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.

So why will some councils get more Scottish Government Grant than others?

We have seen that the distribution of the £13.1 billion was based on an agreed funding formula, and then adjusted by the Floor.

The next step is to subtract the funding that we forecast they will receive from Council Tax and Non-domestic Rates. The amount each council can raise from these mainly depends on the size of their population and the number of businesses. So really it is only the Scottish Government grant that can be adjusted to ensure that each council receives its calculated fair share of the total funding.

The Scottish Government grant therefore works as a balancing item, providing the remainder of the needed funding. This may mean one council receives a lot more actual grant than another.

Diagram illustrating why Council A receives much less grant than Council B

In the above example, Council A's share of the available funding is less than Council B's. It also receives much more from Non-domestic Rates raised in its area. So Council A needs to receive a lot less Scottish Government grant.



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