Scottish Local Government Financial Statistics 2012-13

1. Local Government Revenue Expenditure and Income

1.1 Total Revenue Income and Expenditure

Total gross revenue expenditure by local government in Scotland in 2012-13 was £16.8 billion. The majority of expenditure is in the general fund although over £1 billion of expenditure was in the Housing Revenue Account (HRA) and Significant (Internal) Trading Operations. Further details on these different funds are laid out in sections 2.2 and 2.3.

Table 1.1 details revenue income and expenditure for 2012-13. Throughout the table expenditure is positive and income negative. The biggest single element of gross expenditure were employee costs which account for £7.70 billion of all expenditure. The second largest element was operating costs (which includes property costs, supplies and services costs, transport and payments to agencies and other bodies) which account for £7.12 billion.

Transfer payments are those made to individuals for which no goods or services are received in return by the local authority. The majority of transfer payments are housing benefits which make up £1.66 billion of the total of £2.04 billion. An adjustment for Inter Account and Inter Authority Transfers is made to the gross expenditure to take account of transfers between local authorities and between different services within an authority and ensure that expenditure is not counted twice.

Support services are those paid for services that support the provision of services to the public (including IT, Human Resources, Legal Services, Procurement Services and Corporate Services). In 2012-13 as part of a wider review of the Local Financial Returns (LFRs) the definition of support services was changed to be more prescriptive as to what should and should not be included. This was done to improve comparability of support services costs between local authorities and means that data for support services expenditure in 2012-13 may not be directly comparable with past years.

The surplus or deficit on the provision of service provides an important link between income and expenditure data, and data on reserves, debt and interest costs which were previously collected separately. This allows a greater level of analysis to be undertaken on the relationship between authorities' expenditure, income, funding, debt and reserves. The impact of this can be seen in a number of the tables in Sections 1 and 3 of this publication, in particular in Tables 1.1 and 3.1 which now link together what councils spend, raise and receive with the reserves they hold.

Local authorities are required to ensure that their LFRs are directly comparable 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.

Table 1.1 - Total Revenue Income and Expenditure, 2012-13

		£ thousands
	Total	General Fund Services1	Housing Revenue Account	Significant Trading Operations	Road Bridges	Common Good Fund
Employee Costs	7,696,485	7,211,751	136,700	343,725	4,159	150
Operating Costs	7,117,224	6,190,414	454,878	451,056	6,931	13,945
Support Service Costs	900,480	806,506	64,442	28,972	115	445
Transfer payments	2,036,432	2,034,197	1,985	180	0	70
Revenue Contributions to Capital	285,369	94,151	190,810	368	0	40
Adjustment for Inter Account and Inter Authority Transfers	-1,225,637	-568,298	-28,890	-621,143	-4,979	-2,327
Gross Expenditure	16,810,353	15,768,721	819,925	203,158	6,226	12,323
Government Grants2	-2,640,323	-2,619,484	-9,530	-5	-11,304	0
Other Grants Reimbursements and Contributions	-824,685	-790,289	-10,567	-17,497	-6,300	-32
Customer and Client Receipts	-2,581,251	-1,296,127	-1,034,306	-239,625	-80	-11,113
Total Income	-6,046,259	-4,705,900	-1,054,403	-257,127	-17,684	-11,145
Net Revenue Expenditure (excl Ring Fenced Grants)	10,764,094	11,062,821	-234,478	-53,969	-11,458	1,178
Interest Paid	805,726	683,665	121,904	47	0	110
Interest Received	-32,475	-29,522	-2,391	-18	-66	-478
Investment Income	-39,094	-35,007	-1,927	-22	0	-2,138
Pension interest and expected gains / losses on IAS 19	265,113	262,851	2,170	0	92	0
Sub-Total	999,270	881,987	119,756	7	26	-2,506
General Revenue Funding	-7,782,446	-7,782,446
NDRI Distributable Amount	-2,296,949	-2,296,949
Council Tax	-2,320,521	-2,318,875	-1,646
Arrears of Local Tax Collection	1,806	1,806
Other	-144,740	-134,642	-10,098
Sub-Total	-12,542,850	-12,531,106	-11,744	0	0
Depreciation and Impairment of non-current assets	1,769,939	1,545,687	217,084		7,168
Amortisation and Impairment of Intangible Assets	8,561	8,471	90		0
Movement in the fair value of investment properties	-4,164	-4,395	208		23
Surplus or deficit on Trading Operations not included above	0	-43,642	0	43,642	0
Surplus or deficit on Significant Trading Operations not included above	-2,811	-2,811
Gain or loss on the disposal of Property, Plant and Equipment	54,121	53,930	95		96
Reversal of Employer's contribution to pension fund/benefits payments made	-460,743	-443,868	-16,458		-417
Post-retirement benefits - IAS 19	803,138	784,578	18,191		369
Short term accumulating absences	-24,266	-24,473	224		-17
Govt Capital grants and contributions credited to the CI&ES	-592,145	-555,933	-34,612		-1,600
Non- Govt Capital grants and contributions credited to the CI&ES	-54,942	-50,356	-4,586		0
Reversal of Revenue Contribution to Capital	-284,961	-94,151	-190,810		0
Difference in Requisitions	8,516	8,516	0		0
Surplus or deficit on the provision of services	452,405	595,255	-137,040		-5,810

1. Includes trading services and non-HRA housing. For a breakdown of expenditure in these areas, refer to Table 2.2 and Annexes A and B.

