Government Expenditure and Revenue Scotland (GERS) 2019-2020

Government Expenditure and Revenue Scotland (GERS) is a National Statistics publication. It estimates the revenue raised in Scotland and the goods and services provided for the benefit of Scotland.


Preface

This report is the twenty-seventh in the series of official published estimates of expenditure and revenue balances of the public sector in Scotland.

GERS is classified as National Statistics and produced in accordance with the principles of the Code of Practice for Statistics. More information about National Statistics, including the latest assessment report on GERS (number 274), is available on the UK Statistics Authority website.[2]

The Scottish Government held a public consultation on a potential new publication on devolved public sector finances in Scotland from June to September 2018. A consultation response was published in November 2018, setting out the intention to produce a new statistical publication in this area. Work on this publication has been delayed due to the coronavirus pandemic. The Scottish Government will provide a further update once a publication date is confirmed.

Feedback from users of the publication is welcome. A correspondence address is available in the back leaf of the publication. Comments can be emailed to:

economic.statistics@gov.scot

Coronavirus and the Public Sector Finances

The COVID-19 pandemic, which has spread across the world in 2020, has had profound impacts on public health, the economy, and the public finances. The UK introduced strict public health measures at the end of March, as well as announcing a range of support packages for households and businesses.

Whilst the impact of COVID-19 on the public sector finances remains uncertain, and is likely to continue to be revised, it is already clear that the pandemic will see an increase in public sector borrowing. The Office for Budget Responsibility’s (OBR’s) latest assessment of the impact on borrowing, set out in their Coronavirus Policy Monitoring database,[3] is that UK borrowing in 2019-20 has increased by around £9.4 billion as a result of COVID-19. This is around 0.4% of GDP. The impact is expected to be greater in future years.

The ONS has published an article setting out some of the challenges with measuring the Public Sector Finances at this time, available at:

https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/articles/challengesofmeasuringtheeffectsofthecoronaviruspandemicontaxreceipts/2020-07-21

Some of the response to the pandemic for Scotland, such as additional funding for the NHS, is delivered by the Scottish Government. This expenditure will be captured within Scottish Government reporting systems, and reflected in Scottish Government spending in GERS. Other elements, such as the Coronavirus Job Retention Scheme, which allows firms to place their staff on furlough, with up to 80% of their wages paid by the UK Government, are reflected in Other UK Government Department spending on Enterprise and Economic Development. The OBR’s latest estimate of the cost of these employment support policies in 2019-20 is £2.3 billion, and Scotland is allocated a population share of this spending in GERS. This is in line with the statistics on the uptake of these programmes published by HMRC.[4]

The approach to reporting and estimating the impact of COVID-19 on the GERS figures for Scotland will be reviewed for future publications.

Recent Statistical Decisions and Changes

A number of changes were made to the UK Public Finances in September 2019. These are discussed below. Further information is available at:

https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/bulletins/publicsectorfinances/august2019#developments-in-public-sector-finance-statistics-september-2019

Student loans

On 17 December 2018, the ONS announced that the treatment of student loans in the Public Sector Finances would change, to reflect the fact that some portion of these loans is not expected to be repaid. The revised treatment involves partitioning the loan, with the part not expected to be repaid being recorded as capital spending. This change primarily increases capital expenditure, but will also impact on the accrued interest the government receives from loans. This change was implemented in the UK Public Sector Finances in August 2019. Further information on this change is available at:

https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/articles/newtreatmentofstudentloansinthepublicsectorfinancesandnationalaccounts/2018-12-17

Pensions

Since the move to the European System of Accounts 2010, the ONS has been reviewing the recording of public sector pensions in the Public Sector Finances. Following a consultation with the Public Sector Technical Advisory Committee, and a public consultation in autumn 2018, the reporting of public sector pensions has changed from a net to a gross basis. This change is primarily presentation, but due to the inclusion of the pension administrators’ costs, as well as including the Pension Protection Fund within the public sector boundary, there is an impact on overall public sector spending. This includes increase in public sector debt interest payments, as well as interest receivable by the public sector. In 2019-20, Scotland is apportioned £1.5 billion of debt interest associated with public sector pensions, and £1.7 billion of interest income.

Capital consumption

In September 2019, the ONS implemented a number of improvements to the estimation of capital stocks. These mainly relate to a review of the life length of fixed assets, making the UK approach more consistent with that used in other countries. This change affects the estimate of capital consumption, which is the estimate of how much capital assets are used up each year to deliver public services.

