Government Expenditure & Revenue Scotland (GERS) 2021-22

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 2021-22 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.

Economy statistics - gov.scot (www.gov.scot)

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.

Public Sector Expenditure

Total public sector expenditure for Scotland in 2021-22 is estimated to be £97.5 billion, a decrease of 1.0% from 2020-21. This fall in spending, the first time spending has fallen in cash terms since 2013-14, reflects the beginning of the scaling back of the response to the coronavirus pandemic, which led to large increases in spending, particularly on health, social security, and enterprise and economic development. This final category includes support paid to businesses and workers such as the Coronavirus Job Retention Scheme. Further information on reserved spending in response to the pandemic is set out in Box 3.1.

Table 3.1 shows a breakdown of spending by category.

Table 3.1: Total Expenditure: Scotland 2021-22

	Scotland
	£ million	% of total expenditure
General public services
Public and common services	3,218	3.3%
International services	664	0.7%
Reserved public sector debt interest	4,527	4.6%
Local government pension fund interest expenditure	2,335	2.4%
Defence	3,958	4.1%
Public order and safety	3,731	3.8%
Economic affairs
Enterprise and economic development	3,369	3.5%
Science and technology	776	0.8%
Employment policies	315	0.3%
Agriculture, forestry and fisheries	861	0.9%
Transport	4,480	4.6%
Environment protection	1,537	1.6%
Housing and community amenities	2,624	2.7%
Health	18,488	19.0%
Recreation, culture and religion	1,509	1.5%
Education and training	9,632	9.9%
Social protection	26,076	26.7%
EU transactions	-156	-0.2%
Accounting adjustments	9,557	9.8%
Total Expenditure	97,502	100%

Table 3.2 below shows growth in current and capital spend in Scotland by organization in 2021-22, compared to the UK. Spending fell more slowly in Scotland than the UK as a whole in 2021-22. This is primarily due to increased capital spending in Scotland offsetting falls in current spending. The increases in capital spending are driven by increases by local authorities, including ring-fenced local authority spending on housing which is reported as public corporation spending in GERS (the 'Housing Revenue Account').

Box 3.1: Spending associated with the coronavirus pandemic

The coronavirus pandemic has seen an unprecedented increase in public spending, spread across a range of areas. In the devolved sphere, there has been an increase in health expenditure in response to treating COVID-19 patients and delivering the vaccination programme. There have also been a range of other measures, particularly business support grants paid via local authorities. The Scottish Government spent £8.8 billion in 2020-21 and £5.7 billion in 2021-22 response to the health, economic, and social challenges caused by the coronavirus pandemic.^[23] Whilst this is captured in the Scottish Government spending figures in GERS, it is not separately identifiable from non-pandemic related spend.

The table below summarises some of the key Scottish Government spend in response to coronavirus. This spending has been primarily delivered via grants to local authorities, which means that it cannot be directly reported using the categories of spend used in GERS. Further detail is set out at:

Scotland's financial response to Covid-19 | Audit Scotland (audit-scotland.gov.uk)

Scottish Government spending in response to coronavirus (£ million)

	2020-21	2021-22
Grants to local councils	4,292	1,500
Health and social care	2,755	2,642
Transport	646	470
Other	1,084	1,122
Total	8,777	5,734

In the reserved sphere, there have been a number of interventions, the most significant of which have been the Coronavirus Job Retention Scheme, the Self-Employment Income Support Scheme, and changes to the value and eligibility criteria for Universal Credit. These schemes have all aimed to support household incomes and businesses during the pandemic. Further details are on these schemes was set out in Box 3.1 of last year's edition of GERS.

An additional element of reserved spending is included this year, in the form of coronavirus business loans. The spending here is currently shown only for 2020-21, and represents the value of loans issued in this year which is not expected to be repaid.

The table below summarises the costs for Scotland associated with the schemes above in this edition of GERS. This is not an exhaustive list of reserved coronavirus interventions, with smaller schemes such as the Eat Out to Help Out scheme not included.

