Scottish Local Government Financial Statistics 2011-12

2. Local Government Revenue Expenditure and Income

2.1 Total Revenue Income and Expenditure

Total gross revenue expenditure by local government in Scotland in 2011-12 was £16.7 billion. The majority of expenditure is in the general fund although over £1 billion of expenditure was in the Housing Revenue Account (HRA) and Significant (Internal) Trading Operations. Further details on these different funds are laid out in sections 2.2 and 2.3.

Table 2.1 details revenue income and expenditure for 2011-12, throughout the table expenditure is positive and income negative. The biggest single element of gross expenditure were employee costs which account for £7.65 billion of all expenditure. The second largest element was operating costs (which includes property costs, supplies and services costs, transport and payments to agencies and other bodies) which account for £6.77 billion.

Transfer payments are those made to individuals for which no goods or services are received in return by the local authority. The majority of transfer payments are housing benefits which make up £1.66 billion of the total of £2.27 billion. An adjustment for Inter Account and Inter Authority Transfers is made to the gross expenditure to take account of transfers between local authorities and between different services within an authority and ensure that expenditure is not counted twice.

Support services are those paid for services that support the provision of services to the public (including IT, Human Resources, Legal Services, Procurement Services and Corporate Services). In 2011-12 as part of a wider review of the Local Financial Returns (LFRs) the definition of support services was changed to be more prescriptive as to what should and should not be included. This was done to improve comparability of support services costs between local authorities and means that data for support services expenditure in 2011-12 may not be directly comparable with past years.

In 2011-12, for the first time, it is possible to derive the surplus or deficit on the provision of service from the data collected on expenditure, income and funding in the LFRs. This provides an important link between this data and data on reserves, debt and interest costs which were previously collected separately. This allows a greater level of analysis to be undertaken on the relationship between authorities' expenditure, income, funding, debt and reserves. The impact of this can be seen in a number of the tables in Sections 2 and 4 of this publication, in particular in Tables 2.1 and 4.1 which now link together what councils spend, raise and receive with the reserves they hold.

In addition to this change, local authorities are now required to ensure that their LFRs are directly comparable to their published audited accounts. This should ensure that the data provided is more comparable across authorities and there is less opportunities for error when classifying expenditure across different services within an authority.

Table 2.1 - Total Revenue Income and Expenditure, 2011-12

	£ Thousands
	General Fund Services 1	Housing Revenue Account	Significant Trading Operations	Road Bridges	Common Good Fund
Employee Costs	7,160,414	135,154	352,506	4,214	183
Operating Costs	6,099,780	464,226	465,688	4,318	13,274
Support Service Costs	864,384	69,916	31,457	103	440
Transfer payments	1,993,054	3,141	356	0	1,670
Revenue Contributions to Capital	57,565	157,907	437	0	21
Adjustment for Inter Account and Inter Authority Transfers	-524,455	-25,995	-610,281	-2,550	-1,892
Gross Expenditure	15,650,742	804,349	240,163	6,085	13,696
Government Grants2	-2,500,172	-52,432	-78	-8,788	0
Other Grants Reimbursements and Contributions	-829,791	-17,168	-16,786	-8,800	-735
Customer and Client Receipts	-1,321,294	-965,920	-267,630	-82	-10,809
Total Income	-4,651,257	-1,035,520	-284,494	-17,670	-11,544
Net Revenue Expenditure	10,999,485	-231,171	-44,331	-11,585	2,152
Interest Paid	676,735	115,984	35	0	177
Interest Received	-26,203	-2,353	-19	-78	-617
Investment Income	-31,368	-404	0	0	-4,124
Pension interest and expected gains / losses on IAS 19	122,295	-1,472	0	-76	0
Sub-Total	741,459	111,755	16	-154	-4,564
General Revenue Funding	-7,789,670
NDRI Distributable Amount	-2,203,389
Council Tax	-2,299,676	-2,116
Arrears of Local Tax Collection	322
Other	-185,031	-3,853
Sub-Total	-12,477,444	-5,969	0	0
Depreciation and Impairment of non-current assets	1,439,537	536,771		6,333
Amortisation and Impairment of Intangible Assets	44,927	27,216		0
Movement in the fair value of investment properties	3,338	1,969		-11
Surplus or deficit on Trading Operations not included above	-24,722	0	24,722	0
Gain or loss on the disposal of Property, Plant and Equipment	-5,282	3,698		-3
Reversal of Employer's contribution to pension fund/benefits payments made	-414,657	-17,032		-506
Post-retirement benefits - IAS 19	897,802	16,855		331
Short term accumulating absences	-88,804	51		29
Govt Capital grants and contributions credited to the CI&ES	-587,529	-26,280		-9,656
Non- Govt Capital grants and contributions credited to the CI&ES	-98,067	-7,174		0
Reversal of Revenue Contribution to Capital	-57,565	-157,907		0
Difference in Requisitions	-988	0		0
Surplus or deficit on the provision of services	371,490	252,782		-15,222

1. Includes trading services and non-HRA housing. For a breakdown of expenditure in these areas, refer to Table 2.2 and Annexes A and B respectively.
2. Excluding General Revenue Funding

Source: Local Financial Returns – LFR 00

2.2 Non-General Fund Revenue Income and Expenditure

2.2.1 HRA

The Housing Revenue Account (HRA) records income and expenditure relating to Local Authority housing stock. Whilst most other Local Authority services are funded through a combination of non-domestic rates and council tax income plus Government grants, the HRA is a ring-fenced account, and expenditure is funded by housing rents and Government subsidies.

2.2.2 Trading Services

Trading service accounts cover the finances of Local Authority operated services that are commercial in nature. They are financed by the charges made by a Local Authority to the recipients of the services they provide.

