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.


3 SCOTLAND'S PUBLIC SECTOR ACCOUNTS

Introduction

This chapter provides a summary of Scotland's public sector accounts for the years 2004-05 to 2008-09. It outlines the latest estimates of public sector revenue in Scotland and expenditure for Scotland, and includes:

  • Headline estimates of public sector revenue in Scotland and of expenditure for Scotland, the key aggregates for assessing the strength of public finances in Scotland;
  • Five-year estimates of current and capital expenditure for Scotland and key elements of public sector revenue in Scotland;
  • Estimates of the current budget balance and net fiscal balance of the public sector in Scotland.

As discussed in the preface, within the present constitutional arrangements there is no formal requirement for a comprehensive compilation of UK country and regional budgetary accounts. Therefore, the results presented in this section are statistical estimates of public sector revenue in Scotland and of expenditure for Scotland, not precise financial accounts and should be viewed accordingly.

Financial Sector Interventions

Accounting for the full spectrum of financial sector interventions in the public finances is not straightforward. Indeed, ONS has yet to fully incorporate the various financial accounts of RBS and Lloyds Banking Group into the UK Public Sector Finances 11.

The series of measures undertaken to support the UK financial sector has consisted of three key elements - guarantees, recapitalisation and various loan programmes such as the support provided through the Financial Services Compensation Scheme.

It is important to note that the actual outlay by the government has been much less than the total value of support offered. Many of the provisions, for example the Asset Protection Scheme, would only incur net financial costs if the facility was called upon by participating institutions. Indeed, the full amount would only be realised in a worst case scenario. The stabilisation of markets since these measures were announced has meant that the net outlay from such guarantee schemes is forecast to "not have a material cost on the UK tax payer 12".

However other measures, such as the direct recapitalisation of financial institutions, did incur an immediate, but potentially transitory, financial cost and this will be reflected in any assessment of the public finances.

The headline measure of UK public sector net borrowing in the 2009 Pre-Budget Report and the March 2010 Budget, together with the assessment of the public finances undertaken by the Office for Budget Responsibility in June 2010, is referred to as PSNB-ex. This measure classifies the support to the financial sector as a transaction between the public and private sector, even if the transaction involves a financial institution which is deemed to be in the public sector. This reflects the fact that, in time, the government will return ownership of these institutions to the private sector. For example, any programme of recapitalisation is classified as a burden on the public finances, even if the direct result of such an action is to bring this institution into the public sector. Such a measure of net borrowing therefore captures the effects of the various financial interventions on the UK's public finances. In the financial year 2008-09, the net outlay recorded in public sector net borrowing was £8.3 billion, of which, capital expenditure was £9.4 billion and current expenditure -£1.1 billion (a net-revenue). 13 These figures include expenditure associated with the recapitalisation of RBS, HBOS and Lloyds TSB, and depositor compensation for Bradford and Bingley, net of all revenues received, including those from fees and payments associated with the various schemes.

This edition of GERS follows two approaches. Firstly, it provides an estimate of Scotland's public sector accounts including a share of the net costs of the various measures to support the financial sector within the estimates of Scotland's current budget and net fiscal balance. These estimates are directly comparable with the headline UK current budget and net borrowing figures presented in the March 2010 Budget. Secondly, it estimates Scotland's public sector accounts without a share of the various interventions to support the financial sector. These estimates are presented to highlight underlying trends in the GERS data from previous years to the latest year, 2008-09. 14

In tracing the impact of the various financial sector interventions on the public finances, it should be noted that there is an important distinction between the central government net cash requirement ( CGNCR) and net borrowing. CGNCR represents the government's net financing requirement at a given point in time. In contrast, net borrowing is a general assessment of the change in the public sector's net financial indebtedness and is therefore a broader measure of the underlying strength of the public finances. For example, the package of financial recapitalisation for RBS, HBOS and Lloyds TSB is divided into non-financial and financial elements. The financial part represents the value of the equity acquired. The non-financial part, which contributes to government net borrowing, is recorded as the difference between the price paid for the equity and its market price on the day of the purchase. These were worth £6.1 billion in 2008-09 and £6.4 billion in 2009-10. In contrast, the additional outlay to finance the acquisition of equity included a further £30.8 billion in 2008-09 and £23 billion in 2009-10, and it is this full amount which enters the CGNCR.

