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Government Expenditure and Revenue in Scotland 2001-2002
Section 5: Other Expenditure
Definition
This category includes expenditure classes that do not fall naturally within the programmes included in the identified and non-identified categories.
It includes local authority, central government and public corporation debt interest, net public pensions payments, and a number of adjustments required to bring aggregate expenditure into line with the National Accounts measure of Total Managed Expenditure.
The adjustments record items such as the imputed charge for Non-Trading Capital Consumption ((NTCC), i.e. depreciation), income tax credits, and a deduction for UK payments to the EU (agriculture and sugar levies, customs duties, VAT own resource). These EU payments are included in the UK budget but are scored as taxes paid directly to the EU and are taken off both on the spending (to offset EU receipts), as well as on the revenue side. Other adjustments also comprise the timing reconciliations (see below for details).
Scottish and UK Other Expenditure
Specific data are sparse at the Scottish level, and, hence, most items included in the other expenditure category have been allocated to Scotland on the basis of indicators such as GVA share. Where possible, more relevant data have been used. For example, survey data were used to estimate Local Authority debt interest, Inland Revenue data and other sources have been used to estimate tax credits scored as expenditure. Non-Trading Capital Consumption has been based on Regional Accounts data (see Appendix B for more information on this).
The UK expenditures and the estimates for Scotland are shown in Table 5.1. In 2001-02, Total Other Expenditure in the UK amounted to 37.3 billion. Scotland's share is estimated to be 3.8 billion, or 10.1 per cent of the UK figure. The share is higher than Scotland's share of UK GVA or population, principally because of higher local authority debt interest and higher capital consumption charges.
Debt Interest
Local Authority gross debt interest payments have been taken directly from Scottish Executive estimates of interest payments by Scottish local authorities to bodies other than the Public Works Loan
Board. Central government and public corporation gross debt interest has been allocated on the basis of Scotland's share of UK GVA. Central government's debt interest for Scotland is estimated at 1.8 billion in 2001-02.
Other Items and Accounting Adjustments
The largest component of this category is Non-Trading Capital Consumption (NTCC). It is a measure of the amount of fixed capital resources used up in the process of production: in other words, depreciation.
The Scottish figure is calculated from Regional Accounts estimates produced by the Office for National Statistics, and from the UK total in PESA 2003. In 2001-02, NTCC in Scotland is estimated at 1.4 billion (around 15 per cent of the UK value).
Another large adjustment reflects the treatment of EU transactions under the European System of Accounts ( ESA95). Most EU transactions are removed from UK public spending (revenue) figures and are treated as direct transfers (tax payments) from (to) the EU. This accounting convention led to a nominal reduction in expenditure by 5.6 billion at the UK level in 2001-02, and a share has been allocated to Scotland which reflects its relatively larger net EU receipts (or lower net EU payments) through programmes such as the Common Agricultural Policy and European Structural Funds. The omission of EU-related public expenditure reduces Scottish TES by around 747 million in 2001-02. 8
A timing adjustment reconciles the analyses in Sections 3 and 4 (based on PESA 2003, Chapter 8) with the more recent UK information on TES provided in PESA 2003, Chapter 3. Differences arise, for example, due to the different timing in the collection of data or classification changes. It amounted to -995.0 million at the UK level.
The share of the difference in TES at the UK level has been allocated to Scotland on the basis of its contribution to Total Expenditure on Services (TES) and was thus estimated at - 100.4 million. 9
A further timing adjustment is necessary because of a difference in TME as reported in PESA 2003, Chapter 3 and the latest ONS numbers (Blue Book, September 2003), which show that Total Managed Expenditure in the UK was about 1.2 billion higher in 2001-02. The Scottish share of this adjustment is allocated according to its GVA share and amounted to 94 million.
The remainder of expenditure adjustments was allocated largely according to GVA share and together with net public service pensions total around 1.2 billion.
In sum, 'other items and accounting adjustments' are estimated at 1.9 billion in 2001-02, or 12.9 per cent of the UK amount.
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