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Scottish Local Government Financial Statistics 2011-12

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2. Local Government Revenue Expenditure and Income

2.1 Total Revenue Income and Expenditure

Total gross revenue expenditure by local government in Scotland in 2011-12 was £16.7 billion. The majority of expenditure is in the general fund although over £1 billion of expenditure was in the Housing Revenue Account (HRA) and Significant (Internal) Trading Operations. Further details on these different funds are laid out in sections 2.2 and 2.3.

Table 2.1 details revenue income and expenditure for 2011-12, throughout the table expenditure is positive and income negative. The biggest single element of gross expenditure were employee costs which account for £7.65 billion of all expenditure. The second largest element was operating costs (which includes property costs, supplies and services costs, transport and payments to agencies and other bodies) which account for £6.77 billion.

Transfer payments are those made to individuals for which no goods or services are received in return by the local authority. The majority of transfer payments are housing benefits which make up £1.66 billion of the total of £2.27 billion. An adjustment for Inter Account and Inter Authority Transfers is made to the gross expenditure to take account of transfers between local authorities and between different services within an authority and ensure that expenditure is not counted twice.

Support services are those paid for services that support the provision of services to the public (including IT, Human Resources, Legal Services, Procurement Services and Corporate Services). In 2011-12 as part of a wider review of the Local Financial Returns (LFRs) the definition of support services was changed to be more prescriptive as to what should and should not be included. This was done to improve comparability of support services costs between local authorities and means that data for support services expenditure in 2011-12 may not be directly comparable with past years.

In 2011-12, for the first time, it is possible to derive the surplus or deficit on the provision of service from the data collected on expenditure, income and funding in the LFRs. This provides an important link between this data and data on reserves, debt and interest costs which were previously collected separately. This allows a greater level of analysis to be undertaken on the relationship between authorities' expenditure, income, funding, debt and reserves. The impact of this can be seen in a number of the tables in Sections 2 and 4 of this publication, in particular in Tables 2.1 and 4.1 which now link together what councils spend, raise and receive with the reserves they hold.

In addition to this change, local authorities are now required to ensure that their LFRs are directly comparable to their published audited accounts. This should ensure that the data provided is more comparable across authorities and there is less opportunities for error when classifying expenditure across different services within an authority.

Table 2.1 - Total Revenue Income and Expenditure, 2011-12

  £ Thousands
  General Fund Services 1 Housing Revenue Account Significant Trading Operations Road Bridges Common Good Fund
Employee Costs 7,160,414 135,154 352,506 4,214 183
Operating Costs 6,099,780 464,226 465,688 4,318 13,274
Support Service Costs 864,384 69,916 31,457 103 440
Transfer payments 1,993,054 3,141 356 0 1,670
Revenue Contributions to Capital 57,565 157,907 437 0 21
Adjustment for Inter Account and Inter Authority Transfers -524,455 -25,995 -610,281 -2,550 -1,892
Gross Expenditure 15,650,742 804,349 240,163 6,085 13,696
Government Grants2 -2,500,172 -52,432 -78 -8,788 0
Other Grants Reimbursements and Contributions -829,791 -17,168 -16,786 -8,800 -735
Customer and Client Receipts -1,321,294 -965,920 -267,630 -82 -10,809
Total Income -4,651,257 -1,035,520 -284,494 -17,670 -11,544
Net Revenue Expenditure 10,999,485 -231,171 -44,331 -11,585 2,152
Interest Paid 676,735 115,984 35 0 177
Interest Received -26,203 -2,353 -19 -78 -617
Investment Income -31,368 -404 0 0 -4,124
Pension interest and expected gains / losses on IAS 19 122,295 -1,472 0 -76 0
Sub-Total 741,459 111,755 16 -154 -4,564
General Revenue Funding -7,789,670        
NDRI Distributable Amount -2,203,389        
Council Tax -2,299,676 -2,116      
Arrears of Local Tax Collection 322        
Other -185,031 -3,853      
Sub-Total -12,477,444 -5,969 0 0  
Depreciation and Impairment of non-current assets 1,439,537 536,771   6,333  
Amortisation and Impairment of Intangible Assets 44,927 27,216   0  
Movement in the fair value of investment properties 3,338 1,969   -11  
Surplus or deficit on Trading Operations not included above -24,722 0 24,722 0  
Gain or loss on the disposal of Property, Plant and Equipment -5,282 3,698   -3  
Reversal of Employer's contribution to pension fund/benefits payments made -414,657 -17,032   -506  
Post-retirement benefits - IAS 19 897,802 16,855   331  
Short term accumulating absences -88,804 51   29  
Govt Capital grants and contributions credited to the CI&ES -587,529 -26,280   -9,656  
Non- Govt Capital grants and contributions credited to the CI&ES -98,067 -7,174   0  
Reversal of Revenue Contribution to Capital -57,565 -157,907   0  
Difference in Requisitions -988 0   0  
Surplus or deficit on the provision of services 371,490 252,782   -15,222  

1. Includes trading services and non-HRA housing. For a breakdown of expenditure in these areas, refer to Table 2.2 and Annexes A and B respectively.
2. Excluding General Revenue Funding

Source: Local Financial Returns – LFR 00

2.2 Non-General Fund Revenue Income and Expenditure

2.2.1 HRA

The Housing Revenue Account (HRA) records income and expenditure relating to Local Authority housing stock. Whilst most other Local Authority services are funded through a combination of non-domestic rates and council tax income plus Government grants, the HRA is a ring-fenced account, and expenditure is funded by housing rents and Government subsidies.

2.2.2 Trading Services

Trading service accounts cover the finances of Local Authority operated services that are commercial in nature. They are financed by the charges made by a Local Authority to the recipients of the services they provide.