Treatment of Financial Sector Interventions in GERS

PESA classifies the UK Government's support for the financial sector as UK non-identifiable expenditure - that is HM Treasury has deemed that such interventions are for the benefit of the UK as a whole.

There are various methods that can be applied to apportion a share of such non-identifiable expenditure to Scotland. The method used in this edition of GERS assigns a population share to Scotland of the total UK expenditure, on the basis that all areas of the UK have benefited equally from the resulting stabilisation of the UK financial system. This apportionment results in total Scottish expenditure on financial stability measures of £700 million, comprised of £788 million and -£88 million in capital and current expenditure respectively.

Table 3.1: Scotland: Estimated Share of Financial Stability Expenditures: 2008-09

(£ millions)

Scotland

UK

Current

-88

-1,049

Capital

788

9,361

Total

700

8,312


These estimates are clearly highlighted in Chapter 5 within expenditure on Enterprise and Economic Development.

Current and Capital Budgets

The following tables set out estimates of public sector revenue and expenditure for Scotland over the financial years 2004-05 to 2008-09. The figures for revenue and expenditure correspond to the estimates contained in Chapters 4, 5 and 615.

Current revenue, as defined in the UK National Accounts, is the sum of all revenue raised in a particular year by the entire public sector 16. In Scotland, this consists of the Scottish Government, the UK Government, local authorities and public corporations. The main component is tax revenues.

Public sector current expenditure is the sum of the current expenditure of general government for Scotland and certain distributive transactions (interest and dividends) payable by public corporations. Current expenditure includes items such as wages and salaries, social security payments and day to day health expenditure.

Public sector capital expenditure includes capital formation, the net acquisition of land, and net expenditure through capital grants. Net investment is public sector capital expenditure, net of capital consumption. Capital consumption represents the amount of fixed capital used up each year. It is generally calculated from a model based on assumptions about asset lives and a rolling estimate of the public sector's stock of capital assets derived from annual capital expenditure data.

The term net fiscal balance measures the difference between public sector expenditure and revenue. In Scotland, the gap between public sector revenue and expenditure is not directly reflected in borrowing (or saving) and instead, is part of the overall fiscal stance of the UK public sector.

In GERS, three estimates of Scotland's public sector accounts are presented, (i) an estimate excluding North Sea revenue, (ii) an estimate including a per capita share of North Sea revenue and (iii) an estimate including an illustrative geographical share of North Sea revenue. Chapter 5 contains a discussion of North Sea revenue and the precise definitions used here.

Scotland's Fiscal Balance Including a Share of the UK Government's Financial Sector Interventions

As set out in the Preface, this edition of GERS provides estimates of Scotland's public sector accounts both with and without a share of the expenditure associated with the UK Government's financial sector interventions.

Table 3.2 presents estimates of Scotland's current budget balance and net fiscal balance including a share of the UK Government's financial sector interventions. This is consistent with the methodology used to estimate UK public sector revenue, expenditure and net borrowing in the March 2010 UK Budget and the Pre-Budget Forecasts published by the newly established Office for Budgetary Responsibility in June 2010 17.

Table 3.2: Current and Capital Budgets Including Financial Sector Interventions: Scotland 2004-05 to 2008-09

(£ million)

2004-05

2005-06

2006-07

2007-08

2008-09

Current Budget

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

Current expenditure

40,814

43,394

45,128

47,962

49,876

Current expenditure accounting adjustment

1,779

2,066

2,261

2,372

2,397

Capital consumption

1,443

1,523

1,518

1,609

1,694

Balance on current budget (surplus is positive, deficit is negative)

Excluding North Sea revenue

-7,053

-7,197

-6,709

-6,976

-10,501

Including North Sea revenue (per capita share)

-6,614

-6,403

-5,955

-6,316

-9,413

Including North Sea revenue (geographical share)

