Government Expenditure & Revenue Scotland 2012-13

5 PUBLIC SECTOR EXPENDITURE

Introduction

This chapter provides detailed estimates of public sector expenditure for Scotland. As discussed in Chapter 2, the expenditure estimates presented here exclude the transfer of the Royal Mail Pension Plan to the public sector.

The primary data source used to estimate Scottish public sector expenditure is the November 2013 Country and Regional Analysis (CRA) published by HM Treasury. In addition to this, data provided directly by HM Treasury is used to provide a complete measure of Total Managed Expenditure, the headline measure of aggregate public spending in the UK Public Sector Finances.

This chapter divides public sector expenditure into two categories: identifiable expenditure and non-identifiable expenditure.

Identifiable expenditure is expenditure 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 and health expenditure.

Non-identifiable expenditure is expenditure that cannot be allocated to a particular country of the UK but is instead incurred on behalf of the UK as a whole. The largest elements of non-identifiable expenditure are defence expenditure and public sector debt interest payments.

For total expenditure and each expenditure component, a detailed breakdown according to current and capital is provided.

Each element of expenditure is discussed in detail below. Annex B discusses the relevant apportionment methodologies applied while Annex C provides information on the revisions from previous reports.

Public Sector Expenditure

Estimated total public sector expenditure for Scotland by spending category for 2012-13 is shown in Table 5.1. In 2012-13, total public sector expenditure for Scotland was estimated to be £65.2 billion. This was equivalent to 9.3% of comparable total UK public sector expenditure in 2012-13, shown in Table 5.2. Social protection was the largest Scottish expenditure programme. Together with health expenditure, it accounted for over half of total public sector expenditure for Scotland in 2012-13.

Table 5.1: Total Expenditure: Scotland 2012-13

	Scotland
	£ million	% of total expenditure
General public services
Public and common services	1,381	2.1%
International services	667	1.0%
Public sector debt interest	4,020	6.2%
Defence	3,027	4.6%
Public order and safety	2,529	3.9%
Economic affairs
Enterprise and economic development	1,049	1.6%
Science and technology	249	0.4%
Employment policies	222	0.3%
Agriculture, forestry and fisheries	917	1.4%
Transport	2,779	4.3%
Environment protection	1,210	1.9%
Housing and community amenities	1,628	2.5%
Health	11,284	17.3%
Recreation, culture and religion	1,554	2.4%
Education and training	7,651	11.7%
Social protection	22,458	34.4%
Accounting adjustments	2,581	4.0%
Total Expenditure	65,205	100%

Total public sector expenditure for Scotland is estimated to have increased from £59.4 billion in 2008-09 to £65.2 billion in 2012-13, an increase of 9.7% in nominal terms. Over the same period, equivalent UK public sector expenditure increased from £635.6 billion to £701.7 billion, an increase of 10.4% in nominal terms.

Table 5.2: Total Current and Capital Expenditure Scotland and UK 2008-09 to 2012-13

	(£ million)
	Scotland					UK
	2008-09	2009-10	2010-11	2011-12	2012-13	2008-09	2009-10	2010-11	2011-12	2012-13
Current	52,681	55,406	58,127	58,909	59,627	567,933	605,010	635,268	643,980	656,345
Capital	6,760	6,681	5,968	5,960	5,579	67,693	68,392	59,437	50,335	45,336
Total	59,440	62,087	64,095	64,869	65,205	635,626	673,402	694,705	694,315	701,681

Table 5.3 shows the share of total expenditure between current and capital for Scotland. Between 2008-09 and 2009-10, capital expenditure for Scotland fell from approximately 11.4% to 10.8% of total expenditure. This is due in part to the UK Government's financial sector interventions in 2008-09. These are discussed further in Annex B. Capital expenditure fell as a share of total expenditure in the three subsequent years to 9.2% of total expenditure in 2011-12, and 8.6% in 2012-13.

Table 5.3: Current and Capital Expenditure (% of Total Expenditure): Scotland 2008-09 to 2012-13

	(per cent)
	2008-09	2009-10	2010-11	2011-12	2012-13
Current	88.6%	89.2%	90.7%	90.8%	91.4%
Capital	11.4%	10.8%	9.3%	9.2%	8.6%

Tables 5.4 and 5.5 provide a more detailed breakdown of total public sector expenditure by current and capital split for Scotland and the UK.

Box 5.1 Growth in Scottish and UK Capital Spending

Capital spending in Scotland has historically been higher than a population share of the UK total. In part this reflects the fact that water and sewerage services are within the public sector in Scotland, and these have a high level of associated capital expenditure. However, as shown in the table below, Scotland's share of UK capital spending has increased from being broadly around 10% between 2008-09 and 2010-11 to 12.3% in 2012-13. As both Scotland and the UK have seen falls in capital spending since 2010-11, this reflects the fact that capital spending in Scotland has fallen by less than capital spending in the UK.

UK capital spending declined by 15.3% between 2010-11 and 2011-12 and by a further 9.9% in between 2011-12 and 2012-13. In contrast, capital spending for Scotland remained broadly level in 2011-12 before falling by 6.4% between 2011-12 and 2012-13.