The main trading services are Local Authority Transport (buses, ferries and other Local Authority transport undertakings), Fishery harbours and markets and other trading services (including airports, other harbours and bridges).

2.2.3 Road Bridges

From 2008-09, the funding arrangements for the Forth and Tay bridge authorities changed. Under the Abolition of Bridge Tolls (Scotland) Act 2008, the bridge authorities stopped receiving income from tolls and, instead, started receiving a revenue grant from Transport Scotland. For capital expenditure, bridge authorities also started receiving a capital grant from Transport Scotland, so are no longer reliant on borrowing through their constituent authorities from the Loans Fund. Despite this change in funding, Local Authorities continue to provide services for the bridge authorities by way of contract.

2.2.4 Common Good

Common good funds and assets are those held by local authorities which were, in effect, gifted to the local community (usually a previous burgh council). When managing common good funds and assets, local authorities are expected to have regard to the interests of inhabitants of the former burgh area to which the assets relate (except for Aberdeen City, Dundee City, City of Edinburgh and Glasgow City, where the local authority should have regard to the interests of all residents in the council area).

Common Good Fund income and expenditure is recorded in a separate set of accounts. Some property held within a Local Authority's Common Good Fund can be sold, while some must be maintained in trust for the community. The fund is used for projects that are for the common good of all residents.

2.3 General Fund Revenue Income and Expenditure

The highest spending service in the general fund is education which had net expenditure of £4.55 billion (this makes up nearly 40% of net expenditure). Of this total £1.75 billion was spent on primary education and £1.85 billion on secondary education with the remainder spent on pre-primary, special and community education. Education's share of total net expenditure has stayed the same at around 40% over the five years to 2011-12.

Social work is the next largest service with net expenditure of £2.87 billion (25% of total net expenditure). Data on social work expenditure is collected on the basis of client groups. Of the client groups identified in the LFRs, older persons has the highest expenditure of £1.26 billion followed by children and families with £0.77 billion and adults with learning difficulties with £0.48 billion.

A full breakdown of expenditure by sub-service is available in Annex A.

The single largest income source shown in Table 2.2 are the grants received by local authorities from the Department of Work and Pensions to fund housing benefits these grants were worth £1.66 billion in 2011-12 and are shown as part of income in non-HRA housing.

Another significant source of income are customer and client receipts (including all charges to service users) which raised £1.3 billion across all services. Social work services also receive income from the NHS to provide services, the value of these payments in 2011-12 were £0.38 billion. A full breakdown of income by service can be found in Annex B.

Table 2.2 - General Fund Revenue Income and Expenditure, 2011-12

£ thousands

Gross Expenditure Income Net Expenditure Net Expenditure as % of Total Services Ring Fenced Revenue Grants
Education 4,737,915 185,250 4,552,665 39.6% 5,104
Cultural and Related Services 712,625 94,753 617,872 5.4% 0
Social Work 3,665,002 792,246 2,872,756 25.0% 0
Police 1,210,588 192,306 1,018,282 8.8% 498,493
Fire 333,385 47,253 286,132 2.5% 0
Roads and Transport 671,853 194,625 477,228 4.1% 0
Environmental Services 785,301 129,767 655,534 5.7% 0
Planning & Economic Development 473,079 180,961 292,118 2.5% 0
Non-HRA Housing 2,327,359 1,996,194 331,165 2.9% 7,067
Central Services 682,334 263,683 418,651 3.6% 0
Trading Services 51,301 63,555 -12,254 -0.1% 0
Net Cost of Service 15,650,742 4,140,593 11,510,149 100.0% 510,664
Interest and Investment Income 676,735 57,571 619,164 0 0
Statutory Repayment of Debt 592,031 0 592,031 0 0
Contributions to/from HRA 0 0 0 0 0
Surplus/deficit from Significant Trading Operations -24,722 0 -24,722 0 0
Total 16,894,786 4,198,164 12,696,622 0 510,664

Source: Local Financial Returns - LFR 00

Revised accounting arrangements for Public Private Partnerships (PPP) and Public Finance Initiatives (PFI) were introduced from 1st April 2009. Therefore, from 2009-10 onwards revenue expenditure, statutory repayment of debt and interest and investment income for services in which there are PPP or PFI schemes is not directly comparable with previous years. See section 1.2 for further details. This affects the level of service expenditure when comparing 2008-09 to 2009-10 (and later years), especially in education where most councils have a PPP or PFI scheme in operation.

Table 2.3 - Net Revenue Expenditure by Service, 2007-08 to 2010-11

£ millions

2007-08 2008-09 2009-102 2010-11 2011-12
Education 4,432 4,676 4,633 4,677 4,553
Social Work 2,368 2,684 2,825 2,861 2,873
Police 1,078 1,100 1,125 978 1,018
Fire 289 320 332 313 286
Cultural & Related Services 593 628 662 638 618
Environmental Services 510 628 657 664 656
Roads & Transport 1 447 453 486 503 477
Central Services 439 469 632 560 419
Planning & Economic Development 163 289 332 313 292
Non-HRA Housing 91 427 420 394 331
Trading Services -12 -5 -9 -8 -12
Total General Fund Expenditure 10,400 11,670 12,096 11,892 11,510

1. From 2010-11 the funding of Police Pensions changed leading to a reduction in net expenditure. Therefore police expenditure figures from 2010-11 onwards are not directly comparable with figures up to 2009-10.

Source: Local Financial Returns - LFR 00

In the 2008-09 local government finance revenue settlement, many formerly ring-fenced revenue grants were rolled up into General Revenue Funding (GRF). This change in funding can be seen as a larger than usual increase in expenditure from 2007-08 to 2008-09 both in Table 2.3 above. The Supporting People Grant, the Community Regeneration Fund and the Strategic Waste Fund were three of the largest grants affected by these changes in funding.