-2,521

931

787

474

1,270

Capital Budget

Capital expenditure

3,704

4,283

4,964

5,243

6,585

Capital expenditure accounting adjustment

321

171

147

85

157

Capital consumption

-1,443

-1,523

-1,518

-1,609

-1,694

Net Investment

2,582

2,931

3,593

3,719

5,047

Net Fiscal Balance (surplus is positive, deficit is negative)

Excluding North Sea revenue

-9,635

-10,127

-10,302

-10,695

-15,548

Including North Sea revenue (per capita share)

-9,195

-9,334

-9,548

-10,035

-14,460

Including North Sea revenue (geographical share)

-5,103

-2,000

-2,806

-3,245

-3,777

Tables 3.3a - 3.3c present the estimates of Scotland's public sector accounts as a percentage of Gross Domestic Product ( GDP), including a share of the UK Government's financial sector interventions. Box 3.2 discusses the process used to estimate Scotland's GDP under the three sets of estimates for North Sea revenue.

Table 3.3a: Current and Capital Budgets Including Financial Sector Interventions (Excluding North Sea Revenue) % GDP: Scotland 2004-05 to 2008-09

(per cent of GDP)

2004-05

2005-06

2006-07

2007-08

2008-09

Current Budget

Current revenue

Excluding North Sea revenue

38.4

39.3

39.1

39.2

37.7

Current expenditure

42.4

42.9

41.8

41.8

43.3

Current expenditure accounting adjustment

1.8

2.0

2.1

2.1

2.1

Capital consumption

1.5

1.5

1.4

1.4

1.5

Balance on current budget (surplus is positive, deficit is negative)

Excluding North Sea revenue

-7.3

-7.1

-6.2

-6.1

-9.1

Capital Budget

Capital expenditure

3.8

4.2

4.6

4.6

5.7

Capital expenditure accounting adjustment

0.3

0.2

0.1

0.1

0.1

Capital consumption

-1.5

-1.5

-1.4

-1.4

-1.5

Net Investment

2.7

2.9

3.3

3.2

4.4

Net Fiscal Balance (surplus is positive, deficit is negative)

Excluding North Sea revenue

-10.0

-10.0

-9.6

-9.3

-13.5

Table 3.3b: Current and Capital Budgets Including Financial Sector Interventions (Per Capita Share North Sea Revenue) % GDP: Scotland 2004-05 to 2008-09

(per cent of GDP)

2004-05

2005-06

2006-07

2007-08

2008-09

Current Budget

Current revenue

Including North Sea revenue (per capita share)

38.1

39.2

39.0

38.8

37.7

Current expenditure

41.6

42.0

41.0

40.8

42.2

Current expenditure accounting adjustment

1.8

2.0

2.1

2.0

2.0

Capital consumption

1.5

1.5

1.4

1.4

1.4

Balance on current budget (surplus is positive, deficit is negative)

Including North Sea revenue (per capita share)

-6.7

-6.2

-5.4

-5.4

-8.0

Capital Budget

Capital expenditure

3.8

4.1

4.5

4.5

5.6

Capital expenditure accounting adjustment

0.3

0.2

0.1

0.1

0.1

Capital consumption

-1.5

-1.5

-1.4

-1.4

-1.4

Net Investment

2.6

2.8

3.3

3.2

4.3

Net Fiscal Balance (surplus is positive, deficit is negative)

Including North Sea revenue (per capita share)

-9.4

-9.0

-8.7

-8.5

-12.2

Table 3.3c: Current and Capital Budgets Including Financial Sector Interventions (Geographical Share North Sea Revenue) % GDP: Scotland 2004-05 to 2008-09

(per cent of GDP)

2004-05

2005-06

2006-07

2007-08

2008-09

Current Budget

Current revenue

Including North Sea revenue (geographical share)

36.7

39.1

38.5

36.7

38.4

Current expenditure

36.0

35.4

35.0

33.6

34.7

Current expenditure accounting adjustment

1.6

1.7

1.8

1.7

1.7

Capital consumption

1.3

1.2

1.2

1.1

1.2

Balance on current budget (surplus is positive, deficit is negative)

Including North Sea revenue (geographical share)

-2.2

0.8

0.6

0.3

0.9

Capital Budget

Capital expenditure

3.3

3.5

3.9

3.7

4.6

Capital expenditure accounting adjustment

0.3

0.1

0.1

0.1

0.1

Capital consumption

-1.3

-1.2

-1.2

-1.1

-1.2

Net Investment

2.3

2.4

2.8

2.6

3.5

Net Fiscal Balance (surplus is positive, deficit is negative)

Including North Sea revenue (geographical share)

-4.5

-1.6

-2.2

-2.3

-2.6

The current budget surplus is defined as current revenue (including capital taxes) less current expenditure and capital consumption.

