5. Background to Scottish Local Government Financial Statistics
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. Further information on Scottish Local Government
Finance Statistics can be found at:
5.1 Structure and Functions of Local Government
Local government is responsible for delivering a wide range of services including education, social services, transport, housing, environmental services, cultural services, planning and development and central services. Under the Concordat signed in November 2007, the Scottish Government and local government work jointly towards agreed outcomes under a single national purpose.
Local government in Scotland is comprised of 32 local authorities as shown in Map 5.1. In terms of population, the largest of these 32 Authorities is Glasgow City Council and the smallest is Orkney Islands Council. Table 5.1 below shows the population and area for each Local Authority.
In addition to these 32 local authorities, there are also Valuation Joint Boards, Regional Transport Partnerships and the Forth and Tay Bridge Boards. Most of these Boards are the collective responsibility of two or more Councils. See Table 5.2 for listings of Boards and constituent Local Authorities.
Regional Transport Partnerships (RTPs) were established by the Transport (Scotland) Act 2005. Seven statutory regional transport partnerships were created across Scotland to lead on regional transport strategy and delivery.
Valuation Joint Boards provide valuation services, primarily maintaining the Valuation Roll for non-domestic properties, and the Council Tax Valuation List for domestic dwellings. The Valuation Roll and Council Tax Valuation Lists are used as the basis for local taxation billing liability (council tax and non-domestic rates).
Police and Fire Boards were until 31st March 2013 responsible for providing police and fire services for their constituent Councils. The Police and Fire Reform (Scotland) Act 2012 created Police Scotland and the Scottish Fire and Rescue Service, which replaced the former Police and Fire Boards. These new bodies are classified as central government, so are no longer included in figures on local government in 2013-14. Due to the way that Police and Fire Boards were funded, it is not possible to exclude Police and Fire income from previous years. As such, figures from 2013-14 are not strictly comparable with figures from earlier years.
Where possible, expenditure on Police and Fire have been presented separately so that comparisons over time can be made. However, for many of the income sections, this has not been possible and comparisons should be made with care.
|Population||Area (sq km)||Population Density (Persons per sq km)||Urban Rural Classification|| SIMD Local share |
of datazones in the
most deprived 15%
| Urban |
(% of population)
| Rural |
(% of population)
|Argyll & Bute||88,050||6,909||13||48.1||51.9||8.2%|
|Dumfries & Galloway||150,270||6,426||23||54.4||45.6||6.7%|
|Edinburgh, City of||487,500||263||1,852||99.1||0.9||9.8%|
|Perth & Kinross||147,750||5,286||28||53.8||46.2||3.4%|
Sources: Population and Area - National Records of Scotland 2013 Mid-Year Population Estimates. Urban Rural Classification - SG Urban Rural Classification 2013-14. SIMD - Scottish Index of Multiple Deprivation 2012.
|Local Authority||Regional Transport Partnerships||Valuation Joint Boards|
|Argyll & Bute1||SPT/HITRANS||Dunbartonshire & Argyll& Bute|
|Dumfries & Galloway||SWESTRANS||Dumfries & Galloway|
|East Dunbartonshire||SPT||Dunbartonshire & Argyll& Bute|
|Edinburgh, City of||SESTRAN||Lothian|
|Eilean Siar||HITRANS||Highland and Western Isles|
|Highland||HITRANS||Highland and Western Isles|
|Orkney Islands||HITRANS||Orkney & Shetland|
|Perth & Kinross||TACTRAN||Tayside|
|Shetland Islands||ZetTrans||Orkney & Shetland|
|West Dunbartonshire||SPT||Dunbartonshire & Argyll& Bute|
1. Helensburgh and Lomond are part of SPT while the rest of Argyll and Bute is part of HITRANS.
5.3 Local Government Finance
5.3.1 Capital and Revenue Expenditure
Local government expenditure is split between revenue and capital expenditure.
Both the capital and revenue sections of local authority accounts are collected on an accruals basis. This means that transactions are reflected in the accounts of the period in which the relevant event took place (for example, when income was earned or an expense was incurred).
Revenue expenditure is largely made up of employee and operating costs. Employee costs include salaries, wages, national insurance, superannuation contributions, cash allowances to employees, redundancy and severance payments and other employee costs. Operating costs include property costs, supplies and services, transport and plant costs, payments to agencies and other bodies, and direct administration costs.
Capital expenditure is mainly incurred by local authorities for buying, constructing or enhancing physical assets such as buildings (schools, houses etc), land, vehicles, plant and machinery.
