Publication - Statistics

Government Expenditure and Revenue Scotland 2010-2011

Published: 7 Mar 2012
ISBN:
9781780457055

Government Expenditure and Revenue Scotland (GERS) is a National Statistics publication. It estimates the contribution of revenue raised in Scotland toward the goods and services provided for the benefit of Scotland. The estimates in this publication are consistent with the UK Public Sector Finance Statistics published in January 2012.

Government Expenditure and Revenue Scotland 2010-2011
5 PUBLIC SECTOR EXPENDITURE

5 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 October 2011 Country and Regional Analysis (CRA) contained in the National Statistics publication Public Expenditure Statistical Analyses (PESA) published by HM Treasury19.

In GERS, public sector expenditure is divided into three categories: identifiable expenditure, non-identifiable expenditure and an accounting adjustment. 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.

Finally, an accounting adjustment ensures that public sector expenditure reported in PESA is consistent with Total Managed Expenditure (TME), the UK Government's principal measure of public sector expenditure used in the UK Public Sector Finance Accounts.

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 C discusses the revisions from previous reports and the relevant apportionment methodologies applied.

As discussed in Chapter 2, the estimates in GERS include a share of the permanent effects of the UK Government's financial sector interventions. This is consistent with the methodology used by HM Treasury and the OBR. The UK Government's net financial sector interventions are classified as non-identifiable and are recorded in the Enterprise and Economic Development (EED) expenditure programme lines in both PESA and GERS. The outlays by the UK Government are recorded as a capital expenditure, whilst the fees received are recorded as a negative current expenditure (i.e. revenue received), as summarised in Box 2.4. 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 2008-09.

Total Public Sector Expenditure

Estimated total public sector expenditure for Scotland by spending category for 2010-11 is shown in Table 5.1. In 2010-11, total public sector expenditure for Scotland was estimated to be £61.6 billion, this was equivalent to 9.3 per cent of comparable total UK public sector expenditure in 2010-11, shown in Table 5.2. Social protection was the largest Scottish expenditure programme. Together with health expenditure, it accounted for approximately 51.9 per cent of total public sector expenditure for Scotland in 2010-11.

Table 5.1: Total Expenditure: Scotland 2010-11

Scotland
£ million % of total expenditure
General public services    
Public and common services 1,527 2.5%
International services 746 1.2%
Public sector debt interest 3,700 6.0%
Defence 3,277 5.3%
Public order and safety 2,657 4.3%
Economic affairs    
Enterprise and economic development 822 1.3%
Science and technology 391 0.6%
Employment policies 307 0.5%
Agriculture, forestry and fisheries 963 1.6%
Transport 2,722 4.4%
Environment protection 1,295 2.1%
Housing and community amenities 1,773 2.9%
Health 10,936 17.7%
Recreation, culture and religion 1,571 2.5%
Education and training 8,050 13.1%
Social protection 21,047 34.2%
EU transactions -158 -0.3%
Total 61,625 100.0%

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.

Total public sector expenditure for Scotland is estimated to have increased from £50.4 billion in 2006-07 to £61.6 billion in 2010-11, an increase of approximately 22.3 per cent in nominal terms. Over the same period, equivalent UK public sector expenditure increased from £523.1 billion to £665.1 billion, an increase of 27.1 per cent in nominal terms.

Table 5.2: Total Current and Capital Expenditure Scotland and UK 2006-07 to 2010-11

(£ million)
Scotland UK
2006-07 2007-08 2008-09 2009-10 2010-11 2006-07 2007-08 2008-09 2009-10 2010-11
Current 45,363 48,246 50,007 52,992 55,281 482,232 509,858 539,199 578,163 605,688
Capital 5,044 5,218 6,500 6,435 6,344 40,888 45,425 64,232 64,990 59,444
Total 50,407 53,464 56,507 59,427 61,625 523,120 555,283 603,431 643,153 665,132

Table 5.3 shows the share of total expenditure between current and capital for Scotland. In 2006-07 and 2007-08, capital expenditure for Scotland was approximately 10 per cent of total expenditure. In 2008-09, capital expenditure for Scotland subsequently increased to 11.5 per cent of total expenditure, reflecting the impact of the UK Government's financial sector interventions. Capital expenditure fell as a share of total expenditure in the two subsequent years, to 10.3 per cent of total expenditure in 2010-11, although this remains a larger share of total expenditure than in the two years prior to 2008-09.

