Local Government 2025-26 Provisional Outturn and 2026-27 Budget Estimates

Executive Summary

General Fund Net Revenue Expenditure

• General fund net revenue expenditure on local authority services was provisionally reported as £16,479 million in 2025-26 and budgeted as £17,254 million for 2026-27.
• This is an increase of 6.9% (£1,057 million) in 2025-26, compared to the net revenue expenditure figure of £15,422 million seen in 2024-25. Part of this increase can be attributed to the baselining of £524.9 million into the General Revenue Grant, which switched this funding away from the category of specific grants. As Net Revenue Expenditure measures general funding and the use of Council’s own reserves, funding more money via the General Revenue Grant leads to a corresponding rise in Net Revenue Expenditure.
• General fund net revenue expenditure is estimated to increase by a further 4.7% (£775 million) in 2026-27.
• Education and Social Work continue to be the services with highest net revenue expenditure in both 2025-26 and 2026-27. These services account for around 50% and 31% respectively of general fund net revenue expenditure in both years.

General Funding

• Local authorities reported provisional general funding of £17,581 million in 2025-26, and budgeted for £18,305 million of general funding in 2026-27. The 2026-27 figure includes £20.5 million anticipated to be raised from the Visitor Levy by the City of Edinburgh Council.

General Fund and Harbour Account Reserves

• General Fund (including Harbour Account) reserves at 31 March 2026 were provisionally reported as £2,775 million, and budgeted to be £2,617 million at 31 March 2027. For context, General Fund (including Harbour Account) reserve balances were at around £1,600 million on 31 March 2020. Therefore, whilst reserve balances remain above pre-pandemic levels for Scotland, these are being brought down.
• Harbour Account reserves remain fairly constant at around £277 million as at 31 March 2025, 31 March 2026 and 31 March 2027.

Capital Expenditure

• Capital expenditure across local authorities was £4,779 million in 2024-25, and is provisionally reported as £4,461 million in 2025-26, a decrease of 6.7% (£318 million). It is budgeted as £5,318 million in 2026-27.
• Housing Revenue Account (HRA) has the highest capital expenditure in both 2025-26 and 2026-27, accounting for 29% and 30% of all capital expenditure in both years. Education is expected to have the second highest in both years, accounting for 19% in both 2025-26 and 2026-27.
• Capital expenditure for Education remains on average around £300 million a year higher for the five years 2024-25 to 2028-29, compared to 2019-20 to 2023-24, reflecting the roll out of the Learning Estate Investment Programme.
• The main sources of capital financing are borrowing and grants & contributions. In-year borrowing is expected to increase from £2,103 million in 2024-25, to £2,228 million in 2025-26, and then to £3,349 million in 2026-27. Borrowing is currently the primary source of capital financing.
• Total external debt was provisionally reported as £25,617 million in 2025-26, and budgeted as £28,793 million in 2026-27, with local authorities continuing to remain under-borrowed.