Publication - Statistics

Government Expenditure & Revenue Scotland 2013-14

Published: 11 Mar 2015
ISBN:
9781785441820

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 Finances published in January 2015.

98 page PDF

1.9 MB

98 page PDF

1.9 MB

Contents
Government Expenditure & Revenue Scotland 2013-14
CHAPTER 3: PUBLIC SECTOR REVENUE

98 page PDF

1.9 MB

 

CHAPTER 3: PUBLIC SECTOR REVENUE

Total Public Sector Revenue: Scotland 2013-14

Total Public Sector Revenue: Scotland 2013-14

Introduction

This chapter provides detailed estimates of Scottish public sector revenue. As Chapter 4 discusses the treatment of North Sea revenue in detail, the focus of this chapter is on non‑North Sea elements of public sector revenue.

The majority of public sector revenue payable by Scottish residents and enterprises is collected at the UK level. Generally it is not possible to identify separately the proportion of that revenue receivable from Scotland. GERS therefore uses a number of different methodologies to apportion revenue to Scotland. These methods are discussed in Annex A and in the detailed revenue methodology paper on the GERS website.[19]

GERS uses a set of data sources and methodologies developed over a number of years following consultation with and feedback from users. In some cases, a variety of methodologies could be applied, each leading to different estimates of public sector revenue in Scotland. As discussed in the Preface, HMRC publish estimates of the taxes they collect for the four countries in the UK. Box 3.1 compares the HMRC estimates for Scotland with those in this publication.

Estimated Revenue 2013-14

Table 3.1 highlights estimated public sector revenue in Scotland and the outturn data for the UK in 2013-14. The contribution of each element of revenue to the Scottish total, and the proportion of UK revenue raised in Scotland, are also included in the table.

On the basis of the assumptions and methodologies described in this report, total public sector non-North Sea current revenue in Scotland was estimated to be £50.0 billion in 2013‑14. This is equivalent to 8.1% of UK total non-North Sea current revenue which is broadly in line with Scotland's share of the UK population.[20]

Table 3.1: Current Revenue: Scotland 2013-14

 

Scotland

UK

Scotland as % of UK

£ million

% of total non-North Sea revenue

£ million

Income tax

11,410

22.8%

156,011

7.3%

Corporation tax (excluding North Sea)

2,817

5.6%

35,651

7.9%

Capital gains tax

243

0.5%

3,907

6.2%

Other taxes on income and wealth

334

0.7%

4,118

8.1%

National insurance contributions

8,730

17.5%

107,306

8.1%

VAT

10,060

20.1%

120,226

8.4%

Fuel duties

2,197

4.4%

26,881

8.2%

Stamp duties

639

1.3%

12,481

5.1%

Tobacco duties

1,258

2.5%

9,556

13.2%

Alcohol duties

961

1.9%

10,308

9.3%

Betting and gaming and duties

163

0.3%

1,645

9.9%

Air passenger duty

251

0.5%

3,003

8.4%

Insurance premium tax

201

0.4%

3,018

6.6%

Landfill tax

105

0.2%

1,179

8.9%

Climate change levy

120

0.2%

1,200

10.0%

Aggregates levy

50

0.1%

294

16.9%

Inheritance tax

240

0.5%

3,541

6.8%

Vehicle excise duty

488

1.0%

6,121

8.0%

Non-domestic rates 1

1,927

3.9%

25,564

7.5%

Council tax

1,941

3.9%

27,533

7.1%

Other taxes, royalties and adjustments2

1,109

2.2%

12,677

8.7%

Interest and dividends

472

0.9%

5,781

8.2%

Gross operating surplus

3,972

8.0%

38,281

10.4%

Rent and other current transfers

272

0.5%

3,161

8.6%

Total current revenue (excluding North Sea revenue)

49,958

100%

619,443

8.1%

North Sea revenue 3

Population share

396

 

4,766

8.3%

Geographical share

3,996

 

4,766

83.8%

Total current revenue (including North Sea revenue)

Population share

50,354

 

624,209

8.1%

Geographical share

53,954

 

624,209

8.6%

1. Excludes non-domestic rates that local authorities pay themselves.

2. Although this group includes some 11 separate revenues (as set out in the detailed methodology paper on the GERS website), the two largest - TV Licences and National Lottery Distribution Fund - account for 40.6% (£450 million) of this estimate for Scotland. This group also contains a small accounting adjustment to align the revenue estimates to those in the January 2015 UK Public Sector Finances Statistical Bulletin. This adjustment is apportioned to Scotland on a population share basis.

