Information

Scottish Local Government Financial Statistics 2012-13

Scottish Local Government Financial Statistics is an annual publication that provides a comprehensive overview of Scottish Local Authority financial activity. The publication covers Local Authority income, revenue and capital expenditure, outstanding debt, local taxation and Local Authority pensions.

This document is part of a collection


2. Local Government Capital Expenditure and Financing

2.1 Total Capital Expenditure and Financing

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

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 G and H.

Table 2.1 - Total Capital Expenditure and Financing, 2012-13

£ thousands
General Fund Services Housing Revenue Account Total
Acquisition of land, leases, existing buildings or works 131,004 15,926 146,930
New construction, conversions & enhancement to existing buildings 1,468,935 568,450 2,037,385
Vehicles, machinery & equipment 174,493 22,529 197,022
Intangible assets 6,360 278 6,638
Total Gross Capital Expenditure 1,780,792 607,183 2,387,975
Revenue Expenditure funded from Capital Resources 161,253 96 161,349
Total Expenditure to be met from Capital Resources 1,942,045 607,279 2,549,324
Scottish Government General Capital Grant 450,088 0 450,088
Scottish Government Specific Capital Grants 173,369 43,912 217,281
Grants from Scottish Government Agencies and NDPBs 135,072 6,239 141,311
Other Grants and Contributions 109,026 15,285 124,311
Borrowing from Loans fund 852,238 313,149 1,165,387
Capital receipts used from asset sales/disposals 65,592 40,345 105,937
Capital Fund applied 36,517 350 36,867
Capital funded from current revenue 106,088 187,999 294,087
Assets acquired under credit arrangements (e.g. finance leases, PPP/PFI) 14,055 0 14,055
Total Financing 1,942,045 607,279 2,549,324

Source: Capital Returns (CR Final)

In 2012-13 total gross capital expenditure was £2.39 billion. In addition to this, local authorities had £0.16 billion of revenue expenditure from their capital resources - this was mostly funding third party capital projects in non-HRA housing. This means that total expenditure funded from capital resources was £2.55 billion in 2012-13 (£0.61 billion in the housing revenue account and £1.94 billion in the General Fund), compared to £2.66 billion in 2011-12 - a fall of £0.11 billion. The majority (around 80%) of capital expenditure went on new construction, conversions and enhancements to existing buildings.

The largest source of financing for capital expenditure in 2012-13 was borrowing. Local authorities borrowed £1.17 billion to fund capital expenditure (£0.85 billion for the general fund and £0.31 billion for the HRA). The second most significant source of financing were grants from the Scottish Government and its Agencies. These funded a further £0.81 billion of capital expenditure.

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 2.2 - Total Capital Expenditure and Financing, 2008-09 to 2012-13

£ thousands
2008-09 2009-101 2010-11 2011-12 2012-13
Acquisition of land, leases, existing buildings or works 284,120 477,203 98,730 137,332 146,930
New construction, conversions & enhancement to existing buildings 1,808,204 2,385,906 1,876,692 2,142,293 2,037,385
Vehicles, machinery & equipment 189,280 183,013 156,289 194,836 197,022
Intangible assets 50,373 11,197 5,042 6,052 6,638
Total Gross Capital Expenditure 2,331,977 3,057,319 2,136,753 2,480,513 2,387,975
Revenue Expenditure funded from Capital Resources 200,164 214,040 211,409 181,021 161,349
Total Expenditure to be met from Capital Resources 2,532,141 3,271,359 2,348,162 2,661,534 2,549,324
Scottish Government General Capital Grant 364,039 462,640 352,652 565,541 450,088
Scottish Government Specific Capital Grants 262,093 268,370 228,865 234,365 217,281
Grants from Scottish Government Agencies and NDPBs 141,590 160,281 115,726 82,764 141,311
Other Grants and Contributions 115,871 104,575 94,486 85,714 124,311
Borrowing from Loans fund 1,206,318 1,091,548 1,113,929 1,261,468 1,165,387
Capital receipts used from asset sales/disposals 204,048 164,746 114,722 94,020 105,937
Capital Fund applied 40,609 28,616 14,916 21,653 36,867
Capital funded from current revenue 196,836 166,141 208,894 209,122 294,087
Assets acquired under credit arrangements (e.g. finance leases, PPP/PFI) 737 824,442 103,972 106,888 14,055
Total Financing 2,532,141 3,271,359 2,348,162 2,661,534 2,549,324

1. From 2009-10 onwards assets acquired through PPP/PFI are included. In addition, figures for 2009-10 include assets acquired through PPP/PFI for past years. ( more information on the changes can be found here - http://www.scotland.gov.uk/Topics/Government/local-government/17999/LACapital/CapExReport200910)

Source: Capital Returns (CR Final)

Because of the changes in accounting practice noted above it is difficult to draw conclusions about changes in capital expenditure and financing over the time period presented in Table 2.2 and Chart 2.1. In particular the figures for 2009-10 include all of the expenditure financed by PPP/PFI in the years up to then that would be counted as expenditure under the new regime - this is illustrated by the spike in capital expenditure financing for 2009-10 shown in chart 2.1. However, despite this, it is possible to conclude that there have been some changes in the way capital expenditure has been financed over recent years. As revenue from capital receipts has fallen they play an increasingly small part in financing expenditure, with other forms of financing (for example capital funded from current revenue) increasing their proportion of total capital financing.

