Publication - Statistics publication

Scottish local government financial statistics 2016-2017

Published: 27 Feb 2018

Annual publication providing a comprehensive overview of Scottish local authority financial activity.

80 page PDF

1.6 MB

80 page PDF

1.6 MB

Contents
Scottish local government financial statistics 2016-2017
3. Local Government Reserves, Fixed Assets and Debt

80 page PDF

1.6 MB

3. Local Government Reserves, Fixed Assets and Debt

Local authorities can hold reserves to spend on services in the future and borrow to fund capital expenditure that will create an asset.

  • Total revenue reserves increased by 1.2% from £1.91 billion on the 1 st April 2016 to £1.93 billion on the 31 st March 2017;
  • Total Local Authority debt increased by 5% from £16.1 billion at the 31 st March 2016 to £16.8 billion at the 31 st March 2017;
  • Value of fixed assets increased by 3.5% from £40.7 billion at the 31 st March 2016 to £42.1 billion at the 31 st March 2017.

Total Revenue Reserves: £1.93 billion
Total Revenue Reserves: £1.93 billion

Total Debt, 31st March 2013 to 31st March 2017 (£thousands)
Total Debt, 31st March 2013 to 31st March 2017 (£thousands)

Value of Fixed Assets, 31st March 2013 - 31st March 2017 (£thousands)
Value of Fixed Assets, 31st March 2013 - 31st March 2017 (£thousands)

3.1 Local Authority Debt

Local authority capital expenditure is financed from a number of sources. When this is by borrowing money or a credit arrangement ( e.g. finance lease, Public-Private Partnership ( PPP) or Private Finance Initiative ( PFI)) a debt liability is created to be repaid by the local authority from future revenues.

The Local Government (Scotland) Act 1975 Act requires a local authority to maintain a Loans Fund. Advances are made from the Loans Fund to record the amount of expenditure a local authority has determined should be met from borrowing as permitted by legislation. The repayments made to the Loans Fund are the amount to be met in each financial year from a local authority revenue budget.

The expenditure recorded in the Loans Fund is expenditure which has been deferred ( i.e. not met by taxpayers or housing tenants when it is incurred) and is to be charged to taxpayers or housing tenants over a number of future years. The value of a Loans Fund will increase whenever an advance is made for expenditure incurred, or loans made, in any financial year. The value of the Loans Fund will reduce when Loans Fund advances are repaid by making a charge to the General Fund or Housing Revenue Account. The balance on a Loans Fund at 31 March each year represents the amount of past expenditure a local authority has a liability to fund from its future revenue budgets.

A local authority will borrow externally to fund the expenditure that is deferred and recorded in the Loans Fund. The balance on the Loans Fund should be similar to the value of external borrowing. There may be differences between the two values. Local authorities may borrow internally, that is use cash reserves rather than borrowing externally, or may borrow in advance of incurring the actual expenditure to take advantage of favourable interest rates.

The value of Loans Fund advances outstanding is set out in Table 3.1 and the level of credit arrangements outstanding is set out in Table 3.2.

Following a review of the capital forms in 2015, the timing of the data collection was changed to allow for final, audited capital data to be collected. Prior to this, the data was collected after the financial year had ended, but before the audit of the accounts was complete.

The all-Scotland value of Loans Fund advances outstanding at 31st March 2017 was £14.04 billion (of which £10.58 billion was General Fund and £3.45 billion was HRA). General Fund Loans Fund advances outstanding increased by £512 million (5.1%) between 1st April 2016 and 31st March 2017. HRA Loans Fund advances outstanding rose by £90 million (2.7%) between 1 st April 2016 and 31 st March 2017.

At 31st March 2017, the Scottish average General Fund Loans Fund advances outstanding was equal to £1,958 per person (up 4.7% on 31st March 2016) and the average HRA Loans Fund advances outstanding was equal to £10,900 per HRA dwelling (up 2.7% on 31st March 2016).

Table 3.1 – General Fund and HRA Loans Fund Advances Outstanding, 2012-13 to 2016-17 ( £thousands)

2012-13 2013-14 2014-15 2015-16 2016-17
General Fund
Loans Fund advances outstanding 1 April 9,608,327 9,650,825 9,932,872 9,954,276 10,067,865
ADD New advances from the Loans Fund 852,238 788,568 518,296 558,669 954,113
LESS: Repayments in year 475,952 469,823 462,945 456,449 434,452
LESS: Additional Voluntary Repayments in Year 45,299 34,546 27,437 8,889 3,584
Transfer of assets between funds (transfers out are negative) -292 -1,411 -1,773 -65 -3,552
Total Loans Fund advances outstanding 9,939,022 9,933,613 9,959,013 10,047,542 10,580,390
Per Head (£) 1,870 1,865 1,862 1,870 1,958
Housing Revenue Account
Loans Fund advances outstanding 1 April 2,619,354 2,835,741 3,024,509 3,219,673 3,360,105
ADD New advances from the Loans Fund 313,149 316,958 311,404 272,658 224,697
LESS: Repayments in year 96,475 127,585 105,602 112,504 116,884
LESS: Additional Voluntary Repayments in Year 2,920 9,956 12,411 16,931 20,987
Transfer of assets between funds (transfers out are negative) 292 1,411 1,773 65 3,552
Total Loans Fund advances outstanding 2,833,400 3,016,569 3,219,673 3,362,961 3,450,483
Per HRA dwelling (£) 8,973 9,533 10,138 10,609 10,900
Total ( GF + HRA) Loans Fund advances outstanding 12,772,422 12,950,182 13,178,687 13,410,504 14,041,714