3. A full discussion of North Sea revenue is provided in Chapter 4.

Income tax was the single largest source of public sector revenue in Scotland. In 2013-14, income tax revenue was estimated at £11.4 billion - over a fifth of all public sector revenue in Scotland (excluding revenue from the North Sea).

VAT represented the second largest revenue source in Scotland, and was the largest source of revenue from indirect taxes, raising an estimated £10.1 billion in 2013-14 - 20.1% of total non-North Sea revenues. Further discussion of the VAT estimates for Scotland is provided in Box A.1 in Annex A. National insurance contributions represented the third largest source of revenue, accounting for 17.5% of total non-North Sea revenues.

Gross operating surplus (GOS) refers to the operating (or trading) surpluses (or losses) of central government, local government and public corporations. It was the fourth largest revenue source in Scotland during 2013-14, generating approximately £4.0 billion in revenue, 8.0% of total non-North Sea revenue in Scotland. Scotland's relatively large share of UK GOS is partly due to Scottish Water, which is one of the largest contributors to UK public corporations' GOS. The equivalent water companies in England and Wales are outside the public sector and hence do not contribute to their GOS.[21]

Corporation tax (excluding that from the North Sea) represented the fifth largest revenue source in Scotland in 2013-14 with receipts of £2.8 billion. This was equivalent to 5.6% of total non-North Sea current revenue.[22]

After these five main categories, all other types of tax listed each individually accounted for 4.4% or less of total non-North Sea revenue in Scotland in 2013-14.

The Scottish share of total UK revenue for each element of revenue varies according to the particular tax being estimated. For income tax, Scotland's share of UK revenue was lower than its share of the UK population, reflecting in part differing income distributions, with relatively fewer higher and additional rate tax payers in Scotland. For VAT, corporation tax (excluding North Sea) and national insurance contributions, Scotland's share of UK revenue was broadly in line with its share of the UK population. Revenue from duties on betting and gaming, alcohol and tobacco were higher than Scotland's share of the UK population.

Table 3.2 shows estimates of Scotland's share of UK revenue for five key tax groups between 2009-10 and 2013-14. In each year during this period, total non-North Sea revenue in Scotland has accounted for between 8.1% and 8.2% of UK non-North Sea revenue, broadly in line with Scotland's share of the UK population.

Table 3.2: Non-North Sea Current Revenue: Scotland as Share of UK 2009-10 to 2013-14

 

(per cent of UK revenue)

2009-10

2010-11

2011-12

2012-13

2013-14

Income tax

7.3%

7.2%

7.4%

7.3%

7.3%

Corporation tax (excluding North Sea revenue)

8.3%

7.8%

8.0%

8.0%

7.9%

National Insurance contributions

8.2%

8.2%

8.1%

8.1%

8.1%

Value added tax

8.6%

8.4%

8.4%

8.4%

8.4%

Local authority revenue 1

7.8%

7.8%

7.7%

7.6%

7.3%

All other revenue

9.1%

8.8%

8.9%

9.0%

8.9%

Total non-North Sea current revenue

8.2%

8.1%

8.1%

8.1%

8.1%

1. Council tax and non-domestic rates

Box 3.1: Comparison between GERS and HMRC estimates

Any analysis of public sector receipts in Scotland relies on estimation, and as such alternative estimates are possible. As discussed in the Preface, GERS estimates revenue using a set of appropriate apportionment methodologies, refined over a number of years following consultation with and feedback from users.

Since 2013, HMRC have published estimates of the breakdown of taxes they collect in the four countries of the UK. The latest set of estimates for 2013-14 were published as official statistics in October 2014.

