Scottish local government finance statistics 2015-2016

Annual publication providing a comprehensive overview of Scottish local authority financial activity.

This document is part of a collection


3. Local Government Reserves, Fixed Assets and Debt

Local authorities can hold reserves to spend on services in the future and borrow to fund capital expenditure that will create an asset.

  • Total reserves increased by 6% during the year;
  • Total debt increased by 1% on the previous year;
  • Value of fixed assets increased by 3%.

Total Reserves: £2,519 million

Total Debt, 31st March 2012 to 31st March 2016 (£thousands)

Total Debt, 31st March 2012 to 31st March 2016 (£thousands)

Value of Fixed Assets, 31st March 2012 - 31st March 2016 (£thousands)

Value of Fixed Assets, 31st March 2012 - 31st March 2016 (£thousands)

3.1 Local Authority Debt

Local authority capital expenditure is financed from a number of sources. When this is by borrowing money or a credit arrangement (e.g. a finance lease or a Public-Private Partnership ( PPP) or Private Finance Initiative ( PFI)) a debt liability is created to be repaid by a local authority from future revenues.

The Local Government (Scotland) Act 1975 Act requires a local authority to maintain a loans fund. Advances are made from the loans fund to record the amount of expenditure a local authority has determined should be met from borrowing as permitted by legislation. The repayments made to the Loans Fund is the amount to be met in each financial year from a local authority revenue budget.

The expenditure recorded in the loans fund is expenditure which has been deferred (i.e. not met by taxpayers or housing tenants when it is incurred) and is to be charged to taxpayers or housing tenants over a number of future years. The value of a loans fund will increase whenever an advance is made for expenditure incurred, or loans made, in any financial year. The value of the loans fund will reduce when loans fund advances are repaid by making a charge to the General Fund or Housing Revenue Account. The balance on a loans fund at 31 March each year represents the amount of past expenditure a local authority has a liability to fund from its future revenue budgets.

A local authority will borrow externally to fund the expenditure that is deferred and recorded in the loans fund. The balance on the loans fund should be similar to the value of external borrowing. There may be differences between the two values. Local authorities may borrow internally, that is use cash reserves rather than borrowing externally, or may borrow in advance of incurring the actual expenditure to take advantage of favourable interest rates.

The value of Loans Fund advances outstanding is set out in Table 3.1 and the level of credit arrangements outstanding is set out in Table 3.2.

Following a review of the Capital forms in 2015, the timing of the data collection was changed to allow for final, audited capital data to be collected. Prior to this, near-final data was collected and, as such, the loans fund advances outstanding on 31st March may not match the loans fund advances outstanding on 1st April.

The all Scotland value of loans fund advances outstanding at 31st March 2016 was £13.41 billion (of which £10.05 billion was General Fund and £3.36 billion was HRA). General Fund loans fund advances outstanding increased by £93.3 million (0.9%) between 1st April 2015 and 31st March 2016. HRA loans fund advances outstanding rose by £143 million (4.5%) between 1 st April 2015 and 31 st March 2016.

At 31st March 2016, the Scottish average General Fund loans fund advances outstanding was equal to £1,870 per person (up 0.4% on 31st March 2015) and the average HRA loans fund advances outstanding was equal to £10,609 per HRA dwelling (up 4.6% on 31st March 2015).

Table 3.1: General Fund and HRA Loans Fund Advances Outstanding, 2011-12 to 2015-16

£thousands

2011-12 2012-13 2013-14 2014-15 2015-16
General Fund
Loans Fund advances outstanding 1 April 9,118,442 9,608,327 9,650,825 9,932,872 9,954,276
Add New advances from the Loans Fund 918,890 852,238 788,568 518,296 558,669
Less: Repayments in year 455,689 475,952 469,823 462,945 456,449
Less: Additional Voluntary Repayments in Year 68,547 45,299 34,546 27,437 8,934
Transfer of assets between funds (transfers out are negative) 258 -292 -1,411 -1,773 -65
Total Loans Fund advances outstanding (£ thousands) 9,513,353 9,939,022 9,933,613 9,959,013 10,047,542
Per Head (£) 1,810 1,870 1,865 1,862 1,870
Housing Revenue Account
Loans Fund advances outstanding 1 April 2,384,118 2,619,354 2,835,741 3,024,509 3,219,673
Add New advances from the Loans Fund 342,578 313,149 316,958 311,404 272,658
Less: Repayments in year 97,820 96,475 127,585 105,602 112,504
Less: Additional Voluntary Repayments in Year 7,414 2,920 9,956 12,411 16,931
Transfer of assets between funds (transfers out are negative) -258 292 1,411 1,773 65
Total Loans Fund advances outstanding (£ thousands) 2,621,205 2,833,400 3,016,569 3,219,673 3,362,961
Per HRA dwelling (£) 8,284 8,973 9,533 10,138 10,609
Total ( GF + HRA) Loans Fund advances outstanding 12,134,558 12,772,422 12,950,182 13,178,687 13,410,504