Major reserved coronavirus spending for Scotland (£ millions)

	2020-21	2021-22	Scottish share
Coronavirus Job Retention Scheme1	4,710	860	8.1%
Self-employment Income Support Scheme1	1,195	515	6.1%
Coronavirus business loans2	1,213		5.9%
Welfare spending3	1,349	1,402	6.9%
Health spending4	945	886	7.2%
Total	9,412	3,664	7.2%

Sources:

1 HMRC Tax Receipts and National Insurance Contributions for the UK, Scottish Government calculations

2 HM Treasury Country and Regional Analysis. Includes Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Bounce Back Loan Scheme (BBLS)

3 OBR Economic and Fiscal Outlook March 2021, Scottish Government calculations

4 2020-21: National Audit Office Coronavirus cost tracker, Scottish Government calculations. 2021-22: OSCAR in-year spend data, Scottish Government calculations. UK spending includes some elements which are not reserved, leading to Scottish share being below a population share.

Table 3.2: Expenditure growth: 2020-21 to 2021-22 (£ million)

	Scotland
	2020-21	2021-22	Growth	UK growth
Current expenditure	87,552	85,628	-2.2%	-3.9%
Scottish Government	36,396	37,230	2.3%	2.3%
Local Government	16,025	16,315	1.8%	-7.6%
Public Corporations	-	-	-	-
Other UK Government bodies	35,131	32,083	-8.7%	-3.0%
Capital expenditure	10,887	11,874	9.1%	-4.9%
Scottish Government	3,822	3,939	3.0%	3.0%
Local Government	1,853	2,492	34.5%	9.2%
Public Corporations	1,135	1,605	41.3%	31.4%
Other UK Government bodies	4,076	3,839	-5.8%	-11.6%
Total expenditure	98,439	97,502	-1.0%	-4.0%
Scottish Government	40,219	41,169	2.4%	2.4%
Local Government	17,878	18,807	5.2%	-6.1%
Public Corporations	1,135	1,605	41.3%	31.4%
Other UK Government bodies	39,207	35,921	-8.4%	-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. 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. As noted above, increased capital spending by local authorities has offset falling current expenditure, and leads to an increase in capital spending as a share of overall spending.

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

	per cent
	2017-18	2018-19	2019-20	2020-21	2021-22
Current	88.6%	88.7%	89.0%	88.9%	87.8%
Capital	11.4%	11.3%	11.0%	11.1%	12.2%

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 fallen to 56.1% in 2021-22, although it remains around 5 percentage points higher than before the pandemic.

Although overall spending in Scotland fell more slowly than for the UK in 2021-22, spending as a share of GDP fell faster. This reflects faster nominal GDP growth in Scotland in 2021‑22.

Table 3.4: Total Managed Expenditure as a Share of GDP

	per cent of GDP
	2017-18	2018-19	2019-20	2020-21	2021-22
Scottish TME as a Share of GDP:
Excluding North Sea GDP	48.9%	48.8%	49.2%	64.8%	56.1%
Including population share of North Sea GDP	48.5%	48.3%	48.8%	64.5%	55.5%
Including geographical share of North Sea GDP	45.6%	44.4%	45.4%	62.3%	50.6%
UK TME as a share of GDP:
100% of North Sea GDP	39.6%	39.0%	39.1%	51.6%	44.6%

Table 3.5 shows total public sector expenditure per person for Scotland and the UK. The relative gap between Scottish and UK spending per person increased in 2021-22, with spend per person 12.4% points higher. This increase reflects the reduction of spending in response to the coronavirus pandemic, where Scotland broadly received a population increase of UK spending. As this spending comes to an end, the difference between Scottish and UK spending should return to pre-pandemic levels.

As noted previously, water and sewerage services are provided by the public sector in Scotland, but by the private sector in England and Wales, leading to relatively higher spending in Scotland. This explains slightly less than one percentage point of the difference in spend.

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
	2017-18	2018-19	2019-20	2020-21	2021-22
Scotland	14,257	14,608	15,000	17,998	17,793
UK	12,647	12,887	13,222	16,468	15,830
Difference (Scotland minus UK)	1,610	1,721	1,778	1,530	1,963
Difference between Scottish and UK	12.7%	13.4%	13.4%	9.3%	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 universal credit disability and incapacity related benefits, and housing benefit. Tax credits and child benefit are part of HMRC spending. 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, as set out in Chapter 4.