The divergence in Scottish and UK capital spending in 2011-12 was driven by increased spending by Scottish Local Authorities. Spending increased by approximately £350 million, with approximately half of this increase financed via Local Authority borrowing.^[27] Capital spending in Scotland during 2012-13 was also supported by the Scottish Government's decision to switch approximately £230 million in spending from current to capital budgets.

Finally, capital spending on Enterprise and Economic Development in Scotland has diverged from the UK, with total Scottish spend remaining largely unchanged from 2010-11 whilst UK spending has fallen by almost £1 billion. This may reflect in part the fact that regional development agencies in England were abolished on the 31^st March 2012, whilst funding has continued to be made available to development agencies in Scotland. Further detail on how different types of expenditure have changed is shown in Table 5.9.

Capital expenditure in Scotland and the UK: 2008-09 to 2012-13
	(£ million)
	2008-09	2009-10	2010-11	2011-12	2012-13
Scotland	6,760	6,681	5,968	5,960	5,579
UK	67,693	68,392	59,437	50,335	45,336
Scotland as % of UK total	10.0%	9.8%	10.0%	11.8%	12.3%

Table 5.4: Total Expenditure: Scotland 2008-09 to 2012-13

	(£ million)
	Current					Capital					Total
	2008-09	2009-10	2010-11	2011-12	2012-13	2008-09	2009-10	2010-11	2011-12	2012-13	2008-09	2009-10	2010-11	2011-12	2012-13
General public services
Public and common services	1,296	1,499	1,402	1,475	1,199	298	83	207	147	182	1,594	1,582	1,609	1,622	1,381
International services	502	549	606	616	617	37	50	63	50	50	539	599	669	666	667
Public sector debt interest	2,734	2,599	3,846	4,099	4,020	0	0	0	0	0	2,734	2,599	3,846	4,099	4,020
Defence	2,802	2,825	2,931	2,934	2,740	294	342	361	303	287	3,096	3,167	3,292	3,237	3,027
Public order and safety	2,386	2,437	2,559	2,663	2,388	233	257	245	197	141	2,619	2,694	2,804	2,860	2,529
Economic affairs
Enterprise and economic development	593	669	464	604	773	1,123	700	273	249	276	1,716	1,369	737	853	1,049
Science and technology	199	207	204	220	221	34	36	26	43	28	233	243	230	263	249
Employment policies	207	222	291	242	222	3	4	4	3	0	210	226	295	245	222
Agriculture, forestry and fisheries	734	781	796	828	773	100	111	152	149	144	834	892	948	977	917
Transport	1,526	1,509	1,576	1,574	1,518	1,110	1,329	1,071	1,143	1,261	2,636	2,838	2,647	2,717	2,779
Environment protection	853	970	980	979	945	196	193	238	198	265	1,049	1,163	1,218	1,177	1,210
Housing and community amenities	281	261	296	232	187	1,521	1,710	1,324	1,392	1,441	1,802	1,971	1,620	1,624	1,628
Health	9,740	10,140	10,348	10,560	10,736	515	539	590	486	548	10,255	10,679	10,938	11,046	11,284
Recreation, culture and religion	1,116	1,197	1,169	1,231	1,214	276	283	262	324	340	1,392	1,480	1,431	1,555	1,554
Education and training	6,882	7,068	7,054	6,803	7,012	646	661	597	687	639	7,528	7,729	7,651	7,490	7,651
Social protection	18,451	19,963	20,598	21,091	22,361	92	113	94	68	97	18,543	20,076	20,692	21,159	22,458
Accounting adjustments	2,377	2,507	3,002	2,762	2,702	284	273	461	522	-122	2,661	2,781	3,463	3,284	2,581
Total	52,681	55,406	58,127	58,909	59,627	6,760	6,681	5,968	5,960	5,579	59,440	62,087	64,095	64,869	65,205