In 2008-09, excluding North Sea revenue, current expenditure exceeded current revenue in Scotland leading to a current budget deficit of £10.5 billion (or 9.1 per cent of GDP) as presented in Table 3.3a. With a per capita share of North Sea revenue, current expenditure exceeded current revenue in Scotland by £9.4 billion (or 8.0 per cent of GDP - see Table 3.3b).

In 2008-09, including an illustrative geographical share of North Sea revenue, total current revenue exceeded current expenditure for Scotland to yield a current budget surplus of £1.3 billion (or 0.9 per cent of GDP - see Table 3.3c). In 2008-09, the equivalent UK current budget position, including 100 per cent of all North Sea revenue, was a deficit of £48.9 billion (or 3.4 per cent of GDP) 18.

As Tables 3.2 and 3.3 highlight, any estimate of Scotland's current balance depends on assumptions regarding the allocation of North Sea revenue. Over the period 2005-06 to 2008-09, the estimated current budget balance in Scotland including an illustrative geographical share of North Sea revenue was in surplus. Under the assumption of a geographical share of North Sea revenue, the greatest surplus on the current budget over the past five years was £1.3 billion in 2008-09, with a deficit of £2.5 billion in 2004-05.

The 'net fiscal balance' is equal to public sector current and capital revenue less public sector current and capital expenditure. A positive figure, i.e. a surplus, in any given year is obtained if total public sector revenue in Scotland is greater than total public sector expenditure.

In 2008-09, excluding North Sea revenue, total revenue was less than total expenditure yielding an estimated negative net fiscal balance of £15.5 billion (or 13.5 per cent of GDP). With a per capita share of North Sea revenue the estimated negative net fiscal balance for Scotland was £14.5 billion (or 12.2 per cent of GDP). Including an illustrative geographical share of North Sea revenue, total revenue was less than total expenditure for Scotland to yield a negative net fiscal balance of £3.8 billion (or 2.6 per cent of GDP). In 2008-09, the equivalent UK position including 100 per cent of all North Sea revenue, referred to in the UK Budget 2010 Report as 'net borrowing', was a deficit of £96.1 billion (or 6.7 per cent of GDP) 19.

Over the past five years, excluding North Sea revenue, the largest absolute gap between public sector revenue and expenditure in Scotland was observed in 2008-09 when the net fiscal balance was -£15.5 billion. With a per capita share of North Sea revenue the largest gap was also observed in 2008-09. Under the assumption of an illustrative geographical share of North Sea revenue, the largest gap between public sector revenue and expenditure in Scotland was observed in 2004-05 with an estimated deficit of £5.1 billion. This had fallen to £2.0 billion in 2005-06, but started rising again year on year to £3.8 billion in 2008-09. As a proportion of GDP, the largest deficit, both excluding and with a per capita of North Sea revenue, was in 2008-09. However, with an illustrative geographical share of North Sea revenue the largest deficit was in 2004-05.

Scotland's Fiscal Balance Not Including a Share of the UK Government's Financial Sector Interventions

The tables below estimate Scotland's current budget balance and net fiscal balance without a share of the various interventions to support the financial sector. These estimates are presented to highlight underlying trends in the GERS data from previous years to the latest year, 2008-09 20.

