Scottish Local Government Financial Statistics 2010-11

4 - LOCAL GOVERNMENT CAPITAL EXPENDITURE

KEY SUMMARY FACTS

• Total capital expenditure in 2010-11 was £2,35 million.
• Capital grants from the Scottish Government to finance capital expenditure in 2010-11 were £697 million.
• Borrowing to finance capital expenditure (including finance leases) in 2010-11 was £1.22 billion.
• Capital receipts used to finance 2010-11 capital expenditure were £115 million.
• Capital funded from current revenue in 2010-11 was £209 million.
• The value of Local Authority fixed assets at 31 March 2011 was £36.3 billion.
• Total outstanding debt at 31 March 2011 was £11.5 billion.

Capital expenditure undertaken by Local Authorities is mainly for purchasing, constructing or enhancing physical assets, such as buildings (e.g. police or fire stations and schools), land (e.g. playing fields), infrastructure (e.g. roads), and vehicles, plant and machinery. Capital expenditure also includes expenditure that the Scottish Ministers have permitted the local authorities to treat as capital expenditure and is met from capital resources.

Capital expenditure is financed by one or more of the following types of income:

• Capital receipts from asset sales
• Capital grants and contributions
• Contributions from revenue funds
• Borrowing/ Finance leases

Prior to 1 April 2004, Local Authorities were only permitted to incur liability to fund capital expenditure with the consent of Scottish Ministers. These capital consents were issued by Ministers under section 94 of the Local Government (Scotland) Act 1973. Following the introduction of the Local Government in Scotland Act 2003, Local Authorities are permitted to finance capital expenditure by borrowing without securing Government approval. Local Authorities have a statutory duty to set their own maximum capital expenditure limits. These limits must be set with regard to the CIPFA Prudential Code, which requires that capital expenditure undertaken by Local Authorities must be affordable, prudent and sustainable.

Detailed breakdowns of Capital Expenditure can be found in Annexes I and J.

Table 4.1 - Capital Expenditure, 2010-11¹

	£ thousands
	General Fund Services	Housing Revenue Account	Total
Acquisition of land, leases, existing buildings or works	91,428	7,302	98,730
New construction, conversions & enhancement to existing buildings	1,349,467	527,225	1,876,692
Vehicles, machinery & equipment	145,920	10,369	156,289
Intangible assets	4,202	840	5,042
Total	1,591,017	545,736	2,136,753
Revenue Expenditure funded from Capital Resources	211,029	380	211,409
Total Capital Expenditure	1,802,046	546,116	2,348,162

1. Includes capital funded from current revenue

Table 4.2 - Capital Expenditure by General Fund Service, 2006-07 to 2010-11

	£ thousands
	2006-07	2007-08	2008-09	2009-10	2010-11
Education	415,392	464,827	479,258	1,248,645	508,691
Cultural & Related Services	136,412	166,636	207,088	216,345	196,014
Social Work	58,962	65,449	63,233	66,379	51,256
Police & Fire	66,820	68,680	101,062	83,779	56,224
Roads & Transport	471,778	484,669	479,769	471,795	399,084
Environmental Services	69,260	101,341	121,267	121,769	102,458
Planning & Economic Development	71,000	122,754	124,060	171,613	120,742
Non-HRA housing	82,259	54,806	180,099	182,808	174,404
Trading Services	4,485	22,179	22,764	21,935	12,687
Other Services	283,610	179,887	274,923	212,250	180,486
Total GF Capital Expenditure	1,659,978	1,731,228	2,053,523	2,797,318	1,802,046
Housing Revenue Account	489,313	453,119	500,558	495,317	546,116
Total Capital Expenditure	2,149,291	2,184,347	2,554,081	3,292,635	2,348,162

1. Includes capital funded from current revenue
2. Due to revised accounting arrangements for PPP and PFI, it is not possible to compare capital expenditure for 2009-10 with previous years for services in which there are PPP or PFI schemes. This mainly affects Education.