Table 5.5: Total Expenditure: UK 2008-09 to 2012-13

	(£ million)
	Current					Capital					Total
	2008-09	2009-10	2010-11	2011-12	2012-13	2008-09	2009-10	2010-11	2011-12	2012-13	2008-09	2009-10	2010-11	2011-12	2012-13
General public services
Public and common services	11,889	11,946	11,288	10,631	10,173	2,116	1,820	1,635	1,114	1,503	14,005	13,766	12,923	11,745	11,676
International services	5,970	6,537	7,235	7,361	7,405	441	596	749	597	607	6,411	7,133	7,984	7,958	8,012
Public sector debt interest	32,497	30,956	45,891	48,984	48,230	0	0	0	0	0	32,497	30,956	45,891	48,984	48,230
Defence	33,317	33,652	34,981	35,056	32,908	3,500	4,059	4,305	3,606	3,457	36,817	37,711	39,286	38,662	36,365
Public order and safety	30,906	31,433	31,014	30,509	30,038	2,746	2,685	2,001	1,525	1,426	33,652	34,118	33,015	32,034	31,464
Economic affairs
Enterprise and economic development	4,209	5,113	2,778	3,246	4,263	12,004	7,111	2,024	1,595	1,040	16,213	12,224	4,802	4,841	5,303
Science and technology	2,619	2,819	2,884	2,957	3,106	586	733	521	606	492	3,205	3,552	3,405	3,563	3,598
Employment policies	2,721	2,986	3,705	2,742	2,560	106	87	43	26	8	2,827	3,073	3,748	2,768	2,568
Agriculture, forestry and fisheries	5,451	5,550	5,152	5,521	4,998	315	273	329	268	343	5,766	5,823	5,481	5,789	5,341
Transport	9,019	9,768	8,831	8,375	7,987	11,958	13,204	12,659	11,667	11,351	20,977	22,972	21,490	20,042	19,338
Environment protection	7,060	8,187	8,146	8,213	7,970	2,170	2,209	2,784	2,251	3,175	9,230	10,396	10,930	10,464	11,145
Housing and community amenities	3,755	4,018	3,070	2,547	3,063	11,497	12,326	9,900	7,314	7,481	15,252	16,344	12,970	9,861	10,544
Health	103,382	110,737	114,436	116,984	119,634	5,366	6,179	5,389	4,264	4,640	108,748	116,916	119,825	121,248	124,274
Recreation, culture and religion	9,986	10,383	10,380	10,158	10,416	2,460	2,796	2,582	2,679	2,363	12,446	13,179	12,962	12,837	12,779
Education and training	74,705	78,551	82,351	79,109	80,395	8,295	9,934	9,149	7,788	7,056	83,000	88,485	91,500	86,897	87,451
Social protection	203,374	222,915	230,277	239,824	251,546	724	1,110	1,068	652	658	204,098	224,025	231,345	240,476	252,204
Accounting adjustments	27,079	29,462	32,847	31,763	31,651	3,411	3,269	4,300	4,381	-262	30,489	32,731	37,147	36,144	31,388
Total	567,933	605,010	635,268	643,980	656,345	67,693	68,392	59,437	50,335	45,336	635,626	673,402	694,705	694,315	701,681

Table 5.6 shows estimated total public sector expenditure for Scotland and the UK on a per capita basis from 2008-09 to 2012-13. The table also highlights the absolute per capita difference between Scotland and the UK, and the relative difference between the two. Total expenditure per capita for Scotland is estimated to have been £12,265 in 2012-13, £1,267 (11.5%) higher than the UK average. Since 2008-09, public spending per head for Scotland has been between 9.8% and 11.6% higher than the UK average.

Table 5.6: Total Expenditure Per Capita: Scotland and UK 2008-09 to 2012-13

	2008-09	2009-10	2010-11	2011-12	2012-13
Scotland (£)	11,408	11,852	12,158	12,227	12,265
UK (£)	10,263	10,796	11,046	10,951	10,998
Difference (Scotland minus UK) (£)	1,145	1,056	1,112	1,276	1,267
Relative Expenditure for Scotland (UK = 100)	111.2	109.8	110.1	111.6	111.5

There are a number of reasons why public expenditure per capita for Scotland is above the UK average. In some cases, it reflects the lower population density in Scotland relative to the UK which increases the cost 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 sewerage services are a public sector responsibility in Scotland, and are therefore included in Scottish public expenditure, whilst in England they are operated by the private sector.

In other instances, 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 three year course in England and Wales. Therefore, expenditure on education and training for Scotland will be relatively higher than the rest of the UK. 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.^[28]

Finally, higher public expenditure also reflects Scotland's greater need for some public services such as in health and housing relative to the rest of the UK.

Box 5.2 - Private Finance Initiative and Non-Profit Distributing Financing

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 designing and constructing a building or facility and maintaining and servicing it throughout the contract term. The public sector retains accountability for the main public services. The private sector is responsible for financing the project up front and only receives payment from the public sector once construction has been completed and the services have commenced.

There was also another model of revenue finance in operation over this period called Non-Profit Distributing (NPD). The NPD model is 100% debt funded and there is no dividend bearing equity. Payments for both PFI and NPD projects take the form of a unitary charge which is usually paid annually over the lifetime of the contract.

Public sector unitary charges paid on PFI and NPD projects in Scotland between 2008-09 and 2012-13 are included within individual spending lines, such as transport and health, in the main tables in this chapter, depending on the type of project. The table below presents the overall charges paid in Scotland as a whole.

Public Sector Unitary Charge Expenditure in Scotland 2008-09 to 2012-13
	(£ million)
	2008-09	2009-10	2010-11	2011-12	2012-13
Scottish Public Sector Unitary Charges1	516	592	735	825	909
Other UK Government Departments PFI Unitary Charges for Projects in Scotland	20	23	23	26	26
Total Unitary Charges in Scotland	536	615	758	851	935

Source: Scottish Government and HM Treasury PFI Signed Project List (December 2013).

1. Includes both PFI and NPD figures.

Identifiable and Non-identifiable Expenditure

GERS classifies public sector expenditure for Scotland as either identifiable expenditure or non-identifiable expenditure.

In the vast majority of cases, GERS uses the data on identifiable expenditure contained in the CRA directly. It is a fundamental principle of the CRA 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 to residents and enterprises of that region. As highlighted in the CRA publication, there are limitations 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 the residents of a region in which the facility is located and roads serve the needs of more than the geographical area through which they pass. Definitional and border problems 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 broader economy; 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 to allocate 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 to regions 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 collect local 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 review of all 1,263 segments in CRA 2013, a number of important modifications have been made to a small number of programme expenditures 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' is thought possible than is currently presented in the CRA. The principal changes relate to the treatment of expenditure on nuclear decommissioning by the UK Atomic Energy Authority, and the expenditure on the London Olympics.

