Government Expenditure and Revenue Scotland 2016-2017

Chapter 3: Public Sector Expenditure

Introduction

This chapter provides detailed estimates of public sector expenditure for Scotland. Expenditure is shown by type of spend, using a presentation based on the UN's Classification of the Functions of Government ( COFOG). Further information is provided in the Glossary in Annex D. Current and capital expenditure are shown separately.

The primary data sources used to estimate Scottish public sector expenditure in GERS are Scottish Government spending reported on the UK Government's public spending system, OSCAR, and HM Treasury's Public Expenditure Statistical Analyses ( PESA) ^[25] and the supporting Country and Regional Analysis ( CRA). ^[26]

Spending by the Scottish Government is provided directly by the Scottish Government Directorate for Financial Management. Scottish Local Government spending in all years is taken from HM Treasury's PESA publication. Spending by other UK government departmental spending is based on PESA for 2016-17 and on the CRA, for earlier years. Further information on the methodology is set out in the expenditure methodology paper available at the link below.

http://www.gov.scot/Topics/Statistics/Browse/Economy/GERS/Methodology.

The EU Transactions line in the tables below shows Scotland's contribution to the EU, less funding received from the EU by the public sector. Funding received primarily consists of common agricultural payments and European regional development funding. The one contribution to the EU which is not included in the EU Transactions line is the traditional own resource contribution. This covers EU customs duties collected by the UK and transferred to the EU. As these are EU duties, neither the revenue nor expenditure is included in the UK Public Sector Finances. However, it is normally included in estimates of the UK's total contribution to the EU budget. As a result, users looking for an estimate of Scotland's estimated contribution to the EU should use the figures reported separately in Box 3.2.

In order to present expenditure figures on a National Accounts basis, the international reporting standards used by governments, a number of accounting adjustments are included in total expenditure. These are primarily symmetric adjustments that also form part of revenue, and therefore have little impact on the net fiscal balance. Further information is set out in Annex A.

Recent Statistical Classification Decisions

On 29 September 2016, the ONS announced that registered social landlords in Scotland, often referred to as housing associations, and their counterparts in the other devolved administrations, have been reclassified from the private sector to the public sector. The English bodies had been classified in the same way in October 2015. This change increases capital expenditure, and this is currently included in the accounting adjustment line. It also increases public sector debt interest in current expenditure, which now includes expenditure on repayments of loans by housing associations.

Public Sector Expenditure

Total public sector expenditure for Scotland in 2016-17 is estimated to be £71.2 billion, an increase of 3.1% from 2015-16, compared to growth of 2.2% for the UK as a whole. This was equivalent to 9.2% of total UK public sector expenditure. This is shown by spending category in Table 3.1.

Table 3.1: Total Expenditure: Scotland 2016-17

	Scotland
	£ million	% of total expenditure
General public services
Public and common services	1,512	2.1%
International services	810	1.1%
Public sector debt interest	3,249	4.6%
Defence	3,053	4.3%
Public order and safety	2,747	3.9%
Economic affairs
Enterprise and economic development	1,041	1.5%
Science and technology	441	0.6%
Employment policies	227	0.3%
Agriculture, forestry and fisheries	1,037	1.5%
Transport	3,163	4.4%
Environment protection	1,208	1.7%
Housing and community amenities	1,685	2.4%
Health	12,657	17.8%
Recreation, culture and religion	1,375	1.9%
Education and training	8,162	11.5%
Social protection	23,782	33.4%
EU transactions	-66	-0.1%
Accounting adjustments	5,126	7.2%
Total Expenditure	71,209	100%

Table 3.2 below shows growth in current and capital spend in Scotland by organization in 2016-17, compared to the UK. Although spending increased faster in Scotland than the UK as a whole in 2016-17, spending by the Scottish Government has grown in line with that of other UK Government bodies.

The main difference between Scottish and UK spending is seen in capital spending, particularly that by public corporations and local government. This reflects a number of factors.

Firstly, it reflects an increase in capital expenditure by housing associations (see Table A.8). This is estimated to have increased by £412 million, and accounts for around 40% of the increase in capital spending. This size of increase reflects the fact that capital spending by housing associations was relatively low by historic standards in 2015-16. Overall, Scottish housing associations' capital expenditure in 2016-17 is now £168 million higher than it was in 2014-15.