Table 5.3: Current and Capital Expenditure (% of Total Expenditure): Scotland 2006-07 to 2010-11

(per cent)
2006-07 2007-08 2008-09 2009-10 2010-11
Current 90.0% 90.2% 88.5% 89.2% 89.7%
Capital 10.0% 9.8% 11.5% 10.8% 10.3%

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.

Table 5.4: Total Expenditure: Scotland 2006-07 to 2010-11

 

(£ million)
Current Capital Total
2006-07 2007-08 2008-09 2009-10 2010-11 2006-07 2007-08 2008-09 2009-10 2010-11 2006-07 2007-08 2008-09 2009-10 2010-11
General public services                              
Public and common services 1,255 1,321 1,303 1,510 1,270 140 41 298 75 257 1,396 1,363 1,601 1,585 1,527
International services 495 528 569 617 682 32 37 39 52 65 527 565 609 670 746
Public sector debt interest 2,428 2,644 2,655 2,628 3,700 0 0 0 0 0 2,428 2,644 2,655 2,628 3,700
Defence 2,645 2,624 2,803 2,831 2,921 75 214 292 338 356 2,721 2,838 3,094 3,169 3,277
Public order and safety 2,127 2,237 2,323 2,373 2,392 183 165 226 245 265 2,309 2,402 2,549 2,618 2,657
Economic affairs                              
Enterprise and economic development 691 788 536 595 505 206 237 1,045 665 317 897 1,024 1,580 1,261 822
Science and technology 268 341 327 371 345 55 121 105 77 46 324 462 431 448 391
Employment policies 251 251 275 274 300 13 1 1 7 7 264 253 276 280 307
Agriculture, forestry and fisheries 612 700 722 764 781 73 71 101 112 182 686 771 823 875 963
Transport 1,443 1,537 1,517 1,506 1,521 1,278 1,242 1,118 1,327 1,201 2,721 2,779 2,634 2,833 2,722
Environment protection 835 829 871 985 1,049 162 190 190 188 246 997 1,019 1,061 1,173 1,295
Housing and community amenities 182 333 281 261 332 1,497 1,413 1,521 1,709 1,440 1,679 1,746 1,802 1,970 1,773
Health 8,802 9,360 9,748 10,149 10,312 297 447 512 537 624 9,099 9,807 10,260 10,687 10,936
Recreation, culture and religion 1,095 1,113 1,120 1,183 1,198 205 252 307 322 373 1,301 1,365 1,427 1,506 1,571
Education and training 6,426 6,675 6,932 7,088 7,226 724 696 649 664 823 7,150 7,372 7,581 7,751 8,050
Social protection 16,161 17,200 18,516 20,088 20,905 103 91 96 115 142 16,264 17,291 18,613 20,203 21,047
EU transactions -353 -237 -491 -231 -158 0 0 0 0 0 -353 -237 -491 -231 -158
Total 45,363 48,246 50,007 52,992 55,281 5,044 5,218 6,500 6,435 6,344 50,407 53,464 56,507 59,427 61,625

