interventions

56,460100.0%

N/A

Without financial sector interventions

55,761

N/A

100.0%Total

1

In the TME presentation, expenditure on grants abroad is shown net of grants payable to the UK. This is why the EU
transaction shows negative net expenditure.

Current expenditure is the sum of the current expenditure of general government (i.e. theScottish Government, the UK Government in Scotland and Scottish local authorities) andcertain distributive transactions (interest and dividends) payable by public corporations to theprivate sector and abroad. It does not include expenditure incurred by public corporations in
producing goods and services for sale. Instead, the surplus of sale receipts over operating
costs for public corporations is scored as a public sector revenue and does not affect theexpenditure measure. Public sector current expenditure is defined to be net of certain
revenue items, such as some sales of goods and services by general government. As it isdefined at the public sector level, any transactions between parts of the public sector are
also excluded.

52

Government Expenditure and Revenue Scotland 2008-09

6

P u b l i c S ecto r E xp en d i tu r e

Public sector capital expenditure refers to new capital formation, the net acquisition of land,and expenditure on capital grants. Capital expenditure leads to the holding of assets thatcan be used repeatedly to produce goods and services and generally have an economic lifeof more than one year. Tables 6.2 and 6.2a provide a summary of total current and capital
expenditure over the years 2004-05 to 2008-09 33.
Table 6.2: Total Current and Capital Expenditure Including Financial Sector
Interventions: Scotland and UK 2004-05 to 2008-09(£ m i l l i o n )Sco tl an dUK

2004-05

2005-06

2006-072007-08

2008-09

2004-05

2005-06

2006-072007-08

2008-09

Current

40,814

43,394

45,12847,962

49,876

438,524

463,692

482,193510,221538,133

Capital

3,704

4,283

4,964

5,243

6,585

32,61237,48840,71145,43164,266

Total

44,51847,67750,09353,20556,460471,136

501,180

522,904

555,652

602,399

Table 6.2a: Total Current and Capital Expenditure Not Including Financial Sector
Interventions: Scotland and UK 2004-05 to 2008-09(£ m i l l i o n )Sco tl an dUK

2004-05

2005-06

2006-072007-08

2008-09

2004-05

2005-06

2006-072007-08

2008-09

Current

40,814

43,394

45,12847,962

49,964

438,524

463,692

482,193510,221539,182

Capital

3,704

4,283

4,964

5,243

5,797

32,61237,48840,71145,431

54,905

Total

44,51847,67750,09353,20555,761

471,136

501,180

522,904

555,652594,087

Tables 6.3 and 6.3a highlight the share of total expenditure according to current and capital
expenditure. Including a share of the UK Government’s financial sector interventions, capital
expenditure for Scotland increased from 8.3 per cent of total expenditure in 2004-05 to 11.7
per cent in 2008-09. When this share is not included, capital expenditure increased from 8.3
per cent to 10.4 per cent of total expenditure over the same period.
Table 6.3: Current and Capital Expenditure Including Financial Sector Interventions(% of Total Expenditure): Scotland 2004-05 to 2008-09(per cent)2004-05

2005-06

2006-072007-08

2008-09

Current

91.7%

91.0%

90.1%

90.1%

88.3%

Capital

8.3%

9.0%

9.9%

9.9%

11.7%

Table 6.3a: Current and Capital Expenditure Not Including Financial Sector
Interventions (% of Total Expenditure): Scotland 2004-05 to 2008-09(per cent)2004-05

2005-06

2006-072007-08

2008-09

Current

91.7%

91.0%

90.1%

90.1%

89.6%

Capital

8.3%

9.0%

9.9%

9.9%

10.4%

33

As the entry for the current expenditures associated with the various financial sector interventions is negative (i.e. revenues

received from fees etc), the total estimated figure for Scottish current expenditure including a share of the UK Government’s
financial sector interventions, will be lower than the equivalent estimate when these effects are not included.

Government Expenditure and Revenue Scotland 2008-09

53

6

P u b l i c S ecto r E xp en d i tu r eTables 6.4 and 6.5 provide a more detailed breakdown of total public sector expenditure bycurrent and capital split for Scotland and the UK.
Including a share of the UK Government’s financial sector interventions, total public sector
expenditure for Scotland is estimated to have increased from £44.5 billion in 2004-05 to£56.5 billion in 2008-09, an increase of approximately 26.8 per cent in nominal terms. Overthe same period, equivalent UK public sector expenditure increased from £471.1 billion to£602.4 billion, an increase of 27.9 per cent in nominal terms. When a share of the UK
Government’s financial sector interventions is not included, total public expenditure for
Scotland is estimated to have increased from £44.5 billion to £55.8 billion over this period
whilst the equivalent UK public sector expenditure is estimated to have grown from £471.1
billion to £594.1 billion.
Including a share of the UK Government’s financial sector interventions, estimated public
sector current expenditure for Scotland was £49.9 billion in 2008-09; 88.3 per cent of total
Scottish public sector expenditure. When a share of these interventions is not included,
current expenditure was estimated to have been £50.0 billion in 2008-09; 89.6 per cent of
total public sector expenditure for Scotland. In comparison, UK public sector current
expenditure was £538.1 billion in 2008-09; 89.3 per cent of total UK public sector
expenditure, including the financial sector interventions, and £539.2 billion; 90.6 per cent of
total public expenditure, when these effects are not included.
Estimated public sector capital expenditure for Scotland was £6.6 billion in 2008-09,
including a share of the UK Government’s financial sector interventions. This is equivalent to11.7 per cent of total estimated Scottish public sector expenditure. When these effects are
not included, public sector capital expenditure for Scotland was estimated to be £5.8 billion
in 2008-09, 10.4 per cent of total public sector expenditure. Over the period 2004-05 to
2008-09, capital expenditure, including a share of the UK Government’s financial sector
interventions, increased by 77.8 per cent in nominal terms, much faster than the growthobserved in current expenditure.
When a share of the UK Government’s financial
interventions are not included, capital expenditure increased by 56.5 per cent over the same
period.

54

Government Expenditure and Revenue Scotland 2008-09

40,814

40,814

With financial sector interventions

Without financial sector interventions

Total

-339

EU transactions

5,841

Education and training

15,273

1,000

Recreation, culture and religion

Social protection

7,334

Health279

884Transport

Housing and community amenities

621

Agriculture, forestry and fisheries

676

260

Employment policies

Environment protection

242

751

Science and technology

Other enterprise and econ development

Financial sector interventions

Enterprise and economic development

0

1,935

Public order and safety

Economic affairs

2,387

2,112

454

1,104

DefencePublic sector debt interest

International services

Public and common services

General public services

2004-05

43,394

43,394-366

15,747

6,091

1,056

8,355

162

728

933

605

241

301

745

0

2,121

2,523

2,260

496

1,396

2005-06

45,12845,128-355

15,984

6,413

1,093

8,804

182

833

1,449

593

246

261

725

0

2,089

2,639

2,427

497

1,248

2006-07

Current

Table 6.4: Total Expenditure: Scotland 2004-05 to 2008-09

47,96247,962-242

17,019

6,664

1,110

9,363

333

822

1,533

677

253

330

804

0

2,188

2,618

2,645

532

1,313

2007-08

49,96449,876-502

18,475

6,914

1,119

9,726

260

848

1,526

709

260

321

713

-88

2,284

2,787

2,658

566

1,300

2008-09

3,704

3,704

0

57

304

173

424

1,068

104

745

44

11

48

126

0

180

137

0

16

269

2004-05

4,283

4,283

0

100

480

189

251

1,363

206

913

42

33

62

175

0

164

90

0

28

186

2005-06

5,243

5,243

0

91

696

271

447

1,413

190

1,228

65

1

120

247

0

165

214

0

34

61

2007-08

5,797

6,585

0

96

649

371

518

1,539

189

1,103

90

1

99

293

788

225

292

0

35

297

2008-0944,51844,518-339

15,329

6,145

1,174

7,758

1,347

779

1,629

664

271

290

877

0

2,115

2,524

2,112

470

1,372

2004-05

47,67747,677-366

15,847

6,570

1,245

8,606

1,526

935

1,846

646

274

363

920

0

2,285

2,613

2,260

524

1,582

2005-06

Total

50,09350,093-355

16,087

7,137

1,302

9,102

1,679

995

2,630

660

259

316

941

0

2,279

2,714

2,427

527

1,392

2006-076

55

53,20553,205-242

17,110

7,360

1,382

9,810

1,746

1,012

2,761

741

254

450

1,051

0

2,354

2,832

2,645

566

1,374

2007-08

Government Expenditure and Revenue Scotland 2008-09

4,964

4,964

0

103

724

209

297

1,497

162

1,181

67

13

55

216

0

189

75

0

30

144

2006-07

Capital(£ million)

P u b l i c S ecto r E xp en d i tu r e

55,761

56,460-502

18,571

7,563

1,490

10,244

1,799

1,037

2,629

799

261

420

1,006

700

2,509

3,078

2,658

602

1,597

2008-09

P u b l i c S ecto r E xp en d i tu r e-892

EU transactions

463,692

463,692-598

170,111

63,2549,110

86,467

3,540

6,364

8,459

5,316

2,987

2,232

5,236

0

27,68529,846

26,744

5,868

11,072

2005-06

482,193482,193-1,802

176,340

66,266

9,462

90,623

3,560

7,169

9,551

4,835

3,155

2,136

4,998

0

28,633

31,25028,744

5,887

11,385

2006-07510,221510,221-1,505

186,827

71,162

9,754

97,432

3,859

7,271

9,872

4,753

3,210

2,416

5,501

0

29,652

31,05531,362

6,309

11,291

2007-08

Government Expenditure and Revenue Scotland 2008-09

438,524

Without financial sector interventions

56

438,524

With financial sector interventions

Total

163,647

59,6208,496

79,218Social protection

Education and training

Recreation, culture and religion

Health

3,262

8,129

Transport

Housing and community amenities

5,203

Agriculture, forestry and fisheries

6,177

3,027

Employment policies

Environment protection

1,931

5,094

Science and technology

Other enterprise and econ development

Financial sector interventions

Enterprise and economic development

026,785

Public order and safety

Economic affairs

28,11924,897

5,358

10,451

DefencePublic sector debt interest

International services

Public and common services

General public services

2004-05

Current

Table 6.5: Total Expenditure: UK 2004-05 to 2008-09

6

539,182

538,133-2,927203,195

74,282

9,977

104,605

3,737

7,133

9,027

5,034

3,017

2,550

5,362

-1,04930,91733,13031,5796,733

11,8302008-0932,612

32,612

0

475

5,500

1,467

3,718

5,055

905

7,894

236

157

514

1,503

0

1,707

1,635

0

194

1,653

2004-05

37,48837,488

0

976

6,450

1,699

3,116

7,131

2,211

8,580

280

355

683

1,309

0

1,610

1,072

0

341

1,675

2005-06

40,711

40,711

0

804

6,665

1,767

3,885

7,946

2,231

10,437

315

195

629

1,515

0

1,815

899

0

368

1,241

2006-07

Capital(£ million)

45,43145,431

0

775

6,936

2,252

4,722

8,998

2,274

10,620

293

72

784

1,386

0

2,091

2,539

0

426

1,262

2007-08

54,90564,266

0

747

8,302

3,063

5,345

11,196

2,593

11,758

383

87

618

2,171

9,361

2,741

3,466

0

423

2,012

2008-09471,136

471,136-892

164,122

65,1209,962

82,936

8,317

7,082

16,022

5,439

3,184

2,445

6,598

0

28,49229,75524,897

5,552

12,104

2004-05

501,180

501,180-598

171,088

69,704

10,80989,583

10,6708,575

17,039

5,596

3,342

2,915

6,544

0

29,29530,91826,744

6,209

12,747

2005-06

Total

522,904

522,904-1,802

177,143

72,931

11,22994,50911,506

9,400

19,988

5,150

3,349

2,765

6,512

0

30,44832,14928,744

6,255

12,626

2006-07555,652

555,652-1,505

187,603

78,09812,006102,155

12,856

9,545

20,492

5,046

3,282

3,200

6,888

0

31,74333,59431,362

6,734

12,553

2007-08

594,087

602,399-2,927

203,942

82,583

13,040109,951

14,933

9,726

20,785

5,416

3,104

3,168

7,533

8,312

33,65836,596

31,5797,156

13,843

2008-09

6

P u b l i c S ecto r E xp en d i tu r e

Box 6.1 – Social Protection Expenditure
In 2008-09, social protection expenditure accounted for approximately 33 per cent of public
sector expenditure in Scotland and 34 percent of public sector expenditure in the UK as awhole.
Social protection comprises personal social services and social security expenditure.
Personal social services covers both social work and social care services provided by local
authorities. Examples include residential care homes for the elderly and home careservices. Social security comprises cash benefits that are given to eligible individuals definedby states of need, such as unemployment, disability, sickness, old age etc.
The table below disaggregates social protection expenditure in Scotland and the UK by its
key components in 2008-09. The results show that the composition of spending on social
protection in Scotland and the UK is broadly similar. In both countries, pensions accounted
for over a third of spending on social protection and were the largest single category. Social
security expenditure on sickness and disability, which includes incapacity benefit34 andelements of income support, was the second largest category in both counties, accountingfor 16.2 percent of total social protection in Scotland and 15.1 per cent in the UK. Social
security spending in Scotland is 10.0% of the UK total. This is higher than a per capita and
GVA share.
Social Protection Expenditure in Scotland and the UK 2008-09 (£ million)
ScotlandUK£ million

Scotlandas % ofUK£ million% of totalsocialprotection
expenditure

Sickness and Disability

3,004

16.2%

28,05010.7%

Pensions

6,830

36.8%

70,077

9.7%

Central Government:

Widow's Benefits

192

1.0%

1,622

11.8%

Family Benefits (Income support; Tax Credits and Personal
Social Services)

1,883

10.1%

19,658

9.6%

Unemployment related benefits and personal social services

390

2.1%

4,874

8.0%

1,667

9.0%

18,593

9.0%

189

1.0%

1,985

0.1%

Local Government

4,417

23.8%

40,512

10.9%

Total Social Protection Expenditure

18,571100.0%

185,371

10.0%

Social exclusion
Other social protection

34

Employment and Support Allowance (ESA) was introduced on 27 October 2008. and replaced Incapacity Benefit and Income

Support, paid because of an illness or disability, for new claimants.