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)

	2017-18	2018-19	2019-20	2020-21	2021-22
Social security spending in Scotland
State pension	7,919	8,154	8,313	8,501	8,715
Housing benefit	1,671	1,588	1,441	1,380	1,286
Universal credit	313	766	1,486	2,909	3,016
Other DWP social security	5,749	5,682	5,476	2,719	3,660
HMRC child benefit and tax credits	2,681	2,380	2,076	1,832	1,540
Scottish Government social security	419	745	830	3,892	4,015
Social security spending in Scotland	18,752	19,316	19,622	21,233	22,231
Share of benefit spending outside	340	352	358	366	372
Share of corporate spend	249	270	234	294	370
Other social protection
Net public sector pensions	735	935	356	242	163
Social care for the elderly	2,178	2,290	2,477	2,611	2,752
Other	1,063	1,060	1,112	1,353	189
Total social protection	23,317	24,221	24,159	26,099	26,076

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.

Benefit expenditure and caseload tables - GOV.UK (www.gov.uk)

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 2017-18 to 2021-22

	£ million
	Current					Capital					Total
	2017-18	2018-19	2019-20	2020-21	2021-22	2017-18	2018-19	2019-20	2020-21	2021-22	2017-18	2018-19	2019-20	2020-21	2021-22
General public services
Public and common services	1,298	1,354	1,903	1,784	2,821	350	265	238	335	397	1,648	1,619	2,140	2,118	3,218
International services	755	737	815	739	538	103	236	144	177	126	858	973	959	916	664
Public sector interest expenditure	5,458	5,025	4,871	4,301	6,862	0	0	0	0	0	5,458	5,025	4,871	4,301	6,862
Defence	2,332	2,408	2,563	2,622	2,679	844	885	890	1,005	1,280	3,176	3,293	3,454	3,627	3,958
Public order and safety	2,716	2,845	3,011	3,186	3,519	130	140	158	222	212	2,846	2,985	3,168	3,408	3,731
Economic affairs
Enterprise and economic development	815	904	1,077	7,715	3,003	366	500	486	1,650	366	1,181	1,403	1,562	9,365	3,369
Science and technology	181	186	182	188	199	304	332	347	590	576	485	518	529	778	776
Employment policies	228	242	177	191	306	8	4	0	6	9	237	246	177	197	315
Agriculture, forestry and fisheries	794	814	810	805	704	121	112	94	120	157	916	926	904	925	861
Transport	1,665	1,704	1,836	2,644	2,267	1,890	1,723	1,878	1,961	2,213	3,555	3,427	3,714	4,605	4,480
Environment protection	893	906	919	927	988	330	354	524	532	549	1,223	1,260	1,443	1,459	1,537
Housing and community amenities	159	213	137	216	269	1,689	2,012	2,184	1,870	2,354	1,848	2,225	2,321	2,086	2,624
Health	12,328	12,596	13,301	17,428	17,764	475	486	466	621	725	12,803	13,082	13,767	18,049	18,488
Recreation, culture and religion	1,061	1,169	1,115	1,265	1,252	255	235	238	201	257	1,316	1,404	1,353	1,466	1,509
Education and training	7,499	7,883	8,388	8,946	8,589	995	765	870	1,120	1,043	8,494	8,648	9,258	10,066	9,632
Social protection	23,259	24,135	24,048	25,972	25,920	58	86	111	126	156	23,317	24,221	24,159	26,099	26,076
EU Transactions	415	600	473	595	-156	0	0	0	0	0	415	600	473	595	-156
Accounting adjustments	6,695	6,799	7,292	8,029	8,104	917	878	417	351	1,453	7,612	7,677	7,709	8,380	9,557
Total	68,551	70,519	72,915	87,552	85,628	8,836	9,013	9,045	10,887	11,874	77,387	79,532	81,960	98,439	97,502

