Scottish Local Government Finance - Green Book: 2025-2026

2 Changes Since the Last Settlement

2.1 Comparison to 2024-25 settlement

The needs-based indicators used in assessments have, where possible, been updated to use the most up-to-date data available, though a few elements are fixed, for example, some of the more detailed 2011 population census data.

Some individual totals have not remained at the same levels as the 2024-25 settlement, and in a few cases the formula has changed.

2.2 Data issues

The Data Issues Working Group (DIWG) is the technical advisory group, comprising of representatives of the Scottish Government and local government (including COSLA), which exists to assist the analytical work undertaken in support of the allocation calculations.  The work programme of the DIWG is directed by the Settlement and Distribution Group (SDG), which was established to oversee all matters relating to the local government finance settlement.

2.3 Changes

Dual Indicator Review 2023

The Dual Indicator Review is undertaken for two reasons.  The first is to establish whether or not pairs of indicators currently used in the settlement calculations, and determined mathematically, continue to be valid by displaying a statistically significant relationship with past expenditure.  The second is to produce updated regression coefficients – the measure of the relationship between expenditure and the indicators – for use in the next Settlement.  The coefficients determine the amount of funding distributed on each indicator.  

All seven of the GAE lines distributed by this methodology in the previous settlement, plus one that failed in 2024-25, produced statistically significant values to confirm that the expected relationships still exist.  

2022 Population Census data

Some of the Census data usually used in the settlement became available in time for the 2025-26 settlement. This included the number of dependent children in lone parent families, and the small area data used in rurality estimates (see below). Further data, such as those used in elderly social care and adjusted population estimates, will be available for use in the 2026-27 settlement. The 2023 mid-year population estimates, and the 2022 small area population estimates used for some of the island population estimates, are also based on updated levels from the 2022 Census.

Rural population indicator

Census-based data on the total population of settlements (contiguous output areas of high density population) were provided, with those within 1 km of each other merged. These were then used to calculate new values for the percentage living outwith settlements of size 1,000 and 10,000. Similar calculations were made for the population aged 0-17.

Population dispersion indicators

Methodology

The above-mentioned Census-based settlement data (without the merger of settlements less that 1km apart) were used to produce updated population dispersion indicators. 

The methodology first identifies ‘key settlements’ within each Local Authority as those of population 7,000 or more. If there is no settlement of size 7,000 in an authority, the largest settlement is used. We then calculate the total time taken for each person in the authority to travel to the centre of the nearest (quickest time) key settlement. For those living within the key settlement, this time is limited to a maximum of 15 minutes. Journeys that include ferry travel have an additional 20 minutes added to account for waiting, embarking and disembarking. 

This methodology had changed since the previous 2011 Census-based calculation in three ways: a change from measuring distance to measuring time, the inclusion of populations within key settlements, and the ferry waiting time.

Formulae

Since the population dispersion indicator now includes populations within key settlements, it is no longer as skewed towards rural areas as before. The six formulae that use the indicator have therefore been considered for revision. The first four are: 

• Waste Collection: the weighting on household dispersion was increased to 14 per cent. 
• Administration of Housing Grant: the weighting on population dispersion was increased to 16 per cent.
• Homelessness Prevention Fund: the weighting on household dispersion was increased to 10 per cent, with a reduction in the price index indicators.
• Supported Employment: the weighting on the disabled population dispersion was increased to 23 per cent.

Rural Dispersion

The Demand Responsive Transport Grant line relates to a rural service and so a separate indicator that excludes populations within key settlements has been created – referred to as ‘Rural Dispersion’. The weighting remained unchanged.

Pupil Dispersion

Neither the Population Dispersion nor the Rural Dispersion indicators were considered suitable for the School Transport line. This was because the ‘key settlements’ were clearly an inappropriate proxy for the location of far more local schools, the population should relate to LA pupils rather than the whole population, and free school transport is only available for those living at least two or three miles from the school. 

A separate indicator was therefore calculated which uses the annual Pupil Census data to calculate the total distance travelled by pupils to their school, if that distance was greater than the statutory criteria. Those attending schools in neighbouring authorities through placing requests were excluded, except in the case of denominational or Gaelic-medium provision if that was not available within the authority. All special school provision was also included. In the absence of sufficiently fast computing power, straight-line distances were used rather than road distances, with the statutory limits of two and three road miles adjust accordingly to 2.12 km for primary and 3.31 km for secondary for straight-line distance.

As usual, the indicator was then used in a Dual Indicator Review with the results of that setting the weightings between the pupil dispersion and pupil numbers.

Other indicators

The following lists other changes to formulae for the 2025-26 settlement

• Adult Literacy GAE: Low pay data changed to be below 75% of the Scottish median.
• Child Residential Care GAE: population age-range changed to 0-17.
• Land Access GAE: new data-source used for path lengths.
• Private Sector Housing Grant GAE: cost of repair data replaced by modelled data using rurality.
• Gypsy/Traveller Sites Capital: new data-source used for number of sites and pitches. 
• Biodiversity & Greenspace Capital (formerly SNH): now uses the same distribution as the Biodiversity GAE line.
• Private Sector Housing Grant Capital: now uses indicator from the equivalent revenue line.

2.4 Local Authority naming convention

Please note that City of Edinburgh and Na h Eileanan Siar have been placed in their alphabetical order, which differs from the order used in the Finance Circular.