2. Excluding General Revenue Funding

Source: Local Financial Returns - LFR 00

1.2 Non-General Fund Revenue Income and Expenditure

1.2.1 HRA

The Housing Revenue Account (HRA) records income and expenditure relating to Local Authority housing stock. Whilst most other Local Authority services are funded through a combination of non-domestic rates and council tax income plus Government grants, the HRA is a ring-fenced account, and expenditure is funded by housing rents and Government subsidies.

1.2.2 Trading Services

Trading service accounts cover the finances of Local Authority operated services that are commercial in nature. They are financed by the charges made by a Local Authority to the recipients of the services they provide.

The main trading services are Local Authority Transport (buses, ferries and other Local Authority transport undertakings), Fishery harbours and markets and other trading services (including airports, other harbours and bridges).

1.2.3 Road Bridges

From 2008-09, the funding arrangements for the Forth and Tay bridge authorities changed. Under the Abolition of Bridge Tolls (Scotland) Act 2008, the bridge authorities stopped receiving income from tolls and, instead, started receiving a revenue grant from Transport Scotland. For capital expenditure, bridge authorities also started receiving a capital grant from Transport Scotland, so are no longer reliant on borrowing through their constituent authorities from the Loans Fund. Despite this change in funding, Local Authorities continue to provide services for the bridge authorities by way of contract.

1.2.4 Common Good

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). When managing common good funds and assets, local authorities are expected to have regard to the interests of inhabitants of the former burgh area to which the assets relate (except for Aberdeen City, Dundee City, City of Edinburgh and Glasgow City, where the local authority should have regard to the interests of all residents in the council area).

Common Good Fund income and expenditure is recorded in a separate set of accounts. 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.

1.3 General Fund Revenue Income and Expenditure

The highest spending service in the general fund is education which had net expenditure of £4.59 billion (this makes up 40% of net expenditure). Of this total £1.76 billion was spent on primary education and £1.87 billion on secondary education with the remainder spent on pre-primary, special and community education. Education's share of total net expenditure has stayed the same at around 40% over the six years to 2012-13.

Social work is the next largest service with net expenditure of £2.96 billion (26% of total net expenditure). Data on social work expenditure is collected on the basis of client groups. Of the client groups identified in the LFRs, older persons has the highest expenditure of £1.29 billion followed by children and families with £0.82 billion and adults with learning difficulties with £0.50 billion.

A full breakdown of expenditure by sub-service is available in Annex A.

The single largest income source shown in Table 1.2 are the grants received by local authorities from the Department of Work and Pensions to fund housing benefits. These grants were worth £1.71 billion in 2012-13 and are shown as part of income in non-HRA housing.

Another significant source of income is customer and client receipts (including all charges to service users) which raised £1.30 billion across all services. Social work services also receive income from the NHS to provide services, the value of these payments in 2012-13 were £0.40 billion, up from £0.38 billion in 2011-12. A full breakdown of income by service can be found in Annex B.

Table 1.2 - General Fund Revenue Income and Expenditure, 2012-13

					£ thousands
	Gross Expenditure	Income	Net Expenditure	Net Expenditure as % of Total Services	Ring Fenced Revenue Grants
Education	4,774,454	179,844	4,594,610	39.7%	8,361
Cultural and Related Services	703,107	89,432	613,675	5.3%	0
Social Work	3,785,476	823,859	2,961,617	25.6%	0
Police	1,240,749	219,302	1,021,447	8.8%	507,631
Fire	346,675	50,011	296,664	2.6%	0
Roads and Transport	695,844	208,566	487,278	4.2%	0
Environmental Services	784,331	128,769	655,562	5.7%	0
Planning & Economic Development	483,638	201,088	282,550	2.4%	0
Non-HRA Housing	2,326,819	2,011,115	315,704	2.7%	8,965
Central Services	573,071	210,842	362,229	3.1%	0
Trading Services	54,557	58,115	-3,558	0.0%	0
Net Cost of Service	15,768,721	4,180,943	11,587,778	100.0%	524,957
Interest and Investment Income	683,665	64,529	619,136		0
Statutory Repayment of Debt	595,343	0	595,343		0
Contributions to/from HRA	0	0	0		0
Surplus/deficit from Significant Trading Operations	-2,811	0	-2,811		0
Total	17,044,918	4,245,472	12,799,446		524,957

Source: Local Financial Returns - LFR 00

Revised accounting arrangements for Public Private Partnerships (PPP) and Public Finance Initiatives (PFI) were introduced from 1^st April 2009. Therefore, from 2009-10 onwards revenue expenditure, statutory repayment of debt and interest and investment income for services in which there are PPP or PFI schemes is not directly comparable with previous years. See section 5.2 for further details. This affects the level of service expenditure when comparing 2008-09 to 2009-10 (and later years), especially in education where most councils have a PPP or PFI scheme in operation.

Table 1.3 - Net Revenue Expenditure by Service, 2008-09 to 2012-13

					£ millions
	2008-09	2009-101	2010-111	2011-12	2012-13
Education	4,676	4,633	4,677	4,553	4,595
Social Work	2,684	2,825	2,861	2,873	2,962
Police1	1,100	1,125	978	1,018	1,021
Fire	320	332	313	286	297
Cultural & Related Services	628	662	638	618	614
Environmental Services	628	657	664	656	656
Roads & Transport	453	486	503	477	487
Central Services	469	632	560	419	362
Planning & Economic Development	289	332	313	292	283
Non-HRA Housing	427	420	394	331	316
Trading Services	-5	-9	-8	-12	-4
Total General Fund Expenditure	11,670	12,096	11,892	11,510	11,588

1. From 2010-11 the funding of Police Pensions changed leading to a reduction in net expenditure. Therefore police expenditure figures from 2010-11 onwards are not directly comparable with figures up to 2009-10.