Table 5.5: Total Expenditure: UK 2006-07 to 2010-11

(£ million)
Current Capital Total
2006-07 2007-08 2008-09 2009-10 2010-11 2006-07 2007-08 2008-09 2009-10 2010-11 2006-07 2007-08 2008-09 2009-10 2010-11
General public services                              
Public and common services 11,474 11,366 11,941 11,951 11,390 1,194 1,102 2,014 1,650 2,009 12,669 12,468 13,955 13,601 13,399
International services 5,863 6,272 6,769 7,350 8,133 388 455 472 625 770 6,251 6,726 7,241 7,974 8,903
Public sector debt interest 28,749 31,363 31,555 31,281 44,136 0 0 0 0 0 28,749 31,363 31,555 31,281 44,136
Defence 31,324 31,133 33,328 33,671 34,819 899 2,539 3,468 4,025 4,246 32,223 33,672 36,796 37,696 39,065
Public order and safety 28,673 29,824 31,106 31,627 31,415 1,817 2,022 2,740 2,694 2,309 30,490 31,846 33,846 34,321 33,724
Economic affairs                              
Enterprise and economic development 4,786 5,423 4,018 4,840 2,728 1,534 1,402 11,409 6,450 1,597 6,320 6,826 15,426 11,290 4,325
Science and technology 2,191 2,518 2,686 2,943 2,976 675 785 625 733 515 2,865 3,303 3,311 3,676 3,491
Employment policies 3,215 3,208 3,175 3,392 3,736 195 79 86 112 71 3,410 3,287 3,261 3,503 3,806
Agriculture, forestry and fisheries 4,758 3,974 5,429 5,527 5,133 321 289 377 287 361 5,080 4,263 5,806 5,814 5,495
Transport 9,417 9,871 9,026 9,845 9,462 10,467 10,655 11,801 12,848 13,440 19,885 20,526 20,827 22,693 22,901
Environment protection 7,127 7,224 7,165 8,288 8,743 2,250 2,285 2,533 2,659 3,255 9,377 9,509 9,698 10,947 11,998
Housing and community amenities 3,599 3,878 3,787 4,053 3,535 7,948 9,037 11,207 12,129 10,177 11,547 12,916 14,995 16,182 13,712
Health 90,804 97,632 104,713 112,156 115,855 3,889 4,719 5,346 6,181 5,450 94,693 102,350 110,059 118,338 121,305
Recreation, culture and religion 9,516 9,867 10,019 10,354 10,287 1,842 2,346 3,083 3,567 3,679 11,358 12,213 13,102 13,922 13,966
Education and training 66,387 71,326 74,847 78,638 80,311 6,660 6,921 8,306 9,921 10,242 73,047 78,248 83,153 88,558 90,553
Social protection 176,152 186,510 202,565 222,177 230,106 807 789 766 1,110 1,325 176,959 187,299 203,331 223,287 231,431
EU transactions -1,802 -1,531 -2,931 71 2,922 0 0 0 0 0 -1,802 -1,531 -2,931 71 2,922
Total 482,232 509,858 539,199 578,163 605,688 40,888 45,425 64,232 64,990 59,444 523,120 555,283 603,431 643,153 665,132

Table 5.6 shows estimated total public sector expenditure for Scotland and the UK on a per capita basis from 2006-07 to 2010-11. 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 £11,785 in 2010-11, £1,122 higher than the UK average. The relative difference in public spending per capita between Scotland and the UK has been on a downward trend. In 2006-07 public spending per capita for Scotland was 14.1 per cent higher than the UK average, by 2010-11 this gap had fallen to 10.5 per cent.

Table 5.6: Total Expenditure Per Capita: Scotland and UK 2006-07 to 2010-11

2006-07 2007-08 2008-09 2009-10 2010-11
Scotland (£) 9,838 10,380 10,920 11,426 11,785
UK (£) 8,621 9,089 9,813 10,390 10,663
Difference (Scotland minus UK) (£) 1,217 1,291 1,107 1,037 1,122
Relative Expenditure for Scotland (UK = 100) 114.1 114.2 111.3 110.0 110.5

There are 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 sewage 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. However, this benefits the UK as a whole. 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 relative to the rest of the UK.

Box 5.1 - 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 per cent debt funded which ensures that the returns to the private sector are capped and that 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 2006-07 and 2010-11 are presented in the table below.

Public Sector Unitary Charge Expenditure in Scotland 2006-07 to 2010-11

(£ million)
2006-07 2007-08 2008-09 2009-10 2010-11
Scottish Public Sector Unitary Charges1 435 508 585 729 821
Other UK Government Departments PFI Unitary Charges 13 20 23 23 26
Total Unitary Charges in Scotland 448 527 608 752 847

Source: Scottish Government March 2011 and HM Treasury PFI Signed Project List - November 2011.
1. Includes both PFI and NDP figures.

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 to residents and enterprises of that region. As highlighted in the PESA 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 detailed review of all 1,400 programme object groups in PESA CRA 2011, 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 PESA. The principal changes relate to the treatment of expenditure on nuclear decommissioning by the UK Atomic Energy Authority (UKAEA), and the expenditure on the London Olympics.

Annex C 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 the regional apportionment of public sector expenditure will be reflected in future GERS reports.

In 2010-11 UK identifiable expenditure covered approximately 82.8 per cent 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 C.

