Government Expenditure and Revenue Scotland 2008-09

This report is the sixteenth in the series of official published estimates of expenditure and revenue balances relating to the public sector in Scotland.


6 PUBLIC SECTOR EXPENDITURE

Introduction

This chapter provides detailed estimates of public sector expenditure for Scotland.

The primary data source used to estimate Scottish public sector expenditure is the Country and Regional Analysis ( CRA) contained in the National Statistics publication Public Expenditure Statistical Analyses ( PESA) published by HM Treasury 32.

In GERS, public sector expenditure is divided into three categories: identifiable expenditure, non-identifiable expenditure and an accounting adjustment. Identifiable expenditure is expenditure that can be clearly allocated to Scotland in terms of having been spent for the benefit of Scottish residents and enterprises. Examples of identifiable expenditure include unemployment benefits, local economic development expenditure and most education and health expenditure.

Non-identifiable expenditure is expenditure that cannot be allocated to a particular country of the UK or English region but is instead incurred on behalf of the UK as a whole. The largest element of non-identifiable expenditure is defence expenditure.

Finally, an accounting adjustment ensures that public sector expenditure reported in PESA is consistent with Total Managed Expenditure ( TME), the UK Government's principal measure of public sector expenditure used in the UK Public Finance Accounts.

For total expenditure and each expenditure component, a detailed breakdown according to current and capital is provided.

Each element of expenditure is discussed in detail below. Appendix B discusses the revisions from previous reports and the relevant apportionment methodologies applied.

As discussed in Chapter 3, the UK Government's net financial sector interventions are classified as non-identifiable expenditure in PESA. The outlays by the UK Government are recorded as a capital expenditure, whilst the fees received are recorded as a negative current expenditure. In PESA and GERS, these elements appear in the Enterprise and Economic Development ( EED) expenditure programmes.

The scale of the financial sector interventions, relative to other spending on EED, means that there is a significant increase in expenditure within this category between 2007-08 and 2008-09. GERS therefore separates these two elements of spending.

Total Public Sector Expenditure

Estimated total public sector expenditure for Scotland by spending category for 2008-09 is shown in Table 6.1. On the basis of the assumptions and methodologies described in this report, in 2008-09, total public sector expenditure for Scotland was £56.5 billion when an estimated share of the UK Government's financial sector interventions is included, and £55.8 billion when this share is not included. Under both measures, this was equivalent to 9.4 per cent of comparable total UK public sector expenditure in 2008-09. Social protection was the largest Scottish expenditure programme. Together with health expenditure, it accounts for approximately 50% of total public sector expenditure for Scotland in 2008-09.

Table 6.1: Total Expenditure: Scotland 2008-09

Scotland

£ million

% of total expenditure incl. financial sector interventions

% of total expenditure excl. financial sector interventions

General public services

Public and common services

1,597

2.8%

2.9%

International services

602

1.1%

1.1%

Public sector debt interest

2,658

4.7%

4.8%

Defence

3,078

5.5%

5.5%

Public order and safety

2,509

4.4%

4.5%

Economic affairs

Enterprise and economic development

Financial sector interventions

700

1.2%

N/A

Other enterprise and economic development

1,006

1.8%

1.8%

Science and technology

420

0.7%

0.8%

Employment policies

261

0.5%

0.5%

Agriculture, forestry and fisheries

799

1.4%

1.4%

Transport

2,629

4.7%

4.7%

Environment protection

1,037

1.8%

1.9%

Housing and community amenities

1,799

3.2%

3.2%

Health

10,244

18.1%

18.4%

Recreation, culture and religion

1,490

2.6%

2.7%

Education and training

7,563

13.4%

13.6%

Social protection

18,571

32.9%

33.3%

EU transactions

-502

-0.9%

-0.9%

Total

With financial sector interventions

56,460

100.0%

N/A

Without financial sector interventions

55,761

N/A

100.0%


1 In the TME presentation, expenditure on grants abroad is shown net of grants payable to the UK. This is why the EU transaction shows negative net expenditure.

Current expenditure is the sum of the current expenditure of general government (i.e. the Scottish Government, the UK Government in Scotland and Scottish local authorities) and certain distributive transactions (interest and dividends) payable by public corporations to the private sector and abroad. It does not include expenditure incurred by public corporations in producing goods and services for sale. Instead, the surplus of sale receipts over operating costs for public corporations is scored as a public sector revenue and does not affect the expenditure measure. Public sector current expenditure is defined to be net of certain revenue items, such as some sales of goods and services by general government. As it is defined at the public sector level, any transactions between parts of the public sector are also excluded.

Public sector capital expenditure refers to new capital formation, the net acquisition of land, and expenditure on capital grants. Capital expenditure leads to the holding of assets that can be used repeatedly to produce goods and services and generally have an economic life of more than one year. Tables 6.2 and 6.2a provide a summary of total current and capital expenditure over the years 2004-05 to 2008-09 33.

Table 6.2: Total Current and Capital Expenditure Including Financial Sector Interventions: Scotland and UK 2004-05 to 2008-09

(£ million)

Scotland

UK

2004-05

2005-06

2006-07

2007-08

2008-09

2004-05

2005-06

2006-07

2007-08

2008-09

Current

40,814

43,394

45,128

47,962

49,876

438,524

463,692

482,193

510,221

538,133

Capital

3,704

4,283

4,964

5,243

6,585

32,612

37,488

40,711

45,431

64,266

Total

44,518

47,677

50,093

53,205

56,460

471,136

501,180

522,904

555,652

602,399

Table 6.2a: Total Current and Capital Expenditure Not Including Financial Sector Interventions: Scotland and UK 2004-05 to 2008-09

(£ million)

Scotland

UK

2004-05

2005-06

2006-07

2007-08

2008-09

2004-05

2005-06

2006-07

2007-08

2008-09

Current

40,814

43,394

45,128

47,962

49,964

438,524

463,692

482,193

510,221

539,182

Capital

3,704

4,283

4,964

5,243

5,797

32,612

37,488

40,711

45,431

54,905

Total

44,518

47,677

50,093

53,205

55,761

471,136

501,180

522,904

555,652

594,087

Tables 6.3 and 6.3a highlight the share of total expenditure according to current and capital expenditure. Including a share of the UK Government's financial sector interventions, capital expenditure for Scotland increased from 8.3 per cent of total expenditure in 2004-05 to 11.7 per cent in 2008-09. When this share is not included, capital expenditure increased from 8.3 per cent to 10.4 per cent of total expenditure over the same period.

Table 6.3: Current and Capital Expenditure Including Financial Sector Interventions
(% of Total Expenditure): Scotland 2004-05 to 2008-09

(per cent)

2004-05

2005-06

2006-07

2007-08

2008-09

Current

91.7%

91.0%

90.1%

90.1%

88.3%

Capital

8.3%

9.0%

9.9%

9.9%

11.7%

Table 6.3a: Current and Capital Expenditure Not Including Financial Sector Interventions
(% of Total Expenditure): Scotland 2004-05 to 2008-09

(per cent)

2004-05

2005-06

2006-07

2007-08

2008-09

Current

91.7%

91.0%

90.1%

90.1%

89.6%

Capital

8.3%

9.0%

9.9%

9.9%

10.4%

Tables 6.4 and 6.5 provide a more detailed breakdown of total public sector expenditure by current and capital split for Scotland and the UK.

Including a share of the UK Government's financial sector interventions, total public sector expenditure for Scotland is estimated to have increased from £44.5 billion in 2004-05 to £56.5 billion in 2008-09, an increase of approximately 26.8 per cent in nominal terms. Over the same period, equivalent UK public sector expenditure increased from £471.1 billion to £602.4 billion, an increase of 27.9 per cent in nominal terms. When a share of the UK Government's financial sector interventions is not included, total public expenditure for Scotland is estimated to have increased from £44.5 billion to £55.8 billion over this period whilst the equivalent UK public sector expenditure is estimated to have grown from £471.1 billion to £594.1 billion.

