Scottish Local Government Finance Statistics 2024-25
Annual publication providing a comprehensive overview of financial activity of Scottish local authorities in 2024-25 based on authorities' audited accounts (where available).
3. Capital Expenditure and Financing
Capital expenditure is expenditure that creates an asset, it includes the initial costs of acquisition and construction, and costs incurred subsequently to add to, replace part of, or service the asset. Subsequent costs arising from day-to-day services of an asset, known as repairs and maintenance, is not capital expenditure. Capital expenditure purchases or constructs the buildings and infrastructure necessary to provide services, such as schools, care homes, flood defences, roads, vehicles, plant and machinery. Due to the nature of capital expenditure, it can fluctuate substantially between years.
Capital expenditure also includes grants a local authority provides to a third party to fund capital expenditure of the third party; direct expenditure on a third parties’ assets; and loans to third parties to support capital investment of a third party.
Capital expenditure can be financed by one or more of the following:
- capital grants and contributions;
- borrowing or credit arrangements;
- contributions from capital or revenue reserve funds;
- capital receipts from the sale of assets.
Chapter 4.1 provides more information on local authorities’ capital reserve funds.
3.1 Capital Expenditure
In 2024-25, total capital expenditure was £4,659 million, an increase of 26.7 per cent, or £982 million, from 2023-24. This includes expenditure on the Housing Revenue Account.
Capital expenditure in 2024-25 is impacted by IFRS 16, the International Financial Reporting Standard for leases. It replaces older standards to create a single model for lessees, requiring most leases over 12 months to appear on the balance sheet as a Right-of-Use (ROU) Asset and a Lease Liability. This brings most lease obligations onto the balance sheet, increasing transparency, though it allows exemptions for short-term leases and low-value assets. The mandatory implementation date for IFRS 16 was 1 April 2024.
Chart 3.1 shows the split of capital expenditure into these six categories in 2024-25. The majority of capital expenditure, £3,297 million or 71 per cent, related to new construction, conversions & enhancements to existing buildings.
Chart 3.1: Capital Expenditure in 2024-25 by Expenditure Type, £ millions
Please note, ‘Third party capital projects funded from capital grant’ and ‘Revenue expenditure funded from borrowing’ are also included in authorities’ revenue figures.
Source: LFR CR
Table 3.1 shows a breakdown of capital expenditure between 2020-21 and 2024-25. New construction, conversions and enhancements to existing building has consistently accounted for the majority of capital expenditure over this period. This type of capital expenditure has increased by 13.2 per cent, or £385 million, between 2023-24 and 2024-25.
All categories have increased between 2023-24 and 2024-25, with the exception of Third Party Capital Projects funded from Capital Grant, which decreased from £289 million to £257 million.
Acquisition of land, existing buildings or works has increased from £180 million in 2023-24 to £610 million 2024-25. This included a £102 million increase in Education, a £167 million increase in “Other Services” as a result of IFRS 16 implementation and a £141 million increase in HRA.
Table 3.1: Capital Expenditure from 2020-21 to 2024-25 by Expenditure Type, £ millions
|
Expenditure Type |
2020-21 |
2021-22 |
2022-23 |
2023-24 |
2024-25 |
|
Acquisition of land, existing buildings or works |
66 |
151 |
207 |
180 |
610 |
|
New construction, conversions & enhancements to existing buildings |
2,013 |
2,623 |
2,959 |
2,912 |
3,297 |
|
Vehicles, plant, machinery & equipment |
232 |
222 |
293 |
246 |
388 |
|
Intangible assets |
20 |
30 |
4 |
24 |
31 |
|
Third Party Capital Projects funded from Capital Grant |
240 |
286 |
284 |
289 |
257 |
|
Revenue Expenditure Funded from Borrowing: Third Party Capital Grants |
14 |
26 |
20 |
20 |
22 |
|
Revenue Expenditure Funded from Borrowing: Consented Borrowing |
19 |
4 |
18 |
9 |
55 |
|
Total Capital Expenditure |
2,604 |
3,341 |
3,785 |
3,678 |
4,659 |
Please note, ‘Revenue expenditure funded from capital grant and borrowing’ is also included in authorities’ revenue figures.