The main trading services are Local Authority Transport (buses, ferries and other Local Authority transport undertakings), Fishery harbours and markets and other trading services (including airports, other harbours and bridges).

2.2.3 Road Bridges

From 2008-09, the funding arrangements for the Forth and Tay bridge authorities changed. Under the Abolition of Bridge Tolls (Scotland) Act 2008, the bridge authorities stopped receiving income from tolls and, instead, started receiving a revenue grant from Transport Scotland. For capital expenditure, bridge authorities also started receiving a capital grant from Transport Scotland, so are no longer reliant on borrowing through their constituent authorities from the Loans Fund. Despite this change in funding, Local Authorities continue to provide services for the bridge authorities by way of contract.

2.2.4 Common Good

Common good funds and assets are those held by local authorities which were, in effect, gifted to the local community (usually a previous burgh council). When managing common good funds and assets, local authorities are expected to have regard to the interests of inhabitants of the former burgh area to which the assets relate (except for Aberdeen City, Dundee City, City of Edinburgh and Glasgow City, where the local authority should have regard to the interests of all residents in the council area).

Common Good Fund income and expenditure is recorded in a separate set of accounts. Some property held within a Local Authority's Common Good Fund can be sold, while some must be maintained in trust for the community. The fund is used for projects that are for the common good of all residents.

2.3 General Fund Revenue Income and Expenditure

The highest spending service in the general fund is education which had net expenditure of £4.55 billion (this makes up nearly 40% of net expenditure). Of this total £1.75 billion was spent on primary education and £1.85 billion on secondary education with the remainder spent on pre-primary, special and community education. Education's share of total net expenditure has stayed the same at around 40% over the five years to 2011-12.

Social work is the next largest service with net expenditure of £2.87 billion (25% of total net expenditure). Data on social work expenditure is collected on the basis of client groups. Of the client groups identified in the LFRs, older persons has the highest expenditure of £1.26 billion followed by children and families with £0.77 billion and adults with learning difficulties with £0.48 billion.

A full breakdown of expenditure by sub-service is available in Annex A.

The single largest income source shown in Table 2.2 are the grants received by local authorities from the Department of Work and Pensions to fund housing benefits these grants were worth £1.66 billion in 2011-12 and are shown as part of income in non-HRA housing.

Another significant source of income are customer and client receipts (including all charges to service users) which raised £1.3 billion across all services. Social work services also receive income from the NHS to provide services, the value of these payments in 2011-12 were £0.38 billion. A full breakdown of income by service can be found in Annex B.

Table 2.2 - General Fund Revenue Income and Expenditure, 2011-12

£ thousands

	Gross Expenditure	Income	Net Expenditure	Net Expenditure as % of Total Services	Ring Fenced Revenue Grants
Education	4,737,915	185,250	4,552,665	39.6%	5,104
Cultural and Related Services	712,625	94,753	617,872	5.4%	0
Social Work	3,665,002	792,246	2,872,756	25.0%	0
Police	1,210,588	192,306	1,018,282	8.8%	498,493
Fire	333,385	47,253	286,132	2.5%	0
Roads and Transport	671,853	194,625	477,228	4.1%	0
Environmental Services	785,301	129,767	655,534	5.7%	0
Planning & Economic Development	473,079	180,961	292,118	2.5%	0
Non-HRA Housing	2,327,359	1,996,194	331,165	2.9%	7,067
Central Services	682,334	263,683	418,651	3.6%	0
Trading Services	51,301	63,555	-12,254	-0.1%	0
Net Cost of Service	15,650,742	4,140,593	11,510,149	100.0%	510,664
Interest and Investment Income	676,735	57,571	619,164	0	0
Statutory Repayment of Debt	592,031	0	592,031	0	0
Contributions to/from HRA	0	0	0	0	0
Surplus/deficit from Significant Trading Operations	-24,722	0	-24,722	0	0
Total	16,894,786	4,198,164	12,696,622	0	510,664

Source: Local Financial Returns - LFR 00

Revised accounting arrangements for Public Private Partnerships (PPP) and Public Finance Initiatives (PFI) were introduced from 1^st April 2009. Therefore, from 2009-10 onwards revenue expenditure, statutory repayment of debt and interest and investment income for services in which there are PPP or PFI schemes is not directly comparable with previous years. See section 1.2 for further details. This affects the level of service expenditure when comparing 2008-09 to 2009-10 (and later years), especially in education where most councils have a PPP or PFI scheme in operation.

Table 2.3 - Net Revenue Expenditure by Service, 2007-08 to 2010-11

£ millions

	2007-08	2008-09	2009-102	2010-11	2011-12
Education	4,432	4,676	4,633	4,677	4,553
Social Work	2,368	2,684	2,825	2,861	2,873
Police	1,078	1,100	1,125	978	1,018
Fire	289	320	332	313	286
Cultural & Related Services	593	628	662	638	618
Environmental Services	510	628	657	664	656
Roads & Transport 1	447	453	486	503	477
Central Services	439	469	632	560	419
Planning & Economic Development	163	289	332	313	292
Non-HRA Housing	91	427	420	394	331
Trading Services	-12	-5	-9	-8	-12
Total General Fund Expenditure	10,400	11,670	12,096	11,892	11,510

1. From 2010-11 the funding of Police Pensions changed leading to a reduction in net expenditure. Therefore police expenditure figures from 2010-11 onwards are not directly comparable with figures up to 2009-10.

Source: Local Financial Returns - LFR 00

In the 2008-09 local government finance revenue settlement, many formerly ring-fenced revenue grants were rolled up into General Revenue Funding (GRF). This change in funding can be seen as a larger than usual increase in expenditure from 2007-08 to 2008-09 both in Table 2.3 above. The Supporting People Grant, the Community Regeneration Fund and the Strategic Waste Fund were three of the largest grants affected by these changes in funding.