Secondly, it reflects an increase in Scottish local government capital spending. This increased by £359 million (20.8%) in 2016-17, primarily financed by increased local government borrowing. This accounts for around a third of the increase in the capital spending.

The remainder of the increase in capital spending is largely due to capital spend by Scottish Water, which rose by £160 million, accounting for 15% of the increase in capital spending. Other capital spending by the Scottish Government also increased by £125 million, of which £50 million was associated with the greater use of Scottish Government borrowing powers.

Table 3.2: Expenditure growth: 2015-16 to 2016-17 (£ million)

	Scotland
	2015-16	2016-17	Growth	UK growth
Current expenditure	62,135	63,188	1.7%	1.3%
Scottish Government	23,387	23,922	2.3%	2.3%
Local Government	12,360	12,425	0.5%	-0.4%
Public Corporations	-	-	-	-
Other UK Government bodies	26,387	26,841	1.7%	1.8%
Capital expenditure	6,913	8,021	16.0%	10.6%
Scottish Government	1,982	2,107	6.3%	6.3%
Local Government	1,727	2,086	20.8%	4.9%
Public Corporations	1,011	1,563	54.7%	20.6%
Other UK Government bodies	2,193	2,264	3.2%	9.5%
Total expenditure	69,048	71,209	3.1%	2.2%
Scottish Government	25,369	26,029	2.6%	2.6%
Local Government	14,087	14,511	3.0%	0.1%
Public Corporations	1,011	1,563	54.7%	20.6%
Other UK Government bodies	28,581	29,105	1.8%	2.4%

Notes:

1. Public corporation line for Scotland shows spending by Scottish public corporations only. UK figure shows spending by all public corporations
2. Scottish public corporations have no current expenditure as this is netted off against their income to provide their gross operating surplus in the revenue calculations. Within the CRA, interest expenditure by public corporations is recorded as spending by HM Treasury.
3. Spend by Other UK Government department for Scotland and the UK are not directly comparable, as spending for the UK as a whole it includes spending on functions which are devolved to the Scottish Government.

Table 3.3 shows the split of total expenditure between current and capital for Scotland. The capital spending share has increased in 2016-17, driven by the factors discussed above. The capital spending share is also relatively high in 2012-13, due to the one‑off transfer of the Royal Mail Pension Plan into the public sector.

Table 3.3: Current and Capital Expenditure (% of Total Expenditure): Scotland

	per cent
	2012-13	2013-14	2014-15	2015-16	2016-17
Current	87.8%	89.6%	89.6%	90.0%	88.7%
Capital	12.2%	10.4%	10.4%	10.0%	11.3%

Table 3.4 below shows estimates of Scottish and UK public sector expenditure as a share of GDP. This provides an illustration of the relative size of public spending between countries and over time. It is not an estimate of the contribution of public spending to the economy as much of this spending consists of transfers from government to individuals and businesses. Excluding North Sea GDP, public sector spending as a share of GDP has increased for the first time since 2012-13, having previously been on a downward trend. Public sector spending as a share of GDP in the UK has continued to decline. This divergence in part reflects the higher spending growth in Scotland, but primarily reflects weaker GDP growth in Scotland. If Scottish GDP had grown in line with UK GDP, spending as a share of GDP excluding the North Sea would have fallen to 47.2% in 2016-17.

Including a geographical share of North Sea GDP, public spending as a share of GDP has been increasing since 2013-14 in Scotland, reflecting the fall in North Sea GDP over this period.

Table 3.4: Total Managed Expenditure as a Share of GDP

	per cent of GDP
	2012-13	2013-14	2014-15	2015-16	2016-17
Scottish TME as a Share of GDP:
Excluding North Sea GDP	51.8%	49.0%	47.6%	47.4%	47.5%
Including population share of North Sea GDP	51.0%	48.3%	47.1%	47.0%	47.1%
Including geographical share of North Sea GDP	45.6%	43.4%	43.6%	44.4%	44.7%
UK TME as a share of GDP:
100% of North Sea GDP	43.3%	41.9%	41.0%	40.0%	39.4%

Table 3.5 shows total public sector expenditure per person for Scotland and the UK. Since 2012-13, spending per head in Scotland has been between 10.1% (in 2014-15 ) and 12.2% (in 2016-17) higher than the UK average. Slightly less than one percentage point of this difference is due to water and sewerage services being provided by the public sector in Scotland, and therefore included in Scottish expenditure, whilst in England and Wales they are operated by the private sector and therefore excluded from UK expenditure. Tables 3.6 and 3.7 show current, capital, and total expenditure for Scotland and the UK respectively.

