Government Expenditure and Revenue Scotland (GERS) 2019-2020

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)^[21] and the supporting Country and Regional Analysis (CRA).^[22]

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 departments spending is based on PESA for 2019-20 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.

https://www.gov.scot/collections/economy-statistics/#governmentexpenditureandrevenuescotland(gers)

GERS also includes some transactions between Scotland and the EU. These can be reported in a number of different ways, and are discussed in more detail later in the chapter.

GERS expenditure figures are presented on a National Accounts basis, an international reporting standard used by governments. This requires a number of accounting adjustments to be 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.

As discussed in the preface, there are a number of changes to the expenditure in this year’s publication, reflecting changes in the UK Public Sector Finances. Some of these are primarily presentational, and do not affect the net fiscal balance, such as the change to capital consumption. The main revision to expenditure that impacts on the net fiscal balance is the change to student loans, which is discussed in Box 3.1.

Public Sector Expenditure

Total public sector expenditure for Scotland in 2019-20 is estimated to be £81.0 billion, an increase of 3.1% from 2018-19, compared to growth of 3.5% for the UK as a whole. Scotland’s public sector expenditure in 2019-20 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 2019-20

	Scotland
	£ million	% of total expenditure
General public services
Public and common services	1,809	2.2%
International services	966	1.2%
Public sector debt interest	4,533	5.6%
Defence	3,451	4.3%
Public order and safety	3,153	3.9%
Economic affairs
Enterprise and economic development	1,795	2.2%
Science and technology	754	0.9%
Employment policies	209	0.3%
Agriculture, forestry and fisheries	864	1.1%
Transport	3,970	4.9%
Environment protection	1,358	1.7%
Housing and community amenities	2,443	3.0%
Health	13,765	17.0%
Recreation, culture and religion	1,323	1.6%
Education and training	9,201	11.4%
Social protection	24,275	30.0%
EU transactions	210	0.3%
Accounting adjustments	6,936	8.6%
Total Expenditure	81,015	100%

Table 3.2 below shows growth in current and capital spend in Scotland by organization in 2019-20, compared to the UK. Spending increased more slowly in Scotland than the UK as a whole in 2019-20. This is primarily due to spending on student loans increasing faster in the rest of the UK.

Box 3.1: Changes to the reporting of student loans

Student loans have been used in the UK since 1990, to help some students meet their living costs. In 1998, when tuition fees were introduced for UK universities, student loans were extended to cover these additional costs. At this point, the repayment of loans was also changed to be linked to income, referred to as an income-contingent repayment.

In Scotland, tuition fees were ended for Scottish students in 2001. At the time, they were replaced by a one-off charge at the time of graduation. This was later abolished in 2008.

Student loans are income-contingent, meaning that they are only repaid when the borrower’s earnings exceed a certain threshold, and are written-off, normally after 30 years, regardless of whether they have been repaid. This means that many students will not repay their loans in full.

Under the previous treatment, student loans were recorded as conventional loans. This means that interest is earned on the loan while it is outstanding, and if the loan is not repaid by the expiration date, a charge is recorded in the government accounts at that point. A number of concerns had been raised over this approach, including by the Office for Budget Responsibility, as it meant that:

• The public sector finances showed revenue associated with accrued interest on the loans, even when no payments were being made due to the income criteria not being met; and
• Due to the long length life of the loans, the government would likely face a large expenditure charge in future years when loans issued from 1998 onwards began to be written off.

In response to these concerns, the ONS undertook a review of different approaches for recording the loans, including considering approaches used internationally. The result of the review recommended that loans be recorded by recording part of the loan as a grant, which represents the amount of loan not expected to be repaid, with the remainder still recorded as a conventional loan. The grant element is recorded as capital spending in the year that the loan is issued.

The impact of this change on spending is shown in the table below for Scotland and the UK. As Scottish students do not face tuition fees, the value of loans issued is lower in Scotland, and as such the level of spending is also lower. This spending is currently captured through the expenditure accounting adjustments.

