Government Expenditure and Revenue in Scotland

Government Expenditure and Revenue in Scotland

SECTION 3: IDENTIFIABLE GENERAL GOVERNMENT EXPENDITURE
DEFINITION

This section presents an analysis of identifiable public expenditure by country within the UK. For this purpose, identifiable expenditure is defined as that expenditure which can be identified from official records as having been incurred on behalf of the population of a particular country/region. This is the central "who benefits" principle.

It is important to note that this approach is conceptually different from the alternative methodology, which is to allocate expenditure to the country in which it is actually incurred. In the latter case, the location of the beneficiaries of the service is not explicitly taken into account. In practice, for the identifiable expenditure presented in this section, the allocation under the two approaches is virtually identical. Almost all the expenditure by the Scottish Office and its associated Departments was incurred in Scotland for the benefit of the Scottish people.

Nonetheless, the preferred approach does have its limitations, as some identifiable expenditure will inevitably be to the benefit of people outside Scotland. For example, hospitals and health facilities are not used solely by the residents of the region in which the facility is located, and roads serve the needs of more than the geographical area in which they are sited¹⁰.

UK AND SCOTTISH IDENTIFIABLE GGE
The Treasury's Public Expenditure Statistical Analyses 1998-99 provides (in Section 7) data for identifiable GGE in each of the four countries of the UK for the years 1992-93 to 1996-97. These are replicated in the tables in this section¹¹. Table 1A gives the aggregate figures, showing that identifiable GGE in Scotland was £24.7 billion in 1996-97.

Table 1B shows that Scotland's share of identifiable UK GGE peaked in 1994-95 at 10.6 per cent, before falling in the next 2 years to a share of 10.4 per cent. Similarly, across all countries, the distribution of spending has been broadly stable. Only Northern Ireland's share of UK identifiable expenditure was different at the end of the 5 years under review than at the start.

Table 1A. Identifiable general government expenditure by country

£m	1992-93		1993-94		1994-95		1995-96		1996-97
England	160,448		169,515		176,576		183,603		190,721
Wales	11,438		12,069		12,556		12,985		13,496
Northern Ireland	7,476		7,973		8,276		8,593		9,122
Scotland	20,833		22,091		23,302		24,048		24,748
UK	200,195		211,647		220,710		229,228		238,087


Table 1B. Identifiable general government expenditure as a percentage of UK total

%	1992-93		1993-94		1994-95		1995-96		1996-97
England	80.1		80.1		80.0		80.1		80.1
Wales	5.7		5.7		5.7		5.7		5.7
Northern Ireland	3.6		3.8		3.7		3.7		3.8
Scotland	10.4		10.4		10.6		10.5		10.4
UK	100.0		100.0		100.0		100.0		100.0

Source:Public Expenditure Statistical Analyses 1998-99, Section 7. Table 7.1 and Tables 7.2A - 7.6A.

Table 2A shows that identifiable GGE per head in 1996-97 was significantly above the UK average in Northern Ireland, Scotland and Wales. In that year, identifiable GGE per head in Scotland was £777, or around 19 per cent, higher than the UK average. Hence, identifiable GGE in Scotland was around £4.0 billion higher than if UK GGE had been apportioned strictly by Scotland's population share.

Table 2B shows that, in recent years, identifiable GGE per head in Scotland has been consistently above the UK average. However, some care should be applied in the interpretation of these figures, as discussed in the remainder of this section.

Table 2A. Identifiable general government expenditure per head by country

£ per head	1992-93		1993-94		1994-95		1995-96		1996-97
England	3,317		3,493		3,625		3,754		3,885
Wales	3,946		4,152		4,310		4,452		4,620
Northern Ireland	4,619		4,886		5,041		5,211		5,484
Scotland	4,076		4,314		4,540		4,682		4,826
UK	3,451		3,637		3,780		3,911		4,049


Table 2B. Identifiable general government expenditure per head by country relative to United Kingdom

	£/head Index (UK identifiable GGE = 100)
	1992-93		1993-94		1994-95		1995-96		1996-97
England	96		96		96		96		96
Wales	114		114		114		114		114
Northern Ireland	134		134		133		133		135
Scotland	118		119		120		120		119

Source: Public Expenditure Statistical Analyses 1998-99, Section 7, Table 7.1 and Tables 7.2B - 7.6B.