Table 3.5: Total Expenditure Per Person

	£ per person
	2012-13	2013-14	2014-15	2015-16	2016-17
Scotland	12,807	12,673	12,792	12,832	13,175
UK	11,472	11,468	11,618	11,555	11,739
Difference (Scotland minus UK)	1,334	1,205	1,174	1,277	1,437
Difference between Scottish and UK	11.6%	10.5%	10.1%	11.0%	12.2%

Box 3.1 Social protection spending in Scotland

Social protection spending is the largest single spending line in GERS, and covers a range of different spend types.

The largest spending element within social protection is expenditure on the state pension by the Department for Work and Pensions ( DWP). This is followed by DWP's spending on other social security such as disability and incapacity related benefits, income support, jobseekers allowance, and housing benefit. Tax credits and child benefit are part of HMRC spending, which also includes universal credit. Scottish Government social security spend includes the Scottish Welfare Fund, Council Tax Reduction Scheme, and Scottish Government expenditure on Discretionary Housing Payments, all of which are administered by Local Authorities.

Some UK social security expenditure, mostly associated with the state pension, is paid to non- UK residents. Scotland is allocated a population share of this expenditure in GERS.

Social protection spending for Scotland (£ million)

	2012-13	2013-14	2014-15	2015-16	2016-17
Social security spending in Scotland
State pension	6,791	7,051	7,324	7,560	7,749
Housing benefit	1,789	1,770	1,776	1,772	1,733
Other DWP social security	5,796	5,622	5,686	5,789	5,804
HMRC child benefit and tax credits and universal credit	3,097	2,960	2,914	2,869	2,938
Scottish Government social security	408	421	415	402	398
Social security spending in Scotland	17,881	17,825	18,115	18,392	18,622
Share of benefit spending outside UK and corporate spend	508	449	559	604	665
Other social protection
Net public sector pensions	874	875	966	951	876
Social care for the elderly	2,249	2,263	2,296	2,300	2,297
Other	924	925	931	1,122	1,321
Total social protection	22,437	22,337	22,867	23,369	23,782

Other social protection spending consists primarily of Local Authority expenditure on social care to families and children.

A more detailed breakdown of social security spending is published by DWP, available at the link below.

https://www.gov.uk/government/collections/benefit-expenditure-tables

Spending by different parts of the Public Sector

Table 3.8 below provides a breakdown of Scottish expenditure by the Scottish Government, Scottish local government and public corporations, and other UK government bodies.

Table 3.6: Total Expenditure: Scotland 2012-13 to 2016-17

	£ million
	Current					Capital					Total
	2012-13	2013-14	2014-15	2015-16	2016-17	2012-13	2013-14	2014-15	2015-16	2016-17	2012-13	2013-14	2014-15	2015-16	2016-17
General public services
Public and common services	1,138	1,239	1,261	1,265	1,232	169	234	227	250	279	1,308	1,473	1,489	1,515	1,512
International services	598	762	692	697	738	46	52	177	163	72	644	813	868	861	810
Public sector debt interest	3,396	3,331	3,061	3,093	3,249	0	0	0	0	0	3,396	3,331	3,061	3,093	3,249
Defence	2,259	2,290	2,272	2,293	2,294	771	734	765	729	759	3,030	3,024	3,037	3,021	3,053
Public order and safety	2,644	2,410	2,692	2,748	2,666	201	137	122	74	81	2,844	2,547	2,814	2,822	2,747
Economic affairs
Enterprise and economic development	704	816	765	805	807	247	194	186	134	233	952	1,010	951	940	1,041
Science and technology	23	26	51	103	95	298	365	366	388	345	321	391	416	491	441
Employment policies	239	307	280	218	222	7	6	3	2	5	246	314	283	220	227
Agriculture, forestry and fisheries	762	784	727	686	810	156	171	200	138	227	919	956	928	824	1,037
Transport	1,545	1,568	1,340	1,624	1,564	1,437	1,361	1,475	1,444	1,599	2,982	2,929	2,815	3,069	3,163
Environment protection	887	916	940	927	893	299	366	308	311	315	1,186	1,282	1,248	1,237	1,208
Housing and community amenities	75	123	125	160	200	1,436	1,407	1,423	1,406	1,486	1,511	1,529	1,548	1,567	1,685
Health	10,658	10,870	11,146	11,612	12,045	685	637	489	571	613	11,343	11,506	11,635	12,183	12,657
Recreation, culture and religion	1,286	1,202	1,371	1,116	1,076	336	248	190	239	300	1,623	1,450	1,561	1,354	1,375
Education and training	6,866	6,923	6,979	7,107	7,288	656	636	634	732	874	7,522	7,558	7,614	7,839	8,162
Social protection	22,350	22,318	22,833	23,302	23,710	87	19	34	68	72	22,437	22,337	22,867	23,369	23,782
EU Transactions	167	121	237	266	-66	0	0	0	0	0	167	121	237	266	-66
Accounting adjustments	4,179	4,524	4,580	4,113	4,365	1,485	484	536	265	761	5,664	5,008	5,116	4,379	5,126
Total	59,778	60,532	61,353	62,135	63,188	8,316	7,050	7,134	6,913	8,021	68,094	67,581	68,487	69,048	71,209