Capital expenditure associated with revised student loans recording (£ million)

	2015-16	2016-17	2017-18	2018-19	2019-20
Scotland	165	198	311	285	324
UK	6,483	7,477	9,893	12,411	14,144
Scotland as share of UK (%)	2.5%	2.6%	3.1%	2.3%	2.3%

The capital expenditure on student loans is the main impact on the net fiscal balance. However, there is also an impact on revenue, as less interest will be earned on the loans. More detail on the changes is available at:

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

Table 3.2: Expenditure growth: 2018-19 to 2019-20 (£ million)

	Scotland			UK growth
	2018-19	2019-20	Growth
Current expenditure	69,626	71,540	2.7%	3.4%
Scottish Government	27,255	28,020	2.8%	2.8%
Local Government	12,571	13,266	5.5%	0.9%
Public Corporations	-	-	-	-
Other UK Government bodies	29,800	30,254	1.5%	4.1%
Capital expenditure	8,972	9,475	5.6%	4.3%
Scottish Government	2,688	3,007	11.9%	11.9%
Local Government	2,142	2,350	9.7%	11.4%
Public Corporations	1,573	1,504	-4.4%	4.1%
Other UK Government bodies	2,569	2,614	1.8%	2.1%
Total expenditure	78,598	81,015	3.1%	3.5%
Scottish Government	29,943	31,027	3.6%	3.6%
Local Government	14,713	15,616	6.1%	2.1%
Public Corporations	1,573	1,504	-4.4%	4.1%
Other UK Government bodies	32,369	32,868	1.5%	3.9%

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. Consistent with the CRA, interest expenditure by public corporations is recorded as spending by HM Treasury.

3. Spend by Other UK Government departments for Scotland and the UK are not directly comparable, as spending for the UK as a whole 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 increased in 2016-17. This reflects both increased local authority capital spending and increased Scottish Government capital spending in part due to the use of new capital borrowing powers. It has since remained at this higher level.

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

	per cent
	2015-16	2016-17	2017-18	2018-19	2019-20
Current	89.9%	88.3%	88.2%	88.6%	88.3%
Capital	10.1%	11.7%	11.8%	11.4%	11.7%

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 by 0.7 percentage points in Scotland in 2019-20. This represents a change from the trend of falling public expenditure since 2015-16, and more generally since 2009-10, and reflects the increased spending announced by the UK Government in Spending Round 2019.

Although overall spending in Scotland grew more slowly than for the UK in 2019-20, spending as a share of GDP increased faster. This reflects weaker GDP growth in Scotland in 2019-20.

Table 3.4: Total Managed Expenditure as a Share of GDP

	per cent of GDP
	2015-16	2016-17	2017-18	2018-19	2019-20
Scottish TME as a Share of GDP:
Excluding North Sea GDP	49.3%	49.0%	48.4%	47.5%	48.2%
Including population share of North Sea GDP	49.0%	48.8%	48.1%	47.2%	47.9%
Including geographical share of North Sea GDP	46.9%	47.0%	46.1%	44.4%	46.1%
UK TME as a share of GDP:
100% of North Sea GDP	41.0%	40.2%	40.0%	39.3%	39.8%

Table 3.5 shows total public sector expenditure per person for Scotland and the UK. The gap between Scottish and UK spending per person has increased since 2015-16. In part, this will reflect the new Scottish Government capital borrowing powers which began in 2015-16, and the decision by the Scottish Government to use its new devolved tax powers to on average increase the amount of funding available for public services. 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

	2015-16	2016-17	2017-18	2018-19	2019-20
Scotland	13,493	13,864	14,153	14,436	14,829
UK	12,162	12,360	12,626	12,802	13,196
Difference (Scotland minus UK)	1,331	1,504	1,527	1,634	1,633
Difference between Scottish and UK	10.9%	12.2%	12.1%	12.8%	12.4%

Box 3.2 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. From 2018-19, it also includes spending on newly devolved social security, including the Carer’s Allowance, Carer’s Allowance Supplement, and Best Start Grant. This means it is higher than the figures presented in Table 4.5.

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)

	2015-16	2016-17	2017-18	2018-19	2019-20
Social security spending in Scotland
State pension	7,870	8,064	8,243	8,146	8,318
Housing benefit	1,772	1,733	1,671	1,588	1,442
Other DWP social security	5,806	5,841	6,073	6,364	7,012
HMRC child benefit and tax credits and universal credit	2,876	2,761	2,686	2,422	2,382
Scottish Government social security	426	418	419	663	823
Social security spending in Scotland	18,750	18,817	19,092	19,183	19,977
Share of benefit spending outside UK and corporate spend	549	556	586	376	381
Other social protection
Net public sector pensions	991	896	830	1,033	402
Social care for the elderly	2,292	2,216	2,178	2,196	2,319
Other	721	598	596	1,412	1,197
Total social protection	23,302	23,082	23,281	24,201	24,275