Table 5.7 illustrates the estimated level of identifiable and non-identifiable expenditure assigned to Scotland for each year between 2006-07 and 2010-11. Identifiable expenditure was estimated to be £52.6 billion in 2010-11. In comparison, non-identifiable expenditure was £9.1 billion in 2010-11, approximately 14.7 per cent of estimated total public sector expenditure for Scotland.

Across most programme categories, the level of non-identifiable expenditure is relatively modest. Debt interest payments, defence and international services are typically the largest elements of non-identifiable expenditure. Collectively, these three elements of expenditure accounted for 84.8 per cent of total non-identifiable expenditure for Scotland in 2010-11.

Table 5.7: Total Expenditure, Identifiable and Non-identifiable: Scotland 2006-07 to 2010-11

(£ million)
Identifiable Non-identifiable Total
2006-07 2007-08 2008-09 2009-10 2010-11 2006-07 2007-08 2008-09 2009-10 2010-11 2006-07 2007-08 2008-09 2009-10 2010-11
General public services                              
Public and common services 960 943 1,137 1,153 1,120 435 420 464 433 407 1,396 1,363 1,601 1,585 1,527
International services 12 13 17 15 20 515 552 592 655 727 527 565 609 670 746
Public sector debt interest 0 0 0 0 0 2,428 2,644 2,655 2,628 3,700 2,428 2,644 2,655 2,628 3,700
Defence 7 7 5 9 9 2,713 2,831 3,089 3,160 3,268 2,721 2,838 3,094 3,169 3,277
Public order and safety 2,139 2,228 2,375 2,435 2,508 170 174 174 184 149 2,309 2,402 2,549 2,618 2,657
Economic affairs                              
Enterprise and economic development 811 908 759 828 901 85 116 821 433 -79 897 1,024 1,580 1,261 822
Science and technology 260 412 378 390 335 63 50 54 58 56 324 462 431 448 391
Employment policies 262 252 275 278 306 2 1 1 2 1 264 253 276 280 307
Agriculture, forestry and fisheries 686 771 823 875 963 0 0 0 0 0 686 771 823 875 963
Transport 2,702 2,759 2,611 2,812 2,700 19 20 24 22 22 2,721 2,779 2,634 2,833 2,722
Environment protection 859 900 964 1,012 1,102 138 119 97 161 193 997 1,019 1,061 1,173 1,295
Housing and community amenities 1,679 1,746 1,802 1,970 1,773 0 0 0 0 0 1,679 1,746 1,802 1,970 1,773
Health 9,035 9,727 10,179 10,593 10,821 64 80 82 93 116 9,099 9,807 10,260 10,687 10,936
Recreation, culture and religion 989 1,028 1,080 1,138 1,212 312 337 347 367 359 1,301 1,365 1,427 1,506 1,571
Education and training 7,147 7,368 7,577 7,748 8,049 3 4 3 3 0 7,150 7,372 7,581 7,751 8,050
Social protection 16,025 17,036 18,331 19,904 20,737 239 255 282 299 310 16,264 17,291 18,613 20,203 21,047
EU transactions 0 0 0 0 0 -353 -237 -491 -231 -158 -353 -237 -491 -231 -158
Total 43,575 46,097 48,313 51,160 52,556 6,832 7,367 8,194 8,267 9,069 50,407 53,464 56,507 59,427 61,625

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 2006-07 to 2010-1120. 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 2006-07 and 2010-11 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, and by public corporations. They also 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 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.

In the five years since 2006-07, UK Government departments have accounted for slightly more than one third of total identifiable current expenditure. In contrast, over the same period these departments were typically responsible for less than three percent 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.