Table 3.7: Total Expenditure: UK 2017-18 to 2021-22

	£ million
	Current					Capital					Total
	2017-18	2018-19	2019-20	2020-21	2021-22	2017-18	2018-19	2019-20	2020-21	2021-22	2017-18	2018-19	2019-20	2020-21	2021-22
General public services
Public and common services	10,098	10,220	11,809	15,205	24,455	2,381	2,576	2,657	3,385	3,199	12,479	12,796	14,466	18,590	27,655
International services	9,176	8,998	9,954	9,059	6,537	1,255	2,879	1,759	2,167	1,551	10,431	11,877	11,713	11,226	8,088
Public sector interest expenditure	60,064	54,542	52,933	41,822	72,848	0	0	0	0	0	60,064	54,542	52,933	41,822	72,848
Defence	28,399	29,422	31,358	32,247	32,901	10,271	10,816	10,887	12,335	15,707	38,670	40,238	42,245	44,582	48,608
Public order and safety	29,437	30,438	32,253	35,893	39,394	2,032	1,975	2,272	2,996	2,900	31,469	32,413	34,525	38,889	42,294
Economic affairs
Enterprise and economic development	7,300	9,382	13,894	108,105	35,239	2,687	3,777	3,312	22,172	-1,463	9,987	13,159	17,206	130,277	33,776
Science and technology	1,126	1,011	1,020	1,052	1,128	3,920	5,422	5,787	6,395	6,235	5,046	6,433	6,807	7,447	7,363
Employment policies	2,512	2,632	2,253	2,543	4,099	105	47	2	77	123	2,617	2,679	2,255	2,620	4,222
Agriculture, forestry and fisheries	4,784	5,344	5,405	5,800	5,483	394	390	398	519	926	5,178	5,734	5,803	6,319	6,409
Transport	9,967	11,963	13,030	26,478	19,187	20,365	20,713	21,570	23,323	26,041	30,332	32,676	34,600	49,801	45,228
Environment protection	7,274	7,377	7,909	8,523	8,983	4,529	3,685	3,912	4,435	4,898	11,803	11,062	11,821	12,958	13,881
Housing and community amenities	2,979	3,086	3,257	3,697	3,446	8,377	8,961	10,901	9,884	11,813	11,356	12,047	14,158	13,581	15,260
Health	141,033	145,899	156,509	204,993	207,572	6,304	7,019	7,630	13,576	9,212	147,337	152,918	164,139	218,569	216,784
Recreation, culture and religion	9,306	9,267	9,398	10,806	10,355	2,173	2,119	2,534	2,112	2,443	11,479	11,386	11,932	12,918	12,798
Education and training	77,088	79,051	82,248	86,215	91,009	8,967	8,999	8,365	9,309	9,241	86,055	88,050	90,613	95,524	100,250
Social protection	268,245	274,261	275,347	298,673	297,846	483	551	468	639	840	268,728	274,812	275,815	299,312	298,686
EU transactions	5,360	7,850	5,828	6,999	-1,830	0	0	0	0	0	5,360	7,850	5,828	6,999	-1,830
Accounting adjustments	68,912	70,040	75,301	81,254	82,860	19,146	16,594	11,959	11,611	25,122	88,058	86,634	87,260	92,866	107,982
Total	743,060	760,783	789,706	979,364	941,514	93,389	96,523	94,413	124,935	118,787	836,449	857,306	884,119	1,104,299	1,060,301

Table 3.8a: Total Current Expenditure: Scottish Government, Local Authorities, Public Corporations, and Other UK Government: Scotland 2017-18 to 2021-22

