SCOTFACT
Towards an English GERS

TOWARDS AN 'ENGLISH GERS'

RAB BOYCE, JULY 2019
One of the questions that often arises when discussing Scotland’s fiscal position is ‘Why is there is no English GERS?’

If we assume that the question really means, ‘Why are there no equivalent figures for England?’  then the answer is that, until recently, no-one has really called for it. However, in February 2016 the ONS launched a consultation paper the results of which showed that there was a widespread support for this data mainly due to increased calls for devolution. As a result, the ONS have, since May 2017, published ‘Country and regional public sector finances’ which provides data on ‘what public sector expenditure has occurred, for the benefit of residents or enterprises, in each country or region of the UK and which public sector revenues have been raised in each country or region‘. 

It is worth noting that, unlike GERS which have achieved the status of National Statistics, the ONS numbers are currently considered 
‘experimental’ but, as the documents themselves state, ‘It must be emphasised that the label of experimental statistics does not mean that the statistics are of low quality, but it does signify that the statistics are novel and still being developed’.

These reports seem to have emerged largely unnoticed by those who follow the Scottish independence debate, we therefore thought it would be useful to provide some highlights from this year’s report.

Please note, there are some minor methodological differences between the ONS statistics and the Scottish Government’s GERS figures and although the figures are broadly the same, they are not a 1:1 match, however as the ONS figures are internally consistent we can confidently use them as a basis for regional comparisons.

Government Expenditure and Revenue Scotland (GERS)

Each year the Scottish Government produce a document entitled Government Expenditure and Revenue Scotland (GERS). This provides an overview of the contribution of revenue raised in Scotland toward the goods and services provided for the benefit of Scotland. 

This document is used by politicians, think-tanks and commentators to assess Scotland’s fiscal position.

Fiscal Deficit 2017-18

The ONS regional statistics show that for 2017-18 all but three regions – London, South East and the East of England – run a fiscal deficit i.e. Public expenditure is higher than public revenue.

If we compare the country only aggregates, we can see that, while all countries ran a deficit in 2017-18, the deficits for Scotland, Wales and Northern Ireland were all significantly higher than that of England. 

This can be confusing for many, as England’s population is many times larger than the other three countries and this feels counter-intuitive. However, this is simply due to the large fiscal surpluses generated by London and the South East. If you were to remove these two regions from the aggregate total for England then England’s fiscal deficit would be much larger at £60,379m compare to for example Scotland’s deficit of £13,265m.
COUNTRY FISCAL BALANCE 2017-18
REGIONAL FISCAL BALANCE 2017-18
Revenue Compared to Expenditure 

To help remove the population bias in the figures we can look at the per head figures to determine some of the reasons behind why these numbers are so different. The table below shows the breakdown of Country and regional revenue and expenditure per head.

Regional Revenue and Expenditure 2017-2018 Per Head (£)
Region Revenue
per Head		 Expenditure
per Head
United Kingdom 11,454.0 12,090.1
North East 8,937.6 12,604.3
North West 9,451.8 12,335.9
Yorkshire and the Humber 9,415.9 11,579.5
East Midlands 9,882.7 11,145.8
West Midlands 9,308.0 11,582.2
East of England 11,935.9 10,969.9
London 17,090.0 13,184.7
South East 13,426.8 11,168.6
South West 10,685.0 11,552.7
England 11,705.5 11,807.6
Wales 8,690.5 13,085.4
Scotland 11,229.8 13,681.8
Northern Ireland 9,255.4 14,194.5
REGIONAL REVENUE & EXPENDITURE
COMPARISON 2017-18
Expenditure 

Regional Expenditure per head 2017-2018 (£)
North East North West Yorkshire
& the
Humber		 East Midlands West Midlands East of England London South East South West Wales Scotland Northern Ireland England UK
General public services 1,012 1,001 993 1,016 1,015 1,020 1,016 1,029 1,019 1,093 1,125 1,120 1,014 1,030
Defence 588 588 588 588 588 588 588 588 588 588 588 587 588 588
Public order and safety 528 485 463 418 435 390 719 374 358 465 525 676 470 480
Economic affairs 640 791 594 578 678 711 1,336 749 658 872 1,245 875 792 835
Environment protection 119 457 127 108 108 155 132 147 165 207 239 147 177 183
Housing and community amenities 159 103 162 111 116 103 298 117 92 229 365 395 146 175
Health 2,376 2,361 2,124 1,944 2,189 1,952 2,692 1,956 2,029 2,331 2,374 2,328 2,192 2,218
Recreation, culture and religion 165 172 170 151 149 145 214 154 156 238 249 331 166 181
Education (includes training) 1,340 1,253 1,364 1,284 1,343 1,265 1,493 1,239 1,181 1,373 1,552 1,449 1,310 1,337
Social protection 4,621 4,351 4,130 3,970 4,124 3,792 3,663 3,705 4,152 4,749 4,369 5,039 3,989 4,086
EU transactions 47 91 56 42 74 65 269 123 38 -64 21 -190 105 82
Accounting Adjustments 1,010 682 807 935 763 785 762 989 1,117 1,003 1,029 1,436 858 895
Total 12,604 12,336 11,580 11,146 11,582 10,970 13,185 11,169 11,553 13,085 13,682 14,195 11,808 12,090
We can see that the regions with the highest public expenditure per head are Northern Ireland, Scotland and London. 