Annex B contains a detailed list of all amendments to the CRA made in this report. As with all statistical products, developments in the CRA continue and any further refinements to the regional apportionment of public sector expenditure will be reflected in future GERS reports.

In 2012-13 UK identifiable expenditure covered 82.9% of UK total public expenditure. The remaining spending cannot be attributed to individual locations, for example, 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 basis of 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 Annex B.

Table 5.7 illustrates the estimated level of identifiable and non-identifiable expenditure assigned to Scotland for each year between 2008-09 and 2012-13. Identifiable expenditure was estimated to be £55.8 billion in 2012-13. In comparison, non-identifiable expenditure was £9.4 billion in 2012-13, approximately 14.5% of estimated total public sector expenditure for Scotland.

Across most programme categories, the level of non-identifiable expenditure is relatively modest. Debt interest payments and defence are typically the largest elements of non-identifiable expenditure. Collectively, these two elements of expenditure accounted for 74.7% of total non-identifiable expenditure for Scotland in 2012-13.

Table 5.7: Total Expenditure, Identifiable and Non-identifiable: Scotland 2008-09 to 2012-13

	(£ million)
	Identifiable					Non-identifiable					Total
	2008-09	2009-10	2010-11	2011-12	2012-13	2008-09	2009-10	2010-11	2011-12	2012-13	2008-09	2009-10	2010-11	2011-12	2012-13
General public services
Public and common services	1,145	1,160	1,199	1,241	988	449	422	410	381	392	1,594	1,582	1,609	1,622	1,381
International services	17	15	18	17	14	522	584	651	649	654	539	599	669	666	667
Public sector debt interest	0	0	0	0	0	2,734	2,599	3,846	4,099	4,020	2,734	2,599	3,846	4,099	4,020
Defence	5	5	5	5	4	3,090	3,161	3,287	3,230	3,024	3,096	3,167	3,292	3,237	3,027
Public order and safety	2,444	2,508	2,654	2,721	2,402	176	185	149	140	126	2,619	2,694	2,804	2,860	2,529
Economic affairs
Enterprise and economic development	948	971	856	895	951	768	398	-118	-43	98	1,716	1,369	737	853	1,049
Science and technology	57	58	58	80	80	176	184	171	184	168	233	243	230	263	249
Employment policies	210	226	295	244	222	0	0	0	0	0	210	226	295	245	222
Agriculture, forestry and fisheries	829	880	933	973	917	5	13	15	3	0	834	892	948	977	917
Transport	2,610	2,819	2,629	2,697	2,756	25	20	19	20	23	2,636	2,838	2,647	2,717	2,779
Environment protection	973	1,022	1,046	1,011	1,006	76	140	171	165	203	1,049	1,163	1,218	1,177	1,210
Housing and community amenities	1,802	1,970	1,621	1,624	1,629	0	0	0	0	0	1,802	1,971	1,620	1,624	1,628
Health	10,139	10,552	10,794	10,921	11,178	115	128	144	126	107	10,255	10,679	10,938	11,046	11,284
Recreation, culture and religion	1,080	1,154	1,095	1,224	1,240	312	326	337	331	314	1,392	1,480	1,431	1,555	1,554
Education and training	7,529	7,728	7,652	7,490	7,650	0	0	0	0	0	7,528	7,729	7,651	7,490	7,651
Social protection	18,077	19,518	20,130	20,703	21,969	466	558	564	455	489	18,543	20,076	20,692	21,159	22,458
Accounting adjustments	2,608	2,458	2,845	2,973	2,797	53	324	618	310	-215	2,661	2,781	3,463	3,284	2,581
Total	50,472	53,044	53,829	54,819	55,802	8,968	9,043	10,266	10,050	9,403	59,440	62,087	64,095	64,869	65,205

Analysis of Identifiable Expenditure

This section provides a more detailed analysis of identifiable expenditure for Scotland.

Table 5.8 disaggregates identifiable expenditure for Scotland into expenditure by the Scottish Government and by other UK Government departments for the years 2008-09 to 2012-13.^[29] Tables 5.9 and 5.10 provide a similar disaggregation but with an additional split for current and capital expenditure. Finally, Table 5.11 provides an assessment of the contribution 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 2008-09 to 2012-13 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 National Records of Scotland (NRS), and by public corporations. 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 treatment of certain cash and non-cash items. There are also important differences in classification of expenditure.

UK Government departments accounted for the remaining Scottish identifiable expenditure. Their spending is dominated by expenditure on social protection - i.e. welfare payments and unemployment benefits. Social protection is the only function where the majority of identifiable expenditure is not undertaken by the Scottish Government and Scottish Local Authorities.

In the five years since 2008-09, UK Government departments have accounted for about a third of total identifiable current expenditure, primarily through expenditure on social protection. In contrast, in most years over the same period these departments were typically responsible for less than 3% of identifiable capital expenditure in Scotland, with expenditure in this area instead being almost solely directed by the Scottish Government.

As Table 5.11 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. It should be noted that some of the differences in the composition of spending between Scotland and the UK will reflect variations in the classification of expenditure between spending categories.