Chart 2.1 shows net revenue expenditure per capita by local authority area. This includes expenditure by all local authority bodies in an area (i.e. including expenditure by councils, police boards, fire boards, valuation boards and regional transport partnerships). The chart shows that on average in Scotland local government spent £2,416 per person.

Wide variation is seen in net revenue expenditure per head for different local authority areas. This reflects variations in the cost of providing services due to factors such as deprivation, rurality and population age profile, as well as additional costs for island authorities (which clearly have the highest net revenue expenditure per head). Details of how these factors are taken into account in the needs-based methodology central to local government funding distribution can be found on the Scottish Government Grant Aided Expenditure Website.

Chart 2.1 - Net Revenue Expenditure per Capita by Local Authority 2011-12

2.4 Revenue Expenditure Financing

Revenue expenditure by local authorities is funded by three main sources:

• Grants from Central Government
• Local Taxation (Council Tax and Non Domestic Rates)
• Sales, fees and charges for services

The main source of revenue income for local government is General Revenue Funding, (formerly referred to as the Revenue Support Grant). General Revenue Funding (GRF) is paid by the Scottish Government in support of local authorities' general net revenue expenditure.

Local taxation contributed over £4 billion to the funding of local government in 2011-12 and further information on these taxes is set out in the following sections. Other income is mostly composed of grants and subsidies received from central government and other parts of the public sector.

Table 2.4 - Revenue Income by Source, 2007-08 to 2011-12

£ Million

	2007-08	2008-09	2009-10	2010-11	2011-12
Revenue Income
General Revenue Funding1	6,170	7,426	7,757	8,149	7,790
Council Tax	1,890	1,909	1,910	1,923	1,926
Council Tax Benefit Subsidy	354	351	368	375	376
Non Domestic Rates	1,860	1,963	2,165	2,068	2,182
Sales, Rents, Fees & Charges	2,132	2,262	2,287	2,179	2,298
Other Income2	4,163	3,363	3,390	3,348	3,305
Total revenue income	16,569	17,274	17,877	18,043	17,877

1. Prior to 2008-09 this was Revenue Support Grant

Sources: General Revenue Funding (Up to 2010-11) - Finance Circulars; Non-Domestic Rates - Non Domestic Rates Returns (NDRI); All Other Data - Local Financial Returns (LFRs)

Chart 2.2 - Revenue Income by Source, 2011-12

2.4.1 Council Tax

Council Tax was introduced in Scotland on the 1^st April 1993 to replace the Community Charge system. It is a tax system based on dwellings, contributing around £1.9 billion (excluding council tax benefit) of income to local authorities in 2011-12. A dwelling is classified as any kind of flat or house that is used as a place of residence. Each dwelling is placed into one of the 8 council tax bands (A to H) depending on the market value of the dwelling as at the 1^st April 1991.

Table 2.5 - Chargeable Dwellings¹ by Council Tax Band & Local Authority (as at 3 September 2012)

Valuation band ranges	Band A	Band B	Band C	Band D	Band E	Band F	Band G	Band H	Total
	Under 27,000	27,001 to 35,000	35,001 to 45,000	45,001 to 58,000	58,001 to 80,000	80,001 to 106,000	106,001 to 212,000	Over 212,000
Ratio to band D	6/9	7/9	8/9	9/9	11/9	13/9	15/9	18/9
Scotland	512,916	568,237	385,936	312,765	317,504	178,018	114,282	12,211	2,401,869
Aberdeen City	19,642	26,012	16,963	12,270	13,251	7,829	6,983	808	103,758
Aberdeenshire	19,550	15,344	13,602	16,444	19,946	14,617	8,921	535	108,959
Angus	14,427	12,263	6,756	7,953	7,044	2,869	1,510	150	52,972
Argyll & Bute	7,218	9,398	8,691	5,752	7,032	3,969	2,677	215	44,952
Clackmannanshire	6,025	6,993	1,906	2,401	3,098	1,778	805	41	23,047
Dumfries & Galloway	10,670	22,003	11,431	9,490	10,016	4,834	2,299	155	70,898
Dundee City	25,512	15,335	7,926	8,071	6,176	2,249	997	31	66,297
East Ayrshire	25,573	9,198	4,858	6,266	5,895	2,817	895	39	55,541
East Dunbartonshire	1,073	3,546	7,971	7,243	10,643	6,662	5,974	579	43,691
East Lothian	1,119	8,891	14,260	5,596	5,665	4,476	3,557	611	44,175
East Renfrewshire	1,194	4,987	3,891	6,230	7,888	5,868	5,837	688	36,583
Edinburgh, City of	19,918	42,952	39,856	33,625	35,487	22,355	19,738	3,602	217,533
Eilean Siar	4,500	3,611	2,707	1,657	1,119	159	33	4	13,790
Falkirk	21,461	18,849	6,375	8,218	8,172	4,897	2,262	60	70,294
Fife	38,850	46,606	20,984	18,748	21,522	12,137	5,887	378	165,112
Glasgow City	60,047	74,094	62,090	37,039	25,905	11,533	5,790	603	277,101
Highland	18,580	22,037	21,952	17,288	17,132	8,293	3,980	311	109,573
Inverclyde	18,298	5,548	3,284	3,189	3,349	1,813	1,379	208	37,068
Midlothian	932	11,949	10,111	4,433	4,131	2,524	1,681	157	35,918
Moray	11,290	10,052	6,103	5,655	5,177	1,876	564	50	40,767
North Ayrshire	21,071	17,827	6,526	6,422	8,577	3,525	1,129	52	65,129
North Lanarkshire	52,315	36,269	18,379	15,060	14,894	7,234	2,547	121	146,819
Orkney Islands	2,260	2,667	2,148	1,617	1,143	244	17	3	10,099
Perth & Kinross	8,434	14,152	11,075	9,978	10,994	6,856	5,443	640	67,572
Renfrewshire	12,339	24,438	13,759	10,813	9,949	5,552	3,213	199	80,262
Scottish Borders	15,680	12,218	6,443	5,546	6,047	4,392	3,986	431	54,743
Shetland Islands	2,888	1,746	2,595	1,694	1,247	231	54	0	10,455
South Ayrshire	7,010	12,198	8,496	8,021	9,320	4,584	2,875	272	52,776
South Lanarkshire	34,866	28,737	24,233	18,912	17,925	10,368	5,518	419	140,978
Stirling	5,377	8,109	3,972	4,167	5,820	4,881	4,730	637	37,693
West Dunbartonshire	7,748	16,290	7,254	5,577	4,136	1,541	609	53	43,208
West Lothian	17,049	23,918	9,339	7,390	8,804	5,055	2,392	159	74,106