In most cases, the estimates in GERS and the HMRC publication are very similar. For some taxes, there are definitional differences which mean that the figures in the two publications should not be directly compared. For example, within GERS VAT receipts are shown before the deduction of government VAT refunds, whilst HMRC figures present VAT receipts after the deduction of VAT refunds. For other taxes, notably corporation tax and revenues from oil and gas production, there are methodological differences between the two publications.

HMRC and the devolved administrations recognise that it is helpful to users of their publications to have consistent sets of official statistics wherever possible. HMRC and the devolved administrations are working together to reconcile, and where possible, align methodologies for estimating regional tax receipts. Estimates of VAT and fuel duty have been more closely aligned in this year's GERS publication. While some differences remain, the aim is to ensure a clear understanding of the reasons for any differences and highlight these to users and the impact that this may have on any results.

Much of the work to date has been to understand the differences in approach and to ensure users are properly informed of the differences and the implications of using the different sets of estimates. More work is planned over the next year to make further progress on this issue, updates of which will be published on the GERS website.

The table below compares the estimates in GERS with those implied by the HMRC publication, both in cash terms and as a share of GDP.

Estimates of Total Scottish Tax Revenues 2009-10 to 2013-14

 

£ million

2009-10

2010-11

2011-12

2012-13

2013-14

Cash estimates: onshore revenues

GERS

43,316

45,523

47,279

48,321

49,958

HMRC 1

43,301

45,995

47,145

48,044

49,777

Difference

15

-472

134

277

181

Difference (% GDP)

0.0%

-0.4%

0.1%

0.2%

0.1%

Cash estimates: geographical share of North Sea revenues

GERS

5,682

7,459

9,668

5,235

3,996

HMRC1

5,257

7,205

9,056

4,886

3,793

Difference

425

253

612

348

204

Difference (% GDP)

0.3%

0.2%

0.4%

0.2%

0.1%

Share of UK total: onshore revenues

GERS

8.2%

8.1%

8.1%

8.1%

8.1%

HMRC1

8.2%

8.2%

8.1%

8.1%

8.0%

Difference (% point)

0.0%

-0.1%

0.0%

0.0%

0.0%

Share of UK total: geographical share of North Sea revenues

GERS

94.8%

88.7%

88.2%

84.2%

83.8%

HMRC

87.7%

85.7%

82.6%

78.6%

79.6%

Difference (% point)

7.1%

3.0%

5.6%

5.6%

4.3%

1 For revenues not estimated by HMRC, the GERS estimate has been included in the HMRC figure to allow the totals to be comparable

Further information on the HMRC results and methodology is available at: https://www.gov.uk/government/publications/disaggregation-of-hmrc-tax-receipts

Estimated Revenue: Scotland and the UK, 2009-10 to 2013-14

Table 3.3 overleaf shows estimated current revenue in Scotland and the UK between 2009 10 and 2013-14. Current non-North Sea revenue in Scotland is estimated to have grown by 15.3% between 2009-10 and 2013-14 in nominal terms, less than for the UK as a whole (17.5%). This reflects the fact that income tax, onshore corporation tax, national insurance contributions, and VAT revenues have all grown more slowly in Scotland than in the UK. In general, revenue in Scotland would be expected to grow more slowly than in the UK as Scotland's population, and therefore tax base, has been growing more slowly.

Table 3.3: Current Revenue: Scotland and UK 2009-10 to 2013-14,

 

(£ million)

Scotland

UK

2009-10

2010-11

2011-12

2012-13

2013-14

2009-10

2010-11

2011-12

2012-13

2013-14

Income tax

10,300

10,611

10,780

10,856

11,410

140,606

146,628

146,548

148,435

156,011

Corporation tax (excl North Sea)