Source: Capital Returns ( CR Final), Housing Revenue Account: Local authority housing income and expenditure, NRS Mid-Year Population Estimates (2013)

Table 3.2: Credit Arrangements, 2011-12 to 2015-16

£thousands

2011-12 2012-13 2013-14 2014-15 2015-16
General Fund
Balance brought forward 1 April 2,846,858 2,865,124 2,845,843 2,800,193 2,750,910
Add: New credit arrangements in year 106,888 14,055 30,625 42,701 21,726
Less: Repayments of principal in year 97,269 84,955 90,802 92,895 87,933
Credit arrangements outstanding 31 March 2,856,476 2,794,224 2,785,666 2,749,999 2,684,703
Per Head (£) 544 526 523 514 500
Housing Revenue Account
Balance brought forward 1 April 14,226 10,508 7,132 4,965 3,469
Add: New credit arrangements in year 0 0 0 0 0
Less: Repayments of principal in year 3,683 3,380 2,167 1,496 790
Credit arrangements outstanding 31 March 10,543 7,128 4,965 3,469 2,679
Per Head (£) 33 23 16 11 8
Total ( GF + HRA) Credit Arrangements Outstanding 2,867,019 2,801,352 2,790,631 2,753,468 2,687,382

Source: Capital Returns ( CR Final)

Table 3.3: Total Debt, 31 st March 2012 to 31 st March 2016

£thousands

31st March 2012 31st March 2013 31st March 2014 31st March 2015 31st March 2016
General Fund
Loans Fund Advances Outstanding 9,513,353 9,939,022 9,933,613 9,959,013 10,047,542
Credit Arrangements 2,856,476 2,794,224 2,785,666 2,749,999 2,684,703
Total General Fund Debt 12,369,830 12,733,246 12,719,279 12,709,012 12,732,245
Per Head (£) 2,354 2,396 2,387 2,377 2,370
Housing Revenue Account
Loans Fund Advances Outstanding 2,621,205 2,833,400 3,016,569 3,219,673 3,362,961
Credit Arrangements 10,543 7,128 4,965 3,469 2,679
Total HRA Debt 2,631,748 2,840,528 3,021,534 3,223,142 3,365,640
Per HRA Dwelling (£) 8,317 8,995 9,549 10,149 10,617
Total Debt 15,001,577 15,573,774 15,740,813 15,932,155 16,097,885

Source: Capital Returns ( CR Final)

3.2 Prudential Indicators

The CIPFA Prudential Code sets out a framework for a local authority to demonstrate its capital investment plans are affordable, prudent and sustainable. A number of prudential indicators are set and monitored against three year capital expenditure plans.

Key prudential indicators are:

  • Capital Financing Requirement;
  • Total External Debt;
  • Operational Boundary;
  • Authorised Limit.

The Capital Financing Requirement ( CFR) represents the amount of capital expenditure which a local authority has determined should be met from borrowing with the repayment of that borrowing to be met from future local authority budgets. Each year the CFR will increase by the amount of new capital expenditure which a local authority has determined should be met by borrowing (which includes both borrowing money and credit arrangements such as PPP/ PFI) and decrease by the amounts repaid. The CFR only represents an authority's underlying need to borrow to finance capital expenditure. The actual Total External Debt may be less than the CFR where a local authority has chosen to utilise internal cash reserves rather than borrow externally. The Total External Debt may exceed the CFR where a local authority has chosen to borrow in advance of actual capital expenditure. The Prudential Code limits borrowing in advance to the CFR plus up to 2 years planned capital expenditure to be funded from borrowing.

Prudential Indicators

Local authorities are also required to set limits on external debt. The Operational Boundary is based on the authority's capital spending plans and should reflect the most likely, i.e. prudent, but not worst case scenario for borrowing. In general, it is not significant if an authority breaches the operational boundary for a short period, however a sustained or regular trend above the operational boundary would be significant.

The authorised limit represents the maximum amount that the authority may borrow and is set at a level that reflects capital expenditure plans but includes headroom to allow for unusual cash movements i.e. treasury management.

Local authority Total External Debt increased by £0.17 billion (1.1%), from £14.98 billion at the 31 st March 2015 to £15.15 billion at the 31 st March 2016. Local authorities are currently under-borrowed, i.e. utilising internal cash reserves rather than external borrowing, with total external debt as a percentage of the Capital Financing Requirement falling from 98% at 31 st March 2012 to 94% at 31 st March 2016.

