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Scotland: Public spending and revenue

Published Wednesday, September 26, 2018

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: here we look at 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 £73.4 billion in 2017/18, equivalent to £13,530 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.

Regional comparisons of public spending

Government revenue is highly centralised in the UK with the vast majority of tax revenue, including much of 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 size of the estimate depends on how North Sea oil and gas revenues are allocated to Scotland. The Scottish Government estimates that around £59 billion-£60 billion of revenues were raised in Scotland in 2017/18, equivalent to approximately £10,800-£11,050 per head.

Scotland accounted for 9.3% of UK public spending and around 8% of UK revenues in 2017/18.

Scotland's share of UK tax and spending

Fiscal deficit

In 2017/18, Scotland’s net fiscal deficit – the difference between estimated revenues and public spending – ranges from 9.5% of GDP if North Sea oil and gas are excluded, to 7.9% of GDP if North Sea revenues are shared on a geographical basis, according to where the oil and gas fields are located. This compares with a UK fiscal deficit of 1.9% of GDP.

Net fiscal balance, Scotland and UK, % GDP

North Sea revenues

In recent years, 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 revenues

Two approaches are taken to allocating 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.

The allocation of North Sea oil and gas revenues between Scotland and the rest of the UK make a difference to estimates of government revenue raised in Scotland. Allocated to Scotland on a geographical basis, North Sea revenues in 2017/18 are estimated to be
£1.3 billion; allocated on a population basis, they are estimated to be £98 million. 

North Sea revenues are volatile. If allocated on a geographical basis, Scotland’s North Sea revenues have fluctuated between £4.6 billion and £50 million over the last 6 years; contributing between 8.7% and 0.1% of total Scottish revenue over this period.

Most of the statistics in this note are taken from the Scottish Government’s publication Government Expenditure and Revenue Scotland 2017-2018 (August 2018).

 

Commons Briefing papers SN06625

Author: Matthew Keep

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

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