Source: Local Financial Returns - LFR 00

Chart 1.1 shows net revenue expenditure per capita by local authority area. This includes expenditure by all local authority bodies in an area (i.e. including expenditure by councils, police boards, fire boards, valuation boards and regional transport partnerships). The chart shows that on average in Scotland local government spent £2,409 per person in 2012-13, down slightly from 2,416 in 2011-12.

Wide variation is seen in net revenue expenditure per head for different local authority areas. This reflects variations in the cost of providing services due to factors such as deprivation, rurality and population age profile, as well as additional costs for island authorities (which clearly have the highest net revenue expenditure per head). Details of how these factors are taken into account in the needs-based methodology central to local government funding distribution can be found on the Scottish Government Grant Aided Expenditure Website.

Chart 1.1 - Net Revenue Expenditure per Capita by Local Authority, 2012-13 (£)

1.4 Revenue Expenditure Financing

Revenue expenditure by local authorities is funded by three main sources:

• Grants from Central Government
• Local Taxation (Council Tax and Non Domestic Rates)
• Sales, fees and charges for services

The main source of revenue income for local government is General Revenue Funding, (formerly referred to as the Revenue Support Grant). General Revenue Funding (GRF) is paid by the Scottish Government in support of local authorities' general net revenue expenditure.

Local taxation contributed over £4 billion to the funding of local government in 2012-13 and further information on these taxes is set out in the following sections. Other income is mostly composed of grants and subsidies received from central government and other parts of the public sector.

Table 1.4 - Revenue Income by Source, 2008-09 to 2012-13

					£ millions
	2008-09	2009-10	2010-11	2011-12	2012-13
General Revenue Funding1	7,426	7,757	8,149	7,790	7,782
Council Tax	1,909	1,910	1,923	1,926	1,947
Council Tax Benefit Subsidy	351	368	375	376	371
Non Domestic Rates	1,963	2,165	2,068	2,182	2,263
Sales, Rents, Fees & Charges	2,262	2,287	2,179	2,298	2,342
Other Income	3,363	3,390	3,348	3,300	3,244
Total revenue income	17,274	17,877	18,043	17,872	17,949

1. Prior to 2008-09 this was Revenue Support Grant

Sources: General Revenue Funding (Up to 2010-11) - Finance Circulars; Non-Domestic Rates - Non Domestic Rates Returns (NDRI); All Other Data - Local Financial Returns (LFRs)

Chart 1.2 - Revenue Income by Source, 2012-13 (£ millions)

1.4.1 Council Tax

Council Tax was introduced in Scotland on the 1^st April 1993 to replace the Community Charge system. It is a tax system based on dwellings, contributing around £1.9 billion (excluding council tax benefit) of income to local authorities in 2012-13. A dwelling is classified as any kind of flat or house that is used as a place of residence. Each dwelling is placed into one of the 8 council tax bands (A to H) depending on the market value of the dwelling as at the 1^st April 1991.

Table 1.5 - Chargeable Dwellings¹ by Council Tax Band & Local Authority (as at 2 September 2013)

	Band A	Band B	Band C	Band D	Band E	Band F	Band G	Band H	Total
Valuation band ranges	Under 27,000	27,001 to 35,000	35,001 to 45,000	45,001 to 58,000	58,001 to 80,000	80,001 to 106,000	106,001 to 212,000	Over 212,000
Ratio to band D	6/9	7/9	8/9	9/9	11/9	13/9	15/9	18/9
Scotland	508,296	568,264	388,475	316,245	320,379	180,370	115,947	12,355	2,410,331
Aberdeen City	19,652	26,062	17,144	12,619	13,318	7,951	7,060	823	104,629
Aberdeenshire	19,538	15,425	13,643	16,601	20,187	14,911	9,150	544	109,999
Angus	14,325	12,319	6,740	8,017	7,186	2,867	1,550	144	53,148
Argyll & Bute	7,244	9,455	8,721	5,791	7,052	4,001	2,711	219	45,194
Clackmannanshire	6,030	7,006	1,929	2,416	3,107	1,791	811	43	23,133
Dumfries & Galloway	10,659	22,123	11,475	9,602	10,092	4,916	2,335	156	71,358
Dundee City	25,427	15,305	7,927	8,174	6,206	2,279	1,016	35	66,369
East Ayrshire	25,555	9,162	4,914	6,320	5,975	2,892	899	40	55,757
East Dunbartonshire	1,050	3,549	7,995	7,468	10,542	6,723	6,077	586	43,990
East Lothian	1,130	8,880	14,324	5,656	5,708	4,558	3,595	620	44,471
East Renfrewshire	1,204	5,004	3,889	6,250	7,922	5,867	5,931	682	36,749
Edinburgh, City of	19,773	42,887	40,211	34,128	35,957	22,561	19,918	3,645	219,080
Eilean Siar	4,468	3,613	2,717	1,683	1,140	165	34	4	13,824
Falkirk	21,419	18,849	6,345	8,275	8,213	4,957	2,328	60	70,446
Fife	38,811	46,607	21,104	18,922	21,701	12,307	5,960	379	165,791
Glasgow City	56,659	73,576	62,244	37,308	26,195	11,536	5,822	608	273,948
Highland	18,599	22,129	22,198	17,436	17,305	8,423	4,058	309	110,457
Inverclyde	18,146	5,563	3,344	3,209	3,360	1,830	1,380	206	37,038
Midlothian	932	12,035	10,231	4,563	4,172	2,612	1,771	159	36,475
Moray	11,251	10,062	6,121	5,696	5,311	1,928	581	51	41,001
North Ayrshire	21,009	17,842	6,564	6,454	8,634	3,584	1,137	53	65,277
North Lanarkshire	52,176	36,298	18,549	15,294	15,050	7,422	2,629	122	147,540
Orkney Islands	2,226	2,666	2,207	1,640	1,176	263	18	3	10,199
Perth & Kinross	8,464	14,087	11,171	9,981	11,044	6,927	5,541	639	67,854
Renfrewshire	12,227	24,483	13,884	11,003	10,003	5,563	3,217	198	80,578
Scottish Borders	15,683	12,226	6,582	5,580	6,098	4,417	4,057	440	55,083
Shetland Islands	2,866	1,732	2,606	1,725	1,279	245	54	0	10,507
South Ayrshire	6,923	12,222	8,535	8,061	9,368	4,647	2,866	278	52,900
South Lanarkshire	34,875	28,761	24,451	19,061	18,091	10,611	5,591	443	141,884
Stirling	5,324	8,127	3,982	4,183	5,891	4,907	4,783	648	37,845
West Dunbartonshire	7,640	16,261	7,251	5,613	4,210	1,569	650	55	43,249
West Lothian	17,011	23,948	9,477	7,516	8,886	5,140	2,417	163	74,558
% of all dwellings	21%	24%	16%	13%	13%	7%	5%	1%	100%

