Scottish Local Government Financial Statistics 2010-11

3 - LOCAL GOVERNMENT REVENUE EXPENDITURE

KEY SUMMARY FACTS

• Total gross revenue expenditure in 2010-11 was £18.5 billion.
• Total General Fund net revenue expenditure to be funded from General Revenue Funding (GRF), council tax and non-domestic rates was £13.0 billion.
• Total revenue reserves at 31 March 2011 were £1.6 billion.
• Housing revenue account gross revenue expenditure was £1.0 billion.

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, 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.

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, 2010-11

	£ Thousands
	General Fund Services1	Housing Revenue Account	Significant Trading Operations	Road Bridges	Common Good Fund
Employee Costs	7,580,561	151,164	453,258	4,075	218
Operating Costs	6,056,339	449,303	498,898	2,225	10,358
Support Service Costs	694,379	58,296	26,060	117	370
Transfer payments	2,239,666	1,683	.	-	800
Revenue Contributions to Capital	36,658	140,454	-	9,856	214
Adjustment for inter account and inter authority transfers	-654,297	-22,664	-709,787	-	-3,421
Grants to third parties funded by General Capital Grant	63,407	.	.	.	.
Statutory Repayment of Debt	531,490	105,190	22,378	1,440	2,633
Interest payments	615,931	122,444	..	..	..
Contributions to General Fund/ Other	.	1,475	7,816	-554	358
Total Gross Revenue Expenditure	17,164,134	1,007,345	298,623	17,159	11,530

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, 2010-11

	£ 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	4,856,964	180,450	4,676,514	39.3%	21,624
Cultural and Related Services	738,957	100,851	638,106	5.4%	12
Social Work	3,609,012	748,260	2,860,752	24.1%	2,354
Police	1,242,866	264,657	978,209	8.2%	397,102
Fire	357,138	43,643	313,495	2.6%	-
Roads and Transport	706,996	204,366	502,630	4.2%	300
Environmental Services	792,494	128,939	663,555	5.6%	162
Planning & Economic Development	512,608	199,401	313,207	2.6%	2,242
Non-HRA Housing	2,361,230	1,967,327	393,903	3.3%	2,962
Central Services	774,715	214,395	560,320	4.7%	.
Trading Services	61,552	69,825	-8,273	-0.1%	123
Total General Fund services	16,014,532	4,122,114	11,892,418	100.0%	426,881
Interest and investment income	615,931	26,185	589,746		.
Statutory repayment of debt	531,490	.	531,490		.
Contributions to/from HRA	2,181	.	2,181		.
Surplus/deficit from Significant Trading Operations	.	.	-11,105		.
Total	17,164,134	4,148,299	13,004,730		426,881

Table 3.3 - Net Revenue Expenditure by Service, 2006-07 to 2010-11

	£ millions
	2006-07	2007-08	2008-09	2009-102	2010-11
Education	4,252	4,432	4,676	4,633	4,677
Social Work	2,212	2,368	2,684	2,825	2,861
Police	1,067	1,078	1,100	1,125	978
Fire	280	290	320	332	313
Cultural & Related Services	592	593	628	662	638
Environmental Services	502	510	628	657	664
Roads & Transport1	447	447	453	486	503
Central Services	392	439	469	632	560
Planning & Economic Development	160	163	289	332	313
Non-HRA Housing	77	91	427	420	394
Trading Services	-11	-12	-5	-9	-8

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 - Net Revenue Expenditure By Service (%)

1. Due to revised accounting arrangements for PPP and PFI, it is not possible to directly 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 (and later years), 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.

Map 3.1

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

	£ thousands
	Net Revenue Expenditure1	General Revenue Funding2	Ring-fenced Revenue Grants3	Council Taxes	NDR	Balances
2006-07	10,714,001	5,777,202	888,171	1,811,577	1,883,769	353,282
2007-08	11,119,280	6,169,645	869,939	1,889,913	1,859,727	330,056
2008-09	12,421,451	7,425,886	726,350	1,908,972	1,962,800	397,443
2009-10	13,135,372	7,756,689	761,338	1,909,627	2,165,100	542,618
2010-11	13,004,730	8,149,407	431,419	1,923,186	2,068,200	432,518

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 (%)

	Net Revenue Expenditure1	General Revenue Funding2	Ring-fenced Revenue Grants3	Council Taxes	NDR	Balances
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%	59.8%	5.8%	15.4%	15.8%	3.2%
2010-11	100.0%	62.7%	3.3%	14.8%	15.9%	3.3%

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, 2010-11

	£ thousands
	Revenue Reserves					Total Revenue Reserves
	General Fund	Housing Revenue Account	Renewal and Repairs	Insurance Fund	Other Statutory Funds
Level of Reserves held 1 April 2010	813,544	69,222	185,452	76,092	267,488	1,411,798
Level of Reserves held 31 March 2011	920,750	75,792	201,380	75,820	290,181	1,563,923

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. 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.

Table 3.7 - Trading Service Revenue Expenditure and Income by Service, 2010-11

	Passenger Transport1			£ thousands
	Buses	Ferries	Other transport undertakings	Road bridges	Fisheries, harbours and markets2	Other trading services2	Total External Trading
Expenditure
Employee costs	704	8,452	1,258	4,075	1,944	25,588	42,021
Operating expenses	556	16,326	3,016	1,671	17,765	27,012	66,346
Revenue contributions to capital	.	.	.	9,856	29	-	9,885
Support service costs	46	297	147	117	326	2,013	2,946
Grants to third parties funded by General Capital Grant	-	-	-	-	-	22	22
Adjustment for inter account and inter authority transfers	-1,029	0	-5,191	0	-33	-13,114	-19,367
Total expenditure	277	25,075	-770	15,719	20,031	41,521	101,853
Income
Government grants	133	12	-	1,282	146	-	1,573
Sales, rents, fees and charges	225	5,600	83	89	19,908	46,944	72,849
Other income	200	76	-	15,297	-	2,805	18,378
Grants to third parties funded by General Capital Grant	-	-	-	-	-	22	22
Total income	558	5,688	83	16,668	20,054	49,771	92,822
Ring Fenced Grants	0	0	0	.	.	123	123

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, 2010-11¹

	£ thousands
Expenditure
Employee Costs	151,164
Operating costs	449,303
Transfer Payments	1,683
Support services	58,296
Statutory repayment of debt	105,190
Interest payments	122,444
Total Expenditure2	888,080
Total Gross Revenue Expenditure2	1,007,345
Income
Sales, rents, fees and charges	979,571
Government Grants	9,213
Other Income	2,309
Interest and investment income	1,260
Inter-Account and Inter-Authority Transfers	22,664
TOTAL INCOME	1,015,017
Net expenditure on housing	-126,937
Revenue contribution to capital	140,454
Net expenditure after contribution to capital	13,517
Contributions from the General Fund	2,181
Contributions to the General Fund	1,475
Surplus retained on HRA	17,173

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, 2010-11

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, 2010-11

	£ thousands
Expenditure
Employee Costs	218
Operating Expenses	10,358
Support Service Costs	370
Other Expenditure	358
Revenue Contributions to Capital	214
Transfer Payments	800
Loan Charges	2,633
Adjustment for inter account and inter authority transfers	-3,421
TOTAL EXPENDITURE	11,530
Income
Sales, fees and Charges	7,168
Investment Income	3,157
Other Income	353
TOTAL INCOME	10,678