The Scottish Government

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SUMMARY AND KEY FACTS

Total Expenditure and Income

Scottish Local Authority total gross expenditure for 2006-07 was £18.9 billion. This is a 2.6% increase on the figure for 2005-06, and can be split into gross revenue expenditure of £16.9 billion and gross capital expenditure of £2.0 billion ( Table 1).

Scottish Local Authority gross income in 2006-07 was £20.2 billion. This is an 6.7% increase on the figure for 2005-06, and can be split into £19.1 billion of gross revenue income and £1.0 billion of gross capital income ( Table 1).

General Fund Service Expenditure

General fund gross service expenditure for 2006-07 was £12.9 billion, a 0.9% increase over the previous year's figure ( Table 2A). Since 1996-97 gross revenue spending by Local Authorities in Scotland has increased by 78.0%, an average of 6.0% per year. Net current expenditure, which is defined as gross revenue expenditure less income from sales, fees, charges and other local sources, was £10.6 billion, a 0.9% increase from 2005-06 ( Table 3).

The main components of net current expenditure in 2006-07 were £4.3 billion of spending on education, £2.2 billion on social work and £1.3 billion on police, fire and emergency planning. These figures represent increases of 3.4%, 7.7% and 3.9% respectively on 2005-06.

The long-term trend in net current expenditure by service shows that the greatest increases have been in the education and social work service areas, which in 2006-07 jointly accounted for 61% of net current expenditure (Table S1). Almost half of the £4.1 billion increase in spending since 1996-97 has been allocated to the education service (£1,837 million), with approximately a quarter going to social work services (£1,143 million).

TABLE S1 Net Current Expenditure by Service, General Fund ¹, 1996-97 to 2006-07

1 Excluding general fund contributions to housing, trading services and interest on revenue balances.
2 Including general fund contributions to transport ( LA and non LA).

Housing Revenue Expenditure

Total gross expenditure on housing for 2006-07, including both general fund and Housing Revenue Account ( HRA) spending, was £3.0 billion. After accounting for income received from sales, rents, fees and charges, benefits paid by Central Government and other income, net current expenditure to be financed from non-domestic rates, council taxes and balances was £58.4 million ( Table 5A).

Capital Expenditure and Outstanding Debt

The total gross capital expenditure for 2006-07 was £1,952 million, an increase of 24.2% from 2005-06. Gross capital income was £1,047 million, an increase of 66.7% from the 2005-06 figure ( Table 2B). These large increases are an expected by-product of the 2004-05 transition into the Prudential Regime which allows greater freedom for local authorities to undertake self-financed borrowing.

Gross capital expenditure has continued to increase steadily in 2006-07. Gross capital expenditure fell from 1996-97 to 1997-98 and then remained relatively constant until the large increases in the past four years. Housing, mostly through the Housing Revenue Account ( HRA), accounted for 23% of the gross expenditure. Roads and Transport and Education accounted for 22% and 21% of the gross expenditure respectively.

TABLE S2 Gross Capital Expenditure ¹ by Service, 1996-97 to 2006-07

1 Excluding capital expenditure which is financed from revenue.
2 Including administrative buildings and equipment, housing loans and grants, other services and trading services.
3 Figures are on a cash basis for 1996-97 to 2003-04. Subsequent figures are on an accruals basis

Local authority capital debt outstanding was £9.4 billion at 31 March 2007 ( Table 10). This is a 3.2% increase on the figure for 31 March 2006. Total debt per head at the Scotland level in 2006-07 was £1,842.

Council Tax

Total Council Tax income for 2006-07, including Council Tax Benefit payments from the Department for Work and Pensions, was £2.171 billion (Table S3). This is a 4.6% increase on the income received in 2005-06. Average Band D Council Tax in Scotland for 2006-07 was £1,129, a 3.2% increase from the previous year, and the estimated number of band D equivalent houses (inclusive of all discounts and exemptions) in September 2007 was 2.0 million, a 1.2% increase from September 2006. The number of chargeable dwellings (all dwellings excluding exemptions) has increased from September 2006 by 0.9% to 2.3 million in September 2007 ( Table 12).