Source: Council Tax Base 2013 (CTAXBASE)

Table 1.5 details the band boundaries, the ratio to band D council tax (the multiplier) and the number of chargeable dwellings in each band by local authority. As at 2^nd September 2013, there were 2.4 million chargeable dwellings in Scotland. Around three quarters (1.8 million) of all chargeable dwellings were in council tax bands A to D, and only 0.5% (12,355 dwellings) in band H. The total number of chargeable dwellings and the distribution of those dwellings across council tax bands varies across local authority areas. For example, 78% (10,798) of all chargeable dwellings in Eilean Siar are in bands A to C, compared with 64% (23,198) in Midlothian, and 27% (10,097) in East Renfrewshire. This is a consequence of variation by local authority in the market value of dwellings.

Council tax is used as a source of funding to make up the difference between the amount of money a local authority wishes to spend, and the amount of funding it receives from other sources (such as General Revenue Funding and ring-fenced revenue grants). Each local authority determines its own level of council tax as part of their budget setting process, establishing the band D council tax level. As a result, council tax levels differs across local authority areas ranging from £1,024 in Eilean Siar to £1,230 in Aberdeen City (as shown in Chart 1.3). The council tax charged for all other bands is a proportion of the band D level set (see ratios to band D in table 1.5).

The Scotland band D council tax level over the past 5 years can be seen in table 1.6. Council tax levels remain constant (at 2007-08 levels), as a consequence of the council tax freeze agreed between the Scottish Government and local government. As a result, the average council tax per dwelling has also remained flat since 2007-08, with any small changes reflecting movement in the council tax base (such as changes in the total number of dwellings, the distribution of those dwellings across council tax bands, and the number of discounts and exemptions). In real terms, the level of band D council tax has fallen in each year since 2007-08. Prior to 2007-08, both cash and real terms increases were seen as the band D council tax level increased year on year.

Table 1.6 - Scotland Council Tax Levels

	2009-10	2010-11	2011-12	2012-13	2013-14
Scotland Average Band D Council Tax (£)1	1,149	1,149	1,149	1,149	1,149
Band D % increase (cash terms)	0.0%	0.0%	0.0%	0.0%	0.0%
Band D % increase (real terms)2	-2.7%	-2.6%	-2.3%	-1.8%	-2.0%
Average Council Tax Bill per Dwelling (£)3	987	985	984	985	988

1. Since 2008-09, Council Tax rates have been frozen at 2007-08 levels.

2. Real terms figures are calculated using GDP deflators (HM Treasury Dec 2013)

3. This average is taken over all chargeable dwellings and is affected by a number of factors such as the distribution of dwellings across council tax bands, discounts and exemptions, new construction and removal of demolished housing from the roll.

Source: Council Tax Assumptions (CTAS), Council Tax Base (CTAXBASE)

Chart 1.3 - Band D Council Tax Bill Amount by Local Authority, 2012-13 (£)

Source: Council Tax Assumptions (CTAS) returns

The Band D council tax levels by local authority are shown in Chart 1.3. As a result of the Council Tax Freeze, band D council tax levels have not changed since 2007-08. The one exception is in Stirling where the council took the decision to reduce the band D council tax from £1,223 in 2007-08 to £1,209 in 2008-09, and subsequently to £1,197 in 2012-13.

Not all dwellings are liable to pay full council tax. A dwelling may be eligible for a discount or exemption dependent on either the status of the dwelling or the personal circumstances of the persons resident in the dwelling. If a dwelling is exempt there is no council tax payable in respect of that dwelling. If a dwelling is eligible for a discount then these may range from 10% to 50% depending on the nature of the discount.

