A Guide to the Government Expenditure and Revenue Scotland (GERS) Report

The aim of the Government Expenditure and Revenue Scotland (GERS) report is to enhance public understanding of fiscal issues in Scotland. It is published every year by the Scottish Government with the upcoming report scheduled for publication on 26 August. 

The publishing of GERS is usually followed by a debate about the strength of Scotland’s public finances and the prospects for constitutional change. Claims on both sides of the argument are unfortunately often grounded in misinterpretations of how the statistics are produced and presented. Over the years, we have published multiple articles tackling the various claims and questions that have gained traction each year.

This webpage seeks to build on those articles by providing a longer comprehensive summary of GERS, while also addressing the most common questions and claims about it. It will cover the following topics:

  • What is GERS?
  • How is GERS calculated?
  • How much income does Scotland generate?
  • How much does Scotland contribute to the UK’s deficit?
  • What does GERS tell us about an independent Scotland?

The main purpose of this summary is simply to contribute to public understanding of GERS.  There are important debates about how the GERS numbers should be interpreted, and what it tells us (and doesn’t tell us), about the health of the Scottish economy. But these debates need to be based upon fact and evidence.  

What is GERS?

GERS is an annual estimate of the Scottish fiscal position. It provides a summary of how much revenue is raised in Scotland, how much the country pays for the public services consumed, and to what extent the revenues raised cover the costs of these public services. It takes the current constitutional arrangement as given.

GERS captures the entire public sector in Scotland and provides both analysis of aggregate expenditure and revenue as well as breakdowns according to the individual expenditure and revenue components. 

All the data presented in GERS are nominal figures, with no adjustment for inflation.


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How is GERS calculated?

GERS is produced by statisticians in the Scottish Government. The publication is an accredited National Statistics publication, meaning that the statistics have been independently assessed as being based on appropriate methods and produced without political interference.

Is GERS based on real data?

The data that feeds into the spending side of GERS are predominantly real numbers and not estimates. The total spending is made up of Scottish and local government services and spending by the UK Government for the benefit of the people of Scotland. Scottish Government (and local government spending in Scotland) consists of spending on education, health, and public order and safety, among other things. UK Government spending for Scotland can be split into identifiable and non-identifiable expenditure.

Identifiable expenditure is spending specifically for the benefit of the residents of Scotland, such as social security. If we consider recent events, the UK’s fiscal response to coronavirus is an example of UK Government spending for the benefit of the residents of Scotland. For instance, the UK Government increased spending to finance the Job Retention Scheme which allowed employers to claim for up to 80% of a furloughed employees wage. The spending on the scheme that was allocated to applications made by Scottish employers is directly for the benefit of the residents of Scotland and will therefore appear in GERS, but not until next year. As the fiscal year runs from April to March the following year, spending on the coronavirus response will figure in the GERS report for 2020-21, published in August 2021.

Non-identifiable expenditure consists of spending on matters such as defence and debt interest, with data only collected on a UK-level. Because such expenditure is spent for the benefit of everyone in the UK, GERS estimates a proportion apportioned to Scotland’s spending. This is one part of the GERS numbers that attracts controversy. For example, Scotland is allocated a population share of UK defence expenditure, irrespective of where the spending takes place. 

For revenues, more directly collected data is available following increased devolution in recent years. Taxes with available revenue data in Scotland include council tax, Non-Domestic (or business) Rates, Land and Buildings Transaction Tax (LBTT), and Landfill Tax. In addition to this, the Scottish Government gained power to set the rates and bands for income tax for Scottish residents in 2017-18. In this way, income tax should be thought of as partially devolved tax. The UK Government remains responsible for the tax base and the personal allowance, and HMRC remains responsible for the collection of income tax in Scotland. However, the extension of Scottish income tax powers has made it possible to directly identify Scottish income tax receipts. This mean that the income tax revenue figured in GERS since 2017-18 is based on actual receipts, whereas before it was estimated using a sample of income taxpayers. 

For other revenues where revenue data is not available from tax receipts for Scotland, estimation of these receipts is required. 