The increase in Council Tax income is greater than the combined effect of increases in both the tax level and the tax base, and can be attributed to both an improved in-year collection rate for Council Tax in 2006-07 and the successful recovery of debt from previous years' bills. The provisional in-year Council Tax collection rate for 2006-07 was 93.8% compared with 93.3% in 2005-06.

Figures for Council Tax levels and the taxable base for 2007-08 are included in Table S3. The Scotland average Band D Council Tax has risen by 62.4% in cash terms from 1996-97 to 2007-08, an average of 5.0% per year. After adjusting for inflation, this rise is 23.2% in real terms, or 2.1% per year. The council tax base, expressed in terms of the number of Band D equivalents has been increasing consistently from 1996-97 to 2007-08, at an average rate of approximately 1.0% per year.

TABLE S3 Council Tax Summary Statistics, 1996-97 to 2007-08

1 Excludes water and sewerage charges.
2 Figures for 2007-08 are not yet available.
3 Source: Accounts Commission and Council Tax Receipts Return ( CTRR) statistical returns to the Scottish Government

Non-Domestic Rates

Non-domestic rate ( NDR) income is collected by Local Authorities and pooled at the Scotland level for redistribution on the basis of population.

NDR income, net of all reliefs and rebates, for 2006-07 was £1.933 billion (Table S4), a decrease of 0.01% from the previous year. The mid-year estimate of income for 2007-08 is £1.919 billion, which is a 0.7% decrease compared to the 2006-07 figure.

Scottish Assessors undertook a revaluation of all non-domestic property in Scotland effective from 1 April 2005. The 2005 Revaluation resulted in the production of a new Valuation Roll which contains revised rateable values for all non-domestic properties in Scotland. As a result of the revaluation, the total rateable value of subjects in Scotland increased and since the rates bill is based on rateable value multiplied by the poundage figure, the poundage needed to decrease accordingly. The 2005-06 poundage therefore decreased by 5.5% from the 2004-05 figure, to 46.1p. Ministers subsequently committed to equalise the Scotland poundage rate with that of England over two years. The Scotland poundage rate for 2006-07 was therefore calculated ¹ to be 44.9p, a 2.6% decrease from 2005-06. For 2007-08, full equalisation of the Scottish poundage rate with that of England was achieved, with the Scottish rate set at 44.1p, a decrease of 1.8% from 2006-07 ².

In terms of the taxable base, the net growth in total non-domestic rateable value ( RV) for Scotland showed a sharp increase in 2005-06 due to the revaluation, rising to £5.063 billion, an increase of 13.9% on the previous year's figure. At the beginning of 2006-07, the total RV was £5.186 billion, an increase of 2.4% on the previous year's figure. The total RV has continued to increase, reaching £5.239 billion at the beginning of 2007-08, an increase of 1.0% from the previous year.

TABLE S4 Non-Domestic Rates Summary Statistics, 1996-97 to 2007-08

1 Excludes water rate.
2 Amount of non domestic rate income collected by councils.
3 Mid Year estimate of income for 2007-08.
4 Total rateable value at the beginning of the financial year.

Changes in the total RV are the net result of two components. Firstly, growth in the total RV comes about from new construction or expansion of existing properties. Conversely, successful appeals against revaluation result in a reduction in rateable values and downward movement in the total. This second component is much more variable than the first, as the settlement of appeals is linked to the quinquennial revaluation cycle. The small decreases in total RV evident in the figures for 2003-04 and 2004-05 can be attributed to the fact that the majority of revaluation appeals are settled in the latter years of the cycle. As noted previously, the high increase in 2005-06 is as a direct result of the 2005 revaluation. The increases in total RV seen for 2006-07 and 2007-08 are a result of new construction and expansion having a greater effect than that of revaluation appeals settled within the prior financial year.

Over one quarter (25%) of subjects are shops or other retail premises, a further fifth (21%) are industrial properties and around one sixth (16%) are offices. Together these three categories alone account for 63% of subjects and 62% of the total RV ( Table 14).

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