In addition part, or all, of the council tax bill may be paid through council tax benefit (CTB) for those who qualify.

An exempt dwelling can be occupied or unoccupied. Examples of unoccupied exempt dwellings include dwellings that are unoccupied and unfurnished for up to 6 months, dwellings that cannot be occupied because they are in need of structural repair, or are being improved or reconstructed, or an unoccupied dwelling where the liable person was formerly resident and has moved to receive personal care elsewhere. Occupied dwellings eligible for exemption include dwellings that are the sole residence of only persons under the age of 18, dwellings occupied only by students, and dwellings used as trial flats by registered housing associations.

Where only one council tax liable adult resides in a dwelling they are entitled to claim a 25% discount on their council tax bill. Where a dwelling is classed as a second home or long term empty, that dwelling is entitled to claim a discount of between 10% and 50% depending on the Local Authority. Unoccupied dwellings may also be eligible for a 50% discount for the 6 months after the initial 6 month exemption.

A breakdown of council tax dwellings by classification as chargeable, discounted, or exempt from 2009 to 2013 is given below in Table 1.7. The total number of dwellings has increased by around 49,000 (2%) from 2.477 million dwellings in 2009 to 2.527 million in 2013. Similarly, the number of chargeable dwellings has increased by around 45,000 (2%) from 2.365 million chargeable dwellings in 2009, to 2.410 million in 2013. The proportion of dwellings exempt, chargeable or discounted has remained steady over time with around 4.5% of all dwellings exempt from paying council tax, and 42% of all chargeable dwellings discounted. In 2013, there were 116,372 exempt dwellings and 1,016,891 discounted dwellings.

Table 1.7 - Council Tax Chargeable Dwellings, Discounts and Exemptions¹

	2009	2010	2011	2012	2013
Total dwellings	2,477,397	2,488,928	2,500,769	2,515,042	2,526,703
Dwellings exempt	112,168	111,454	111,740	113,173	116,372
Chargeable dwellings	2,365,229	2,377,474	2,389,029	2,401,869	2,410,331
Chargeable dwellings subject to:
25% discount	936,957	941,915	945,515	948,208	952,251
Second Homes2	37,060	38,002	39,250	40,599	35,734
Long Term Empty2	22,169	24,598	25,356	25,454	27,327
Occupied entirely by disregarded adults	2,668	1,887	1,910	1,809	1,579
Dwellings not subject to discount	1,366,375	1,371,072	1,376,998	1,385,799	1,393,440

1. As at the first Monday in September of each year

2. It is not possible for some councils to separately identify second homes and long term empty dwellings. For these councils, the total number of second homes and long term empty dwellings have been recorded under second homes.

Source: Council Tax Base (CTAXBASE) Returns

Local Authorities are responsible for the billing and collection of council tax. Each individual bill is calculated by applying the multiplier for each band to the band D council tax level, and the applying any discounts, exemptions or reductions as detailed above. At the start of each financial year local authorities issue council tax bills to households liable for each bill. They collect council tax income relating to these bills over the year, and also continue to collect late amounts from previous billing years^[1]. The amount of council tax income collected in 2012-13 are reported in table 1.8 below.

Table 1.8 - Council Tax Income by Local Authority, 2012-13

			£ thousands
	Council Tax Income (excl CTB)1	Council Tax Benefit Subsidy (CTB)	Council Tax Income (incl CTB)1
Scotland	1,947,014	370,805	2,317,819
Aberdeen City	99,200	10,492	109,692
Aberdeenshire	110,077	8,171	118,248
Angus	40,204	5,746	45,950
Argyll & Bute	41,248	5,927	47,175
Clackmannanshire	17,415	3,722	21,137
Dumfries & Galloway	53,869	9,368	63,237
Dundee City	45,894	13,242	59,136
East Ayrshire	39,070	10,289	49,359
East Dunbartonshire	48,023	4,831	52,854
East Lothian	40,758	5,694	46,452
East Renfrewshire	40,353	4,164	44,517
Edinburgh, City of	203,437	28,657	232,094
Eilean Siar	8,786	1,692	10,478
Falkirk	51,427	8,982	60,409
Fife	129,630	22,340	151,970
Glasgow City	179,079	72,927	252,006
Highland	97,453	13,288	110,741
Inverclyde	25,936	7,217	33,153
Midlothian	32,468	5,627	38,095
Moray	34,158	4,121	38,279
North Ayrshire	46,011	12,179	58,190
North Lanarkshire	98,016	26,295	124,311
Orkney Islands	7,204	880	8,084
Perth & Kinross	64,729	7,101	71,830
Renfrewshire	62,758	14,047	76,805
Scottish Borders	44,872	5,945	50,817
Shetland Islands	8,111	754	8,865
South Ayrshire	44,854	9,089	53,943
South Lanarkshire	106,461	22,818	129,279
Stirling	39,520	4,834	44,354
West Dunbartonshire	27,912	9,924	37,836
West Lothian	58,081	10,442	68,523

1. Includes Community Charge

Source: Local Financial Returns - LFR 12

1.4.2 Non-Domestic Rates

Non-domestic Rates (NDR) are a property tax paid by the owner/occupier or tenant of a non-domestic property. NDR bills are calculated using the rateable value of non-domestic properties, multiplied by a poundage set nationally by Scottish Ministers, less any relief or exemption entitlement. In 2012-13, the income raised from NDR was £2.35 billion.