Looking at the three biggest areas of expenditure namely Social Protection, Health and Education, there are some significant variances in spend across the regions.
There are many reasons for these variances, including socio-demographic factors, population distribution and public sector wages. London, for example, spends the most on health of all the regions at £2,692 per head, this is largely due the higher costs of employment of staff due to schemes such as the public sector High Cost Area supplements for NHS staff. [1]

The policy decisions of devolved administrations also affect regional expenditure. Scotland, for example, spends more on education than any other region, with policies such as no university tuition fees for Scottish and EU (not including rUK) students contributing to this increase. As the devolution journey continues these local policy decisions are likely to have an increasing impact on the divergence in public spending.

One area of public spending that is largely demand-driven and is less affected by devolved policy decisions is Social Protection as this mainly covers welfare and pensions. However, this will likely change in future as the Scottish Government take on more responsibility for welfare spending, and exercise their powers under the provisions of the Scotland Act 2016 to augment existing or to create new benefits.
Social Protection in Northern Ireland, Wales, the North East and Scotland are significantly higher than the UK average (£4,086). There are many reasons for this, but the main drivers are a combination of higher unemployment and/or lower wages in these regions.
Revenue

Revenue per head can likewise inform us of relative performance of the various countries and regions. We have listed the 12 highest value categories below (you can see the full data set on our ONS Regional Revenue page). We can see a wide disparity across the regions in terms of the amount raised per person.
Regional Revenue per head (12 highest value categories) 2017-2018 (£)
United Kingdom North East North West Yorkshire and the Humber East Midlands West Midlands East of England London South East South West England Wales Scotland Northern Ireland
Income tax 2,747 1,668 2,000 1,842 2,094 1,942 3,136 5,045 3,751 2,322 2,898 1,582 2,316 1,459
VAT 2,172 1,984 2,102 2,090 2,048 1,928 2,160 2,436 2,320 2,137 2,171 2,050 2,223 2,246
National Insurance Contributions 2,001 1,582 1,669 1,598 1,746 1,677 2,187 2,996 2,382 1,708 2,054 1,459 1,954 1,475
Corporation tax (excl. North Sea) 848 501 644 636 615 637 729 1,939 936 677 899 419 718 413
Gross operating surplus 697 821 433 645 727 554 673 631 768 913 671 729 822 1,071
Council tax 489 463 474 458 498 457 561 460 603 583 512 477 431 -
Fuel duties 424 382 419 440 486 465 492 210 482 463 419 431 440 506
Business rates paid by market sector bodies 417 324 374 355 315 348 371 798 392 346 429 331 493 -
Stamp duty land tax 205 66 97 90 108 110 222 565 296 192 227 74 103 44
Alcohol duties 176 177 204 201 185 154 177 119 190 181 174 147 205 194
Tobacco duties 133 135 154 154 140 125 124 78 128 97 123 151 180 264
Capital gains tax 119 42 69 74 68 60 127 274 192 116 131 45 62 40
From the data above it is clear that the main sources of government revenue are Income Tax, VAT and National Insurance. These three taxes alone account for 60% of all Government revenue.
Due to the disproportionately higher incomes of those that live in London and the South East, these areas generate significantly higher tax returns per person than other regions. This coupled with the high populations of these regions contributes massively to the fiscal surplus generated by these regions.

Of course, one of the areas where Scotland’s per person revenue greatly exceeds the other regions is that of North Sea Oil. Offshore corporation tax accounts for £314 per head, compared to the next highest region, Yorkshire and the Humber at £7.73 per head.
CONCLUSION
When discussing Scotland’s Fiscal position, the focus in Scottish Politics tends to be on the GERS figures, they are not however useful in discussing relative performance.

The like-for-like comparisons produced as part of the ‘Country and Regional Public Sector finances’ allow us to make meaningful comparisons between the regions of the UK in terms of their fiscal positions. 

As we have shown, there is a wide disparity between both the revenue raised per person and public expenditure per person across the UK, both at a country and regional level. While this disparity can help us better understand the economic performance and relative investment in infrastructure and services across the regions, the deficits are largely notional as, other than some devolved and local taxes, there is no direct link between where revenues are raised and spend occurs. 
We have published more some more detailed breakdowns of the regional expenditure and revenue numbers in our facts section.

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REFERENCES & FOOTNOTES
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