Government Expenditure & Revenue Scotland 2015-16

Chapter 4: Devolved Revenue And Expenditure

Introduction

This chapter sets out the amount of public sector revenue and expenditure currently devolved and how this has changed with the implementation of the Scotland Act 2012 and will change with the implementation of the Scotland Act 2016.

Devolved Revenues

The table below set out revenue raised in Scotland from taxes devolved to the Scottish Parliament prior to implementation of Scotland Act 2012.

Table 4.1: Revenue devolved prior to Scotland Act 2012
	£ million
	2011-12	2012-13	2013-14	2014-15	2015-16
Council Tax	1,919	1,940	1,963	2,011	2,122
Non Domestic Rates	1,954	1,930	1,932	1,914	1,916
Total	3,873	3,870	3,895	3,925	4,038

The table below shows the estimated historical revenues from the taxes devolved under the Scotland Act 2012.

Table 4.2: Revenue devolved under Scotland Act 2012
	£ million
	2011-12	2012-13	2013-14	2014-15	2015-16
Scottish Rate of Income Tax Liabilities (devolved from 2016-17) 1	4,267	4,273	4,288	4,449	4,277
Land and Buildings Transaction Tax (devolved from 2015-16) 2	275	283	389	478	416
Landfill tax (devolved from 2015-16)	131	139	150	147	147

Source: HMRC, OBR
Notes: ¹ This table shows Scottish Rate of Income Tax liabilities rather than receipts. They are therefore calculated on a different basis to the estimates of total Scottish income tax receipts in Table 1.1.
² Figures for years prior to 2015-16 are for UK stamp duty on property, which Land and Building Transaction Tax replaced.

The table below shows the estimated historical revenues from the taxes devolved under the Scotland Act 2016, following the recommendations of the Smith Commission.

Table 4.3: Revenue devolved under Scotland Act 2016
	£ million
	2011-12	2012-13	2013-14	2014-15	2015-16
Air Passenger Duty (devolved from 2018-19)	228	244	270	290	275
Aggregates Levy (date of devolution to be decided)	48	43	44	55	53
Non-savings and non-dividend income tax liabilities (devolved from 2017-18)	10,584	10,489	10,881	11,004	11,214

Note: this table shows Scottish non-savings and non-dividends income tax liabilities rather than receipts. They are therefore calculated on a different basis to the estimates of total Scottish income tax receipts in Table 1.1.

The Scotland Act 2016 assigns the Scottish Government receipts from the first 10p of the standard rate of VAT and the first 2.5p of the reduced rate of VAT in Scotland.

Table 4.4 shows the VAT that would be assigned to Scotland under this approach. Within GERS, VAT is shown gross of VAT refunds to government. This is consistent with the approach taken by the ONS in the UK public sector finances. This figure is higher than the actual amount of VAT received by HMRC, which is VAT net of refunds. Table 4.4 shows the estimated VAT which would be assigned to Scotland on both a gross and net basis. VAT assigned to the Scottish Government would likely be reported on a net basis in budget documents.

Table 4.4: VAT Assignment: Scotland 2011-12 to 2015-16
	£ million
	2011-12	2012-13	2013-14	2014-15	2015-16
Gross VAT (from 2019-20)	4,758	4,875	5,182	5,367	5,614
Net VAT (from 2019-20)	4,108	4,228	4,571	4,756	4,982

Note: Assigned VAT receipts are 50% of total receipts in all years.

Further information on the planned devolution of revenue to the Scottish Government is available in the fiscal framework agreement between the Scottish and UK Governments. ^[24] The net impact on Scottish Government funding will depend in part on how the block grant received by the Scottish Government is adjusted to reflect the devolution of new revenue streams. This adjustment will be based in part on the relative growth in tax per head for each devolved tax in Scotland and the rest of the UK. Table 4.5 below shows tax per head for Scotland and the rest of the UK for each of the relevant taxes.

Table 4.5: Devolved revenue per head: Scotland and rest of UK
	£ per person
	Scotland					Rest of UK
	2011-12	2012-13	2013-14	2014-15	2015-16	2011-12	2012-13	2013-14	2014-15	2015-16
Income tax	1,996	1,973	2,040	2,055	2,086	2,306	2,302	2,366	2,373	2,399
VAT	897	917	972	1,002	1,045	883	895	932	961	996
APD	43	46	51	54	51	41	44	46	49	46
LBTT	52	53	73	89	77	101	113	151	173	178
Landfill tax	25	26	28	27	27	16	17	17	16	15
AL	9	8	8	10	10	4	4	4	5	5

Notes: Income tax refers to non-savings non-dividend income tax liabilities
APD: air passenger duty
LBTT: Land and Buildings Transaction Tax for Scotland, compared to LBTT and stamp duties on property for the UK
AL: aggregates levy

Devolved Social Security

The table below shows the expenditure in Scotland from social security benefits devolved to the Scottish Parliament prior to implementation of Scotland Act 2016.

Table 4.6: Social security devolved prior to Scotland Act 2016
	£ million
	2011-12	2012-13	2013-14	2014-15	2015-16
Council Tax Reduction 1	384	379	360	344	332
Scottish Welfare Fund 2	34	29	29	36	33
Discretionary Housing Payments 3	-	-	20	35	38
Total	418	408	409	415	370

Notes: ¹ Council tax reduction replaced council tax benefit administered by the Department for Work and Pensions in 2013-14
² Figures for years prior to 2013-14 are or Community Care Grants and Crisis Loans components of the Social Fund, which the Scottish Welfare Fund Replaced
³ Discretionary housing payments in this table only includes spending by the Scottish Government and excludes Department for Work and Pensions spending

The table below shows the latest available figures for social security benefits devolved to the Scottish Government under the Scotland Act 2016.