The principles of non-domestic rates were established in the Lands Valuation (Scotland) Act of 1854. This act also provided for the appointment of the Scottish Assessors, who are responsible for determining the classification and valuation of non-domestic and domestic properties, and are independent of both the Scottish Government and local authorities. A non-domestic property is an individual property used for non-domestic purposes including businesses, public buildings and advertising hoardings. The value given to a property is called its rateable value (RV).

As a property tax, the RV of a property (a legally defined valuation, broadly based on rental values) is a reflection of its value rather than profitability, turnover or output of the business. It is established at revaluation where the Scottish Assessors assess rateable values for all non-domestic properties, taking account of the type and nature of the property. All non-domestic properties and their corresponding RVs are listed on the Valuation Roll, maintained by the Scottish Assessors. Table 1.9 shows the composition of properties (and associated RV) on the Valuation Roll by property type. As at 1^st April 2013, there were 219,441 properties with a total RV of £6.7 billion.

Table 1.9 - Non-Domestic Rates Properties by Classification (as at 1 April 2013)

	Number of properties	Rateable value (£000s)
CATEGORY	1st April 2013	1st April 2013
Advertising	2,100	8,226
Care Facilities	3,058	104,011
Communications	339	15,149
Cultural	1,392	47,385
Education and Training	3,832	514,237
Garages and Petrol Stations	4,415	65,910
Health and Medical	3,168	210,377
Hotels	4,874	185,060
Industrial Subjects	46,167	1,127,543
Leisure, Entertainment, Caravans etc.	20,516	236,107
Offices	38,467	1,124,700
Other	13,159	89,732
Petrochemical	143	111,949
Public Houses	3,856	110,019
Public Service Subjects	9,988	321,401
Quarries, Mines, etc.	696	26,657
Religious	6,283	54,361
Shops	53,028	1,603,829
Sporting Subjects	3,364	17,970
Statutory Undertaking	596	741,676
TOTAL ALL NON-DOMESTIC PROPERTIES	219,441	6,716,299

Source: Scottish Assessors Valuation Roll, 1st April 2013

Table 1.10 provides a breakdown of properties on the Valuation Roll by local authority and RV band. Around 78% of all properties (170,575 properties) have a Rateable Value less than or equal to £18,000.

Table 1.10 - Non-Domestic Rates Subjects by Local Authority (as at 1 April 2013)¹

Local Authority	Rateable Value Band			Total Non-Domestic Properties
	<= £18,000	£18,001 to £34,999	>= £35,000
Scotland	170,575	19,809	29,057	219,441
Aberdeen City	4,927	1,149	2,283	8,359
Aberdeenshire	9,734	779	1,028	11,541
Angus	4,020	356	401	4,777
Argyll & Bute	7,429	347	346	8,122
Clackmannanshire	1,310	132	147	1,589
Dumfries & Galloway	8,118	491	550	9,159
Dundee City	4,185	595	952	5,732
East Ayrshire	3,165	307	419	3,891
East Dunbartonshire	1,712	304	309	2,325
East Lothian	2,719	262	325	3,306
East Renfrewshire	1,248	217	224	1,689
Edinburgh, City of	13,144	2,393	3,934	19,471
Eilean Siar	2,008	101	112	2,221
Falkirk	3,555	466	683	4,704
Fife	10,188	1,209	1,602	12,999
Glasgow City	17,241	2,926	4,806	24,973
Highland	15,031	976	1,378	17,385
Inverclyde	1,737	207	310	2,254
Midlothian	2,181	265	361	2,807
Moray	3,928	247	359	4,534
North Ayrshire	4,074	382	500	4,956
North Lanarkshire	6,887	1,033	1,552	9,472
Orkney Islands	1,850	124	96	2,070
Perth & Kinross	6,937	588	723	8,248
Renfrewshire	4,696	609	956	6,261
Scottish Borders	6,191	411	414	7,016
Shetland Islands	1,713	105	148	1,966
South Ayrshire	3,758	420	556	4,734
South Lanarkshire	6,971	1,125	1,470	9,566
Stirling	3,927	434	566	4,927
West Dunbartonshire	2,075	266	414	2,755
West Lothian	3,916	583	1,133	5,632

1. Includes properties with zero rateable value.

Source: Scottish Assessors Valuation Roll, 1st April 2013

Table 1.11 shows the annual NDR Income, total Rateable Value, and Poundage Rate, as well as their changes over time. As a consequence of the 2010 revaluation, the poundage was reduced from 48.1p in 2009-10 to 40.7p in 2010-11 and the total RV of non-domestic properties (the tax base) increased from £5.3 billion in 2009-10 to £6.6 billion in 2010-11. The next revaluation will take place in 2017.

Table 1.11 - Non-Domestic Rates Income, Total Rateable Values and Poundage Rate

	2009-10	2010-11	2011-12	2012-13	2013-14
Non Domestic Rates Income (£m)1	2,010	2,138	2,251	2,347	2,446
Total Rateable Value (£m)	5,299	6,612	6,678	6,718	6,716
Poundage Rate (pence)	48.1	40.7	42.6	45.0	46.2

1. Councils' notified (pre-audit) estimate of income for 2012-13 and mid-year estimate of income for 2013-14

Sources: NDR Income - Non-domestic Rate Income Returns, Rateable Value - Scottish Assessors Valuation Roll as at 1st April

Table 1.11 also shows that the total RV has increased slightly since the 2010 revaluation from £6.61 billion to £6.72 billion in 2013-14. This is due to the net impact of several factors including increases in the tax base from new properties or extension of existing properties, and decreases as demolished properties are deleted from the valuation roll or as the RV is reduced as a result of appeals^[2]. As Non-Domestic Rates bills in Scotland are directly related to the rateable values of individual non-domestic properties, changes in the total RV impact on the amount of NDR available for collection.