Chart 2.1 shows net revenue expenditure per capita by local authority area. This includes expenditure by all local authority bodies in an area (i.e. including expenditure by councils, police boards, fire boards, valuation boards and regional transport partnerships). The chart shows that on average in Scotland local government spent £2,416 per person.

Wide variation is seen in net revenue expenditure per head for different local authority areas. This reflects variations in the cost of providing services due to factors such as deprivation, rurality and population age profile, as well as additional costs for island authorities (which clearly have the highest net revenue expenditure per head). Details of how these factors are taken into account in the needs-based methodology central to local government funding distribution can be found on the Scottish Government Grant Aided Expenditure Website.

Chart 2.1 - Net Revenue Expenditure per Capita by Local Authority 2011-12

Chart 2.1 - Net Revenue Expenditure per Capita by Local Authority 2011-12

2.4 Revenue Expenditure Financing

Revenue expenditure by local authorities is funded by three main sources:

  • Grants from Central Government
  • Local Taxation (Council Tax and Non Domestic Rates)
  • Sales, fees and charges for services

The main source of revenue income for local government is General Revenue Funding, (formerly referred to as the Revenue Support Grant). General Revenue Funding (GRF) is paid by the Scottish Government in support of local authorities' general net revenue expenditure.

Local taxation contributed over £4 billion to the funding of local government in 2011-12 and further information on these taxes is set out in the following sections. Other income is mostly composed of grants and subsidies received from central government and other parts of the public sector.

Table 2.4 - Revenue Income by Source, 2007-08 to 2011-12

£ Million

2007-08 2008-09 2009-10 2010-11 2011-12
Revenue Income
General Revenue Funding1 6,170 7,426 7,757 8,149 7,790
Council Tax 1,890 1,909 1,910 1,923 1,926
Council Tax Benefit Subsidy 354 351 368 375 376
Non Domestic Rates 1,860 1,963 2,165 2,068 2,182
Sales, Rents, Fees & Charges 2,132 2,262 2,287 2,179 2,298
Other Income2 4,163 3,363 3,390 3,348 3,305
Total revenue income 16,569 17,274 17,877 18,043 17,877

1. Prior to 2008-09 this was Revenue Support Grant

Sources: General Revenue Funding (Up to 2010-11) - Finance Circulars; Non-Domestic Rates - Non Domestic Rates Returns (NDRI); All Other Data - Local Financial Returns (LFRs)

Chart 2.2 - Revenue Income by Source, 2011-12

Chart 2.2 - Revenue Income by Source, 2011-12

2.4.1 Council Tax

Council Tax was introduced in Scotland on the 1st April 1993 to replace the Community Charge system. It is a tax system based on dwellings, contributing around £1.9 billion (excluding council tax benefit) of income to local authorities in 2011-12. A dwelling is classified as any kind of flat or house that is used as a place of residence. Each dwelling is placed into one of the 8 council tax bands (A to H) depending on the market value of the dwelling as at the 1st April 1991.

Table 2.5 - Chargeable Dwellings1 by Council Tax Band & Local Authority (as at 3 September 2012)

Valuation band ranges Band A Band B Band C Band D Band E Band F Band G Band H Total

Under 27,000 27,001 to 35,000 35,001 to 45,000 45,001 to 58,000 58,001 to 80,000 80,001 to 106,000 106,001 to 212,000 Over 212,000
Ratio to band D 6/9 7/9 8/9 9/9 11/9 13/9 15/9 18/9
Scotland 512,916 568,237 385,936 312,765 317,504 178,018 114,282 12,211 2,401,869
Aberdeen City 19,642 26,012 16,963 12,270 13,251 7,829 6,983 808 103,758
Aberdeenshire 19,550 15,344 13,602 16,444 19,946 14,617 8,921 535 108,959
Angus 14,427 12,263 6,756 7,953 7,044 2,869 1,510 150 52,972
Argyll & Bute 7,218 9,398 8,691 5,752 7,032 3,969 2,677 215 44,952
Clackmannanshire 6,025 6,993 1,906 2,401 3,098 1,778 805 41 23,047
Dumfries & Galloway 10,670 22,003 11,431 9,490 10,016 4,834 2,299 155 70,898
Dundee City 25,512 15,335 7,926 8,071 6,176 2,249 997 31 66,297
East Ayrshire 25,573 9,198 4,858 6,266 5,895 2,817 895 39 55,541
East Dunbartonshire 1,073 3,546 7,971 7,243 10,643 6,662 5,974 579 43,691
East Lothian 1,119 8,891 14,260 5,596 5,665 4,476 3,557 611 44,175
East Renfrewshire 1,194 4,987 3,891 6,230 7,888 5,868 5,837 688 36,583
Edinburgh, City of 19,918 42,952 39,856 33,625 35,487 22,355 19,738 3,602 217,533
Eilean Siar 4,500 3,611 2,707 1,657 1,119 159 33 4 13,790
Falkirk 21,461 18,849 6,375 8,218 8,172 4,897 2,262 60 70,294
Fife 38,850 46,606 20,984 18,748 21,522 12,137 5,887 378 165,112
Glasgow City 60,047 74,094 62,090 37,039 25,905 11,533 5,790 603 277,101
Highland 18,580 22,037 21,952 17,288 17,132 8,293 3,980 311 109,573
Inverclyde 18,298 5,548 3,284 3,189 3,349 1,813 1,379 208 37,068
Midlothian 932 11,949 10,111 4,433 4,131 2,524 1,681 157 35,918
Moray 11,290 10,052 6,103 5,655 5,177 1,876 564 50 40,767
North Ayrshire 21,071 17,827 6,526 6,422 8,577 3,525 1,129 52 65,129
North Lanarkshire 52,315 36,269 18,379 15,060 14,894 7,234 2,547 121 146,819
Orkney Islands 2,260 2,667 2,148 1,617 1,143 244 17 3 10,099
Perth & Kinross 8,434 14,152 11,075 9,978 10,994 6,856 5,443 640 67,572
Renfrewshire 12,339 24,438 13,759 10,813 9,949 5,552 3,213 199 80,262
Scottish Borders 15,680 12,218 6,443 5,546 6,047 4,392 3,986 431 54,743
Shetland Islands 2,888 1,746 2,595 1,694 1,247 231 54 0 10,455
South Ayrshire 7,010 12,198 8,496 8,021 9,320 4,584 2,875 272 52,776
South Lanarkshire 34,866 28,737 24,233 18,912 17,925 10,368 5,518 419 140,978
Stirling 5,377 8,109 3,972 4,167 5,820 4,881 4,730 637 37,693
West Dunbartonshire 7,748 16,290 7,254 5,577 4,136 1,541 609 53 43,208
West Lothian 17,049 23,918 9,339 7,390 8,804 5,055 2,392 159 74,106

