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Government Expenditure and Revenue Scotland 2022-23

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Chapter 1: Public Sector Revenue


Introduction

This chapter provides detailed estimates of Scottish public sector revenue.

The majority of public sector revenue payable by Scottish residents and enterprises is collected at the UK level. Generally it is not possible to identify separately the proportion of revenue receivable from Scotland. GERS therefore uses a number of different methodologies to apportion revenue to Scotland. These are discussed in the methodology paper on the GERS website.[9]

Following the implementation of the Scotland Act 2012 and Scotland Act 2016, an increasing amount of revenue is being devolved to the Scottish Parliament, and direct Scottish measures of these revenues are becoming available. To date, landfill tax, property transaction taxes, and non-savings non-dividend income tax have been devolved. Chapter 4 provides more information on current and future devolved taxes. Note that the income tax figures in this chapter cover all income tax, whilst those in Chapter 4 cover only non-savings and non-dividend income tax.

For taxes where there is no direct measure of Scottish revenue, GERS uses a set of data sources and methodologies developed over a number of years following consultation with, and feedback from users and experts. In some cases, a variety of methodologies could be applied, each leading to different estimates of public sector revenue in Scotland. Table A.5 in Annex A provides analysis of the confidence intervals around revenue estimates based on survey data.

GERS reports tax and non-tax revenue separately. Non-tax revenues are primarily non-cash items such as capital consumption, included for accounting purposes in gross operating surplus, and the operating surplus of public corporations such as Scottish Water. These are discussed in more detail below.

Revenue 2022-23

Table 1.1 reports estimated public sector revenue in Scotland and the preliminary outturn data for the UK in 2022-23. The contribution of each element of revenue to the Scottish total, and the proportion of UK revenue raised in Scotland, are also included in the table. The three largest taxes, income tax, national insurance contributions, and value added tax account for around two thirds of total non-North Sea revenue.

Overall, Scotland raised £87.5 billion in 2022-23, or 8.6% of total UK income. This represents an increase from a share of 7.9% in 2021-22, reflecting the growth in North Sea revenue, which grew by £6.9 billion to reach £9.4 billion in 2022-23, its highest ever level. Scotland has around 90% of the total UK North Sea revenue, which reached £10.6 billion in 2022-23. This is discussed further in Chapter 2.

Excluding the North Sea revenue, Scotland’s revenue increased to £78.1 billion, an increase of 11.5%, as revenues continued to recover from the impact of the pandemic. Scotland saw stronger growth in non-North Sea revenue than the UK, primarily due to stronger growth in income tax receipts and non-domestic rates income.

For income tax, this reflects the latest 2022-23 Pay As You Earn (PAYE) income tax data from HMRC’s Real Time Information system, where Scottish receipts grew by 11.4% in 2022-23 compared to growth of 11.0% for the UK as a whole. It also reflects stronger growth in Self-Assessment receipts relating to 2021‑22 but which are recorded against 2022-23, the year they are paid.

For non‑domestic rates income, which grew from £2.1 billion to £2.8 billion, this reflects the ending of reliefs related to the pandemic ended, and the stronger growth in Scotland will at least in part reflect the different timing and coverage of reliefs available in Scotland compared to other parts of the UK.

In order to report revenue on a National Accounts basis, an international reporting standard used by governments, a number of accounting adjustments are included in the total revenue estimate. These are primarily symmetric adjustments that also form part of expenditure, and therefore have little impact on the net fiscal balance.

Table 1.1: Revenue: Scotland and
UK 2022-23
Scotland UK Scotland as % of UK
£ million % of total non-North Sea taxes £ million
Income tax 16,608 24.5% 248,740 6.7%
National insurance contributions 13,345 19.7% 176,880 7.5%
Value added tax 13,253 19.5% 161,592 8.2%
Corporation tax (excl. North Sea) 4,355 6.4% 73,112 6.0%
Fuel duties 2,172 3.2% 25,098 8.7%
Non-domestic rates 2,848 4.2% 28,035 10.2%
Council tax 2,760 4.1% 41,640 6.6%
VAT refunds 2,331 3.4% 25,095 9.3%
Capital gains tax 720 1.1% 18,052 4.0%
Inheritance tax 332 0.5% 7,121 4.7%
Reserved stamp duties 310 0.5% 19,121 1.6%
Land & buildings transaction tax 858 1.3% 858 100.0%
Scottish landfill tax 110 0.2% 110 100.0%
Air passenger duty 252 0.4% 3,268 7.7%
Tobacco duties 1,073 1.6% 9,375 11.4%
Alcohol duties 1,214 1.8% 12,411 9.8%
Insurance premium tax 528 0.8% 7,461 7.1%
Vehicle excise duties 573 0.8% 7,339 7.8%
Environmental levies 802 1.2% 6,756 11.9%
Other taxes1 3,410 5.0% 39,592 8.6%
Total Non-North Sea taxes 67,854 100% 911,656 7.4%
North Sea taxes2
Population share 865 10,570 8.2%
Geographical share 9,386 10,570 88.8%
Other revenue
Interest and dividends 2,553 31,592 8.1%
Gross operating surplus 7,584 67,772 11.2%
Other receipts 120 1,274 9.4%
Total revenue
Excluding North Sea 78,110 1,012,294 7.7%
Population share of North Sea 78,975 1,022,864 7.7%
Geographic share of North Sea 87,496 1,022,864 8.6%
of which: revenue accounting adjustments 8,347 85,162 9.8%

