Local government finance circular No. 2/2024: settlement for 2024-2025

Chief Executives and Directors of Finance of Scottish Local Authorities

Chief Executive, Convention of Scottish Local Authorities (COSLA)

Our ref:    A47514626

29 February 2024

Dear Chief Executive/Director of Finance

1.  The Scottish Parliament debated and approved the Local Government Finance (Scotland) Order 2024 on 28 February. The Order provides the statutory authority to pay the General Revenue Grant (GRG) for 2024-25, and the changes made to amounts payable to each authority for 2023-24 since the 2023 Order.

2. This Circular provides a summary of the 2024-25 figures (and the revised revenue allocations for 2023-24) which have been updated from those contained in Local Government Finance Circular No. 8/2023. The total funding changes from Finance Circular 08/2023 are detailed in Annex A.

3. The Deputy First Minister wrote to the COSLA President, copied to all Council Leaders on 19 December 2023, confirming the package of measures that make up the settlement to be provided to local government.  This Circular should be read in conjunction with that letter.  The terms of this settlement have been discussed with COSLA on behalf of all 32 of its member councils.

4. The Deputy First Minister also confirmed her intention to prioritise additional funding of £62.7 million for local authorities, pass on any consequentials for increased teacher pension contributions and increase the Islands Cost of Living Fund by £4.0 million, subject to the outcome of the UK Government’s Spring Budget on 6 March delivering net additional funding.  Any additional funding will be discussed and agreed through the formal financial governance process and included for approval in the 2025 Order. 

5. The Scottish Government will work in partnership with local government to implement the budget and our joint priorities in return for the full funding package worth over £13.9 billion and includes:

• £950.9 million of funding that has now been baselined into the GRG, as part of our commitment under the Verity House Agreement to review ring-fenced funding;
•  An additional £230.0 million to deliver the payment of £12 per hour minimum pay settlement for adult social care workers in commissioned services via agreed contract uplifts;
• An additional £11.5 million to support the uprating of Free Personal and Nursing Care rates;
• An additional £6.0 million to support the expansion of the Free School Meals policy;
• An additional £6.8 million for Discretionary Housing Payments;
•  £145.5 million to support additional teachers and support staff;
•  £242 million to support teacher pay uplifts; and
• £266.2 million of resource to support local government pay.

6. In light of the decision to baseline £950.9 million into General Revenue Grant, Scottish Government will no longer be writing annually to councils to confirm individual allocations for the relevant funding streams but remains committed to working closely with COSLA to ensure that our joint priorities continue to be delivered sustainably.  For example, the Scottish Government will continue to work in close partnership with COSLA, councils and the wider childcare sector to ensure we realise the benefits of the 1140 hours expansion and to develop an outcomes and measurement framework for funded ELC as part of the development of an Assurance and Accountability Framework and a Fiscal Framework with Local Government.

7.In addition to the funding set out in this Circular it should be noted that there are a number of further revenue and capital funding streams outwith the local government finance settlement for particular policy initiatives which deliver on shared priorities and benefit local government services.  Table 2.17 in the “Scottish Budget: 2024 to 2025”, which was published on 19 December 2023, as amended by an errata on 24 January 2024, provides provisional details of these funding streams but as with previous years, the actual sums payable will be notified by the relevant policy team at the earliest opportunity.

8. The Scottish Budget: 2024 to 2025 also made available £147 million to fund a freeze in Council Tax across each of Scotland’s 32 local authorities. The funding earmarked is equivalent to a 5% net increase in Council Tax nationally.

9. The allocations have been arrived at using the standard agreed needs-based distribution methodology and updated indicators.  Reflecting the unique implications of incorporating the 2022 census data for the first time, the funding floor has been set at 0.5% below the average.

10. Any undistributed sums will be allocated in the standard way following consideration by the Settlement and Distribution Group.  We have shared a separate note with COSLA providing a full reconciliation of the changes between the 2023-24 and 2024-25 Budgets and between Circular 8/2023 and the figures in this Circular.  We have also provided full details of all the revenue and capital allocations.

11. The Scottish Government also expects constituent local authorities and/or valuation joint boards to continue to pass on the allocated amounts for the Barclay Implementation costs in full to the relevant assessors in 2024-25.

12. The various parts and annexes to this Circular, listed below, provide more of the detail behind the calculations. 

Part A:    Local Government Finance Settlement – Revenue: 2024-25 and changes in 2023-24; 
Part B:    Local Government Finance Settlement – Capital: 2023-25; and
Part C:    Non-Domestic Rates for 2024-25.