1. Excludes dwellings exempt from council tax

Source: Council Tax Base 2012 (CTAXBASE)

Table 2.5 details the band boundaries, the ratio to band D council tax (the multiplier) and the number of chargeable dwellings in each band by local authority. As at 3rd September 2012, there were 2.4 million chargeable dwellings in Scotland. Around three quarters (1.8 million) of all chargeable dwellings were in council tax bands A to D, and only 0.5% (12,211 dwellings) in band H. The total number of chargeable dwellings and the distribution of those dwellings across council tax bands varies across local authority areas. For example, 49% (18,298) of all chargeable dwellings in Inverclyde are in council tax band A compared with 22% (2,260) in the Orkney Islands, and 2% (1,073) in East Dunbartonshire. This is a consequence of variation by local authority in the market value of dwellings.

Council tax is used as a source of funding to make up the difference between the amount of money a local authority wishes to spend, and the amount of funding it receives from other sources (such as GRF and ring-fenced revenue grants). Each local authority determines its own level of council tax as part of their budget setting process, establishing the band D council tax level. As a result, council tax levels differs across local authority areas ranging from £1,024 in Eilean Siar to £1,230 in Aberdeen City (Chart 2.3). The council tax charged for all other bands is a proportion of the band D level set (see ratios to band D in table 2.6).

The Scotland band D council tax level, and its change over time, can be seen in table 2.7. Council tax levels remain constant at 2007-08 levels as a consequence of the council tax freeze agreed between the Scottish Government and local government, hence the average council tax per dwelling has also remained flat. Any small changes reflect movement in the council tax base such as changes in the total number of dwellings, the distribution of those dwellings across council tax bands, and the number of discounts and exemptions. In real terms, the level of band D council tax has fallen in each year since 2007-08, where prior to this, both cash and real terms increases were seen as the band D council tax level increased year on year.

Table 2.6 - Scotland Council Tax Levels

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Scotland Average Band D Council Tax (£)1 1,094 1,129 1,149 1,149 1,149 1,149 1,149 1,149
Band D % increase (cash terms) 3.9% 3.2% 1.8% 0.0% 0.0% 0.0% 0.0% 0.0%
Band D % increase (real terms2) 1.6% 0.5% -0.7% -2.7% -1.5% -2.8% -2.1% -2.1%
Average Council Tax Bill per Dwelling (£)3 925 958 980 983 987 985 984 985

1. Since 2008-09, Council Tax rates have been frozen at 2007-08 levels.

2. Real terms figures are calculated using GDP deflators

3. This average is taken over all chargeable dwellings and is affected by a number of factors such as the distribution of dwellings across council tax bands, discounts and exemptions, new construction and removal of demolished housing from the roll.

Source: Council Tax Assumptions (CTAS), Council Tax Base (CTAXBASE)

Chart 2.3 - Band D Council Tax Bill Amount by Local Authority

Chart 2.3 - Band D Council Tax Bill Amount by Local Authority

Table 2.7 - Band D Council Tax by Local Authority

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Scotland 1,094 1,129 1,149 1,149 1,149 1,149 1,149
Aberdeen City 1,162 1,196 1,230 1,230 1,230 1,230 1,230
Aberdeenshire 1,065 1,113 1,141 1,141 1,141 1,141 1,141
Angus 1,037 1,072 1,072 1,072 1,072 1,072 1,072
Argyll & Bute 1,117 1,156 1,178 1,178 1,178 1,178 1,178
Clackmannanshire 1,074 1,127 1,148 1,148 1,148 1,148 1,148
Dumfries & Galloway 988 1,018 1,049 1,049 1,049 1,049 1,049
Dundee City 1,180 1,211 1,211 1,211 1,211 1,211 1,211
East Ayrshire 1,116 1,171 1,189 1,189 1,189 1,189 1,189
East Dunbartonshire 1,078 1,121 1,142 1,142 1,142 1,142 1,142
East Lothian 1,069 1,096 1,118 1,118 1,118 1,118 1,118
East Renfrewshire 1,053 1,105 1,126 1,126 1,126 1,126 1,126
Edinburgh, City of 1,126 1,152 1,169 1,169 1,169 1,169 1,169
Eilean Siar 956 999 1,024 1,024 1,024 1,024 1,024
Falkirk 999 1,045 1,070 1,070 1,070 1,070 1,070
Fife 1,050 1,091 1,118 1,118 1,118 1,118 1,118
Glasgow City 1,213 1,213 1,213 1,213 1,213 1,213 1,213
Highland 1,086 1,135 1,163 1,163 1,163 1,163 1,163
Inverclyde 1,176 1,206 1,198 1,198 1,198 1,198 1,198
Midlothian 1,176 1,210 1,210 1,210 1,210 1,210 1,210
Moray 1,045 1,096 1,135 1,135 1,135 1,135 1,135
North Ayrshire 1,075 1,125 1,152 1,152 1,152 1,152 1,152
North Lanarkshire 1,041 1,077 1,098 1,098 1,098 1,098 1,098
Orkney Islands 973 1,007 1,037 1,037 1,037 1,037 1,037
Perth & Kinross 1,088 1,136 1,158 1,158 1,158 1,158 1,158
Renfrewshire 1,091 1,143 1,165 1,165 1,165 1,165 1,165
Scottish Borders 1,019 1,064 1,084 1,084 1,084 1,084 1,084
Shetland Islands 981 1,017 1,053 1,053 1,053 1,053 1,053
South Ayrshire 1,063 1,111 1,154 1,154 1,154 1,154 1,154
South Lanarkshire 1,040 1,076 1,101 1,101 1,101 1,101 1,101
Stirling 1,149 1,201 1,223 1,209 1,209 1,209 1,209
West Dunbartonshire 1,113 1,138 1,163 1,163 1,163 1,163 1,163
West Lothian 1,074 1,101 1,128 1,128 1,128 1,128 1,128