Inflation is a key driver of growth in NDR income as the poundage rate, set nationally by Scottish Ministers^[3], is typically tied to the Retail Price Index (other than in the first year of a revaluation). NDR bills are calculated by multiplying the RV of a property by the poundage rate, and then applying discounts and exemptions. Large business properties also pay a supplement to the poundage rate, known as the Large Business Supplement (LBS), which is used to fund a portion of the Small Business Bonus Scheme (SBBS). The LBS was 0.8p in 2012-13 for properties with a Rateable Value greater than £35,000. For the period 2012-13 to 2014-15, large retailers that sell both alcohol and tobacco will also pay the Public Health Supplement (PHS) - an additional 9.3p on the poundage rate in 2012-13. These supplements increase the amount paid in NDR bills. Conversely, exempt properties (which do not pay rates), and relief schemes can significantly reduce the amount paid in NDR bills, and therefore the NDR income.

Table 1.12 summarises the total number of properties and rateable value as at 1^st April 2013, and the NDR income collected in 2012-13 and estimated income for 2013-14 by local authority (net of reliefs). Income for 2013-14 is estimated at £2.45 billion compared to £2.35 billion in 2012-13. The higher poundage rate (due to the normal annual inflation) will have contributed to this estimated increase in income. The net change in the tax base will also be a factor, including the impact of revaluation appeals (which can in some cases result in significant annual fluctuations at a local authority level).

Table 1.12 - Non-Domestic Rates Properties, Rateable Values and Income By Local Authority¹

Authority	Non-Domestic Properties2 Apr-13	Non-Domestic Rateable Values Apr-13	Non-Domestic Rate income
			2012-133	2013-144
		(£000s)	(£000s)	(£000s)
Scotland	219,441	6,716,299	2,346,727	2,445,642
Aberdeen City	8,359	445,785	170,592	184,282
Aberdeenshire	11,541	211,875	75,630	80,772
Angus	4,777	77,580	25,324	27,006
Argyll & Bute	8,122	85,674	27,419	24,417
Clackmannanshire	1,589	38,757	14,038	13,904
Dumfries & Galloway	9,159	119,551	42,021	44,577
Dundee City	5,732	189,571	59,634	53,001
East Ayrshire	3,891	82,899	28,644	28,811
East Dunbartonshire	2,325	68,536	22,561	22,092
East Lothian	3,306	69,219	23,259	22,873
East Renfrewshire	1,689	39,084	13,224	14,518
Edinburgh, City of	19,471	912,555	319,909	342,803
Eilean Siar	2,221	21,835	6,547	6,946
Falkirk	4,704	176,769	65,786	54,672
Fife	12,999	435,069	156,484	146,152
Glasgow City	24,973	984,337	316,100	335,413
Highland	17,385	308,110	107,753	111,739
Inverclyde	2,254	59,626	19,140	20,735
Midlothian	2,807	77,420	25,780	27,909
Moray	4,534	85,781	31,760	32,265
North Ayrshire	4,956	108,553	36,571	37,653
North Lanarkshire	9,472	296,677	93,673	107,373
Orkney Islands	2,070	25,151	8,189	8,323
Perth & Kinross	8,248	150,182	50,276	52,041
Renfrewshire	6,261	238,785	87,133	90,261
Scottish Borders	7,016	90,997	27,596	29,562
Shetland Islands	1,966	44,790	15,790	14,807
South Ayrshire	4,734	109,316	37,588	37,435
South Lanarkshire	9,566	657,758	253,711	277,132
Stirling	4,927	115,205	38,960	39,818
West Dunbartonshire	2,755	172,140	70,056	73,719
West Lothian	5,632	216,714	75,581	82,632

1. Rates bills for specific utilities are collected by specified councils on behalf of all 32 councils, and appear on the valuation roll for those councils: South Lanarkshire (Electricity), West Dunbartonshire (Gas), Fife (Water), Falkirk (Docks and Harbours), Highland (Railways), Renfrewshire (Telecommunications). This increases the take for those authorities.

2. Includes properties with a zero rateable value

3. Notified (pre-audit) estimate of Income

4. Mid-year estimate of Income

Source: Number of Properties and Rateable Value - Scottish Assessors Valuation Roll 1st April 2013; NDR Income - Non-domestic Rate Income Returns provided by Councils

NDR Income - Non-domestic Rate Income Returns provided by Councils

Table 1.12 shows geographical variations in the number of properties, rateable value and NDR income. It should be noted however that some councils have responsibility for collection of NDR for specific utilities as detailed in the footnote to the table. For these councils, the entries on the valuation roll and NDR income include Scotland-wide data for the specified utilities sectors. The 2013-14 income data in table 1.12 are mid-year estimates which provide an indication of income but may change significantly, particularly at local authority level, when final data are available.