Government Expenditure and Revenue Scotland 2008-09

57

6

P u b l i c S ecto r E xp en d i tu r eTable 6.6 shows estimated total public sector expenditure for Scotland and the UK on a percapita basis. The table also highlights the absolute per capita difference between Scotland
and the UK and Scottish expenditure relative to the UK level. Total expenditure per capita for
Scotland is estimated to have been £10,910 in 2008-09, £1,097 (or 11.4 per cent) higher
than the UK average, when a share of the UK Government’s financial sector interventions is
included, and £10,775 (11.5 per cent higher than the UK average) when these effects are
not included. It should be noted that UK Government departments may have classified
certain expenditures to particular categories using a different approach to that taken by
Scottish Government Statisticians. Therefore, allocations of certain expenditure for Scotland
may differ from those for the UK, not as a result of different levels of actual expenditure, but
as a result of different classifications of similar expenditures. Caution should therefore be
exercised when comparing expenditure per capita for Scotland with UK figures for individual
expenditure categories.
Table 6.6: Total Expenditure per capita: Scotland and UK 2008-09
Per Capita Difference
Scotland (£)

UK (£)(Scotland less UK)(£)

Relative expenditure
for Scotland(UK = 100)

General public services
Public and common services

309

225

83

137

International services

116

116

0

100

Public sector debt interest

514

514

0

100

Defence

595

595

0

100

Public order and safety

485

547

-63

89

135

135

0

100

194

123

72

159

Science and technology

81

52

30

157

Employment policies

50

50

0

100

Agriculture, forestry and fisheries

154

88

66

175

Transport

508

338

170

150

Environment protection

200

158

42

127

Housing and community amenities

348

243

105

143

1,980

1,788

191

111

288

212

76

136

Education and training

1,462

1,343

118

109

Social protection

3,589

3,317

272

108

EU transactions

-97

-48

-49

204

With financial sector interventions

10,910

9,797

1,113

111

Without financial sector interventions

10,775

9,662

1,113

112

Economic affairs
Enterprise and economic development
Financial sector interventions
Other enterprise and econdevelopment

HealthRecreation, culture and religion

Total

58

Government Expenditure and Revenue Scotland 2008-09

P u b l i c S ecto r E xp en d i tu r e

6With the exception of defence, international services, public sector debt interest payments,
public order and safety and employment policies, public expenditure per capita for Scotland
was estimated to be higher than the UK average across all programme types. The biggest
absolute differences were in social protection, health and transport, where per capita
expenditure for Scotland was between £170 and £272 higher than the UK average. In
relative terms, the greatest differences in expenditure per capita occurred in science andtechnology and agriculture, forestry and fisheries expenditure.
Within the UK, the levels of public expenditure vary from one constituent part to another,reflecting the needs rather than the wealth or tax capacity of an area.
There are number of reasons why public expenditure for Scotland often lies above the UK
average. In some cases, higher expenditure per capita reflects the greater relative
importance of particular activities for Scotland. Agriculture, fisheries and forestry is one such
example. Scotland also has a lower population density than the UK which increases thecost of providing the same level of public service activity, particularly in areas such as
education, health and transport.
The scope and remit of the public sector also differs in Scotland compared to the UK. For
example, water and sewage services are a public sector responsibility in Scotland, and are
therefore included in Scottish public expenditure, whilst in England they are operated by theprivate sector. The inclusion of Scottish Water in the public sector is one reason why net
investment in Scotland is relatively higher than for the UK as a whole.
In other areas, the higher Scottish expenditure often observed reflects greater demand for
Scottish-based providers. For example, the strength of Scottish universities has created a
net inflow of students from other parts of the UK. Additionally, Scottish university courses are
typically longer - the honours degree course takes four years, compared with a typical threeyear course in England and Wales. Therefore, expenditure on education and training for
Scotland will be relatively higher than the rest of the UK. However, this benefits the UK as awhole. As discussed in GERS 2006-07, Scottish universities have also been able to attract
above average levels of research funding which has contributed to the high level of public
expenditure for science and technology in Scotland.
Finally, higher public expenditure also reflects Scotland’s greater need for some public
services such as in health and housing.

Box 6.2 – Private Finance Initiative
The Private Finance Initiative (PFI) is a method to provide financial support for Public Private
Partnerships (PPPs) between the public and private sectors. PFI projects 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 designingand 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. Payment
takes the form of a unitary charge which is usually paid annually over the lifetime of thecontract. A detailed discussion of the treatment of PFI projects in GERS is provided in Box
6.3 of GERS 2007-08.
The unitary charges paid on PFI projects in Scotland between 2004-05 and 2008-09 arepresented in the table below.

Government Expenditure and Revenue Scotland 2008-09

59

6

P u b l i c S ecto r E xp en d i tu r e

PFI Unitary Charge Expenditure in Scotland 2004-05 to 2008-09(£ million)
2004-05

2005-06

2006-072007-08

2008-09

Scottish Public Sector Unitary Charge

358

391

435

509

610

Other UK Government Departments Unitary
Charges

18

19

20

28

22

Total Unitary Charges in Scotland

376

410

455

537

632

Source: Scottish Government and HM Treasury PFI Signed Project List – February 2010

Identifiable and Non-identifiable Expenditure
GERS classifies public sector expenditure for Scotland according to three categories:
identifiable expenditure, non-identifiable expenditure and accounting adjustments.
In the vast majority of cases, GERS uses the data on identifiable expenditure contained in
PESA CRA directly. It is a fundamental principle of PESA that the apportionment of UK
expenditure adheres to the ‘who benefits’ principle whereby spending is allocated to a given
region if the benefit of the service derived from the expenditure is thought to accrue toresidents and enterprises of that region. As highlighted in the PESA publication, there arelimitations in the ability to capture precisely ‘who benefits’ from a given item of expenditure:•

there are practical difficulties. For example, schools are not used solely by theresidents of a region in which the facility is located and roads serve the needs ofmore than the geographical area through which they pass. Definitional and borderproblems become increasingly significant the smaller the geographical unit
considered;•

there are also significant definitional problems associated with assessing ‘who
benefits’. For example, agricultural support is treated as benefiting the farmers who
receive subsidies rather than the final consumers of food; and•there are also issues around collecting accurate country and regional data in a cost
efficient way. UK government departments are encouraged but not required toallocate all expenditure on the basis of ‘who benefits’. If spending is not significant(less than £20 million on capital or current) and/or relevant data for allocating this toregions are not available, departments may use some statistical proxy instead. For
example: using straight per capita shares, or using the regional allocation
proportions for related spending. Further, it is not practical or cost effective to collectlocal government spending data on the basis of ‘who benefits’. Instead, local
government spending is assumed to benefit the area where the expenditure occurs.

Following a detailed review of all 1,404 expenditure programme object groups in PESA
2010, a number of important modifications to the PESA data have been made before being
used for the GERS report. These changes reflect the fact that in certain circumstances,officials in the Scottish Government believe a more accurate assessment of ‘who benefits’ isthought possible than is currently presented in PESA. As in GERS 2007-08, the principalchange relates to the treatment of expenditure on nuclear decommissioning by the UK
Atomic Energy Authority (UKAEA) and British Nuclear Fuels, as outlined in Box 6.3.
Appendix B contains a detailed list of all amendments to PESA implemented in this report.
The development of PESA continues to be work in progress and further improvements in theregional apportionment of public sector expenditure will be reflected in future GERS reports.
60

Government Expenditure and Revenue Scotland 2008-09

P u b l i c S ecto r E xp en d i tu r e6

Box 6.3 – The Regional Allocation of Decommissioning Expenditure by UK
Atomic Energy Authority and British Nuclear Fuels
PESA currently apportions decommissioning expenditure by the UK Atomic Energy Authority(UKAEA) and British Nuclear Fuels (BNF) to UK countries or English regions according towhere the nuclear facility is located.
GERS has departed from the PESA CRA analysis in this instance and re-classified all
UKAEA and BNF decommissioning expenditure as non-identifiable, on the basis that during
the plants operational life, the value added from nuclear facilities benefited all UK residents.
A proportion of total decommissioning expenditure, including that for plants in England, istherefore apportioned to Scotland on a per capita basis. Related expenditure, for example
that corresponding to the security of nuclear facilities is treated similarly. The rationale forthis change is set out in detail in Box 6.4 of GERS 2007-08.
The table below illustrates the impact of these revisions and highlights the extent to which
the data presented in GERS differ from PESA CRA analysis in this respect. Under the
methodology used in GERS, expenditure on UKAEA and BNF decommissioning for Scotland
was estimated to be £65 million in 2008-09, £48 million lower than the estimate contained in
PESA.
Expenditure on Nuclear Decommissioning: 2004-05 to 2008-09(£ million)
2004-05

2005-06

2006-072007-08

2008-09

Total UKAEA Decommissioning Expenditureand related nuclear expenditure

524

1,280

1,606

1,374

987

Expenditure ‘identified’ to Scotland in PESA

180

507

240

238

145

Revised apportionment to Scotland in GERS

44

108

136

116

83

-135

-399

-104

-122

-62

Revision

In 2008-09, UK identifiable expenditure covered approximately 83.4 per cent of UK total
public sector expenditure including the financial sector interventions. When these effects are
not included, UK identifiable expenditure accounted for 84.6 per cent of UK total public
sector expenditure. The remaining spending cannot be attributed to individual locations, forexample, because it is spent for the benefit of the UK as a whole. A proportion of such UK
non-identifiable expenditure is allocated to the public sector for Scotland either on the basisof Scotland’s share of the UK population, GVA or a more specific apportionment variable.
Information on the methodologies used to apportion each element of expenditure is provided
in Appendix B.
Table 6.7 illustrates the estimated level of identifiable and non-identifiable expenditureassigned to Scotland for each year between 2004-05 and 2008-09. Identifiable expenditure
was estimated to be £48.3 billion in 2008-09. This figure is not affected by the UK
Government’s financial sector interventions as all of these are classified as non-identifiable.
In comparison, non-identifiable expenditure was £8.1 billion in 2008-09, approximately 14.4
per cent of estimated total public sector expenditure for Scotland when a share of the UK
Government’s financial interventions is included. When these effects are not included, nonidentifiable expenditure was £7.4 billion in 2008-09, approximately 13.3 per cent of
estimated total public sector expenditure for Scotland.

Government Expenditure and Revenue Scotland 2008-09

61

6

P u b l i c S ecto r E xp en d i tu r e

Across most programme categories, the level of non-identifiable expenditure is relatively
modest. This, in part, reflects development work that has been undertaken in compiling the
PESA CRA database in recent years to identify more specifically particular elements ofexpenditure on a regional basis. Debt interest payments, defence and enterprise andeconomic development are typically the largest elements of non-identifiable expenditure.
Collectively, these three elements of expenditure accounted for 79.7 per cent of total nonidentifiable expenditure for Scotland in 2008-09 when a share of the UK Government’s
financial sector interventions is included, and 77.8 per cent of total non-identifiable
expenditure for Scotland when these effects are not included.

Box 6.4 – The London Olympics and Glasgow Commonwealth GamesIn PESA CRA 2010, HM Treasury classify expenditure on the London Olympics as UK nonidentifiable expenditure. This assumes the benefits from the London Olympics are sharedequally by all UK residents. There is some debate whether all the expenditures classified as
being part of the 2012 London Olympics are non-identifiable. For example, a significant
proportion of spending is for investment in infrastructure and re-development of areas in theeast end of London. Previous regeneration schemes have generally been classified as
identifiable to the region in which they occur.
Expenditure associated with the 2014 Commonwealth Games in Glasgow has been
separately identified in PESA for the first time this year. Current expenditures of £2 millionand £4 million are reported for 2007-08 and 2008-09 respectively. PESA classifies all the
expenditure associated with the Commonwealth Games as being identifiable to Scotland.
This implies all the resulting benefits accrue to Scotland.
The classifications used in PESA imply that Scottish residents are assumed to be the sole
beneficiaries of the expenditure associated with the Commonwealth Games, whilst all UK
residents benefit equally from the expenditure associated with the London Olympics. This
creates an apparent asymmetry in the treatment of the expenditures associated with these
two events.
One option would be to reclassify expenditure on the London Olympics as being identifiable
to London.
This would mean that expenditures associated with the Olympics andCommonwealth Games are treated symmetrically, with the principal beneficiaries of both
events being the residents of the area in which they are held. This adjustment would reduce
the estimates of Scottish public expenditure by £33 million in 2007-08 and £96 million in
2008-09. However this approach would not account for the fact that regions outside London
will benefit as a result of the hosting of the Olympic Games in the UK. For example, throughincreased tourism. Equally, England, Wales and Northern Ireland may accrue similar benefits
from the expenditure associated with the Commonwealth Games. Scottish Government
Statisticians will review the methodologies used to apportion expenditures associated with theOlympics and Commonwealth Games in GERS with a view to proposing a revised
methodology for introduction in GERS 2009-10. This will be informed by the review ofOlympic expenditure currently being undertaken by UK Government officials in response to aformal request from the Devolved Administrations.