Including a share of the UK Government's financial sector interventions, estimated public sector current expenditure for Scotland was £49.9 billion in 2008-09; 88.3 per cent of total Scottish public sector expenditure. When a share of these interventions is not included, current expenditure was estimated to have been £50.0 billion in 2008-09; 89.6 per cent of total public sector expenditure for Scotland. In comparison, UK public sector current expenditure was £538.1 billion in 2008-09; 89.3 per cent of total UK public sector expenditure, including the financial sector interventions, and £539.2 billion; 90.6 per cent of total public expenditure, when these effects are not included.

Estimated public sector capital expenditure for Scotland was £6.6 billion in 2008-09, including a share of the UK Government's financial sector interventions. This is equivalent to 11.7 per cent of total estimated Scottish public sector expenditure. When these effects are not included, public sector capital expenditure for Scotland was estimated to be £5.8 billion in 2008-09, 10.4 per cent of total public sector expenditure. Over the period 2004-05 to 2008-09, capital expenditure, including a share of the UK Government's financial sector interventions, increased by 77.8 per cent in nominal terms, much faster than the growth observed in current expenditure. When a share of the UK Government's financial interventions are not included, capital expenditure increased by 56.5 per cent over the same period.

Table 6.4: Total Expenditure: Scotland 2004-05 to 2008-09

(£ million)

Current

Capital

Total

2004-05

2005-06

2006-07

2007-08

2008-09

2004-05

2005-06

2006-07

2007-08

2008-09

2004-05

2005-06

2006-07

2007-08

2008-09

General public services

Public and common services

1,104

1,396

1,248

1,313

1,300

269

186

144

61

297

1,372

1,582

1,392

1,374

1,597

International services

454

496

497

532

566

16

28

30

34

35

470

524

527

566

602

Public sector debt interest

2,112

2,260

2,427

2,645

2,658

0

0

0

0

0

2,112

2,260

2,427

2,645

2,658

Defence

2,387

2,523

2,639

2,618

2,787

137

90

75

214

292

2,524

2,613

2,714

2,832

3,078

Public order and safety

1,935

2,121

2,089

2,188

2,284

180

164

189

165

225

2,115

2,285

2,279

2,354

2,509

Economic affairs

Enterprise and economic development

Financial sector interventions

0

0

0

0

-88

0

0

0

0

788

0

0

0

0

700

Other enterprise and econ development

751

745

725

804

713

126

175

216

247

293

877

920

941

1,051

1,006

Science and technology

242

301

261

330

321

48

62

55

120

99

290

363

316

450

420

Employment policies

260

241

246

253

260

11

33

13

1

1

271

274

259

254

261

Agriculture, forestry and fisheries

621

605

593

677

709

44

42

67

65

90

664

646

660

741

799

Transport

884

933

1,449

1,533

1,526

745

913

1,181

1,228

1,103

1,629

1,846

2,630

2,761

2,629

Environment protection

676

728

833

822

848

104

206

162

190

189

779

935

995

1,012

1,037

Housing and community amenities

279

162

182

333

260

1,068

1,363

1,497

1,413

1,539

1,347

1,526

1,679

1,746

1,799

Health

7,334

8,355

8,804

9,363

9,726

424

251

297

447

518

7,758

8,606

9,102

9,810

10,244

Recreation, culture and religion

1,000

1,056

1,093

1,110

1,119

173

189

209

271

371

1,174

1,245

1,302

1,382

1,490

Education and training

5,841

6,091

6,413

6,664

6,914

304

480

724

696

649

6,145

6,570

7,137

7,360

7,563

Social protection

15,273

15,747

15,984

17,019

18,475

57

100

103

91

96

15,329

15,847

16,087

17,110

18,571

EU transactions

-339

-366

-355

-242

-502

0

0

0

0

0

-339

-366

-355

-242

-502

Total

With financial sector interventions

40,814

43,394

45,128

47,962

49,876

3,704

4,283

4,964

5,243

6,585

44,518

47,677

50,093

53,205

56,460

Without financial sector interventions

40,814

43,394

45,128

47,962

49,964

3,704

4,283

4,964

5,243

5,797

44,518

47,677

50,093

53,205

55,761

Table 6.5: Total Expenditure: UK 2004-05 to 2008-09

(£ million)

Current

Capital

Total

2004-05

2005-06

2006-07

2007-08

2008-09

2004-05

2005-06

2006-07

2007-08

2008-09

2004-05

2005-06

2006-07

2007-08

2008-09

General public services

Public and common services

10,451

11,072

11,385

11,291

11,830

1,653

1,675

1,241

1,262

2,012

12,104

12,747

12,626

12,553

13,843

International services

5,358

5,868

5,887

6,309

6,733

194

341

368

426

423

5,552

6,209

6,255

6,734

7,156

Public sector debt interest

24,897

26,744

28,744

31,362

31,579

0

0

0

0

0

24,897

26,744

28,744

31,362

31,579

Defence

28,119

29,846

31,250

31,055

33,130

1,635

1,072

899

2,539

3,466

29,755

30,918

32,149

33,594

36,596

Public order and safety

26,785

27,685

28,633

29,652

30,917

1,707

1,610

1,815

2,091

2,741

28,492

29,295

30,448

31,743

33,658

Economic affairs

Enterprise and economic development

Financial sector interventions

0

0

0

0

-1,049

0

0

0

0

9,361

0

0

0

0

8,312

Other enterprise and econ development

5,094

5,236

4,998

5,501

5,362

1,503

1,309

1,515

1,386

2,171

6,598

6,544

6,512

6,888

7,533

Science and technology

1,931

2,232

2,136

2,416

2,550

514

683

629

784

618

2,445

2,915

2,765

3,200

3,168

Employment policies

3,027

2,987

3,155

3,210

3,017

157

355

195

72

87

3,184

3,342

3,349

3,282

3,104

Agriculture, forestry and fisheries

5,203

5,316

4,835

4,753

5,034

236

280

315

293

383

5,439

5,596

5,150

5,046

5,416

Transport

8,129

8,459

9,551

9,872

9,027

7,894

8,580

10,437

10,620

11,758

16,022

17,039

19,988

20,492

20,785

Environment protection

6,177

6,364

7,169

7,271

7,133

905

2,211

2,231

2,274

2,593

7,082

8,575

9,400

9,545

9,726

Housing and community amenities

3,262

3,540

3,560

3,859

3,737

5,055

7,131

7,946

8,998

11,196

8,317

10,670

11,506

12,856

14,933

Health

79,218

86,467

90,623

97,432

104,605

3,718

3,116

3,885

4,722

5,345

82,936

89,583

94,509

102,155

109,951

Recreation, culture and religion

8,496

9,110

9,462

9,754

9,977

1,467

1,699

1,767

2,252

3,063

9,962

10,809

11,229

12,006

13,040

Education and training

59,620

63,254

66,266

71,162

74,282

5,500

6,450

6,665

6,936

8,302

65,120

69,704

72,931

78,098

82,583

Social protection

163,647

170,111

176,340

186,827

203,195

475

976

804

775

747

164,122

171,088

177,143

187,603

203,942

EU transactions

-892

-598

-1,802

-1,505

-2,927

0

0

0

0

0

-892

-598

-1,802

-1,505

-2,927

Total

With financial sector interventions

438,524

463,692

482,193

510,221

538,133

32,612

37,488

40,711

45,431

64,266

471,136

501,180

522,904

555,652

602,399

Without financial sector interventions

438,524

463,692

482,193

510,221

539,182

32,612

37,488

40,711

45,431

54,905

471,136

501,180

522,904

555,652

594,087

Box 6.1 - Social Protection Expenditure

In 2008-09, social protection expenditure accounted for approximately 33 per cent of public sector expenditure in Scotland and 34 percent of public sector expenditure in the UK as a whole.

Social protection comprises personal social services and social security expenditure. Personal social services covers both social work and social care services provided by local authorities. Examples include residential care homes for the elderly and home care services. Social security comprises cash benefits that are given to eligible individuals defined by states of need, such as unemployment, disability, sickness, old age etc.