Table 5.8: Total Identifiable Expenditure: Scotland 2008-09 to 2012-13

	(£ million)
	Scottish Government and Local Authorities					Other UK Government					Total
	2008-09	2009-10	2010-11	2011-12	2012-13	2008-09	2009-10	2010-11	2011-12	2012-13	2008-09	2009-10	2010-11	2011-12	2012-13
General public services
Public and common services	1,080	1,087	1,137	1,193	963	64	73	62	48	25	1,145	1,160	1,199	1,241	988
International services	0	0	0	0	0	17	15	18	17	14	17	15	18	17	14
Public sector debt interest	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Defence	5	5	5	4	4	0	0	0	0	0	5	5	5	5	4
Public order and safety	2,306	2,359	2,561	2,581	2,274	138	150	92	140	128	2,444	2,508	2,654	2,721	2,402
Economic affairs
Enterprise and econ development	787	835	752	782	811	161	136	104	113	139	948	971	856	895	951
Science and technology	12	7	6	5	4	44	51	52	75	76	57	58	58	80	80
Employment policies	0	0	0	0	0	210	226	295	244	222	210	226	295	244	222
Agriculture, forestry and fisheries	818	870	926	965	909	10	10	8	8	8	829	880	933	973	917
Transport	2,599	2,768	2,595	2,665	2,727	11	50	34	32	28	2,610	2,819	2,629	2,697	2,756
Environment protection	927	978	986	956	955	47	45	60	55	51	973	1,022	1,046	1,011	1,006
Housing and community amenities	1,802	1,970	1,621	1,624	1,629	0	0	0	0	0	1,802	1,970	1,621	1,624	1,629
Health	10,130	10,545	10,789	10,916	11,169	9	7	5	5	9	10,139	10,552	10,794	10,921	11,178
Recreation, culture and religion	1,002	1,061	1,019	1,126	1,138	78	94	75	99	101	1,080	1,154	1,095	1,224	1,240
Education and training	7,499	7,702	7,629	7,463	7,625	30	25	23	27	25	7,529	7,728	7,652	7,490	7,650
Social protection	4,457	4,847	5,038	5,083	5,539	13,620	14,671	15,092	15,620	16,430	18,077	19,518	20,130	20,703	21,969
Accounting adjustments	2,608	2,458	2,845	2,973	2,797	0	0	0	0	0	2,608	2,458	2,845	2,973	2,797
Total	36,032	37,491	37,909	38,336	38,546	14,440	15,553	15,920	16,483	17,256	50,472	53,044	53,829	54,819	55,802

Table 5.9: Identifiable Expenditure - Scottish Government and Local Authorities: Scotland 2008-09 to 2012-13

	(£ million)
	Current					Capital
	2008-09	2009-10	2010-11	2011-12	2012-13	2008-09	2009-10	2010-11	2011-12	2012-13
General public services
Public and common services	827	1,036	969	1,055	800	254	50	168	138	163
International services	0	0	0	0	0	0	0	0	0	0
Public sector debt interest	0	0	0	0	0	0	0	0	0	0
Defence	5	5	5	4	4	0	0	0	0	0
Public order and safety	2,100	2,140	2,343	2,408	2,151	206	218	218	173	123
Economic affairs
Enterprise and econ development	527	560	511	551	564	260	275	241	231	247
Science and technology	5	7	6	5	4	7	0	0	0	0
Employment policies	0	0	0	0	0	0	0	0	0	0
Agriculture, forestry and fisheries	719	759	774	817	765	100	111	152	148	144
Transport	1,505	1,456	1,539	1,538	1,482	1,094	1,312	1,056	1,127	1,245
Environment protection	841	885	899	875	859	85	93	87	82	95
Housing and community amenities	281	261	296	231	188	1,521	1,709	1,324	1,393	1,441
Health	9,626	10,013	10,213	10,437	10,623	504	532	576	478	546
Recreation, culture and religion	758	814	793	851	834	244	247	226	275	304
Education and training	6,853	7,042	7,032	6,777	6,988	646	661	596	686	638
Social protection	4,395	4,788	4,990	5,040	5,465	62	59	48	43	74
Accounting adjustments	2,439	2,309	2,676	2,791	2,609	169	149	169	182	187
Total	30,880	32,075	33,047	33,381	33,338	5,153	5,416	4,862	4,955	5,208

Table 5.10: Identifiable Expenditure - Other UK Government: Scotland 2008-09 to 2012-13

	(£ million)
	Current					Capital
	2008-09	2009-10	2010-11	2011-12	2012-13	2008-09	2009-10	2010-11	2011-12	2012-13
General public services
Public and common services	60	61	57	45	27	4	12	5	3	-2
International services	17	14	17	16	13	0	0	1	1	1
Public sector debt interest	0	0	0	0	0	0	0	0	0	0
Defence	0	0	0	0	0	0	0	0	0	0
Public order and safety	129	136	87	132	124	9	13	5	7	4
Economic affairs
Enterprise and econ development	123	121	88	112	139	38	15	16	1	1
Science and technology	44	49	51	64	73	1	2	1	11	3
Employment policies	207	222	291	242	222	3	4	4	2	1
Agriculture, forestry and fisheries	10	10	8	8	8	0	0	0	0	0
Transport	4	42	27	25	23	8	8	7	7	6
Environment protection	38	39	41	48	41	9	6	20	7	10
Housing and community amenities	0	0	0	0	0	0	0	0	0	0
Health	7	6	5	5	9	1	1	0	0	0
Recreation, culture and religion	57	70	52	70	79	22	24	23	28	23
Education and training	29	25	23	26	24	1	0	1	1	1
Social protection	13,592	14,632	15,058	15,609	16,430	28	39	34	11	-1
Accounting adjustments	0	0	0	0	0	0	0	0	0	0
Total	14,317	15,428	15,805	16,403	17,209	123	125	116	80	47