2,542

2,728

2,646

2,799

2,817

30,558

35,134

33,207

34,958

35,651

Capital gains tax

163

201

274

320

243

2,504

3,589

4,336

3,926

3,907

Other taxes on income and wealth

182

341

244

259

334

2,037

6,050

2,901

3,115

4,118

National insurance contributions

7,911

7,968

8,266

8,501

8,730

96,638

97,747

101,597

104,483

107,306

VAT

7,326

8,366

9,386

9,569

10,060

84,825

99,523

112,067

114,465

120,226

Fuel duties

2,187

2,262

2,206

2,169

2,197

26,197

27,256

26,798

26,571

26,881

Stamp duties

517

577

511

464

639

7,904

8,931

8,919

9,140

12,481

Tobacco duties

1,028

1,055

1,207

1,283

1,258

9,462

9,305

9,878

9,590

9,556

Alcohol duties

891

912

970

941

961

9,246

9,434

10,180

10,139

10,308

Betting and gaming and duties

106

98

122

121

163

1,029

1,069

1,221

1,228

1,645

Air passenger duty

162

183

227

234

251

1,870

2,183

2,637

2,818

3,003

Insurance premium tax

165

173

204

201

201

2,262

2,509

3,002

3,033

3,018

Landfill tax

85

97

95

99

105

944

1,094

1,075

1,116

1,179

Climate change levy

61

61

63

61

120

687

660

678

663

1,200

Aggregates levy

49

55

48

44

50

276

294

283

261

294

Inheritance tax

206

175

170

214

240

2,431

2,722

2,955

3,150

3,541

Vehicle excise duty

466

470

477

481

488

5,692

5,789

5,930

6,003

6,121

Non-domestic rates

1,822

1,863

1,933

1,946

1,927

22,401

22,474

23,713

24,845

25,564

Council tax

1,894

1,901

1,914

1,929

1,941

25,203

25,706

25,925

26,285

27,533

Other taxes, royalties and adjustments

1,162

1,177

1,256

1,207

1,109

13,287

13,716

14,902

14,077

12,677

Interest and dividends

425

470

502

461

472

5,204

5,662

6,095

5,633

5,781

Gross operating surplus

3,522

3,654

3,654

3,853

3,972

34,353

35,133

36,098

37,687

38,281

Rent and other current transfers

141

124

125

308

272

1,656

1,501

1,505

3,602

3,161

Total current revenue
(excluding North Sea revenue)

43,316

45,523

47,279

48,321

49,958

527,272

564,109

582,450

595,223

619,443

North Sea revenue

Population share

503

705

917

518

396

5,991

8,406

10,958

6,214

4,766

Geographical share

5,682

7,459

9,668

5,235

3,996

5,991

8,406

10,958

6,214

4,766

Total current revenue
(including North Sea revenue)

Population share

43,819

46,227

48,196

48,838

50,354

533,263

572,515

593,408

601,437

624,209

Geographical share

48,998

52,981

56,947

53,555

53,954

533,263

572,515

593,408

601,437

624,209

Table 3.4 shows per person receipts for Scotland and the UK between 2009-10 and 2013-14.

Table 3.4: Current Revenue Per Person: Scotland and UK 2009-10 to 2013-141

 

2009-10

2010-11

2011-12

2012-13

2013-14

Scotland

Excluding North Sea revenue

8,300

8,600

8,900

9,100

9,400

Including North Sea revenue (population share)

8,400

8,800

9,100

9,200

9,400

Including North Sea revenue (geographical share)

9,400

10,000

10,700

10,100

10,100

UK

Excluding North Sea revenue

8,500

9,000

9,200

9,300

9,600

Including North Sea revenue

8,500

9,100

9,400

9,400

9,700

Difference (Scotland minus UK)

Excluding North Sea revenue

-200

-300

-300

-200

-300

Including North Sea revenue (population share)

-200

-300

-300

-200

-300

Including North Sea revenue (geographical share)

800

900

1,400

600

400

1 Figures rounded to nearest £100

Box 3.2: European System of Accounts (ESA10) changes to revenue

The move to report Scotland's public sector finances on an ESA10 basis has resulted in a number of changes to revenues. In general, these are accounting changes which increase both revenue and expenditure by equal amounts, leaving the overall fiscal position unchanged.

