Preface
The aims and objectives
The aim of Government Expenditure and Revenue in Scotland ( GERS) is to enhance public understanding of fiscal issues in Scotland. The primary objective is to create accounts for the inflows of fiscal resources to Scotland and the outflows of resources from Scotland that are directed through the UK Government's budgetary process.
The approach
The estimates in GERS embrace two key principles. Firstly, public expenditure on services and their associated expenditures are only included if they are incurred for the benefit of Scottish residents. Secondly, on the revenue side, GERS records only receipts where a tax burden is imposed on Scottish residents and enterprise.
The research that underlies this report faces important methodological questions. Where there are possible alternative approaches, the report seeks to identify the options and indicate the reasoning for the chosen method. It is noteworthy that, with the present constitutional arrangements, there is no formal requirement for a comprehensive compilation of UK regional budgetary accounts, in general, and a budgetary account for Scotland, in particular. This has two important implications:
- Firstly, many concepts and definitions that would be required in the formulation of UK regional budgetary accounts remain either undefined or ill-defined and the report, therefore, proposes methods of estimation in the light of the prevailing constitutional settlement that seek to overcome this shortcoming.
- Secondly, the underlying data for regional budgetary accounts remain relatively undeveloped. This report uses the available data and employs a wide range of survey and statistical indicators to estimate flows where the specific budgetary information is unavailable.
Thus, this report adopts an approach on the basis of many reasoned assumptions. Where there are conceptual or data issues, these are noted throughout the report
New developments
For this edition of GERS, the revenue estimates incorporate a methodological change in the way profits, less holding gains, have been calculated in the ONS Regional Accounts. This results in revisions to the estimates of corporation tax revenue in Scotland. On the expenditure side, HM Treasury is currently reviewing its Public Expenditure Statistical Analyses ( PESA) methodology ahead of the next PESA publication in 2007. Any revision to the PESA data would affect Scotland's expenditure and net-borrowing estimates and would be incorporated into future GERS publications. The appendices provide further information.
Acknowledgements
Finally, I would acknowledge the help and advice received from other Departments within the Scottish Executive and from UK Government Departments and other organisations outwith Scotland including HM Treasury, HM Revenue and Customs, and the Office for National Statistics.
Andrew Goudie
Chief Economic Adviser
December 2006
Objective of Government Expenditure and Revenue in Scotland |
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To provide estimates of public sector flows of expenditure and revenue for Scotland on the basis of the national accounting standards used by the UK (the European System of Accounts 1995; ESA 95). Expenditure To provide: - estimates of expenditure of the public sector (as defined by ESA95); and
- estimates of total expenditures, including those directed and managed by the Scottish Executive and UK Government, and those directed and managed by the EU.
Revenue To provide: - estimates of public sector receipts, raised from individuals and enterprises resident and located in Scotland (as defined by ESA95); and
- estimates of total receipts, raised from individuals and enterprises resident and located in Scotland, including those received by the UK Government, HM Revenue & Customs and those contributed to finance the EU budget.
The Basic Principles In producing the estimates, the key principles are: - for expenditure: what amount of spending is incurred for services that benefit Scottish residents?
- for revenue: what tax burden is imposed on Scottish residents and enterprises?
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