62

Government Expenditure and Revenue Scotland 2008-09

664

Agriculture, forestry and fisheries

0

EU transactions

38,466

38,466

With financial sector interventions

Without financial sector interventions

Total

15,124

6,138

Social protection

Education and training

898

7,702

HealthRecreation, culture and religion

1,347

733

Housing and community amenities

Environment protection

1,611

270

Employment policies

Transport

250

832

0

1,931

6

0

16

942

Science and technology

Other enterprise and econ development

Financial sector interventions

Enterprise and economic development

Economic affairs

Public order and safety

DefencePublic sector debt interest

International services

Public and common services

General public services

2004-05

41,26741,2670

15,625

6,564

951

8,562

1,526

826

1,827

646

273

318

869

0

2,119

6

0

18

1,137

2005-06

43,31443,3140

15,859

7,130

989

9,035

1,679

859

2,612

660

258

260

884

0

2,105

7

0

16

961

2006-07

Identifiable

45,89745,897

0

16,867

7,353

1,029

9,727

1,746

897

2,742

741

253

400

998

0

2,176

7

0

16

943

2007-08

48,32948,3290

18,304

7,554

1,081

10,160

1,799

951

2,606

799

260

365

953

0

2,332

5

0

18

1,145

2008-09

6,052

6,052

-339

205

7

276

56

0

46

18

0

1

40

45

0

184

2,517

2,112

453

431

2004-05

6,409

6,409

-366

222

6

295

44

0

109

18

0

1

44

51

0

167

2,607

2,260

506

445

2005-06

7,308

7,308

-242

242

7

353

82

0

115

20

0

1

50

53

0

177

2,825

2,645

549

430

2007-08

7,432

8,132

-502

267

10

409

84

0

86

23

0

1

55

53

700

177

3,073

2,658

584

452

2008-0944,51844,518-339

15,329

6,145

1,174

7,758

1,347

779

1,629

664

271

290

877

0

2,115

2,524

2,112

470

1,372

2004-05

47,67747,677-366

15,847

6,570

1,245

8,606

1,526

935

1,846

646

274

363

920

0

2,285

2,613

2,260

524

1,582

2005-06

50,09350,093-355

16,087

7,137

1,302

9,102

1,679

995

2,630

660

259

316

941

0

2,279

2,714

2,427

527

1,392

2006-07

Total

6

63

53,20553,205-242

17,110

7,360

1,382

9,810

1,746

1,012

2,761

741

254

450

1,051

0

2,354

2,832

2,645

566

1,374

2007-08

Government Expenditure and Revenue Scotland 2008-09

6,778

6,778

-355

227

7

313

67

0

136

18

0

1

56

57

0

173

2,707

2,427

511

430

2006-07

Non-identifiable(£ million)

Table 6.7: Total Expenditure, Identifiable and Non-identifiable: Scotland 2004-05 to 2008-09

P u b l i c S ecto r E xp en d i tu r e

55,761

56,460-502

18,571

7,563

1,490

10,244

1,799

1,037

2,629

799

261

420

1,006

700

2,509

3,078

2,658

602

1,597

2008-09

6

P u b l i c S ecto r E xp en d i tu r eAnalysis of Identifiable ExpenditureThis section provides a more detailed analysis of identifiable expenditure for Scotland.
As the UK Government’s financial sector interventions are recorded in GERS as nonidentifiable expenditure, they are not reflected in the identifiable expenditure tables below.
Therefore only one estimate of both expenditure on Enterprise and Economic Development
and total public spending is provided.
Table 6.8 disaggregates identifiable expenditure for Scotland into expenditure by the
Scottish Government and by other UK Government departments for the years 2004-05 to
2008-0935. Tables 6.9 and 6.10 provide a similar disaggregation but with an additional split
for current and capital expenditure. Finally, Table 6.11 provides an assessment of thecontribution of each expenditure programme to overall identifiable expenditure for Scotland
and the UK as a whole.
The Scottish Government accounted for over two thirds of total Scottish identifiable public
expenditure in each year between 2004-05 and 2008-09 with the majority of such
expenditure on health and education. It should be noted that the figures presented for
Scottish Government expenditure in GERS do not reconcile directly with Scottish
Government budget statements. The identifiable expenditure figures contained in GERS
include expenditure by non-ministerial departments, such as the General Register Office for
Scotland (GROS), and by public corporations. They exclude a small expenditure by the
Scottish Government on services outside Scotland. Furthermore, the figures presented in
GERS are consistent with the National Accounts framework for public sector expenditure
and will therefore differ from the Scottish Government budget documents in their treatmentof certain cash and non-cash items. There are also important differences in classification of
expenditure.
UK Government departments accounted for a third of Scottish identifiable expenditure. Their
spending is dominated by expenditure on social protection – i.e. welfare payments andunemployment benefits. Social protection is the only function where the majority ofidentifiable expenditure is not undertaken by the Scottish Government.
Decomposing the data into current and capital components shows that the Scottish
Government’s share of identifiable current expenditure increased from 65.0 per cent in 200405 to 66.1 per cent in 2008-09. Over the same period the proportion of identifiable capital
expenditure undertaken by the Scottish Government increased from 88.6 per cent in 200405 to 96.6 per cent in 2008-09. A significant element of this increase reflects the transfer of
responsibility for elements of railways expenditure from the Department for Transport to the
Scottish Government. This issue is set out more in detail in box 6.1 in GERS 2007-08.
As Table 6.11 highlights, the pattern of identifiable expenditure for Scotland was broadly
similar to that for the UK as a whole, with social protection and health being the dominant
expenditure components.

35

Expenditure by Scottish Government in the tables in Chapter 6 incorporates expenditure by Scottish Local Authorities andPublic Corporations

64

Government Expenditure and Revenue Scotland 2008-09

0

EU transactions

25,835

3,650

Social protection

Total

6,108

Education and training

808

7,664

HealthRecreation, culture and religion

1,347

694

1,335

651

0

90

671

1,914

Housing and community amenities

Environment protection

Transport

Agriculture, forestry and fisheries

Employment policies

Science and technology

Enterprise and econ development

Economic affairs

Public order and safety

60

Public sector debt interest

Defence0897International services

Public and common services

General public services

2004-05

28,189

0

3,817

6,528

835

8,517

1,526

776

1,586

634

0

135

664

2,104

6

0

0

1,062

2 005-06

30,214

0

3,765

7,098

892

8,992

1,679

815

2,554

646

0

88

689

2,091

7

0

0

898

2 006-07

32,308

0

4,261

7,330

945

9,689

1,746

862

2,688

727

1

195

818

2,165

7

0

0

873

2 007-08

Scottish Government

33,515

0

4,499

7,523

999

10,111

1,799

919

2,585

785

4

138

760

2,305

5

0

0

1,083

2 008-09

12,631

0

11,474

30

90

38

0

39

276

13

270

161

161

18

0

0

16

45

2 004-05

Table 6.8: Total Identifiable Expenditure: Scotland 2004-05 to 2008-09

13,0790

11,808

36

116

45

0

50

241

12

273

184

205

15

0

0

18

75

2 005-06

13,5890

12,606

23

84

39

0

35

54

14

252

204

179

11

0

0

16

70

2 007-08

14,813013,805

31

82

48

0

31

21

13

256

227

193

27

0

0

18

61

2 008-09

38,4660

15,124

6,138

898

7,702

1,347

733

1,611

664

270

250

832

1,931

6

0

16

942

2 004-05

41,2670

15,625

6,564

951

8,562

1,526

826

1,827

646

273

318

869

2,119

6

0

18

1,137

2 005-06

Total

43,3140

15,859

7,130

989

9,035

1,679

859

2,612

660

258

260

884

2,105

7

0

16

961

2006-0745,897

0

16,867

7,353

1,029

9,727

1,746

897

2,742

741

253

400

998

2,176

7

0

16

943

2007-08

Government Expenditure and Revenue Scotland 2008-09

13,1000

12,094

31

97

43

0

44

58

14

258

172

194

15

0

0

16

63

2 006-07

Other UK Government(£ million)

P u b l i c S ecto r E xp en d i tu r e

65

48,3290

18,304

7,554

1,081

10,160

1,799

951

2,606

799

260

365

953

2,332

5

0

18

1,145

2008-09

6

P u b l i c S ecto r E xp en d i tu r e

0EU transactions

66

24,665

0

3,770

6,068

707

8,282

162

681

889

593

0

105

532

1,945

6

0

0

923

2005-06

25,765

0

3,707

6,390

735

8,715

182

766

1,395

579

0

69

532

1,918

7

0

0

769

2006-07

Government Expenditure and Revenue Scotland 2008-09

22,7603,612Social protection

Total

5,823

676

Education and training

Recreation, culture and religion

7,261

279

Housing and community amenities

Health616

820Transport

Environment protection

609

0

73

564

1,746

Agriculture, forestry and fisheries

Employment policies

Science and technology

Enterprise and econ development

Economic affairs

Public order and safety

60

Public sector debt interest

Defence0674International services

Public and common services

General public services

2004-05

Cu r r en t

27,664

0

4,195

6,637

742

9,250

333

772

1,476

663

1

110

627

2,013

7

0

0

837

2007-08

28,517

0

4,434

6,875

756

9,602

260

834

1,505

696

4

75

542

2,099

5

0

0

832

2008-09

3,075

0

38

285

131

402

1,068

79

515

43

0

17

107

168

0

0

0

223

2004-05(£ m i l l i o n )Table 6.9: Identifiable Expenditure - Scottish Government: Scotland 2004-05 to 2008-09

6

3,524

0

46

460

128

234

1,363

95

696

41

0

30

132

159

0

0

0

139

2005-06

4,449

0

58

709

157

277

1,497

49

1,159

67

0

18

157

173

0

0

0

129

2006-07

Cap i tal

4,644

0

66

694

203

439

1,413

90

1,211

64

0

85

192

152

0

0

0

36

2007-08

4,999

0

65

648

244

510

1,539

85

1,080

89

0

63

218

206

0

0

0

252

2008-09

Total12,2350

EU transactions

11

Education and training

11,45655

Recreation, culture and religion

Social protection

19

0

19

Health

Housing and community amenities

Environment protection

53

Transport

258

Employment policies
12

136

Science and technology

Agriculture, forestry and fisheries

147

16

0

Enterprise and econ development

Economic affairs

Public order and safety

Defence016International services

Public sector debt interest

39

Public and common services

General public services

2004-05

12,6050

11,755

16

66

25

0

26

32

11

240

160

168

17

0

0

18

69

2005-06

12,8510

12,050

16

64

27

0

22

42

14

245

146

144

7

0

0

16

58

2006-07

Cu r r en t

13,4350

12,582

20

57

35

0

28

45

13

251

182

130

10

0

0

16

65

2007-08

396

0

19

19

35

19

0

21

223

1

11

25

14

2

0

0

1

6

2004-05

474

0

53

19

50

20

0

24

209

1

33

23

37

-2

0

0

1

5

2005-06

249

0

44

15

33

16

0

22

15

1

13

26

50

7

0

0

0

5

2006-07

Cap i tal

154

0

25

3

27

3

0

7

10

1

1

23

49

1

0

0

1

5

2007-08

6

67

174

0

31

1

22

2

0

6

14

1

1

25

66

1

0

0

0

5

2008-09

Government Expenditure and Revenue Scotland 2008-09

14,6390

13,774

29

60

46

0

25

7

13

255

202

126

26

0

0

17

56

2008-09(£ m i l l i o n )Table 6.10: Identifiable Expenditure - Other UK Government: Scotland 2004-05 to 2008-09

P u b l i c S ecto r E xp en d i tu r eP u b l i c S ecto r E xp en d i tu r e

0EU transactions

68

69.3%

0.0%

9.3%

15.6%

2.1%

20.9%

3.7%

1.9%

5.3%

1.6%

0.0%

0.3%

1.6%

4.8%

0.0%

0.0%

0.0%

2.2%

Share ofidentifiable
expenditure

Government Expenditure and Revenue Scotland 2008-09

33,515

4,499

Social protection

Total

7,523

999

10,111

1,799

919

2,585

785

Education and training

Recreation, culture and religion

Health

Housing and community amenities

Environment protection

Transport

Agriculture, forestry and fisheries

4138

Science and technology

Employment policies

760

2,305

Enterprise and econ development

Economic affairs

Public order and safety

50

Public sector debt interest

Defence0

1,083International services

Public and common services

General public services(£ million)

Expenditure

Scottish Government

Scotland

14,813013,805

31

82

48

0

31

21

13

256

227

193

27

0

0

18

61

(£ million)

Expenditure

30.7%

0.0%

28.6%

0.1%

0.2%

0.1%

0.0%

0.1%

0.0%

0.0%

0.5%

0.5%

0.4%

0.1%

0.0%

0.0%

0.0%

0.1%

Share ofidentifiable
expenditure

Other UK Government

Table 6.11: Identifiable Expenditure: Scotland and UK 2008-09

6

48,3290

18,304

7,554

1,081

10,160

1,799

951

2,606

799

260

365

953

2,332

5

0

18

1,145

(£ million)

Expenditure

Total

100.0%

0.0%

37.9%

15.6%

2.2%

21.0%

3.7%

2.0%

5.4%

1.7%

0.5%

0.8%

2.0%

4.8%

0.0%

0.0%

0.0%

2.4%

Share ofidentifiable
expenditure502,365

0200,60982,4708,130

108,934

14,933

8,685

20,479

5,416

3,087

2,490

6,892

31,552

82

0

214

8,391

( £ million)

Expenditure

Total

UK

100.0%

0.0%

39.9%

16.4%

1.6%

21.7%

3.0%

1.7%

4.1%

1.1%

0.6%

0.5%

1.4%

6.3%

0.0%

0.0%

0.0%

1.7%

Share ofidentifiable
expenditureP u b l i c S ecto r E xp en d i tu r e

6Table 6.12 shows identifiable expenditure per capita for Scotland in 2008-09 and compares
this with the corresponding per capita figure for the UK. In 2008-09, identifiable expenditure
per capita for Scotland was estimated to be £9,339 which is £1,169 (14.3 per cent) higher
than the UK average.
In absolute terms, the largest differences arose in transport, health and social protection
where per capita identifiable expenditure for Scotland was between £170 and £274 higher
than the UK average. These are the key factors in explaining the difference in total
identifiable expenditure between Scotland and the UK.
In relative terms, the greatest variations in spending per capita arose in enterprise andeconomic development, science and technology, and agriculture, forestry and fisheries.
Table 6.12: Identifiable Expenditure per capita: Scotland and UK 2008-09
Scotland (£)

UK (£)

Difference(Scotlandless UK) (£)

Relative expenditure
for Scotland(UK = 100)

General public services
Public and common services

221

136

85

162

International services

3

3

0

97

Public sector debt interest

0

0

0

0

1

1

0

72

451

513

-63

88

Enterprise and econ development

184

112

72

164

Science and technology

70

40

30

174

Employment policies

50

50

0

100

Agriculture, forestry and fisheries

154

88

66

175

Transport

504

333

170

151

Environment protection

184

141

42

130

Housing and community amenities

348

243

105

143

1,963

1,772

192

111

209

132

77

158

Education and training

1,460

1,341

118

109

Social protection

3,537

3,263

274

108

EU transactions

0

0

0

0

9,339

8,170

1,169

114

DefencePublic order and safety
Economic affairs

HealthRecreation, culture and religion

Total

Government Expenditure and Revenue Scotland 2008-09

69

6

P u b l i c S ecto r E xp en d i tu r eAnalysis of Non-Identifiable ExpenditureThis section provides a more detailed analysis of non-identifiable expenditure. There are anumber of possible ways in which to allocate a share of UK non-identifiable expenditure to
Scotland including Scotland’s share of UK GVA or population. The methodologies used toapportion each element of non-identifiable expenditure are discussed in Appendix B.
In addition to non-identifiable expenditure, PESA also includes a small amount of UK
Government expenditure which is classified as identifiable but for programmes outside theUK. This includes expenditure on international development programmes. This category is
included in GERS within non-identifiable expenditure for both Scotland and the UK. This
treatment is consistent with the view that expenditure outside the UK is non-identifiable fromthe perspective of the UK's constituent countries, as the benefits are shared between them.
To make the Scottish non-identifiable expenditure comparable with UK data, this category istherefore included in UK non-identifiable expenditure.
Table 6.13 presents total non-identifiable expenditure for Scotland and the UK between
2004-05 and 2008-09. Tables 6.14 and 6.15 decompose Scottish and UK non-identifiable
expenditure into their current and capital components.
Including a share of the UK Government’s financial sector interventions, total non-identifiable
expenditure for Scotland was estimated to be £8.1 billion in 2008-09, 8.1 per cent of theequivalent UK figure. When a share of the financial sector interventions is not included, total
non-identifiable expenditure for Scotland is estimated to be £7.4 billion (8.1 per cent of the
UK total).
Defence and debt interest payments comprise the largest components. As Tables 6.14 and6.15 highlight, current expenditure was the major component of non-identifiable expenditure
for both Scotland and the UK in 2008-09.

