Local Government 2024-25 Provisional Outturn and 2025-26 Budget Estimates
This publication summarises the 2024-25 provisional outturn and 2025-26 budget estimates for revenue and capital services provided by Scottish local authorities.
Revenue Expenditure
Revenue expenditure is the cost of delivering services each year and includes both service operating costs and overheads. These costs might include salaries, rent, building maintenance, supplies and services. The benefits from revenue expenditure are mainly received within the financial year.
Net revenue expenditure (NRE) is the element of revenue expenditure funded by general funding or reserves. It is calculated as gross service expenditure minus gross service income. Gross service income is any income received directly relating to services, such as service-specific grants or fees / charges received for the provision of services. Net revenue expenditure is therefore directly influenced by the amount of service income received, i.e. an increase in service income will reduce net revenue expenditure, and a decrease in service income will increase net revenue expenditure. Where service income is greater than service expenditure, a service would have a negative net revenue expenditure, i.e. net income. Individual local authority level figures can also be affected by large, one-off payments in any year, for example Equal Pay back-pay settlement expenditure.
The Revenue POBE collects net revenue expenditure for all General Fund services only. Revenue figures exclude amounts relating to a local authority’s direct provision of housing which is recorded in the Housing Revenue Account (HRA). However 2024-25 budget estimates for local authority’s HRA were published in the Housing Revenue Accounts Statistics in November 2024. It should also be noted that for the purposes of the Revenue POBE return and this publication, Trading Services includes amounts relating to Harbour Accounts. These are separate accounts and reserve funds specifically for harbour undertakings held by Orkney Islands and Shetland Islands councils only.
Local authorities have reported, for the general fund, provisional outturn net revenue expenditure of £15,760 million in 2024-25, and have budgeted net revenue expenditure of £16,239 million for 2025-26. This is an increase on the £14,758 million seen in 2023-24, and higher than all the three preceding years (Figure 1).
Compared to 2023-24 SLGFS figures, general fund net revenue expenditure is estimated to increase by 6.8% (£1,002 million) in 2024-25. Much of this increase can be attributed to the baselining of £950.9 million into the General Revenue Grant (GRG)[1]. This funding was previously classed as gross income in the net revenue expenditure calculation (NRE = Gross Expenditure minus Gross Income). However, baselining it into the GRG leads to a corresponding increase in NRE. Of the £950.9 million which was baselined, this included the Specific Grant for Early
Learning and Childcare (£521.9m)[2]. NRE is estimated to increase by a further 3.0% (£479 million) in 2025-26.
Local authorities were asked to provide figures for additional gross expenditure directly incurred due to COVID-19 in order to give some indication of the impact of COVID-19 in each year. Additional COVID-19 expenditure was as follows:
- £604 million in 2020-21[3];
- £375 million in 2021-22[4];
- £156 million in 2022-23[5];
- £37 million in 2023-24[6];
- Provisional outturn for 2024-25 was forecast to be £6 million, and;
- Budget estimates of just £2 million in 2025-26.
These amounts feature within the expenditure totals for each year.
Figure 1: General Fund Net Revenue Expenditure for 2021-22 to 2025-26, £ millions
Source: POBE 2025 Return, LFR 00
Figure 2 provides a summary of the 2024-25 provisional outturn and 2025-26 budget estimate for net revenue expenditure against the SLGFS net revenue expenditure from 2023-24 by service. Education and Social Work continue to be the services with highest net revenue expenditure in both years. These services account for around 80% of general fund net revenue expenditure in all years since 2021-22.
Education has the highest net revenue expenditure, with provisional outturn of £7,775 million in 2024-25, and a budget estimate for 2025-26 of £8,082 million. The increase of £815 million in net revenue expenditure is partly the result of the baselining of the Specific Grant for Early Learning and Childcare (£521.9 million). Education accounts for 50% of general fund net revenue expenditure in all years since 2021-22.
Social Work has the second highest net revenue expenditure, with local authorities reporting provisional outturn of £4,858 million in 2024-25 and budgeting expenditure of £5,075 million for 2025-26. Social work accounts for 31% of general fund net revenue expenditure in all years since 2021-22.
Figure 2: Net Revenue Expenditure for 2023-24 to 2025-26 by Service, £ millions
Source: POBE 2025 Return, LFR 00
Local authorities also incur some revenue expenditure and income that is not attributable to specific services, such as interest paid or received, or statutory repayment of debts. As shown in Table 1, local authorities’ provisional outturn (2024-25) and budget estimates (2025-26) for Other Income and Expenditure is £1,181 million and £1,314 million respectively.
General funding principally consists of the General Revenue Grant (GRG) and local taxation, specifically Non-Domestic Rates (NDR) and Council Tax. Local authorities have reported provisional general funding of £16,394 million in 2024-25, and have budgeted for general funding of £17,358 million in 2025-26. Further information on funding of net revenue expenditure between 2021-22 and 2025-26 is available in Figure 3.
