Scottish Government

1 - INTRODUCTION TO SCOTTISH LOCAL GOVERNMENT FINANCE STATISTICS

Scottish Local Government Finance Statistics is an annual publication that provides a comprehensive review of Scottish Local Authority financial activity. The publication covers Local Authority income, revenue and capital expenditure, outstanding debt, local taxation and Local Authority pensions. Further information on Scottish Local Government Finance Statistics can be found at http://www.scotland.gov.uk/Topics/Statistics/Browse/Local-Government-Finance.

1.1 Structure and Functions of Local Government

Local Government in Scotland is comprised of 32 Unitary Councils, each responsible for all the Local Government services provided by the previous Councils, except for water and sewerage and the Reporters to the Children's Panel. In terms of population, the largest of these 32 Authorities is Glasgow City Council and the smallest is Orkney. Table 1.1 below shows the population and area for each Local Authority.

In addition to these 32 Local Authorities, there are also Police and Fire Boards, Valuation Joint Boards, Regional Transport Partnerships and the Forth and Tay Bridge Boards. Most of these Boards are the collective responsibility of two or more Councils. See Annex A for listings of Boards and constituent Local Authorities.

Police and Fire Boards are responsible for providing police and fire services to their constituent council members. Board members are nominated by the constituent councils. Net funding is requisitioned from the constituent councils.

Regional Transport Partnerships ( RTPs) were established by the Transport (Scotland) Act 2005. Seven statutory regional transport partnerships were created across Scotland to lead on regional transport strategy and delivery.

Valuation Joint Boards provide valuation services, primarily maintaining the Valuation Roll for non-domestic rates subjects, and the Council Tax Valuation List for domestic subjects. The Valuation Roll and Council Tax Valuation Lists are used as the basis for local taxation billing liability.

Local Government is responsible for delivering a wide range of services, including education, social services, transport, housing, environmental services, cultural services, planning and development and central services. Under the Concordat, signed in November 2007, the Scottish Government and Local Government now work jointly towards agreed outcomes under a single national purpose.

1.2 Local Government Finance

Capital and Revenue

Local Government expenditure is split between revenue and capital expenditure.

Both the capital and revenue sections of Local Authority accounts are collected on an accruals basis. This means that transactions are reflected in the accounts of the period in which they took place. Capital accounts figures prior to 2004-05 were recorded on a cash basis, where transactions were recorded in the period in which the payment was made or received.

Revenue expenditure is largely made up of employee and operating costs. Employee costs include salaries, wages, national insurance, superannuation contributions, cash allowances to employees, redundancy and severance payments and other employee costs. Operating costs include property costs, supplies and services, transport and plant costs, payments to agencies and other bodies, and direct administration costs.

Capital expenditure is mainly incurred by Local Authorities for buying, constructing or enhancing physical assets such as buildings (schools, houses etc), land, vehicles, plant and machinery.

Revenue and capital accounts can be combined to produce total expenditure and income figures. For accounting purposes revenue and capital are kept separate, but there is a relationship between the two, where capital expenditure (on a building for example) can have implications for revenue expenditure (where that building needs to be maintained and staffed). The revenue accounts reported include the General Fund, Housing Revenue accounts and External Trading Services accounts. Adjustments are made for transfers between accounts in order to avoid any double counting of expenditure or income.

Revenue expenditure is largely financed through Scottish Government grants, Non-Domestic Rates income and Council Tax income. Capital is mainly financed through Scottish Government grants, borrowing, capital receipts and revenue contributions.

Local Authority Funds and Reserves

Local Authorities are required under section 93(1) of the Local Government (Scotland) Act 1973 to have a General Fund. All sums received by or on behalf of the authority are required to be paid into that fund, and all sums payable by the authority shall be paid out of the General Fund, except where statute provides otherwise. The General Fund is therefore the main account for local authorities and the one where most transactions occur. General Fund revenue expenditure and income is reported in Chapter 3 of this publication.

The Housing (Scotland) Act 1987 requires a local authority to keep a Housing Revenue Account in respect of housing dwellings of a local authority. This separates the costs of social housing from other services provided by the local authority. Details of the Housing Revenue Account are reported in Chapter 3 (Section 3.5) of this publication.

Local authorities also own and manage Common Good assets. Statute requires these assets to be accounted for separately. Common good values are reported in Chapter 3 (Section 3.6) of this publication.

Local Authorities are empowered by the Local Government (Scotland) Act 1975 to establish a Renewal and Repair fund. This fund may be used for repairing, maintaining, replacing and renewing the authority's buildings, plant and equipment. The Renewal and Repair fund may also be used to finance capital expenditure. Expenditure may not be charged directly to reserves. As such, all transactions are restricted to contributions to and from the General Fund.

The Local Government (Scotland) Act 1975 (as amended by schedule 13 of the Local Government etc. (Scotland) Act 1994) also enables a local authority to establish an Insurance Fund. Again, in accordance with the local authority Statement of Recommended Accounting Practice, expenditure should not be charged directly to any reserve. As such, all transactions for this reserve are restricted to contributions to and from the General Fund.

In addition to the funds listed above, some local authorities may have specific statutory authority to hold other reserves. Examples include the Orkney County Council Act 1974 and the Zetland County Council Act 1974, which require the respective councils to keep separate accounts for their harbour undertakings and provide the power for the councils to hold a reserve fund for the same undertakings. As with other reserves' transactions, all transactions for these reserves are restricted to contributions to and from the General Fund.

The Local Government (Scotland) Act 1975 Act also permits a local authority to establish a Capital Fund. This fund may be used for the purpose of meeting the cost of capital expenditure and for the repayment of principal on loans (but not any interest on loans). Capital receipts may be paid directly into the Capital Fund in accordance with the provisions of the 1975 Act.

Details of the balances held by local authorities on their General Fund and other reserves are detailed in Chapter 3 (Section 3.3).

In addition to their own funds certain local authorities have the responsibility for managing pension funds. The Local Government Pension Schemes do not form part of the local authority accounts or reserves. Pension fund data is reported in Chapter 5 of this publication.

Table 1.1 Local Authority Population and Area, 2007-08

1. 2007 mid-year population estimates: http://www.gro-scotland.gov.uk/statistics/publications-and-data/population-estimates/mid-2007-population-estimates-scotland/list-of-tables.html
2. Source: Table 10 Land area and population density, by administrative area: 30 June 2007 (Revised)

Map 1.1 - Local Authority Areas

Data Sources and Notes

The tables and figures in this publication have been compiled using various financial returns made by Local Authorities and Joint Boards throughout the financial year. The continued co-operation of these bodies in completing these returns is gratefully acknowledged.

All financial data is shown at outturn level to reflect the amounts after the year's accounts have been closed, but before audit. Where possible actual figures have been used. Where this has not been possible, near-actual figures have been taken. For this reason the figures published in this publication may not always agree with those published in Local Authority Audited Accounts.

Please note that due to rounding, some totals may not agree with the sum of their constituent parts. Calculations have been made where possible using un-rounded figures and may therefore not agree exactly with the rounded figures given in accompanying tables.

The following symbols are used throughout the publication:

Enquiries

Enquiries relating to any of the text, tables or figures contained in the publication may be directed to:

Tel: (0131) 244 7033
E-mail: lgfstats@scotland.gsi.gov.uk

All tables in this publication and further background data are available as Excel spreadsheets from the Scottish Government Local Government Finance Statistics website at: http://www.scotland.gov.uk/stats/lgfstats