70

Government Expenditure and Revenue Scotland 2008-09

0

-339

EU transactions

6,052
6,052

With financial sector interventions

Without financial sector interventions

Total

205

7

276

56

0

46

Social protection

Education and training

Recreation, culture and religion

Health

Housing and community amenities

Environment protection

18

Agriculture, forestry and fisheries

Transport

1

6,409

6,409

-366

222

6

295

44

0

109

18

0

1

44

51

45
40

0

167

2,607

2,260

506

445

2005-06

0

184

2,517

Employment policies

Science and technology

Other enterprise and econ development

Financial sector interventions

Enterprise and economic development

Economic affairs

Public order and safety

Defence

2,112

453

International services

Public sector debt interest

431

Public and common services

General public services

2004-05

6,778

6,778

-355

227

7

313

67

0

136

18

0

1

56

57

0

173

2,707

2,427

511

430

2006-07

Scotland

7,308

7,308

-242

242

7

353

82

0

115

20

0

1

50

53

0

177

2,825

2,645

549

430

2007-08

Table 6.13: Non-Identifiable Expenditure: Scotland and UK 2004-05 to 2008-09

74,82774,827

-892

2,517

88

3,286

671

0

553

372

0

14

490

543

0

2,165

29,67624,897

5,346

5,101

2004-05

79,951

79,951

-598

2,734

72

3,517

538

0

1,300

380

0

15

547

610

0

1,973

30,841

26,744

5,984

5,295

2005-06

UK

83,06383,063-1,802

2,820

80

3,753

804

0

1,627

346

0

18

688

687

0

2,054

32,05828,744

6,057

5,130

2006-0788,42888,428-1,505

3,021

84

4,231

991

0

1,370

351

0

13

618

640

0

2,104

33,501

31,362

6,513

5,135

2007-08

Government Expenditure and Revenue Scotland 2008-09

7,432

8,132

-502

267

10

409

84

0

86

23

0

1

55

53

700

177

3,073

2,658

584

452

2008-09(£ million)

P u b l i c S ecto r E xp en d i tu r e

71

91,722100,035-2,927

3,333

113

4,910

1,017

0

1,041

306

0

17

678

641

8,312

2,106

36,514

31,579

6,942

5,451

2008-09

6

P u b l i c S ecto r E xp en d i tu r e-339

EU transactions

6,124

6,124

-366

221

6

283

47

0

21

11

0

1

36

45

0

160

2,517

2,260

478

404

2005-06

Government Expenditure and Revenue Scotland 2008-09

5,818

Without financial sector interventions

72

5,818

With financial sector interventions

Total

205

7

269

53

0

41

Social protection

Education and training

Recreation, culture and religion

Health

Housing and community amenities

Environment protection

11

0Agriculture, forestry and fisheries

Transport

1

34

40

0

174

2,381

Employment policies

Science and technology

Other enterprise and econ development

Financial sector interventions

Enterprise and economic development

Economic affairs

Public order and safety

Defence

2,112

438

International services

Public sector debt interest

391

Public and common services

General public services

2004-05

6,512

6,512

-355

227

7

294

62

0

45

11

0

1

45

48

0

164

2,632

2,427

481

420

2006-07

Cu r r en t

6,863

6,863

-242

242

7

311

78

0

22

12

0

1

39

47

0

165

2,611

2,645

516

410

2007-08

Table 6.14: Non-Identifiable Expenditure: Scotland 2004-05 to 2008-09

6

6,809

6,720

-502

267

10

303

79

0

-12

14

0

1

44

45

-88

159

2,782

2,658

549

412

2008-09

233

233

0

0

0

7

3

0

5

6

0

0

6

5

0

10

137

0

15

40

2004-05(£ m i l l i o n )

285

285

0

1

0

12

-3

0

87

7

0

0

9

6

0

7

90

0

28

42

2005-06

266

266

0

1

0

19

4

0

92

7

0

0

10

9

0

9

75

0

30

10

2006-07

Cap i tal

445

445

0

1

0

42

5

0

93

7

0

0

12

6

0

12

214

0

34

20

2007-08

624

1,412

0

0

0

106

6

0

98

9

0

0

11

8

788

18

292

0

35

40

2008-09

-892

EU transactions

71,92071,920With financial sector interventions

Without financial sector interventions

Total

2,516

88

3,195

642

0

496

152

0

14

414

480

0

2,051

28,066Social protection

Education and training

Recreation, culture and religion

Health

Housing and community amenities

Environment protection

Transport

Agriculture, forestry and fisheries

Employment policies

Science and technology

Other enterprise and econ development

Financial sector interventions

Enterprise and economic development

Economic affairs

Public order and safety

Defence

24,8975,168

International services

Public sector debt interest

4,632

Public and common services

General public services

2004-05

76,44476,444

-598

2,726

72

3,375

574

0

263

165

0

14

441

542

0

1,894

29,776

26,744

5,655

4,802

2005-06

79,78479,784-1,802

2,811

80

3,517

753

0

541

161

0

17

559

579

0

1,945

31,16828,744

5,702

5,008

2006-07

Cu r r en t

Table 6.15: Non-Identifiable Expenditure: UK 2004-05 to 2008-09

83,06383,063-1,505

3,014

84

3,725

937

0

264

197

0

13

472

565

0

1,962

30,96531,362

6,115

4,893

2007-08

2,907

2,907

0

1

0

90

30

0

56

219

0

0

76

64

0

114

1,610

0

178

469

2004-05

3,507

3,507

0

8

0

142

-36

0

1,037

215

0

1

106

68

0

79

1,066

0

329

493

2005-06

3,279

3,279

0

9

0

236

50

0

1,086

184

0

0

129

107

0

109

891

0

355

123

2006-07

Cap i tal

5,365

5,365

0

7

0

506

54

0

1,106

154

0

0

145

75

0

142

2,536

0

398

242

2007-08

Government Expenditure and Revenue Scotland 2008-09

84,307

83,258-2,927

3,328

113

3,642

950

0

-126

214

0

17

538

544

-1,0491,890

33,05031,579

6,524

4,970

2008-09(£ m i l l i o n )P u b l i c S ecto r E xp en d i tu r e

73

7,415

16,776

0

5

0

1,268

67

0

1,167

92

0

0

140

97

9,361

216

3,464

0

417

481

2008-096

6

P u b l i c S ecto r E xp en d i tu r eTable 6.16 compares the composition of non-identifiable expenditure for Scotland and the
UK for 2008-09. For both Scotland and the UK, the structure of non-identifiable expenditureis broadly similar, with debt interest and defence expenditure contributing the largest
amounts.
Table 6.16: Non-Identifiable Expenditure: Scotland and UK 2008-09
ScotlandExpenditure(£ million)

UK

Share ofnonidentifiable
expenditureinc. financial
interventions

Share ofnonidentifiable
expenditureexc. financial
interventions

Expenditure(£ million)

Share ofnon-identifiable
expenditureinc. financial
interventions

Share of nonidentifiable
expenditureexc. financial
interventions

General public services
Public and common
services

452

5.6%

6.1%

5,451

5.4%

5.9%

International services

584

7.2%

7.9%

6,942

6.9%

7.6%

2,658

32.7%

35.8%

31,579

31.6%

34.4%

3,073

37.8%

41.4%

36,514

36.5%

39.8%

177

2.2%

2.4%

2,106

2.1%

2.3%

700

8.6%

N/A

8,312

8.3%

N/A

53

0.7%

0.7%

641

0.6%

0.7%

Science and technology

55

0.7%

0.7%

678

0.7%

0.7%

Employment policies

1

0.0%

0.0%

17

0.0%

0.0%

Agriculture, forestry andfisheries

0

0.0%

0.0%

0

0.0%

0.0%

Transport

23

0.3%

0.3%

306

0.3%

0.3%

Environment protection

86

1.1%

1.2%

1,041

1.0%

1.1%

Housing and community
amenities

0

0.0%

0.0%

0

0.0%

0.0%

Health

84

1.0%

1.1%

1,017

1.0%

1.1%

Recreation, culture andreligion

409

5.0%

5.5%

4,910

4.9%

5.4%

Education and training

10

0.1%

0.1%

113

0.1%

0.1%

Social protection

267

3.3%

3.6%

3,333

3.3%

3.6%

EU transactions

-502

-6.2%

-6.8%

-2,927

-2.9%

-3.2%

With financial sector
interventions

8,132

100.0%

N/A

100,035

100.0%

N/A

Without financial
sector interventions

7,432

N/A

100.0%

91,722

N/A

100.0%

Public sector debt
interest
DefencePublic order and safety
Economic affairs
Enterprise andeconomic development
Financial sector
interventions
Other enterprise andecon development

Total

74

Government Expenditure and Revenue Scotland 2008-09

6

P u b l i c S ecto r E xp en d i tu r eTable 6.17 outlines Scottish non-identifiable expenditure on services per capita in 2008-09
and compares this with the corresponding figure for the UK. For Scotland, non-identifiable
expenditure was estimated to be £1,571 per capita including a share of the UK
Government’s financial sector interventions, and £1,436 per capita when these effects are
not included. These are marginally lower than the equivalent UK per capita figures of £1,627
and £1,492 respectively. This reflects the fact that for some apportionments, GVA was used
and Scotland’s GVA per capita (excluding extra-regio) was marginally smaller than thecorresponding UK figure in 2008-09.
Table 6.17: Non-Identifiable Expenditure Per Capita: Scotland and UK 2008-09
Difference
Scotland (£)

UK (£)(Scotland lessUK) (£)

Relative
expenditure for
Scotland(UK = 100)

General public services
Public and common services

87

89

-1

98

International services

113

113

0

100

Public sector debt interest

514

514

0

100

Defence

594

594

0

100

Public order and safety

34

34

0

100

Financial sector interventions

135

135

0

100

Other enterprise and econ development

10

10

0

99

Science and technology

11

11

0

97

Employment policies

0

0

0

100

Agriculture, forestry and fisheries

0

0

0

0

Transport

4

5

0

90

Environment protection

17

17

0

99

Housing and community amenities

0

0

0

0

Health

16

17

0

99

Recreation, culture and religion

79

80

-1

99

Education and training

2

2

0

100

Social protection

52

54

-3

95

EU transactions

-97

-48

-49

204

With financial sector interventions

1,571

1,627

-56

97

Without financial sector interventions

1,436

1,492

-56

96

Economic affairs
Enterprise and economic development

Total

Government Expenditure and Revenue Scotland 2008-09

75

6

P u b l i c S ecto r E xp en d i tu r e

Box 6.5 – Debt Interest Payments
The debt interest payment expenditure in the above tables refers to payments to coverinterest on outstanding UK Government debt. In GERS, such expenditure is classified as
non-identifiable. For each year, a per capita share of UK Government debt interest
expenditure is allocated for Scotland. The allocation on a per capita basis is based on theassumption that residents across the UK bear an equal burden of UK Government liabilities.
As there is no separate identification of Scotland’s share of UK public sector net debt in UK
public financial accounts, a separate Scottish debt interest expenditure does not exist. An
assessment of an implied ‘debt position’ for Scotland is inherently problematic, not least
because general government borrowing is controlled by the UK Government.
Debt interest payments can also be viewed as payments related to past UK public sector net
borrowing and government expenditure. Current expenditure excluding debt interest
payments represents expenditure on public services consumed within the current financial
year. The difference between this estimate and estimated current revenue represents thecurrent budget fiscal position for public services provided at a given point in time (the primary
current balance). In GERS, an estimate of debt interest payments is then deducted from thisbalance to obtain the current budget balance which is presented in Chapter 3.
Estimates for Scotland over the period 2004-05 to 2008-09, including a share of the UK
Government’s financial sector interventions, are highlighted in the table below, illustrating thecurrent balance on public services consumed within each financial year.
Current Balance on Public Services Consumed Including Financial Sector
Interventions: Scotland 2008-09(£ million)
2004-05

2005-06

2006-072007-08

2008-09

Excluding North Sea revenue

36,98339,78742,19844,966

43,466

Including North Sea revenue (per capita
share)