Source: Council Tax Assumptions (CTAS) returns

The Band D council tax levels by local authority over time are shown in Table 2.7. As mentioned above, the agreement between Scottish Government and Local Government to maintain a council tax freeze means that band D council tax levels have not changed since 2007-08. The one exception is in Stirling where the council took the decision to reduce the band D council tax from £1,223 in 2007-08 to £1,209 in 2008-09 (and subsequently retained it at this level). Prior to the council tax freeze, the band D council tax increased each year in all local authorities.

Not all dwellings are liable to pay full council tax. A dwelling may be eligible for a discount or exemption dependent on either the status of the dwelling or the personal circumstances of the persons resident in the dwelling. If a dwelling is exempt there is no council tax payable in respect of that dwelling. If a dwelling is eligible for a discount then these may range from 10% to 50% depending on the nature of the discount.

An exempt dwelling can be occupied or unoccupied. Examples of unoccupied exempt dwellings include dwellings that are unoccupied and unfurnished for up to 6 months, dwellings that cannot be occupied because they are in need of structural repair, or are being improved or reconstructed, or an unoccupied dwelling where the liable person was formerly resident and has moved to receive personal care elsewhere. Occupied dwellings eligible for exemption include dwellings that are the sole residence of only persons under the age of 18, dwellings occupied only by students, and dwellings used as trial flats by registered housing associations.

Where only one council tax liable adult resides in a dwelling they are entitled to claim a 25% discount on their council tax bill. Where a dwelling is classed as a second home or long term empty, that dwelling is entitled to claim a discount of between 10% and 50% depending on the Local Authority. Unoccupied dwellings may also be eligible for a 50% discount for the 6 months after the initial 6 month exemption.

A breakdown of council tax dwellings by classification as chargeable, discounted, or exempt from 2007 to 2011 is given below in Table 2.8. The total number of dwellings has increased by around 52,000 from 2.463 million dwellings in 2008 to 2.515 million in 2012. The proportion of dwellings exempt, chargeable or discounted has remained steady over time with around 4.5% of all dwellings exempt from paying council tax, and 42% of all chargeable dwellings discounted. In 2012, there were 113,173 exempt dwellings and 1,016,070 discounted dwellings.

Table 2.8 - Chargeable dwellings, Discounts and Exemptions1

2008 2009 2010 2011 2012
Total dwellings 2,462,571 2,477,397 2,488,928 2,500,769 2,515,042
Dwellings exempt 112,838 112,168 111,454 111,740 113,173
Chargeable dwellings 2,349,733 2,365,229 2,377,474 2,389,029 2,401,869
Chargeable dwellings subject to:
25% discount 929,246 936,957 941,915 945,515 948,208
Second Homes2 35,036 37,060 38,002 39,250 40,599
Long Term Empty2 22,784 22,169 24,598 25,356 25,454
Occupied entirely by disregarded adults 1,986 2,668 1,887 1,910 1,809
Dwellings not subject to discount 1,360,681 1,366,375 1,371,072 1,376,998 1,385,799

1. As at the first Monday in September of each year

2. It is not possible for some councils to separately identify second homes and long term empty dwellings. For these councils, the total number of second homes and long term empty dwellings have been recorded under second homes.

Source: Council Tax Base (CTAXBASE) Returns

Local Authorities are responsible for the billing and collection of council tax. Each individual bill is calculated by applying the multiplier for each band to the band D council tax level, and the applying any discounts, exemptions or reductions as detailed above. At the start of each financial year local authorities issue council tax bills to households liable for each bill. They collect council tax income relating to these bills over the year, and also continue to collect late amounts from previous billing years[1]. The amount of council tax income collected in 2011-12 are reported in table 2.9 below.

Table 2.9 - Council Tax Income by Local Authority, 2011-12

£ thousands

Council Tax Income (excl CTB)1 Council Tax Benefit Subsidy (CTB) Council Tax Income (incl CTB)1
Scotland 1,926,190 375,706 2,301,896
Aberdeen City 96,939 10,988 107,927
Aberdeenshire 110,990 8,422 119,412
Angus 39,803 5,921 45,724
Argyll & Bute 41,257 6,052 47,309
Clackmannanshire 16,924 3,785 20,709
Dumfries & Galloway 53,649 9,310 62,959
Dundee City 45,317 13,473 58,790
East Ayrshire 38,615 10,222 48,837
East Dunbartonshire 47,752 4,940 52,692
East Lothian 39,322 6,619 45,941
East Renfrewshire 40,026 4,062 44,088
Edinburgh, City of 199,632 29,549 229,181
Eilean Siar 8,763 1,752 10,515
Falkirk 51,071 8,970 60,041
Fife 128,565 23,074 151,639
Glasgow City 178,058 73,214 251,272
Highland 95,916 13,568 109,484
Inverclyde 25,753 7,268 33,021
Midlothian 31,993 5,535 37,528
Moray 33,796 4,141 37,937
North Ayrshire 45,664 12,297 57,961
North Lanarkshire 94,070 26,649 120,719
Orkney Islands 7,076 907 7,983
Perth & Kinross 64,431 7,144 71,575
Renfrewshire 62,177 14,012 76,189
Scottish Borders 44,672 5,988 50,660
Shetland Islands 8,004 748 8,752
South Ayrshire 44,570 9,035 53,605
South Lanarkshire 106,709 22,461 129,170
Stirling 39,445 4,971 44,416
West Dunbartonshire 28,078 10,099 38,177
West Lothian 57,153 10,530 67,683