1. Excludes dwellings exempt from council tax

Source: Council Tax Base 2012 (CTAXBASE)

Table 2.5 details the band boundaries, the ratio to band D council tax (the multiplier) and the number of chargeable dwellings in each band by local authority. As at 3^rd September 2012, there were 2.4 million chargeable dwellings in Scotland. Around three quarters (1.8 million) of all chargeable dwellings were in council tax bands A to D, and only 0.5% (12,211 dwellings) in band H. The total number of chargeable dwellings and the distribution of those dwellings across council tax bands varies across local authority areas. For example, 49% (18,298) of all chargeable dwellings in Inverclyde are in council tax band A compared with 22% (2,260) in the Orkney Islands, and 2% (1,073) in East Dunbartonshire. This is a consequence of variation by local authority in the market value of dwellings.

Council tax is used as a source of funding to make up the difference between the amount of money a local authority wishes to spend, and the amount of funding it receives from other sources (such as GRF and ring-fenced revenue grants). Each local authority determines its own level of council tax as part of their budget setting process, establishing the band D council tax level. As a result, council tax levels differs across local authority areas ranging from £1,024 in Eilean Siar to £1,230 in Aberdeen City (Chart 2.3). The council tax charged for all other bands is a proportion of the band D level set (see ratios to band D in table 2.6).

The Scotland band D council tax level, and its change over time, can be seen in table 2.7. Council tax levels remain constant at 2007-08 levels as a consequence of the council tax freeze agreed between the Scottish Government and local government, hence the average council tax per dwelling has also remained flat. Any small changes reflect movement in the council tax base such as changes in the total number of dwellings, the distribution of those dwellings across council tax bands, and the number of discounts and exemptions. In real terms, the level of band D council tax has fallen in each year since 2007-08, where prior to this, both cash and real terms increases were seen as the band D council tax level increased year on year.

Table 2.6 - Scotland Council Tax Levels

	2005-06	2006-07	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13
Scotland Average Band D Council Tax (£)1	1,094	1,129	1,149	1,149	1,149	1,149	1,149	1,149
Band D % increase (cash terms)	3.9%	3.2%	1.8%	0.0%	0.0%	0.0%	0.0%	0.0%
Band D % increase (real terms2)	1.6%	0.5%	-0.7%	-2.7%	-1.5%	-2.8%	-2.1%	-2.1%
Average Council Tax Bill per Dwelling (£)3	925	958	980	983	987	985	984	985

1. Since 2008-09, Council Tax rates have been frozen at 2007-08 levels.

2. Real terms figures are calculated using GDP deflators

3. This average is taken over all chargeable dwellings and is affected by a number of factors such as the distribution of dwellings across council tax bands, discounts and exemptions, new construction and removal of demolished housing from the roll.

Source: Council Tax Assumptions (CTAS), Council Tax Base (CTAXBASE)

Chart 2.3 - Band D Council Tax Bill Amount by Local Authority

Table 2.7 - Band D Council Tax by Local Authority

	2005-06	2006-07	2007-08	2008-09	2009-10	2010-11	2011-12
Scotland	1,094	1,129	1,149	1,149	1,149	1,149	1,149
Aberdeen City	1,162	1,196	1,230	1,230	1,230	1,230	1,230
Aberdeenshire	1,065	1,113	1,141	1,141	1,141	1,141	1,141
Angus	1,037	1,072	1,072	1,072	1,072	1,072	1,072
Argyll & Bute	1,117	1,156	1,178	1,178	1,178	1,178	1,178
Clackmannanshire	1,074	1,127	1,148	1,148	1,148	1,148	1,148
Dumfries & Galloway	988	1,018	1,049	1,049	1,049	1,049	1,049
Dundee City	1,180	1,211	1,211	1,211	1,211	1,211	1,211
East Ayrshire	1,116	1,171	1,189	1,189	1,189	1,189	1,189
East Dunbartonshire	1,078	1,121	1,142	1,142	1,142	1,142	1,142
East Lothian	1,069	1,096	1,118	1,118	1,118	1,118	1,118
East Renfrewshire	1,053	1,105	1,126	1,126	1,126	1,126	1,126
Edinburgh, City of	1,126	1,152	1,169	1,169	1,169	1,169	1,169
Eilean Siar	956	999	1,024	1,024	1,024	1,024	1,024
Falkirk	999	1,045	1,070	1,070	1,070	1,070	1,070
Fife	1,050	1,091	1,118	1,118	1,118	1,118	1,118
Glasgow City	1,213	1,213	1,213	1,213	1,213	1,213	1,213
Highland	1,086	1,135	1,163	1,163	1,163	1,163	1,163
Inverclyde	1,176	1,206	1,198	1,198	1,198	1,198	1,198
Midlothian	1,176	1,210	1,210	1,210	1,210	1,210	1,210
Moray	1,045	1,096	1,135	1,135	1,135	1,135	1,135
North Ayrshire	1,075	1,125	1,152	1,152	1,152	1,152	1,152
North Lanarkshire	1,041	1,077	1,098	1,098	1,098	1,098	1,098
Orkney Islands	973	1,007	1,037	1,037	1,037	1,037	1,037
Perth & Kinross	1,088	1,136	1,158	1,158	1,158	1,158	1,158
Renfrewshire	1,091	1,143	1,165	1,165	1,165	1,165	1,165
Scottish Borders	1,019	1,064	1,084	1,084	1,084	1,084	1,084
Shetland Islands	981	1,017	1,053	1,053	1,053	1,053	1,053
South Ayrshire	1,063	1,111	1,154	1,154	1,154	1,154	1,154
South Lanarkshire	1,040	1,076	1,101	1,101	1,101	1,101	1,101
Stirling	1,149	1,201	1,223	1,209	1,209	1,209	1,209
West Dunbartonshire	1,113	1,138	1,163	1,163	1,163	1,163	1,163
West Lothian	1,074	1,101	1,128	1,128	1,128	1,128	1,128