37,42240,58042,952

45,62744,553

Including North Sea revenue (geographicalshare)

41,51547,914

49,69452,41755,23644,036

46,983

48,90751,94353,966

Less debt interest payments (as used inheadline GERS estimates)-2,112-2,260-2,427-2,645-2,658

Total current expenditure on services
consumed within current financial year

41,92444,72346,48049,29851,309Excluding North Sea revenues-4,941-4,936-4,281-4,332-7,843

Including North Sea revenues (percapita share)-4,502-4,143-3,528-3,671-6,755

-409

3,192

3,214

3,119

3,928

Current revenue

Total current expenditure(including capital consumption andaccounting adjustments)

Current balance on public services
consumed within current financial year

Including North Sea revenues(geographical share)

76

Government Expenditure and Revenue Scotland 2008-09

6

P u b l i c S ecto r E xp en d i tu r e

Accounting Adjustments
The analysis of public sector expenditure in GERS focuses on Total Expenditure on Services(TES). This is consistent with the departmental budget framework. In UK public financedocuments, the principal measure of public sector expenditure is Total Managed
Expenditure (TME). TME is constructed from categories in the National Accounts framework.
The main difference between TES and TME is that TES does not include general
government capital consumption and does not reverse the deduction of certain VAT refunds
in the budget-based expenditure data. It also contains a number of items that are in budgets
but not in TME, for example the grant–equivalent element of student loans. In most years,
TES amounts to approximately 95 per cent of TME. To reconcile TES and TME, an
accounting adjustment is introduced such that TES plus the accounting adjustment equals
TME.
The largest component of the UK accounting adjustment is general government capitalconsumption. It is a measure of the amount of fixed capital resources used up in the processof the provision of public services. In 2008-09, the UK capital consumption of £13.8 billion
represented 50.5 per cent of the total UK accounting adjustment. Table 6.18 shows thecomponent disaggregation of the UK accounting adjustment. The total UK accounting
adjustments was estimated at £27.3 billion in 2008-09. The estimates of the UK accounting
adjustment presented in Table 6.18 include the effect of the UK Government’s financial
sector interventions.
Table 6.18: Accounting Adjustment Including Financial Sector Interventions: UK
2004-05 to 2008-09(£ million)
2004-05

2005-06

2006-072007-08

2008-09

UK total managed expenditure (TME)

492,332

523,942

549,819581,919

629,659

UK total expenditure on services (TES)

471,136

501,180

522,904

555,652

602,399

UK accounting adjustment

21,196

22,762

26,91526,26727,260Central government capital consumption

5,513

5,734

5,881

6,142

6,530

Local government capital consumption

5,437

5,952

6,478

6,803

7,224

Current VAT refunds

7,803

8,791

9,416

9,725

10,001

Capital VAT refunds

1,508

1,655

1,772

1,982

1,978

116

1,246

1,406

0

0

-327

-429

-290

-1,032

-524

715

1,431

1,528

1,535

1,488

368

370

474

469

472

63

-1,988

250

643

91

of which:

Nigerian debt cancellation
Student loans subsidy

1

Imputed subsidy from Local Authorities tothe Housing Revenue Account2

Imputed flows for Renewable Obligation
Certificates
Residual

3

1

TES includes the subsidy implied in student loans being issued at lower than market rate. This is not included in TME – the National
Accounts measures (in the current balance) the difference between interest received from students and the amount of interest paid by thegovernment on the debt incurred to make the loans.
2
The Housing Revenue Account (HRA) is classified as a Public Corporation by the ONS, which means that they pay dividends on their profits
to local authorities. To ensure that these dividends are non-negative, the ONS impute a subsidy from local authorities to HRAs to cover any
shortfall (offset in Public Corporation gross operating surplus, which scores on the revenue side of the account).
3
Renewable Obligation Certificates are bought and sold by energy companies. The ONS have decided that these flows should be channelled
through central government and so impute offsetting amounts of spending and income.

Government Expenditure and Revenue Scotland 2008-09

77

6

P u b l i c S ecto r E xp en d i tu r e

The corresponding Scottish figures, as highlighted in Table 6.19, are calculated using avariety of apportionment methodologies. Firstly, estimates of general government capitalconsumption from the ONS Regional Accounts, together with information from local
government returns, have been used to apportion capital consumption to UK countries andEnglish regions. In 2008-09, general government capital consumption for Scotland wasestimated at £1.3 billion (9.2 per cent of UK capital consumption). This is relatively high for
Scotland, reflecting a higher stock of public sector assets (e.g. roads, hospitals, schools)
than elsewhere in the UK. These figures are identical to those used in the general
government gross operating surplus calculations in the revenue account. The figures cancel
out in the net borrowing calculation
VAT refunds have been allocated to Scotland using the apportionments derived in therevenue calculations for VAT refunds which form part of the total VAT calculations (seeAppendix A), and therefore cancel out in the calculation of net borrowing. The figures for
Scottish student loan subsidies were provided by HM Treasury. The imputed subsidy fromlocal authorities to the Housing Revenue Account adopt the same apportionment allocation
as in the gross operating surplus calculations on the revenue side, and the imputed flows for
Renewable Obligation Certificates adopts the same methodology used in ‘other taxes androyalties’. These items cancel in the net borrowing calculations. The Scottish share of the
Nigerian debt write-off has been allocated on a per capita basis. The current and capitalresiduals are allocated to Scotland using the appropriate TES ratios.
In sum, the total Scottish public sector accounting adjustment was estimated at £2.6 billion in
2008-09, or 9.4 per cent of the total UK accounting adjustment, including the effect of the UK
Government’s financial sector interventions. The relatively higher proportion compared toper capita or GVA shares reflects the high share of general government capital consumption
for Scotland.

78

Government Expenditure and Revenue Scotland 2008-09

6

P u b l i c S ecto r E xp en d i tu r eTable 6.19: Accounting Adjustment Including Financial Sector Interventions:
Scotland 2004-05 to 2008-09(£ million)
2004-05

2005-06

2006-072007-08

2008-09

Central government capital consumption

496

501

522

542

579

Local government capital consumption

591

651

611

658

688

736

868

839

879

909

-33

-40

-27

-44

7

Imputed subsidy from Local Authorities to3
the Housing Revenue Account

75

160

158

149

128

Imputed flows for Renewable Obligation
4
Certificates

46

33

35

50

56

Capital expenditure:

142

163

158

179

180

Capital VAT refunds

10

105

119

0

0

Nigerian debt cancellation

169

-98

-130

-95

-23

2,100

2,238

2,408

2,456

2,553

9.9%

9.8%

8.9%

9.4%

9.4%

Capital consumption:

1

Current expenditure:
Current VAT refunds
Student loans subsidy

2

Current expenditure residual

Capital expenditure residual
Total accounting adjustment
Percentage of UK accounting
adjustment
1

Public Corporations’ capital consumption is included in gross operating surplus.

2

TES includes the subsidy implied in student loans being issued at lower than market rate. This is not included in TME –the National Accounts measures (in the current balance) the difference between interest received from students and theamount of interest paid by the government on the debt incurred to make the loans.
3

The Housing Revenue Account (HRA) is classified as a Public Corporation by the ONS, which means that they pay

dividends on their profits to local authorities. To ensure that these dividends are non-negative, the ONS impute a subsidy
from local authorities to HRAs to cover any shortfall (offset in Public Corporations gross operating surplus, which scores on
the revenue side of the account).
4

Renewable Obligation Certificates are bought and sold by energy companies. The ONS have decided that these flows

should be channelled through central government and so impute offsetting amounts of spending and income.

Government Expenditure and Revenue Scotland 2008-09

79

6

80

P u b l i c S ecto r E xp en d i tu r eGovernment Expenditure and Revenue Scotland 2008-09

7

CONCLUSION

The aim of GERS is to enhance public understanding of fiscal issues in Scotland. The
primary objective is to estimate a detailed set of public sector accounts for Scotland throughan analysis of official UK and Scottish Government financial statistics.
Incorporating a share of the expenditure associated with the UK Government’s financial
sector interventions, in 2008-09, the estimated current budget balance for the public sector
in Scotland was a deficit of £10.5 billion (9.1 per cent of GDP) excluding North Sea revenue,
a deficit of £9.4 billion (8.0 per cent of GDP) including a per capita share of North Sea
revenue or a surplus of £1.3 billion (0.9 per cent of GDP) including an illustrative
geographical share of North Sea revenue. These estimates are comparable with theestimate of the UK’s current budget balance published in the March 2010 UK Budget.
Not including a share of the UK Government’s financial sector interventions, in 2008-09, theestimated current budget balance for the public sector in Scotland was a deficit of £10.5
billion (9.1 per cent of GDP) excluding North Sea revenue, a deficit of £9.4 billion (8.0 per
cent of GDP) including a per capita share of North Sea revenue or a surplus of £1.2 billion(0.9 per cent of GDP) including an illustrative geographical share of North Sea revenue.
Incorporating a share of the expenditure associated with the UK Government’s financial
sector interventions, in 2008-09, the estimated net fiscal balance was a deficit of £15.5 billion(13.5 per cent of GDP) when excluding North Sea revenue, a deficit of £14.5 billion (12.2 percent of GDP) when including a per capita share of North Sea revenue or a deficit of £3.8
billion (2.6 per cent of GDP) when an illustrative geographical share of North Sea revenue isincluded. This is comparable with the estimate of UK net borrowing published in the March2010 UK Budget.
Not including a share of the UK Government’s financial sector interventions, in 2008-09, theestimated net fiscal balance in Scotland, that is the estimated current budget balance plus
estimated net capital investment, was a deficit of £14.7 billion (12.8 per cent of GDP) whenexcluding North Sea revenue, a deficit of £13.6 billion (11.5 per cent of GDP) when including
a per capita share of North Sea revenue or a deficit of £3.0 billion (2.1 per cent of GDP)
when an illustrative geographical share of North Sea revenue is included.
Between 2007-08 and 2008-09, Scottish revenues (excluding North Sea revenues)
decreased from £45.0 billion to £43.5 billion, a decline of 3.5 per cent. The equivalent UK
figures fell by 3.7 per cent. Over this period, total managed expenditure in Scotland
increased by 6.0 per cent.
The development of GERS is an ongoing process and feedback from users of the
publication is welcome. Please address any comments toGovernment Expenditure and Revenue Scotland (GERS)
Office of the Chief Economic Adviser,
Scottish Government,
St Andrew’s House,
Regent Road,
Edinburgh, EH1 3DG

Government Expenditure and Revenue Scotland 2008-09

81

7

82

C o n cl u si o n

Government Expenditure and Revenue Scotland 2008-09

A

REVENUE METHODOLOGYThis appendix outlines the methodologies used to estimate public sector revenue in
Scotland. As the issue of North Sea revenue has been discussed extensively in Chapter 5,
this appendix focuses on all other elements of public sector revenue.
In contrast to public sector expenditure, there is no one generic approach to estimating
public sector revenue in Scotland; instead each revenue stream is estimated using aseparate methodology. This appendix discusses these techniques and highlights any
significant changes which have been introduced in this edition of GERS. It should be noted
that, as the underlying datasets used in GERS have been subject to revision and update,estimates may differ from previous editions of GERS even if the methodology has remained
unchanged.

Methodology
As highlighted in Chapter 4, the vast majority of public sector revenue raised in Scotland iscollected at the UK level by HM Revenue and Customs.
In some cases, revenue figures can be obtained for Scotland directly. Examples include
local government revenue and particular elements of public corporation revenue. Suchrevenues are the exception and separate identification of most other revenue streams for
Scotland is not possible. GERS therefore uses a number of different methodologies toapportion revenue to Scotland. In doing so, there are often theoretical and practicalchallenges in determining an appropriate share to allocate to Scotland. In certain cases, avariety of alternative methodologies could be applied each leading to different estimates.
Obtaining an estimate of public sector revenue in Scotland is a two-stage process.
In the first stage, the UK outturn figure for each element of revenue is obtained from ONS
Public Sector Finance Statistics. In the second stage, Scotland’s share of the UK figure isestimated according to a specific apportionment methodology. The methodology used differs
for each element of revenue. The detailed Revenue Methodology paper on the GERS
website contains a discussion of the apportionment methodology used for each revenue
stream and highlights the sensitivity of the results to changes in the underlying
assumptions36 .

UK Revenue Figures
The basis for estimating public sector revenue for Scotland is National Statistics outturn
figures for UK fiscal revenue taken from ONS Public Sector Finance Statistics. The detailed
components, revenue by revenue, are taken from an ONS database which is consistent withboth the totals published in the Public Sector Finances and the figures published in table
PSAT2 of Public Sector Accounts. PSAT2 is HM Treasury’s preferred presentation ofrevenues, it is shown in Tables 21 and 22 of the Supplementary Material to the March 2010
UK Budget37, and underlies the main tables in the UK Budget.
These data are presented on an accruals basis and separately identify revenue attributed tocentral government, local government and public corporations. The international standards
36

http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/GERS

37

Budget 2010: The Economy and Public Finances - Supplementary Material

Government Expenditure and Revenue Scotland 2008-09

83

A

R even u e Meth o d o l o g y

for National Accounts and Government Finance Statistics use the accruals basis rather thana cash approach. This is because accruals accounting reflects a more accurate picture ofwhen revenue is due and spending occurs than the more volatile alternative of cash, which,for example, records when bills are settled rather than when the expenditure occurs.
The revenue figures used in GERS are taken from published outturns as at April 2010,
consistent with those used for the UK Budget in March 201038.
It should be noted that the UK figures for individual revenues presented in GERS 2008-09
may differ from other publications as, on certain occasions, figures are still presented on a
cash rather than an accruals basis. For example, Table C6 of the UK Budget in March 2010shows types of tax on a cash basis. However, to be consistent with the presentation
throughout GERS and international standards, the equivalent table to C6 is presented on an
accruals basis.
The treatment of tax credits and EU revenue in GERS follows international standards for
National Accounts and is different from Table C6 of the UK Budget in March 2010. Revenue
raised for the EU (on VAT, import levies and sugar levy) is not shown as public sector
revenue, instead it is considered to be paid directly to the EU, even though the UK
Government may act as an intermediary in the process between the taxpayer and the EU39 .
The assumptions underpinning the apportionment of each revenue source are outlined
below.

