4. Reserves and Fixed Assets

4.1 Reserves

Usable reserves reflect a local authority's accumulation of surplus income that can be used to finance future revenue or capital expenditure on services. Chart 4.1 shows the total usable reserves at 31 March 2020, by fund.

Chart 4.1: Usable Reserves at 31 March 2020, £ millions
Treemap showing usable reserves at 31 March 2020 in £ millions

Source: LFR 23


A = Other Statutory Funds, £13m

The General Fund is the principle usable revenue reserve of the local authority. Any deficit in a local authorities' revenue accounts is met from their General Fund, and any surplus is added to the General Fund reserve. The General Fund therefore reflects a local authority's accumulation of surplus income that can be used to finance future revenue expenditure on services or to fund future capital expenditure.

The Orkney County Council Act 1974 and the Zetland County Council Act 1974 require Orkney and Shetland to also hold a Harbour Account, a separate account and reserve fund specifically for harbour undertakings. Orkney and Shetland are also able to transfer money between their General Fund and their Harbour Accounts. In this chapter Harbour Account figures are presented separately, however they are included within General Fund figures in other chapters within this publication.

Where a council has housing stock, the accumulation of surplus income relating to housing is separately identified in their Housing Revenue Account (HRA).

In addition to the General Fund a local authority may also hold other statutory usable revenue reserves, such as a Renewal and Repairs Fund, an Insurance Fund, or other reserves specific to a local authority as permitted by legislation. Amounts will be transferred to and from the General Fund to these reserves.

Local authorities hold two capital reserves – the Capital Fund / Capital Receipts Reserve and a Capital Grants and Receipts Unapplied Account.

The Capital Fund and Capital Receipts Reserve were previously identified separately but are now treated as a single reserve. The Capital Fund / Capital Receipts Reserve may be used for the purpose of meeting the cost of capital expenditure and for the repayment of principal on loans, but not any interest on loans.

The Capital Grants Unapplied Account holds capital grant that has been received but not yet used to fund capital expenditure, or capital receipts held pending their funding of specific expenditure as permitted by Scottish Ministers.

Local authorities also hold a number of unusable reserves, that is reserves which are not backed by cash resources and cannot be used to fund services. Unusable reserves include a Revaluation Reserve, where increases in the value of fixed assets are recorded. This reserve is not usable as an increase in value of an asset will not be realised until the asset is sold. Other unusable reserves include sums deferred or set aside as statutory adjustments which are used to ensure the Annual Accounts of a local authority reconcile to statutory requirements. As these are unusable reserves, they are not discussed in this publication. However this data is collected as part of the Local Financial Returns and is available in the published LFR 23 workbook.

A change in accounting practice in 2018-19 (IFRS 9) resulted in unrealised gains in the value of investments held by local authorities being included in the General Fund / HRA / Harbour reserve balances, rather than in an unusable reserve as before. This gain is unrealised as the investment is still held and any gain will only be realised if the investment is sold. The unrealised gain is therefore required to be earmarked and is not available to fund future revenue expenditure or to fund capital investment. The value of usable reserves presented in this publication therefore exclude any IFRS 9 unrealised gains held as part of the General Fund / HRA balances.

Table 4.1 sets out the movements across all reserves in 2019-20. Figures relating to the General Fund (including Harbour Account figures) and HRA were also presented in Chapter 2.4.

Local authorities had an increase of £114 million in their revenue reserves, and an increase of £8 million in their capital reserves in 2019-20. This means local authorities' usable reserves increased by £123 million overall, from £2,586 million at 1 April 2019 to £2,708 million at 31 March 2020.