1 A description of the other taxes line is provided in the detailed methodology paper on the GERS website.

Unlike the expenditure accounting adjustments, which are shown in a separate expenditure line, the revenue accounting adjustments are included within different revenue lines, as is set out in Table A.9 in Annex A. In order to aid transparency, a revenue accounting adjustments line is shown at the bottom of Table 1.1 and 1.4. This is a sub-total of revenue, and is not additional to the revenue totals reported in these tables.

Scotland’s share of UK total non-North Sea revenue in 2022-23 was 7.7% which is 0.5 percentage points lower than Scotland’s share of the UK population, and the second lowest share on record after 2021-22.[10] Scotland’s share of revenue has been declining over time in line with its declining population share.

In general, Scotland’s share of most large revenues is close to either its population or GDP share. However, there are some exceptions to this, discussed below.

Revenues where Scotland’s share of UK revenue is relatively low are those associated with property or assets, such as capital gains tax (4.0%), and inheritance tax (4.7%). This reflects the fact that properties and assets in Scotland tend to have lower values than the UK average.[11] Scotland’s share of income tax (6.7%) is also relatively low. In part, this reflects the increasingly progressive nature of income tax, following the introduction of the additional rate of income tax and increases in the personal allowance. Scotland has relatively fewer additional rate tax payers, with only around 4% of the UK total.

Revenues where Scotland has a relatively large share include gross operating surplus (GOS), which includes the surpluses of public corporations. Scotland is estimated to generate approximately 11.2% of UK public sector GOS, higher than Scotland’s population share. Scotland’s GOS includes Scottish Water, which is a large contributor to UK public corporations’ GOS. The equivalent water companies in England and Wales are outside the public sector and hence do not contribute to UK GOS.

Scotland tends to also have relatively high shares of duties associated with tobacco and alcohol. This reflects the greater incidence of smoking in Scotland,[12] and also the fact that Scotland has higher consumption of spirits than the rest of the UK.[13]

Table 1.2 below shows Scotland’s share of the largest UK revenues. Scotland’s share of UK revenue in 2022-23 is broadly similar to that in 2020-21, at 7.7%, although slightly lower, in line with its falling share of the UK population.

Table 1.2: Non-North Sea Revenue: Scotland as share of
UK 2020-21 to 2022‑23
per cent of UK revenue
2020-21 2021-22 2022-23
Income Tax 6.7% 6.5% 6.7%
Corporation tax (excl North Sea) 6.0% 6.0% 6.0%
National insurance contributions 7.6% 7.6% 7.5%
Value added tax 8.2% 8.2% 8.2%
Council tax and non-domestic rates 7.8% 7.2% 8.0%
All other revenue 9.0% 8.9% 8.8%
Total current non-North Sea revenue 7.8% 7.6% 7.7%

Estimated Revenue: Scotland and the UK, 2020-21 to 2022-23

Table 1.4 shows estimated revenue in Scotland and the UK between 2020-21 and 2022-23. Over this period, Non-North Sea revenue in Scotland is estimated to have grown by 26.7% in nominal terms, slightly slower than the UK as a whole (27.7%). The largest single factor explaining this difference is weaker growth in receipts from national insurance contributions in Scotland, which reflects weaker growth in earnings and employment, in part as a result of weaker population growth. The impact of this weaker earnings and employment on Scottish income tax receipts has to a degree been offset through policy changes in Scotland. Other important factors are weaker growth in capital gains tax and interest and dividends in Scotland. The latter reflects growth in interest payments from student loans in the UK.

Table 1.3 shows estimates of revenue per person for Scotland and the UK between 2020-21 and 2022-23. Revenue per person in Scotland is higher than in the UK by £696 in 2022-23, the first time that they have been higher since 2014-15. Excluding North Sea revenue, Scottish revenue is £859 lower. Note that per person figures will be subject to future revision when mid-year population estimates are published following the release of the Scottish Census 2022.