The table below disaggregates social protection expenditure in Scotland and the UK by its key components in 2008-09. The results show that the composition of spending on social protection in Scotland and the UK is broadly similar. In both countries, pensions accounted for over a third of spending on social protection and were the largest single category. Social security expenditure on sickness and disability, which includes incapacity benefit 34 and elements of income support, was the second largest category in both counties, accounting for 16.2 percent of total social protection in Scotland and 15.1 per cent in the UK. Social security spending in Scotland is 10.0% of the UK total. This is higher than a per capita and GVA share.

Social Protection Expenditure in Scotland and the UK 2008-09 (£ million)

Scotland

UK

£ million

% of total social protection expenditure

£ million

Scotland as % of UK

Central Government:

Sickness and Disability

3,004

16.2%

28,050

10.7%

Pensions

6,830

36.8%

70,077

9.7%

Widow's Benefits

192

1.0%

1,622

11.8%

Family Benefits (Income support; Tax Credits and Personal Social Services)

1,883

10.1%

19,658

9.6%

Unemployment related benefits and personal social services

390

2.1%

4,874

8.0%

Social exclusion

1,667

9.0%

18,593

9.0%

Other social protection

189

1.0%

1,985

0.1%

Local Government

4,417

23.8%

40,512

10.9%

Total Social Protection Expenditure

18,571

100.0%

185,371

10.0%

Table 6.6 shows estimated total public sector expenditure for Scotland and the UK on a per capita basis. The table also highlights the absolute per capita difference between Scotland and the UK and Scottish expenditure relative to the UK level. Total expenditure per capita for Scotland is estimated to have been £10,910 in 2008-09, £1,097 (or 11.4 per cent) higher than the UK average, when a share of the UK Government's financial sector interventions is included, and £10,775 (11.5 per cent higher than the UK average) when these effects are not included. It should be noted that UK Government departments may have classified certain expenditures to particular categories using a different approach to that taken by Scottish Government Statisticians. Therefore, allocations of certain expenditure for Scotland may differ from those for the UK, not as a result of different levels of actual expenditure, but as a result of different classifications of similar expenditures. Caution should therefore be exercised when comparing expenditure per capita for Scotland with UK figures for individual expenditure categories.

Table 6.6: Total Expenditure per capita: Scotland and UK 2008-09

Scotland (£)

UK (£)

Per Capita Difference
(Scotland less UK) (£)

Relative expenditure for Scotland
( UK = 100)

General public services

Public and common services

309

225

83

137

International services

116

116

0

100

Public sector debt interest

514

514

0

100

Defence

595

595

0

100

Public order and safety

485

547

-63

89

Economic affairs

Enterprise and economic development

Financial sector interventions

135

135

0

100

Other enterprise and econ development

194

123

72

159

Science and technology

81

52

30

157

Employment policies

50

50

0

100

Agriculture, forestry and fisheries

154

88

66

175

Transport

508

338

170

150

Environment protection

200

158

42

127

Housing and community amenities

348

243

105

143

Health

1,980

1,788

191

111

Recreation, culture and religion

288

212

76

136

Education and training

1,462

1,343

118

109

Social protection

3,589

3,317

272

108

EU transactions

-97

-48

-49

204

Total

With financial sector interventions

10,910

9,797

1,113

111

Without financial sector interventions

10,775

9,662

1,113

112


With the exception of defence, international services, public sector debt interest payments, public order and safety and employment policies, public expenditure per capita for Scotland was estimated to be higher than the UK average across all programme types. The biggest absolute differences were in social protection, health and transport, where per capita expenditure for Scotland was between £170 and £272 higher than the UK average. In relative terms, the greatest differences in expenditure per capita occurred in science and technology and agriculture, forestry and fisheries expenditure.

Within the UK, the levels of public expenditure vary from one constituent part to another, reflecting the needs rather than the wealth or tax capacity of an area.

There are number of reasons why public expenditure for Scotland often lies above the UK average. In some cases, higher expenditure per capita reflects the greater relative importance of particular activities for Scotland. Agriculture, fisheries and forestry is one such example. Scotland also has a lower population density than the UK which increases the cost of providing the same level of public service activity, particularly in areas such as education, health and transport.

The scope and remit of the public sector also differs in Scotland compared to the UK. For example, water and sewage services are a public sector responsibility in Scotland, and are therefore included in Scottish public expenditure, whilst in England they are operated by the private sector. The inclusion of Scottish Water in the public sector is one reason why net investment in Scotland is relatively higher than for the UK as a whole.

In other areas, the higher Scottish expenditure often observed reflects greater demand for Scottish-based providers. For example, the strength of Scottish universities has created a net inflow of students from other parts of the UK. Additionally, Scottish university courses are typically longer - the honours degree course takes four years, compared with a typical three year course in England and Wales. Therefore, expenditure on education and training for Scotland will be relatively higher than the rest of the UK. However, this benefits the UK as a whole. As discussed in GERS 2006-07, Scottish universities have also been able to attract above average levels of research funding which has contributed to the high level of public expenditure for science and technology in Scotland.

Finally, higher public expenditure also reflects Scotland's greater need for some public services such as in health and housing.

Box 6.2 - Private Finance Initiative

The Private Finance Initiative ( PFI) is a method to provide financial support for Public Private Partnerships ( PPPs) between the public and private sectors. PFI projects 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. Payment takes the form of a unitary charge which is usually paid annually over the lifetime of the contract. A detailed discussion of the treatment of PFI projects in GERS is provided in Box 6.3 of GERS 2007-08.

The unitary charges paid on PFI projects in Scotland between 2004-05 and 2008-09 are presented in the table below.

PFI Unitary Charge Expenditure in Scotland 2004-05 to 2008-09

(£ million)

2004-05

2005-06

2006-07

2007-08

2008-09

Scottish Public Sector Unitary Charge

358

391

435

509

610

Other UK Government Departments Unitary Charges

18

19

20

28

22

Total Unitary Charges in Scotland

376

410

455

537

632

Source: Scottish Government and HM Treasury PFI Signed Project List - February 2010

Identifiable and Non-identifiable Expenditure

GERS classifies public sector expenditure for Scotland according to three categories: identifiable expenditure, non-identifiable expenditure and accounting adjustments.

In the vast majority of cases, GERS uses the data on identifiable expenditure contained in PESACRA directly. It is a fundamental principle of PESA that the apportionment of UK expenditure adheres to the 'who benefits' principle whereby spending is allocated to a given region if the benefit of the service derived from the expenditure is thought to accrue to residents and enterprises of that region. As highlighted in the PESA publication, there are limitations in the ability to capture precisely 'who benefits' from a given item of expenditure:

  • there are practical difficulties. For example, schools are not used solely by the residents of a region in which the facility is located and roads serve the needs of more than the geographical area through which they pass. Definitional and border problems become increasingly significant the smaller the geographical unit considered;
  • there are also significant definitional problems associated with assessing 'who benefits'. For example, agricultural support is treated as benefiting the farmers who receive subsidies rather than the final consumers of food; and
  • there are also issues around collecting accurate country and regional data in a cost efficient way. UK government departments are encouraged but not required to allocate all expenditure on the basis of 'who benefits'. If spending is not significant (less than £20 million on capital or current) and/or relevant data for allocating this to regions are not available, departments may use some statistical proxy instead. For example: using straight per capita shares, or using the regional allocation proportions for related spending. Further, it is not practical or cost effective to collect local government spending data on the basis of 'who benefits'. Instead, local government spending is assumed to benefit the area where the expenditure occurs.

Following a detailed review of all 1,404 expenditure programme object groups in PESA 2010, a number of important modifications to the PESA data have been made before being used for the GERS report. These changes reflect the fact that in certain circumstances, officials in the Scottish Government believe a more accurate assessment of 'who benefits' is thought possible than is currently presented in PESA. As in GERS 2007-08, the principal change relates to the treatment of expenditure on nuclear decommissioning by the UK Atomic Energy Authority ( UKAEA) and British Nuclear Fuels, as outlined in Box 6.3.

