4. Reserves and Fixed Assets
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 2021, by fund.
Please note that 'Other' revenue reserves includes the Insurance Fund.
Source: LFR 23
The General Fund is the principle usable revenue reserve of the local authority. Any deficit in a local authority’s 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 summary of the movement in each unusable reserve in 2020-21 is also provided in the ‘SLGFS 2020-21 – Additional Analysis – Reserves’ supporting excel file.
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 2020-21. 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 £1,191 million in their revenue reserves, and an increase of £9 million in their capital reserves in 2020-21. This means local authorities’ usable reserves increased by £1,201 million overall, from £2,723 million at 1 April 2020 to £3,924 million at 31 March 2021.
|Usable Reserve||Level of
held at 1 April
|Net increase (+)
or decrease (-) in year
held at 31 March
|Housing Revenue Account||188||61||248|
|Renewal and Repairs||141||37||177|
|Other Statutory Funds||13||2||14|
|Total Revenue Reserves||2,041||1,191||3,233|
|Capital Fund / Capital Receipts||475||-11||464|
|Capital Grants and Receipts Unapplied||207||20||227|
|Total Capital Reserves||681||9||691|
|Total Usable Reserves||2,723||1,201||3,924|
Please note that level of reserves held at 1 April and 31 March exclude amounts relating to unrealised gains that are included in revenue reserves in statutory Annual Accounts applying IFRS 9: Financial Instruments.
Source: LFR 23
The majority of the increase in usable reserves relates to an increase in the General Fund of £1,036 million between 1 April 2020 and 31 March 2021. This increase is largely attributable to additional Covid-19 funding from the Scottish Government that was confirmed to be paid via GRG on 18 March 2021. Any element of this funding which remained unspent at 31 March 2021 was added to local authorities’ General Fund reserves to be carried forward for use in future years.
Local authorities are able to earmark, or set aside, part of their General Fund reserves for future use for a specific purpose. At 31 March 2021, local authorities’ had earmarked 71.1 per cent, or £1,682 million, of their General Fund reserves.
Table 4.2 sets out the level of reserves held across all local authorities in Scotland at 31 March from 2016-17 to 2020-21. Over this five year period, the most significant change is between 2019-20 and 2020-21 which is discussed earlier in this chapter.
|Renewal and Repairs||171||172||138||141||177|
|Other Statutory Funds||20||32||12||13||14|
|Total Revenue Reserves||1,934||1,935||1,874||2,027||3,233|
Capital Fund / Capital Receipts
|Capital Grants and Receipts Unapplied||45||147||180||207||227|
|Total Capital Reserves||567||638||671||681||691|
|Total Usable Reserves||2,501||2,573||2,546||2,708||3,924|
Please note the following:
Figures exclude amounts relating to unrealised gains that are included in revenue reserves in statutory Annual Accounts applying IFRS: Financial Instruments.
Figures for 2019-20 may not match the 1 April 2020 figures shown in Table 4.1 due to restatements in local authorities' accounts between years.
Source: LFR 23
4.2 Fixed Assets
Capital expenditure creates local authority assets. In 2020-21, the value of local authority fixed assets was £50,234 million, an increase of 4.0 per cent, or £1,920 million, from 2019-20. The value of local authority fixed assets from 2016-17 to 2020-21 is shown in Table 4.3.
|Fixed Asset Type||2016-17||2017-18||2018-19||2019-20||2020-21||% change
between 2018-19 & 2019-20
Source: LFR CR for 2019-20 and 2020-21, CR Final for all other years
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 by 18.6 per cent, or £7,507 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. Non-operational assets and intangible assets together accounted for 4.9 per cent of local authorities’ total fixed assets in 2020-21.
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