Table 4.1: Movements in Usable Reserves in 2019-20, £ millions 1
  Level of reserves held at 1 April Net increase (+) or decrease (-) in year Level of reserves held at 31 March
Revenue Reserves
General Fund 1,211 104 1,315
Housing Revenue Account 177 11 188
Harbour Account 284 -15 269
Renewal and Repairs 138 2 141
Insurance Fund 90 12 102
Other Statutory Funds 12 0 13
Total Revenue Reserves 1,913 114 2,027
Capital Reserves
Capital Fund / Capital Receipts 494 -20 475
Capital Grants and Receipts Unapplied 179 28 207
Total Capital Reserves 673 8 681
Total Usable Reserves 2,586 123 2,708

Source: LFR 23


1 Excludes amounts relating to unrealised gains as at 31 March 2019 that have been included in revenue reserves applying under IFRS 9: Financial Instruments.

Table 4.2 sets out the level of reserves held by all local authorities in Scotland at 31 March from 2015-16 to 2019-20. Usable reserves have been broadly stable over this period, with some fluctuations between years. Over this five year period, the most significant change in total usable reserves is between 2018-19 and 2019-20.

Table 4.2: Level of Usable Reserves held at 31 March from 2015-16 to 2019-20, £ millions
  2015-16 2016-17 2017-18 2018-19 a, b 2019-20 b
Revenue Reserves
General Fund 1,193 1,178 1,153 1,143 1,315
HRA 142 169 177 177 188
Harbour Account 1 n/a 312 312 314 269
Renewal and Repairs 201 171 172 138 141
Insurance Fund 85 84 88 90 102
Other Statutory Funds 1 282 20 32 12 13
Total Revenue Reserves 1,903 1,934 1,935 1,874 2,027
Capital Reserves
Capital Fund / Capital Receipts 578 522 491 491 475
Capital Grants and Receipts Unapplied 50 45 147 180 207
Total Capital Reserves 628 567 638 671 681
Total Usable Reserves 2,531 2,501 2,573 2,546 2,708

Source: LFR 23


a Figures may not match the 1 April figures in Table 4.1 due to restatements in local authorities' accounts between years. In particular, the significant change in General Fund reserve relates to an adjustment by SPT to move £66 million of balance sheet creditors to General Fund reserves in line with the Transport (Scotland) Act 2019.

b Excludes amounts relating to unrealised gains that are included in revenue reserves in statutory Annual Accounts applying IFRS 9: Financial Instruments.

1 Figures for Harbour Accounts were not collected separately in returns prior to 2016-17, they were instead included in the Other Statutory Fund figures.

4.2 Fixed Assets

Capital expenditure creates local authority assets. In 2019-20, the value of local authority fixed assets was £48,315 million, an increase of 4.6 per cent, or £2,132 million, from 2018-19. The value of local authority fixed assets from 2015-16 to 2019-20 is shown in Table 4.3.

Table 4.3: Value of Fixed Assets at 31 March from 2015-16 to 2019-20, £ millions 1
  2015-16 2016-17 2017-18 2018-19 2019-20 % change between 2018-19 & 2019-20
Operational assets 39,116 40,258 41,620 44,242 46,110 4.2%
Non-operational assets 1,523 1,810 1,780 1,875 2,139 14.1%
Intangible assets 48 51 56 65 65 -1.3%
Total Assets 40,687 42,120 43,456 46,182 48,315 4.6%

Source: LFR CR for 2019-20 and CR Final for all other years


1 A more detailed breakdown of fixed asset values between 2015-16 and 2019-20 is provided in Table 4.3a in the 'SLGFS 2019-20 - Publication Tables' Excel file.

Operational assets are assets a local authority can use when providing services, such as a school, council houses, vehicles etc. Almost all of local authorities' fixed assets are operational assets and the value of these has increased each year since 2015-16, with a total increase of 17.9 per cent, or £6,994 million, over this period.

Non-operational assets are assets that a local authority cannot currently utilise, for example an asset that is still under construction or an asset that is being held for disposal. Intangible assets are non-physical assets, such as computer software. Both non-operational assets and intangible assets account for a very small proportion of local authorities' fixed assets.


Email: lgfstats@gov.scot