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Technical Notes for Scotland Performs Indicators and Targets - Purpose Target 1

This page relates to the 2007 version of the National Performance Framework. Information about the current version of the NPF is available on the Scotland Performs Home Page.

Scotland Performs Purpose Target 1 - Economic Growth (GDP)

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Title

Economic Growth (GDP) - Purpose target

Associated target

To raise Scotland's GDP growth rate to the UK level by 2011.

To match the GDP growth rate of the small independent EU countries by 2017.

Brief description

The GDP growth targets are "trackers" in the sense that they aim to match a variable, the future UK growth rate and the future average growth rate of small EU countries by an identified point in time. Historical growth performance gives some indication of the extent of the challenge posed by these targets: Scotland's average GDP growth rate has been below that of the UK and comparable small EU countries over the last 30 years.

Strategic Objective(s) to which indicator relates

This indicator informs progress in relation to all five Strategic Objectives:

Wealthier and Fairer;

Healthier;

Safer and Stronger;

Smarter; and

Greener.

More Detailed Definitions

Definitions of Keywords

Gross Domestic Product (GDP) is a measure of the value added to materials and other inputs in the production of goods and services by resident organisations; before allowing for depreciation or capital consumption. In accordance with UK National Accounting principles, GDP figures for Scotland exclude output from the North Sea oil and gas sector. Output from this sector - termed "extra-regio" activity - is not attributed to any one area of the UK. Net receipts from interest, profits and dividends abroad are also excluded.

There are two measures of GDP, market prices and basic prices. The estimates produced for Scotland are measured in basic prices, which excludes taxes less subsidies on products (taxes on products include VAT and excise duties). Gross Value Added (GVA) is another term for GDP at basic prices.

Evidence Source

Data for Scotland and theUK

GDP figures for Scotland are produced by the Office of the Chief Economic Adviser ( OCEA) in the Scottish Government. Figures are published quarterly.

GDP at market prices is the headline measure used by the UK but they also produce estimates of GVA for their industry breakdown as it is difficult to break down taxes and subsidies below whole economy level. Although there is difficulty in allocating taxes and subsidies below national level, GDP can be estimated at market prices for Scotland using the UK ratio of current prices to basic prices.

All UK figures used for comparing GDP performance between Scotland and the UK refer to GDP at basic prices (or GVA). UK figures are taken from the Office for National Statistics' ( ONS) Quarterly National AccountsGDP publication, and the headline CGCE series is used (which includes output from the North Sea oil and gas sector).

Data for Small EU Countries

GDP growth data for the Small EU countries is collected from the Organisation for Economic Cooperation and Development ( OECD). The data series used provides GDP volume estimates in constant prices, and fixed Purchasing Power Parities ( PPP).

This data is available in the OECD statistics web site and can be found through the following link, http://stats.oecd.org/WBOS/index.aspx.

Baseline and Past Trends

Match UK Growth by 2011 Target

The baseline position is 2007 Quarter 1. Over the 30 year period to 2006, Scotland's average annual GDP growth rate was 1.9%, significantly below the UK average of 2.4%. This has resulted in an underlying GDP growth gap of around 0.5% points.

Match small EU countries by 2017

The small EU countries are defined here as: Austria, Denmark, Finland, Ireland, Luxembourg, Portugal, and Sweden. The GDP growth rate for the Small EU is calculated using a weighted approach, whereby the total reflects the relative economic size of each of the seven countries.

The baseline is 2007 quarter 1. Over the 30 year period to 2006, Scotland's average annual GDP growth rate was 1.9%, considerably below the Small EU average of 2.7%. This has resulted in an underlying GDP growth gap of around 0.9% points.

Details of the latest performance and past trends can be found on Scotland Performs, http://www.scotland.gov.uk/About/scotPerforms/purposes/economicgrowth.

Methodology for Data Source

Details of the methodologies employed in the production of the statistics can be found at: http://www.scotland.gov.uk/gdp

Quarterly Scottish GDP estimates tend to be less reliable than UK estimates. This is primarily due to the equivalent UK figures being produced through balancing 3 independent sets of estimates (Output (GVA), Income & Expenditure-based approaches). Furthermore, the survey data used to produce the Scottish GDP estimates tend to be based on smaller numbers of units, making figures for Scotland more likely to be subject to random fluctuation. To account for this annual GDP growth rates (to the most recent quarter) for Scotland are calculated on a rolling 4 quarters on 4 quarters basis.

In order to ensure consistency in the measurement of performance against the GDP growth targets annual GDP growth rates for the UK and the Small EU countries are also calculated using the 4 quarters on 4 quarters approach.

Data Ownership and Quality Assurance

The quarterly GDP statistics are classed as market sensitive National Statistics produced by the Scottish Government.

The data used to produce the Scottish GDP estimates come from a range of sources including monthly and quarterly turnover inquiries carried out by the Office for National Statistics; published data sources (e.g. on employment levels or activity levels in certain industries); and data received directly from companies and other organisations.

Publication of Data

Published quarterly on the Scottish Government website ( http://www.scotland.gov.uk/gdp) on pre-announced dates (usually 3rd Wednesday in January, April, July, October).

Methodology for Recent Change Arrow on Scotland

This evaluation is based on: any difference in the gap in annual growth rates within +/- 0.1 percentage points of the last quarter's figure suggests that the position is more likely to be maintaining than showing any change. A movement of 0.1 percentage points or more in Scotland's favour suggests that the position is improving, whereas a movement of 0.1 percentage points or more in the UK or Small EU's favour suggests that the position is worsening.

Future issues or reviews

The GDP series for Scotland is produced using a range of data sources including monthly and quarterly turnover inquiries carried out by the Office for National Statistics; published data sources (e.g. on employment levels or activity levels in certain industries); and data received directly from companies and other organisations. These data sources are in a constant state of development. As a result data sources and methods used in the measurement of GDP and other economic statistics will at times need to be revised.

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