Source: LFR CR
3.1.1 Capital Expenditure by Service
Chart 3.2 shows capital expenditure in 2024-25 by service. HRA had the largest share of expenditure at £1,286 million, followed by Education (£1,169 million) and Other (£624 million). Other includes Central Services (£198 million), Other Services (£343 million), Social Work (£59 million) and Trading Services (£25 million).
Chart 3.2: Capital Expenditure in 2024-25 by Service, £ millions
Please note, ‘Other’ includes Central Services, Other Services, Social Work and Trading Services.
Source: LFR CR
Chart 3.3 shows capital expenditure for 2020-21 to 2024-25 for the six services with the highest capital expenditure in 2024-25. Education increased by 72.3 per cent (£491 million) and this reflects the rollout of the Learning Estate Investment Programme. Other, including Central Services increased by 162.8% (£335 million) and this is likely to be due to the mandatory implementation of IFRS 16 as at 1 April 2024. HRA capital expenditure increased by 10.7 per cent (£124 million). Building, Planning and Development increased by 34.3% (£82 million). Capital expenditure increased for Non-HRA Housing (15.7 per cent, £33 million). Finally, Culture and Related Services increased by 11.4% (£24 million). Not shown in the chart, Roads & Transport decreased by 12.8 per cent (£91 million);
Chart 3.3: Capital Expenditure from 2020-21 to 2024-25 by Service, £ millions
This chart excludes expenditure for Environmental Services; Social Work and Trading Services which, combined, accounted for 5 per cent of total capital expenditure in 2024-25.
Source: LFR CR
3.1.2 General Fund Capital Expenditure by Council
In any given year, capital expenditure per person varies substantially between local authority areas. This will in part reflect the different priorities of local authorities, however it also reflects differences in the timing of capital projects. Expenditure on capital projects can be highly variable as some projects can be high-value and infrequent, and expenditure per head in local authority areas will move, possibly substantially, from year to year as projects begin or wind down.
Chart 3.4 shows capital expenditure on General Fund services per person by council. In 2024-25, the average capital expenditure per person across all councils was £599, an increase from £451 per person in 2023-24. Spend per person ranged from £202 per person in Clackmannanshire to £1,275 per person in Scottish Borders.
Chart 3.4: General Fund Capital Expenditure in 2024-25 by Council, £ per person
Source: LFR CR, National Records of Scotland Mid-2024 population estimates
3.2 Capital Financing
Chart 3.5 shows how local authorities financed their capital expenditure in 2024-25. This includes expenditure on the Housing Revenue Account. The two main sources of financing were Borrowing from the Loans Fund, £2,101 million, and Grants & Contributions, £1,479 million, which together accounted for 77 per cent of all capital financing in 2024-25.
Capital grants and contributions are provided to local authorities to fund capital investment. This includes grants and contributions received from the Scottish and UK Governments; other government agencies and Non-Departmental Public Bodies (NDPBs); other local authorities; and private developers. The Scottish Government provides two types of capital grant funding to local authorities – a General Capital Grant (GCG) and a number of specific capital grants. The General Capital Grant accounted for just over two-fifths of grants and contributions in 2024-25[10].
More information on borrowing is provided in Chapter 3.3 and more information on the Loans Fund is provided in Chapter 5.1.1.
Chart 3.5: Capital Financing in 2024-25 by Source, £ millions
Please note that ‘Borrowing from Loans Fund’ and ‘Grants & Contributions’ include amounts used to fund grant to third-party capital projects which will also be included in the revenue figures.
Source: LFR CR
Chart 3.6 shows capital financing by type from 2020-21 to 2024-25. Except for Grants & Contributions and Capital Reserves, all types of financing have increased between 2023-24 and 2024-25. Borrowing from the Loans Fund and Grants & Contributions continue to be the main sources of capital financing.
Chart 3.6: Capital Financing from 2020-21 to 2024-25 by Source, £ millions
Please note that ‘Borrowing from Loans Fund’ and ‘Grants & Contributions’ include amounts used to fund grants to third-party capital projects which will also be included in the revenue figures.
Source: LFR CR
Financing from credit arrangements saw a marked increase during 2024-25 of around £690 million. This is a consequence of IFRS 16 where these assets are now recognised on the balance sheet.
