Publication - Statistics

Scottish Local Government Financial Statistics 2013-14

Published: 24 Feb 2015
ISBN:
9781785441288

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.

Scottish Local Government Financial Statistics 2013-14
2. Local Government Capital Expenditure and Financing

2. Local Government Capital Expenditure and Financing

2.1 Total Capital Expenditure and Financing

Capital expenditure by local authorities is mainly for purchasing, constructing or enhancing physical assets, such as buildings (e.g. care homes or 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 meet 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

The Local Government in Scotland Act 2003, provides local authorities with the power 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, 2013-14

£ thousands
General Fund Services Housing Revenue Account Total
Acquisition of land, leases, existing buildings or works 49,759 40,576 90,335
New construction, conversions & enhancement to existing buildings 1,415,322 551,988 1,967,310
Vehicles, machinery & equipment 163,523 25,986 189,509
Intangible assets 13,096 23 13,119
Total Gross Capital Expenditure 1,641,700 618,573 2,260,273
Revenue Expenditure funded from Capital Resources 199,585 143 199,728
Total Expenditure to be met from Capital Resources 1,841,285 618,716 2,460,001
Scottish Government General Capital Grant 438,163 0 438,163
Scottish Government Specific Capital Grants 136,731 43,818 180,549
Grants from Scottish Government Agencies and NDPBs 145,737 5,024 150,761
Other Grants and Contributions 124,601 17,476 142,077
Borrowing 788,568 316,958 1,105,526
Capital receipts used from asset sales/disposals 43,794 48,373 92,167
Capital Reserves (Capital Fund) 23,438 1,360 24,798
Capital funded from current revenue 109,628 185,707 295,335
Assets acquired under credit arrangements (e.g. finance leases, PPP/PFI) 30,625 0 30,625
Total Financing 1,841,285 618,716 2,460,001

Source: Capital Returns (CR Final)

In 2013-14 total gross capital expenditure was £2.26 billion. In addition to this, local authorities funded £0.20 billion of revenue expenditure from capital resources - this was mostly funding third party capital housing projects. This means that total expenditure funded from capital resources was £2.46 billion in 2013-14 (£0.62 billion in the housing revenue account and £1.84 billion in the General Fund). 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 2013-14 was borrowing. Local authorities borrowed £1.11 billion (45% of total financing) to fund capital expenditure (£0.79 billion for the General Fund and £0.32 billion for the HRA). The second most significant source of financing were grants from the Scottish Government and its Agencies. These funded a further £0.77 billion (31% of total financing) of capital expenditure.

The capital data from 2009-10 include the cost of changes arising from accounting changes from the introduction of International Financial Reporting Standards (IFRS). Based on these standards, more assets are now recognised as assets of the local authority (on-balance sheet) which they were not under the previous arrangements. The associated liability to finance the asset is a type of debt which is known as a finance lease or credit arrangement. The 2009-10 figures will not be comparable with earlier or later years as they include an adjustment to implement the new accounting standards.

Table 2.2 - Total Capital Expenditure and Financing, 2009-10 to 2013-14

£ thousands
2009-10a 2010-11 2011-12 2012-13 2013-14b
Acquisition of land, leases, existing buildings or works 477,203 98,730 137,332 146,930 90,335
New construction, conversions & enhancement to existing buildings 2,385,906 1,876,692 2,142,293 2,037,385 1,967,310
Vehicles, machinery & equipment 183,013 156,289 194,836 197,022 189,509
Intangible assets 11,197 5,042 6,052 6,638 13,119
Total Gross Capital Expenditure 3,057,319 2,136,753 2,480,513 2,387,975 2,260,273
Revenue Expenditure funded from Capital Resources 214,040 211,409 181,021 161,349 199,728
Total Expenditure to be met from Capital Resources 3,271,359 2,348,162 2,661,534 2,549,324 2,460,001
Scottish Government General Capital Grant 462,640 352,652 565,541 450,088 438,163
Scottish Government Specific Capital Grants 268,370 228,865 234,365 217,281 180,549
Grants from Scottish Government Agencies and NDPBs 160,281 115,726 82,764 141,311 150,761
Other Grants and Contributions 104,575 94,486 85,714 124,311 142,077
Borrowing from Loans fund 1,091,548 1,113,929 1,261,468 1,165,387 1,105,526
Capital receipts used from asset sales/disposals 164,746 114,722 94,020 105,937 92,167
Capital Fund applied 28,616 14,916 21,653 36,867 24,798
Capital funded from current revenue 166,141 208,894 209,122 294,087 295,335
Assets acquired under credit arrangements (e.g. finance leases, PPP/PFI) 824,442 103,972 106,888 14,055 30,625
Total Financing 3,271,359 2,348,162 2,661,534 2,549,324 2,460,001

a.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)

b. Following the Police and Fire Reform (Scotland) Act 2012 figures for 2013-14 may not be comparable with previous years. See section 5.2 for details.

Source: Capital Returns (CR Final)

Because of the changes in accounting practice noted above and Police and Fire Reform, 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 high level of capital expenditure financing for 2009-10 shown in chart 2.1. Figures for 2013-14 do not include Police or Fire Boards, which were replaced by new national bodies that are not classified as local government.

The majority of capital expenditure is financed by borrowing from the Loans Fund, with 45% of capital expenditure funded from borrowing in 2013-14. The next largest source of financing is Grants from Scottish Government (SG General/Specific, Agencies and NDPBs) which financed 31% of capital expenditure in 2013-14. Capital funded from current revenue has steadily increased since 2009-10, increasing from 5% of capital financing to 12% in 2013-14.

Chart 2.1 - Capital Expenditure Financing1, 2

£thousands

Chart 2.1

1. 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)

2. Following the Police and Fire Reform (Scotland) Act 2012 figures for 2013-14 may not be comparable with previous years. See section 5.2 for details.