1. Includes Community Charge

Source: Local Financial Returns - LFR 12

2.4.2 Non-Domestic Rates

Non-domestic Rates (NDRs) are a property tax paid by the owner/occupier or tenant of a non-domestic property. They are calculated using the rateable value of a non-domestic property, multiplied by a poundage set nationally by Scottish Ministers less any relief entitlement. In 2011-12, the income raised from NDRs was £2.25 billion.

The principles of non-domestic rates were established in the Lands Valuation (Scotland) Act of 1854. This act also provided for the appointment of the Scottish Assessors, who are responsible for determining the classification and valuation of non-domestic and domestic properties, and are independent of both the Scottish Government and local authorities. A non-domestic property is an individual property used for non-domestic purposes including businesses, public buildings and advertising hoardings. The value given to a property is called its rateable value (RV).

As a property tax, the RV of a property (a legally defined valuation, broadly based on rental values) is a reflection of its value rather than profitability, turnover or output of the business. It is established at revaluation where, the Scottish Assessors assess rateable values for all non-domestic properties, taking account of the type and nature of the property. All non-domestic properties and their corresponding RVs are listed on the Valuation Roll. Tables 2.10 and 2.11 show the composition of properties on the Valuation Roll by property type and RV band. As at 1st April 2012, there were 217,598 properties with a total RV of £6.7 billion. 77% of all properties (168,619 properties) had a RV less than or equal to £18,000.

Table 2.10 - Non-Domestic Rates Properties by Classification (as at 1 April 2012)

CATEGORY Number of properties Rateable value (£000s)
1st April 2012 1st April 2012
Advertising 2,146 8,298
Care Facilities 3,090 104,094
Communications 354 15,156
Cultural 1,394 46,888
Education and Training 3,875 512,856
Garages and Petrol Stations 4,472 68,229
Health and Medical 3,137 204,285
Hotels 4,794 187,152
Industrial Subjects 45,840 1,120,309
Leisure, Entertainment, Caravans etc. 19,809 232,494
Offices 37,822 1,128,081
Other 13,057 90,743
Petrochemical 144 112,972
Public Houses 3,909 112,026
Public Service Subjects 10,044 320,376
Quarries, Mines, etc. 695 26,165
Religious 6,302 54,303
Shops 52,782 1,624,594
Sporting Subjects 3,349 19,218
Statutory Undertaking 583 729,366
TOTAL ALL NON-DOMESTIC PROPERTIES 217,598 6,717,607

Source: Scottish Assessors Valuation Roll, 1st April 2012

Table 2.11 - Non-Domestic Rates Subjects by Local Authority (as at 1 April 2012)1

Local Authority Rateable Value Band Total Non-Domestic Properties
<= £18,000 £18,001 to £34,999 >= £35,000
Scotland 168,619 19,851 29,128 217,598
Aberdeen City 4,938 1,161 2,279 8,378
Aberdeenshire 9,650 759 988 11,397
Angus 4,047 359 398 4,804
Argyll & Bute 7,048 345 350 7,743
Clackmannanshire 1,267 131 149 1,547
Dumfries & Galloway 8,015 491 557 9,063
Dundee City 4,132 600 966 5,698
East Ayrshire 3,155 307 410 3,872
East Dunbartonshire 1,678 299 311 2,288
East Lothian 2,706 263 316 3,285
East Renfrewshire 1,233 217 229 1,679
Edinburgh, City of 12,883 2,415 3,944 19,242
Eilean Siar 1,992 99 113 2,204
Falkirk 3,539 462 681 4,682
Fife 10,089 1,225 1,612 12,926
Glasgow City 17,109 2,895 4,857 24,861
Highland 14,821 971 1,381 17,173
Inverclyde 1,727 217 315 2,259
Midlothian 2,162 263 362 2,787
Moray 3,914 249 362 4,525
North Ayrshire 4,014 390 497 4,901
North Lanarkshire 6,780 1,028 1,555 9,363
Orkney Islands 1,815 120 96 2,031
Perth & Kinross 6,860 589 729 8,178
Renfrewshire 4,678 628 960 6,266
Scottish Borders 6,194 407 414 7,015
Shetland Islands 1,701 103 145 1,949
South Ayrshire 3,754 432 555 4,741
South Lanarkshire 6,936 1,131 1,489 9,556
Stirling 3,897 436 564 4,897
West Dunbartonshire 2,043 268 416 2,727
West Lothian 3,842 591 1,128 5,561

1. Includes properties with zero rateable value.

Source: Scottish Assessors Valuation Roll, 1st April 2012

At the 2010 revaluation, the total RV of non-domestic properties (the tax base) increased from £5.3 billion in 2009-10 to £6.6 billion in 2010-11. As revaluation is designed to be cost neutral, a drop in the poundage (from 48.1p to 40.7p) is seen for the same time period. This can be seen in Table 2.12 which shows the annual NDR Income, total Rateable Value, and Poundage Rate, as well as their changes over time. The next revaluation will take place in 2017.

