This item was published during the term of a previous administration that ended in April 2007
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Government Expenditure and Revenue in Scotland 2003-04
14/12/2005
Estimates of the amount of public money spent in Scotland compared to the amount raised, are published in Government Expenditure and Revenue in Scotland 2003-04 (GERS) today.
GERS is an annual publication which uses aggregate expenditure and revenue data to estimate the net borrowing (NB) attributable to Scotland.
The report aims to improve public understanding of fiscal issues in Scotland. Public expenditure on services and their associated expenditures are only included if they are incurred for the benefit of the residents of Scotland. On the revenue side, only tax receipts relating to Scotland's residents and businesses are recorded.
The report concentrates on the 2003-04 data but also provides estimates of Scotland's fiscal position over previous years.
The key findings are:
Expenditure
In 2003-04, the total expenditure for Scotland is estimated at £45.3 billion or 10 per cent of the UK total. This includes devolved and reserved spending in Scotland.
"Identifiable" government expenditure in Scotland (spending specifically incurred on behalf of the residents of Scotland) was £37.2 billion, or 10.1 per cent of the corresponding UK total, which translates into the largest per head expenditure after Northern Ireland. Scotland's identifiable expenditure on services is about 19 per cent higher than in the UK on average.
"Non-identifiable" expenditure (Scotland's share of expenditure that is generally incurred on behalf of the UK people as whole, e.g. defence) was estimated at £5.7 billion or 8.1 per cent of the UK amount.
Accounting adjustments were £2.4 billion, or 14.5 per cent of the UK total.
Revenue
In 2003-04, total receipts (the main contributions coming from Income tax, Corporation tax, VAT, Social Security contributions, Local Authority revenues) in Scotland are estimated at £34 billion, equivalent to 8.2 per cent of total UK receipts. This excludes North Sea oil revenues.
Net Borrowing (NB)
The NB attributable to Scotland is the estimate of the extent to which expenditure for Scotland exceeds receipts. In 2003-04 it is calculated at £11.2 billion, equivalent to 12.9 per cent of Scottish GDP. This compares to an equivalent UK ratio of 3.7 per cent. These estimates also exclude North Sea oil revenues.
North Sea Oil Revenues
In the event of all North Sea revenue being attributed to Scotland, the 2003-04 NB would be £7 billion, or 6.2 per cent of the Scottish GDP (including North Sea output).
Context for Scottish Expenditure
There are many reasons for the differences in expenditure priorities in Scotland. Higher expenditure per head, in some policy areas, reflects the greater importance that particular activities have in economic life in Scotland e.g. agriculture, fisheries and forestry. Scotland is also the most sparsely populated area in the UK, and lower population density raised programme costs, for example, in primary and secondary education.
Differences also occur because of variations in the distribution of activities between the public and private sectors. For example, water and sewerage services are a public sector responsibility in Scotland, and are included in the Scottish public expenditure totals.
In health expenditure, Scotland's needs are greater for a number of reasons, including high death rates from circulatory diseases and cancer. Higher costs also accrue in education. There is traditionally a net inflow of students from the rest of the UK to Scotland and Scottish university courses are typically longer. The honours degree course takes four years compared with a typical three-year course in England and Wales. Another factor raising expenditure is the higher proportion of housing stock in the public sector.
The expenditure estimates in GERS are based on HM Treasury's Public Expenditure Statistical Analyses (PESA) publication.
For public receipts, GERS relies on numerous sources. Many taxes are collected centrally and their distribution by region is often unavailable. Consequently, GERS uses appropriate survey data to estimate Scotland's share of the various revenue sources. For details on the methodology see Appendix B of the publication.
Net borrowing (NB) is the difference between expenditure and receipts, defined to exclude North Sea oil revenues. The NB figure is an estimate for Scotland, based on expenditure and receipts calculations that by necessity include some estimation. Therefore, the NB estimate should be used with some caution.