	£ million
	Scottish Government, LAs and Public Corporations					Other UK Government					Total
	2017-18	2018-19	2019-20	2020-21	2021-22	2017-18	2018-19	2019-20	2020-21	2021-22	2017-18	2018-19	2019-20	2020-21	2021-22
General public services
Public and common services	835	906	1,385	1,176	1,474	463	448	518	607	1,347	1,298	1,354	1,903	1,784	2,821
International services	1	1	1	1	5	754	736	814	738	532	755	737	815	739	538
Public sector interest expenditure	1,731	1,825	1,767	2,293	2,335	3,727	3,200	3,104	2,008	4,527	5,458	5,025	4,871	4,301	6,862
Defence	3	3	3	6	3	2,329	2,405	2,560	2,616	2,676	2,332	2,408	2,563	2,622	2,679
Public order and safety	2,519	2,639	2,784	2,850	3,061	196	205	227	336	457	2,716	2,845	3,011	3,186	3,519
Economic affairs
Enterprise and econ development	495	496	473	791	663	320	408	603	6,924	2,340	815	904	1,077	7,715	3,003
Science and technology	3	0	2	1	1	178	186	180	187	198	181	186	182	188	199
Employment policies	0	0	0	0	0	228	242	177	191	306	228	242	177	191	306
Agriculture, forestry and fisheries	779	805	783	785	685	15	9	27	20	18	794	814	810	805	704
Transport	1,271	1,269	1,394	2,071	1,844	394	435	441	573	423	1,665	1,704	1,836	2,644	2,267
Environment protection	840	854	833	861	881	53	53	85	66	107	893	906	919	927	988
Housing and community amenities	159	213	137	216	269	0	0	0	0	0	159	213	137	216	269
Health	12,252	12,537	13,237	16,519	16,874	76	59	65	909	890	12,328	12,596	13,301	17,428	17,764
Recreation, culture and religion	718	816	752	954	937	344	353	363	310	315	1,061	1,169	1,115	1,265	1,252
Education and training	7,472	7,868	8,366	8,932	8,575	27	15	22	13	14	7,499	7,883	8,388	8,946	8,589
Social protection	5,255	5,742	5,457	8,681	9,190	18,004	18,393	18,591	17,291	16,730	23,259	24,135	24,048	25,972	25,920
EU transactions	0	0	0	0	0	415	600	473	595	-156	415	600	473	595	-156
Accounting adjustments	5,698	5,864	6,162	6,284	6,745	997	936	1,129	1,745	1,359	6,695	6,799	7,292	8,029	8,104
Total	40,031	41,836	43,535	52,421	53,546	28,520	28,683	29,380	35,131	32,083	68,551	70,519	72,915	87,552	85,628

Table 3.8b: Total Capital Expenditure: Scottish Government, Local Authorities, Public Corporations, and Other UK Government: Scotland 2017-18 to 2021-22

	£ million
	Scottish Government, LAs and Public Corporations					Other UK Government					Total
	2017-18	2018-19	2019-20	2020-21	2021-22	2017-18	2018-19	2019-20	2020-21	2021-22	2017-18	2018-19	2019-20	2020-21	2021-22
General public services
Public and common services	254	169	138	214	312	96	96	100	121	85	350	265	238	335	397
International services	0	0	0	0	0	103	236	144	177	126	103	236	144	177	126
Public sector interest expenditure	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Defence	0	0	0	0	0	844	885	890	1,005	1,280	844	885	890	1,005	1,280
Public order and safety	107	117	128	179	184	23	23	30	42	28	130	140	158	222	212
Economic affairs
Enterprise and econ development	355	476	457	478	520	11	24	29	1,172	-154	366	500	486	1,650	366
Science and technology	0	2	0	0	0	304	330	347	590	576	304	332	347	590	576
Employment policies	0	0	0	0	0	8	4	0	6	9	8	4	0	6	9
Agriculture, forestry and fisheries	122	110	91	119	152	0	2	3	2	5	121	112	94	120	157
Transport	1,247	1,197	1,371	1,337	1,648	643	526	508	624	565	1,890	1,723	1,878	1,961	2,213
Environment protection	85	144	324	313	319	244	210	200	219	230	330	354	524	532	549
Housing and community amenities	1,689	2,012	2,184	1,870	2,354	0	0	0	0	0	1,689	2,012	2,184	1,870	2,354
Health	408	465	450	455	665	68	21	16	166	60	475	486	466	621	725
Recreation, culture and religion	196	183	173	160	216	59	53	65	41	41	255	235	238	201	257
Education and training	995	764	869	1,120	1,043	0	1	0	0	0	995	765	870	1,120	1,043
Social protection	40	73	112	108	144	18	13	-1	18	12	58	86	111	126	156
EU transactions	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Accounting adjustments	793	581	406	457	478	124	297	11	-106	974	917	878	417	351	1,453
Total	6,291	6,294	6,704	6,811	8,035	2,545	2,719	2,341	4,076	3,839	8,836	9,013	9,045	10,887	11,874

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 continued to make payments to, and receive funding from, the EU in 2020-21 under transitional arrangements. These transactions largely ended in 2021-22, but as per the Withdrawal Agreement, it continues to makes payments for its outstanding commitments through the EU Financial Settlement. However, these payments are not scored as EU transactions, but instead are classed as spending on public and common services. Scotland is allocated a population share of this spending in GERS, and this is reflected in an increase in Other UK Government current expenditure on public and common services in Table 3.8a above.

