Scotland’s Overall Fiscal Position with and/or without N. Sea oil and gas: You Decide

ECITB oil rig generalThe Government has today published the latest annual statistics on Scotland’s overall fiscal position – the GERS report. The section on N. Sea oil and gas is published verbatim below so you can decide for yourself – without media and/or political spin.

GERS provides two measures of Scotland‟s fiscal position, the current budget balance and the net fiscal balance.

The current budget balance shows the difference between revenue and current expenditure. It measures the degree to which taxpayers meet the cost of paying for day-to-day public services, excluding capital investment. It is shown in Table S.5 below.

Excluding North Sea revenue, the current budget balance for Scotland tends to move in line with the figure for the UK, although the deficit in Scotland is typically six to seven percentage points larger. In 2015-16, the Scottish non-North Sea current budget balance improved by 0.6 percentage points, whilst the UK improved by 0.9 percentage points.

When including the North Sea, the movement in Scotland‟s current budget balance is more variable, and does not follow the same pattern as the UK. Between 2014-15 and 2015-16, Scotland‟s current budget balance including the North Sea revenue worsened by 0.7 percentage points, reflecting the decline in North Sea revenue and GDP in this year

What is GERS?

GERS is produced by Scottish Government statisticians. It is designated as a National Statistics product, which means that it is produced independently of Scottish Ministers and has been assessed by the UK Statistics Authority as being produced in line with the Code of Practice for Official Statistics. This means the statistics have been found to meet user needs, to be methodologically sound, explained well and produced free of political interference.

Q: Is GERS a description of the whole Scottish economy?

A : No.

GERS reports only on public sector revenue and expenditure. Although these may be affected by economic performance, GERS does not directly report on Scotland‟s wider economy. If users are interested in the measurement of the economy as a whole, they should examine other economic statistics products, such as the quarterly Gross Domestic product figures (www.gov.scot/gdp) or Quarterly National Accounts Scotland (QNAS, www.gov.scot/snap). These publications provide real terms growth in the economy, and GDP in cash or nominal terms and its components.

Scotland’s revenue and expenditure

GERS Table 1  2016Table S.1 shows two of the estimates of Scotland‟s public sector revenue presented in GERS:

  • excluding North Sea revenue, and
  • including an illustrative geographical share of North Sea revenue.

Estimates including a population share of North Sea revenue are available in the main chapters.

Scotland‟s estimated non-North Sea revenue in 2015-16 was £53.7 billion.

As a percentage of GDP, non-North Sea revenues increased to 36.5% in 2015-16, the highest level since 2007-08, before the financial crisis.

The term Housing Associations is used to refer to private registered providers of social housing. This is consistent with the terminology used by the Office for Budget Responsibility in their Economic and Fiscal Outlooks.

Non-North Sea revenue in Scotland grew by 3.7% in 2015-16, similar to that for the UK as a whole, 3.8%.

Including an illustrative geographical share of the North Sea, total Scottish revenue increased 0.3% between 2014-15 and 2015-16. This is lower than the growth in non-North Sea revenue, reflecting the decline in UK North Sea revenue, which fell from £2.3 billion in 2014-15 to £76 million in 2015-16.

The increase in Scottish revenue as a percentage of GDP is smaller when including the North Sea, as Scottish North Sea GDP declined by 24% in 2015-16. The fall in North Sea revenue and GDP occurred because relatively high operating costs and falling prices have reduced North Sea profits and therefore GDP.

Note: Scotland as a % of UK is lower than previously published for all years shown here by around 0.1 – 0.2 percentage points due to the inclusion of English HAs in the UK figure, which increases UK revenue.

Table S.2 shows estimates of revenue per person for Scotland and the UK.

GERS Table 2 2016Excluding North Sea revenue, revenue per person in Scotland is lower than in the UK by approximately £400 per year.

  • Including an illustrative geographical share of North Sea revenue, the difference between revenue per person in Scotland and the UK is quite variable. In the latest year, including an illustrative geographical share of North Sea revenue, revenue per person was £400 lower than the UK average. Note that UK revenue in all years has been increased by approximately £100 per person compared to estimates in previous editions of GERS, due to the reclassification of English housing associations.

 

Summary

Government Expenditure and Revenue Scotland 2015-16

GERS Table 3 2016Table S.3  shows estimates of total managed expenditure for Scotland and the UK, the principle measure of overall public spending in the UK public sector finances. Scotland‟s share of UK expenditure is relatively stable over the period, at around 9.1%. This is slightly lower than previously estimated in GERS as UK spending has been revised up due to the inclusion of English housing associations.

  • Expenditure as a share of GDP including an illustrative geographical share of the North Sea increased in 2015-16. This reflects the decline in North Sea GDP discussed above

Note: Scottish public expenditure in 2012-13 is higher by £788 million due to the transfer of the Royal Mail Pension Plan into the public sector. This is a population share of a £9.5 billion increase in UK expenditure.

GERS Table 4 2016Table S.4 shows estimated expenditure per person for Scotland and the UK. Expenditure for Scotland has been consistently higher per person than the UK average over the period. Note that UK expenditure in all years has been increased by approximately £100 per person, compared to estimates in previous editions of GERS, due to the inclusion of English housing associations.

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