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 2015-16 to 2019-20

	£ million
	Current					Capital					Total
	2015-16	2016-17	2017-18	2018-19	2019-20	2015-16	2016-17	2017-18	2018-19	2019-20	2015-16	2016-17	2017-18	2018-19	2019-20
General public services
Public and common services	1,295	1,250	1,297	1,347	1,446	256	246	350	263	363	1,551	1,496	1,646	1,611	1,809
International services	682	735	762	744	822	164	158	101	235	143	845	893	862	979	966
Public sector debt interest	4,439	4,663	5,110	4,643	4,533	0	0	0	0	0	4,439	4,663	5,110	4,643	4,533
Defence	2,294	2,296	2,332	2,408	2,564	729	762	844	885	887	3,023	3,057	3,176	3,293	3,451
Public order and safety	2,746	2,660	2,716	2,844	3,004	73	78	130	140	149	2,818	2,738	2,845	2,984	3,153
Economic affairs
Enterprise and economic development	910	906	959	1,112	1,324	140	342	366	500	471	1,051	1,249	1,326	1,612	1,795
Science and technology	101	146	181	186	189	377	349	383	533	565	478	494	564	720	754
Employment policies	217	214	230	246	209	2	5	9	4	0	219	219	239	250	209
Agriculture, forestry and fisheries	692	816	790	811	738	120	116	122	112	126	812	932	911	923	864
Transport	1,650	1,646	1,667	1,719	1,780	1,511	1,765	1,925	1,786	2,190	3,162	3,411	3,592	3,505	3,970
Environment protection	932	873	891	905	929	311	330	322	352	429	1,244	1,203	1,213	1,257	1,358
Housing and community amenities	160	112	159	213	227	1,410	1,476	1,689	2,029	2,216	1,570	1,588	1,848	2,242	2,443
Health	11,585	12,036	12,328	12,596	13,300	569	626	499	494	465	12,154	12,662	12,827	13,089	13,765
Recreation, culture and religion	1,140	1,092	1,061	1,169	1,123	263	310	258	236	201	1,404	1,403	1,320	1,405	1,323
Education and training	7,106	7,299	7,499	7,883	8,362	732	972	995	765	839	7,837	8,272	8,494	8,648	9,201
Social protection	23,234	23,012	23,223	24,115	24,170	68	71	58	86	105	23,302	23,082	23,281	24,201	24,275
EU Transactions	315	156	207	270	210	0	0	0	0	0	315	156	207	270	210
Accounting adjustments	5,771	6,338	6,363	6,414	6,610	609	1,146	999	554	326	6,379	7,484	7,362	6,968	6,936
Total	65,270	66,250	67,774	69,626	71,540	7,333	8,752	9,050	8,972	9,475	72,603	75,001	76,823	78,598	81,015

Table 3.7: Total Expenditure: UK 2015-16 to 2019-20

	£ million
	Current					Capital					Total
	2015-16	2016-17	2017-18	2018-19	2019-20	2015-16	2016-17	2017-18	2018-19	2019-20	2015-16	2016-17	2017-18	2018-19	2019-20
General public services
Public and common services	9,778	9,656	10,092	10,204	11,341	1,433	2,827	2,381	2,576	3,140	11,211	12,483	12,473	12,780	14,481
International services	8,260	8,923	9,261	9,083	10,040	1,984	1,918	1,226	2,866	1,749	10,244	10,841	10,487	11,949	11,789
Public sector debt interest	53,788	56,642	62,206	56,728	55,382	0	0	0	0	0	53,788	56,642	62,206	56,728	55,382
Defence	27,796	27,881	28,399	29,422	31,336	8,831	9,250	10,271	10,816	10,835	36,627	37,131	38,670	40,238	42,171
Public order and safety	28,928	28,954	29,437	30,438	32,209	1,279	1,116	2,030	1,972	2,246	30,207	30,070	31,467	32,410	34,455
Economic affairs
Enterprise and economic development	6,733	6,589	7,306	9,398	12,593	733	1,678	2,688	3,777	3,123	7,466	8,267	9,994	13,175	15,717
Science and technology	875	978	1,126	1,011	1,020	3,868	3,510	3,920	5,422	5,786	4,743	4,488	5,046	6,433	6,806
Employment policies	2,379	2,347	2,512	2,632	2,251	22	60	105	47	2	2,401	2,407	2,617	2,679	2,253
Agriculture, forestry and fisheries	4,090	4,769	4,774	5,320	5,354	381	434	403	414	514	4,471	5,203	5,177	5,734	5,868
Transport	9,765	9,868	9,967	11,963	13,407	18,143	18,953	20,464	20,741	21,295	27,908	28,821	30,431	32,704	34,701
Environment protection	7,937	7,264	7,260	7,365	7,793	3,676	3,782	4,529	3,685	3,860	11,613	11,046	11,789	11,050	11,653
Housing and community amenities	2,988	2,943	2,979	3,086	3,286	6,847	7,359	8,377	8,961	11,179	9,835	10,302	11,356	12,047	14,465
Health	132,663	136,978	141,033	145,899	156,501	5,836	5,611	6,304	7,019	7,629	138,499	142,589	147,337	152,918	164,130
Recreation, culture and religion	9,326	9,382	9,306	9,267	9,144	2,041	2,224	2,173	2,120	2,417	11,367	11,606	11,479	11,387	11,561
Education and training	75,595	77,319	77,088	79,051	83,800	9,319	7,586	8,967	8,999	8,596	84,914	84,905	86,055	88,050	92,395
Social protection	264,585	264,975	268,245	274,261	274,876	317	451	483	551	470	264,902	265,426	268,728	274,812	275,346
EU transactions	7,671	4,723	5,360	7,874	6,132	0	0	0	0	0	7,671	4,723	5,360	7,874	6,132
Accounting adjustments	59,951	65,148	65,386	65,720	67,957	15,677	20,534	18,995	13,009	14,171	75,628	85,682	84,380	78,729	82,128
Total	713,108	725,339	741,737	758,722	784,420	80,387	87,292	93,316	92,975	97,011	793,495	812,631	835,053	851,697	881,431