Table 4.3 - Capital Expenditure by Local Authority type, 2010-11

						£ thousands
	General Fund	Housing Revenue Account	Total		General Fund		General Fund
Scotland	1,802,046	546,116	2,348,162
Aberdeen City	89,110	52,991	142,101
Aberdeenshire	41,665	25,882	67,547	Central Scotland Fire	1,005	Ayrshire VJB	7
Angus	23,293	8,344	31,637	Dumfries & Galloway Fire	595	Central VJB	-
Argyll & Bute 1	22,697	-	22,697	Fife Fire and Rescue Service	973	Dunbartonshire& Argyll & Bute VJB	47
Clackmannanshire	5,242	3,468	8,710	Grampian Fire	1,681	Grampian VJB	-
Dumfries & Galloway1	66,217	-	66,217	Highlands & Islands Fire	2,652	Highland & Western Isles VJB	-
Dundee City	57,801	26,962	84,763	Lothian and Borders Fire	2,275	Lanarkshire VJB	-
East Ayrshire	28,148	14,379	42,527	Strathclyde Fire	18,698	Lothian VJB	72
East Dunbartonshire	20,141	4,564	24,705	Tayside Fire	3,104	Orkney & Shetland VJB	-
East Lothian	27,849	30,075	57,924	TOTAL FIRE	30,983	Renfrewshire VJB	20
East Renfrewshire	14,199	4,677	18,876			Tayside VJB	38
Edinburgh, City of	198,873	37,718	236,591	Central Scotland Police	1,406	TOTAL VALUATION BOARDS	184
Eilean Siar1	35,206	-	35,206	Dumfries & Galloway Police	672
Falkirk	25,897	16,815	42,712	Fife Constabulary	1,386
Fife	95,133	47,314	142,447	Grampian Police	2,851
Glasgow City1	305,837	-	305,837	Lothian & Borders Police	4,984
Highland	72,525	17,678	90,203	Northern Police	1,659
Inverclyde1	17,942	-	17,942	Strathclyde Police	9,541
Midlothian	9,096	26,363	35,459	Tayside Police	2,347
Moray	26,178	10,300	36,478	TOTAL POLICE	24,846
North Ayrshire	18,962	27,095	46,057
North Lanarkshire	117,591	61,100	178,691	Forth Estuary Transport	9,055
Orkney Islands	14,443	6,268	20,711	Tay Road Bridge	1,807
Perth & Kinross	55,915	7,101	63,016	TOTAL BRIDGE AUTHORITIES	10,862
Renfrewshire	26,045	13,141	39,186
Scottish Borders1	29,869	-	29,869	HITRANS	-
Shetland Islands	15,864	2,704	18,568	NESTRANS	2,848
South Ayrshire	16,172	12,377	28,549	SESTRAN	377
South Lanarkshire	119,776	40,628	160,404	SWESTRANS	648
Stirling	19,235	12,379	31,614	SPT	26,378
West Dunbartonshire	35,696	15,796	51,492	TACTRAN	-
West Lothian	52,303	19,997	72,300	ZetTrans	-
TOTAL UNITARY AUTHORITIES	1,704,920	546,116	2,251,036	TOTAL REGIONAL TRANSPORT PARTNERSHIPS	30,251

1. These councils have transferred their housing stock to Registered Social Landlords

Map 4.1

4.1 Financing Capital Expenditure

Capital expenditure can be financed by central Government grants, capital receipts (proceeds from the sale of fixed assets), other grants and contributions, revenue resources and prudential borrowing (consisting of self-financed borrowing and borrowing supported through loan charge support from the Scottish Government).

The capital data for 2009-10 (and subsequent years) include the changes arising from the introduction of International Financial Reporting Standards (IFRS). Under the new accounting arrangements the criteria for asset recognition moved from risk and reward to the control of service provision and control of the residual value of the asset. Based on the new tests most local authorities identified that they do have control of service provision and the residual interest in the PFI assets, such as schools. These assets are now recognised as assets of the local authority (on-balance sheet) which they were not under the previous arrangements and now form part of the capital regime. Any expenditure on their construction or enhancement will be capital expenditure. The associated financing of the arrangement is a type of debt which is known as a finance lease or credit arrangement.

Table 4.4 - Financing of capital expenditure, 2010-11

	£ thousands
	General Fund	Housing Revenue Account	Total
Scottish Government General Capital Grant	352,272	380	352,652
Scottish Government Specific Capital Grants	223,183	5,682	228,865
Grants from Scottish Government Agencies and NDPBs	108,264	7,462	115,726
Other Grants and Contributions	84,520	9,966	94,486
Borrowing from Loans fund	808,181	305,748	1,113,929
Capital receipts used from asset sales/disposals	56,256	58,466	114,722
Capital Fund applied	14,904	12	14,916
Capital funded from current revenue	50,494	158,400	208,894
Assets acquired under credit arrangements (e.g. finance leases, PPP/PFI)	103,972	-	103,972
TOTAL	1,802,046	546,116	2,348,162