Appendix B contains a detailed list of all amendments to PESA implemented in this report. The development of PESA continues to be work in progress and further improvements in the regional apportionment of public sector expenditure will be reflected in future GERS reports.

Box 6.3 - The Regional Allocation of Decommissioning Expenditure by UK Atomic Energy Authority and British Nuclear Fuels

PESA currently apportions decommissioning expenditure by the UK Atomic Energy Authority ( UKAEA) and British Nuclear Fuels ( BNF) to UK countries or English regions according to where the nuclear facility is located.

GERS has departed from the PESACRA analysis in this instance and re-classified all UKAEA and BNF decommissioning expenditure as non-identifiable, on the basis that during the plants operational life, the value added from nuclear facilities benefited all UK residents. A proportion of total decommissioning expenditure, including that for plants in England, is therefore apportioned to Scotland on a per capita basis. Related expenditure, for example that corresponding to the security of nuclear facilities is treated similarly. The rationale for this change is set out in detail in Box 6.4 of GERS 2007-08.

The table below illustrates the impact of these revisions and highlights the extent to which the data presented in GERS differ from PESACRA analysis in this respect. Under the methodology used in GERS, expenditure on UKAEA and BNF decommissioning for Scotland was estimated to be £65 million in 2008-09, £48 million lower than the estimate contained in PESA.

Expenditure on Nuclear Decommissioning: 2004-05 to 2008-09

(£ million)

2004-05

2005-06

2006-07

2007-08

2008-09

Total UKAEA Decommissioning Expenditure and related nuclear expenditure

524

1,280

1,606

1,374

987

Expenditure 'identified' to Scotland in PESA

180

507

240

238

145

Revised apportionment to Scotland in GERS

44

108

136

116

83

Revision

-135

-399

-104

-122

-62

In 2008-09, UK identifiable expenditure covered approximately 83.4 per cent of UK total public sector expenditure including the financial sector interventions. When these effects are not included, UK identifiable expenditure accounted for 84.6 per cent of UK total public sector expenditure. The remaining spending cannot be attributed to individual locations, for example, because it is spent for the benefit of the UK as a whole. A proportion of such UK non-identifiable expenditure is allocated to the public sector for Scotland either on the basis of Scotland's share of the UK population, GVA or a more specific apportionment variable. Information on the methodologies used to apportion each element of expenditure is provided in Appendix B.

Table 6.7 illustrates the estimated level of identifiable and non-identifiable expenditure assigned to Scotland for each year between 2004-05 and 2008-09. Identifiable expenditure was estimated to be £48.3 billion in 2008-09. This figure is not affected by the UK Government's financial sector interventions as all of these are classified as non-identifiable. In comparison, non-identifiable expenditure was £8.1 billion in 2008-09, approximately 14.4 per cent of estimated total public sector expenditure for Scotland when a share of the UK Government's financial interventions is included. When these effects are not included, non-identifiable expenditure was £7.4 billion in 2008-09, approximately 13.3 per cent of estimated total public sector expenditure for Scotland.

Across most programme categories, the level of non-identifiable expenditure is relatively modest. This, in part, reflects development work that has been undertaken in compiling the PESACRA database in recent years to identify more specifically particular elements of expenditure on a regional basis. Debt interest payments, defence and enterprise and economic development are typically the largest elements of non-identifiable expenditure. Collectively, these three elements of expenditure accounted for 79.7 per cent of total non-identifiable expenditure for Scotland in 2008-09 when a share of the UK Government's financial sector interventions is included, and 77.8 per cent of total non-identifiable expenditure for Scotland when these effects are not included.

Box 6.4 - The London Olympics and Glasgow Commonwealth Games

In PESACRA 2010, HM Treasury classify expenditure on the London Olympics as UK non-identifiable expenditure. This assumes the benefits from the London Olympics are shared equally by all UK residents. There is some debate whether all the expenditures classified as being part of the 2012 London Olympics are non-identifiable. For example, a significant proportion of spending is for investment in infrastructure and re-development of areas in the east end of London. Previous regeneration schemes have generally been classified as identifiable to the region in which they occur.

Expenditure associated with the 2014 Commonwealth Games in Glasgow has been separately identified in PESA for the first time this year. Current expenditures of £2 million and £4 million are reported for 2007-08 and 2008-09 respectively. PESA classifies all the expenditure associated with the Commonwealth Games as being identifiable to Scotland. This implies all the resulting benefits accrue to Scotland.

The classifications used in PESA imply that Scottish residents are assumed to be the sole beneficiaries of the expenditure associated with the Commonwealth Games, whilst all UK residents benefit equally from the expenditure associated with the London Olympics. This creates an apparent asymmetry in the treatment of the expenditures associated with these two events.

One option would be to reclassify expenditure on the London Olympics as being identifiable to London. This would mean that expenditures associated with the Olympics and Commonwealth Games are treated symmetrically, with the principal beneficiaries of both events being the residents of the area in which they are held. This adjustment would reduce the estimates of Scottish public expenditure by £33 million in 2007-08 and £96 million in 2008-09. However this approach would not account for the fact that regions outside London will benefit as a result of the hosting of the Olympic Games in the UK. For example, through increased tourism. Equally, England, Wales and Northern Ireland may accrue similar benefits from the expenditure associated with the Commonwealth Games. Scottish Government Statisticians will review the methodologies used to apportion expenditures associated with the Olympics and Commonwealth Games in GERS with a view to proposing a revised methodology for introduction in GERS 2009-10. This will be informed by the review of Olympic expenditure currently being undertaken by UK Government officials in response to a formal request from the Devolved Administrations.

Table 6.7: Total Expenditure, Identifiable and Non-identifiable: Scotland 2004-05 to 2008-09

(£ million)

Identifiable

Non-identifiable

Total

2004-05

2005-06

2006-07

2007-08

2008-09

2004-05

2005-06

2006-07

2007-08

2008-09

2004-05

2005-06

2006-07

2007-08

2008-09

General public services

Public and common services

942

1,137

961

943

1,145

431

445

430

430

452

1,372

1,582

1,392

1,374

1,597

International services

16

18

16

16

18

453

506

511

549

584

470

524

527

566

602

Public sector debt interest

0

0

0

0

0

2,112

2,260

2,427

2,645

2,658

2,112

2,260

2,427

2,645

2,658

Defence

6

6

7

7

5

2,517

2,607

2,707

2,825

3,073

2,524

2,613

2,714

2,832

3,078

Public order and safety

1,931

2,119

2,105

2,176

2,332

184

167

173

177

177

2,115

2,285

2,279

2,354

2,509

Economic affairs

Enterprise and economic development

Financial sector interventions

0

0

0

0

0

0

0

0

0

700

0

0

0

0

700

Other enterprise and econ development

832

869

884

998

953

45

51

57

53

53

877

920

941

1,051

1,006

Science and technology

250

318

260

400

365

40

44

56

50

55

290

363

316

450

420

Employment policies

270

273

258

253

260

1

1

1

1

1

271

274

259

254

261

Agriculture, forestry and fisheries

664

646

660

741

799

0

0

0

0

0

664

646

660

741

799

Transport

1,611

1,827

2,612

2,742

2,606

18

18

18

20

23

1,629

1,846

2,630

2,761

2,629

Environment protection

733

826

859

897

951

46

109

136

115

86

779

935

995

1,012

1,037

Housing and community amenities

1,347

1,526

1,679

1,746

1,799

0

0

0

0

0

1,347

1,526

1,679

1,746

1,799

Health

7,702

8,562

9,035

9,727

10,160

56

44

67

82

84

7,758

8,606

9,102

9,810

10,244

Recreation, culture and religion

898

951

989

1,029

1,081

276

295

313

353

409

1,174

1,245

1,302

1,382

1,490

Education and training

6,138

6,564

7,130

7,353

7,554

7

6

7

7

10

6,145

6,570

7,137

7,360

7,563

Social protection

15,124

15,625

15,859

16,867

18,304

205

222

227

242

267

15,329

15,847

16,087

17,110

18,571

EU transactions

0

0

0

0

0

-339

-366

-355

-242

-502

-339

-366

-355

-242

-502

Total

With financial sector interventions

38,466

41,267

43,314

45,897

48,329

6,052

6,409

6,778

7,308

8,132

44,518

47,677

50,093

53,205

56,460

Without financial sector interventions

38,466

41,267

43,314

45,897

48,329

6,052

6,409

6,778

7,308

7,432

44,518

47,677

50,093

53,205

55,761

Analysis of Identifiable Expenditure

This section provides a more detailed analysis of identifiable expenditure for Scotland.