Table 3.7: Total Expenditure: UK 2012-13 to 2016-17

	£ million
	Current					Capital					Total
	2012-13	2013-14	2014-15	2015-16	2016-17	2012-13	2013-14	2014-15	2015-16	2016-17	2012-13	2013-14	2014-15	2015-16	2016-17
General public services
Public and common services	9,607	9,359	9,689	9,827	10,059	1,575	1,816	1,761	1,366	3,045	11,182	11,175	11,450	11,193	13,104
International services	7,174	9,167	8,355	8,450	8,941	546	621	2,133	1,979	871	7,720	9,788	10,488	10,429	9,812
Public sector debt interest	40,719	40,086	36,978	37,483	39,375	0	0	0	0	0	40,719	40,086	36,978	37,483	39,375
Defence	27,102	27,571	27,460	27,796	27,800	9,238	8,834	9,238	8,831	9,200	36,340	36,405	36,698	36,627	37,000
Public order and safety	29,896	28,345	29,235	28,928	28,993	1,410	1,258	1,252	1,279	1,128	31,306	29,603	30,487	30,207	30,121
Economic affairs
Enterprise and economic development	4,057	4,495	4,196	4,629	4,245	942	1,178	862	673	1,560	4,999	5,673	5,058	5,302	5,805
Science and technology	272	363	496	875	389	3,054	3,831	3,976	3,944	3,506	3,326	4,194	4,472	4,819	3,895
Employment policies	2,799	3,579	3,125	2,406	2,399	79	77	32	22	60	2,878	3,656	3,157	2,428	2,459
Agriculture, forestry and fisheries	4,977	4,969	4,696	4,075	4,778	307	409	517	395	567	5,284	5,378	5,213	4,470	5,345
Transport	7,675	7,666	6,617	9,765	10,133	12,605	13,196	15,354	18,012	19,483	20,280	20,862	21,971	27,777	29,616
Environment protection	7,376	7,608	7,813	7,959	7,405	3,288	3,575	3,753	3,676	3,854	10,664	11,183	11,566	11,635	11,259
Housing and community amenities	3,221	3,150	3,077	2,977	3,096	6,878	6,832	7,358	7,053	7,471	10,099	9,982	10,435	10,030	10,567
Health	117,944	121,968	127,651	132,663	138,816	6,358	7,421	6,402	5,836	5,524	124,302	129,389	134,053	138,499	144,340
Recreation, culture and religion	10,666	9,573	10,427	9,226	9,287	2,044	1,837	2,022	1,670	2,339	12,710	11,410	12,449	10,896	11,626
Education and training	75,773	76,040	75,604	75,468	77,104	8,219	8,838	9,450	9,319	10,070	83,992	84,878	85,054	84,787	87,174
Social protection	252,999	254,363	261,016	264,663	263,882	450	-393	-111	316	414	253,449	253,970	260,905	264,979	264,296
EU transactions	6,705	7,210	6,225	7,671	4,725	0	0	0	0	0	6,705	7,210	6,225	7,671	4,725
Accounting adjustments	47,508	51,262	53,598	47,457	50,016	18,530	10,451	11,731	7,228	10,076	66,038	61,713	65,329	54,685	60,092
Total	656,470	666,774	676,258	682,318	691,443	75,523	69,781	75,730	71,599	79,168	731,993	736,555	751,988	753,917	770,611