a. Following the Police and Fire Reform (Scotland) Act 2012 figures for 2013-14 onwards may not be comparable with previous years. See Background to Local Government section for details.
Source: Capital Returns ( CRFinal), Housing Statistics for Scotland, NRS Mid-Year Population Estimates

Credit arrangements such as Private Finance Initiatives ( PFI) and Public Private Partnerships ( PPP) including the Scottish Non Profit Distributing ( NPD) model are not charged to the Loans Fund, but are a form of borrowing and included in the total debt figures.

Total credit arrangements outstanding stood at £2.80 billion on the 31 st March 2017, an increase of 4% on the previous year. Credit arrangements per head within the General Fund increased by 3.4% to £517 per head, while within the Housing Revenue Account, credit arrangements per HRA dwelling fell by 4.9% to £8 per dwelling.

Table 3.2 – Credit Arrangements, 2012-13 to 2016-17 ( £thousands)

2012-13 2013-14 2014-15 2015-16 2016-17
General Fund
Balance brought forward 1 April 2,865,124 2,845,843 2,800,193 2,750,910 2,675,714
ADD: New credit arrangements in year 14,055 30,625 42,701 21,726 207,018
LESS: Repayments of principal in year 84,955 90,802 92,895 87,933 90,265
Credit arrangements outstanding 31 March 2,794,224 2,785,666 2,749,999 2,684,703 2,792,467
Per Head (£) 526 523 514 500 517
Housing Revenue Account
Balance brought forward 1 April 10,508 7,132 4,965 3,469 2,679
ADD: New credit arrangements in year 0 0 0 0 0
LESS: Repayments of principal in year 3,380 2,167 1,496 790 136
Credit arrangements outstanding 31 March 7,128 4,965 3,469 2,679 2,543
Per HRA Dwelling (£) 23 16 11 8 8
Total ( GF + HRA) Credit Arrangements Outstanding 2,801,352 2,790,631 2,753,468 2,687,382 2,795,010

Source: Capital Returns ( CRFinal)

Total debt increased by 5% from £16.1 billion on the 31 st March 2016 to £16.8 billion on the 31 st March 2017. Of this, £13.4 billion was in the General Fund, which equates to £2,474 per head of population and £3.5 billion was in the Housing Revenue Account, which equates to £10,908 per HRA dwelling.

Table 3.3 – Total Debt, 31 st March 2013 to 31 st March 2017 ( £thousands)

31st March 2013 31st March 2014 31st March 2015 31st March 2016 31st March 2017
General Fund
Loans Fund Advances Outstanding 9,939,022 9,933,613 9,959,013 10,047,542 10,580,390
Credit Arrangements 2,794,224 2,785,666 2,749,999 2,684,703 2,792,467
Total General Fund Debt 12,733,246 12,719,279 12,709,012 12,732,245 13,372,857
Per Head (£) 2,396 2,387 2,377 2,370 2,474
Housing Revenue Account
Loans Fund Advances Outstanding 2,833,400 3,016,569 3,219,673 3,362,961 3,450,483
Credit Arrangements 7,128 4,965 3,469 2,679 2,543
Total HRA Debt 2,840,528 3,021,534 3,223,142 3,365,640 3,453,026
Per HRA Dwelling (£) 8,995 9,549 10,149 10,617 10,908
Total Debt 15,573,774 15,740,813 15,932,155 16,097,885 16,825,883

Source: Capital Returns ( CR Final)

3.2 Prudential Indicators

The CIPFA Prudential Code sets out a framework for a local authority to demonstrate its capital investment plans are affordable, prudent and sustainable. A number of prudential indicators are set and monitored against three year capital expenditure plans.

Key prudential indicators are:

  • Capital Financing Requirement;
  • Total External Debt;
  • Operational Boundary;
  • Authorised Limit.

The Capital Financing Requirement ( CFR) represents the amount of capital expenditure which a local authority has determined should be met from borrowing with the repayment of that borrowing to be met from future local authority budgets. Each year the CFR will increase by the amount of new capital expenditure which a local authority has determined should be met by borrowing (which includes both borrowing money and credit arrangements, which includes PPP/ PFI) and decrease by the amounts repaid. The CFR only represents an authority's underlying need to borrow to finance capital expenditure. The actual Total External Debt may be less than the CFR where a local authority has chosen to utilise internal cash reserves rather than borrow externally. The Total External Debt may exceed the CFR where a local authority has chosen to borrow in advance of actual capital expenditure. The Prudential Code limits borrowing in advance to the CFR plus up to 2 years planned capital expenditure to be funded from borrowing.