Summary of Changes
Table A.1 provides a summary of the apportionment methodologies used for each elementof revenue and highlights whether or not the methodology has changed since the previous
edition of GERS. Most of these revisions have been relatively minor.
In some instances ONS’s Public Sector Finance estimates of UK revenue for some taxes
have also been revised since the last edition of GERS, these changes will affect theestimates of Scottish tax revenue. In addition, there have been revisions to some of the data
sources used to apportion tax revenues to Scotland. This means that the share of some UK
taxes apportioned to Scotland has changed since GERS 2007-08.
More detailed information on the methodologies used and the changes introduced can befound in the Revenue Methodology paper on the GERS website.

38

The latest Public Sector Finances database is available fromhttp://www.statistics.gov.uk/downloads/theme_economy/PSF_Supplementary_Data.xls. As this database is updated monthly,
figures contained in the more recent data releases will differ from those used in this report
39

Tables which show revenues on a cash basis, e.g. Table C6 of Budget 2010 and the revenue tables in previous editions of

GERS, identify EU revenues. However, these tables also include a negative entry (either separately or in ‘other revenue’) for
contributions to EU budget. The net effect is zero revenue to the UK and is therefore consistent with the approach taken in
GERS.

84

Government Expenditure and Revenue Scotland 2008-09

Various (see web appendix)
Supplied directly by HMRC
Expenditure and Food Survey: ONS
Public Sector Finances: ONS
ONS and GROS

Scotland’s share of profits (less holding gains) of UK corporations

Actual outturns for Scotland

Various (see web appendix)

Estimates of employer, employee, class 2 and class 3 NIC revenue in UK
and Scotland

VAT net of LG and CG refunds: Scotland’s share of UK household VAT
expenditure

LG refunds: Scotland’s share of UK LG current expenditure on goods andservices

CG Refunds – MOD: Scotland/UK populations

Corporation tax (excl. North Sea)

Capital gains tax

Other taxes on income and wealthNational insurance contributions

Stocks and shares: Family Resources Survey (DWP)

Stocks and shares: - Scotland/UK ratio of adults owning shares

Aggregates levy

Climate change levy

Scotland’s share of UK’s aggregate production

Solid and other fuels: Scotland’s share of UK (less extra-regio) GVA

No

NoGovernment Expenditure and Revenue Scotland 2008-09

United Kingdom Minerals Yearbook 2008: British
Geological Survey

Solid and other fuels: Regional Accounts: ONS

Gas: DECC

Electricity: DECC

Electricity: Scotland’s share of UK electricity consumption by commercial
and industrial users

Gas: Scotland’s share of UK gas sales to commercial and industrial users

No

Landfill tax

No

Scottish Environment Protection Agency, Environment
Agency, Dept. of Environment in Northern Ireland

Insurance premium tax

ONS and GROS

Yes

Yes

Scotland’s share of UK tonnage of waste sent to landfill

Scotland/UK population

Air passenger duty

Expenditure and Food Survey : ONS

Expenditure and Food Survey : ONS

No

Scotland/UK population

Betting and gaming duties

Yes

No

No

Yes

No

No

No

No

No

RevisedONS and GROS

Spend on alcohol in Scotland/UK

Spend on betting and gaming in Scotland/UK

Alcohol duties

Expenditure and Food Survey : ONSLand and property stamp duty: HMRC

Land and property stamp duty: Actual outturns for Scotland

Spend on tobacco in Scotland/UK

Fuel consumption statistics: DECCPESA

– Other Gov depts: Scotland/UK total TES (Excluding NHS/MOD)

Scotland’s share of road traffic fuel consumption

PESA

Supplied directly by HMRC

Regional Accounts: ONS– NHS: Scotland/UK TES for HealthTobacco duties

Stamp duties

Fuel duties

VAT

Survey of Personal Income (SPI): HMRC

Scottish share of UK income tax liabilities applied to income tax gross of tax
credits. Negative expenditure on tax credits estimated using Scot/UK shareof overall spend on tax credits (negative tax plus benefits)

Income tax
Data on overall spend on tax credits: HMRC

SourceApportionment Methodology

Revenue

Table A.1: Apportionment Methodologies and Sources for Public Sector Revenue in Scotland (Excluding North Sea Revenue)

R even u e Meth o d o l o g y

85AR even u e Meth o d o l o g yActual Data

Actual Data

Various (see web appendix)

Non-domestic rates

Council tax

Other taxes and royalties

See Chapter 5

North Sea revenue

Government Expenditure and Revenue Scotland 2008-09

Various (see web appendix)

Rent and other current transfers(excluding oil royalties and licence fees)

86

Public corporations – individual data for Scottish PCs – data for UK-wide
PCs based on relevant industry GVA – and actual data for Local Authority
housing rentals

LG: Scottish/UK share of local government NMCC

CG: Scottish/UK share of central government NMCC

For LG and CG receipts: Scotland/UK population

Gross operating surplus

Interest and dividends

Scotland’s share of total value of UK vehicle licences issued (less refunds)

Vehicle excise duty

For PC receipts: Scotland’s share of public sector UK GVA

Actual outturns for Scotland

Inheritance tax

See Chapter 5

Various (see web appendix)

PC: Supplied by Public Sector Finance team: ONS,
and Regional Accounts: ONS

LG: ONS Regional Accounts

CG: ONS Regional Accounts

Regional Accounts: ONS

Various (see web appendix)

Scottish Local Government Finance Statistics

Scottish Local Government Finance Statistics

DVLA

Supplied directly by HMRC

No

Yes

No

Yes

No

No

No

No

Table A.1: Apportionment Methodologies and Sources for Public Sector Revenue in Scotland (Excluding North Sea Revenue) (Cont)A

R even u e Meth o d o l o g yATable A.2 summarises the revisions in this edition of GERS by comparing the estimates
contained in this report with last year’s publication. Overall, estimated public sector revenue
in Scotland has been revised downwards by between 0.5 per cent and 1.1 per cent over theyears 2004-05 and 2007-08.
Table A.2: Revision to Estimates of Total Non-North Sea Public
Sector Revenue: 2004-05 to 2007-08(£ million)
2004-05

2005-06

2006-072007-08

Estimates published in GERS 07-08

37,36940,09542,67445,191

Estimates published in GERS 08-09

36,98339,78742,19844,966

-386

-308

-476

-225

Estimates published in GERS 07-08

447,439

477,102510,246

540,150

Estimates published in GERS 08-09

447,326

477,149

510,059

540,621

-113

47

-187

471

Estimates published in GERS 07-08

8.4%

8.4%

8.4%

8.4%

Estimates published in GERS 08-09

8.3%

8.3%

8.3%

8.3%

Revision

-0.1%

-0.1%

-0.1%

-0.1%

Scotland

Revision
UK

Revision
Scotland/UK ratio

Government Expenditure and Revenue Scotland 2008-09

87

A

R even u e Meth o d o l o g yTable A.3 illustrates the revisions to individual public sector revenue streams in Scotland andthe UK for 2007-08, the latest year directly comparable between GERS 2007-08 and GERS
2008-09. The methodology changes summarised above, combined with revisions to the UKrevenue estimates and to the underlying data used to apportion some taxes to Scotland,
have resulted in minor revisions to some revenue estimates. The net effect of all of thechanges has been to reduce the estimate of public sector revenue in Scotland by £225
million and to increase the estimate of UK tax revenue by £471 million.
Table A.3: Revision to Estimates of Public Sector Revenue: Scotland andUK 2007-08(£ million)
ScotlandUK

Income tax

22

282

Corporation tax (excluding North Sea)

-32

0

Capital gains tax

60

Other taxes on income and wealth80National insurance contributions

106

-73

VAT

-89

13

5

0

Fuel duties
Stamp duties-14

0

Tobacco duties-27

0

Alcohol duties

320

Betting and gaming and duties

70

Air passenger duty00Insurance premium tax-1-9

Landfill tax

6-1

Climate change levy00Aggregates levy

5-1

Inheritance tax

00

Vehicle excise duty00

Non-domestic rates

00Council tax-1

9

Other taxes and royalties

26

18

Interest and dividends

18

206

Gross operating surplus

-299

61

-3

-34

-225

471

Rent and other current transfers
Revision

The large revision to the gross operating surplus estimate for Scotland is due to a revised
estimate of local government depreciation. The figures now used are consistent with thosein the ONS Regional Accounts as the previous source has been discontinued. The revision
has also been applied to the accounting adjustment, and so will have no impact on thecurrent budget balance.

88

Government Expenditure and Revenue Scotland 2008-09

R even u e Meth o d o l o g yASensitivity Analysis
As the figures for public sector revenue in Scotland contained in this report are estimates, it
is important to obtain a sense of the impact on total revenue of any possible variation in theestimates of individual revenue streams. Table A.4 illustrates the effect a 1 per centvariation in the estimate of each revenue stream would have on total non-North Sea revenue
in Scotland for 2008-09.
The largest source of non-North Sea revenue in Scotland is income tax. A 1 per centvariation in the estimate of income tax would revise income tax in Scotland by £107 million,
which is equivalent to 0.2 per cent of total non-North Sea revenue.
Table A.4: Effect of a 1% Change in Revenue (Excluding North Sea
Revenue): Scotland 2008-09
Impact of 1% variation(+/- £ million)

As % of total
non-North Sea revenue (+/- %)Income tax

107

0.2%

Corporation tax (excluding North Sea)

28

0.1%

Capital gains tax

5

0.0%

Other taxes on income and wealth

3

0.0%

National insurance contributions

80

0.2%

VAT

75

0.2%

Fuel duties

21

0.0%

Stamp duties

6

0.0%

Tobacco duties

9

0.0%

Alcohol duties

8

0.0%

Betting and gaming and duties

1

0.0%

Air passenger duty

2

0.0%

Insurance premium tax

2

0.0%

Landfill tax

1

0.0%

Climate change levy

1

0.0%

Aggregates levy

1

0.0%

Inheritance tax

2

0.0%

Vehicle excise duty

4

0.0%

Non-domestic rates

17

0.0%

Council tax

20

0.0%

Other taxes and royalties

7

0.0%

Interest and dividends

7

0.0%

Gross operating surplus

26

0.1%

4

0.0%

435

1.0%

Rent and other current transfers(excluding oil royalties and licence fees)
Total

Government Expenditure and Revenue Scotland 2008-09

89

A

90

R even u e Meth o d o l o g y

Government Expenditure and Revenue Scotland 2008-09

B

EXPENDITURE METHODOLOGYThis appendix outlines the methodologies used to estimate public sector expenditure for
Scotland and highlights where these methodologies differ from those used in previous
editions of GERS.

Methodology
Figures for UK and Scottish public sector expenditure are taken directly from official UK
Government sources.
Total Expenditure on Services (TES) can be separated into two components:•

Identifiable expenditure: that is expenditure that can be clearly allocated to a
country or region in terms of having been spent for the benefit of that country or
region; and•Non-identifiable expenditure; that is expenditure that cannot be identified as
benefiting a particular country or region of the UK but is instead incurred onbehalf of the UK as a whole.

Total Expenditure on Services covers most expenditure by the public sector. Adding an
accounting adjustment reconciles it with Total Managed Expenditure (TME). In 2008-09,
TES accounted for approximately 96 per cent of TME.

UK Expenditure Figures
The primary data source used to estimate Scottish public sector expenditure is the Public
Expenditure Statistical Analyses (PESA) database, published by HM Treasury40. Within
PESA, tables relating to a Country and Regional Analysis (CRA) are available in which UK
Government departments and devolved administrations have allocated expenditure
programmes to Scotland, Wales, Northern Ireland and English regions.

Methodologies for apportioning non-identifiable expenditure
In GERS, the methodology to apportion non-identifiable expenditure and identifiable
expenditure which occurs outside the UK to Scotland varies according to the particularexpenditure estimated.
The methodologies used are listed in Table B.1. Each reflects the approach that is thought tocapture most appropriately the ‘who benefits’ principle. None of the methods used toapportion non-identifiable expenditure to Scotland have changed from the previous edition of
GERS.

40

http://www.hm-treasury.gov.uk/pespub_pesa10_natstats.htm

Government Expenditure and Revenue Scotland 2008-09

91

B

E xp en d i tu r e Meth o d o l o g yTable B.1: Apportionment Methodologies for NonIdentifiable Expenditure: Scotland 2004-05 to 2008-09 1, 2
Non-idOutside the UK

Public and common services

Populationn/aInternational services

Population

Population

Public sector debt interest

Population

n/aDefencePopulation

n/a

Public order and safety

Population

n/aPopulation

Population

Science and technology

GVA

Population

Employment policies

n/aPopulation

Agriculture, forestry and fisheries

n/a

n/a

Transport

GVA

Population

GVA & Population

Population

Housing and community amenities

n/a

n/a

Healthn/aPopulation

General public services

Economic affairs
Enterprise and econ development

Environment protection

4

3

Recreation, culture and religion

Population

Population

Education and training

n/a

Population

Social protection

n/aPopulation

EU transactions

Actual

GVA, VAT & Population

1: Where there is no UK non-identifiable expenditure this is entered as not applicable (n/a).
2: Identifiable expenditure outside the UK, except EU transactions, is apportioned on a per capita basis.
3: All environment protection expenditure is apportioned on a GVA basis, except UKAEA and BNF expenditureon nuclear decommissioning, which is apportioned on a per capita basis.