This change is purely an accounting change, and does not affect estimates of the net fiscal balance. It does, however, affect the current budget balance. This is because under the new approach, more capital assets are considered to be used up providing day-to-day services, so the cost of delivering these services increases. The current budget balance has increased by around 0.7 percentage points of GDP as a result of this change.

Within the net fiscal balance calculation, overall spending is unchanged, but more capital spending is assumed to be used to replace the assets used to provide day-to-day services. Therefore, net investment in new assets decreases.

What Questions Does GERS Address?

GERS addresses three questions about Scotland’s public sector accounts for a given year:

1. What revenues were raised in Scotland?

2. How much did the country pay for the public services that were consumed?

3. To what extent did the revenues raised cover the costs of these public services?

Revenue

Public sector revenue is estimated where a financial burden is imposed on residents and enterprises in Scotland.

In general, the way in which revenue is collected means that separate figures for each country and region of the UK are not available for most revenues, although following increased devolution in recent years, more Scottish data have become available. As a result, Scottish public sector revenue is estimated by considering each revenue stream separately. Where Scottish data are unavailable, GERS estimates revenue using a set of apportionment methodologies, refined over a number of years following consultation with and feedback from users. The methodology note on the GERS website provides a detailed discussion of the methodologies and datasets used.[5]

Expenditure

Public sector expenditure is estimated on the basis of spending incurred for the benefit of residents of Scotland. That is, a particular public sector expenditure is apportioned to a region if the benefit of the expenditure is thought to accrue to residents of that region.

This is a different measure from total public expenditure in Scotland. For most expenditure, spending for or in Scotland will be similar. For example, the vast majority of health expenditure by NHS Scotland occurs in Scotland and is for patients resident in Scotland. Therefore, the in and for approaches should yield virtually identical assessments of expenditure. However, for expenditure where the final impact is more widespread, such as defence, an assessment of ‘who benefits’ depends upon the nature of the benefit being assessed. Where there are differences between the for and in approaches, GERS estimates Scottish expenditure using a set of apportionment methodologies, refined over a number of years following consultation with and feedback from users.

The for approach considers the location of the recipients of services or transfers that public sector expenditure finances, irrespective of where the expenditure takes place. For example, with respect to defence expenditure, as the service provided is a national ‘public good’, the for methodology operates on the premise that the entire UK population benefits from the provision of a national defence service. Accordingly, under the for methodology, national defence expenditure is apportioned across the UK on a population basis.

Estimates of spending in Scotland are used in some Scottish Government publications, such as the Quarterly National Accounts. However, these do not provide a complete measure of spending, as some types of spending, such as welfare spending, are not reported. The Scottish Government is currently reviewing the potential to provide users with estimates of spending in Scotland, and information on how this would differ from spending for Scotland.

The Data Sources

The source of the revenue data in GERS is ONS’s Public Sector Finances, which provides disaggregated figures relating to UK public sector revenue.[6]

The primary data sources used to estimate Scottish public sector expenditure in GERS are Scottish Government accounting data, and HM Treasury’s Public Expenditure Statistical Analyses[7] and the supporting Country and Regional Analysis (CRA).[8]

GERS also makes use of the estimates of Scottish Gross Domestic Product (GDP) in current market prices published in the Quarterly National Accounts Scotland (QNAS).[9]

Additional Information on the GERS Website

The GERS website contains a number of additional analyses of Scotland’s public sector finances. In addition to containing copies of the GERS report from 1990-91 onwards, the website also contains the tables underpinning this edition of GERS in Excel format and statistics providing a consistent time series of Scotland’s public sector finances from 1998-99 to 2019-20.

The GERS website can be accessed via https://www.gov.scot/publications/about-government-expenditure-and-revenue-scotland/.

Comparisons to other countries and regions of the UK

GERS does not provide comparisons of Scottish revenue and expenditure with other parts of the UK, as data are not available for 2019-20 for each country and region of the UK. Users who are interested in these comparisons are advised to use the Country and Regional Public Sector Finances publication published by the ONS, available at the link below. A comparison between the ONS and GERS figures for Scotland is provided in Box 1.1.

https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/articles/countryandregionalpublicsectorfinances/financialyearending2019

International comparisons

The Scotland figures in the main tables in GERS are produced to be comparable to the UK figures presented in the ONS Public Sector Finances and the OBR Economic and Fiscal Outlook. These report for the public sector as a whole on a financial year basis. In contrast, organizations such as the European Commission and the International Monetary Fund (IMF) report countries’ finances on a calendar year basis and for the government sector only. Figures for Scotland on this basis are available in Table A.4.

Contact

Email: Economic.Statistics@gov.scot

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