For revenues that are only collected on a UK-wide level – such as by the HMRC – apportionment methodologies are applied to estimate GERS data – the details of which are set out in painstaking detail in the accompanying methodology documents. For instance, the revenue generated from fuel duties are appointed to Scotland by estimating Scotland’s share of UK fuel consumption. This estimation is based on UK road traffic fuel consumption broken down by region, based on weighted traffic flows on a sample of roads across the UK. GERS applies the estimate to the figure for total fuel duty revenue to apportion Scotland’s share. The GERS methodologies papers provide a more in-depth outline of the methodologies used to estimate revenue and spending data. 

Are the results unreliable because they are based – in part – on estimation?

It is always reasonable to highlight the need to improve coverage of Scottish economic statistics. However, it is wrong, as some have done in the past, to dismiss the figures produced in GERS because they partly rely on estimation.

Estimation is common in economic statistics. An informed estimate based on internationally accepted and accredited practice is not the same thing as a guess. Figures for GDP, national accounts, labour productivity, unemployment, and employment are all based on estimation, to a greater or lesser extent. For example, we estimate that Scotland’s economy is ranked fourth in the UK (behind London, the South East, and the East of England) in terms of economic activity on a per capita basis. But we do not have actual data. 

Relying on estimation in statistics is true not only for Scotland, but for all countries around the world. So, the key question to ask when it comes to estimation is whether the methodology applied is robust or not; based on the best data available; transparent; been subject to consultation with the users of the statistics; and has been independently assessed.

An estimation methodology is considered robust when it provides results that are not drastically affected by change in methods. For example, GERS publishes 95% confidence intervals for many of the taxes that rely on estimation using survey sources. This gives a range of possible values for each of the estimated taxes, with a 95% confidence level that the true value is in the proposed range. The key figures for 2018-19 are shown below. 

Table 1: Confidence intervals around survey-based apportionments: Scotland 2018-19.

Source: GERS 2018-19

To put this in context, the total range of £556m is equivalent to 0.3% of Scottish GDP in 2018-19. So, a useful exercise, if you believe that one or two of the estimates are inaccurate, is to stress test how wrong these estimates would have to be to change your key conclusions. 

All in all, the methods used by the Scottish Government for estimation in GERS have been tried and tested for years, with statistical checks confirming the robustness of the estimation methodologies. They have also been subject to extensive user consultation and independent assessment by the UK Statistics Authority.

For a further read on estimation in GERS, see our previous article here.

How much income does Scotland generate?

The income received by the public sector in Scotland is primarily generated from taxes. Public sector revenues are also collected in the form of income made by public corporations, such as Scottish Water. The amount of income Scotland generates thus depends on how much revenue is collected.

Income tax is the single largest source of tax revenue in Scotland. VAT, national insurance contributions, and corporation tax are the second, third, and fourth largest sources of non-North Sea revenue. Revenue from all other taxes, such as business rates, council tax, capital gains tax, inheritance tax, and air passenger duty, make up 30.5% of total revenue (excluding North Sea revenue). 

Chart 1: Composition of Scottish non-North Sea tax revenue raised in 2018-19.

Source: GERS 2018-19

What about North Sea oil revenues?

Public sector revenues from oil and gas extraction also contribute to the total income in Scotland and is included in GERS as North Sea revenue. In GERS, North Sea revenue refers to all offshore oil and gas activity and it comes from three sources of revenue: petroleum tax, corporation tax, and licence fees. In 2018-19, North Sea revenues made up approximately 2.3% of total revenues in Scotland. 

GERS includes two estimates of Scotland’s share of North Sea revenue: a population share and an illustrative geographical share. Under the population share approach, Scotland is allocated a share of North Sea revenue based on Scotland’s share of the UK population. The illustrative geographical share approach employs the median line principle to determine the boundary between Scotland and the rest of the UK and apportions a geographical share of North Sea revenue to Scotland thereafter. 

Throughout this text, North Sea revenue will always refer to the geographical share of North Sea revenue as that is the approach used in GERS for aggregate estimates of revenue, spending, and net fiscal balance. For comparative reasons, GERS provides estimates of the aggregate figures excluding North Sea revenue. These numbers will also be included in this text. 