IDENTIFIABLE GGE BY PROGRAMME

Table 3 shows identifiable general government expenditure per head in 1996-97 in Scotland relative to the UK, broken down by public expenditure programme¹². As noted previously, total identifiable expenditure per head in 1996-97 was around 19 per cent higher in Scotland than in the UK. This is reflected in the programme relatives, notably in agriculture, fisheries, food and forestry; housing; trade, industry, energy, employment and training; and other environmental services.

Table 3. Identifiable general government expenditure per head by programme in Scotland, 1996-97
					Scotland relative to the UK UK = 100 ⁽¹⁾
Agriculture, fisheries, food and forestry					185
Trade, industry, energy, employment and training					139
Transport					127
Housing					162
Other environmental services					144
Law, order and protective services					101
Education					126
Culture, media and sport					103
Health and personal social services					119
Social security					109
Total					119

Note: 1. Based on unrounded figures.
Source: Public Expenditure Statistical Analyses 1998-99, Section 7, Table 7.6B.

It is to be expected that, within any state, the level of public expenditure will vary from one constituent part to another. Needs vary and public expenditure should reflect needs rather than the wealth or taxable capacity of the area. In an unitary state, these transfers occur automatically as a result of the taxation and public expenditure system. Previous Government Expenditure and Revenue in Scotland publications¹³ have described some of the reasons for the differences in expenditure priorities in Scotland. It is useful to refer to them again here.

In some cases, higher expenditure per head reflects the greater importance that particular activities have in the economic life of the country: in Scotland, agriculture, fisheries, food and forestry is a case in point. Scotland is the most sparsely populated area in the UK, and relative population density has also to be taken into account, for example, in primary and secondary education. Differences can also occur because of variations in the distribution of activity between the public and private sectors. This applies in the case of capital spending on water and sewerage, which is a public sector responsibility in Scotland and included in the Scottish public expenditure total.

In health expenditure, Scotland's needs are greater for a number of reasons, including the highest death rates in the UK from circulatory diseases and cancer. Different characteristics also apply in education, such as the higher proportion of courses in Scotland which are longer (ie the 4-year honours degree course, compared with a typical 3-year course in England and Wales) and the net inflow of students from the rest of the UK that Scotland experiences. Lastly, in the case of housing, there is a higher proportion of housing stock in the public sector.

Table 4 and Figure 2 show the allocation of identifiable GGE allocated across the main spending programmes in Scotland, together with the relevant percentages of the total amount. The table also shows the distribution of expenditure by programme in the UK. In Scotland, social security is by far the biggest programme of expenditure and, together with health and personal social services, accounts for almost three-fifths of total Scottish identifiable GGE. The other major spending programme is education. A similar pattern applies at the UK level, with a slightly higher share being spent on social security and a slightly smaller share on education.

Table 4. Identifiable general government expenditure in Scotland and the UK by programme, 1996-97


		Scotland				United Kingdom
		Expenditure £ million		Share of Total Expenditure ⁽¹⁾%		Expenditure £ million		Share of Total Expenditure⁽¹⁾%

Agriculture, fisheries, food and forestry		751		3.0		4,660		2.0
Trade, industry, energy, employment and training		869		3.5		7,140		3.0
Transport		1,022		4.1		9,208		3.9
Housing		575		2.3		4,067		1.7
Other environmental services		1,249		5.0		9,965		4.2
Law, order and protective services		1,450		5.9		16,522		6.9
Education		4,026		16.3		36,574		15.4
Culture, media and sport		267		1.1		2,960		1.2
Health and personal social services		5,225		21.1		50,533		21.2
Social security		9,142		36.9		96,111		40.4
Miscellaneous		172		0.7		348		0.1
Total		24,748		100.0		238,087		100.0

Note: 1. Percentages may not add up to 100 because of rounding.
Source: Public Expenditure Statistical Analyses 1998-99, Section 7, Table 7.6A.

Figure 2: Identifiable GGE in Scotland by programme, 1996-97



Note: As for Table 4
Source: As for Table 4

SECTION 3: IDENTIFIABLE GENERAL GOVERNMENT EXPENDITURE

DEFINITION

UK AND SCOTTISH IDENTIFIABLE GGE

1992-93