Methodology for estimating the accounting adjustment
The public sector expenditure analysis in this report focuses on Total Expenditure on
Services (TES). In UK public finance documents, the principal measure of public sector
expenditure is Total Managed Expenditure (TME). The main difference between TES and
TME is that TES does not include general government capital consumption and does notreverse the deduction of certain VAT refunds in the budget-based expenditure data. It also
contains a number of items that are in budgets but not in TME, for example the grantequivalent element of student loans. TME is consistent with ONS National Accounts and the
UK Public Sector Finances.
An accounting adjustment is introduced to align TES to TME. The largest component of theUK accounting adjustment is general government capital consumption. This is a measure of
the amount of fixed capital resources used up in the process of providing public services.
The estimate of an accounting adjustment for Scotland is calculated using a variety ofapportionment methodologies. Firstly, estimates of capital consumption from the ONS
regional accounts, together with data from UK local government returns, have been used toestimate capital consumption for Scotland. In 2008-09, capital consumption for Scotland
was estimated at £1.3 billion (9.2 per cent of the UK total). This calculation is identical tothat underpinning the estimates of general government gross operating surplus on therevenue side. These two elements cancel out when calculating net borrowing.
92

Government Expenditure and Revenue Scotland 2008-09

B

E xp en d i tu r e Meth o d o l o g y

VAT refunds have been allocated to Scotland using the apportionments derived in therevenue calculations (see Appendix A), and therefore cancel out in the calculation of net
borrowing. The figures for Scottish student loan subsidies were provided by HM Treasury.
The imputed subsidy from local authorities to HRA adopt the same apportionment allocation
as in the gross operating surplus calculations on the revenue side, and the imputed flows for
Renewable Obligation Certificates adopts the same methodology used in ‘other taxes androyalties’. These items cancel in the net borrowing calculations. The Scottish share of the
Nigerian debt write-off has been allocated on a per capita basis. The current and capitalresiduals are allocated to Scotland using the appropriate TES ratios.
In summary, the accounting adjustment for Scotland was estimated at £2.6 billion in 200809, or 9.4 per cent of the total UK Accounting Adjustment.

Amendments to PESA CRA Data
A number of significant improvements have been made to the PESA CRA database inrecent years to apportion expenditure more accurately to countries and regions. While
many anomalies in previous editions of PESA CRA have been addressed and are now
reflected in both PESA CRA 2010 and this GERS report, a number of supplementary
amendments to the PESA CRA 2010 dataset were made in producing GERS. The aim ofthese refinements was to ensure that the public sector expenditure figure for Scotland
captures as accurately as possible expenditure for the benefit of Scotland.
The revisions to PESA CRA 2010 made in GERS can be grouped under the following
headings and are summarised in Table B2:•••

direct amendment of the PESA database (affecting UK total)
re-classification of expenditure from Scotland to the rest of UK;
re-apportionment of expenditure between Scotland and the rest of UK.

Table B.2: Revisions to Estimates of Total Public Sector Expenditure from PESA
2010: Scotland 2004-05 to 2008-09(£ million)
2004-05

2005-06

2006-072007-08

2008-0944,351

47,98250,35753,496

56,69644,51847,67750,09353,20556,460

167

-306

-265

-291

-236

Amendment of PESA database

332

120

0

0

21

Re-classification of expenditure

-59

-62

-195

-194

-218

Re-apportionment of expenditure

-106

-364

-70

-97

-38

Total Expenditure in Scotland (PESA)

41

Total Expenditure in Scotland (GERS)
Total revisions between PESA and GERSOf which

41

In this analysis, an estimate of total expenditure from PESA has been calculated as the sum of all ID expenditure plus a

proportion of Non-ID/outside UK expenditures. This figure therefore excludes all amendments documented in this appendix.

Government Expenditure and Revenue Scotland 2008-09

93

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E xp en d i tu r e Meth o d o l o g y

Amendment of the PESA database
Due to a reporting change, capital expenditure by Scottish Water in PESA CRA 2008 wasrevised downwards from the expenditure reported in PESA CRA 2007. While the figures for
2007-08 and 2008-09 in PESA CRA 2010 are accurate, the figures for earlier years areincorrect. Following a review of the actual capital expenditure undertaken by Scottish Water,
GERS replaced the erroneous data in PESA CRA 2010 with the correct data, entered in
PESA CRA 2007, for the years 2004-05 to 2005-06. These are consistent with Scottish
Water’s published annual accounts.
Following the publication of PESA 2010, the Local Government Finance team in the Scottish
Government identified a number of their expenditure lines which had been since beenrevised. These revisions have been incorporated into the PESA database.
An inconsistency between the expenditure classification of fisheries science activities wasindentified during the production of this publication. In Scotland, Fisheries ResearchServices (FRS) expenditure was assigned to “Public and common services” in PESA,
whereas the counterpart organisation for the rest of UK – CEFAS – was assigned to the“Environment protection” group. In the interests of comparability by function, FRS
expenditure has been re-assigned to the environment protection category albeit with nochange to total expenditure.
Table B.3: Amendments to the 2010 PESA database(£ million)
2004-05

2005-06

2006-072007-08

2008-09

Scottish Water capital expenditure

361

120

0

0

0

Amendments to Local Government Expenditure

-29

0

0

0

21

Fisheries science – reduction in “Public andcommon services”

-39

-53

-77

-54

-84

Fisheries science – increase in “Environment
protection”

39

53

77

54

84

Total

332

120

0

0

21

Re-classification of expenditure in PESA 2010
In PESA CRA 2010, some expenditure by UK Government departments with responsibility
only in England and Wales was recorded as UK non-identifiable or a share directly allocatedto Scotland. This included:
•
•
•
•
•
•
•

Office of the Third Sector
Office of Government Commerce
Insolvency Services Executive Agency
an element of central health administration expenditure and health pensions paid
overseas
Department for Culture, Media and Sport (DCMS) expenditure on libraries andadministration.
Department of Communities and Local Government research expenditure
UK Population Census (Office for National Statistics)

In GERS, such expenditure has been re-classified as expenditure for England and Wales
only. As a result, no share was apportioned to Scotland in this publication.

94

Government Expenditure and Revenue Scotland 2008-09

B

E xp en d i tu r e Meth o d o l o g y

An inconsistency was also identified in the attribution of some UK-wide police activities as
identifiable expenditure to Scotland. Whilst the powers of the Serious and Organised Crime
Agency (SOCA) and the related Assets Recovery Agency (ARA) were acknowledged to be
weaker in Scotland, an amount equivalent to a population share had been assigned to
Scotland in PESA. Further investigation with the Scottish Government’s finance teamrevealed that transfers of money from the Scottish Government to these organisations to pay
for these activities had already been accounted for in the Scottish Government’s PESA
return. Any further attribution of expenditure to Scotland is therefore likely to represent a
double-count. As a result, these expenditures have been re-allocated to the rest of the UK.
As discussed in Box 6.1 in last years’ edition of GERS, railways expenditure, alongside
expenditure on roads, is apportioned to Scotland on an ‘in’ basis. This means that
expenditure ‘in’ Scotland on railways is apportioned to Scottish public sector expenditure
while, where possible, a zero share is allocated to Scotland for all expenditure on rail acrossthe rest of the UK. This required a number of modifications to the underlying PESA data
which affected the expenditure by London and Continental Railways, the Channel Tunnel
Rail link, and Network Rail.
Table B.4: Re-classification of Expenditure in PESA 2010: Scotland 2004-05 to 2008-09(£ million)
2004-05

2005-06

2006-072007-08

2008-09

Office of the third sector

0

0

0

-1

-1

Office of Government Commerce

-1

-1

-3

-3

-2

Insolvency Services Executive Agency

0

0

-2

-3

-1

-10

-11

-12

-13

-15

Central health administration and pensions
Census

0

0

0

0

-4

Libraries and DCMS Administration

-5

-5

-7

-7

-7

Network Rail

0

0

-94

-90

-112

-12

-11

-8

-6

1

0

-1

-1

-3

-2

London and Continental Railways
Channel Tunnel
Police and Crime Reduction

-13

-18

-50

-49

-54

Other

-18

-15

-19

-21

-22

Total

-59

-62

-195

-194

-218

0 : less than £0.5 million

Re-apportionment of Expenditure in PESA 2010
In PESA CRA 2010, expenditure on nuclear decommissioning was classified as identifiable
to the region where nuclear facilities are located. However, as discussed in Box 6.4 it isbelieved that this expenditure is best captured as a non-identifiable expenditure. This has
been amended and nuclear decommissioning expenditure has been apportioned on a percapita basis. Other associated nuclear expenditure has also been reapportioned on a percapita basis.
In addition to this relatively major revision, a number of smaller amendments were made.
PESA CRA 2010 assigns no expenditure from the Export Credit Guarantee Department to
Scotland. As the department covers the whole of the UK, an element of this expenditure has
been assigned in Scotland in proportion to Scotland’s share of UK Manufacturing GVA.

Government Expenditure and Revenue Scotland 2008-09

95

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E xp en d i tu r e Meth o d o l o g y

Similarly, a number of learned societies, for example the Royal Society and the Royal
Academy of Engineering, are attributed only to London despite the benefits of their activities
benefitting all in the UK and overseas. Such organisations have been re-apportioned with
Scotland receiving a population share of expenditure. Similarly, research facilities located inEngland but available for use by all UK-wide academic and commercial researchers havebeen re-apportioned to Scotland on a population basis.
Finally, in PESA CRA 2010, expenditure for the Scottish Office Pension Agency, NHS andTeacher pensions was allocated only to Scotland. In contrast, expenditure by comparable
pension agencies across the rest of the UK was allocated to the residence of the recipient of
the pension. To correct for this asymmetry, information from the Scottish Office Pension
Agency was used to re-apportion these pension expenditures across the UK according toresidence. As some elements of the pension expenditure were negative this change has
resulted in a slight increase in expenditure assigned to Scotland.
Table B.5: Re-apportionment of Expenditure in PESA 2010: Scotland 2004-05 to 200809(£ million)
2004-05

2005-06

2006-072007-08

2008-09

-135

-399

-104

-122

-62

Export Credit Guarantee Department

3

3

3

2

2

Learned societies

4

4

5

6

6

Research facilities

7

6

4

0

0

Public Pensions

7

9

8

5

1

Other

9

12

14

11

14

Total

-106

-364

-70

-97

-38

Nuclear Decommissioning and related expenditure

Revisions to Expenditure Estimates from GERS 2007-08
Tables B.6 to B.9 set out the changes in estimates of public expenditure in Scotland and the
UK between this report and GERS 2007-08. These revisions reflect changes in theunderlying PESA CRA data and other revisions to the GERS methodology. Revisions topublic expenditure that can be traced to changes in the PESA CRA database are specified
separately.
Revisions to total expenditure
Table B.6 displays the difference between the estimates of total expenditure in GERS 200708 and those contained in Chapter 6 of this publication.
Total public sector expenditure for Scotland in 2007-08 has been revised down by £131
million (0.2 per cent of total expenditure). For the UK as a whole total expenditure has beenrevised up by £441 million in 2007-08 (0.1 per cent of total expenditure). Around 33 per centof these changes reflect revisions made in PESA 2010 which have a corresponding impact
on the estimates for Scotland in this edition of GERS.

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B

E xp en d i tu r e Meth o d o l o g yTable B.6: Revisions to Estimates of Total Expenditure: Scotland 2004-05 to 2007-08(£ million)
2004-05

2005-06

2006-072007-08

GERS 2007-08

44,62547,74650,26753,336GERS 2008-09

44,51847,67750,09353,205

-107

-70

-174

-131

176

200

25

-43

GERS 2007-08

471,000

501,166

523,003555,211

GERS 2008-09

471,136

501,180

522,904

555,652

136

15

-99

441

165

15

-99

441

GERS 2007-08

9.5%

9.5%

9.6%

9.6%

GERS 2008-09

9.4%

9.5%

9.6%

9.6%

0.0%

0.0%

0.0%

0.0%

Scotland

Revision
Of which revisions made in PESA 2010
UK

Revision
Of which revisions made in PESA 2010
Scotland/UK Ratio

Revision

All other revisions are net changes between GERS 2007-08 and GERS 2008-09.

The large revision in the accounting adjustment is due to the revised estimate of local
government depreciation. The figures now used are consistent with those in the ONS
Regional Accounts as the previous source has discontinued. The revision has also been
applied to the gross operating surplus estimates, and so will have no impact on the current
budget balance.
Revisions to identifiable expenditure
Table B.7 summarises the effects of methodological changes and revisions to the underlying
PESA CRA data on the estimates of Scottish identifiable expenditure between 2004-05 and2007-08. In 2007-08, the estimate of identifiable expenditure in Scotland has been revised
down by £77 million. This revision equates to 0.2 per cent of identifiable expenditure in
2007-08.
Revisions made in PESA 2010 reflect changes made by UK Government departments inallocating spending to UK countries and regions. The reduction of £104 million is thedifference between the estimate of total identifiable expenditure on services for Scotland
reported in Table 9.1 in PESA 2010 and that reported in the same table in PESA 2010.
Table B.7: Revisions to Estimates of Identifiable Expenditure: Scotland 2004-05 to
2007-08(£ million)
2004-05

2005-06

2006-072007-08

GERS 2007-08

38,541

41,29843,43845,974

GERS 2008-09

38,466

41,26743,31445,897

-75

-30

-124

-77

-75

-101

-151

-104

Revision
Of which revisions made in PESA 2010

All other revisions are net changes between GERS 2007-08 and GERS 2008-09.

Government Expenditure and Revenue Scotland 2008-09

97

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E xp en d i tu r e Meth o d o l o g y

Revisions to non-identifiable expenditure
Table B.8 summarises the effects of methodological changes and revisions to the underlying
PESA data on the estimates of Scottish non-identifiable expenditure between 2004-05 and2007-08, the final year for which such comparisons are possible.
In total, revisions to the underlying PESA data and changes in apportionment methodologies
have resulted in an downward revision of £53 million to the estimate of total non-identifiable
expenditure for Scotland in 2007-08. This revision equates to 0.7 per cent of total nonidentifiable expenditure in that year.
Table B.8: Revisions to Estimates of Total Non-Identifiable Expenditure: Scotland
2004-05 to 2007-08(£ million)
2004-05

2005-06

2006-072007-08

GERS 2007-08

6,084

6,448

6,829

7,362

GERS 2008-09

6,052

6,409

6,778

7,308

Revision
Of which revisions made in PESA 2010

-32

-39

-50

-53

251

301

176

61

All other revisions are net changes between GERS 2007-08 and GERS 2008-09.