Table 1.3: Revenue Per Person: Scotland and
UK 2020-21 to 2022-23
£ per person
2020-21 2021-22 2022-23
Scotland
Excluding North Sea revenue 11,275 12,780 14,254
Including North Sea revenue (population) 11,283 12,820 14,412
Including North Sea revenue (geographical) 11,413 13,227 15,967
UK
Excluding North Sea revenue 11,826 13,685 15,113
Including North Sea revenue 11,833 13,725 15,271
Difference (Scotland minus UK)
Excluding North Sea revenue -550 -905 -859
Including North Sea revenue (population) -550 -905 -859
Including North Sea revenue (geographical) -420 -498 696
Table 1.4: Revenue: Scotland and
UK 2020-21 to 2022-23 (£ million)
Scotland UK
2020-21 2021-22 2022-23 2020-21 2021-22 2022-23
Income tax 12,989 14,694 16,608 195,264 224,995 248,740
National insurance contributions 11,041 12,112 13,345 144,327 160,186 176,880
Value added tax 9,685 11,754 13,253 117,473 143,415 161,592
Onshore Corporation tax 3,233 4,103 4,355 54,321 68,851 73,112
Fuel duties 1,702 2,267 2,172 20,934 25,943 25,098
Non-domestic rates 1,816 2,108 2,848 18,368 25,802 28,035
Council tax 2,564 2,640 2,760 37,577 39,970 41,640
VAT refunds 1,849 2,152 2,331 20,695 23,161 25,095
Capital gains tax 511 609 720 11,130 15,264 18,052
Inheritance tax 249 283 332 5,350 6,080 7,121
UK stamp duties 298 358 310 14,637 18,877 19,121
Land & buildings transaction tax 517 814 858 517 814 858
Scottish landfill tax 107 122 110 107 122 110
Air passenger duty 26 95 252 329 1,189 3,268
Tobacco duties 1,111 1,170 1,073 9,788 10,191 9,375
Alcohol duties 1,204 1,296 1,214 12,156 13,179 12,411
Insurance premium tax 447 481 528 6,306 6,792 7,461
Vehicle excise duties 540 558 573 6,914 7,149 7,339
Environmental levies 747 747 802 6,296 6,296 6,756
Other taxes 2,156 2,577 3,410 24,558 30,667 39,592
Total Non-North Sea taxes 52,792 60,941 67,854 707,047 828,943 911,656
North Sea taxes
Population share 43 218 865 522 2,662 10,570
Geographical share 752 2,446 9,386 522 2,662 10,570
Other receipts
Interest and dividends 2,022 2,064 2,553 24,131 24,308 31,592
Gross operating surplus 6,676 6,850 7,584 59,678 61,321 67,772
Other receipts 180 180 120 2,124 2,076 1,274
Total revenue
Excluding North Sea 61,670 70,035 78,110 792,980 916,648 1,012,294
Population share North Sea 61,713 70,253 78,975 793,502 919,310 1,022,864
Geographic share North Sea 62,423 72,481 87,496 793,502 919,310 1,022,864
Of which, revenue accounting adjustment 7,192 7,640 8,347 73,979 77,913 85,162

Comparison between GERS and ONS estimates

Any analysis of public sector receipts in Scotland relies on estimation, and as such alternative estimates are possible. As discussed in the Preface, GERS estimates revenue using a set of apportionment methodologies, refined over a number of years following consultation with, and feedback from, users.

The Office for National Statistics (ONS) now publishes public sector finances for the countries and regions of the UK. The latest estimates covering the period to 2021-22 were published on 26 May 2023.[14]

The table below compares the estimates in GERS with those published by ONS. There are some differences between the ONS and GERS numbers. For non-North Sea taxes, these primarily relate to VAT. The estimates of VAT in GERS are consistent with those published by HMRC for Scottish Assigned VAT, whilst the ONS use a methodology which produces results for all UK country and regions, which has a higher estimate for Scotland. The ONS, HMRC and the devolved administrations are working together to reconcile, and where possible align, methodologies for estimating tax receipts for the UK countries and regions

The differences in other non‑North Sea receipts are primarily due to using different data sources for interest and dividends, where GERS uses specific data for interest income from Scottish student loans.

Table 1.5: Estimates of Scottish Revenues 2020-21 to 2022-23 (£ million)
2020-21 2021-22 2022-23
Non-North Sea taxes
GERS 52,792 60,941 67,854
ONS 52,854 60,494 n/a
Difference -62 447 n/a
Other non-North Sea receipts
GERS 8,879 9,094 10,256
ONS 10,340 10,329 n/a
Difference -1,461 -1,235 n/a
Geographical share of North Sea revenues
GERS 752 2,446 9,386
ONS 760 2,515 n/a
Difference -8 -69 n/a
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