Scottish Local Government Financial Statistics 2009-10

3 LOCAL GOVERNMENT REVENUE EXPENDITURE

KEY SUMMARY FACTS

• Total gross revenue expenditure in 2009-10 was £18.5 billion.
• Total General Fund net revenue expenditure to be funded from GRF, council tax and non-domestic rates was £13.1 billion.
• Total revenue reserves at 31 March 2010 were £1.4 billion.
• Housing revenue account gross revenue expenditure was £973 million.

Revenue expenditure covers the costs of maintaining local services and primarily consists of employee costs and operating costs. The benefits of revenue expenditure are received within one financial year. All revenue expenditure, except expenditure on Local Authority housing, is accounted for through the General Fund.

Employee costs include salaries and wages, national insurance and superannuation contributions, cash allowances paid to employees, redundancy and severance payments and other employee costs.

Operating costs include property costs, supplies and services costs, transport (including car allowances) and plant costs, payments to agencies and other bodies, and direct administration costs (including training).

Support Service costs are those paid for services that support the provision of services to the public, e.g.IT, Human Resources, Legal Services, Procurement Services and Corporate Services.

Transfer payments are those made to individuals for which no goods or services are received in return by the local authority.

Revenue Contributions to Capital ( RCC) are the revenue contributions towards capital expenditure on capital assets which were met directly from the service revenue within the current year. RCC can also be referred to as capital funded from current revenue ( CFCR) in discussions of Capital accounts.

Adjustment for inter-account and inter-authority transfers is an adjustment made for the contributions made by one authority to another, i.e. inter-authority transfers, and the recharges, or income from other accounts within an authority, i.e. inter-account transfers. The adjustment is equal to the total of inter-authority transfers and the total of inter-account transfers.

Grants to third parties funded by General Capital Grant ( GCG) come under both revenue and capital expenditure. The General Capital Grant was introduced for the first time in 2008-09. It is a Scottish Government grant paid to the 32 Local Authorities. The grant may be used to fund the capital expenditure of the local authority. With certain limitations, the grant may also be used to fund third party capital expenditure (either through direct spend or the provision of grant). Where the GCG is used to finance the capital expenditure of the council, this expenditure is considered strictly as capital expenditure. Where the GCG is used to fund third party capital projects the GCG is treated as revenue income and the corresponding third-party grant or direct payment is treated as revenue expenditure.

Revised accounting arrangements for Public Private Partnerships ( PPP) and Public Finance Initiatives ( PFI) were introduced from 1 ^st April 2009. Therefore, 2009-10 revenue expenditure, statutory repayment of debt and interest and investment income for services in which there are PPP or PFI schemes is not comparable with previous years. See section 1.2 for further details.

Gross revenue expenditure is the total expenditure on Local Authority services within a financial year less inter-authority and inter-account transfers.

Net revenue expenditure is gross revenue expenditure, less other government grants, sales, fees and charges, grants to third parties funded by General Capital Grant, and other grants, reimbursements and contributions. It is therefore the net revenue expenditure that is to be financed from General Revenue Funding, non-domestic rates, council tax and balances.

Table 3.1 - Gross Revenue Expenditure, 2009-10

£ Thousands

	General Fund Services 1	Housing Revenue Account	Significant Trading Operations	Road Bridges	Common Good Fund
Employee Costs	7,504,392	137,832	502,149	4,189	149
Operating Costs	6,083,923	470,755	515,365	2,979	11,238
Support Service Costs	701,560	67,325	23,378	115	388
Transfer payments	2,337,408	1,395	.	-	1,449
Revenue Contributions to Capital	40,905	106,463	975	8,871	232
Adjustment for inter account and inter authority transfers	-673,792	-14,319	-728,181	-	-979
Grants to third parties funded by General Capital Grant	75,150	.	.	.	.
Statutory Repayment of Debt	473,136	94,410	14,845	740	1,609
Interest payments	599,150	104,786	..	..	..
Contributions to General Fund/ Other	.	4,299	4,509	-	626
Total Gross Revenue Expenditure	17,141,832	972,946	333,040	16,894	14,712

1- Includes trading services and non- HRA housing. For a breakdown of expenditure in these areas, refer to Table 3.7 and Annexes F and G respectively.