As the UK Government's financial sector interventions are recorded in GERS as non-identifiable expenditure, they are not reflected in the identifiable expenditure tables below. Therefore only one estimate of both expenditure on Enterprise and Economic Development and total public spending is provided.

Table 6.8 disaggregates identifiable expenditure for Scotland into expenditure by the Scottish Government and by other UK Government departments for the years 2004-05 to 2008-09 35. Tables 6.9 and 6.10 provide a similar disaggregation but with an additional split for current and capital expenditure. Finally, Table 6.11 provides an assessment of the contribution of each expenditure programme to overall identifiable expenditure for Scotland and the UK as a whole.

The Scottish Government accounted for over two thirds of total Scottish identifiable public expenditure in each year between 2004-05 and 2008-09 with the majority of such expenditure on health and education. It should be noted that the figures presented for Scottish Government expenditure in GERS do not reconcile directly with Scottish Government budget statements. The identifiable expenditure figures contained in GERS include expenditure by non-ministerial departments, such as the General Register Office for Scotland ( GROS), and by public corporations. They exclude a small expenditure by the Scottish Government on services outside Scotland. Furthermore, the figures presented in GERS are consistent with the National Accounts framework for public sector expenditure and will therefore differ from the Scottish Government budget documents in their treatment of certain cash and non-cash items. There are also important differences in classification of expenditure.

UK Government departments accounted for a third of Scottish identifiable expenditure. Their spending is dominated by expenditure on social protection - i.e. welfare payments and unemployment benefits. Social protection is the only function where the majority of identifiable expenditure is not undertaken by the Scottish Government.

Decomposing the data into current and capital components shows that the Scottish Government's share of identifiable current expenditure increased from 65.0 per cent in 2004-05 to 66.1 per cent in 2008-09. Over the same period the proportion of identifiable capital expenditure undertaken by the Scottish Government increased from 88.6 per cent in 2004-05 to 96.6 per cent in 2008-09. A significant element of this increase reflects the transfer of responsibility for elements of railways expenditure from the Department for Transport to the Scottish Government. This issue is set out more in detail in box 6.1 in GERS 2007-08.

As Table 6.11 highlights, the pattern of identifiable expenditure for Scotland was broadly similar to that for the UK as a whole, with social protection and health being the dominant expenditure components.

Table 6.8: Total Identifiable Expenditure: Scotland 2004-05 to 2008-09

(£ million)

Scottish Government

Other UK Government

Total

2004-05

2005-06

2006-07

2007-08

2008-09

2004-05

2005-06

2006-07

2007-08

2008-09

2004-05

2005-06

2006-07

2007-08

2008-09

General public services

Public and common services

897

1,062

898

873

1,083

45

75

63

70

61

942

1,137

961

943

1,145

International services

0

0

0

0

0

16

18

16

16

18

16

18

16

16

18

Public sector debt interest

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

Defence

6

6

7

7

5

0

0

0

0

0

6

6

7

7

5

Public order and safety

1,914

2,104

2,091

2,165

2,305

18

15

15

11

27

1,931

2,119

2,105

2,176

2,332

Economic affairs

Enterprise and econ development

671

664

689

818

760

161

205

194

179

193

832

869

884

998

953

Science and technology

90

135

88

195

138

161

184

172

204

227

250

318

260

400

365

Employment policies

0

0

0

1

4

270

273

258

252

256

270

273

258

253

260

Agriculture, forestry and fisheries

651

634

646

727

785

13

12

14

14

13

664

646

660

741

799

Transport

1,335

1,586

2,554

2,688

2,585

276

241

58

54

21

1,611

1,827

2,612

2,742

2,606

Environment protection

694

776

815

862

919

39

50

44

35

31

733

826

859

897

951

Housing and community amenities

1,347

1,526

1,679

1,746

1,799

0

0

0

0

0

1,347

1,526

1,679

1,746

1,799

Health

7,664

8,517

8,992

9,689

10,111

38

45

43

39

48

7,702

8,562

9,035

9,727

10,160

Recreation, culture and religion

808

835

892

945

999

90

116

97

84

82

898

951

989

1,029

1,081

Education and training

6,108

6,528

7,098

7,330

7,523

30

36

31

23

31

6,138

6,564

7,130

7,353

7,554

Social protection

3,650

3,817

3,765

4,261

4,499

11,474

11,808

12,094

12,606

13,805

15,124

15,625

15,859

16,867

18,304

EU transactions

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

Total

25,835

28,189

30,214

32,308

33,515

12,631

13,079

13,100

13,589

14,813

38,466

41,267

43,314

45,897

48,329

Table 6.9: Identifiable Expenditure - Scottish Government: Scotland 2004-05 to 2008-09

(£ million)

Current

Capital

2004-05

2005-06

2006-07

2007-08

2008-09

2004-05

2005-06

2006-07

2007-08

2008-09

General public services

Public and common services

674

923

769

837

832

223

139

129

36

252

International services

0

0

0

0

0

0

0

0

0

0

Public sector debt interest

0

0

0

0

0

0

0

0

0

0

Defence

6

6

7

7

5

0

0

0

0

0

Public order and safety

1,746

1,945

1,918

2,013

2,099

168

159

173

152

206

Economic affairs

Enterprise and econ development

564

532

532

627

542

107

132

157

192

218

Science and technology

73

105

69

110

75

17

30

18

85

63

Employment policies

0

0

0

1

4

0

0

0

0

0

Agriculture, forestry and fisheries

609

593

579

663

696

43

41

67

64

89

Transport

820

889

1,395

1,476

1,505

515

696

1,159

1,211

1,080

Environment protection

616

681

766

772

834

79

95

49

90

85

Housing and community amenities

279

162

182

333

260

1,068

1,363

1,497

1,413

1,539

Health

7,261

8,282

8,715

9,250

9,602

402

234

277

439

510

Recreation, culture and religion

676

707

735

742

756

131

128

157

203

244

Education and training

5,823

6,068

6,390

6,637

6,875

285

460

709

694

648

Social protection

3,612

3,770

3,707

4,195

4,434

38

46

58

66

65

EU transactions

0

0

0

0

0

0

0

0

0

0

Total

22,760

24,665

25,765

27,664

28,517

3,075

3,524

4,449

4,644

4,999

Table 6.10: Identifiable Expenditure - Other UK Government: Scotland 2004-05 to 2008-09

(£ million)

Current

Capital

2004-05

2005-06

2006-07

2007-08

2008-09

2004-05

2005-06

2006-07

2007-08

2008-09

General public services

Public and common services

39

69

58

65

56

6

5

5

5

5

International services

16

18

16

16

17

1

1

0

1

0

Public sector debt interest

0

0

0

0

0

0

0

0

0

0

Defence

0

0

0

0

0

0

0

0

0

0

Public order and safety

16

17

7

10

26

2

-2

7

1

1

Economic affairs

Enterprise and econ development

147

168

144

130

126

14

37

50

49

66

Science and technology

136

160

146

182

202

25

23

26

23

25

Employment policies

258

240

245

251

255

11

33

13

1

1

Agriculture, forestry and fisheries

12

11

14

13

13

1

1

1

1

1

Transport

53

32

42

45

7

223

209

15

10

14

Environment protection

19

26

22

28

25

21

24

22

7

6

Housing and community amenities

0

0

0

0

0

0

0

0

0

0

Health

19

25

27

35

46

19

20

16

3

2

Recreation, culture and religion

55

66

64

57

60

35

50

33

27

22

Education and training

11

16

16

20

29

19

19

15

3

1

Social protection

11,456

11,755

12,050

12,582

13,774

19

53

44

25

31

EU transactions

0

0

0

0

0

0

0

0

0

0

Total

12,235

12,605

12,851

13,435

14,639

396

474

249

154

174

Table 6.11: Identifiable Expenditure: Scotland and UK 2008-09

Scotland

UK

Scottish Government

Other UK Government

Total

Total

Expenditure
(£ million)