Table 2.12 - Non-Domestic Rates Income, Total Rateable Values and Poundage Rate

2008-09 2009-10 2010-11 2011-12 2012-13
Non Domestic Rates Income (£m) 1 1,924 2,010 2,138 2,252 2,362
Total Rateable Value (£m) 5,296 5,299 6,612 6,678 6,718
Poundage Rate (pence) 45.8 48.1 40.7 42.6 45.0

1. Councils' notified (pre-audit) estimate of income for 2011-12 and mid-year estimate of income for 2012-13

Source: NDR Income - Non-domestic Rate Income Returns, Rateable Value - Scottish Assessors Valuation Roll as at 1st April

Table 2.12 also shows that the total RV continued to increase after the 2010 revaluation from £6.6 billion to £6.7 billion in 2012-13. This is due to the net impact of increases in the tax base from new properties (or extension of existing properties), and decreases as demolished properties are deleted from the valuation roll or as the RV is reduced as a result of appeals[2]. As Non-Domestic Rates in Scotland are directly proportional to the rateable values of individual non-domestic properties, changes in the total RV impact on the amount of NDR available for collection.

Inflation is a key driver of growth in NDR income as the poundage rate, set nationally by Scottish Ministers[3], is tied to the Retail Price Index (other than in the first year of a revaluation). NDR bills are calculated by multiplying the RV of a property by the poundage rate, and then applying discounts and exemptions. Large business properties also pay a supplement to the poundage rate, known as the Large Business Supplement (LBS), which is used to fund a portion of the Small Business Bonus Scheme (SBBS). The LBS was 0.7p in 2011-12 for properties with a RV > 35,000. For the period 2012-13 to 2014-15, large retailers that sell both alcohol and tobacco will also pay the Public Health Supplement (PHS) - an additional 9.3p on the poundage rate in 2012-13. These supplements increase the amount paid in NDR bills. Conversely, exempt properties (which do not pay rates), and relief schemes significantly reduce the amount paid in NDR bills, and therefore the NDR income.

Table 2.13 summarises the total number of properties and rateable value as at 1st April 2012, and the NDR income collected in 2011-12 and estimated income for 2012-13 by local authority (net of reliefs). Income for 2012-13 is estimated at £2.36 billion compared to £2.25 billion in 2011-12. The higher poundage rate (due to the normal annual inflation), and to a lesser extent additional income from the public health supplement in 2012-13 will have contributed to the increase in income. The net change in the tax base will also be a factor.

Table 2.13 - Non-Domestic Rates Properties, Rateable Values and Income By Local Authority1

Authority Non-Domestic
Properties2
1st April 2012
Rateable Values
1st April 2012
Non-Domestic Rate income
2011-123 2012-134
(£000s) (£000s) (£000s)
Scotland 217,598 6,717,607 2,251,622 2,361,878
Aberdeen City 8,378 450,106 163,154 176,097
Aberdeenshire 11,397 207,910 71,367 76,211
Angus 4,804 77,715 24,023 26,387
Argyll & Bute 7,743 84,987 26,047 25,867
Clackmannanshire 1,547 39,372 13,858 13,084
Dumfries & Galloway 9,063 120,440 40,288 43,261
Dundee City 5,698 194,803 60,793 58,461
East Ayrshire 3,872 81,888 26,656 28,576
East Dunbartonshire 2,288 68,316 20,914 22,525
East Lothian 3,285 67,542 20,518 22,544
East Renfrewshire 1,679 39,801 12,599 14,364
Edinburgh, City of 19,242 917,270 302,593 324,985
Eilean Siar 2,204 21,069 6,024 6,705
Falkirk 4,682 175,026 62,900 58,551
Fife 12,926 438,660 148,556 138,744
Glasgow City 24,861 982,955 304,138 314,465
Highland 17,173 304,379 104,085 108,387
Inverclyde 2,259 60,275 18,684 20,347
Midlothian 2,787 78,135 24,889 26,765
Moray 4,525 84,511 29,183 31,286
North Ayrshire 4,901 107,027 33,536 35,836
North Lanarkshire 9,363 299,342 97,322 106,972
Orkney Islands 2,031 24,857 8,010 8,359
Perth & Kinross 8,178 147,219 46,343 51,109
Renfrewshire 6,266 245,796 85,463 93,662
Scottish Borders 7,015 87,655 25,884 28,479
Shetland Islands 1,949 44,671 14,228 15,856
South Ayrshire 4,741 110,771 36,262 35,500
South Lanarkshire 9,556 651,514 244,723 264,209
Stirling 4,897 115,247 37,578 34,570
West Dunbartonshire 2,727 172,828 67,722 70,149
West Lothian 5,561 215,518 73,282 79,561

1. Rates bills for specific utilities are collected by specified councils on behalf of all 32 councils, and appear on the valuation roll for those councils: South Lanarkshire (Electricity), West Dunbartonshire (Gas), Fife (Water), Falkirk (Docks and Harbours), Highland (Railways), Renfrewshire (Telecommunications). This increases the take for those authorities.

2. Includes properties with a zero rateable value

3. Notified (pre-audit) estimate of income.

4. Mid-year estimate of income.

Source: Number of Properties and Rateable Value - Scottish Assessors Valuation Roll 1st April 2012, NDR Income - Non-domestic Rate Income Returns

Table 2.13 shows geographical variations in the number of properties, rateable value and NDR income. It should be noted however that some councils have responsibility for collection of NDR for specific utilities as detailed in the footnote to the table. For these councils, the entries on the valuation roll and NDR income include Scotland-wide data for the specified utilities sector.