Source: Council Tax Assumptions (CTAS) returns

The Band D council tax levels by local authority over time are shown in Table 2.7. As mentioned above, the agreement between Scottish Government and Local Government to maintain a council tax freeze means that band D council tax levels have not changed since 2007-08. The one exception is in Stirling where the council took the decision to reduce the band D council tax from £1,223 in 2007-08 to £1,209 in 2008-09 (and subsequently retained it at this level). Prior to the council tax freeze, the band D council tax increased each year in all local authorities.

Not all dwellings are liable to pay full council tax. A dwelling may be eligible for a discount or exemption dependent on either the status of the dwelling or the personal circumstances of the persons resident in the dwelling. If a dwelling is exempt there is no council tax payable in respect of that dwelling. If a dwelling is eligible for a discount then these may range from 10% to 50% depending on the nature of the discount.

An exempt dwelling can be occupied or unoccupied. Examples of unoccupied exempt dwellings include dwellings that are unoccupied and unfurnished for up to 6 months, dwellings that cannot be occupied because they are in need of structural repair, or are being improved or reconstructed, or an unoccupied dwelling where the liable person was formerly resident and has moved to receive personal care elsewhere. Occupied dwellings eligible for exemption include dwellings that are the sole residence of only persons under the age of 18, dwellings occupied only by students, and dwellings used as trial flats by registered housing associations.

Where only one council tax liable adult resides in a dwelling they are entitled to claim a 25% discount on their council tax bill. Where a dwelling is classed as a second home or long term empty, that dwelling is entitled to claim a discount of between 10% and 50% depending on the Local Authority. Unoccupied dwellings may also be eligible for a 50% discount for the 6 months after the initial 6 month exemption.

A breakdown of council tax dwellings by classification as chargeable, discounted, or exempt from 2007 to 2011 is given below in Table 2.8. The total number of dwellings has increased by around 52,000 from 2.463 million dwellings in 2008 to 2.515 million in 2012. The proportion of dwellings exempt, chargeable or discounted has remained steady over time with around 4.5% of all dwellings exempt from paying council tax, and 42% of all chargeable dwellings discounted. In 2012, there were 113,173 exempt dwellings and 1,016,070 discounted dwellings.

Table 2.8 - Chargeable dwellings, Discounts and Exemptions¹

	2008	2009	2010	2011	2012
Total dwellings	2,462,571	2,477,397	2,488,928	2,500,769	2,515,042
Dwellings exempt	112,838	112,168	111,454	111,740	113,173
Chargeable dwellings	2,349,733	2,365,229	2,377,474	2,389,029	2,401,869
Chargeable dwellings subject to:
25% discount	929,246	936,957	941,915	945,515	948,208
Second Homes2	35,036	37,060	38,002	39,250	40,599
Long Term Empty2	22,784	22,169	24,598	25,356	25,454
Occupied entirely by disregarded adults	1,986	2,668	1,887	1,910	1,809
Dwellings not subject to discount	1,360,681	1,366,375	1,371,072	1,376,998	1,385,799

1. As at the first Monday in September of each year

2. It is not possible for some councils to separately identify second homes and long term empty dwellings. For these councils, the total number of second homes and long term empty dwellings have been recorded under second homes.

Source: Council Tax Base (CTAXBASE) Returns

Local Authorities are responsible for the billing and collection of council tax. Each individual bill is calculated by applying the multiplier for each band to the band D council tax level, and the applying any discounts, exemptions or reductions as detailed above. At the start of each financial year local authorities issue council tax bills to households liable for each bill. They collect council tax income relating to these bills over the year, and also continue to collect late amounts from previous billing years^[1]. The amount of council tax income collected in 2011-12 are reported in table 2.9 below.

Table 2.9 - Council Tax Income by Local Authority, 2011-12

£ thousands

	Council Tax Income (excl CTB)1	Council Tax Benefit Subsidy (CTB)	Council Tax Income (incl CTB)1
Scotland	1,926,190	375,706	2,301,896
Aberdeen City	96,939	10,988	107,927
Aberdeenshire	110,990	8,422	119,412
Angus	39,803	5,921	45,724
Argyll & Bute	41,257	6,052	47,309
Clackmannanshire	16,924	3,785	20,709
Dumfries & Galloway	53,649	9,310	62,959
Dundee City	45,317	13,473	58,790
East Ayrshire	38,615	10,222	48,837
East Dunbartonshire	47,752	4,940	52,692
East Lothian	39,322	6,619	45,941
East Renfrewshire	40,026	4,062	44,088
Edinburgh, City of	199,632	29,549	229,181
Eilean Siar	8,763	1,752	10,515
Falkirk	51,071	8,970	60,041
Fife	128,565	23,074	151,639
Glasgow City	178,058	73,214	251,272
Highland	95,916	13,568	109,484
Inverclyde	25,753	7,268	33,021
Midlothian	31,993	5,535	37,528
Moray	33,796	4,141	37,937
North Ayrshire	45,664	12,297	57,961
North Lanarkshire	94,070	26,649	120,719
Orkney Islands	7,076	907	7,983
Perth & Kinross	64,431	7,144	71,575
Renfrewshire	62,177	14,012	76,189
Scottish Borders	44,672	5,988	50,660
Shetland Islands	8,004	748	8,752
South Ayrshire	44,570	9,035	53,605
South Lanarkshire	106,709	22,461	129,170
Stirling	39,445	4,971	44,416
West Dunbartonshire	28,078	10,099	38,177
West Lothian	57,153	10,530	67,683