Table 3.4: Prudential Information, 2011-12 to 2015-16

£thousands

2011-12 2012-13 2013-14 2014-15 2015-16
Capital Financing Requirement at 1 April 13,988,396 14,674,452 14,893,146 15,863,207 16,020,231
Capital Expenditure to be financed by borrowing or credit arrangements 1,368,356 1,179,442 1,136,151 872,402 853,053
Capital Expenditure to be financed by borrowing 1,261,468 1,165,387 1,105,526 829,701 831,327
Capital Expenditure to be financed by credit arrangements 106,888 14,055 30,625 42,701 21,726
Loans Fund principal repayments 553,509 572,427 597,408 568,548 568,953
Credit arrangements principal repayments 100,952 88,335 92,969 94,391 88,723
Additional voluntary contributions of principal repayments 75,961 48,219 44,502 39,848 25,865
Change in Capital Financing Requirement 637,934 470,461 401,272 169,615 169,512
Capital Financing Requirement at 31 March 14,626,330 15,144,913 15,294,418 16,032,822 16,189,743
Borrowing at 1 April 10,800,370 11,290,176 11,558,504 11,897,475 12,378,022
Other long term liabilities at 1 April 2,920,001 2,875,632 2,852,975 2,690,905 2,648,120
Total External Debt at 1 April 13,720,371 14,165,808 14,411,479 14,588,380 15,026,142
Borrowing at 31 March 11,340,431 11,706,550 11,816,384 12,332,169 12,465,804
Other long term liabilities at 31 March 2,925,936 2,801,352 2,790,631 2,645,977 2,680,311
Total External Debt at 31 March 14,266,367 14,507,902 14,607,015 14,978,146 15,146,115
Operational boundary for external debt at 31 March 16,223,733 16,571,358 16,684,872 16,779,418 16,982,303
Authorised limit for external debt at 31 March 17,223,932 17,553,906 17,749,541 17,787,296 17,733,442
Total External debt as a percentage of the Capital Financing Requirement at 31 March 98% 96% 96% 93% 94%

Source: Capital Returns ( CR Final)

Chart 3.1: Prudential Indicators: 31 st March 2012 to 31 st March 2016

£thousands

Chart 3.1: Prudential Indicators: 31st March 2012 to 31st March 2016

Source: Capital Returns ( CR Final)

3.3 Fixed Assets

Capital Expenditure creates local authority assets. The value of local authority fixed assets is shown in Table 3.5 below. At 31 st March 2016, local authorities held a total of £40.7 billion of assets, an increase of 3.3% (£1,293 million) on 31 st March 2015.

Table 3.5: Value of Fixed Assets, 31 st March 2012 to 31 st March 2016

£thousands

Value of fixed assets as at 31 March 2012 a Value of fixed assets as at 31 March 2013 Value of fixed assets as at 31 March 2014 b Value of fixed assets as at 31 March 2015 Value of fixed assets as at 31 March 2016
Operational Assets
Council dwellings 9,475,119 10,450,805 10,839,706 10,535,999 11,281,473
Other land and buildings 18,955,480 18,978,739 18,276,923 18,866,921 18,995,354
Vehicles, plant and machinery 937,152 1,022,046 1,003,162 1,178,814 1,197,642
Infrastructure assets 4,432,109 4,751,596 4,987,041 5,361,011 5,608,853
Community assets 165,502 168,819 161,728 169,971 184,156
Heritage assets 417,174 1,804,230 1,803,074 1,840,245 1,848,685
Total operational assets 34,382,536 37,176,235 37,071,634 37,952,961 39,116,163
Non-operational assets
Assets under construction 1,456,501 1,271,111 1,200,830 845,627 1,011,066
Surplus assets held for disposal 397,053 377,632 365,120 336,021 314,377
Investment properties 205,613 205,220 197,445 207,027 197,382
Total non-operational assets 2,059,167 1,853,963 1,763,395 1,388,675 1,522,825
Intangible Assets 77,184 19,747 23,913 52,306 48,437
Total Assets excluding Police & Fire 36,299,949 38,214,124 38,858,942 39,393,942 40,687,425
Total Assets 37,168,112 39,049,945 38,858,942 39,393,942 40,687,425

a. Total Assets for 2011-12 includes £649,225 thousand for South Ayrshire Council that couldn't be broken down into the above categories.
b. Following the Police and Fire Reform (Scotland) Act 2012 figures for 2013-14 onwards may not be comparable with previous years. See the Background chapter for details.
Source: Capital Returns ( CR Final)

Contact

Email: Euan Smith

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