Table 3.8: Total Expenditure: Scottish Government, Local Authorities, Public Corporations, and Other UK Government: Scotland 2012-13 to 2016-17

	£ million
	Scottish Government, LAs and Public Corporations					Other UK Government					Total
	2012-13	2013-14	2014-15	2015-16	2016-17	2012-13	2013-14	2014-15	2015-16	2016-17	2012-13	2013-14	2014-15	2015-16	2016-17
General public services
Public and common services	859	1,021	1,014	1,048	1,027	448	452	475	467	484	1,308	1,473	1,489	1,515	1,512
International services	0	0	0	0	0	644	813	868	861	810	644	813	868	861	810
Public sector debt interest	0	0	0	0	0	3,396	3,331	3,061	3,093	3,249	3,396	3,331	3,061	3,093	3,249
Defence	3	3	3	4	4	3,027	3,021	3,034	3,017	3,049	3,030	3,024	3,037	3,021	3,053
Public order and safety	2,597	2,307	2,567	2,592	2,515	248	240	247	230	232	2,844	2,547	2,814	2,822	2,747
Economic affairs
Enterprise and econ development	744	782	743	632	712	208	228	208	308	328	952	1,010	951	940	1,041
Science and technology	0	0	0	0	0	321	391	416	491	441	321	391	416	491	441
Employment policies	0	0	0	0	0	246	314	283	220	227	246	314	283	220	227
Agriculture, forestry and fisheries	916	952	922	819	1,021	2	4	5	5	16	919	956	928	824	1,037
Transport	2,804	2,750	2,623	2,318	2,372	178	179	192	751	792	2,982	2,929	2,815	3,069	3,163
Environment protection	943	1,013	950	949	935	242	270	298	288	273	1,186	1,282	1,248	1,237	1,208
Housing and community amenities	1,511	1,529	1,548	1,567	1,685	0	0	0	0	0	1,511	1,529	1,548	1,567	1,685
Health	11,184	11,354	11,483	12,002	12,508	159	152	151	180	149	11,343	11,506	11,635	12,183	12,657
Recreation, culture and religion	1,119	1,066	1,142	999	979	504	384	419	355	397	1,623	1,450	1,561	1,354	1,375
Education and training	7,504	7,541	7,587	7,814	8,156	18	17	27	25	6	7,522	7,558	7,614	7,839	8,162
Social protection	5,513	5,481	5,658	5,731	5,669	16,924	16,857	17,209	17,638	18,114	22,437	22,337	22,867	23,369	23,782
EU transactions	0	0	0	0	0	167	121	237	266	-66	167	121	237	266	-66
Accounting adjustments	4,187	4,156	4,256	3,992	4,520	1,477	851	860	386	606	5,664	5,008	5,116	4,379	5,126
Total	39,885	39,956	40,497	40,467	42,103	28,209	27,625	27,990	28,581	29,105	68,094	67,581	68,487	69,048	71,209

Box 3.2: Scotland's Notional Contributions to the European Union Budget

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.

As discussed at the beginning of this chapter, the EU Transactions lines in the tables above are produced on a National Accounts basis, and exclude traditional own resource contributions to the EU. These are normally included when reporting on the UK's net contribution to EU budgets. The tables in this box show net payments to the EU including these contributions.

Although contributions to the EU are made by the public sector, funding from the EU is received by both public and non-public sector bodies. Both the EU Transactions line in the above tables and the figures in this box report only on transactions with the EU by the public sector, in common with the presentation used by HM Treasury. EU payments to Higher Education Institutions, which are not part of the public sector, are discussed further below.

Funding the EU Budget

There are three key sources of funding for the EU, which come from each member state:

• Traditional own resource ( TOR) - Agriculture duties and customs duties levied on agriculture and non-agriculture products from outside the EU.
• VAT based own resource - Calculated as a percentage of countries' VAT tax base.
• Gross National Income ( GNI) based own resource - Calculated as a percentage of countries' GNI. This is the EU's single largest source of revenue.

UK Correction (Rebate, or Abatement)

Since 1985, the UK has received a rebate. The UK rebate is broadly equal to 66% of the UK's net contribution (in the previous year). Further detail is available from HM Treasury's European Union Finances 2016 publication.

https://www.gov.uk/government/statistics/european-union-finances-2016

Scotland's contribution to the EU Budget

Scotland does not contribute directly to the EU budget. In this analysis, 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 estimated using the ratio of Scottish to UK GDP, both including and excluding the North Sea (the non-North Sea share is used in headline GERS estimates). VAT based own resource is assigned to Scotland using Scotland's share of UK VAT receipts, and a population share is used to assign TOR.