The increase in credit arrangements during 2022-2023 is partly as a result of Glasgow City Council securing £200 million in credit arrangements as part of a sale and leaseback arranged to fund its £200 million equal pay settlement. The properties involved included Kelvingrove Art Gallery, Kelvin Hall, the Gallery of Modern Art and the City Chambers[11].
3.3 Borrowing and Credit Arrangements
Local authorities can borrow to fund capital expenditure, either through the borrowing of money or by way of a credit arrangement, such as a lease. The cost of repaying debt, including the interest costs, is expenditure to the revenue accounts. The costs of servicing debt in 2024-25 are provided in Table 2.5, which shows the cost of repayments and interest payable.
The Local Government (Scotland) Act 1973 provides councils with a general power to borrow money. Other local authorities’ powers are set out in legislation specific to that authority. The Local Authority (Capital Finance and Accounting) (Scotland) Regulations 2016 sets out the purposes for which a local authority may borrow.
Table 3.2 provides a summary of borrowing and credit arrangements in 2024-25. Local authorities financed £2,101 million of capital expenditure from borrowing in 2024-25. From Chart 3.6, this was an increase of 23.2 per cent, £396 million, compared to 2023-24.
In 2024-25, local authorities recorded credit arrangements, recognising debt of £692 million, an increase of £690 million, from 2023-24. This increase is the consequence of IFRS 16 which means these assets are now recognised on the balance sheet. This is likely to be a one-off change and captures transactions which may have occurred prior to 2024-25.
Table 3.2: Borrowing and Credit Arrangement Summary for 2024-25, £ million
| Category | General Fund | HRA | Total |
|---|---|---|---|
|
Advances for Capital Expenditure |
1,185 |
862 |
2,047 |
|
Advances for Consented Borrowing |
55 |
0 |
55 |
|
Total Loans Fund Borrowing |
1,240 |
862 |
2,101 |
|
Credit Arrangements |
692 |
0 |
692 |
|
Total Borrowing and Credit Arrangements |
1,932 |
862 |
2,794 |
Please note that ‘Advances for Capital Expenditure’ includes borrowing from the Loans Fund used to fund grants to third party capital projects which will also be included in the revenue figures.
Source: LFR CR
Trends for borrowing from the Loans Fund and credit arrangements between 2020-21 and 2024-25 are shown in Chart 3.6 and discussed in Chapter 3.2.
3.4 Capital Receipts
Capital receipts is the term used to recognise income from the sale or disposal of an asset, such as land or council housing. As shown in Table 3.3, local authorities generated £90 million in capital receipts in 2024-25. This is a decrease of £34 million compared to 2023-24. The larger figure 2023-24 is due to Glasgow City Council’s sale and leaseback transactions (see Chapter 3.2).
Table 3.3: Capital Receipts raised in 2020-21 to 2024-25, £ millions
|
Category |
2020-21 |
2021-22 |
2022-23 |
2023-24 |
2024-25 |
|
General Fund |
68 |
44 |
292 |
89 |
77 |
|
HRA |
25 |
22 |
32 |
36 |
12 |
|
Total |
93 |
67 |
324 |
124 |
90 |
Source: LFR CR
Capital receipts may only be used to fund capital expenditure or for a purpose specified by statute, or statutory guidance. Local authorities can also hold capital receipts in a capital reserve for future use. This means the value of capital receipts raised in year may not equal the amount used in year. Table 3.4 sets out how capital receipts were used in 2024-25.
Table 3.4: Use of capital receipts in 2024-25, £ millions
|
Use |
General Fund |
HRA |
Total |
|
Fund capital expenditure |
51 |
18 |
69 |
|
Repay debt |
24 |
0 |
25 |
|
Fund transformation projects |
0 |
0 |
0 |
|
Fund premiums incurred on refinancing |
0 |
0 |
0 |
|
Fund deferred premiums |
0 |
0 |
0 |
|
Fund impact of Covid-19 |
0 |
0 |
0 |
|
Total capital receipts used in year |
76 |
18 |
94 |
Source: LFR CR
Local authorities used a total of £94 million capital receipts in 2024-25, the entirety of which were used to fund capital expenditure and repay debt, which accounted for 74 and 26 per cent of capital receipts used respectively.
Contact
Email: lgfstats@gov.scot