Table 5.8: Total Identifiable Expenditure: Scotland 2006-07 to 2010-11

(£ million)
Scottish Government and Local Authorities Other UK Government Total
2006-07 2007-08 2008-09 2009-10 2010-11 2006-07 2007-08 2008-09 2009-10 2010-11 2006-07 2007-08 2008-09 2009-10 2010-11
General public services                              
Public and common services 898 873 1,079 1,085 1,059 62 70 58 67 61 960 943 1,137 1,153 1,120
International services 0 0 0 0 0 12 13 17 15 20 12 13 17 15 20
Public sector debt interest 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Defence 7 7 5 9 9 0 0 0 0 0 7 7 5 9 9
Public order and safety 2,091 2,165 2,306 2,355 2,443 48 63 69 80 65 2,139 2,228 2,375 2,435 2,508
Economic affairs                              
Enterprise and econ development 689 818 664 734 820 122 90 95 94 82 811 908 759 828 901
Science and technology 88 195 137 110 68 173 216 241 280 267 260 412 378 390 335
Employment policies 0 1 4 3 3 262 251 271 275 303 262 252 275 278 306
Agriculture, forestry and fisheries 674 759 811 864 954 12 12 12 11 10 686 771 823 875 963
Transport 2,554 2,692 2,604 2,766 2,669 148 67 6 46 31 2,702 2,759 2,611 2,812 2,700
Environment protection 815 862 927 978 1,052 44 38 38 34 50 859 900 964 1,012 1,102
Housing and community amenities 1,679 1,746 1,802 1,970 1,773 0 0 0 0 0 1,679 1,746 1,802 1,970 1,773
Health 8,992 9,689 10,130 10,545 10,772 43 39 48 49 49 9,035 9,727 10,179 10,593 10,821
Recreation, culture and religion 892 945 999 1,058 1,122 97 84 81 80 90 989 1,028 1,080 1,138 1,212
Education and training 7,114 7,344 7,546 7,725 8,030 33 24 31 23 20 7,147 7,368 7,577 7,748 8,049
Social protection 3,768 4,264 4,479 4,865 5,160 12,257 12,772 13,852 15,039 15,577 16,025 17,036 18,331 19,904 20,737
EU transactions 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total 30,261 32,360 33,492 35,066 35,932 13,314 13,737 14,821 16,093 16,623 43,575 46,097 48,313 51,160 52,556

Table 5.9: Identifiable Expenditure - Scottish Government and Local Authorities: Scotland 2006-07 to 2010-11

(£ million)
Current Capital
2006-07 2007-08 2008-09 2009-10 2010-11 2006-07 2007-08 2008-09 2009-10 2010-11
General public services                    
Public and common services 769 837 827 1,036 833 129 36 252 49 225
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 7 7 5 9 9 0 0 0 0 0
Public order and safety 1,918 2,013 2,100 2,136 2,198 173 152 206 218 245
Economic affairs                    
Enterprise and econ development 532 627 470 492 541 157 192 194 242 279
Science and technology 69 110 68 80 56 18 85 69 30 12
Employment policies 0 1 4 3 3 0 0 0 0 0
Agriculture, forestry and fisheries 601 689 711 754 772 73 70 100 111 182
Transport 1,395 1,476 1,505 1,456 1,484 1,159 1,215 1,099 1,310 1,185
Environment protection 766 772 841 885 937 49 90 85 93 115
Housing and community amenities 182 333 281 261 332 1,497 1,413 1,521 1,709 1,440
Health 8,715 9,250 9,626 10,013 10,161 277 439 504 532 610
Recreation, culture and religion 735 742 755 811 826 157 203 244 247 297
Education and training 6,405 6,650 6,898 7,062 7,207 709 694 648 663 823
Social protection 3,710 4,198 4,413 4,805 5,065 58 65 65 61 95
EU transactions 0 0 0 0 0 0 0 0 0 0
Total 25,806 27,706 28,504 29,802 30,425 4,455 4,655 4,988 5,264 5,507

Table 5.10: Identifiable Expenditure - Other UK Government: Scotland 2006-07 to 2010-11

(£ million)
Current Capital
2006-07 2007-08 2008-09 2009-10 2010-11 2006-07 2007-08 2008-09 2009-10 2010-11
General public services                    
Public and common services 57 65 52 61 57 5 4 6 7 4
International services 12 12 17 14 19 0 1 0 0 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 48 61 67 78 65 1 1 2 2 0
Economic affairs                    
Enterprise and econ development 120 88 93 84 69 2 2 2 10 13
Science and technology 159 199 220 248 244 14 18 21 32 23
Employment policies 249 249 270 268 296 13 1 1 7 7
Agriculture, forestry and fisheries 11 11 11 10 9 1 1 1 1 0
Transport 36 48 -3 37 24 111 19 9 9 7
Environment protection 23 31 31 30 31 22 7 6 4 19
Housing and community amenities 0 0 0 0 0 0 0 0 0 0
Health 27 35 46 47 46 16 3 2 2 2
Recreation, culture and religion 64 57 59 56 66 33 27 22 25 24
Education and training 18 22 30 23 19 15 2 1 1 0
Social protection 12,212 12,747 13,821 14,985 15,530 45 25 31 53 47
EU transactions 0 0 0 0 0 0 0 0 0 0
Total 13,036 13,626 14,717 15,941 16,477 278 111 104 152 147