Receipts from the EU

Receipts received from the EU are broken down into two categories: public sector receipts and external assistance. Scottish public sector receipts reflect expenditure specifically for Scotland as reported in the Scottish Government's Consolidated Accounts, and include payments under the Common Agricultural Policy, European Structural Funds, and European Regional Development Funding.

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 shown in the other attributed costs line in the tables below. A population share of this expenditure is assigned to Scotland.

UK's Net Contribution to the EU

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.

The table below sets out the latest UK figures, as contained in Table C.1 of Public Expenditure Statistical Analyses, published July 2017.

UK: Transactions with the institutions of the EU, 2012-13 to 2016-17

	£ million
	2012-13	2013-14	2014-15	2015-16	2016-17
GNI based contribution	12,303	13,845	14,154	12,570	11,440
UK abatement	-3,172	-4,130	-4,811	-4,068	-4,757
VAT-based contribution to the EU	2,398	2,163	2,316	2,751	2,477
Expenditure transfers to the EU	11,529	11,879	11,658	11,253	9,160
Receipts to cover collection costs of TOR	-720	-733	-743	-771	-357
TOR	2,891	2,933	3,006	3,085	3,377
Gross contribution to the EU budget	13,699	14,079	13,921	13,567	12,180
Public sector EU receipts	-4,022	-3,856	-4,690	-2,811	-4,079
Net contributions to the EU budget	9,678	10,223	9,231	10,756	8,102
less other attributed costs	82	79	-	-	-
Net payments to EU institutions	9,595	10,143	9,231	10,756	8,102

Source: Public Expenditure Statistical Analyses (July 2017), Table C.1 https://www.gov.uk/government/statistics/public-expenditure-statistical-analyses-2017

Scotland's Net Contribution to the EU

Estimates are provided for Scotland in the table below, showing the GNI contribution assigned using Scotland's share excluding and including the North Sea. As discussed at the beginning of this Chapter, the difference between Scotland's net payments to EU institutions (based on GDP excluding the North Sea) in the table below and the EU Transactions line in Tables 3.6 and 3.8 is Scotland's share of UK TOR.

Scotland: Estimated transactions with the institutions of the EU

2012-13 to 2016-17

	£ million
	2012-13	2013-14	2014-15	2015-16	2016-17
GNI based contribution ( GDP exc North Sea ( NS))	963	1,083	1,107	983	874
GNI based contribution ( GDP inc NS)	1,087	1,226	1,212	1,037	932
UK abatement (Population share)	-264	-343	-398	-336	-390
VAT-based payments to the EU	201	185	195	232	209
Expenditure transfers to the EU ( GDP exc NS)	900	925	904	880	692
Expenditure transfers to the EU ( GDP inc NS)	1,024	1,068	1,009	934	751
Receipts to cover collection costs of TOR	-60	-61	-61	-64	-29
TOR	241	244	249	254	278
Gross contribution to the EU budget ( GDP exc NS)	1,080	1,108	1,091	1,071	941
Gross contribution to the EU budget ( GDP inc NS)	1,205	1,250	1,196	1,125	1,000
Public sector EU receipts	-666	-737	-606	-551	-729
Net contributions to the EU budget ( GDP exc NS)	415	371	485	520	212
Net contributions to the EU budget ( GDP inc NS)	539	513	590	574	271
less other attributed costs	-7	-7	0	0	0
Net payments to EU institutions ( GDP exc NS)	408	365	485	520	212
Net payments to EU institutions ( GDP inc NS)	532	507	590	574	271

Note: As set out in the footnotes to the expenditure table, the net payments to EU institutions figure does not have the same definition as EU transactions presented there: as TOR is collected on behalf of the EU, it is not considered a transaction of the UK Government in the official public sector finances. Therefore to get to EU Transactions from the figure above, TOR must be subtracted.

EU Payments to Higher Education Institutions

This box has covered the transactions that the Scottish and UK public sector has with the EU. However, the EU also makes payments to bodies outside the public sector, such as Higher Education Institutions ( HEIs), which are considered private sector not-for-profit institutions. The Higher Education Statistics Agency ( HESA) produces statistics on these payments. These payments are not included in the tables shown above as they are not transactions with the public sector and are therefore out of the scope of public sector finances.

