Government Expenditure and Revenue in Scotland

Government Expenditure and Revenue in Scotland

SECTION 4: NON-IDENTIFIABLE GENERAL GOVERNMENT EXPENDITURE

DEFINITION AND DATA SOURCES
"Non-identifiable" expenditure is that expenditure which is incurred on behalf of the UK as a whole or which cannot be fully separated between the individual parts of the UK from existing records. The former absorbed some 97 per cent of non-identifiable expenditure in 1996-97.

Table 5 shows general government expenditure on services in the UK (excluding privatisation proceeds), in which non-identifiable expenditure by programme is shown alongside identifiable expenditure. The non-identifiable expenditure information is taken from Public Expenditure Statistical Analyses 1998-99 and, together with additional, more detailed, information from the Treasury, forms the basis of the calculations of Scottish non-identifiable expenditure contained in this section.

Table 5. Identifiable and non-identifiable general government expenditure on services ⁽¹⁾ in the UK, 1996-97

£million ⁽³⁾
	Identifiable		Non-identifiable			Total
Defence	-		21,160			21,160
International development assistance	-		3,370			3,370
and other international services
Agriculture, fisheries, food and forestry	4,660		1,260			5,920
Trade, industry, energy, employment	7,140		2,350			9,490
and training
Transport	9,210		-370			8,830
Housing	4,070		-			4,070
Other environmental services	9,970		140			10,110
Law, order and protective services	16,520		10			16,530
Education	36,570		20			36,590
Culture, media and sport	2,960		-			2,960
Health and personal social services	50,530		140			50,670
Social security	96,110		1,350			97,470
Miscellaneous ⁽²⁾	350		5,970			6,320
Total	238,090		35,410			273,490

Notes: 1. Excluding privatisation proceeds, general government debt interest and accountingadjustments which are not allocated to countries: ie, the third category of GGE described in this report - "Other Expenditure" - is not included.
2. Includes contribution to the European Communities.
3. All figures have been rounded to the nearest £10 million; therefore, figures may not add up to totals.

Source: Public Expenditure Statistical Analyses 1998-99, Section 7, Table 7.7.

UK NON-IDENTIFIABLE EXPENDITURE
In 1996-97, UK non-identifiable expenditure was £35.4 billion, representing around 13 per cent of UK general government expenditure on services. It was dominated by defence expenditure, which accounted for £21.2 billion, or almost three-fifths of the total. The other principal areas of non-identifiable expenditure were trade, industry, energy, employment and training (6.6 per cent), which includes most of central government's contribution to the financing requirements of nationalised industries, and international assistance and services (9.5 per cent). Miscellaneous expenditure absorbed around 17 per cent of UK non-identifiable expenditure. This includes the UK's net payments to EC institutions, together with expenditure associated with the general maintenance of government, such as tax collection and population registration.

SCOTTISH NON-IDENTIFIABLE EXPENDITURE
To estimate aggregate GGE for Scotland, it is necessary to apportion to Scotland a share of the UK non-identifiable expenditure shown in Table 5. However, a small amount of UK non-identifiable expenditure is known not to have been spent for the benefit of Scotland. It is clearly inappropriate to include this in the calculations, and, in the estimates which follow, such expenditure has therefore been removed from the total being apportioned. More broadly, of the £35.4 billion in non-identifiable expenditure, around £34.3 billion was incurred for the benefit of the UK as a whole, £1.1 billion for the benefit of GB, and around £50 million for the benefit of England and Wales.

There are a number of possible ways in which to allocate Scotland a share of non-identifiable expenditure. The relative share of UK population (8.7 per cent in 1996) or of UK GDP (8.6 per cent), or some more sophisticated method, could be used. For the purposes of the current exercise, Scotland's share of most non-identifiable items has been allocated in line with its share of UK GDP (excluding Continental Shelf)¹⁴, though, in value terms, it is items allocated on a population basis which dominate in the estimate of total non-identifiable expenditure for Scotland¹⁵.

GGE includes central government's contributions to the financing requirements of the nationalised industries and public corporations, and, as already noted, part of these are recorded as non-identifiable expenditure within Table 5. As in previous years, a share has been apportioned to Scotland according to its GDP share.

On the basis of these assumptions, estimates of non-identifiable GGE for Scotland by programme in 1996-97 are shown in Table 6. Total non-identifiable expenditure was £3.1 billion, around 8.7 per cent of the UK total. The largest components, as for the UK, were in defence, international development assistance, and trade, industry, energy, employment and training.

Taking identifiable and non-identifiable expenditure together, the total for Scotland in 1996-97 was £27.8 billion. This is approximately 10.2 per cent of the UK amount.

Table 6. Identifiable and non-identifiable general government expenditure on services ⁽¹⁾ in Scotland, 1995-96

£million ⁽⁴⁾
		Identifiable ⁽²⁾			Non-identifiable		Total
Defence				-	1,850		1,850
International development assistance and other international services				-	290		290
Agriculture, fisheries, food and forestry		750		(620)	110		860
Trade, industry, energy, employment and training		870		(580)	200		1,070
Transport		1,020		(860)	-30		990
Housing		580		(580)	0		580
Other environmental services		1,250		(1,220)	10		1,260
Law, order and protective services		1,450		(1,380)	0		1,450
Education		4,030		(4,030)	0		4,030
Culture, media and sport		270		(260)	0		270
Health and personal social services		5,230		(5,230)	10		5,240
Social security		9,140		(0)	120		9,260
Miscellaneous ⁽³⁾		170		(170)	510		690
Total		24,750		(14,920)	3,080		27,830

Notes: 1. Excluding privatisation proceeds, general government debt interest and accounting adjustments. See Section 5 on GGE "Other Expenditure".
2. The figures in brackets refer to identifiable expenditure by the Scottish Office and related Departments.
3. See Table 5, footnote 2.
4. All figures have been rounded to the nearest £10 million; therefore, figures may not add up to totals.

Sources: Scottish Office estimates derived from Public Expenditure Statistical Analyses, 1998-99, Table 7.7, and more detailed figures from HM Treasury.

DEFENCE EXPENDITURE
As noted earlier, defence expenditure is the largest item in UK non-identifiable GGE, accounting for almost 60 per cent of the total in 1996-97. The Scottish share of this (£1.8 billion) is based on Scotland's population share. Previous reports¹⁶ have used the GDP share; this would yield a similar amount (also rounded to £1.8 billion) for the 1996-97 year.

The use of the population (or GDP) share is determined by - and consistent with - the "who benefits" principle, given that defence expenditure is incurred on behalf of the UK as a whole. It is appropriate to note here that the geographic location of defence contractors and employees is a separate issue, and some background discussion can be found in previous reports¹⁷.

SECTION 4: NON-IDENTIFIABLE GENERAL GOVERNMENT EXPENDITURE

DEFINITION AND DATA SOURCES

UK NON-IDENTIFIABLE EXPENDITURE

SCOTTISH NON-IDENTIFIABLE EXPENDITURE

DEFENCE EXPENDITURE