For accounting purposes revenue and capital are kept separate, but there is a relationship between the two, where capital expenditure (on a building for example) can have implications for revenue expenditure (where that building needs to be maintained and staffed). The revenue accounts reported include the General Fund, Housing Revenue accounts and External Trading Services accounts. Adjustments are made for transfers between accounts in order to avoid any double counting of expenditure or income.
Revenue and capital accounts should not be combined to produce total expenditure and income figures. There are elements of expenditure, i.e. Revenue Contributions to Capital, which is also known as Capital Financed from Current Revenue, and Grants to third parties funded by the General Capital Grant, which are reported both as Revenue and as Capital expenditure. As such, analysis and discussion of revenue and capital accounts are done separately to avoid double-counting.
5.3.2 Local Government Expenditure - Funding
Revenue expenditure is largely financed through Scottish Government grants, Non-Domestic Rates income and Council Tax income. Capital is mainly financed through Scottish Government grants, borrowing, capital receipts and revenue contributions.
This publication does not cover how funding is distributed amongst Local Authorities but details of the needs-based methodology central to funding allocation can be found on the Scottish Government Grant Aided Expenditure Website.
5.3.3 Local Authority Funds and Reserves
Local Authorities are required under section 93(1) of the Local Government (Scotland) Act 1973 to have a General Fund. All sums received by or on behalf of the authority are required to be paid into that fund, and all sums payable by the authority shall be paid out of the General Fund, except where statute provides otherwise. The General Fund is therefore the main account for Local Authorities and the one where most transactions occur. References to General Fund Income and Expenditure in this publication encompass the income and expenditure of the 32 Local Authorities, the Police and Fire Boards (until their abolition), the Valuation Joint Boards, and the Regional Transport Partnerships, but do not include revenue income and expenditure of the Forth or Tay Bridge Boards.
The Housing (Scotland) Act 1987 requires a local authority to keep a Housing Revenue Account (HRA) for income and expenditure in relation to a local authority's own direct provision of housing. This separates the costs of social housing from other services provided by the local authority.
Local authorities also own and manage Common Good assets. 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). Statute requires these assets to be accounted for separately. 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.
Local Authorities are empowered by the Local Government (Scotland) Act 1975 to establish a Renewal and Repair fund. This fund may be used for repairing, maintaining, replacing and renewing the authority's buildings, plant and equipment. The Renewal and Repair fund may also be used to finance capital expenditure. In accordance with the Code of Practice on Local Authority Accounting in the UK (the Code), expenditure may not be charged directly to reserves. As such, all transactions are restricted to contributions to and from the General Fund.
The Local Government (Scotland) Act 1975 (as amended by schedule 13 of the Local Government etc. (Scotland) Act 1994) also enables a local authority to establish an Insurance Fund. Again, expenditure should not be charged directly to any reserve. As such, all transactions for this reserve are restricted to contributions to and from the General Fund.
In addition to the funds listed above, some local authorities may have specific statutory authority to hold other statutory reserves. Examples include the Orkney County Council Act 1974 and the Zetland County Council Act 1974, which require the respective councils to keep separate accounts for their harbour undertakings and provide the power for the councils to hold a reserve fund for the same undertakings. As with other reserves' transactions, all transactions for these reserves are restricted to contributions to and from the General Fund.
The Local Government (Scotland) Act 1975 Act also permits a local authority to establish a Capital Fund. This fund may be used for the purpose of meeting the cost of capital expenditure and for the repayment of principal on loans (but not any interest on loans). Capital receipts may be paid directly into the Capital Fund in accordance with the provisions of the 1975 Act.
In addition to their own funds certain local authorities have the responsibility for managing pension funds. The Local Government Pension Schemes do not form part of the local authority accounts or reserves.
5.3.4 Changes to Accounting Arrangements for Public Private Partnerships and Public Finance Initiatives
Revised accounting arrangements for Public Private Partnerships (PPP) and Public Finance Initiatives (PFI) were introduced from 1st April 2009. Local Financial Returns 2009-10 and Final Capital Return 2009-10 were revised to collect data based on the new arrangements and this has continued for subsequent returns.