How does Scotland compare with the UK?

The 2018-19 GERS report showed an estimation of public sector revenue in Scotland (including geographical share of North Sea revenue) to £62.7 billion. This is equivalent to 8% of UK total revenue, which is 0.2 percentage points lower than Scotland’s share of the UK population.

In terms of revenue per person, Scotland has raised slightly less compared with the UK in the past five years. This is illustrated in the chart below. 

Chart 2: Public sector revenue per person in Scotland and the UK since 2014-15.

Source: GERS 2018-19

Revenue per head was almost equal between the UK and Scotland (including North Sea revenue) in 2014-15. The year after there was significant decline due to a drop in North Sea revenues. Since then, Scottish revenue per head has slowly increased, but at a slower rate than the UK as a whole. 

This gap between Scotland and the UK can be explained by the fact that there are fewer people in Scotland at the top of the income distribution where lots of taxes are raised, alongside the significantly higher amounts of corporate and wealth taxes raised in the City of London.

But it is also worth mentioning that only four areas – London, the South East, England, and the East of England – were estimated to raise more revenue per person than Scotland in 2018-19 according to the ONS. These four areas are also the only ones that raise more revenue per person compared with the UK average. 

Chart 3: Country and regional revenue per person in 2018-19.

Source: ONS

How much does Scotland spend?

Total spending in Scotland is made up of expenditure by the Scottish and local governments and spending by the UK Government for the benefit of the people of Scotland. 

Social protection is the single largest spending line in GERS, making up almost a third of total expenditure. It covers a range of different spend types, with the largest being spending on the state pension. Health and education and training are the second and third largest spending lines. All other public sector expenditure, including spending on transport, science and technology, public order and safety, and environment protection, makes up 39% of total spending. 

Chart 4: Composition of public sector spending in Scotland in 2018-19.

 Source: GERS 2018-19

How does Scotland compare with the UK?

The 2018-19 report estimated total public sector expenditure in Scotland to be £75.3 billion, which is equivalent to 9.3% of total UK public spending. GERS also estimates Scottish spending per person and provides a comparison with the figure for the UK.

Chart 5: Public sector spending per person in Scotland and the UK since 2014-15.

Source: GERS 2018-19

Expenditure for Scotland has consistently been higher per person than the UK average in the past 5 years. This can be explained by that Scotland simply spends more per person on things like health, education, and economic development, but also due to differences between Scotland and the UK in terms of the number of people entitled to certain benefits.

According to ONS figures, Scotland had the second highest spending per person in 2018-19, with only Northern Ireland spending more per head.

Chart 6: Country and regional expenditure per person in 2018-19.

Source: ONS

What does Scotland’s overall fiscal position look like?

Scotland’s overall fiscal position is given by the ‘notional’ estimated net fiscal balance, which measures the difference between total public sector expenditure and total public sector revenue. When total spending is greater than total revenue, the net fiscal balance is negative and when total revenue is greater than total spending, the net fiscal balance is positive.

Chart 7: Public sector revenue and spending in Scotland since 2008-09.

Source: GERS 2007-08GERS 2012-13GERS 2015-16GERS 2018-19

The chart above shows that spending has continuously been higher than revenue in Scotland throughout the past 10 years. This means that there is, and has been, a ‘notional’ estimated negative net fiscal balance, or deficit, in Scotland.

The chart also shows that the estimated gap between spending and revenue (including North Sea) was at its smallest in 2008-09 but has since widened due to falling oil revenues. With North Sea revenues dropping, total revenue including North Sea is now almost the same as total revenue excluding North Sea. The causes of this decline in oil revenues is discussed later in this article.

How does Scotland compare with the UK?

The ‘notional’ net fiscal balance is displayed in GERS both as the amount and as a percentage of GDP, which provides a good basis for comparison. Last year’s report showed an estimated net fiscal balance in Scotland of -7.0% of GDP (including geographical share of North Sea revenue) for 2018-19. This can be compared with a UK balance of -1.1% of GDP.