3.1 General Fund Revenue Expenditure⁵

Table 3.2 - General Fund Revenue Expenditure, 2009-10

£ thousands

	Gross Expenditure	Income	Net Expenditure financed from grants, NDR , council tax and balances	Net exp as % of total services	Ring-fenced Revenue Grants
Education	4,818,152	185,275	4,632,877	38.3%	37,783
Cultural and Related Services	768,987	106,791	662,196	5.5%	7,883
Social Work	3,559,328	734,196	2,825,132	23.4%	14,669
Police	1,296,823	171,357	1,125,466	9.3%	594,980
Fire	349,708	18,001	331,707	2.7%	-
Roads and Transport	698,778	213,051	485,727	4.0%	1,218
Environmental Services	789,900	132,473	657,427	5.4%	1,787
Planning & Economic Development	514,080	181,929	332,151	2.7%	94,768
Non- HRA Housing	2,323,649	1,903,387	420,262	3.5%	4,608
Central Services	889,716	257,374	632,342	5.2%	.
Trading Services	59,530	68,759	-9,229	-0.1%	122
Total General Fund services	16,068,651	3,972,593	12,096,058	100.0%	757,818
Interest and investment income	599,150	30,358	568,792		.
Statutory repayment of debt	473,136	.	473,136		.
Contributions to/from HRA	895	.	895		.
Surplus/deficit from Significant Trading Operations	.	.	-3,509		.
Total	17,141,832	4,002,951	13,135,372		757,818

Table 3.3 - Net Revenue Expenditure by Service, 2005-06 to 2009-10

£ millions

	2005-06	2006-07	2007-08	2008-09	2009-10 2
Education	4,112	4,252	4,432	4,676	4,633
Social Work	2,054	2,212	2,368	2,684	2,825
Police	1,018	1,067	1,078	1,100	1,125
Fire	278	280	290	320	332
Cultural & Related Services	575	592	593	628	662
Environmental Services	476	502	510	628	657
Roads & Transport 1	555	447	447	453	486
Central Services	551	392	439	469	632
Planning & Economic Development	159	160	163	289	332
Non- HRA Housing	64	77	91	427	420
Trading Services	-9	-11	-12	-5	-9

1. Includes Local Authority Transport Undertakings
2. Due to revised accounting arrangements for PPP and PFI, it is not possible to compare net revenue expenditure for 2009-10 with previous years for services in which there are PPP or PFI schemes. The services affected are: Education, Social Work, Culture & Related Services, Environmental Services and Roads & Transport.

Chart 3.1 General Fund Net Revenue Expenditure by Service (%)^1,2

1. Due to revised accounting arrangements for PPP and PFI, it is not possible to compare net revenue expenditure for 2009-10 with previous years for services in which there are PPP or PFI schemes. The services affected are: Education, Social Work, Culture & Related Services, Environmental Services and Roads & Transport.
2. Roads & Transport includes Local Authority Transport Undertakings.

As identified in Section 1.2, changes in accounting arrangements in 2009-10 for PPP and PFI mean that items relating to financing of PPP and PFI previously included within service expenditure are now recorded in statutory repayment of debt and interest payments. This affects the level of service expenditure when comparing 2008-09 to 2009-10, especially in education where most councils have a PPP or PFI scheme in operation. As mentioned earlier in section 2.1, 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 3.3 and in Chart 3.1 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.

3.2 Revenue Expenditure Financing

Net revenue expenditure is funded through grants, non-domestic rates, council tax and balances as shown below in Tables 3.4 and 3.5.

Table 3.4 - Financing of Net Revenue Expenditure, 2005-06 to 2009-10

£ thousands

	Net Revenue Expenditure 1	General Revenue Funding 2	Ring-fenced Revenue Grants 3	Council Taxes	NDR	Balances
2005-06	10,612,201	5,567,902	756,874	1,720,305	1,897,073	670,047
2006-07	10,714,001	5,777,204	888,171	1,811,577	1,883,769	353,280
2007-08	11,119,280	6,169,645	869,938	1,889,913	1,859,727	330,057
2008-09	12,421,451	7,425,884	723,776	1,908,972	1,962,800	400,019
2009-10	13,135,372	7,756,689	757,818	1,909,627	2,165,100	546,138

1. Includes trading services and non- HRA housing. For a breakdown of expenditure in these areas, refer to Table 3.7 and Annexes F and G respectively.
2. Prior to 2008-09, GRF or General Revenue Funding was referred to as Revenue Support Grant.
3. Prior to 2008-09, Ring-fenced Revenue Grants were referred to as Specific Grants.

