Deficit waterfall

Deficit waterfall: from revenue to the deficit

This chart shows the journey from revenue to deficit for Scotland in any given year, with a particular focus on the reserved expenditure items which contribute to that deficit. The chart splits revenue between onshore (green) and offshore (grey) and splits devolved spending between current and capital.

Reserved spending allocations are broken down into their main constituent parts. Detailed footnotes explain what's behind each element of reserved spending, with a particular focus on whether the costs involved represent identifiable expenditure that takes place directly for Scotland or non-identifiable expenditure which is typically allocated on a population share basis.

Understanding reserved expenditure items allocated to Scotland in GERS

  1. Accounting adjustments: put the figures on a National Accounts basis (ESA 2010), consistent with ONS Public Sector Finances. The Scotland-specific adjustments sit in devolved spending; this line is Scotland's share of the equivalent UK-wide adjustments. They are broadly mirrored by accounting adjustments on the revenue side, so excluding them would reduce revenue by a similar amount.
  2. Social protection: identifiable spending for and in Scotland including pensions, universal credit, reserved sickness and disability benefits and child benefit as well as DWP corporate costs see [spend detail]
  3. Defence spending: treated as non-identifiable and allocated to Scotland on a population share basis. It averages close to 2.0% of GDP see [here] and is perhaps most usefully considered within the context of the historical NATO guideline for member countries to spend 2% of GDP on defence, and the more recent 5% Hague defence commitment committing allies to 3.5% of GDP on "core defence requirements" (i.e. what this HMT category represents) with a further 1.5% on "defence- and security-related spending" by 2035.
  4. Transport spending is dominated by identifiable Network Rail expenditure for and in Scotland see [spend detail]
  5. Enterprise & Economic Development spending is almost entirely identifiable as being both for and in Scotland: energy bills support scheme, renewable heat incentive, R&D tax credits and other tax reliefs (which net off against taxes reported on the revenue side). See [spend detail]
  6. Public & Common services are mostly non-identifiable central government costs allocated on a population share basis, including: EU withdrawal agreement financial settlement, HMRC operating costs, Cabinet office, FCDO, House of Commons and House of Lords costs, HMT operating costs, etc. see [spend detail]
  7. International services are treated as non-identifiable costs allocated on a population share basis, including foreign economic aid and FCDO operating costs (including British embassies, high commissions, and consulates overseas). see [spend detail]
  8. Other is mostly identifiable spend for Scotland see [spend detail] and includes: DSIT (research and innovation investment), DCMS (BBC and Lottery grants), DWP (overhead and operating costs), DESNZ (nuclear decommissioning: treated as non-identifiable in GERS, so population share allocated although the actual costs associated with nuclear decommissioning in Scotland are greater, as explained in GERS table A.6)
  9. Public sector debt interest is a population share allocation of central government debt interest (see fiscal transfers for more discussion of this)

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