Share of identifiable expenditure

Expenditure
(£ million)

Share of identifiable expenditure

Expenditure
(£ million)

Share of identifiable expenditure

Expenditure
( £ million)

Share of identifiable expenditure

General public services

Public and common services

1,083

2.2%

61

0.1%

1,145

2.4%

8,391

1.7%

International services

0

0.0%

18

0.0%

18

0.0%

214

0.0%

Public sector debt interest

0

0.0%

0

0.0%

0

0.0%

0

0.0%

Defence

5

0.0%

0

0.0%

5

0.0%

82

0.0%

Public order and safety

2,305

4.8%

27

0.1%

2,332

4.8%

31,552

6.3%

Economic affairs

Enterprise and econ development

760

1.6%

193

0.4%

953

2.0%

6,892

1.4%

Science and technology

138

0.3%

227

0.5%

365

0.8%

2,490

0.5%

Employment policies

4

0.0%

256

0.5%

260

0.5%

3,087

0.6%

Agriculture, forestry and fisheries

785

1.6%

13

0.0%

799

1.7%

5,416

1.1%

Transport

2,585

5.3%

21

0.0%

2,606

5.4%

20,479

4.1%

Environment protection

919

1.9%

31

0.1%

951

2.0%

8,685

1.7%

Housing and community amenities

1,799

3.7%

0

0.0%

1,799

3.7%

14,933

3.0%

Health

10,111

20.9%

48

0.1%

10,160

21.0%

108,934

21.7%

Recreation, culture and religion

999

2.1%

82

0.2%

1,081

2.2%

8,130

1.6%

Education and training

7,523

15.6%

31

0.1%

7,554

15.6%

82,470

16.4%

Social protection

4,499

9.3%

13,805

28.6%

18,304

37.9%

200,609

39.9%

EU transactions

0

0.0%

0

0.0%

0

0.0%

0

0.0%

Total

33,515

69.3%

14,813

30.7%

48,329

100.0%

502,365

100.0%

Table 6.12 shows identifiable expenditure per capita for Scotland in 2008-09 and compares this with the corresponding per capita figure for the UK. In 2008-09, identifiable expenditure per capita for Scotland was estimated to be £9,339 which is £1,169 (14.3 per cent) higher than the UK average.

In absolute terms, the largest differences arose in transport, health and social protection where per capita identifiable expenditure for Scotland was between £170 and £274 higher than the UK average. These are the key factors in explaining the difference in total identifiable expenditure between Scotland and the UK.

In relative terms, the greatest variations in spending per capita arose in enterprise and economic development, science and technology, and agriculture, forestry and fisheries.

Table 6.12: Identifiable Expenditure per capita: Scotland and UK 2008-09

Scotland (£)

UK (£)

Difference
(Scotland less UK) (£)

Relative expenditure for Scotland
( UK = 100)

General public services

Public and common services

221

136

85

162

International services

3

3

0

97

Public sector debt interest

0

0

0

0

Defence

1

1

0

72

Public order and safety

451

513

-63

88

Economic affairs

Enterprise and econ development

184

112

72

164

Science and technology

70

40

30

174

Employment policies

50

50

0

100

Agriculture, forestry and fisheries

154

88

66

175

Transport

504

333

170

151

Environment protection

184

141

42

130

Housing and community amenities

348

243

105

143

Health

1,963

1,772

192

111

Recreation, culture and religion

209

132

77

158

Education and training

1,460

1,341

118

109

Social protection

3,537

3,263

274

108

EU transactions

0

0

0

0

Total

9,339

8,170

1,169

114


Analysis of Non-Identifiable Expenditure

This section provides a more detailed analysis of non-identifiable expenditure. There are a number of possible ways in which to allocate a share of UK non-identifiable expenditure to Scotland including Scotland's share of UKGVA or population. The methodologies used to apportion each element of non-identifiable expenditure are discussed in Appendix B.

In addition to non-identifiable expenditure, PESA also includes a small amount of UK Government expenditure which is classified as identifiable but for programmes outside the UK. This includes expenditure on international development programmes. This category is included in GERS within non-identifiable expenditure for both Scotland and the UK. This treatment is consistent with the view that expenditure outside the UK is non-identifiable from the perspective of the UK's constituent countries, as the benefits are shared between them. To make the Scottish non-identifiable expenditure comparable with UK data, this category is therefore included in UK non-identifiable expenditure.

Table 6.13 presents total non-identifiable expenditure for Scotland and the UK between 2004-05 and 2008-09. Tables 6.14 and 6.15 decompose Scottish and UK non-identifiable expenditure into their current and capital components.

Including a share of the UK Government's financial sector interventions, total non-identifiable expenditure for Scotland was estimated to be £8.1 billion in 2008-09, 8.1 per cent of the equivalent UK figure. When a share of the financial sector interventions is not included, total non-identifiable expenditure for Scotland is estimated to be £7.4 billion (8.1 per cent of the UK total).

Defence and debt interest payments comprise the largest components. As Tables 6.14 and 6.15 highlight, current expenditure was the major component of non-identifiable expenditure for both Scotland and the UK in 2008-09.

Table 6.13: Non-Identifiable Expenditure: Scotland and UK 2004-05 to 2008-09

(£ million)

Scotland

UK

2004-05

2005-06

2006-07

2007-08

2008-09

2004-05

2005-06

2006-07

2007-08

2008-09

General public services

Public and common services

431

445

430

430

452

5,101

5,295

5,130

5,135

5,451

International services

453

506

511

549

584

5,346

5,984

6,057

6,513

6,942

Public sector debt interest

2,112

2,260

2,427

2,645

2,658

24,897

26,744

28,744

31,362

31,579

Defence

2,517

2,607

2,707

2,825

3,073

29,676

30,841

32,058

33,501

36,514

Public order and safety

184

167

173

177

177

2,165

1,973

2,054

2,104

2,106

Economic affairs

Enterprise and economic development

Financial sector interventions

0

0

0

0

700

0

0

0

0

8,312

Other enterprise and econ development

45

51

57

53

53

543

610

687

640

641

Science and technology

40

44

56

50

55

490

547

688

618

678

Employment policies

1

1

1

1

1

14

15

18

13

17

Agriculture, forestry and fisheries

0

0

0

0

0

0

0

0

0

0

Transport

18

18

18

20

23

372

380

346

351

306

Environment protection

46

109

136

115

86

553

1,300

1,627

1,370

1,041

Housing and community amenities

0

0

0

0

0

0

0

0

0

0

Health

56

44

67

82

84

671

538

804

991

1,017

Recreation, culture and religion

276

295

313

353

409

3,286

3,517

3,753

4,231

4,910

Education and training

7

6

7

7

10

88

72

80

84

113

Social protection

205

222

227

242

267

2,517

2,734

2,820

3,021

3,333

EU transactions

-339

-366

-355

-242

-502

-892

-598

-1,802

-1,505

-2,927

Total

With financial sector interventions

6,052

6,409

6,778

7,308

8,132

74,827

79,951

83,063

88,428

100,035

Without financial sector interventions

6,052

6,409

6,778

7,308

7,432

74,827

79,951

83,063

88,428

91,722

Table 6.14: Non-Identifiable Expenditure: Scotland 2004-05 to 2008-09

(£ million)

