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Scotland: Public spending and revenue

Published Wednesday, March 22, 2017

Public spending and taxation in Scotland was a hotly debated issue in the run up to the Scottish independence referendum, and has remained so since. A range of statistics exist on the subject: this note summarises what these say and how they are measured.

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Spending and revenue

The Scottish Government estimates that total public spending in Scotland was £68.6 billion in 2015/16, equivalent to £12,800 per head. This estimate covers all public spending in Scotland: it includes spending by the Scottish Government and Scottish local authorities, but also spending by UK Government departments in Scotland.

Scotland’s public spending per head is higher than the UK average. It is higher than all the English regions and Wales, but lower than Northern Ireland.

Public spending per head, UK regions

Government revenue is highly centralised in the UK with the vast majority of tax revenue, including that raised in Scotland, being collected centrally by HM Revenue and Customs. Despite this it is possible to estimate the amount of tax raised in Scotland. The Scottish Government estimates that an estimated £53.7 billion of revenues were raised in Scotland in 2015/16, equivalent to £10,000 per head. On a per head basis, revenue raised in Scotland is slightly below the UK average.

Scotland accounted for 9.1% of UK public spending and 7.9% of UK revenues in 2015/16.

Scotland's share of UK public spending, tax and population, 2015/16

Fiscal deficit

In 2015/16, Scotland’s net fiscal deficit – the difference between estimated revenues and public spending – ranges from 10.1% of GDP if North Sea oil and gas are excluded, to 9.5% of GDP if the North Sea is shared on a geographical basis, according to where the oil and gas fields are located. This compares with a UK fiscal deficit of 4.0% of GDP.

Scotland and UK net fiscal position, % GDP

North Sea revenues

Falls in the oil price combined with high levels of investment and rising decommissioning costs have resulted in North Sea revenues falling to the lowest levels since records began in 1968/69.

UK North Sea revenue, £ billion

Two approaches are taken to attributing North Sea oil and gas revenues to Scotland. One approach shares the revenues between Scotland and the rest of the UK on a population basis: this is often described as a per capita share. The other approach shares the revenues on a geographical basis, according to where the oil and gas fields are located.

In previous years the allocation of North Sea oil and gas revenues between Scotland and the rest of the UK made a difference to estimates of government revenue raised in Scotland. However, in 2015/16, as the revenues are low, their allocation makes little difference.

North Sea revenues are volatile. If allocated on a geographical basis, Scotland’s North Sea revenues have fluctuated between £9.6 billion and £60 million over the last 6 years; between 17% and 0.1% of total Scottish revenue over this period.

North Sea revenues as a % of total Scottish revenues

Many of the statistics in this note are taken from the Scottish Government’s publication Government Expenditure and Revenue Scotland 2015-2016 (August 2016).

Commons Briefing papers SN06625

Author: Matthew Keep

Topics: Devolution, Economic policy, Public expenditure, Scottish Parliament, Taxation

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