Table 5.11: Identifiable Expenditure: Scotland and UK 2010-11

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 1,059 2.0% 61 0.1% 1,120 2.1% 8,504 1.5%
International services 0 0.0% 20 0.0% 20 0.0% 235 0.0%
Public sector debt interest 0 0.0% 0 0.0% 0 0.0% 0 0.0%
Defence 9 0.0% 0 0.0% 9 0.0% 85 0.0%
Public order and safety 2,443 4.6% 65 0.1% 2,508 4.8% 31,948 5.8%
Economic affairs                
Enterprise and econ development 820 1.6% 82 0.2% 901 1.7% 5,134 0.9%
Science and technology 68 0.1% 267 0.5% 335 0.6% 2,808 0.5%
Employment policies 3 0.0% 303 0.6% 306 0.6% 3,800 0.7%
Agriculture, forestry and fisheries 954 1.8% 10 0.0% 963 1.8% 5,495 1.0%
Transport 2,669 5.1% 31 0.1% 2,700 5.1% 22,580 4.1%
Environment protection 1,052 2.0% 50 0.1% 1,102 2.1% 9,685 1.8%
Housing and community amenities 1,773 3.4% 0 0.0% 1,773 3.4% 13,712 2.5%
Health 10,772 20.5% 49 0.1% 10,821 20.6% 119,925 21.8%
Recreation, culture and religion 1,122 2.1% 90 0.2% 1,212 2.3% 8,598 1.6%
Education and training 8,030 15.3% 20 0.0% 8,049 15.3% 90,550 16.4%
Social protection 5,160 9.8% 15,577 29.6% 20,737 39.5% 227,727 41.3%
EU transactions 0 0.0% 0 0.0% 0 0.0% 0 0.0%
Total 35,932 68.4% 16,623 31.6% 52,556 100.0% 550,787 100.0%

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 C.

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 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 2006-07 and 2010-11. 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 £9.1 billion in 2010-11, 7.9 per cent 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 2010-11.

As outlined in Box 2.4 the UK Government's financial sector interventions 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 total non-identifiable expenditure on EED for Scotland is estimated to have increased from £116 million in 2007-08 to £821 million in 2008-09, before falling to -£79 million in 2010-11.

The negative value for 2010-11 is due to the fact that the fees received from the various schemes are recorded as a negative current expenditure (i.e. revenue received). As shown in Table 5.13, these fees exceeded the current expenditure on other elements of EED in both 2008-09 and 2010-11. As such, total current expenditure on non-identifiable EED is negative in both of these years.

Table 5.12: Non-Identifiable Expenditure: Scotland and UK 2006-07 to 2010-11

(£ million)
Scotland UK
2006-07 2007-08 2008-09 2009-10 2010-11 2006-07 2007-08 2008-09 2009-10 2010-11
General public services                    
Public and common services 435 420 464 433 407 5,189 5,011 5,543 5,196 4,895
International services 515 552 592 655 727 6,094 6,551 7,029 7,795 8,668
Public sector debt interest 2,428 2,644 2,655 2,628 3,700 28,749 31,363 31,555 31,281 44,136
Defence 2,713 2,831 3,089 3,160 3,268 32,133 33,581 36,713 37,614 38,979
Public order and safety 170 174 174 184 149 2,018 2,070 2,070 2,186 1,776
Economic affairs                    
Enterprise and economic development 85 116 821 433 -79 1,170 1,531 9,909 5,304 -810
Science and technology 63 50 54 58 56 777 607 644 704 683
Employment policies 2 1 1 2 1 18 13 18 25 6
Agriculture, forestry and fisheries 0 0 0 0 0 0 1 1 0 0
Transport 19 20 24 22 22 395 396 355 337 322
Environment protection 138 119 97 161 193 1,646 1,419 1,154 1,924 2,313
Housing and community amenities 0 0 0 0 0 0 0 0 0 0
Health 64 80 82 93 116 771 961 984 1,112 1,380
Recreation, culture and religion 312 337 347 367 359 3,885 4,435 4,980 5,390 5,368
Education and training 3 4 3 3 0 36 43 41 41 3
Social protection 239 255 282 299 310 2,831 3,026 3,351 3,563 3,703
EU transactions -353 -237 -491 -231 -158 -1,802 -1,531 -2,931 71 2,922
Total 6,832 7,367 8,194 8,267 9,069 83,910 89,476 101,416 102,543 114,345