Table 5.11: Identifiable Expenditure: Scotland and UK 2012-13

	Scotland						UK
	Scottish Government and Local Authorities		Other UK Government		Total		Total
	Expenditure (£ million)	Share of identifiable expenditure	Expenditure (£ million)	Share of identifiable expenditure	Expenditure (£ million)	Share of identifiable expenditure	Expenditure (£ million)	Share of identifiable expenditure
General public services
Public and common services	963	1.7%	25	0.0%	988	1.8%	6,939	1.2%
International services	0	0.0%	14	0.0%	14	0.0%	164	0.0%
Public sector debt interest	0	0.0%	0	0.0%	0	0.0%	0	0.0%
Defence	4	0.0%	0	0.0%	4	0.0%	75	0.0%
Public order and safety	2,274	4.1%	128	0.2%	2,402	4.3%	29,947	5.1%
Economic affairs
Enterprise and econ development	811	1.5%	139	0.2%	951	1.7%	4,097	0.7%
Science and technology	4	0.0%	76	0.1%	80	0.1%	1,582	0.3%
Employment policies	0	0.0%	222	0.4%	222	0.4%	2,568	0.4%
Agriculture, forestry and fisheries	909	1.6%	8	0.0%	917	1.6%	5,340	0.9%
Transport	2,727	4.9%	28	0.1%	2,756	4.9%	18,861	3.2%
Environment protection	955	1.7%	51	0.1%	1,006	1.8%	8,706	1.5%
Housing and community amenities	1,629	2.9%	0	0.0%	1,629	2.9%	10,543	1.8%
Health	11,169	20.0%	9	0.0%	11,178	20.0%	122,995	21.1%
Recreation, culture and religion	1,138	2.0%	101	0.2%	1,240	2.2%	9,015	1.5%
Education and training	7,625	13.7%	25	0.0%	7,650	13.7%	87,448	15.0%
Social protection	5,539	9.9%	16,430	29.4%	21,969	39.4%	246,125	42.3%
Accounting adjustments	2,797	5.0%	0	0.0%	2,797	5.0%	28,023	4.8%
Total	38,546	69.1%	17,256	30.9%	55,802	100%	582,427	100%

Box 5.3 EU Transactions

As a member of the European Union (EU) the UK contributes to the EU budget and receives funding from the EU via a number of programmes. The methodology used in GERS to apportion a share of the UK's EU contributions and receipts to Scotland is set out below.

Contributions to the EU Budget

EU members contribute to the EU budget through three sources:

• GNI based own resource: Each member state makes a contribution in proportion to their GNI, in 2013 this was approximately 1.13% their GNI.
• VAT based own resource: Each member state contributes 0.3% of their harmonised VAT base.
• Traditional Own Resource (TOR): Consists of agriculture duties and customs duties levied on agriculture and non-agriculture products from outside the EU.

Under the current fiscal framework, Scotland does not contribute directly to the EU budget. In GERS, Scotland is therefore assigned a share of the UK's contribution based on various apportionment methodologies. Scotland's share of the UK's GNI based contribution is calculated using the ratio of Scottish to UK onshore GDP. VAT based own resource and TOR are assigned to Scotland using Scotland's share of UK VAT receipts.

Since 1985, the UK has received a rebate broadly equal to 66% of the UK's net contribution in the previous year - where the net contribution is the difference between the UK's share of VAT contributions and its share of expenditure allocated to Member States. A population share of the rebate is assigned to Scotland.

Receipts from the EU Budget

Within GERS, receipts received from the EU are broken down into two categories, public sector receipts and external assistance. Public sector receipts reflect expenditure specifically for Scotland as reported in the Scottish Government's Consolidated Accounts such as payments under the Common Agricultural Policy. They are therefore recorded in GERS as identifiable expenditures for Scotland. The EU's external assistance budget provides aid to states outside the EU. A share of this expenditure is attributed to the UK based on its contribution to the EU budget. This is consistent with the UK Government's accounting approach. GERS classifies this expenditure as non-identifiable and assigns Scotland a population share.

Two measures are generally used to illustrate the UK's net contribution to the EU:

• The primary measure is the UK's net contribution to the EU budget - this is calculated as the difference between the UK's gross contribution to the EU budget (less the rebate) and public sector EU receipts.
• A secondary measure is the UK's net payment to EU institutions - this is equal to the UK's net contribution to the EU Budget less its share of the EU's external assistance aid budget.

Estimates of both measures are provided for Scotland in the table below. The table also demonstrates the impact of assigning the UK's GNI based contributions to Scotland using different measures of Scottish GDP.