Current

Capital

2004-05

2005-06

2006-07

2007-08

2008-09

2004-05

2005-06

2006-07

2007-08

2008-09

General public services

Public and common services

391

404

420

410

412

40

42

10

20

40

International services

438

478

481

516

549

15

28

30

34

35

Public sector debt interest

2,112

2,260

2,427

2,645

2,658

0

0

0

0

0

Defence

2,381

2,517

2,632

2,611

2,782

137

90

75

214

292

Public order and safety

174

160

164

165

159

10

7

9

12

18

Economic affairs

Enterprise and economic development

Financial sector interventions

0

0

0

0

-88

0

0

0

0

788

Other enterprise and econ development

40

45

48

47

45

5

6

9

6

8

Science and technology

34

36

45

39

44

6

9

10

12

11

Employment policies

1

1

1

1

1

0

0

0

0

0

Agriculture, forestry and fisheries

0

0

0

0

0

0

0

0

0

0

Transport

11

11

11

12

14

6

7

7

7

9

Environment protection

41

21

45

22

-12

5

87

92

93

98

Housing and community amenities

0

0

0

0

0

0

0

0

0

0

Health

53

47

62

78

79

3

-3

4

5

6

Recreation, culture and religion

269

283

294

311

303

7

12

19

42

106

Education and training

7

6

7

7

10

0

0

0

0

0

Social protection

205

221

227

242

267

0

1

1

1

0

EU transactions

-339

-366

-355

-242

-502

0

0

0

0

0

Total

With financial sector interventions

5,818

6,124

6,512

6,863

6,720

233

285

266

445

1,412

Without financial sector interventions

5,818

6,124

6,512

6,863

6,809

233

285

266

445

624

Table 6.15: Non-Identifiable Expenditure: UK 2004-05 to 2008-09

(£ million)

Current

Capital

2004-05

2005-06

2006-07

2007-08

2008-09

2004-05

2005-06

2006-07

2007-08

2008-09

General public services

Public and common services

4,632

4,802

5,008

4,893

4,970

469

493

123

242

481

International services

5,168

5,655

5,702

6,115

6,524

178

329

355

398

417

Public sector debt interest

24,897

26,744

28,744

31,362

31,579

0

0

0

0

0

Defence

28,066

29,776

31,168

30,965

33,050

1,610

1,066

891

2,536

3,464

Public order and safety

2,051

1,894

1,945

1,962

1,890

114

79

109

142

216

Economic affairs

Enterprise and economic development

Financial sector interventions

0

0

0

0

-1,049

0

0

0

0

9,361

Other enterprise and econ development

480

542

579

565

544

64

68

107

75

97

Science and technology

414

441

559

472

538

76

106

129

145

140

Employment policies

14

14

17

13

17

0

1

0

0

0

Agriculture, forestry and fisheries

0

0

0

0

0

0

0

0

0

0

Transport

152

165

161

197

214

219

215

184

154

92

Environment protection

496

263

541

264

-126

56

1,037

1,086

1,106

1,167

Housing and community amenities

0

0

0

0

0

0

0

0

0

0

Health

642

574

753

937

950

30

-36

50

54

67

Recreation, culture and religion

3,195

3,375

3,517

3,725

3,642

90

142

236

506

1,268

Education and training

88

72

80

84

113

0

0

0

0

0

Social protection

2,516

2,726

2,811

3,014

3,328

1

8

9

7

5

EU transactions

-892

-598

-1,802

-1,505

-2,927

0

0

0

0

0

Total

With financial sector interventions

71,920

76,444

79,784

83,063

83,258

2,907

3,507

3,279

5,365

16,776

Without financial sector interventions

71,920

76,444

79,784

83,063

84,307

2,907

3,507

3,279

5,365

7,415

Table 6.16 compares the composition of non-identifiable expenditure for Scotland and the UK for 2008-09. For both Scotland and the UK, the structure of non-identifiable expenditure is broadly similar, with debt interest and defence expenditure contributing the largest amounts.

Table 6.16: Non-Identifiable Expenditure: Scotland and UK 2008-09

Scotland

UK

Expenditure
(£ million)

Share of non-identifiable expenditure inc. financial interventions

Share of non-identifiable expenditure exc. financial interventions

Expenditure
(£ million)

Share of non-identifiable expenditure inc. financial interventions

Share of non-identifiable expenditure exc. financial interventions

General public services

Public and common services

452

5.6%

6.1%

5,451

5.4%

5.9%

International services

584

7.2%

7.9%

6,942

6.9%

7.6%

Public sector debt interest

2,658

32.7%

35.8%

31,579

31.6%

34.4%

Defence

3,073

37.8%

41.4%

36,514

36.5%

39.8%

Public order and safety

177

2.2%

2.4%

2,106

2.1%

2.3%

Economic affairs

Enterprise and economic development

Financial sector interventions

700

8.6%

N/A

8,312

8.3%

N/A

Other enterprise and econ development

53

0.7%

0.7%

641

0.6%

0.7%

Science and technology

55

0.7%

0.7%

678

0.7%

0.7%

Employment policies

1

0.0%

0.0%

17

0.0%

0.0%

Agriculture, forestry and fisheries

0

0.0%

0.0%

0

0.0%

0.0%

Transport

23

0.3%

0.3%

306

0.3%

0.3%

Environment protection

86

1.1%

1.2%

1,041

1.0%

1.1%

Housing and community amenities

0

0.0%

0.0%

0

0.0%

0.0%

Health

84

1.0%

1.1%

1,017

1.0%

1.1%

Recreation, culture and religion

409

5.0%

5.5%

4,910

4.9%

5.4%

Education and training

10

0.1%

0.1%

113

0.1%

0.1%

Social protection

267

3.3%

3.6%

3,333

3.3%

3.6%

EU transactions

-502

-6.2%

-6.8%

-2,927

-2.9%

-3.2%

Total

With financial sector interventions

8,132

100.0%

N/A

100,035

100.0%

N/A

Without financial sector interventions

7,432

N/A

100.0%

91,722

N/A

100.0%

Table 6.17 outlines Scottish non-identifiable expenditure on services per capita in 2008-09 and compares this with the corresponding figure for the UK. For Scotland, non-identifiable expenditure was estimated to be £1,571 per capita including a share of the UK Government's financial sector interventions, and £1,436 per capita when these effects are not included. These are marginally lower than the equivalent UK per capita figures of £1,627 and £1,492 respectively. This reflects the fact that for some apportionments, GVA was used and Scotland's GVA per capita (excluding extra-regio) was marginally smaller than the corresponding UK figure in 2008-09.

Table 6.17: Non-Identifiable Expenditure Per Capita: Scotland and UK 2008-09

Scotland (£)

UK (£)

Difference
(Scotland less UK) (£)

Relative expenditure for Scotland
( UK = 100)

General public services

Public and common services

87

89

-1

98

International services

113

113

0

100

Public sector debt interest

514

514

0

100

Defence

594

594

0

100

Public order and safety

34

34

0

100

Economic affairs

Enterprise and economic development

Financial sector interventions

135

135

0

100

Other enterprise and econ development

10

10

0

99

Science and technology

11

11

0

97

Employment policies

0

0

0

100

Agriculture, forestry and fisheries

0

0

0

0

Transport

4

5

0

90

Environment protection

17

17

0

99

Housing and community amenities

0

0

0

0

Health

16

17

0

99

Recreation, culture and religion

79

80

-1

99

Education and training

2

2

0

100

Social protection

52

54

-3

95

EU transactions

-97

-48

-49

204

Total

With financial sector interventions

1,571

1,627

-56

97

Without financial sector interventions

1,436

1,492

-56

96

Box 6.5 - Debt Interest Payments

The debt interest payment expenditure in the above tables refers to payments to cover interest on outstanding UK Government debt. In GERS, such expenditure is classified as non-identifiable. For each year, a per capita share of UK Government debt interest expenditure is allocated for Scotland. The allocation on a per capita basis is based on the assumption that residents across the UK bear an equal burden of UK Government liabilities.

As there is no separate identification of Scotland's share of UK public sector net debt in UK public financial accounts, a separate Scottish debt interest expenditure does not exist. An assessment of an implied 'debt position' for Scotland is inherently problematic, not least because general government borrowing is controlled by the UK Government.

