Government Expenditure and Revenue Scotland (GERS) 2019-2020

Chapter 4: Devolved Revenue & Expenditure

Introduction

Following the implementation of Scotland Act 2012 and Scotland Act 2016, the powers of the Scottish Parliament over taxation and expenditure in Scotland are changing. This chapter sets out the amount of public sector revenue and expenditure currently devolved and how this is changing with the implementation of the Scotland Act 2016.

Devolved Revenue

The table below sets out revenue raised in Scotland from taxes currently devolved to the Scottish Parliament. Total devolved tax revenue in 2019-20 was estimated to reach £17,673 million.

Since 2017-18, power over non-saving non-dividend income tax has been devolved to the Scottish Parliament. HMRC has put in place new infrastructure to identify Scottish income tax payers and tax revenue since 2016-17, and this provides an important new statistical source in GERS. However, it also creates a discontinuity in the income tax series in Table 4.1 as comparable data are not available for earlier years. As a result, the income tax estimates for 2015-16 marked with ^† are not directly comparable to the estimates for later years.

Table 4.1: Currently devolved taxes

	£ million
	2015-16	2016-17	2017-18	2018-19	2019-20
Council tax	2,045	2,074	2,253	2,359	2,518
Non-domestic rates	2,579	2,732	2,762	2,847	2,761
Land and buildings transaction tax1 (devolved from 2015-16)	425	484	557	554	598
Scottish landfill tax (devolved from 2015-16)2	147	149	148	149	119
Non-savings and non-dividend income tax liabilities (devolved from 2016-17)3	10,948†	10,719	10,916	11,378	11,677
Total devolved taxes	16,144	16,157	16,636	17,287	17,673

1 Figures for 2015-16 onwards are from Revenue Scotland. Previous years are based on HMRC estimates

2 Figures for 2015-16 onwards are from Revenue Scotland. Previous years are based on ONS estimates

3 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. Figures for 2015-16 and earlier are based on the Survey of Personal Incomes. Figures for 2016-17 and 2017-18 are from HMRC accounts, and the figures for 2018-19 and 2019-20 are from the SFC forecast from February 2020.

Note: Shaded cells represent estimates for years when tax devolution has not occurred. These are not directly comparable to outturn data in other cells.

Further devolution of taxes is due to continue in the next few years, following the Scotland Act 2016. As these taxes are not yet devolved, the table below shows the estimated historical revenues from these taxes.

Table 4.2: Revenue to be devolved under Scotland Act 2016

	£ million
	2015-16	2016-17	2017-18	2018-19	2019-20
Air passenger duty (date of devolution to be decided)	246	256	274	290	273
Aggregates levy (date of devolution to be decided)	53	63	57	57	57

As well as devolving tax powers to the Scottish Government, the Scotland Act 2016 allows for the first 10p of the standard rate of VAT receipts and the first 2.5p of the reduced rate of VAT receipts in Scotland to be assigned to the Scottish Government. The transition period for VAT assignment began on 1 April 2019.

Table 4.3 shows the VAT that would have been assigned to Scotland under this approach, consistent with the latest published estimates of Scottish Assigned VAT (see Box 1.2).

Table 4.3: VAT

	£ million
	2015-16	2016-17	2017-18	2018-19	2019-20
VAT assignment (from 2019-20)	4,808	4,823	5,268	5,567	5,507

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

Further information on the planned devolution of taxes 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 4.4 below shows tax per head for Scotland and the rest of the UK for each of the relevant taxes.

Table 4.4: Devolved revenue per head: Scotland and rest of UK

	£ per person
	Scotland					Rest of UK
	2015-16	2016-17	2017-18	2018-19	2019-20	2015-16	2016-17	2017-18	2018-19	2019-20
Income tax	2,035†	1,981	2,011	2,090	2,137	2,422	2,481	2,540	2,662	2,688
VAT	894†	891†	971†	1,022†	1,008†	894	930	947	999	1,001
APD	46†	47†	50†	53†	50†	47	49	51	55	51
LBTT	80†	91	104	103	110	181	198	215	198	191
Landfill tax	27†	28	27	27	22	15	14	12	11	11
AL	10†	12†	11†	11†	10†	5	6	5	5	5

Notes: Income tax refers to non-savings non-dividend income tax liabilities

^† represents estimates for years when tax devolution has not occurred. These are not directly comparable to figures in other cells.

Income tax figures for 2019-20 for Scotland and the rest of the UK, are based on official forecasts from the Scottish Fiscal Commission and Office for Budget Responsibility respectively.

