Funding of local government 2021 to 2022: process overview

Overview of the process to determine the local government finance settlement for 2021 to 2022. The figures used are set out in Finance Circular 5/2021, as agreed by Parliament. The publication relates to general funding, and excludes any additional COVID-19 funding provided over the last year.

How are Capital Projects funded?

All of the funding referred to so far has been for day-to-day running costs, called 'revenue spend'. In addition to that, councils also spend on longer-term capital projects, such as flood defences, town centre renewal and road building.

In the past this was funded by borrowing, with the Scottish Government providing a grant to fund repayments. But now the Scottish Government provides a Capital Grant to fund capital projects.

The Capital Grant is also distributed by means of a funding formula, based largely on population and road-length. Some funding is ring-fenced for specific projects such as flood defence.

Capital funding cannot be used on day-to-day running costs, but councils can use some of their revenue funding to pay for capital projects.

Total Capital Grant provided in 2021-22 - £629 million

Summary of the 11 different indicators used in the formulae
Pie chart showing the proportions distributed on different indictors



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