Spending "for" Scotland

Sending vs getting back: revenue, spending and the fiscal transfer

This waterfall chart explains the different types of expenditure that lead to Scotland's reported deficit (and illustrates why this implies a fiscal transfer in Scotland's favour).

The question of what is spent in as opposed to for Scotland is not dealt with here (see In vs For) - this chart simply illustrates how expenditure allocated to Scotland in GERS contributes to Scotland benefitting from more spending than the revenue it generates (i.e. this happens when the waterfall chart drops below the line).

As explained in the Fiscal Transfer section, if Scotland is assumed to take no responsibility for the UK's central debt then it's deficit before UK central debt interest is the fiscal transfer in Scotland's favour.

Taking the commonly accepted view that Scotland assumes its population share of the UK's national debt (hence debt interest cost), the chart goes on to illustrate how this leads to Scotland net benefitting from the resulting (implied) fiscal transfer.

Chart Notes

  1. Devolved spending: entirely controlled by the Scottish Government and Local Authorities
  2. Accounting adjustments: required to report the fiscal balance on a National Accounts basis (ESA 2010), consistent with ONS Public Sector Finances and with how every other country reports. They generally mirror accounting adjustments on the revenue side (i.e. if these accounting adjustments were excluded, revenue would need to drop by an equivalent amount) - they cannot simply be assumed away
  3. Social protection: pensions, universal credit and various other reserved benefits paid directly to recipients in Scotland see [here]. [to be technically accurate: ~2.0% of this figure is an attribution for Scotland's share of pension payments to recipients overseas and ~0.7% is Scotland's population share of DWP corporate overhead]
  4. Other Identifiable spending: spending that "can be clearly allocated to a country or region on the basis of having been spent for the benefit of that country or region" [Expenditure Methodology]. The biggest examples are Network Rail, UK Research & innovation (research grants), Energy bills support scheme, various tax credits and reliefs, etc. see full breakdown [here]), Renewable heat incentive (a subsidy paid directly to households and businesses that installed renewable heating), DWP operational delivery, and much more see [here].
  5. Defence Spending: a straightforward population share
  6. Other non-ID: a series of UK functions that are typically (but not exclusively) allocated to Scotland on a population share basis - with a few exceptions (e.g. EU contributions/withdrawal costs, the BBC, Nuclear decommissioning) these represent core government functions that Scotland clearly benefits from and/or would need to pay for or replace if operating fiscally autonomously: FCDO (foreign aid, overseas embassaies & consulates), HMRC, Home Office (asylum & protection, border force, immigration enforcement, etc.), Cabinet Office, DWP corporate overhead, National Crime Agency, Maritime & Coastguard Agency, etc.
  7. Deficit before UK Public Sector Debt Interest: The scale of Scotland's deficit before any central borrowing costs are allocated
  8. UK Public Sector Debt Interest: central borrowing debt costs
  9. Scotland's Deficit: as reported in GERS
  10. Population Share of UK Defcit: a simple population share of the UK's deficit, being the implied liability that Scotland assumes (see Fiscal Transfer)
  11. Fiscal Transfer: the amount of Scotland's GERS deficit not covered by the population share of the UK's deficit which Scotland is assumed to absorb liability for

All charts