Table 4.5 - Total Capital Expenditure and Financing¹

	£ thousands
	2006-07	2007-08	2008-09	2009-10	2010-11
Total Capital Expenditure	2,149,479	2,184,347	2,554,081	3,292,635	2,348,162
Financed by:
Scottish Government grants	553,047	722,171	767,722	891,291	697,243
Borrowing2	766,272	715,234	1,207,055	1,915,990	1,217,901
Other grants and contributions	176,929	132,287	137,811	125,851	94,486
Capital Receipts/Capital Fund applied	454,178	440,987	244,657	193,362	129,638
Capital funded from current revenue	199,053	173,668	196,836	166,141	208,894

1. Includes Housing Revenue Account expenditure and financing.
2. Includes finance leases.

Chart 4.1 - Capital Expenditure Financing

4.2 Capital Receipts

Capital receipts can be used to finance capital expenditure and repay debt (principal but not interest). These receipts are generated through the sale or disposal of assets, such as a council house or other local authority land/building.

Table 4.6 - Capital receipts summary, 2010-11

	£ thousands
	General Fund	Housing Revenue Account	TOTAL
Capital Receipts brought forward at 1 April 2010	67,869	7,628	75,497
Capital receipts from the sale/ disposal of tangible fixed assets	76,385	65,515	141,900
Capital receipts from the sale/ disposal of intangible fixed assets	71	-	71
Total capital receipts available for use	144,325	73,143	217,468
Capital receipts used from asset sales/disposals	56,256	58,466	114,722
Capital receipts used to repay debt	1,521	5,453	6,974
Capital receipts transferred to Capital Fund	18,444	-	18,444
Capital receipts held 31 March 2011	68,104	9,224	77,328

4.3 Borrowing

Local Authorities have the statutory power to borrow under Schedule 3 of the Local Government (Scotland) Act 1975. Local Authorities may borrow for the purposes of:

• Acquiring land
• Construction of buildings
• Undertaking permanent work or provision of plant and machinery
• Lending to relevant authorities or Community Councils
• Any other purpose for which the authority is authorised under any enactment to borrow

Borrowing is a major component of the funding of capital expenditure, whose proportion in terms of capital expenditure financing increased greatly from 2007-08 to 2008-09, as shown in Chart 4.1.

The Scottish Government provides loan charge support as part of local authority revenue funding, which covers the debt charges on a notional amount of capital expenditure each year. This is known as supported borrowing. Borrowing over and above the level of supported borrowing is classified as self-financed borrowing, and is financed by the local authority itself.

Local authorities are required by legislation to operate a loans fund. All amounts of money borrowed by local authorities must be paid into this loans fund, which then makes advances to service accounts to fund capital expenditure. The Scottish Government monitors the value of debt recorded in the loans fund (rather than the level of external debt) because it is this amount of debt that is charged to services over a period of time. It is not expected, however, that the levels of loan pool debt and external debt will be significantly different in value.

Table 4.7 - Loans Fund Borrowing to Finance Capital Expenditure

	£ thousands
	2006-07	2007-08	2008-09	2009-10	2010-11
Scotland	766,272	710,474	1,206,318	1,091,548	1,113,929
Unitary Authorities	760,598	706,643	1,194,867	1,086,559	1,110,056
Fire	616	-	5,674	-	3,873
Police	994	3,831	5,777	4,989	-
Valuation Boards1	..	..	..	..	0
Regional Transport Partnerships	-	-	-	-	-
Bridge Authorities	4,064	-	-	-	-

1. Data from Valuation Boards was collected for the first time in 2010-11

The costs of servicing debt on Local Authority trading services (e.g piers and harbours) are mainly met through the charges made for these services, while the costs of servicing Housing Revenue Account (HRA) debt are met principally through income from rents and from Housing Support Grant.

4.4 Fixed Assets and Outstanding Debt

As a result of borrowing to finance capital expenditure, Local Authorities create assets but also a liability to repay the debt. The value of Local Authority fixed assets is shown in Table 4.8 below, and the levels of outstanding debt are shown in Table 4.9.