Scotland's Estimated Notional Net Contributions to the EU
	(£ million)
	2008-09	2009-10	2010-11	2011-12	2012-13
Total Contributions with:
GNI contribution estimated based on Scottish onshore GDP share	1,104	1,132	1,283	1,284	1,368
GNI contribution estimated based on Scottish GDP including a per capita share of North Sea GDP	1,119	1,146	1,300	1,300	1,384
GNI contribution estimated based on Scottish including a geographical share of North Sea GDP	1,248	1,267	1,450	1,438	1,512
Rebate	-471	-354	-225	-294	-264
Total Contribution after rebate with:
GNI contribution estimated based on Scottish onshore GDP share	633	778	1,059	990	1,104
GNI contribution estimated based on Scottish GDP including a per capita share of North Sea GDP	648	792	1,076	1,006	1,119
GNI contribution estimated based on Scottish including a geographical share of North Sea GDP	777	912	1,226	1,144	1,247
Public Sector EU Receipts	-622	-619	-724	-800	-687
Net Contribution to the EU Budget
GNI contribution estimated based on Scottish onshore GDP share	11	159	335	190	417
GNI contribution estimated based on Scottish GDP including a per capita share of North Sea GDP	26	173	352	206	432
GNI contribution estimated based on Scottish including a geographical share of North Sea GDP	155	293	502	344	560
Less payments to EU Budget attributed to the EU aid programme	63	78	81	73	74
Net payments to EU institutions with:
GNI contribution estimated based on onshore GDP share	-52	81	254	117	343
GNI contribution estimated based on including a per capita share of North Sea GDP	-37	95	271	133	358
GNI contribution estimated based on including a geographical share of North Sea GDP	92	215	421	271	486

Analysis of Non-Identifiable Expenditure

This section provides a more detailed analysis of non-identifiable expenditure. There are a number 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 to apportion each element of non-identifiable expenditure are discussed in Annex B.

In addition to non-identifiable expenditure, the CRA also includes a small amount of UK Government expenditure which is classified as identifiable but for programmes outside the UK. 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 from the 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 is therefore included in UK non-identifiable expenditure.

Table 5.12 presents total non-identifiable expenditure for Scotland and the UK between 2008-09 and 2012-13. Tables 5.13 and 5.14 decompose Scottish and UK non-identifiable expenditure into their current and capital components.

Total non-identifiable expenditure for Scotland was estimated to be £9.4 billion in 2012-13, 7.9% of the UK total.

Defence and debt interest payments comprise the largest components. As Tables 5.13 and 5.14 highlight, current expenditure was the major component of non-identifiable expenditure for both Scotland and the UK in 2012-13.

As outlined in Chapter 2 and Box B.1 in Annex B the UK Government's financial sector interventions in 2008-09 are classified as non-identifiable expenditure and are recorded in the Enterprise and Economic Development (EED) expenditure programme lines. The scale of the financial sector interventions, relative to other spending on this category, means that capital non-identifiable expenditure on EED for Scotland is estimated to have fallen from £825 million in 2008-09 to £17 million in 2010-11 before rising to £29 million in 2012-13.

The negative values for current expenditure for EED between 2008-09 and 2011-12 in Table 5.13 are due to the fact that the fees received from the various schemes are recorded as a negative current expenditure (i.e. revenue received), and these fees exceeded the current expenditure on other elements of EED in these years.

Table 5.12: Non-Identifiable Expenditure: Scotland and UK 2008-09 to 2012-13

	(£ million)
	Scotland					UK
	2008-09	2009-10	2010-11	2011-12	2012-13	2008-09	2009-10	2010-11	2011-12	2012-13
General public services
Public and common services	449	422	410	381	392	5,366	5,061	4,927	4,581	4,738
International services	522	584	651	649	654	6,205	6,957	7,766	7,757	7,848
Public sector debt interest	2,734	2,599	3,846	4,099	4,020	32,497	30,956	45,891	48,984	48,230
Defence	3,090	3,161	3,287	3,230	3,024	36,736	37,634	39,212	38,601	36,288
Public order and safety	176	185	149	140	126	2,089	2,200	1,774	1,669	1,517
Economic affairs
Enterprise and economic development	768	398	-118	-43	98	9,138	4,750	-1,401	-488	1,204
Science and technology	176	184	171	184	168	2,099	2,201	2,046	2,202	2,017
Employment policies	0	0	0	0	0	1	1	1	1	0
Agriculture, forestry and fisheries	5	13	15	3	0	55	149	178	37	2
Transport	25	20	19	20	23	303	245	247	271	477
Environment protection	76	140	171	165	203	901	1,675	2,043	1,967	2,439
Housing and community amenities	0	0	0	0	0	0	0	0	0	0
Health	115	128	144	126	107	1,367	1,522	1,717	1,500	1,280
Recreation, culture and religion	312	326	337	331	314	3,710	3,885	4,022	3,952	3,765
Education and training	0	0	0	0	0	3	3	4	4	4
Social protection	466	558	564	455	489	5,677	6,788	6,920	5,647	6,079
Accounting adjustments	53	324	618	310	-215	3,121	6,225	10,589	6,672	3,365
Total	8,968	9,043	10,266	10,050	9,403	109,268	110,253	125,936	123,357	119,254