Table 4.7: Devolved social security under Scotland Act 2016
	£ million
	2011-12	2012-13	2013-14	2014-15	2015-16
Disability Living Allowance	1,372	1,450	1,473	1,465	1,399
Attendance Allowance	481	489	481	485	487
Carer's Allowance	153	169	182	203	224
Winter Fuel Payment	188	187	186	184	180
Personal Independence Payment	-	-	20	164	315
Industrial Injuries Disablement Benefit	88	89	89	89	91
Severe Disablement Allowance	97	97	91	77	49
Discretionary Housing Payments	3	4	18	15	13
Cold Weather Payment	2	8	1	7	3
Funeral Payment	4	4	4	4	4
Sure Start Maternity Grant	4	3	3	3	3
Total expenditure on social security to be devolved	2,392	2,501	2,548	2,695	2,768

¹ Discretionary Housing Payments above only includes spending by the Department for Work and Pensions, and excludes spending by the Scottish Government

The fiscal framework agreement discussed above also covers the devolution of social security expenditure to the Scottish Government. The Scotland Act 2016 sets out the that final impact on the Scottish Government budget of devolution of these benefits will be determined through an adjustment to the Scottish block grant. As with devolved revenue, the adjustment made to the Scottish Government's budget to reflect this additional spending responsibility will depend in part on the relative growth in expenditure per head for each newly devolved benefit in Scotland and the rest of the UK. Table 4.8 below shows expenditure per head for each of the relevant benefits for Scotland and the rest of Great Britain.

Table 4.8: Devolved social security expenditure per head: Scotland and rest of GB
	£ per person
	Scotland					Rest of GB
	2011-12	2012-13	2013-14	2014-15	2015-16	2011-12	2012-13	2013-14	2014-15	2015-16
Disability living allowance	259	273	276	274	260	199	212	216	214	203
Attendance allowance	91	92	90	91	91	87	88	86	86	86
Carer's allowance	29	32	34	38	42	28	31	33	37	40
Winter fuel payment	35	35	35	34	34	35	35	34	34	33
Personal Independence Payments	-	-	4	31	59	0	0	3	24	46
Industrial Injuries disability benefit	17	17	17	17	17	14	15	14	14	14
Severe disablement allowance	18	18	17	14	9	14	14	14	12	7
Discretionary housing payments	0	1	3	3	2	0	1	3	3	2
Cold weather payment	0	2	0	1	1	2	2	0	0	2
Funeral expenses payments	1	1	1	1	1	1	1	1	1	1
Sure Start maternity grant	1	1	1	0	1	1	1	1	1	0

Summary of current and proposed devolved powers

The table below shows estimates of devolved receipts and expenditure under the Scotland Act 2012 and the Scotland Act 2016.

Table 4.9: Fiscal powers before and after Scotland Act 2016, 2015-16 (£ million)
	Before Scotland Act 2016	After Scotland Act 2016
Non Saving Non Dividend Income Tax Liabilities (devolved from 2016-17)	4,277	11,214
Stamp Duties (Land and Buildings) (devolved from 2015-16)	416	416
Air Passenger Duty (devolved from 2018-19)		275
Landfill Tax (devolved from 2015-16)	147	147
Aggregates Levy (date to be decided)		53
Non-domestic Rates	1,916	1,916
Council Tax	2,122	2,122
Total devolved revenues	8,878	16,144
Devolved revenue as % of non-North Sea Scottish revenue	17%	30%
as % of revenue incl geographical share of North Sea revenue 1	17%	30%
Assigned VAT 2 (assigned from 2019-20)		5,614
Total devolved and assigned revenues	8,878	21,758
Devolved and assigned revenue as % of non-North Sea Scottish revenue	17%	41%
as % of revenue incl geographical share of North Sea revenue 1	17%	40%
Devolved expenditure excluding housing benefit 3 ( HB)	38,764	41,532
Devolved revenue as % of estimated devolved expenditure excl HB	23%	39%
Devolved and Assigned revenue as % of estimated devolved expenditure excl HB	23%	52%
Devolved expenditure including housing benefit 3	40,536	43,304
Devolved revenue as % of estimated devolved expenditure incl HB	22%	37%
Devolved and Assigned revenue as % of estimated devolved expenditure incl HB	22%	50%

¹ Figures for the shares of devolved revenue as a share of total revenue including a population share of North Sea revenue are the same as the share when excluding North Sea revenue.
² Assigned VAT is shown on a gross basis, consistent with the National Accounts presentation. If net VAT were to be used, devolved expenditure would also need to be adjusted, as set out in Table A.9. In this case, devolved revenue as a share of estimated devolved expenditure would be 40% excluding housing benefit and 38% including housing benefit. Other Scotland Bill 2015-16 percentages are unchanged.
³ In GERS and the CRA, housing benefit is included in Scottish Local Government spending, as they make the payments to recipients, although it is set centrally and funded by the Department for Work and Pensions. Depending on definitions adopted, it could either be excluded or included in devolved expenditure. GERS presents both approaches.