Chart 2.1 - Capital Expenditure Financing

Chart 2.1 - Capital Expenditure Financing

From 2009-10 onwards assets acquired through PPP/PFI are included. In addition, figures for 2009-10 include assets acquired through PPP/PFI for past years. ( more information on the changes can be found here - http://www.scotland.gov.uk/Topics/Government/local-government/17999/LACapital/CapExReport200910)

Source: Capital Returns (CR Final)

2.2 General Fund Capital Expenditure

General fund capital expenditure in 2012-13 was £1,942 million. The service with the highest capital expenditure was education with 27% (£517 million) of local government capital expenditure going on education. It is difficult to make comparisons with past data for education expenditure because of the changes made to accounting for PPP/PFI from 2009-10 onwards. It should be noted that expenditure for 2009-10 includes a large amount of expenditure funded by PPP/PFI for past years and this disproportionately affects education expenditure.

The next biggest service for capital expenditure is roads and transport which had expenditure of £503 million (26% of general fund expenditure). Expenditure on roads and transport by City of Edinburgh Council in 2012-13 was £161 million (32% of total roads and transport expenditure). In the period 2008-09 to 2012-13 City of Edinburgh Council's expenditure on roads and transport was £645 million out of a total of £2,337 million in Scotland. This represents 28% of total roads and transport expenditure. This high share of expenditure includes expenditure related to the construction of the Edinburgh Trams.

Table 2.3 - Capital Expenditure by Service, 2008-09 to 2012-13

£ thousands
2008-09 2009-101 2010-11 2011-12 2012-13
Education 479,258 1,248,645 508,691 691,878 517,158
Social Work 63,233 66,379 51,256 46,487 73,812
Police 45,673 37,744 25,241 30,188 45,365
Fire 33,449 24,759 30,983 43,856 21,755
Cultural & Related Services 207,088 216,345 196,014 245,371 257,040
Environmental Services 121,267 121,769 102,458 105,036 126,631
Roads & Transport1 479,769 471,795 399,084 482,554 503,480
Central Services 274,923 212,250 180,486 143,678 123,740
Planning & Economic Development 124,060 171,613 120,742 113,476 118,282
Non-HRA Housing 180,099 182,808 174,404 149,002 136,363
Trading Services 22,764 21,935 12,687 10,390 18,419
Total General Fund Capital Expenditure 2,031,583 2,776,042 1,802,046 2,061,916 1,942,045
Housing Revenue Account 500,558 495,317 546,116 599,618 607,279
Total Capital Expenditure 2,532,141 3,271,359 2,348,162 2,661,534 2,549,324

1. From 2009-10 onwards assets acquired through PPP/PFI are included. In addition, figures for 2009-10 include assets acquired through PPP/PFI for past years. ( more information on the changes can be found here - http://www.scotland.gov.uk/Topics/Government/local-government/17999/LACapital/CapExReport200910)

Source: Local Financial Returns - LFR 00

The next largest spending service is cultural and related services (which includes recreation and sports facilities) with expenditure of £257 million (13% of total general fund expenditure). Annex G presents Capital Expenditure by Local Authority and Service. This shows that Glasgow City Council had capital expenditure on cultural and related services of £83 million (32% of total cultural and related services expenditure).

In the period 2008-09 to 2012-13 Glasgow City Council's expenditure on cultural and related services was £335 million out of a total of £1,036 million in Scotland. This represents 32% of cultural and related services expenditure. This high share of expenditure includes some expenditure related to the Commonwealth Games.

Chart 2.2 - Capital Expenditure

Chart 2.2 - Capital Expenditure

From 2009-10 onwards assets acquired through PPP/PFI are included. In addition, figures for 2009-10 include assets acquired through PPP/PFI for past years. ( more information on the changes can be found here - http://www.scotland.gov.uk/Topics/Government/local-government/17999/LACapital/CapExReport200910)

In any given year capital expenditure per capita 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 is uneven and expenditure per head in local authority areas will move (possibly substantially) from year to year.

Chart 2.3 - Gross Capital Expenditure per Capita by Local Authority Area 2012-13

Chart 2.3 - Gross Capital Expenditure per Capita by Local Authority Area 2012-13

Source: Capital Returns (CR Final) & National Records of Scotland Mid-Year Population Estimates (2012)

2.3 General Fund Capital Financing

2.3.1 Capital Grants

Capital grants are grants provided to local authorities to fund capital investment. The Scottish Government provides two types of grant funding to local authorities - a General Capital Grant and a number of ring-fenced grants. Scottish Government Agencies, such as Transport Scotland, and Non-Departmental Bodies, such as sportscotland may also award grants for projects. Other grants and contributions include grants from other local authorities, European Structural Funds, contributions from private developers or persons, and grants from the National Lottery. Table 2.4 details capital grants by source, and type of local authority.

