Scottish Local Government Finance - Green Book: 2026-2027

2 Changes Since the Last Settlement

2.1 Comparison to 2025-26 settlement

The needs-based indicators used in assessments have, where possible, been updated to use the most up-to-date data available, though a few elements are fixed, for example, Marches and Parades uses 2003 data. 

Some individual totals have not remained at the same levels as the 2025-26 settlement, and in a few cases the formula has changed.

2.2 Data issues

The Data Issues Working Group (DIWG) is the technical advisory group, comprising of representatives of the Scottish Government and local government (including COSLA), which exists to assist the analytical work undertaken in support of the allocation calculations.  The work programme of the DIWG is directed by the Settlement and Distribution Group (SDG), which was established to oversee all matters relating to the local government finance settlement.

2.3 Changes

Dual Indicator Review 2025

The Dual Indicator Review is undertaken for two reasons.  The first is to establish whether or not pairs of indicators currently used in the settlement calculations, and determined mathematically, continue to be valid by displaying a statistically significant relationship with past expenditure.  The second is to produce updated regression coefficients – the measure of the relationship between expenditure and the indicators – for use in the next Settlement.  The coefficients determine the amount of funding distributed on each indicator. 

All eight of the GAE lines distributed by this methodology in the previous settlement produced statistically significant values to confirm that the expected relationships still exist.  

2022 Population Census data

The final sets of the Census data usually used in the settlement became available in time for the 2026-27 settlement. These included those used in elderly social care, adjusted population estimates, and the smaller area data used for national parks.

Elderly Social Care

The availability of the 2022 Census data facilitated an updating of the methodology for three composite indicators used extensively in Adult Social Care lines. The indicators related to Residential Care, Home Care, and Personal & Nursing Care, all for aged 65 plus. 

The methodology, and in some cases the data, had not been updated since the 2001 Census, and some of the original formulae had not been based on modelling. The latest available client number data were modelled against Pensions Credit data, Council Tax data, mortality ratios, and three census variables (limiting long-term illness, living alone, and single-owner occupiers). Revised models for each were obtained using regression analysis. In Personal & Nursing Care, the previously used rates that scaled modelled numbers to historical participation rates were removed.

The scope of two of these lines were adjusted to aid modelling, namely, personal and nursing care for home-based clients moved to being considered as part of the Home Care line, transferring about £95.5 million of quantum.

The magnitude and scope of the changes resulted in some large redistributions of funding.  The new methodology can be seen in the Supplementary Tables accompanying this publication.

Special Islands Needs Allowance

A review was carried out during 2024 and 2025 to determine if there were revisions needed to the Special Island Needs Allowance made to island communities in recognition of the additional cost of providing services on islands. In the absence of a large-scale data collection exercise, there was no compelling evidence to suggest a change to the current revenue SINA methodology was required. 

However, in capital, it was agreed that it would be beneficial to consider changes given higher costs for islands are not generally currently reflected, there being no overall SINA payment in the capital settlement. This resulted in the following changes being made.

• Basic, Transport, Regional Transport Partnerships, and Waste: The percentage mark-ups from the revenue settlement were applied to the distributions, with the full distribution then scaled back to the correct quantum.
• Biodiversity: Sites on islands receive a 15 per cent mark-up within the formula.
• Piers and harbours: Weights were changed to 50 per cent terminal numbers, 50 per cent passenger numbers, to more fairly reflect the differing size of terminals. The fixed amount was removed, and data related to island terminals received a 15 per cent mark-up.

Justice Social Work

A review was carried out to identify a new formula for Justice Social Work, as some of the data used were no longer published, and the formula was considered overly complicated, based on ten indicators. A technical advisory group recommended three variables; a three-year average of cleared-up crimes and offences, excluding road traffic offences; adult population, weighted by the age profile of people given a community payback order; populations living outwith settlements of size 1,000. It was also agreed that a damping mechanism be used that ensures a gradual introduction whereby a percentage decrease in an authority’s funding share will be no more than 2.5 per cent in 2026-27, five per cent in 2027-28, 7.5 per cent in 2028-29, and ten per cent in 2029-30, compared with its funding share for 2025-26. Damping will be removed in 2030-31.

Other indicators

The following lists other changes to formulae for the 2026-27 settlement

• Ten per cent of additional funding for Additional Support for Learning will be distributed based on the Education Deprivation Line, with the remainder continuing to be based on the Non-teaching Staff line.
• Funding for Real Living Wage Children's Social Care uplifts will be moved to being based on the Changing Children’s Services Development Fund GAE line.
• Supported Employment will use disability benefits data, rather than the sample data that was becoming less reliable.
• The £20 million School Fund Transfer was merged into the Primary, Secondary and Special Teaching Staff lines, though this year still identified as School Buildings.
• It was recognised that the Loan Charges Adjustment line was  already included within the Loan Charges line and so should not be additionally paid.
• The School Fund Capital line, which had generally been rolled forward since about 2000, is distributed based on pupil numbers, scaled up using an average capital costs index from the Building Costs Information Service.

2.4 Local Authority naming convention

Please note that City of Edinburgh and Na h Eileanan Siar have been placed in their correct alphabetical order, which differs from that used in the Finance Circular.