Further details on the EU Financial Settlement are available from:

Brexit: the financial settlement - a summary - House of Commons Library (parliament.uk)

Scotland did not contribute directly to the EU budget. In GERS, Scotland is assigned an estimated share of the UK contribution. In contrast, Scotland received 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.

Funding the EU Budget

There are three key sources of funding for the EU, which come from each member state:^[24]

• 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 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, 2017-18 to 2021-22 (£ million)

	Scotland					UK
	2017-18	2018-19	2019-20	2020-21	2021-22	2017-18	2018-19	2019-20	2020-21	2021-22
GNI based contribution	966	1,195	1,064	887	11	11,761	14,599	13,003	12,762	139
UK abatement	-374	-397	-339	-279	15	-4,547	-4,846	-4,149	-3,785	181
VAT-based contribution to the EU	244	257	220	183	-0	2,974	3,138	2,696	1,954	-4
Expenditure transfers to the EU	837	1,055	945	791	26	10,188	12,892	11,549	10,930	315
Receipts to cover collection costs of TOR	-57	-54	-54	-39	-1	-698	-664	-663	-585	-10
TOR	280	270	271	220	4	3,413	3,304	3,320	2,695	49
EU Financial Settlement (EUFS) net payments				-20	665				-249	8,124
Gross contribution to the EU budget	1,060	1,271	1,162	972	29	12,903	15,531	14,206	12,791	8,478
Public sector EU receipts	-364	-401	-418	-157	-180	-4,130	-4,378	-5,059	-3,346	-2,136
Net contributions to the EU budget	695	870	744	815	-151	8,773	11,154	9,147	9,445	6,343
EU transactions (net contributions to EU institutions less TOR and EUFS)	415	600	473	595	-155	5,360	7,850	5,827	6,999	-1,830

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.

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:

Infrastructure investment - Government finance - gov.scot (www.gov.scot)

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 2021-22 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, 2017-18 to 2021-22

	£ million
	2017-18	2018-19	2019-20	2020-21	2021-22
By scheme type
Private Finance Initiative	1,013	1,027	1,046	1,060	1,063
Non-Profit Distributing models1	189	262	330	353	360
Total Unitary Charge payments	1,202	1,289	1,376	1,413	1,423
By procuring authority
Further Education	35	35	35	35	36
Local Government	548	585	606	640	641
NHS	273	298	327	340	349
Other Scottish Government	169	191	224	213	214
Ministry of Defence	26	26	24	22	21
Scottish Water	151	155	160	162	162
Total Unitary Charge payments	1,202	1,289	1,376	1,413	1,423
By sector of project
Energy	5	-	-	-	-
Further Education	35	35	35	35	36
Health	273	298	327	340	349
IT	-	-	-	-	-
Ministry of Defence	26	26	24	22	21
Offices	3	3	3	3	3
Police	4	5	5	5	5
Prisons	47	48	50	52	52
Schools	502	545	565	599	600
Transport	138	158	190	177	178
Waste	169	172	178	180	180
Total Unitary Charge payments	1,202	1,289	1,376	1,413	1,423
UK Total Unitary Charge Payments	10,773	10,158	10,212	10,045	9,896
Scotland as % UK	11.2%	12.7%	13.5%	14.1%	14.4%

1 Non-profit distributing models includes projects delivered by the hub model and projects commissioned prior to 2010. Further detail is available at: Infrastructure investment - Government finance - gov.scot (www.gov.scot)

Source: HM Treasury and Scottish Government figures. See the accompanying spreadsheet for full details of all sources