Table 1.13 - Amount of Non-Domestic Rates Relief Provided by Relief Type¹

					£thousands
	2008-09	2009-10	2010-11	2011-12	2012-132
Unoccupied Property/Partly Unoccupied Property	127,385	153,361	145,936	157,862	169,134
Charities	113,417	122,132	136,731	151,276	164,980
Sports Clubs	9,651	11,604	11,476	12,059	12,431
Disabled persons relief	42,914	45,484	51,901	54,372	57,580
SBBS3	72,553	108,420	123,259	134,719	150,196
Religious Properties	18,986	20,218	24,016	22,960	24,573
Rural Rate Relief	3,887	3,918	4,129	4,218	4,313
Renewable Energy Relief Scheme4			3,560	4,126	4,811
Other	27	19	4	43	8
Gross Amount	388,821	465,157	501,013	541,635	588,026

1. Estimates include mandatory and discretionary elements of relief where applicable, but exclude backdated payments of relief

2. Notified (pre-audit) estimate of relief expenditure for 2012-13

3. From 1 April 2008, the Small Business Rates Relief Scheme was replaced with the Small Business Bonus Scheme.

4. The Renewable Energy Relief Scheme was introduced at 1 April 2010

Source: Non-domestic Rate Income Returns

There are a number of types of NDR relief that reduce the NDR bill for qualifying properties. Table 1.13 shows the main types of relief available^[4] and the amount of relief provided each year from 2008-09 to 2012-13.

The gross amount of relief provided increased substantially from £389 million in 2008-09 to £588 million in 2012-13. Key reasons for this are increases in the poundage rate (due to normal annual inflation) and an increase in relief provided through the Small Business Bonus Scheme, with expansion of the scheme thresholds and greater awareness of the scheme likely to be contributory reasons. Further secondary factors are likely to include growth in the tax base over this period (i.e. an increase in the overall Rateable Value) and changes to amounts awarded for other reliefs (for example an increase in Charity Relief and the introduction of the Renewable Energy Relief Scheme).

The total NDR income collected by Local Authorities is pooled at the Scotland level^[5]. Each council reports the NDR collected to the Scottish Government to be included in the central pool. The amount to be re-distributed from the pool is known as the Distributable Amount (DA) and is set by the Scottish Government before the start of the financial year in question.

From 1^st April 2011, the distribution methodology provides that Councils retain what it is estimated they can collect in business rates (rather than the previous policy where it was redistributed on the basis of population shares). As the combined total of NDR income and General Revenue Funding (GRF) provided to councils is guaranteed by the Scottish Government, any reduction in the amount of NDR collected is compensated for by a corresponding increase in GRF and vice versa. Any surpluses or deficits are paid out or recovered from Councils in the calculation of future years distributable business rates totals. The DA is based upon a forecast of the NDR income and prior year adjustments, and is therefore not guaranteed to match the total contributions to the pool for that year.

The calculation of the distributable amount for 2012-13 is given in Annex F and the 2012-13 distributable amount per Local Authority is shown in Table 1.14.

Table 1.14 - Non-Domestic Rates Distributable Amount by Local Authority, 2012-13

	Non-Domestic Rate Income (£000s)
Scotland	2,263,000
Aberdeen City	164,576
Aberdeenshire	73,370
Angus	23,944
Argyll & Bute	26,479
Clackmannanshire	11,033
Dumfries & Galloway	41,403
Dundee City	50,140
East Ayrshire	26,529
East Dunbartonshire	21,268
East Lothian	21,500
East Renfrewshire	12,941
Edinburgh, City of	310,993
Eilean Siar	6,018
Falkirk	63,467
Fife	135,516
Glasgow City	310,099
Highland	106,091
Inverclyde	19,395
Midlothian	24,781
Moray	28,502
North Ayrshire	34,333
North Lanarkshire	101,467
Orkney Islands	8,203
Perth & Kinross	47,331
Renfrewshire	90,807
Scottish Borders	26,489
Shetland Islands	15,035
South Ayrshire	36,842
South Lanarkshire	253,924
Stirling	27,833
West Dunbartonshire	67,090
West Lothian	75,601

Source: Finance Circular 3/2012

1.4.3 Sales, Rents, Fees and Charges

Local Authorities receive income from sales, rents, fees and charges as a result of providing services. These services are wide ranging in nature, as is the amount of income associated with each service, as detailed in Table 1.15 below.

Table 1.15 - Sales, Rents, Fees and Charges

					£ thousand
	2008-09	2009-10	2010-11	2011-12	2012-13
Education	85,691	87,115	95,006	115,017	113,355
Cultural & Related Services	78,621	85,516	81,521	77,479	71,357
Social Work	259,061	246,014	251,167	268,101	276,450
Police, Fire & Emergency Planning	88,557	93,043	55,098	66,575	111,992
Roads & Transport	146,605	165,941	146,068	171,674	154,117
Environmental Services	117,873	123,164	120,400	117,767	117,969
Planning & Economic Development	112,644	120,146	97,897	118,518	116,541
Non-HRA Housing	232,028	189,150	164,339	179,116	165,412
Central Services	141,455	144,819	113,862	143,521	110,889
Trading Services	70,810	66,992	66,852	63,526	58,045
Total GF Sales, Rents, Fees and Charges	1,333,345	1,321,900	1,192,210	1,321,294	1,296,127
HRA1	920,146	955,710	979,571	965,920	1,034,306
Common Good Fund	8,324	9,073	7,168	10,809	11,113
Road Bridges	162	133	89	82	80
Total Sales, Rents, Fees and Charges	2,261,977	2,286,816	2,179,038	2,298,105	2,341,626

1. The Housing Revenue Account (HRA) records income and expenditure relating to Local Authority housing stock

Source: Local Financial Returns (LFRs)