Table 3.4: Current and Capital Budgets: Scotland 2004-05 to 2008-09 (£ Million) Not Including Financial Sector Interventions

(£ million)

2004-05

2005-06

2006-07

2007-08

2008-09

Balance on current budget (surplus is positive, deficit is negative)

Excluding North Sea revenue

-7,053

-7,195

-6,708

-6,965

-10,530

Including North Sea revenue (per capita share)

-6,613

-6,402

-5,954

-6,305

-9,443

Including North Sea revenue (geographical share)

-2,520

933

788

485

1,240

Net Fiscal Balance (surplus is positive, deficit is negative)

Excluding North Sea revenue

-9,636

-10,128

-10,303

-10,732

-14,728

Including North Sea revenue (per capita share)

-9,196

-9,335

-9,550

-10,071

-13,640

Including North Sea revenue (geographical share)

-5,103

-2,000

-2,808

-3,281

-2,957


Table 3.5: Current and Capital Budgets: Scotland 2004-05 to 2008-09 (% of GDP) Not Including Financial Sector Interventions

(per cent of GDP)

2004-05

2005-06

2006-07

2007-08

2008-09

Balance on current budget (surplus is positive, deficit is negative)

Excluding North Sea revenue

-7.3

-7.1

-6.2

-6.1

-9.1

Including North Sea revenue (per capita share)

-6.7

-6.2

-5.4

-5.4

-8.0

Including North Sea revenue (geographical share)

-2.2

0.8

0.6

0.3

0.9

Net Fiscal Balance (surplus is positive, deficit is negative)

Excluding North Sea revenue

-10.0

-10.0

-9.6

-9.4

-12.8

Including North Sea revenue (per capita share)

-9.4

-9.0

-8.7

-8.6

-11.5

Including North Sea revenue (geographical share)

-4.5

-1.6

-2.2

-2.3

-2.1


In 2008-09, when a share of the UK Government's financial sector interventions are not included, Scotland is estimated to have a current budget deficit of £10.5 billion (9.1 per cent of GDP) excluding North Sea revenue, and a current budget deficit of £9.4 billion (8.0 per cent of GDP) when a per capita share of North Sea revenue is assigned to Scotland. In 2008-09, including an illustrative geographical share of North Sea revenue, Scotland is estimated to have a current budget surplus of £1.2 billion (0.9 per cent of GDP) when the impact of the UK Government's financial sector interventions are not included. 21

Not including a share of the UK Government's financial sector interventions, Scotland's net fiscal balance is estimated to have been a deficit of £14.7 billion (12.8 per cent of GDP) in 2008-09 excluding North Sea revenue, and a deficit of £13.6 billion (11.5 per cent of GDP) including a per capita share of North Sea revenue. When an illustrative geographical share of North Sea revenue is included, Scotland is estimated to have a net fiscal deficit of £3.0 billion (2.1 per cent of GDP), not including a share of the UK Government's financial sector interventions.

Box 3.1 - Current Budget Balance and Net Fiscal Balance

Scotland's current budget balance illustrates the difference between current revenue and current expenditure, including capital consumption and an accounting adjustment. It measures the degree to which current taxpayers meet the cost of paying for the public services they use and a contribution to debt interest payments. It is therefore an important indicator of intertemporal fairness and indicates the sustainability of current policies. National governments typically aim to manage current surpluses and deficits to ensure balance over the longer term and that any systematic excess of total expenditure over and above revenue is used only for capital expenditure, which will accrue benefits to future tax payers. This capital expenditure must itself be managed responsibly.

Box 3.2: Scotland's GDP with and without North Sea GDP

When calculating Scotland's capital and current budgets as a percentage of GDP, the measure of GDP used must adopt the same assumptions made in the corresponding budget calculations.

When Scotland's public sector accounts are presented excluding North Sea revenue, they are expressed as a percentage of Scotland's GDP excluding the amount of GDP arising from North Sea activities.

Scottish GDP Including and Excluding North Sea GDP: 2004-05 to 2008-09

When a proportion of North Sea revenue is included in the Scottish public sector revenue estimates, the same share is included in Scottish GDP. For example, if 100 per cent of North Sea revenue is included in the Scottish estimate, then 100 per cent of North Sea GDP will be included in Scotland's corresponding GDP figure. Scotland's GDP figures under the three sets of estimates presented above are reflected in the following table.