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 4.5: Social security devolved prior to Scotland Act 2016

	£ million
	2015-16	2016-17	2017-18	2018-19	2019-20
Council tax reduction	344	332	327	331	340
Scottish welfare fund	33	35	33	35	38
Discretionary housing payments	49	52	59	62	66
Total	426	418	419	429	443

The table below shows the latest available figures for social security spending which is due to be devolved to the Scottish Government under the Scotland Act 2016.

Table 4.6: Devolved social security under Scotland Act 2016

	£ million
	2015-16	2016-17	2017-18	2018-19	2019-20
Disability living allowance	1,400	1,219	999	893	801
Attendance allowance	487	487	492	506	531
Carer's allowance1	222	234	249	266	276
Winter fuel payment	181	178	176	173	171
Personal independence payment	318	552	930	1,138	1,332
Industrial injuries disablement benefit	87	84	82	82	82
Severe disablement allowance	51	22	12	10	9
Cold weather payment	3	1	22	10	29
Funeral payment	5	5	5	5	4
Sure Start maternity grant2	3	3	2	2	-
Total expenditure on social security to be devolved	2,757	2,785	2,969	3,084	3,234

Notes: 1 Carer’s Allowance was devolved to the Scottish Government on 3 September 2018. Figures here show spending as if continuing UK Government policies, as estimated by the SFC. It there excludes the new Carer’s Allowance Supplement introduced by the Scottish Government.

2 Sure Start maternity grant was replaced in Scotland by the Scottish Government’s Best Start Grant on 10 December 2018. Comparable spending figures are not available for 2019-20.

The fiscal framework agreement discussed above also covers the devolution of social security expenditure to the Scottish Government. The Scotland Act 2016 sets out that the final impact on the Scottish Government budget of devolution of these benefits will be determined through an adjustment to the Scottish block grant. For the Sure Start maternity grant and Funeral payments, a one-off adjustment will be made to the Scottish Government budget when they are devolved. For the other benefits. 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 GB.

Table 4.7 below shows expenditure per head for each of the relevant benefits for Scotland and the rest of Great Britain. For the majority of social security, expenditure per head is higher in Scotland than the rest of Great Britain, although overall the rate of growth in expenditure per head has been similar between Scotland and the rest of Great Britain since 2014-15 for each individual benefit.

Table 4.7: Devolved social security expenditure per head: Scotland and rest of GB

	£ per person
	Scotland					Rest of GB
	2015-16	2016-17	2017-18	2018-19	2019-20	2015-16	2016-17	2017-18	2018-19	2019-20
Disability living allowance	260	225	184	164	147	204	176	142	122	108
Attendance allowance	91	90	91	93	97	86	85	86	87	91
Carer's allowance	41	43	46	49	51	40	42	44	44	45
Winter fuel payment	34	33	32	32	31	33	32	31	31	30
Personal independence payments	59	102	171	209	244	46	79	131	159	187
Industrial Injuries disability benefit	16	16	15	15	15	13	13	12	12	12
Severe disablement allowance	9	4	2	2	2	7	4	2	1	1
Cold weather payment	1	0	4	2	5	0	0	2	0	0

Summary of current and proposed devolved powers

The table below shows estimates of devolved receipts and expenditure before and after the implementation of the Scotland Acts 2012 and 2016.

Table 4.8: Fiscal powers before and after Scotland Act 2016, 2019-20 (£ million)

	Before Scotland Acts 2012 and 2016	After Scotland Acts 2012 and 2016
Non-saving non-dividend income tax liabilities (devolved from 2016-17)	-	11,677
Council tax	2,487	2,487
Non-domestic rates	2,761	2,761
Land and buildings transaction tax (devolved from 2015-16)	-	598
Scottish landfill tax (devolved from 2015-16)	-	119
Air passenger duty (date to be decided)	-	273
Aggregates levy (date to be decided)	-	57
Total devolved taxes	5,248	17,972
Devolved taxes as % of non-North Sea Scottish revenue	8%	28%
as % of revenue incl geographical share of North Sea revenue	8%	27%
Assigned VAT (in transition from 2019-20)	-	5,507
Total devolved and assigned taxes	5,248	23,479
Devolved and assigned taxes as % of non-North Sea Scottish revenue	8%	36%
as % of taxes incl geographical share of North Sea revenue	8%	36%
Devolved expenditure including housing benefit1 (HB)	48,147	51,381
Devolved taxes as % of estimated devolved expenditure	11%	35%
Devolved and Assigned taxes as % of estimated devolved expenditure	11%	46%

1 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.