Table 5.13: Non-Identifiable Expenditure: Scotland 2006-07 to 2010-11

(£ million)
Current Capital
2006-07 2007-08 2008-09 2009-10 2010-11 2006-07 2007-08 2008-09 2009-10 2010-11
General public services                    
Public and common services 429 419 424 413 379 6 1 40 20 27
International services 483 516 552 603 663 32 36 39 52 64
Public sector debt interest 2,428 2,644 2,655 2,628 3,700 0 0 0 0 0
Defence 2,638 2,617 2,798 2,822 2,912 75 214 292 338 356
Public order and safety 161 162 156 159 129 9 12 18 25 20
Economic affairs                    
Enterprise and economic development 39 73 -27 20 -105 46 43 849 413 26
Science and technology 40 32 39 42 46 23 18 15 16 11
Employment policies 1 1 1 2 0 0 0 0 0 0
Agriculture, forestry and fisheries 0 0 0 0 0 0 0 0 0 0
Transport 11 12 14 13 13 7 7 9 8 9
Environment protection 47 26 -2 70 80 92 93 98 91 113
Housing and community amenities 0 0 0 0 0 0 0 0 0 0
Health 59 75 76 90 105 4 5 6 3 11
Recreation, culture and religion 296 314 305 317 307 15 22 42 51 52
Education and training 3 4 3 3 0 0 0 0 0 0
Social protection 238 255 282 298 310 1 1 0 1 1
EU transactions -353 -237 -491 -231 -158 0 0 0 0 0
Total 6,522 6,915 6,787 7,249 8,380 311 452 1,408 1,018 690

Table 5.14: Non-Identifiable Expenditure: UK 2006-07 to 2010-11

(£ million)
Current Capital
2006-07 2007-08 2008-09 2009-10 2010-11 2006-07 2007-08 2008-09 2009-10 2010-11
General public services                    
Public and common services 5,110 4,998 5,065 4,960 4,567 79 14 478 236 327
International services 5,719 6,124 6,565 7,174 7,906 375 427 464 621 762
Public sector debt interest 28,749 31,363 31,555 31,281 44,136 0 0 0 0 0
Defence 31,242 31,045 33,247 33,590 34,735 891 2,536 3,466 4,023 4,245
Public order and safety 1,909 1,930 1,856 1,889 1,535 109 140 214 297 241
Economic affairs                    
Enterprise and economic development 620 1,016 -177 381 -1,117 549 515 10,086 4,923 307
Science and technology 497 392 468 516 553 280 215 176 189 130
Employment policies 18 12 18 25 6 0 0 0 0 0
Agriculture, forestry and fisheries 0 1 1 0 0 0 0 0 0 0
Transport 207 241 259 238 211 188 155 96 99 111
Environment protection 561 313 -13 840 966 1,086 1,106 1,167 1,084 1,347
Housing and community amenities 0 0 0 0 0 0 0 0 0 0
Health 721 907 917 1,076 1,249 50 54 67 37 132
Recreation, culture and religion 3,591 3,859 3,718 3,868 3,777 295 576 1,261 1,522 1,591
Education and training 36 43 41 41 2 0 0 0 0 1
Social protection 2,822 3,019 3,346 3,551 3,694 9 6 5 12 10
EU transactions -1,802 -1,531 -2,931 71 2,922 0 0 0 0 0
Total 79,999 83,732 83,934 89,500 105,142 3,911 5,744 17,482 13,043 9,203

Box 5.2 - Debt Interest Payments

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.

Estimates for Scotland over the period 2006-07 to 2010-11, are highlighted in the table below, illustrating the current balance on public services consumed within each financial year.