(£ million)

2004-05

2005-06

2006-07

2007-08

2008-09

Scottish GDP

Excluding North Sea GDP

96,258

101,136

107,871

114,747

115,286

Including per capita share of North Sea GDP

98,096

103,440

110,148

117,544

118,189

Including geographical share of North Sea GDP

113,259

122,599

128,929

142,725

143,834

Estimates of Gross Domestic Product at current market prices used in the GERS publication are calculated using an income approach in which estimates of Compensation of Employees, Gross Operating Surplus and Taxes, less subsidies, on production are added to an estimate of taxes, less subsidies, on products (final consumption taxes) to form a headline estimate for Scotland. As part of the Scottish National Accounts Project ( SNAP), a programme of work designed to improve the collection and reporting of economic statistics in Scotland, these estimates are now released quarterly (in experimental form). Further information can be obtained from the SNAP website - http://www.scotland.gov.uk/snap22.

Expenditure

This section presents summary results of estimates of public sector expenditure for Scotland (excluding accounting adjustments) for the years 2004-05 to 2008-09. Table 3.6 provides estimates for the six largest functions of public sector expenditure. The share of the UK Government's expenditure on financial sector interventions assigned to Scotland is also separately identified. Total public sector expenditure for Scotland is reported with and without Scotland's estimated share of the UK Government's financial sector interventions. For a discussion and more detailed breakdown of expenditure, refer to Chapter 6 and Appendix B.

Table 3.6: Summary of Total Public Sector Expenditure: Scotland 2004-05 to 2008-09

(£ million)

2004-05

2005-06

2006-07

2007-08

2008-09

Social protection

15,329

15,847

16,087

17,110

18,571

Health

7,758

8,606

9,102

9,810

10,244

Education and training

6,145

6,570

7,137

7,360

7,563

General public services

3,954

4,366

4,346

4,584

4,856

Defence

2,524

2,613

2,714

2,832

3,078

Public order and safety

2,115

2,285

2,279

2,354

2,509

Financial sector interventions

0

0

0

0

700

Other

6,693

7,389

8,428

9,156

8,938

Total

With financial sector interventions

44,518

47,677

50,093

53,205

56,460

Without financial sector interventions

44,518

47,677

50,093

53,205

55,761

In 2008-09, total public sector expenditure for Scotland was estimated to be £56.5 billion when a share of the UK Government's financial sector interventions is included, and £55.8 billion not including this share. This represented nominal increases of 26.8 per cent and 25.3 per respectively since 2004-05. Health and education and training expenditure experienced the greatest relative increases, rising by approximately 32.1 per cent and 23.1 per cent respectively in nominal terms over these five years.

Box 3.3: Total Managed Expenditure as a Share of GDP23

In 2008-09 aggregate public expenditure for Scotland, as measured by Total Managed Expenditure ( TME) was £59 billion, when a share of the UK Government's financial sector interventions is included. This measure of expenditure is comparable to the headline measures of UKTME published in the March 2010 UK Budget, and the Office for Budgetary Responsibility's June 2010 Pre-Budget Forecasts.

Total Managed Expenditure for Scotland Including Financial Sector Interventions: 2004-05 to 2008-09

(£ million)

2004-05

2005-06

2006-07

2007-08

2008-09

Current expenditure

40,814

43,394

45,128

47,962

49,876

Current expenditure accounting adjustment

1,779

2,066

2,261

2,372

2,397

Capital expenditure

3,704

4,283

4,964

5,243

6,585

Capital expenditure accounting adjustment

321

171

147

85

157

Total Managed Expenditure With Financial Interventions

46,617

49,914

52,500

55,661

59,014

The table below presents the estimates of TME as a share of GDP under the three sets of estimates of GDP.

In 2008-09, the ratio of TME for Scotland to GDP was 51.2 per cent excluding North Sea GDP and 49.9 per cent including a per capita share. This ratio falls to 41.0 per cent when an illustrative geographical share of North Sea GDP is included.

Such statistics provide a useful illustration of the relative size of public spending between countries by controlling for the size of the economy. They should not, however, be viewed as an estimate of the relative contribution of public spending (or the public sector) to the economy as a significant proportion of such spending is on transfers from government to individuals and businesses.