Table 3.5 - Financing of Net Revenue Expenditure (%), 2005-06 to 2009-10

	Net Revenue Expenditure 1	General Revenue Funding 2	Ring-fenced Revenue Grants 3	Council Taxes	NDR	Balances
2005-06	100.0%	52.5%	7.1%	16.2%	17.9%	6.3%
2006-07	100.0%	53.9%	8.3%	16.9%	17.6%	3.3%
2007-08	100.0%	55.5%	7.8%	17.0%	16.7%	3.0%
2008-09	100.0%	59.8%	5.8%	15.4%	15.8%	3.2%
2009-10	100.0%	59.1%	5.8%	14.5%	16.5%	4.2%

1. Includes trading services and non- HRA housing. For a breakdown of expenditure in these areas, refer to Table 3.7 and Annexes F and G respectively.
2. Prior to 2008-09, GRF or General Revenue Funding was referred to as Revenue Support Grant.
3. Prior to 2008-09, Ring-fenced Revenue Grants were referred to as Specific Grants.

3.3 Revenue Reserves

Reserves are generated by accumulating surplus income, which is generally then used to finance future spending on services.

Table 3.6 - Beginning and End of Year Revenue Reserves Levels by Account, 2009-10

£ thousands

	Revenue Reserves
	General Fund	Housing Revenue Account	Renewal and Repairs	Insurance Fund	Other Statutory Funds	Total Revenue Reserves
Level of Reserves held 1 April 2009	718,211	99,373	189,362	76,688	261,496	1,345,130
Level of Reserves held 31 March 2010	775,622	95,715	185,026	75,914	274,513	1,406,790

3.4 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).

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. On the capital expenditure side of things, 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.

Table 3.7 - Trading Service Revenue Expenditure and Income by Service, 2009-10

	Passenger Transport 1						£ thousands
	Buses	Ferries	Other transport undertakings	Road bridges	Fisheries, harbours and markets 2	Other trading services 2	Total External Trading
Expenditure
Employee costs	621	8,168	1,183	4,189	1,888	20,037	36,086
Operating expenses	556	16,684	2,877	2,979	16,482	21,313	60,891
Revenue contributions to capital	.	.	.	8,871	-	1,356	10,227
Support service costs	11	254	219	115	342	1,460	2,401
Adjustment for inter account and inter authority transfers	-940	-88	-5,292	-	-245	-3,103	-9,668
Total expenditure	248	25,018	-1,013	16,154	18,467	41,063	99,937
Income
Government grants	80	31	-	1,226	2	-	1,339
Sales, rents, fees and charges	202	5,469	64	133	18,277	48,715	72,860
Other income	-	366	-	13,142	84	1,681	15,273
Total income	282	5,866	64	14,501	18,363	50,396	89,472
Ring Fenced Grants	-	-	-	.	.	122	122

1. Included under Roads & Transport in service level breakdowns
2. Included under Trading Services in service level breakdowns

3.5 Housing Revenue Account

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.

Table 3.8 - Housing Revenue Account Expenditure and Income, 2009-10 ¹

£ thousands

Expenditure
Employee Costs	137,832
Operating costs	470,755
Transfer Payments	1,395
Support services	67,325
Statutory repayment of debt	94,410
Interest payments	104,786
Total Expenditure 2	876,503
Total Gross Revenue Expenditure 2	972,946
Income
Sales, rents, fees and charges	955,710
Government Grants	5,583
Other Income	5,942
Interest and investment income	1,878
Inter-Account and Inter-Authority Transfers	14,319
TOTAL INCOME	983,432
Net expenditure on housing	-106,929
Revenue contribution to capital	106,463
Net expenditure after contribution to capital	-466
Contributions from the General Fund	895
Contributions to the General Fund	4,299
Surplus retained on HRA	4,728

1. Includes leasing charges
2. The total expenditure breakdown represents the way HRA is recorded in local authority accounts.
The total gross revenue expenditure figure is included to ensure consistency with the HRA expenditure breakdown in table 3.1 which provides a comparison with other accounts.

Chart 3.2 - Housing Revenue Account Expenditure and Income, 2009-10

3.6 Common Good Fund

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.

Table 3.9 - Common Good Fund Expenditure and Income, 2009-10

£ thousands

Expenditure
Employee Costs	149
Operating Expenses	11,238
Support Service Costs	388
Other Expenditure	626
Revenue Contributions to Capital	232
Transfer Payments	1,449
Loan Charges	1,609
Adjustment for inter account and inter authority transfers	-979
TOTAL EXPENDITURE	14,712
Income
Sales, fees and Charges	9,073
Investment Income	3,296
Other Income	396
TOTAL INCOME	12,765