VAT: ESA10 changes the treatment of VAT based contributions to the EU. Previously, the VAT raised in the UK and paid to the EU was excluded from the UK public sector finances. Under ESA10, this VAT is now recorded as both a UK revenue and a UK payment to the EU. This increases UK VAT revenue by approximately £2 billion a year and estimated Scottish VAT revenue by approximately £200 million. A corresponding increase in expenditure is included within the expenditure accounting adjustment, leaving the net fiscal position unchanged.

Income tax: Previously, parts of the child tax credit and working tax credit schemes were treated as negative income tax receipts. Under ESA10, these schemes are now treated as a benefit expenditure. This increases UK revenue by approximately £2.7 billion in 2013-14, and estimated Scottish revenue by approximately £200 million. A corresponding increase in expenditure is included within the expenditure accounting adjustment, leaving the net fiscal position unchanged.

Council tax and non-domestic rates: Under ESA95, council tax and non-domestic rates were reported based on the expected amount of tax that would be collected, with written‑off tax treated as a capital payment to households. Under ESA10, written‑off tax is deducted from total tax. This change results in small reductions to both revenue and expenditure, but leaves the net fiscal position unchanged.

Gross operating surplus: For central and local government, gross operating surplus represents their capital consumption. As discussed in Box 5.1 spending on research and development and single use military equipment has increased capital spending. This leads to a corresponding increase in capital consumption and gross operating surplus. UK revenue increases by approximately £10 billion in 2013-14, with Scottish revenue increasing by approximately £800 million. A corresponding amount of expenditure is included within the expenditure accounting adjustment, leaving the net fiscal position unchanged.

Rent: Under ESA95, revenue from the sale of 3G and 4G licenses in 2000 and 2013 was treated as the sale of a capital asset, which decreased net investment. Under ESA10, this revenue will be treated as rent, with the revenue spread over a 20 year period. This increases revenue in all years after 2000-01. UK revenue increases by approximately £1 billion a year, with Scottish revenue estimated to increase by approximately £80 million.

Network Rail: Under ESA10, Network Rail is now classified as part of central government, as its debt is explicitly guaranteed by the Department for Transport and there is a statutory obligation on government to protect rail services. These factors, which were not relevant in classifying bodies under ESA95, were judged by ONS to be sufficient evidence that Network Rail is controlled by government, and should therefore be included in government accounts.

Information on Network Rail's revenue and expenditure in Scotland has been taken from Network Rail's regulatory financial statements, which provides a breakdown of Network Rail's accounts across England and Wales, and Scotland. Scotland has also been apportioned a share of Network Rail's activity associated with the East Coast and West Coast Mainlines.

Including Network Rail increases UK central government operating surplus by approximately £4.6 billion, and estimated central government operating surplus in Scotland by approximately £350 million.

 

Box 3.3: Comparison of Scottish revenue estimates with other parts of the UK (Experimental Statistics)

The recent GERS consultation and user requests throughout the year have highlighted an interest in comparing GERS figures to other countries and regions of the UK. HMRC produces tax revenue figures for Scotland, Wales, Northern Ireland and England. However, as discussed in Box 3.1, these are only for the taxes collected by HMRC and are not directly comparable to the GERS figures, which cover all UK revenues. In addition, the HMRC estimates do not provide a breakdown of tax receipts for the English regions.

The chart below provides experimental estimates of public sector receipts for each of the UK countries and regions using the GERS methodology. Full details of the methodology is available on the GERS website: http://www.gov.scot/Topics/Statistics/Browse/Economy/GERS/RelatedAreas

We welcome user feedback about this analysis, including comments on the methods used. As normal, please feedback to economic.statistics@scotland.gsi.gov.uk.

The chart below shows estimates of public sector revenue per head for each of the UK countries and regions relative to the UK average. Scotland is estimated to raise the fifth most onshore revenue per person of the UK regions. When an illustrative geographical share of North Sea revenue is included, revenue per person in Scotland is estimated to be the fourth highest of the UK countries and regions, behind London, the South East, and East England.

Revenue per head, 2013-14

Revenue per head, 2013-14

Note: Relative revenue per head when a population share of the North Sea is assigned to each country and region is the same as onshore revenue.


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