Local government capital

A local authority's capital expenditure is the money it spends on providing or improving non-current assets, which include land, buildings and equipment, which will be of use or benefit in providing services for more than one financial year.

We provide local authorities in Scotland with funding to support their capital expenditure. This funding is provided in the form of two types of grant:

Details of the grants awarded to each local authority are issued in the finance circulars relating to the Local Government Finance Settlement.

Other public bodies which form part of the wider Scottish Government may also provide capital grants to local authorities for specific projects. These grants are not shown in the finance circulars.

In addition to these grants, local authorities finance their capital expenditure from the following sources:

  • revenue, either their annual revenue budget or revenue reserves
  • capital receipts, i.e. money received from selling land, buildings or other capital assets (capital receipts may only be used to fund new capital expenditure or the repayment of debt principal)
  • borrowing

The funding local authority capital expenditure: framework identifies how different types of expenditure are treated in the national accounts and local authority accounts.

General Capital Grant

The General Capital Grant is provided to councils as part of the annual Local Government Settlement, i.e. the amount of grants provided to local government each year.

Councils are able to spend this grant on capital projects that meet local and national priorities to deliver their Single Outcome Agreement or the national Strategic Objective and Purpose. A General Capital Grant offer is made to individual councils each year through the issue of a grant offer letter.

Specific Capital Grant

Specific Capital Grants are also known as specific purpose grants or ring-fenced grants, and may only be used by local authorities to fund specific capital expenditure. The terms and conditions of each grant are set out separately in the grant offer letters.

We provide local authorities with some Specific Capital Grants through the Local Government Finance Settlement. Additional Specific Capital Grants are paid to local authorities in Scotland outwith the Local Government Finance Settlement.

Borrowing

Local authorities have legal powers to borrow for specific purposes. It is for local authorities to decide how much they can afford to borrow. In deciding what they can afford, they have to apply the CIPFA Prudential Code principles of affordability, prudence and sustainability.

Find out more on our Local government borrowing: fact sheet.