Current Balance on Public Services Consumed: Scotland 2006-07 to 2010-11

(£ million)
2006-07 2007-08 2008-09 2009-10 2010-11
Current revenue          
Excluding North Sea revenue 42,272 45,167 43,391 41,916 45,177
Including North Sea revenue (per capita share) 43,026 45,796 44,479 42,462 45,914
Including North Sea revenue (geographical share) 49,776 52,282 55,131 47,846 53,128
Total current expenditure (including capital consumption and accounting adjustments) 49,223 52,389 54,138 57,099 59,517
Less debt interest payments (as used in headline GERS estimates) -2,428 -2,644 -2,655 -2,628 -3,700
Total current expenditure on services consumed within current financial year 46,796 49,744 51,483 54,470 55,817
Current balance on public services consumed within current financial year          
Excluding North Sea revenues -4,523 -4,578 -8,092 -12,554 -10,640
Including North Sea revenues (per capita share) -3,770 -3,949 -7,004 -12,009 -9,903
Including North Sea revenues (geographical share) 2,980 2,538 3,648 -6,624 -2,689

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 finance documents, the principal measure of public sector expenditure is Total Managed Expenditure (TME). The differences between TME and TES are described in detail in Annex C. 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 capital consumption. It is a measure of the amount of fixed capital resources used up in the process of the provision of public services. In 2010-11, the UK general government capital consumption of £15.2 billion represented 67.2 per cent of the total UK accounting adjustment. Table 5.15 shows the component disaggregation of the UK accounting adjustment. The total UK accounting adjustment was estimated at £22.7 billion in 2010-11.

Table 5.15: Accounting Adjustment: UK 2006-07 to 2010-11

(£ million)
2006-07 2007-08 2008-09 2009-10 2010-11
UK total managed expenditure (TME) 550,045 582,937 629,223 669,736 687,805
UK total expenditure on services (TES) 523,120 555,283 603,431 643,153 665,132
UK accounting adjustment 26,925 27,654 25,792 26,583 22,673
of which:          
Central government capital consumption 5,951 6,170 6,544 6,700 7,200
Local government capital consumption 6,466 6,774 7,164 7,550 8,027
Current VAT refunds 9,419 9,701 9,952 9,354 10,777
Capital VAT refunds 1,705 1,883 1,934 1,834 2,194
Nigerian debt cancellation 1,406 0 0 0 0
Student loans subsidy1 -305 -1,046 -814 -1,466 -1,746
Imputed subsidy from Local Authorities to the Housing Revenue Account2 1,528 1,535 1,477 1,500 1,581
Imputed flows for Renewable Obligation Certificates3 474 487 472 470 535
Residual4 281 2,150 -937 641 -5,895

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 the government 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.
4 The residual for the UK in 2010-11 is largely explained by a timing adjustment. The TES figure used in GERS is consistent with the latest CRA analysis, which is from June 2011. The TME figure in GERS is consistent with the public sector finances statistical bulletin published in January 2012. The June 2011 residual of -£2,034 million was revised down by £3,861 million in the January 2012 publication reflecting downward revisions to TME for 2010-11 made by the ONS.

The corresponding Scottish figures, as highlighted in Table 5.16, are calculated using a variety of apportionment methodologies described in Annex C. The total Scottish public sector accounting adjustment was estimated at £2.2 billion in 2010-11, or 9.6 per cent of the total UK accounting adjustment. The relatively higher proportion compared to a per capita share reflects the high share of general government capital consumption for Scotland.

Table 5.16: Accounting Adjustment: Scotland 2006-07 to 2010-11

(£ million)
2006-07 2007-08 2008-09 2009-10 2010-11
Capital consumption:1          
Central government capital consumption 528 544 580 594 645
Local government capital consumption 610 656 683 723 766
Current expenditure: 0 0 0 0 0
Current VAT refunds 840 878 905 888 1,006
Student loans subsidy2 -42 -58 -17 -63 22
Imputed subsidy from Local Authorities to the Housing Revenue Account3 158 146 126 119 76
Imputed flows for Renewable Obligation Certificates4 35 48 56 55 60
Current expenditure residual 136 254 59 -46 -262
Capital expenditure: 0 0 0 0 0
Capital VAT refunds 152 171 176 174 197
Nigerian debt cancellation 119 0 0 0 0
Capital expenditure residual -133 -133 -210 155 -327
Total accounting adjustment 2,403 2,506 2,358 2,598 2,182
Percentage of UK accounting adjustment 8.9% 9.1% 9.1% 9.8% 9.6%

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 the amount 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.


Contact

Email: Sandy Stewart