Chart 8: ‘Notional’ estimated net fiscal balance as a percentage of GDP since 2008-09.

Source: GERS 2007-08GERS 2012-13GERS 2015-16GERS 2018-19

Before 2012-13, the relatively high total revenues (including North Sea) meant that Scotland had a smaller fiscal deficit as a percentage of GDP compared with the UK. With the decline in North Sea revenues, the net fiscal balance (including North Sea) is now closer to the non-North Sea net fiscal balance. Correspondingly, Scotland’s net fiscal balance as a percentage of GDP is now weaker than the UK’s, both with and without North Sea revenue. 

Scotland is not unique in this regard. All but three of the 12 NUTS 1 countries and regions had a fiscal deficit in 2018-19. The ‘notional’ estimated net fiscal balances of all NUTS 1 countries and regions, plus England and the overall UK figure, are presented in the table below with new data published by the ONS. 

Table 2: ‘Notional’ estimated Net fiscal balance: NUTS 1 countries and regions 2018-19.

Source: ONS

The table above also shows that Scotland, alongside 9 other areas, had a greater deficit per person compared with the UK. 

How much does Scotland contribute to the UK’s deficit?

While Scotland contributes to the UK’s deficit, it is important to remember that the UK’s net fiscal balance is a sum of all 12 NUTS 1 countries and regions in the UK. Saying that “the numbers in GERS imply that Scotland is responsible for almost half of the UK’s deficit”, a common claim in previous years, is simply wrong. 

As presented in the table above, several areas run a fiscal deficit and they all contribute negatively to the UK net fiscal balance. Likewise, some areas run a surplus, and thus contribute positively to the UK net fiscal balance. 

The relative contributions of all NUTS 1 regions to the total UK net fiscal position are illustrated below.

Chart 9: Contributions to the UK Net Fiscal Position.

Source: ONS

Comparing the absolute deficit of the UK to only one NUTS 1 area, such as Scotland, is therefore a pointless comparison. A comparison like that says little about Scotland’s relative contribution to the UK net fiscal position.

More accurately, in 2018-19 Scotland added 13% to the total deficit contributed by the 9 regions of the UK who raised less in taxes than they spent on public services. How much Scotland contributes to the UK’s deficit in any year depends on both the size of the Scottish deficit, and the fiscal balances of all other 11 NUTS 1 countries and regions.

Why have North Sea revenues decreased?

In previous years, the release of GERS has also drawn attention to changes in Scotland’s fiscal position that have occurred over time. These changes are linked to the rapid fall in oil revenues since 2011 which, as highlighted throughout this text, has caused total revenues in Scotland to drop and the fiscal deficit to increase. 

Chart 10: Annual Scottish North Sea revenue since 2003-04 (nominal figures).

Source: GERS 2007-08GERS 2012-13GERS 2015-16GERS 2018-19

The fall in North Sea tax receipts can be explained by both lower oil prices and production, cuts in tax rates to help support the sector, and as fields are being decommissioned, producers are able to offset the costs of cleaning up old oil and gas installations against their tax liabilities.

What does GERS tell us about an independent Scotland? 

GERS reflects the position under the current constitutional settlement. It is a backward-looking estimate of spending and revenues in the previous financial year. This means that if an independent Scotland would bring about structural changes to the economy and society, the figures in GERS say little about the long-term finances of an independent Scotland.

The possible financial costs and risks, or savings and opportunities, of implementing a new constitutional framework are, naturally, not considered in GERS. Similarly, it does not report on the effects of faster or slower economic growth in an independent Scotland.

An independent Scotland would also be subject to new macroeconomic risks and opportunities that would have to be managed. The role of GERS is not to estimate the impact on Scotland’s public finances of such changes.

When the new GERS report is published on 26 August, it will provide a picture of Scotland’s fiscal position in 2019-20. It will give an insight into where our money is spent each year, who spends it, and where it comes from. 

This presents a useful starting point for a discussion regarding the challenges and opportunities that Scotland would face under new fiscal and constitutional arrangements.