The various Annexes included in this Circular are as follows:
Annex A:    All Scotland Aggregated Funding Totals 2023-25;
Annex B:    Individual Revenue Allocations for 2024-25;
Annex C:    Revised Individual Revenue Allocations for 2023-24;
Annex D:    Explanatory Notes on the Revenue Distribution;
Annex E:    Estimates of Ring-Fenced Grant Revenue Funding for 2024-25;
Annex F:    Floor calculation for 2024-25;
Annex G:    Redeterminations of Individual Revenue funding for 2023-24;
Annex H:    2008-25 Changes Column;
Annex I:    General Capital Grant and Specific Capital Grants 2024-25;
Annex J:    General Capital Grant – Flood Allocations Per Local Authority 2024-25;
Annex K:    Updated General Capital Grant 2023-24; and
Annex L:    Total Local Government Funding Settlement 2024-25.

Part A: Local Government Finance Settlement - Revenue: 2024-25 and changes in 2023-24

13. This Finance Circular sets out the distribution of revenue funding allocations for 2024-25.  Annex A of this Circular sets out the all-Scotland aggregate totals for 2023-25.

14. Annexes B and C set out the distribution of the total revenue funding allocation between councils and the allocation of the different elements (GRG Funding, Non-Domestic Rate Income and Ring-Fenced Revenue Grants) for each council for 2024-25 and 2023-24.  The basis behind the grant distribution methodology is as recommended in the report from the Settlement and Distribution Group (SDG).  The explanatory notes contained in Annex D explain the basis behind the calculation of the individual council grant allocations.

15. Annex E gives a breakdown of the provisional individual council shares of all the ring-fenced revenue grant allocations for 2024-25. The provisional total for ring-fenced grant included in the circular is £24.187 million higher than was published in the 2024-25 Scottish Government Budget due to the in-year transfer from the GRG to the Support for Ferries specific grant for £13.760 million.  The variance of  £10.427 million for Pupil Equity funding was included in table 2.16 of the Scottish Budget (Local Government Attainment Grants) and will also be transferred in-year.  

16. The calculation and effects of the main floor adjustment for 2024-25, which provided councils with a maximum reduction in the funding used in the calculation of the main floor of 1.07%, is set out in Annex F of this Circular.  The setting of the floor is in line with the revised arrangements agreed following the SDG review of the floor methodology during 2018 with the percentage set at 0.5% below the average.

17. This Circular confirms the continuation of the 85% funding floor for 2024-25.  The methodology compares total revenue funding plus local authorities’ assumed Council Tax income and any council whose total support under this method falls below 85% will be topped up to ensure that all councils receive 85% of the Scottish average total revenue support per head.  As all 32 local authorities now exceed 85% of the Scottish average, no additional funding has been provided.

18. This Local Government Finance Circular provides details of 2023 24 redeterminations at Annex G for the GRG.  

19. Annex H summarises the column within the settlement titled 2008-25 Changes Column.

Part B:  Local Government Finance Settlement – Capital Grants 2023-25 

20. In 2024-25 the Local Government Settlement provides capital grants totalling £656.009 million. This is made up of General Capital Grant totalling £534.837 million and Specific Capital Grants totalling £121.172 million.

21. Annex I sets out the distribution of the Settlement for capital per local authority for 2024-25.  The methodologies used to calculate these provisional allocations have been agreed with COSLA. Capital grants which remain undistributed are identified as such.  

22. The distribution for the General Capital Grant includes allocations for flood schemes. The allocations for these schemes is set out in Annex J.  Where schemes have slipped and the grant paid in a prior year exceeds the grant due, the scheme will show a negative value which will reduce the total General Capital Grant payable to that Council. 

23. Annex K provides a breakdown of the updated 2023-24 General Capital Grant allocations by local authority.

24. Annex L summarises the Local Government Finance Settlement for 2024-25

Part C: Non-Domestic Rates for 2024-25

25. The Distributable Amount of Non-Domestic Rates Income for 2024-25 has been set at £3,068 million.  This figure uses the latest forecast of net income from Non-Domestic Rates in 2024-25 and also draws on council estimates of the amounts they will contribute to the Non-Domestic Rating Account (the ‘Pool’) in 2023-24.  The figure incorporates the Scottish Fiscal Commission’s estimate of the contributable amount and includes a calculation of gross income; expected losses from appeals; estimated expenditure on mandatory and other reliefs; write-offs and provision of bad debt together; and estimated changes due to prior year adjustments.  The distribution of Non-Domestic Rates Income for 2024-25 has been based on the amount each Council estimates that it will collect (based on the 2023-24 mid-year estimates provided by councils).  The GRG provides the guaranteed balance of funding. This method of allocation provides a clear presentation of the Non-Domestic Rates Income per council and transparency in the make-up of council funding.

26. The 2024-25 Non-Domestic Basic Property Rate (‘poundage’) is provisionally set at 49.8 pence, the same rate as last year.  The Intermediate Property Rate (levied on properties with a rateable value from £51,001 to £100,000) and Higher Property Rate (levied on properties with a rateable value over £100,000) will increase by inflation to 54.5 pence and 55.9 pence respectively.