Table 2.14 - Non-Domestic Rates Reliefs by Relief Type1

£000s

2007-08 2008-09 2009-10 2010-11 2011-122
Unoccupied Property/Partly Unoccupied Property 119,957 127,385 153,361 145,936 157,040
Charities 107,766 113,417 122,132 136,731 151,112
Sports Clubs 9,173 9,651 11,604 11,476 11,953
Disabled persons relief 40,040 42,914 45,484 51,901 54,372
SBRRS/SBBS3 24,686 72,553 108,420 123,259 134,719
Religious Properties 18,146 18,986 20,218 24,016 23,802
Rural Rate Relief 3,901 3,887 3,918 4,129 4,218
Former Agricultural Premises4 19
Hardship 20 27 19 4 306
Renewable Energy Relief Scheme5 3,560 4,126
Gross Amount 323,708 388,821 465,157 501,013 541,648

1. Estimates include mandatory and discretionary elements of relief where applicable, but exclude backdated payments of relief

2. Notified (pre-audit) estimate of relief expenditure for 2011-12

3. From 1 April 2008, the Small Business Rates Relief Scheme was replaced with the Small Business Bonus Scheme.

4. Relief for Former Agricultural Premises was a time limited relief which ended at 31 March 2008

5. The Renewable Energy Relief Scheme was introduced at 1 April 2010

Source: Non-domestic Rate Income Returns

There are a number of types of NDR relief that reduce the NDR bill for qualifying properties. Table 2.14 shows the main types of relief available[4] in 2011-12 and the amount of relief provided each year from 2007-08 to 2011-12.

The gross amount of relief provided increased substantially from £324 million in 2007-08 to £542 million in 2011-12. This increase is predominately due to increases in the poundage rate (due to normal annual inflation) and an increase in relief provided to small businesses after the Small Business Rates Relief Scheme (SBRRS) was replaced by the Small Business Bonus Scheme (SBBS) from 1st April 2008. The cost of the SBBS scheme is much greater than that of the former SBRRS due to higher percentage of relief being available and wider qualifying RV thresholds. As a result, a larger than usual increase in the gross amount of reliefs awarded from 2007-08 to 2008-09, (and from 2008-09 to 2009-10 as up-take increased) can been seen[5]. Increased take-up of other reliefs is also a factor in the increased cost of reliefs.

The total NDR income collected by Local Authorities is pooled at the Scotland level[6]. Each council reports the NDR collected to the Scottish Government to be included in the central pool. The amount to be re-distributed from the pool is known as the Distributable Amount (DA) and is set by the Scottish Government before the start of the financial year in question.

From 1st April 2011, the distribution methodology provides that Councils retain what it is estimated they can collect in business rates (rather than the previous policy where it was redistributed on the basis of population shares). As the combined total of NDR income and General Revenue Funding (GRF) provided to councils is guaranteed by the Scottish Government, any reduction in the amount of NDR collected is compensated for by a corresponding increase in GRF and vice versa. Any surpluses or deficits are paid out or recovered from Councils in the calculation of future years distributable business rates totals. The DA is based upon a forecast of the NDR income and prior year adjustments, and is therefore not guaranteed to match the total contributions to the pool for that year.

The calculation of the distributable amount for 2011-12 is given in Annex F and the 2011-12 distributable amount per Local Authority is shown in Table 2.15.

Table 2.15 - Non-Domestic Rates Distributable Amount by Local Authority, 2011-12

Non-Domestic Rate Income
(£000s)
Scotland 2,182,000
Aberdeen City 161,429
Aberdeenshire 68,670
Angus 23,391
Argyll & Bute 25,582
Clackmannanshire 12,284
Dumfries & Galloway 38,488
Dundee City 61,315
East Ayrshire 25,318
East Dunbartonshire 20,346
East Lothian 19,319
East Renfrewshire 11,976
Edinburgh, City of 297,442
Eilean Siar 5,983
Falkirk 55,518
Fife 135,006
Glasgow City 303,146
Highland 95,372
Inverclyde 18,700
Midlothian 23,254
Moray 27,053
North Ayrshire 33,082
North Lanarkshire 96,759
Orkney 7,722
Perth & Kinross 45,285
Renfrewshire 85,237
Scottish Borders 23,948
Shetland 14,308
South Ayrshire 34,835
South Lanarkshire 243,978
Stirling 31,891
West Dunbartonshire 65,977
West Lothian 69,386

Source: Finance Circular 4/2011

2.4.3 Sales, Rents, Fees and Charges

Local Authorities receive income from sales, rents, fees and charges as a result of providing services. These services are wide ranging in nature, as is the amount of income associated with each service, as detailed in Table 2.16 below.

Table 2.16 - Sales, Rents, Fees and Charges

£ thousand

2007-08 2008-09 2009-10 2010-11 2011-12
Education 93,255 85,691 87,115 95,006 115,017
Cultural & Related Services 81,421 78,621 85,516 81,521 77,479
Social Work 256,018 259,061 246,014 251,167 268,101
Police, Fire & Emergency Planning 55,564 88,557 93,043 55,098 66,575
Roads & Transport 145,226 146,605 165,941 146,068 171,674
Environmental Services 117,585 117,873 123,164 120,400 117,767
Planning & Economic Development 141,791 112,644 120,146 97,897 118,518
Non-HRA Housing 124,893 232,028 189,150 164,339 179,116
Central Services 130,075 141,455 144,819 113,862 143,521
Trading Services 56,544 70,810 66,992 66,852 63,526
Total GF Sales, Rents, Fees and Charges 1,202,372 1,333,345 1,321,900 1,192,210 1,321,294
HRA 909,126 920,146 955,710 979,571 965,920
Common Good Fund 7,342 8,324 9,073 7,168 10,809
Road Bridges 13,618 162 133 89 82
Total Sales, Rents, Fees and Charges 2,132,458 2,261,977 2,286,816 2,179,038 2,298,105

1. The Housing Revenue Account (HRA) records income and expenditure relating to Local Authority housing stock

Source: Local Financial Returns (LFRs)