Prudential Indicators

Local authorities are also required to set limits on external debt. The Operational Boundary is based on the authority's capital spending plans and should reflect the most likely, i.e. prudent, but not worst case scenario for borrowing. In general, it is not significant if an authority breaches the operational boundary for a short period, however a sustained or regular trend above the operational boundary would be significant.

The authorised limit represents the maximum amount that the authority may borrow and is set at a level that reflects capital expenditure plans but includes headroom to allow for unusual cash movements i.e. treasury management.

Local authority Total External Debt increased by £0.80 billion (5.3%), from £15.15 billion at the 31 st March 2016 to £15.94 billion at the 31 st March 2017. Local authorities are currently under-borrowed, i.e. utilising internal cash reserves rather than external borrowing, with total external debt as a percentage of the Capital Financing Requirement of 94% at 31 st March 2017.

Table 3.4 - Prudential Information, 2012-13 to 2016-17 ( £thousands)

  2012-13 2013-14 2014-15 2015-16 2016-17
Capital Financing Requirement at 1 April 14,674,452 14,893,146 15,863,207 16,020,231 16,197,880
Capital Expenditure to be financed by borrowing or credit arrangements 1,179,442 1,136,151 872,402 853,053 1,385,828
Capital Expenditure to be financed by borrowing 1,105,526 829,701 829,701 831,327 1,178,810
Capital Expenditure to be financed by credit arrangements 14,055 30,625 42,701 21,726 207,018
Loans Fund principal repayments 572,427 597,408 568,548 568,953 558,595
Credit arrangements principal repayments 88,335 92,969 94,391 88,723 90,401
Additional voluntary contributions of principal repayments 48,219 44,502 39,848 25,865 26,359
Change in Capital Financing Requirement 470,461 401,272 169,615 169,512 710,473
Capital Financing Requirement at 31 March 15,144,913 15,294,418 16,032,822 16,189,743 16,908,353
Borrowing at 1 April 11,290,176 11,558,504 11,897,475 12,378,022 12,465,897
Other long term liabilities at 1 April 2,875,632 2,852,975 2,690,905 2,648,120 2,674,322
Total External Debt at 1 April 14,165,808 14,411,479 14,588,380 15,026,142 15,140,219
Borrowing at 31 March 11,706,550 11,816,384 12,332,169 12,465,804 13,159,196
Other long term liabilities at 31 March 2,801,352 2,790,631 2,645,977 2,680,311 2,782,628
Total External Debt at 31 March 14,507,902 14,607,015 14,978,146 15,146,115 15,941,824
Operational boundary for external debt at 31 March 16,571,358 16,684,872 16,779,418 16,982,303 17,519,099
Authorised limit for external debt at 31 March 17,553,906 17,749,541 17,787,296 17,733,442 19,083,076
Total External debt as a percentage of the Capital Financing Requirement at 31 March 96% 96% 93% 94% 94%

Source: Capital Returns ( CRFinal)

Chart 3.1 – Prudential Indicators: 31 st March 2013 to 31 st March 2017 ( £thousands)
Chart 3.1 – Prudential Indicators: 31st March 2013 to 31st March 2017 (£thousands)
Source: Capital Returns ( CRFinal)

3.3 Fixed Assets

Capital Expenditure creates local authority assets. The value of local authority fixed assets is shown in Table 3.5 below. At 31 st March 2017, local authorities held a total of £42.1 billion of assets, an increase of 3.5% (£1,433 million) on 31 st March 2016.

Table 3.5 – Value of Fixed Assets, 31 st March 2013 to 31 st March 2017 ( £thousands)

  Value of fixed assets as at 31 March 2013 Value of fixed assets as at 31 March 2014b Value of fixed assets as at 31 March 2015 Value of fixed assets as at 31 March 2016 Value of fixed assets as at 31 March 2017
Operational Assets
Council dwellings 10,450,805 10,839,706 10,535,999 11,281,473 11,189,874
Other land and buildings 18,978,739 18,276,923 18,866,921 18,995,354 20,177,171
Vehicles, plant and machinery 1,022,046 1,003,162 1,178,814 1,197,642 1,145,829
Infrastructure assets 4,751,596 4,987,041 5,361,011 5,608,853 5,710,060
Community assets 168,819 161,728 169,971 184,156 177,537
Heritage assets 1,804,230 1,803,074 1,840,245 1,848,685 1,857,999
Total operational assets 37,176,235 37,071,634 37,952,961 39,116,163 40,258,470
Non-operational assets
Assets under construction 1,271,111 1,200,830 845,627 1,011,066 1,316,259
Surplus assets held for disposal 377,632 365,120 336,021 314,377 301,251
Investment properties 205,220 197,445 207,027 197,382 192,725
Total non-operational assets 1,853,963 1,763,395 1,388,675 1,522,825 1,810,235
Intangible Assets 19,747 23,913 52,306 48,437 51,435
Total Assets excluding Police & Fire 38,214,124 38,858,942 39,393,942 40,687,425 42,120,140
Total Assets 39,049,945 38,858,942 39,393,942 40,687,425 42,120,140

Source: Capital Returns ( CRFinal)


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