Table 3.8: Total Expenditure: Scottish Government, Local Authorities, Public Corporations, and Other UK Government: Scotland 2015-16 to 2019-20

	£ million
	Scottish Government, LAs and Public Corporations					Other UK Government					Total
	2015-16	2016-17	2017-18	2018-19	2019-20	2015-16	2016-17	2017-18	2018-19	2019-20	2015-16	2016-17	2017-18	2018-19	2019-20
General public services
Public and common services	1,048	1,002	1,089	1,075	1,203	503	495	557	535	606	1,551	1,496	1,646	1,611	1,809
International services	0	0	1	1	1	845	893	861	978	965	845	893	862	979	966
Public sector debt interest	0	0	0	0	0	4,439	4,663	5,110	4,643	4,533	4,439	4,663	5,110	4,643	4,533
Defence	4	4	3	3	3	3,019	3,053	3,173	3,290	3,448	3,023	3,057	3,176	3,293	3,451
Public order and safety	2,592	2,515	2,626	2,756	2,912	226	223	219	228	241	2,818	2,738	2,845	2,984	3,153
Economic affairs
Enterprise and econ development	632	831	851	971	960	419	417	475	640	835	1,051	1,249	1,326	1,612	1,795
Science and technology	2	3	3	2	2	476	492	562	717	753	478	494	564	720	754
Employment policies	0	0	0	0	0	219	219	239	250	209	219	219	239	250	209
Agriculture, forestry and fisheries	804	922	901	915	856	8	11	11	8	8	812	932	911	923	864
Transport	2,359	2,397	2,518	2,466	2,753	803	1,014	1,074	1,038	1,217	3,162	3,411	3,592	3,505	3,970
Environment protection	949	938	925	998	1,078	295	265	288	259	280	1,244	1,203	1,213	1,257	1,358
Housing and community amenities	1,570	1,588	1,848	2,242	2,443	0	0	0	0	0	1,570	1,588	1,848	2,242	2,443
Health	12,002	12,508	12,660	13,002	13,680	152	155	167	87	85	12,154	12,662	12,827	13,089	13,765
Recreation, culture and religion	997	971	914	999	887	407	431	406	406	436	1,404	1,403	1,320	1,405	1,323
Education and training	7,814	8,247	8,467	8,632	9,184	23	25	27	16	16	7,837	8,272	8,494	8,648	9,201
Social protection	5,734	5,420	5,295	5,815	5,887	17,568	17,662	17,987	18,386	18,388	23,302	23,082	23,281	24,201	24,275
EU transactions	0	0	0	0	0	315	156	207	270	210	315	156	207	270	210
Accounting adjustments	5,694	6,266	6,422	6,351	6,299	685	1,218	940	616	637	6,379	7,484	7,362	6,968	6,936
Total	42,201	43,611	44,521	46,229	48,147	30,402	31,390	32,302	32,369	32,868	72,603	75,001	76,823	78,598	81,015

Scotland’s Notional Contributions to the European Union Budget

While a member of the European Union (EU), the UK contributed to the EU budget and receives funding from the EU via a number of programmes. Although the UK left the EU on 31 January 2020, it continues to make payments to, and receive funding from, the EU under transitional arrangements.