Table 5.13: Non-Identifiable Expenditure: Scotland 2008-09 to 2012-13

	(£ million)
	Current					Capital
	2008-09	2009-10	2010-11	2011-12	2012-13	2008-09	2009-10	2010-11	2011-12	2012-13
General public services
Public and common services	409	403	376	375	372	40	19	34	5	20
International services	485	535	589	600	604	37	50	62	49	50
Public sector debt interest	2,734	2,599	3,846	4,099	4,020	0	0	0	0	0
Defence	2,796	2,820	2,926	2,928	2,736	294	341	361	302	288
Public order and safety	158	160	129	123	113	18	25	20	17	14
Economic affairs
Enterprise and economic development	-57	-12	-136	-60	69	825	410	17	17	29
Science and technology	150	150	147	152	143	26	34	25	32	25
Employment policies	0	0	0	0	0	0	0	0	0	0
Agriculture, forestry and fisheries	5	13	15	3	0	0	0	0	0	0
Transport	17	12	11	12	13	8	9	8	8	9
Environment protection	-26	46	40	55	44	101	94	131	110	159
Housing and community amenities	0	0	0	0	0	0	0	0	0	0
Health	107	122	131	117	104	8	6	13	9	2
Recreation, culture and religion	302	313	324	310	301	10	13	13	21	13
Education and training	0	0	0	0	0	0	0	0	0	0
Social protection	465	543	551	441	466	1	15	13	15	23
Accounting adjustments	-62	199	326	-30	94	115	124	291	340	-309
Total	7,484	7,903	9,276	9,125	9,080	1,484	1,140	990	924	324

Table 5.14: Non-Identifiable Expenditure: UK 2008-09 to 2012-13

	(£ million)
	Current					Capital
	2008-09	2009-10	2010-11	2011-12	2012-13	2008-09	2009-10	2010-11	2011-12	2012-13
General public services
Public and common services	4,890	4,828	4,516	4,518	4,492	476	233	412	63	246
International services	5,769	6,364	7,025	7,166	7,253	436	593	740	591	595
Public sector debt interest	32,497	30,956	45,891	48,984	48,230	0	0	0	0	0
Defence	33,237	33,576	34,909	34,990	32,834	3,499	4,058	4,303	3,611	3,454
Public order and safety	1,875	1,904	1,534	1,471	1,354	214	297	241	199	163
Economic affairs
Enterprise and economic development	-669	-129	-1,607	-691	859	9,807	4,879	206	203	345
Science and technology	1,784	1,792	1,751	1,818	1,716	315	409	296	384	301
Employment policies	1	1	1	1	0	0	0	0	0	0
Agriculture, forestry and fisheries	55	149	178	37	2	0	0	0	0	0
Transport	207	143	150	179	363	96	103	97	92	114
Environment protection	-303	550	474	656	527	1,205	1,125	1,570	1,311	1,912
Housing and community amenities	0	0	0	0	0	0	0	0	0	0
Health	1,267	1,449	1,558	1,394	1,251	100	73	159	106	29
Recreation, culture and religion	3,587	3,730	3,866	3,705	3,612	122	156	156	248	153
Education and training	3	3	4	4	4	0	0	0	0	0
Social protection	5,663	6,613	6,764	5,470	5,800	14	175	156	177	280
Accounting adjustments	1,691	4,776	8,340	4,475	5,843	1,430	1,448	2,249	2,197	-2,478
Total	91,554	96,704	115,354	114,175	114,141	17,715	13,549	10,582	9,182	5,113

Box 5.4 - Debt Interest Payments and the Current Primary Balance

The debt interest payment expenditure in the above tables refers to payments to cover interest on outstanding UK Government debt. As there is no separate identification of Scotland's share of UK public sector net debt in UK public financial accounts they do not provide a separate Scottish debt interest expenditure. 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 the assumption that residents across the UK bear an equal burden of UK Government liabilities.

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 the current 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 this balance to obtain the current budget balance which is presented in Chapter 2.

The table below illustrates the current primary balance on public services consumed for Scotland between 2008-09 and 2012-13.

Current Primary Balance: Scotland 2008-09 to 2012-13
	(£ million)
	2008-09	2009-10	2010-11	2011-12	2012-13
Current revenue
Excluding North Sea revenue	43,772	42,053	44,317	46,313	47,564
Including North Sea revenue (per capita share)	44,820	42,556	45,022	47,261	48,117
Including North Sea revenue (geographical share)	55,350	47,732	51,771	56,313	53,146
Current expenditure including capital consumption	54,467	57,289	60,072	60,948	61,746
Less debt interest payments	2,734	2,599	3,846	4,099	4,020
Current expenditure on services	51,733	54,690	56,226	56,849	57,726
Current Primary balance
Excluding North Sea revenue	-7,961	-12,637	-11,909	-10,536	-10,162
Including North Sea revenue (per capita share)	-6,913	-12,134	-11,204	-9,587	-9,610
Including North Sea revenue (geographical share)	3,617	-6,958	-4,454	-536	-4,581

The table below presents the estimates of Scottish and UK current primary balances as a share of GDP.

Current Primary Balance: Scotland & UK 2008-09 to 2012-13 (% GDP)
	2008-09	2009-10	2010-11	2011-12	2012-13
Scotland - Excluding North Sea revenue	-6.7%	-10.9%	-9.7%	-8.4%	-8.0%
Scotland - Including North Sea revenue (per capita share)	-5.7%	-10.3%	-9.0%	-7.5%	-7.5%
Scotland - Including North Sea revenue (geographical share)	2.5%	-5.2%	-3.1%	-0.4%	-3.2%
UK	-1.3%	-5.4%	-3.6%	-2.6%	-2.8%