Payments to HEIs from the EU include:

• Payments from EU government bodies
• Payments from EU-based charities through an open competitive process
• Payments from EU industry, commerce and public corporations
• Payments from other EU bodies

To illustrate the size of these payments, the table below shows research grants and contracts income from the EU to HEIs for Scotland and the UK for academic years 2011-12 to 2015-16, which is the latest year for which figures are available. This spending is outside the public sector, and therefore has no impact on the figures reported in GERS.

EU Payments to Higher Education Institutions, Academic Year 2011-12 to 2015-16

	£ million
	2011-12	2012-13	2013-14	2014-15	2015-16
Scotland	74.7	81.4	88.8	94.1	97.4
UK	599.7	690.3	789.2	836.1	836.1

Note: The academic year runs from 1 August to 31 July

These figures have been reproduced with the permission of the Higher Education Statistics Agency ( HESA). More details on these statistics can be found on the HESA website ( www.hesa.ac.uk ).

Box 3.3: Private Finance Initiative and Non-Profit Distributing Financing support for Public Private Partnerships ( PPPs)

This box gives an introduction to Public Private Partnerships ( PPPs) and the funding models that have been used in Scotland. It also breaks down unitary charge payments by scheme type, by type of procuring authority and by the sector of the project. This analysis uses sources of publicly available data, all brought together into an accompanying spreadsheet. The spreadsheet is available from the GERS website: http://www.gov.scot/Topics/Statistics/Browse/Economy/GERS/RelatedAreas

Introduction to PFI, PPPs, and NPD

Public Private Partnerships ( PPPs) 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.

The Private Finance Initiative ( PFI) used to be the UK's preferred form of PPP. In Scotland, the Non-Profit Distributing ( NPD) model has been the Scottish Government's preferred procurement option since 2007. For more information on these schemes, and the data sources used in this box, please see the Scottish Government website: http://www.gov.scot/Topics/Government/Finance/18232/12308

Unitary Charge Payments

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. It is worth emphasising that these payments are already fully reflected in the GERS spending figures. In addition, the table below includes Ministry of Defence projects in Scotland which are procured by and entirely funded by the Ministry of Defence. Scotland is assigned a population share of this expenditure in GERS. Unitary charge payments cover repayment of capital, interest payments, and in some cases service charge payments. Figures are shown here for the years 2012-13 to 2016-17 to be consistent with other tables in this report. The underlying spreadsheets on the GERS website have data covering the period back to 1998-99 as well as estimated payments into the 2040s. Additional information about the individual procuring authority ( e.g. individual local authority and health board information) and comparisons with the UK are also provided.

Scotland: Unitary charge payments, 2012-13 to 2016-17

	£ million
	2012-13	2013-14	2014-15	2015-16	2016-17
By scheme type
Private Finance Initiative	924	944	979	995	1,009
Non-Profit Distributing models 1	52	55	59	73	117
Total Unitary Charge payments	977	999	1,038	1,069	1,126
By procuring authority
Further Education	2	2	2	10	27
Local Government	478	488	497	507	522
NHS	227	235	242	247	261
Other Scottish Government	105	109	127	136	139
Ministry of Defence	23	22	24	21	25
Scottish Water	142	143	146	146	151
Total Unitary Charge payments	977	999	1,038	1,069	1,126
By sector of project
Energy	4	4	5	5	5
Further Education	2	2	2	10	27
Health	227	235	242	247	261
IT	1	-	-	-	-
Ministry of Defence	23	22	24	21	25
Offices	3	3	3	3	3
Police	4	4	4	4	4
Prisons	45	46	49	49	47
Schools	436	446	454	462	479
Transport	75	78	93	104	107
Waste	157	158	162	163	168
Total Unitary Charge payments	977	999	1,038	1,069	1,126
UK Total Unitary Charge Payments	9,257	9,744	10,206	10,465	10,361
Scotland as % UK	10.5%	10.2%	10.2%	10.2%	10.9%

1 Non-profit distributing models includes projects delivered by the hub model and projects commissioned prior to 2010. Further detail is available at: http://www.gov.scot/Topics/Government/Finance/18232/12308
Source: HM Treasury and Scottish Government figures. See the accompanying spreadsheet for full details of all sources