1. Includes Community Charge

Source: Local Financial Returns - LFR 12

2.4.2 Non-Domestic Rates

Non-domestic Rates (NDRs) are a property tax paid by the owner/occupier or tenant of a non-domestic property. They are calculated using the rateable value of a non-domestic property, multiplied by a poundage set nationally by Scottish Ministers less any relief entitlement. In 2011-12, the income raised from NDRs was £2.25 billion.

The principles of non-domestic rates were established in the Lands Valuation (Scotland) Act of 1854. This act also provided for the appointment of the Scottish Assessors, who are responsible for determining the classification and valuation of non-domestic and domestic properties, and are independent of both the Scottish Government and local authorities. A non-domestic property is an individual property used for non-domestic purposes including businesses, public buildings and advertising hoardings. The value given to a property is called its rateable value (RV).

As a property tax, the RV of a property (a legally defined valuation, broadly based on rental values) is a reflection of its value rather than profitability, turnover or output of the business. It is established at revaluation where, the Scottish Assessors assess rateable values for all non-domestic properties, taking account of the type and nature of the property. All non-domestic properties and their corresponding RVs are listed on the Valuation Roll. Tables 2.10 and 2.11 show the composition of properties on the Valuation Roll by property type and RV band. As at 1^st April 2012, there were 217,598 properties with a total RV of £6.7 billion. 77% of all properties (168,619 properties) had a RV less than or equal to £18,000.

Table 2.10 - Non-Domestic Rates Properties by Classification (as at 1 April 2012)

CATEGORY	Number of properties	Rateable value (£000s)
	1st April 2012	1st April 2012
Advertising	2,146	8,298
Care Facilities	3,090	104,094
Communications	354	15,156
Cultural	1,394	46,888
Education and Training	3,875	512,856
Garages and Petrol Stations	4,472	68,229
Health and Medical	3,137	204,285
Hotels	4,794	187,152
Industrial Subjects	45,840	1,120,309
Leisure, Entertainment, Caravans etc.	19,809	232,494
Offices	37,822	1,128,081
Other	13,057	90,743
Petrochemical	144	112,972
Public Houses	3,909	112,026
Public Service Subjects	10,044	320,376
Quarries, Mines, etc.	695	26,165
Religious	6,302	54,303
Shops	52,782	1,624,594
Sporting Subjects	3,349	19,218
Statutory Undertaking	583	729,366
TOTAL ALL NON-DOMESTIC PROPERTIES	217,598	6,717,607

Source: Scottish Assessors Valuation Roll, 1^st April 2012

Table 2.11 - Non-Domestic Rates Subjects by Local Authority (as at 1 April 2012)¹

Local Authority	Rateable Value Band			Total Non-Domestic Properties
	<= £18,000	£18,001 to £34,999	>= £35,000
Scotland	168,619	19,851	29,128	217,598
Aberdeen City	4,938	1,161	2,279	8,378
Aberdeenshire	9,650	759	988	11,397
Angus	4,047	359	398	4,804
Argyll & Bute	7,048	345	350	7,743
Clackmannanshire	1,267	131	149	1,547
Dumfries & Galloway	8,015	491	557	9,063
Dundee City	4,132	600	966	5,698
East Ayrshire	3,155	307	410	3,872
East Dunbartonshire	1,678	299	311	2,288
East Lothian	2,706	263	316	3,285
East Renfrewshire	1,233	217	229	1,679
Edinburgh, City of	12,883	2,415	3,944	19,242
Eilean Siar	1,992	99	113	2,204
Falkirk	3,539	462	681	4,682
Fife	10,089	1,225	1,612	12,926
Glasgow City	17,109	2,895	4,857	24,861
Highland	14,821	971	1,381	17,173
Inverclyde	1,727	217	315	2,259
Midlothian	2,162	263	362	2,787
Moray	3,914	249	362	4,525
North Ayrshire	4,014	390	497	4,901
North Lanarkshire	6,780	1,028	1,555	9,363
Orkney Islands	1,815	120	96	2,031
Perth & Kinross	6,860	589	729	8,178
Renfrewshire	4,678	628	960	6,266
Scottish Borders	6,194	407	414	7,015
Shetland Islands	1,701	103	145	1,949
South Ayrshire	3,754	432	555	4,741
South Lanarkshire	6,936	1,131	1,489	9,556
Stirling	3,897	436	564	4,897
West Dunbartonshire	2,043	268	416	2,727
West Lothian	3,842	591	1,128	5,561

1. Includes properties with zero rateable value.

Source: Scottish Assessors Valuation Roll, 1^st April 2012

At the 2010 revaluation, the total RV of non-domestic properties (the tax base) increased from £5.3 billion in 2009-10 to £6.6 billion in 2010-11. As revaluation is designed to be cost neutral, a drop in the poundage (from 48.1p to 40.7p) is seen for the same time period. This can be seen in Table 2.12 which shows the annual NDR Income, total Rateable Value, and Poundage Rate, as well as their changes over time. The next revaluation will take place in 2017.