Total Managed Expenditure for Scotland Including Financial Sector Interventions as a Share of GDP: 2004-05 to 2008-09

(per cent of GDP)

2004-05

2005-06

2006-07

2007-08

2008-09

Share of GDP:

Excluding North Sea GDP

48.4%

49.4%

48.7%

48.5%

51.2%

Including per capita share of North Sea GDP

47.5%

48.3%

47.7%

47.4%

49.9%

Including geographical share of North Sea GDP

41.2%

40.7%

40.7%

39.0%

41.0%

Not including a share of the UK Government's financial sector interventions, TME for Scotland was estimated to be £58.2 billion in 2008-09, as illustrated in the tables below. This is equivalent to 50.5 per cent of Scottish GDP when North Sea GDP is excluded, and 49.3 per cent of GDP when Scotland is assigned a population share of North Sea GDP. Including an illustrative geographical share of North Sea GDP the ratio falls to 40.5 per cent.

Total Managed Expenditure for Scotland Not Including Financial Sector Interventions: 2004-05 to 2008-09

(£ million)

2004-05

2005-06

2006-07

2007-08

2008-09

Current expenditure

40,814

43,394

45,128

47,962

49,964

Current expenditure accounting adjustment

1,782

2,070

2,268

2,385

2,383

Capital expenditure

3,704

4,283

4,964

5,243

5,797

Capital expenditure accounting adjustment

322

173

149

126

86

Total Managed Expenditure Without Financial Interventions

46,622

49,919

52,509

55,716

58,229

Total Managed Expenditure for Scotland Not Including Financial Sector Interventions as a Share of GDP: 2004-05 to 2008-09

(per cent of GDP)

2004-05

2005-06

2006-07

2007-08

2008-09

Share of GDP:

Excluding North Sea GDP

48.4%

49.4%

48.7%

48.6%

50.5%

Including per capita share of North Sea GDP

47.5%

48.3%

47.7%

47.4%

49.3%

Including geographical share of North Sea GDP

41.2%

40.7%

40.7%

39.0%

40.5%

Current Revenue

This section summarises the estimates of public sector revenue in Scotland for the years 2004-05 to 2008-09. Table 3.7 provides estimates of Scottish public sector current revenue by economic category. A more detailed discussion and breakdown of revenue is provided in Chapters 4, 5 and in Appendix A.

Table 3.7: Summary of Current Revenue by Economic Category: Scotland 2004-05 to 2008-09

(£ million)

2004-05

2005-06

2006-07

2007-08

2008-09

Taxes on income and wealth

11,550

12,911

14,153

15,255

14,320

National insurance contributions

6,533

6,925

7,304

7,873

7,988

Taxes on production and imports

13,482

13,875

14,588

15,250

14,678

Other current taxes

2,225

2,369

2,485

2,594

2,647

Taxes on capital

164

198

227

269

178

Gross operating surplus

2,103

2,492

2,505

2,566

2,613

Rent and other current transfers

388

413

382

395

381

Interest and dividends from private sector and abroad

537

602

554

766

659

Total current non-North Sea revenue

36,983

39,787

42,198

44,966

43,466

North Sea revenue

Per capita share

440

793

754

660

1,088

Geographical share

4,532

8,128

7,496

7,450

11,771

Total current revenue (including North Sea revenue)

Per capita share

37,422

40,580

42,952

45,627

44,553

Geographical share

41,515

47,914

49,694

52,417

55,236

In 2008-09, total current revenue, excluding revenue from the North Sea was estimated to be approximately £43.5 billion. This represented a nominal increase of 17.5 per cent from the £37.0 billion estimated to have been raised in 2004-05. This was largely a consequence of increased revenue from taxes on income and wealth, national insurance contributions, gross operating surplus and interest and dividends from the private sector and abroad. It is interesting to note that for a number of key taxes, the cash value raised in 2008-09 was lower than in 2007-08. This reflects the impact of the credit crunch on economic activity and corresponding fall in tax revenues. A detailed discussion of these effects is provided in Box 4.3.

As Table 3.7 highlights, there was a significant increase in revenue from the North Sea from 2005-06 onwards. In 2004-05, Scotland's estimated geographical share of North Sea revenue was estimated at approximately £4.5 billion, but in 2008-09, this figure had increased to £11.8 billion. A similar relative increase was observed under a per capita apportionment though the overall impact was much smaller.

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