Figure 3: General Funding for 2021-22 to 2025-26, £ millions
Please note the following:
- The 2021-22 and 2022-23 GRG figures differ to the Finance Circular allocation due to the exclusion of amounts for agency grants paid to local authorities via GRG.
- GRG budget estimates for 2025-26 include an additional £144 million to fund Employer National Insurance Contributions, which was not included in Finance Circular 1/2025.
- ‘Other Funding’ includes government grants paid to joint boards and income received through NDR Tax Incremental Financing (TIF) and Business Rates Incentivisation Scheme (BRIS). As this category amounts to less than 1% of the total shown in each year, this category is not visible in the chart, however figures are provided in the ‘POBE 2025 – Tables’ supporting Excel file.
Source: POBE 2025 Return, LFR A0
GRG is paid to local authorities by the SG. The SG guarantees the combined sum of GRG and NDR funding for local authorities in each financial year. There was a significant reduction in NDR in 2021-22 due to rates relief to support various sectors during the COVID-19 pandemic. GRG figures for these years reflect an increase to match the decrease in NDR, as well as significant amounts of COVID-19 specific funding.
During the first full year of the pandemic (in 2020-21), GRG and NDR funding accounted for around 67 and 14 per cent of General Funding respectively[7]. This has now settled to a position where GRG funding makes up around 63% of General Funding and NDR makes up around 19%.
More information on the process to determine local government funding from the SG is available in the Local Government Funding: Process Overview publication. Detailed funding figures per local authority are available in the latest Local Government Finance Circulars.
A surplus occurs when a local authority’s revenue expenditure is less than the amount of general funding received. A surplus is added to a local authority’s reserves and carried forward to the next year. A deficit occurs when a local authority’s revenue expenditure is more than the amount of general funding received. Any deficit must be met from a local authority’s reserves. Table 1 shows the surplus / deficit, in addition to the total movement in general fund reserves.
Table 1: Movement in General Fund Reserves from 2023-24 to 2025-26, £ millions
Please note that the level of reserves held at 1 April and 31 March excludes amounts relating to unrealised gains that are included in revenue reserves in statutory Annual Accounts applying IFRS 9: Financial Instruments. This table also contains Harbour Account reserves and transactions for Orkney and Shetland, which total around £288 million at the end of each year. Further notes are contained in the accompanying Excel tables.
Source: POBE 2025 Return, LFR A0, LFR 23
|
|
2023-24 |
2024-25 |
2025-26 |
|
Balance at 1 April |
3,198 |
3,178 |
2,771 |
|
Net Revenue Expenditure |
-14,758 |
-15,760 |
-16,239 |
|
Other Income (+) and Expenditure (-) |
-481 |
-1,181 |
-1,314 |
|
General Funding |
14,983 |
16,394 |
17,358 |
|
Surplus (+) or Deficit (-) on provision of services |
-255 |
-547 |
-195 |
|
Net movements in (+) or out (-) due to transfers between reserves |
263 |
151 |
50 |
|
Increase (+) or decrease (-) in IFRS 9 unrealised gains to be excluded |
27 |
12 |
0 |
|
Balance at 31 March |
3,178 |
2,771 |
2,625 |
Across all local authorities, the provisional outturn figures give a deficit of £547 million for 2024-25, more than the deficit of £255 million seen in 2023-24. The deficit figures of £195 million for 2025-26 reflect local authorities continuing to use some of their reserves to fund day-to-day services.
The General Fund balance (including Harbour Accounts) across local authorities at 31 March 2025 was £2,771 million, a decrease from the balance of £3,178 million at 31 March 2024. Local authorities’ budgets give a further decrease in the General Fund and Harbour Account balances to £2,625 million at 31 March 2026.
For context, General Fund reserve balances (including the Harbour Account) were £1,584 million on 31 March 2020 (see LFR 23, row 73 in Scottish local government finance statistics (SLGFS) 2019-20: workbooks). Therefore, whilst reserve balances remain above pre-pandemic levels for Scotland, they are being brought down.
[2] See Deputy First Minister and Cabinet Secretary for Finance. Annex A includes a breakdown of the £950.9 million funding which was baselined. This also includes £333.5 million for the Living Wage.
[3] See LFR 00 (2020-21). Cell M97. In addition to this, £3.076 million was incurred by the HRA.
[4] See LFR 00 (2021-22). Cell M108. In addition to this, £4.401 million was incurred by the HRA.
[5] See LFR 00 (2022-23). Cell M108. In addition to this, £0.042 million was incurred by the HRA.
[6] See LFR 00 (2023-34). Cell M108. Nothing was incurred by the HRA.
[7] See Table 2.6 in Scottish Local Government Finance Statistics 2023-24 - gov.scot.