Debt interest payments can also be viewed as payments related to past UK public sector net borrowing and government expenditure. Current expenditure excluding debt interest payments represents expenditure on public services consumed within the current financial year. The difference between this estimate and estimated current revenue represents the current budget fiscal position for public services provided at a given point in time (the primary current balance). In GERS, an estimate of debt interest payments is then deducted from this balance to obtain the current budget balance which is presented in Chapter 3.

Estimates for Scotland over the period 2004-05 to 2008-09, including a share of the UK Government's financial sector interventions, are highlighted in the table below, illustrating the current balance on public services consumed within each financial year.

Current Balance on Public Services Consumed Including Financial Sector Interventions: Scotland 2008-09

(£ million)

2004-05

2005-06

2006-07

2007-08

2008-09

Current revenue

Excluding North Sea revenue

36,983

39,787

42,198

44,966

43,466

Including North Sea revenue (per capita share)

37,422

40,580

42,952

45,627

44,553

Including North Sea revenue (geographical share)

41,515

47,914

49,694

52,417

55,236

Total current expenditure

(including capital consumption and accounting adjustments)

44,036

46,983

48,907

51,943

53,966

Less debt interest payments (as used in headline GERS estimates)

-2,112

-2,260

-2,427

-2,645

-2,658

Total current expenditure on services consumed within current financial year

41,924

44,723

46,480

49,298

51,309

Current balance on public services consumed within current financial year

Excluding North Sea revenues

-4,941

-4,936

-4,281

-4,332

-7,843

Including North Sea revenues (per capita share)

-4,502

-4,143

-3,528

-3,671

-6,755

Including North Sea revenues (geographical share)

-409

3,192

3,214

3,119

3,928

Accounting Adjustments

The analysis of public sector expenditure in GERS focuses on Total Expenditure on Services ( TES). This is consistent with the departmental budget framework. In UK public finance documents, the principal measure of public sector expenditure is Total Managed Expenditure ( TME). TME is constructed from categories in the National Accounts framework. The main difference between TES and TME is that TES does not include general government capital consumption and does not reverse the deduction of certain VAT refunds in the budget-based expenditure data. It also contains a number of items that are in budgets but not in TME, for example the grant-equivalent element of student loans. In most years, TES amounts to approximately 95 per cent of TME. To reconcile TES and TME, an accounting adjustment is introduced such that TES plus the accounting adjustment equals TME.

The largest component of the UK accounting adjustment is general government capital consumption. It is a measure of the amount of fixed capital resources used up in the process of the provision of public services. In 2008-09, the UK capital consumption of £13.8 billion represented 50.5 per cent of the total UK accounting adjustment. Table 6.18 shows the component disaggregation of the UK accounting adjustment. The total UK accounting adjustments was estimated at £27.3 billion in 2008-09. The estimates of the UK accounting adjustment presented in Table 6.18 include the effect of the UK Government's financial sector interventions.

Table 6.18: Accounting Adjustment Including Financial Sector Interventions: UK 2004-05 to 2008-09

(£ million)

2004-05

2005-06

2006-07

2007-08

2008-09

UK total managed expenditure ( TME)

492,332

523,942

549,819

581,919

629,659

UK total expenditure on services ( TES)

471,136

501,180

522,904

555,652

602,399

UK accounting adjustment

21,196

22,762

26,915

26,267

27,260

of which:

Central government capital consumption

5,513

5,734

5,881

6,142

6,530

Local government capital consumption

5,437

5,952

6,478

6,803

7,224

Current VAT refunds

7,803

8,791

9,416

9,725

10,001

Capital VAT refunds

1,508

1,655

1,772

1,982

1,978

Nigerian debt cancellation

116

1,246

1,406

0

0

Student loans subsidy 1

-327

-429

-290

-1,032

-524

Imputed subsidy from Local Authorities to the Housing Revenue Account 2

715

1,431

1,528

1,535

1,488

Imputed flows for Renewable Obligation Certificates 3

368

370

474

469

472

Residual

63

-1,988

250

643

91


1 TES includes the subsidy implied in student loans being issued at lower than market rate. This is not included in TME - the National Accounts measures (in the current balance) the difference between interest received from students and the amount of interest paid by the government on the debt incurred to make the loans.
2 The Housing Revenue Account ( HRA) is classified as a Public Corporation by the ONS, which means that they pay dividends on their profits to local authorities. To ensure that these dividends are non-negative, the ONS impute a subsidy from local authorities to HRAs to cover any shortfall (offset in Public Corporation gross operating surplus, which scores on the revenue side of the account).
3 Renewable Obligation Certificates are bought and sold by energy companies. The ONS have decided that these flows should be channelled through central government and so impute offsetting amounts of spending and income.

The corresponding Scottish figures, as highlighted in Table 6.19, are calculated using a variety of apportionment methodologies. Firstly, estimates of general government capital consumption from the ONS Regional Accounts, together with information from local government returns, have been used to apportion capital consumption to UK countries and English regions. In 2008-09, general government capital consumption for Scotland was estimated at £1.3 billion (9.2 per cent of UK capital consumption). This is relatively high for Scotland, reflecting a higher stock of public sector assets (e.g. roads, hospitals, schools) than elsewhere in the UK. These figures are identical to those used in the general government gross operating surplus calculations in the revenue account. The figures cancel out in the net borrowing calculation

VAT refunds have been allocated to Scotland using the apportionments derived in the revenue calculations for VAT refunds which form part of the total VAT calculations (see Appendix A), and therefore cancel out in the calculation of net borrowing. The figures for Scottish student loan subsidies were provided by HM Treasury. The imputed subsidy from local authorities to the Housing Revenue Account adopt the same apportionment allocation as in the gross operating surplus calculations on the revenue side, and the imputed flows for Renewable Obligation Certificates adopts the same methodology used in 'other taxes and royalties'. These items cancel in the net borrowing calculations. The Scottish share of the Nigerian debt write-off has been allocated on a per capita basis. The current and capital residuals are allocated to Scotland using the appropriate TES ratios.

In sum, the total Scottish public sector accounting adjustment was estimated at £2.6 billion in 2008-09, or 9.4 per cent of the total UK accounting adjustment, including the effect of the UK Government's financial sector interventions. The relatively higher proportion compared to per capita or GVA shares reflects the high share of general government capital consumption for Scotland.

Table 6.19: Accounting Adjustment Including Financial Sector Interventions: Scotland 2004-05 to 2008-09

(£ million)

2004-05

2005-06

2006-07

2007-08

2008-09

Capital consumption: 1

Central government capital consumption

496

501

522

542

579

Local government capital consumption

591

651

611

658

688

Current expenditure:

Current VAT refunds

736

868

839

879

909

Student loans subsidy 2

-33

-40

-27

-44

7

Imputed subsidy from Local Authorities to the Housing Revenue Account 3

75

160

158

149

128

Imputed flows for Renewable Obligation Certificates 4

46

33

35

50

56

Current expenditure residual

Capital expenditure:

142

163

158

179

180

Capital VAT refunds

10

105

119

0

0

Nigerian debt cancellation

169

-98

-130

-95

-23

Capital expenditure residual

Total accounting adjustment

2,100

2,238

2,408

2,456

2,553

Percentage of UK accounting adjustment

9.9%

9.8%

8.9%

9.4%

9.4%


1 Public Corporations' capital consumption is included in gross operating surplus.
2 TES includes the subsidy implied in student loans being issued at lower than market rate. This is not included in TME - the National Accounts measures (in the current balance) the difference between interest received from students and the amount of interest paid by the government on the debt incurred to make the loans.
3 The Housing Revenue Account ( HRA) is classified as a Public Corporation by the ONS, which means that they pay dividends on their profits to local authorities. To ensure that these dividends are non-negative, the ONS impute a subsidy from local authorities to HRAs to cover any shortfall (offset in Public Corporations gross operating surplus, which scores on the revenue side of the account).
4 Renewable Obligation Certificates are bought and sold by energy companies. The ONS have decided that these flows should be channelled through central government and so impute offsetting amounts of spending and income.

Back to top