27. A 100% non-domestic rates relief will be available in 2024-25 for properties in the hospitality sectors on islands, as defined by the Islands (Scotland) Act 2018, and prescribed remote areas, capped at £110,000 per ratepayer.

28. The Scottish Budget 2024-25 announced the following changes to existing reliefs:

• District Heating relief for renewables will be extended and expanded.  A 90% relief will be available until 31 March 2027 for district heating networks where at least 80% of the thermal energy generated derives from renewables. Previously support for renewable district heating was limited to new networks entered on the valuation roll after 1 April 2021.
• Telecommunications mobile mast relief will be extended from 31 March 2029 to 31 March 2031.
• Enterprise Areas relief which had been due to expire on 31 March 2024, will be phased out over 2024-25 and 2025-26 as set out in the table below.

Enterprise Areas Relief 

Rateable Value	Relief available
	2023-24	2024-25	2025-26
£120,000 or less	100%	66.7%	33.3%
£120,001 to £240,000	50%	33.3%	16.7%
£240,001 to £480,000	25%	16.7%	8.3%
£480,001 to £1,200,000	10%	6.7%	3.3%
£1,200,001 to £2,400,000	5%	3.3%	1.7%
Over £2,400,000	2.5%	1.7%	0.8%

1. The Scottish Budget 2023‑24 introduced the following transitional reliefs for the 2023 revaluation which will apply in the 2024-25 financial year:

• A General Revaluation Transitional Relief to protect those most affected by revaluation with bills capped as per the three tables below showing the annual and cumulative impact of the relief on annual gross bill increase limits for qualifying properties.

Table 1: Properties with rateable value on 1 April 2023 up to and including £20,000 

	2023-2024	2024-2025
Annual cap	12.5%	25.0%
Cumulative cap	12.5%	40.6%
Cumulative multiplier	1.125	1.406

Table 2: Properties with rateable value on 1 April 2023 from £20,001 and up to and including £100,000 

	2023-2024	2024-2025
Annual cap	25.0%	50.0%
Cumulative cap	25.0%	87.5%
Cumulative multiplier	1.250	1.875

Table 3: Properties with rateable value on 1 April 2023 in excess of £100,000 

	2023-2024	2024-2025
Annual cap	37.5%	75.0%
Cumulative cap	37.5%	140.6%
Cumulative multiplier	1.375	2.406

• A Small Business Transitional Relief: for those losing or seeing a reduction in eligibility for Small Business Bonus Scheme relief, or losing eligibility for Rural Rate relief, on 1 April 2023, the maximum increase in the rates liability relative to 31 March 2023 were capped at £600 in 2023-24, rising to £1,200 in 2024-25 and £1,800 in 2025 26. 
• Parks Transitional Relief provided 67% relief in 2023-24, and will provide 33% relief in 2024-25 for parks, or parts of parks, that became rateable on 1 April 2023.

30. The following reliefs will be maintained: business growth accelerator relief, charitable rates relief, day nursery relief, disabled rates relief, fresh start relief, hardship relief, hydro relief, new fibre relief, renewable energy relief, rural relief, small business bonus scheme relief, sports club relief and stud farms relief.  

31. Empty Property Relief was devolved to local authorities on 1 April 2023 covering all relief and rates exemptions for fully unoccupied properties including listed buildings, properties where the owner is in administration, etc. Partly unoccupied properties that the council requests be apportioned by the assessor will be liable for rates on the occupied portion only. Councils may offer their own local reliefs under the Community Empowerment (Scotland) Act 2015 including to empty properties.

32. NDR reliefs, like other subsidy or support measures, may be subject to the Subsidy Control Act 2022.

33. Information on the Non-Domestic Rates Incentivisation Scheme (NDRIS) is set out in Circular 1/2024.

Enquiries relating to this Circular 

34. It should be noted that figures in this Circular may be marginally different from final allocations due to roundings.  Local authorities should note that if they have any substantive specific enquiries relating to this Circular these should, in the first instance, be addressed through COSLA. We have given an undertaking to respond to these queries as quickly as possible.  Contact details for COSLA are: 

Mirren Kelly  mirren.kelly@cosla.gov.uk 

Other queries

Please address them to: 
Local Government Revenue and Capital Settlement. Craig Inglis  Craig.Inglis@gov.scot 
Non-Domestic Rates. Anouk Berthier  Anouk.Berthier@gov.scot 

35. This Circular, along with the supporting tables will be made available through the Local Government section of the Scottish Government website at:  
https://www.gov.scot/publications/local-government-finance-circulars-index/ 

Yours faithfully

Ellen Leaver
Deputy Director, Local Government and Analytical Services Division 

Local government finance circular No.2/2024: settlement for 2024 - 2025 - tables

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