Table 2.12 - Non-Domestic Rates Income, Total Rateable Values and Poundage Rate

	2008-09	2009-10	2010-11	2011-12	2012-13
Non Domestic Rates Income (£m) 1	1,924	2,010	2,138	2,252	2,362
Total Rateable Value (£m)	5,296	5,299	6,612	6,678	6,718
Poundage Rate (pence)	45.8	48.1	40.7	42.6	45.0

1. Councils' notified (pre-audit) estimate of income for 2011-12 and mid-year estimate of income for 2012-13

Source: NDR Income - Non-domestic Rate Income Returns, Rateable Value - Scottish Assessors Valuation Roll as at 1^st April

Table 2.12 also shows that the total RV continued to increase after the 2010 revaluation from £6.6 billion to £6.7 billion in 2012-13. This is due to the net impact of increases in the tax base from new properties (or extension of existing properties), and decreases as demolished properties are deleted from the valuation roll or as the RV is reduced as a result of appeals^[2]. As Non-Domestic Rates in Scotland are directly proportional to the rateable values of individual non-domestic properties, changes in the total RV impact on the amount of NDR available for collection.

Inflation is a key driver of growth in NDR income as the poundage rate, set nationally by Scottish Ministers^[3], is tied to the Retail Price Index (other than in the first year of a revaluation). NDR bills are calculated by multiplying the RV of a property by the poundage rate, and then applying discounts and exemptions. Large business properties also pay a supplement to the poundage rate, known as the Large Business Supplement (LBS), which is used to fund a portion of the Small Business Bonus Scheme (SBBS). The LBS was 0.7p in 2011-12 for properties with a RV > 35,000. For the period 2012-13 to 2014-15, large retailers that sell both alcohol and tobacco will also pay the Public Health Supplement (PHS) - an additional 9.3p on the poundage rate in 2012-13. These supplements increase the amount paid in NDR bills. Conversely, exempt properties (which do not pay rates), and relief schemes significantly reduce the amount paid in NDR bills, and therefore the NDR income.

Table 2.13 summarises the total number of properties and rateable value as at 1^st April 2012, and the NDR income collected in 2011-12 and estimated income for 2012-13 by local authority (net of reliefs). Income for 2012-13 is estimated at £2.36 billion compared to £2.25 billion in 2011-12. The higher poundage rate (due to the normal annual inflation), and to a lesser extent additional income from the public health supplement in 2012-13 will have contributed to the increase in income. The net change in the tax base will also be a factor.

Table 2.13 - Non-Domestic Rates Properties, Rateable Values and Income By Local Authority¹

Authority	Non-Domestic Properties2 1st April 2012	Rateable Values 1st April 2012	Non-Domestic Rate income
			2011-123	2012-134
		(£000s)	(£000s)	(£000s)
Scotland	217,598	6,717,607	2,251,622	2,361,878
Aberdeen City	8,378	450,106	163,154	176,097
Aberdeenshire	11,397	207,910	71,367	76,211
Angus	4,804	77,715	24,023	26,387
Argyll & Bute	7,743	84,987	26,047	25,867
Clackmannanshire	1,547	39,372	13,858	13,084
Dumfries & Galloway	9,063	120,440	40,288	43,261
Dundee City	5,698	194,803	60,793	58,461
East Ayrshire	3,872	81,888	26,656	28,576
East Dunbartonshire	2,288	68,316	20,914	22,525
East Lothian	3,285	67,542	20,518	22,544
East Renfrewshire	1,679	39,801	12,599	14,364
Edinburgh, City of	19,242	917,270	302,593	324,985
Eilean Siar	2,204	21,069	6,024	6,705
Falkirk	4,682	175,026	62,900	58,551
Fife	12,926	438,660	148,556	138,744
Glasgow City	24,861	982,955	304,138	314,465
Highland	17,173	304,379	104,085	108,387
Inverclyde	2,259	60,275	18,684	20,347
Midlothian	2,787	78,135	24,889	26,765
Moray	4,525	84,511	29,183	31,286
North Ayrshire	4,901	107,027	33,536	35,836
North Lanarkshire	9,363	299,342	97,322	106,972
Orkney Islands	2,031	24,857	8,010	8,359
Perth & Kinross	8,178	147,219	46,343	51,109
Renfrewshire	6,266	245,796	85,463	93,662
Scottish Borders	7,015	87,655	25,884	28,479
Shetland Islands	1,949	44,671	14,228	15,856
South Ayrshire	4,741	110,771	36,262	35,500
South Lanarkshire	9,556	651,514	244,723	264,209
Stirling	4,897	115,247	37,578	34,570
West Dunbartonshire	2,727	172,828	67,722	70,149
West Lothian	5,561	215,518	73,282	79,561

1. Rates bills for specific utilities are collected by specified councils on behalf of all 32 councils, and appear on the valuation roll for those councils: South Lanarkshire (Electricity), West Dunbartonshire (Gas), Fife (Water), Falkirk (Docks and Harbours), Highland (Railways), Renfrewshire (Telecommunications). This increases the take for those authorities.

2. Includes properties with a zero rateable value

3. Notified (pre-audit) estimate of income.

4. Mid-year estimate of income.

Source: Number of Properties and Rateable Value - Scottish Assessors Valuation Roll 1st April 2012, NDR Income - Non-domestic Rate Income Returns

Table 2.13 shows geographical variations in the number of properties, rateable value and NDR income. It should be noted however that some councils have responsibility for collection of NDR for specific utilities as detailed in the footnote to the table. For these councils, the entries on the valuation roll and NDR income include Scotland-wide data for the specified utilities sector.