Total Revision to expenditure (including accounting adjustment)
The overall change in Total Managed Expenditure (TME) is highlighted below. The revision
is equal to the sum of revisions to Total Expenditure on Services (TES) and the accounting
adjustment.
Table B.9: Revisions to Estimates of Total Managed Expenditure: Scotland
2004-05 to 2007-08(£ million)
2004-05

2005-06

2006-072007-08

GERS 2007-08

44,62547,74650,26753,336GERS 2008-09

44,51847,67750,09353,205GERS 2007-08

2,292

2,486

2,801

2,949

GERS 2008-09

2,100

2,238

2,408

2,456

GERS 2007-08

46,91750,23253,06856,285GERS 2008-09

46,61749,91452,50055,661

-300

-318

-568

-624

Total Expenditure on Services

Accounting Adjustment

Total Managed Expenditure

Revision to Total Managed Expenditure98

Government Expenditure and Revenue Scotland 2008-09

E xp en d i tu r e Meth o d o l o g yBSensitivity Analysis
As the figures for public sector expenditure for Scotland contained in this report are
estimates, it is important to obtain a sense of the impact on total expenditure of any possible
variation in the estimates of individual expenditure components. Table B.10 illustrates theeffect a 1 per cent variation in the estimate of each expenditure programme would have on
overall expenditure for Scotland in 2008-09.
As the largest elements of public sector expenditure for Scotland, changes in the estimatedlevel of social security, health and education will have the most significant impact on
estimated total public sector expenditure for Scotland.
Table B.10: Effect of a 1% Change in Expenditure: Scotland 2008-09
Impact of 1% variation(+/- £ million)

as % of total expenditure(+/- %)

General public services
Public and common services

16~

International services

6~

Public sector debt interest

27~

Defence31

0.1%

Public order and safety

25~

Financial Sector Interventions

7~

Other enterprise and econ. dev.

10~

Science and technology

4~

Employment policies

3~

Agriculture, forestry and fisheries

8~

Transport

26~

Environment protection

10~

Housing and community amenities

18~

Health102

0.2%

Recreation, culture and religion

15~

Education and training

76

0.1%

Social protection

186

0.3%

EU transactions

-5

~

565

1.0%

Economic affairs
Enterprise and economic development

Total- : less than £0.5 million~ : less than 0.05%

Government Expenditure and Revenue Scotland 2008-09

99

B

E xp en d i tu r e Meth o d o l o g y

100

Government Expenditure and Revenue Scotland 2008-09

C

LIST OF ABBREVIATIONS

AEF
AME

Aggregate External Finance
Annually Managed Expenditure

BGS

British Geological Survey

BNF
CG
CGNCR
COFOG
CRA
CT
DECC
DCMS
DEL
DfT
DVLA
DWP
EED
EFS
ESA
ESA
EU
FISIM
GDP
GERS
GNI
GOS
GRG
GROS
GVA
HMRC
HMT
HRA
LG
NDRI
NHS
NIC
NMCC
MOD
ONS
PBR
PC
PFI

British Nuclear Fuels
Central Government
Central Government Net Cash Requirement
UN Classification of Functions of Government
Country and Regional Analysis
Corporation Tax
Department of Energy and Climate Change
Department for Culture, Media and Sport
Departmental Expenditure Limit
Department for Transport
Driver and Vehicle Licensing Agency
Department for Work and Pensions
Enterprise and Economic Development
Expenditure and Food Survey
European System of Accounts
Employment and Support Allowance
European Union
Financial Intermediation Services Indirectly Measured
Gross Domestic Product (at market prices)
Government Expenditure and Revenue Scotland
Gross National Income
Gross Operating Surplus
General Revenue Grant
General Register Office for Scotland
Gross Value Added (GDP at basic prices)
HM Revenue and Customs
HM Treasury
Housing Revenue AccountLocal Government
Non-Domestic Rate Income
National Health Service
National Insurance Contributions
Non-Market Capital Consumption
Ministry of Defence
Office for National Statistics
Pre-Budget Report
Public Corporations
Private Finance Initiative

Government Expenditure and Revenue Scotland 2008-09

101

C

L i st o f A b b r evi ati o n s

PPP
PESA
PRT
PSAT2
PSNB
SDLT
SDRT
SC
SNAP
SPI
TES
TME
UK
UKAEA
UK-CEFAS
UKCS
VAT
WGA
UKAEA
UKCS
VAT
US/USA
WGA

102

Public Private Partnerships
Public Expenditure Statistical Analyses
Petroleum Revenue Tax
Public Sector Accounts Table 2
Public Sector Net Borrowing
Stamp Duty Land Tax
Stamp Duty Revenue Tax
Supplementary Charge
Scottish National Accounts Project
Survey of Personal Incomes
Total Expenditure on Services
Total Managed Expenditure
United Kingdom
UK Atomic Energy Authority
United Kingdom – Centre for Environment, Fisheries and Aquaculture
UK Continental Shelf
Value Added Tax
Whole of Government Accounts
UK Atomic Energy Authority
UK Continental Shelf
Value Added Tax
United States of America
Whole of Government Accounts

Government Expenditure and Revenue Scotland 2008-09

D

GLOSSARY

Accounting Adjustment: the adjustment required to reconcile Total Expenditure on
Services (TES) provided in PESA with Total Managed Expenditure (TME), the principal
measure of public sector expenditure in UK public finance publications. The largest elementof the accounting adjustment is capital consumption.
Accruals: the accounting convention whereby an expenditure or revenue is recorded(recognised) at the time when it has been incurred or earned rather than when the money ispaid or received.
Aggregate External Finance (AEF): central government support for expenditure on local
authority core services.
Annually Managed Expenditure (AME): spending that does not fall within Departmental
Expenditure Limits (DEL). Expenditure in AME is generally less predictable than expenditurein DEL and cannot be reasonably be subject to firm, multi-year limits.
Capital Consumption: also called Consumption of Fixed Capital; the amount of fixed
assets used up in an accounting period as a result of normal wear and tear, foreseeable
obsolescence, and losses from accidental damage. Has been referred to as depreciation insome documents, although this is not recommended to avoid confusion with the same term
used with a different definition for tax and business accounting purposes.
Capital Expenditure: includes• capital formation, the net acquisition of land, and expenditure on capital grants. Fixed
assets are assets that can be used repeatedly to produce goods and services andgenerally have an economic life of more than one year.
• capital expenditure includes the value of assets acquired under finance leases.
• in-house development of assets such as computer software and databases can becapitalised in government accounts provided certain conditions are met. It issometimes called ‘own account capital formation’.
Central Government: comprises parliaments; government departments (including Scottish
Government) and their executive agencies; government funds such as the national loans
fund; the foreign exchange official reserves; non-departmental public bodies; NHS trusts andvarious other non-market public bodies controlled by central government.
Country and Regional Analysis (CRA): Analysis in PESA showing public expenditure
identifiable to Scotland, Wales, Northern Ireland and the English regions.
Current Budget: the difference between current revenues (including capital taxes) andcurrent expenditure (including capital consumption)
Current Expenditure: the sum of the current expenditure of general government (i.e. theScottish Government, the UK Government in Scotland and Scottish local authorities) andcertain distributive transactions (interest and dividends) payable by public corporations to theprivate sector and abroad. Public sector current expenditure is defined to be net of certain
revenue items, such as some sales of goods and services by general government. As it isdefined at the public sector level, any transactions and transfers between parts of the public

Government Expenditure and Revenue Scotland 2008-09

103

D

G l o ssar ysector are also excluded. Current expenditure includes items such as public sector wages
and salaries and transfer payments.
Current Revenue: all revenue raised by the public sector from tax and non-tax revenues
except the sale of assets or interest received.
Departmental Expenditure Limits (DELs): spending which is planned and controlled
across the period of each spending review. In general, DEL will cover all administrationbudgets and all programme expenditure. The vast majority of Scottish Government
expenditure is DEL.
European System of Accounts 1995 (ESA95): the system used by the Office for National
Statistics for producing and presenting UK National Accounts. The system is a legal
requirement for EU member states reporting economic statistics to the EU Commission.
Extra-regio: the part of UK economic activity that is not allocated to a specific region. Extraregio includes ‘continental shelf’ activity relating to offshore oil and gas extraction, UK
embassies overseas and armed forces stationed abroad.
General Government: Central government and local government.
Gross Domestic Product (at market prices): a measure of the value of goods andservices produced in the UK before providing for capital consumption. It is equal to grossvalue added at basic prices plus taxes (less subsidies) on products. Alternatively, it is equal
to the sum of total final domestic consumption expenditures less imports of goods andservices.
Gross Operating Surplus: the surplus generated by operating activities after the labour
factor input has been recompensed.
Gross Value Added: the contribution to the economy of each individual producer, industry
or sector in Scotland or the UK. It is a measure of GDP in basic prices.
Holding Gains (or losses): either profit or loss obtained by holding assets whose pricechanges within the period of account. This represents that part of the change in the bookvalue of inventories and work-in-progress during the year, which arises from increases in theprices at which inventories and work-in-progress are valued.
Identifiable Expenditure: expenditure that can be directly identified as having been spent
for the benefit of a country or region within the UK.
Local Government: all 32 local authorities in Scotland.
National Accounts: a statistical system that represents the economic activity andtransactions between sectors in a national economy.
Net Fiscal Balance: the difference between estimated total public sector spending for
Scotland and estimated total public sector revenue raised in Scotland.
Net Investment: public sector capital expenditure, net of capital consumption.
Non-departmental bodies: a body which has a role in the processes of government, but is
not a government department or part of one, and which accordingly operates to a greater or
lesser extent at arm’s length from Ministers.

104

Government Expenditure and Revenue Scotland 2008-09

G l o ssar yD

Non-Identifiable Expenditure: expenditure that is considered to occur on behalf of the UK
as a whole and which cannot be decomposed on an individual country or regional basis.
Outturn: expenditure (revenue) actually incurred (received) to date and been subject toaudit.
Public Corporations: a sector from National Accounts consisting of publicly controlledmarket entities. To be classed as ‘market’ their sales must be at least 50 per cent of theiroperating costs.
Public Expenditure Statistical Analysis (PESA): the primary source of outturn data on
public expenditure in the UK. The country and regional analysis, (CRA), presents public
expenditure identifiable for Scotland, Wales, Northern Ireland and the English regions.
Public Sector Finances: the monthly statistics on the public sector produced jointly by the
Office for National Statistics and HM Treasury.
Total Expenditure on Services (TES): an aggregate used in PESA to analyse capital andcurrent spending of the public sector. It includes current expenditure on services and capital
expenditure on services.
Total Managed Expenditure (TME): a definition of aggregate public spending derived from
National Accounts. TME captures total public expenditure in the UK.
UK Public Sector Net Borrowing: the difference between the sum of UK public sector
current and capital revenues and UK public sector expenditure as measured in the Public
Sector Finances according to the National Accounts framework.
Who Benefits Principle: the approach used to estimate expenditure for Scotland. It
identifies the expenditure in a given year that was incurred for the full range of public
services that were consumed: that is, those services provided for the people of Scotland.
Who Pays Principle: the approach used to estimate public sector revenue in Scotland. It isbased upon the residential location of where the revenue is raised.

Government Expenditure and Revenue Scotland 2008-09

105

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Details of pre-release access will be provided in the Scottish Government Statistics Website under 'Forthcoming
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Enquiries on Government Expenditure and Revenue Scotland
should be addressed to:General enquiries on Scottish Government statistics
can be addressed to:

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Room 4.ER, St Andrews House
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e-mail: sandy.stewart@scotland.gsi.gov.uk

Niamh Laffan
Office of the Chief Statistician
Scottish Government
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For general enquiries about National Statistics in the United
Kingdom Government contact the National Statistics Public
Enquiry Service on+44 (0) 845 601 3034
minicom: +44 (0)1633 812399
Email: info@statistics.gov.uk
Fax: +44 (0)1633 652747
Letters: Customer Contact Centre, Room 1.015
Office for National Statistics, Cardiff Road, Newport
NP10 8XG
You can also find National Statistics on the internet go to www.statistics.gov.uk

If you would like to be consulted about new or existing statistical collections or receive notification of forthcoming statistical
publications, please register your interest on the Scottish Government ScotStat website at www.scotland.gov.uk/scotstat
Current contact points, e-mail addresses and the publications listed below as well as a range of other statistical publications
can be found on the Scottish Government Web site at www.scotland.gov.uk/stats
Further information on the General Register Office for Scotland is available on the website www.gro-scotland.gov.uk

Most recent Publications relating to the economy theme
Ref no.

Title

Last published

Price

Gross Domestic Product for Scotland for the fourth quarter of 200921/04/2010

Free

Scottish Manufactured Exports Estimates for the fourth quarter of 2009

01/04/2010

Free

Input-Output Tables and Multipliers for Scotland (1998 – 2004)

31/03/2009

Free

Scotland’s Global Connections 2008

13/01/2010

Free

Additional copies of these publications may be purchased from Scottish Government Publication Sales, Blackwell’sBookshop, 53 South Bridge, Edinburgh, EH1 1YS, Telephone: 0131 622 8283 or 0131 622 8258, Fax: 0131 557 8149.
Cheques should be made payable to ‘Blackwell’s Bookshop’.

Complaints and suggestions
If you are not satisfied with our service, please write to the Chief Statistician, Mr Rob Wishart, 1N03, St Andrews House,
Edinburgh, EH1 3DG, Telephone: (0131) 244 0302, e-mail rob.wishart@scotland.gsi.gov.uk. We also welcome any comments
or suggestions that would help us to improve our standards of service.
Crown CopyrightBrief extracts from the Crown Copyright material in this publication may be reproduced provided the source is fully
acknowledged.

GOVERNMENT
EXPENDITURE & REVENUESCOTLAND 2008-2009

GOVERNMENT EXPENDITURE & REVENUE SCOTLAND 2008-2009 JUNE 2010

© Crown copyright 2010
Further copies of this publication can be obtained from:
Office of the Chief Economic Adviser
Scottish Government
St Andrew’s House
Regent Road
Edinburgh
EH1 3DG
This document is also available on the Scottish Government website:www.scotland.gov.uk
ISBN 978-0-7559-9412-0
The text pages of this document are printed on recycled paper
and are 100% recyclable.
APS Group Scotland
DPPAS10118 (06/10)

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