Table 2.4 - Capital Grants, 2012-13 1, 2

£ thousands
Scotland Unitary Authorities Police Boards Fire Boards Regional Transport Partnerships Bridge Authorities Valuation Boards
Grants from Scottish Government Agencies and NDPBs 693,020 638,072 5,128 15,509 17,542 16,769 0
Grants from other Local Authorities/Joint Boards 16,936 8,692 5,617 0 2,601 0 26
European Union Structural Funds 7,365 7,365 0 0 0 0 0
Contributions from private developers or persons 8,816 8,816 0 0 0 0 0
Grants from the National Lottery 13,526 13,526 0 0 0 0 0
Other grants/ contributions 99,750 96,491 3,040 60 0 0 159
Total Grants 839,413 772,962 13,785 15,569 20,143 16,769 185

1. These figures are those reported by local authorities in their 2012-13 Final Capital Return for Income. They will not, therefore, match the figures for financing in Table 3.2

2. Figures include Housing Revenue Account

Source: Capital Returns (CR Final)

2.3.2 Capital Receipts

'Capital receipts' is the term used to recognise income from the sale or disposal of a fixed asset, such as land or council housing. Under statute capital receipts may only be used to fund capital expenditure or for the repayment of the principal of loans.

Table 2.5 details capital receipts categorised by service from 2008-09 to 2012-13. In order to reflect the corporate nature of assets and to promote good asset management practices local authorities commonly move assets to "Central Services" (which forms part of the "Other Services" categorisation in this table) when they become identified as surplus for disposal. This can be seen from the table where in recent years for General Fund services, the greatest value of capital receipts has generally been reported against "Other Services". From 2009-10, Local authorities have been required to report Capital Receipts against the service with which the asset was last in use. A detailed breakdown of Capital Receipts by Service for 2012-13 can be found in Annex J.

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. Revenue raised from capital receipts has been falling for a number of years, but because of the changes in recording practice it is difficult to attribute this fall to a particular service.

Table 2.5 - Capital Receipts Raised by Service, 2008-09 to 2012-13

£ thousands
2008-09 2009-10 2010-11 2011-12 2012-13
Education 30,489 4,089 18,822 20,177 5,664
Culture & Related Services 2,594 2,243 12,013 746 984
Social Work 715 285 2,026 3,477 3,155
Police & Fire 4,908 3,709 3,834 4,926 7,206
Roads & Transport 1,928 742 913 6,087 2,778
Environmental Services 793 1,113 799 611 507
Planning & Economic Development 9,120 8,996 17,901 13,962 15,011
Trading Services 6 133 1,082 1 35
Other Services 43,557 142,394 18,613 15,663 23,925
Non-HRA Housing 211 602 453 344 81
Total General Fund Services 94,321 164,306 76,456 65,994 59,346
Housing Revenue Account 135,657 65,091 65,515 46,326 42,369
Total Services 229,978 229,397 141,971 112,320 101,715

Source: Capital Returns (CR Final)

Table 2.6 - Capital receipts summary, 2012-13

£ thousands
General Fund Housing Revenue Account TOTAL
Capital Receipts brought forward at 1 April 2012 78,667 6,428 85,095
Capital receipts from the sale/ disposal of tangible fixed assets 59,289 42,369 101,658
Capital receipts from the sale/ disposal of intangible fixed assets 57 0 57
Total capital receipts available for use 138,013 48,797 186,810
Capital receipts used from asset sales/disposals 65,592 40,345 105,937
Capital receipts used to repay debt 1,012 5,013 6,025
Capital receipts transferred to Capital Fund 23,896 0 23,896
Capital receipts held 31 March 2013 47,513 3,439 50,952

Source: Capital Returns (CR Final)

Table 2.6 shows the impact capital receipts raised and used have on the capital receipts brought forward at 1 April 2012 (£85.1m), resulting in capital receipts held at 31 March 2013 of £51.0m.

2.3.3 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 as shown in Table 2.7.

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 2.7 - Loans Fund Borrowing to Finance Capital Expenditure

£ thousands
2008-09 2009-10 2010-111 2011-12 2012-13
Scotland 1,206,318 1,091,548 1,113,929 1,261,468 1,165,387
Unitary Authorities 1,194,867 1,086,559 1,110,056 1,245,898 1,165,387
Fire 5,674 0 3,873 15,570 0
Police 5,777 4,989 0 0 0
Valuation Boards1 nc nc 0 0 0
Regional Transport Partnerships 0 0 0 0 0
Bridge Authorities 0 0 0 0 0

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

Source: Capital Returns (CR Final)

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. The costs of servicing debt are detailed in Table 1.1 which shows interest paid and the cost of repayments can be seen in Annex B (Statutory Repayment of Debt).

Contact

Email: Euan Smith

Back to top