The Scottish Government provides a block grant to local authorities which amounts to the vast majority of their funding, around 85% of their net revenue expenditure, with the remainder funded largely from local taxation, i.e. Council Tax. This funding stream is broken down into three constituent parts, i.e. Revenue Support Grant, Non Domestic Rates Income, and Specific Grants which are set out below.
The method the Scottish Government use for calculating how much each local authority will receive for the Revenue Support Grant aspect of the block grant payment is set out using Grant Aided Expenditure (GAE) calculations and projections. Grant Aided Expenditure figures do not represent budgets, targets, or expenditure guidelines but are simply a means of determining what share of the total revenue funding from the Scottish Government each local authority should receive on the basis of relative need.
In addition to the block grant funding councils may also apply for discretionary funding under the Bellwin Scheme to assist them in undue financial burden as a result of providing relief and carrying out immediate work due to large-scale emergencies.
Details of how much each council will receive as their block grant are set out in the Local Government Finance settlement. This settlement is approved in Parliament when the Local Government Finance Order is passed. The detail of the block grant support is issued to local authorities by circular and the most recent circulars can be found by following the link to our finance circulars.
Once the amounts each local authority will receive has been approved by Parliament amendments might be discussed on a policy basis but can not be altered until Parliament has approved an amendment order. If Parliament approves these amendments they will then be paid to local authorities in the last two weeks of the financial year and councils will be informed of these changes in a finance circular issued at that time. These amendments to local authorities budgets are know as 'redeterminations'.
The distribution of each of the Grant Aided Expenditure lines are agreed by the Government in consultation with the Convention of Scottish Local Authorities (COSLA) and allocated using a number of indicators. These indicators can vary in number and type but could include data such as: population, pupil numbers, or deprivation.
In 2008, Mr Swinney, the Cabinet Secretary for Finance and Sustainable Growth, announced to Parliament that the Scottish Government together with local government would review the formula to ensure that the most robust system is in place. The outcome of this joint review with COSLA is available in the 'Distribution Review Officer Group, Final Report'.
Further information about GAE, including the 2012-2015 base calculations, is available on the Grant Aided Expenditure Statistics page.
Revenue Support Grant (RSG)
More commonly known as the General Revenue Grant. This is a grant paid by the Scottish Government in support of local authorities' general net revenue expenditure. This sum is calculated to make up the difference between a local authorities' standing spending assessment and the sum of resources obtained from national non-domestic rates and the council tax.
Non-domestic rates income is set centrally and pooled centrally but generated locally and is distributed back to local authorities through the distribution formula agreed with COSLA as part of the local government finance settlement. Each council's share of the estimated non-domestic rate income for the year ahead is distributed proportionately on the basis of council's latest mid-year income returns net of prior year adjustments. NDRI White Paper.
This is the amount authorities receive separately as grant, but specifically for one service, also known as 'ring fenced' funding. Funding for these grants are top-sliced from the overall funding totals.
This is a discretionary scheme, which exists to give special financial assistance to local authorities who would otherwise be faced with an undue financial burden as a result of providing relief and carrying out immediate work due to large-scale emergencies. Local authorities are expected to include a small amount within their annual budget to deal with unforeseen emergencies. There is no automatic entitlement to assistance.