Table 4.8 - Value of Fixed Assets, 2008 - 2011

	£ thousands
	Value of fixed assets as at 31 March 2008	Value of fixed assets as at 31 March 2009	Value of fixed assets as at 31 March 2010	Value of fixed assets as at 31 March 2011
Operational Assets
Council dwellings	7,953,481	8,739,347	9,140,999	9,780,140
Other land and buildings	12,522,596	13,383,489	18,182,691	19,132,148
Vehicles, plant and machinery	646,958	719,015	769,104	928,814
Infrastructure assets	3,287,842	3,640,832	3,941,374	4,335,085
Community assets	150,566	170,045	172,117	177,755
Total operational assets	24,561,443	26,652,728	32,206,285	34,353,942
Non-operational assets
Assets under construction	897,459	1,019,265	983,249	1,275,873
Surplus assets held for disposal	546,398	540,592	583,577	492,701
Investment properties	1,238,439	1,130,689	702,732	209,196
Total non-operational assets	2,682,296	2,690,546	2,269,558	1,977,770
Intangible Assets	46,977	43,305	42,756	18,052
TOTAL ASSETS	27,290,716	29,386,579	34,518,599	36,349,764

Table 4.9 - Outstanding Debt for each Local Authority, 2010-11

	General Fund Services1		Housing Revenue Account		Total All Debt (£000s)
	Total Debt (£000s)	Per Head (£)	Total Debt (£000s)	Per HRA dwelling (£)
Scotland	9,107,360	1,744	2,383,441	7,451	11,490,801
Aberdeen City	431,783	1,989	185,923	8,189	617,706
Aberdeenshire	301,581	1,227	124,685	9,702	426,266
Angus	131,031	1,185	27,478	3,529	158,509
Argyll & Bute2	183,818	2,061	-	-	183,818
Clackmannanshire	93,028	1,837	32,225	-	125,253
Dumfries & Galloway2	240,170	1,621	-	-	240,170
Dundee City	229,685	1,592	157,725	11,349	387,410
East Ayrshire	172,105	1,431	71,717	5,548	243,822
East Dunbartonshire	130,916	1,252	16,247	4,548	147,163
East Lothian	193,100	1,981	81,384	9,941	274,484
East Renfrewshire	94,652	1,057	25,020	8,179	119,672
Edinburgh, City of	851,321	1,751	327,962	15,761	1,179,283
Eilean Siar2	145,171	5,543	-	-	145,171
Falkirk	188,439	1,229	41,063	2,537	229,502
Fife	520,870	1,427	144,984	4,764	665,854
Glasgow City2	1,518,745	2,562	-	-	1,518,745
Highland	490,959	2,215	139,883	10,324	630,842
Inverclyde2	186,077	2,333	-	-	186,077
Midlothian	101,224	1,248	106,512	16,279	207,736
Moray	120,753	1,377	43,125	7,407	163,878
North Ayrshire	163,174	1,207	84,884	6,419	248,058
North Lanarkshire	453,813	1,391	148,338	3,996	602,151
Orkney Islands	32,046	1,594	2,875	3,644	34,921
Perth & Kinross	178,570	1,208	46,202	6,301	224,772
Renfrewshire	212,136	1,246	98,459	7,652	310,595
Scottish Borders2	198,721	1,761	-	-	198,721
Shetland Islands	13,895	620	41,468	23,154	55,363
South Ayrshire	132,987	1,193	56,283	6,834	189,270
South Lanarkshire	614,257	1,970	167,015	6,534	781,272
Stirling	134,128	1,493	21,178	3,906	155,306
West Dunbartonshire	120,726	1,333	101,686	8,980	222,412
West Lothian	351,014	2,040	89,120	6,896	440,134
Central Scotland Fire	6,200	21	.	.	6,200
Dumfries & Galloway Fire	-	-	.	.	-
Fife Fire and Rescue Service	-	-	.	.	-
Grampian Fire	9,957	18	.	.	9,957
Highlands & Islands Fire	11,149	38	.	.	11,149
Lothian and Borders Fire	8,489	9	.	.	8,489
Strathclyde Fire	29,409	13	.	.	29,409
Tayside Fire	6,361	16	.	.	6,361
Central Scotland Police	9,245	31	.	.	9,245
Dumfries & Galloway Police	-	-	.	.	-
Fife Constabulary	-	-	.	.	-
Grampian Police	5,810	11	.	.	5,810
Lothian & Borders Police	26,894	28	.	.	26,894
Northern Police	17,918	62	.	.	17,918
Strathclyde Police	35,541	16	.	.	35,541
Tayside Police	9,492	24	.	.	9,492
Forth Estuary Transport	-	..	.	.	-
Tay Road Bridge	-	..	.	.	-
HITRANS	-	-	.	.	-
NESTRANS	-	-	.	.	-
SESTRAN	-	-	.	.	-
SWESTRANS	-	-	.	.	-
SPT	-	-	.	.	-
TACTRAN	-	-	.	.	-
ZetTrans	-	-	.	.	-

1. Includes Trading Services
2. These councils have transferred their housing stock to Registered Social Landlords