Table 2.14 - Non-Domestic Rates Reliefs by Relief Type¹

£000s

	2007-08	2008-09	2009-10	2010-11	2011-122
Unoccupied Property/Partly Unoccupied Property	119,957	127,385	153,361	145,936	157,040
Charities	107,766	113,417	122,132	136,731	151,112
Sports Clubs	9,173	9,651	11,604	11,476	11,953
Disabled persons relief	40,040	42,914	45,484	51,901	54,372
SBRRS/SBBS3	24,686	72,553	108,420	123,259	134,719
Religious Properties	18,146	18,986	20,218	24,016	23,802
Rural Rate Relief	3,901	3,887	3,918	4,129	4,218
Former Agricultural Premises4	19
Hardship	20	27	19	4	306
Renewable Energy Relief Scheme5				3,560	4,126
Gross Amount	323,708	388,821	465,157	501,013	541,648

1. Estimates include mandatory and discretionary elements of relief where applicable, but exclude backdated payments of relief

2. Notified (pre-audit) estimate of relief expenditure for 2011-12

3. From 1 April 2008, the Small Business Rates Relief Scheme was replaced with the Small Business Bonus Scheme.

4. Relief for Former Agricultural Premises was a time limited relief which ended at 31 March 2008

5. The Renewable Energy Relief Scheme was introduced at 1 April 2010

Source: Non-domestic Rate Income Returns

There are a number of types of NDR relief that reduce the NDR bill for qualifying properties. Table 2.14 shows the main types of relief available^[4] in 2011-12 and the amount of relief provided each year from 2007-08 to 2011-12.

The gross amount of relief provided increased substantially from £324 million in 2007-08 to £542 million in 2011-12. This increase is predominately due to increases in the poundage rate (due to normal annual inflation) and an increase in relief provided to small businesses after the Small Business Rates Relief Scheme (SBRRS) was replaced by the Small Business Bonus Scheme (SBBS) from 1^st April 2008. The cost of the SBBS scheme is much greater than that of the former SBRRS due to higher percentage of relief being available and wider qualifying RV thresholds. As a result, a larger than usual increase in the gross amount of reliefs awarded from 2007-08 to 2008-09, (and from 2008-09 to 2009-10 as up-take increased) can been seen^[5]. Increased take-up of other reliefs is also a factor in the increased cost of reliefs.

The total NDR income collected by Local Authorities is pooled at the Scotland level^[6]. Each council reports the NDR collected to the Scottish Government to be included in the central pool. The amount to be re-distributed from the pool is known as the Distributable Amount (DA) and is set by the Scottish Government before the start of the financial year in question.

From 1^st April 2011, the distribution methodology provides that Councils retain what it is estimated they can collect in business rates (rather than the previous policy where it was redistributed on the basis of population shares). As the combined total of NDR income and General Revenue Funding (GRF) provided to councils is guaranteed by the Scottish Government, any reduction in the amount of NDR collected is compensated for by a corresponding increase in GRF and vice versa. Any surpluses or deficits are paid out or recovered from Councils in the calculation of future years distributable business rates totals. The DA is based upon a forecast of the NDR income and prior year adjustments, and is therefore not guaranteed to match the total contributions to the pool for that year.

The calculation of the distributable amount for 2011-12 is given in Annex F and the 2011-12 distributable amount per Local Authority is shown in Table 2.15.

Table 2.15 - Non-Domestic Rates Distributable Amount by Local Authority, 2011-12

	Non-Domestic Rate Income (£000s)
Scotland	2,182,000
Aberdeen City	161,429
Aberdeenshire	68,670
Angus	23,391
Argyll & Bute	25,582
Clackmannanshire	12,284
Dumfries & Galloway	38,488
Dundee City	61,315
East Ayrshire	25,318
East Dunbartonshire	20,346
East Lothian	19,319
East Renfrewshire	11,976
Edinburgh, City of	297,442
Eilean Siar	5,983
Falkirk	55,518
Fife	135,006
Glasgow City	303,146
Highland	95,372
Inverclyde	18,700
Midlothian	23,254
Moray	27,053
North Ayrshire	33,082
North Lanarkshire	96,759
Orkney	7,722
Perth & Kinross	45,285
Renfrewshire	85,237
Scottish Borders	23,948
Shetland	14,308
South Ayrshire	34,835
South Lanarkshire	243,978
Stirling	31,891
West Dunbartonshire	65,977
West Lothian	69,386

Source: Finance Circular 4/2011

2.4.3 Sales, Rents, Fees and Charges

Local Authorities receive income from sales, rents, fees and charges as a result of providing services. These services are wide ranging in nature, as is the amount of income associated with each service, as detailed in Table 2.16 below.

Table 2.16 - Sales, Rents, Fees and Charges

£ thousand

	2007-08	2008-09	2009-10	2010-11	2011-12
Education	93,255	85,691	87,115	95,006	115,017
Cultural & Related Services	81,421	78,621	85,516	81,521	77,479
Social Work	256,018	259,061	246,014	251,167	268,101
Police, Fire & Emergency Planning	55,564	88,557	93,043	55,098	66,575
Roads & Transport	145,226	146,605	165,941	146,068	171,674
Environmental Services	117,585	117,873	123,164	120,400	117,767
Planning & Economic Development	141,791	112,644	120,146	97,897	118,518
Non-HRA Housing	124,893	232,028	189,150	164,339	179,116
Central Services	130,075	141,455	144,819	113,862	143,521
Trading Services	56,544	70,810	66,992	66,852	63,526
Total GF Sales, Rents, Fees and Charges	1,202,372	1,333,345	1,321,900	1,192,210	1,321,294
HRA	909,126	920,146	955,710	979,571	965,920
Common Good Fund	7,342	8,324	9,073	7,168	10,809
Road Bridges	13,618	162	133	89	82
Total Sales, Rents, Fees and Charges	2,132,458	2,261,977	2,286,816	2,179,038	2,298,105

1. The Housing Revenue Account (HRA) records income and expenditure relating to Local Authority housing stock

Source: Local Financial Returns (LFRs)