The revisions require local authorities to separate the PPP/PFI unitary charge into elements recognising the liability to meet the construction cost of the asset (statutory repayment of debt), interest costs arising from financing arrangements and the service charge for services (revenue expenditure) provided under the arrangement. Previously the total unitary charge was included within the relevant service revenue expenditure. Therefore, for 2009-10 revenue expenditure, statutory repayment of debt and interest and investment income for services in which there are PPP or PFI schemes are not comparable with previous years. Total revenue expenditure is not affected by the changes. To allow comparisons to be made between the old and new accounting arrangements, revenue expenditure tables prepared on the old basis [LGF Stats 2009-10 (PPP/PFI Adjusted)] were published alongside Scottish Local Government Financial Statistics 2009-10 (which included tables on the new basis).
Capital expenditure is also affected by the revised accounting arrangements. Before 1st April 2009 assets provided by a PFI/PPP or similar arrangement were not recorded as assets of the authority and therefore expenditure on the construction or enhancement of those assets was not recorded as capital expenditure. 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.
This change should therefore be taken into account when comparing 2009-10 capital expenditure for services in which councils have PPP or PFI with those of previous years. Comparison between data on the old and new bases is provided in Capital Expenditure Report 2010-11.
The services in which councils have reported having PPP or PFI are Education, Social Work, Culture & Related Services, Environmental Services and Roads & Transport. The biggest effect can be seen in Education as most councils have a PPP or PFI scheme for this service.
For more detailed information on the accounting changes see Finance Circular 4/2010.
5.3.5 Data Collection and Quality
The tables and figures in this publication have been compiled using various financial returns made by Local Authorities and Joint Boards throughout the financial year. These financial returns are approved by local authority directors of finance. The continued co-operation of these bodies in completing these returns is gratefully acknowledged.
To aid comparability, data collection aims to follow accountancy standards where they apply - for example revenue expenditure data are collected in line with the Chartered Institute of Public Finance and Accountancy (CIPFA) Service Code of Practice (SeRCoP).
Local authorities are required to ensure that their Local Financial Returns (LFRs) are as comparable as possible to their published audited accounts. This should ensure that the data provided is more comparable across authorities and there is less opportunity for error when classifying expenditure across different services within an authority.
As part of the quality assurance procedure, the Scottish Government carries out validation checks on the incoming data to identify possible errors. Potential problems are identified in a number of ways, including comparing the data received to: other known sources; data from previous years; and data from other local authorities. Where appropriate, views are also sought from policy colleagues - for example where a change in the financial data may be attributable to a policy change. To ensure the data are of a high quality, the Scottish Government then works with the relevant local authorities to resolve any data issues identified.
The LFRs are used to collect revenue income and expenditure data from local authorities. A full review of the LFRs was carried out for the 2011-12 data collection by the LFR Review Group, comprising of representatives from local authorities, the Convention of Scottish Local Authorities (COSLA), the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Scottish Government. This group continued to provide help and advice with regard to the 2012-13 LFRs, for example improving definitions to aid consistency, and this support is gratefully acknowledged.
Further information on Sources, Uses and Quality of Local Government Finance National Statistics can be found on the Local Government Finance Statistics pages of the Scottish Government website.
Revenue expenditure data from 2011-12 onwards were collected after local authority accounts were audited.
All other financial data is shown at outturn level to reflect the amounts after the year's accounts have been closed, but before audit. Where possible actual figures have been used. Where this has not been possible, near-actual figures have been taken. For this reason the figures published in this publication may not always agree with those published in Local Authority Audited Accounts.
Please note that due to rounding, some totals may not agree with the sum of their constituent parts. Calculations have been made where possible using un-rounded figures and may therefore not agree exactly with the rounded figures given in accompanying tables.
Enquiries relating to any of the text, tables or figures contained in the publication may be directed to:Scottish Government
Local Government Finance Statistics
Local Governance and Reform Analytical Division
Area 3H-North, Victoria Quay
Tel: (0131) 244 7033
Many of the data collections feeding into this report collect data at a more detailed level than the information published here. Much of the additional data can be made available if requested (contact details as above). Empty data collection forms, which illustrate what is collected can be viewed on the Scottish Government website Local Government Finance - Data Supplier Area pages.
All tables in this publication, and further background data, are available as Excel spreadsheets from the Scottish Government Local Government Finance Statistics website at: http://www.scotland.gov.uk/Topics/Statistics/Browse/Local-Government-Finance
5.3.8 Local Government Financial Statistics from other parts of the UK
Statistics on local government finance in England and Wales can be found here:
Although many of the statistics in the publications for Scotland, England and Wales adopt common accounting standards, there will be some variations in definitions for statistics for different countries.
If further advice is required on the definitions used in Scottish Local Government Financial Statistics, please use the contact details in the Enquiries section (above).
Email: Euan Smith