Source: Capital Returns (CR Final)

2.2 General Fund Capital Expenditure

General fund capital expenditure in 2013-14 was £1,841 million. The service with the highest capital expenditure was education with 28% (£524 million) of capital expenditure. 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 £459 million (25% of General Fund expenditure).

Table 2.3 - Capital Expenditure by Service, 2009-10 to 2013-14

£ thousands
2009-10a 2010-11 2011-12 2012-13 2013-14
Education 1,248,645 508,691 691,878 517,158 523,776
Cultural & Related Services 216,345 196,014 245,371 257,040 148,933
Social Work 66,379 51,256 46,487 73,812 80,849
Roads & Transport 471,795 399,084 482,554 503,480 458,876
Environmental Services 121,769 102,458 105,036 126,631 188,525
Planning & Development Services 171,613 120,742 113,476 118,282 94,415
Central Services 212,250 180,486 143,678 123,740 175,153
Non-HRA Housing 182,808 174,404 149,002 136,363 156,699
Trading Services 21,935 12,687 10,390 18,419 14,059
Total General Fund Capital Expenditure excluding Police & Fire 2,713,539 1,745,822 1,987,872 1,874,925 1,841,285
Police2 37,744 25,241 30,188 45,365
Fire2 24,759 30,983 43,856 21,755
Total General Fund Capital Expenditure 2,776,042 1,802,046 2,061,916 1,942,045 1,841,285
Housing Revenue Account 495,317 546,116 599,618 607,279 618,716
Total Capital Expenditure 3,271,359 2,348,162 2,661,534 2,549,324 2,460,001

a. 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)

2. Following the Police and Fire Reform (Scotland) Act 2012 figures for 2013-14 may not be comparable with previous years. See section 5.2 for details.

Source: Capital Returns (CR Final)

Chart 2.2 - Capital Expenditure

£thousands

Chart 2.2

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 2013-14

Chart 2.3

Source: Capital Returns (CR Final) & National Records of Scotland Mid-Year Population Estimates (2013)

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, 2013-14 a, b

£ thousands
Scotland Unitary Authorities Regional Transport Partnerships Bridge Authorities Valuation Boards
Grants from Scottish Government Agencies and NDPBs 662,704 649,888 7,860 4,956 0
Grants from other Local Authorities/Joint Boards 15,943 13,537 2,383 0 23
European Union Structural Funds 9,545 9,545 0 0 0
Contributions from private developers or persons 17,034 17,034 0 0 0
Grants from the National Lottery 12,311 12,311 0 0 0
Other grants/ contributions 91,119 87,491 3,530 0 98
Total Grants 808,656 789,806 13,773 4,956 121

a. These figures are those reported by local authorities in their 2013-14 Final Capital Return for Income. They will not, therefore, match the figures for financing in Table 2.2

b. 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 2009-10 to 2013-14. 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 includes "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 "Central 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 2013-14 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, 2009-10 to 2013-14a

£ thousands
2009-10 2010-11 2011-12 2012-13 2013-14
Education 4,089 18,822 20,177 5,623 13,798
Culture & Related Services 2,243 12,013 746 1,025 3,574
Social Work 285 2,026 3,477 3,155 2,632
Roads & Transport 742 913 6,087 2,778 1,742
Environmental Services 1,113 799 611 507 1,378
Planning & Development Services 8,996 17,901 13,962 15,011 58,276
Central Services 142,394 18,613 15,663 23,925 28,128
Non-HRA Housing 602 453 344 81 198
Trading Services 133 1,082 1 35 6
Total GF Capital Receipts excluding Police & Fire 160,597 72,622 61,068 52,140 109,732
Police & Fire1 3,709 3,834 4,926 7,206
Total GF Capital Receipts 164,306 76,456 65,994 59,346 109,732
Housing Revenue Account 65,091 65,515 46,326 42,369 53,529
Total Capital Receipts 229,397 141,971 112,320 101,715 163,261

a. Following the Police and Fire Reform (Scotland) Act 2012 figures for 2013-14 may not be comparable with previous years. See section 5.2 for details.

2. In 2012-13 fire boards had £41k in education capital receipts raised.

Source: Capital Returns (CR Final)

Table 2.6 - Capital receipts summary, 2013-14

£ thousands
General Fund Housing Revenue Account TOTAL
Capital Receipts brought forward at 1 April 2013 45,123 2,821 47,944
Capital receipts from the sale/ disposal of fixed assets 109,732 53,529 163,261
Total capital receipts available for use 154,855 56,350 211,205
Capital receipts used from asset sales/disposals 43,794 48,373 92,167
Capital receipts used to repay debt 55,231 3,955 59,186
Capital receipts transferred to Capital Fund 34,228 0 34,228
Capital receipts held 31 March 2014 21,602 4,022 25,624

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 2013 (£48.0m), resulting in capital receipts held at 31 March 2014 of £25.6m.

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.

Local authorities are required by legislation to operate a loans fund. All 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 - 2009-10 to 2013-14

£ thousands
2009-10 2010-11a 2011-12 2012-13 2013-14
General Fund 779,807 808,181 918,890 852,238 788,568
Advances for Capital Expenditure 758,526 794,407 915,766 846,269 751,634
Advances for Consented Borrowing 21,281 13,774 3,124 5,969 36,934
Housing Revenue Account 311,741 305,748 342,578 313,149 316,958
Advances for Capital Expenditure 311,741 305,748 342,578 313,053 316,815
Advances for Consented Borrowing 0 0 0 96 143
Total Loans Fund Borrowing 1,091,548 1,113,929 1,261,468 1,165,387 1,105,526

a. 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. 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).


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Email: Euan Smith