Scotland does not contribute directly to the EU budget. In GERS, Scotland is assigned an estimated share of the UK contribution. In contrast, Scotland receives funding directly from the EU, through the Common Agricultural Policy, European Structural Funds, and European Regional Development Funding. Actual amounts are used for these items.

The EU Transactions lines in the tables above are produced on a National Accounts basis, and exclude traditional own resource payments. These are payments collected by the UK on behalf of the EU, and therefore are excluded from the UK Public Sector Finances. However, they are normally included when reporting on the UK’s net contribution to EU budgets. Table 3.9 shows 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. The EU Transactions line in the GERS tables report only on transactions with the EU by the public sector. EU payments to Higher Education Institutions, which are not part of the public sector, are discussed in Box 3.2.

Funding the EU Budget

There are three key sources of funding for the EU, which come from each member state:^[23]

• 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.

Since 1985, the UK has received a rebate on its contribution, broadly equal to 66% of its net contribution in the previous year. Scotland is apportioned a population share of the rebate.

Net Contribution to the EU

The UK’s net contribution to the EU is calculated as the difference between the UK’s gross contribution to the EU budget (less the rebate) and public sector EU receipts.

The table below sets out these transactions for Scotland and the UK.

Table 3.9: Transactions with the institutions of the EU, 2015-16 to 2019-20 (£ million)

	Scotland					UK
	2015-16	2016-17	2017-18	2018-19	2019-20	2015-16	2016-17	2017-18	2018-19	2019-20
GNI based contribution	1,039	927	945	1,174	1,045	12,570	11,440	11,761	14,599	13,003
UK abatement	-336	-392	-374	-397	-339	-4,068	-4,757	-4,547	-4,846	-4,149
VAT-based contribution to the EU	227	204	244	257	225	2,751	2,477	2,974	3,138	2,696
Expenditure transfers to the EU	930	739	816	1,034	931	11,253	9,160	10,188	12,892	11,549
Receipts to cover collection costs of TOR	-64	-29	-57	-54	-54	-771	-357	-698	-664	-663
TOR	254	277	280	270	272	3,085	3,366	3,413	3,304	3,320
Gross contribution to the EU budget	1,121	987	1,039	1,250	1,148	13,567	12,169	12,903	15,531	14,206
Public sector EU receipts	-551	-554	-552	-710	-666	-2,811	-4,081	-4,130	-4,360	-4,754
Net contributions to the EU budget	570	433	487	540	482	10,756	8,088	8,773	11,171	9,452
EU transactions (net contributions to EU institutions less TOR)	315	156	207	270	210	7,671	4,722	5,360	7,867	6,132

Box 3.3: EU Payments to Higher Education Institutions

The figures above covered the transactions that the Scottish and UK public sector have 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 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 2014-15 to 2018-19, 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 2014-15 to 2018-19

	£ million
	2014-15	2015-16	2016-17	2017-18	2018-19
Scotland	94.1	97.4	104.8	116.3	111.1
UK	836.1	840.6	877.2	924.4	990.8

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

Box 3.4: 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.

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 2015-16 to 2019-20 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, 2015-16 to 2019-20

	£ million
	2015-16	2016-17	2017-18	2018-19	2019-20
By scheme type
Private Finance Initiative	995	998	1,013	1,027	1,046
Non-Profit Distributing models1	72	107	189	271	333
Total Unitary Charge payments	1,067	1,106	1,202	1,298	1,379
By procuring authority
Further Education	9	27	35	35	35
Local Government	507	514	548	586	606
NHS	247	258	273	303	328
Other Scottish Government	136	133	169	194	226
Ministry of Defence	21	25	26	26	24
Scottish Water	146	148	151	155	160
Total Unitary Charge payments	1,067	1,106	1,202	1,298	1,379
By sector of project
Energy	5	5	5	-	-
Further Education	9	27	35	35	35
Health	247	258	273	303	328
IT	-	-	-	-	-
Ministry of Defence	21	25	26	26	24
Offices	3	3	3	3	3
Police	4	4	4	5	5
Prisons	49	47	47	48	50
Schools	462	469	502	546	565
Transport	104	102	138	161	192
Waste	163	165	169	172	178
Total Unitary Charge payments	1,067	1,106	1,202	1,298	1,379
UK Total Unitary Charge Payments	10,502	10,471	10,715	10,099	10,152
Scotland as % UK	10.2%	10.6%	11.2%	12.9%	13.6%

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