Scottish Local Government Financial Statistics 2014-15

Scottish Local Government Financial Statistics is an annual publication that provides a comprehensive overview of Scottish Local Authority financial activity. The publication covers Local Authority income, revenue and capital expenditure, outstanding debt, local taxation and Local Authority pensions.


3. Local Government Reserves, Fixed Assets and Debt

3.1 Reserves

Revenue reserves reflect an accumulation of surplus income. These are used to finance future spending on services. The surplus or deficit on the provision of service is laid out in Table 1.1; in order to be consistent with that table income is shown in brackets and expenditure as positive in the following tables.

On 1 April 2014 local authorities had total revenue reserves of £1.813 billion. Over the course of the year, total reserves increased by £65 million (3.6%) to £1.879 billion on 31 March 2015. Capital reserves increased by £10.3 million (1.9%), from £0.528 billion to £0.538 billion.

Table 3.1 - Movements in Reserves by Account, 2014-15

£thousands

Revenue Reserves Total Revenue Reserves
General Fund Housing Revenue Account Renewal and Repairs Insurance Fund Other Statutory Funds
Level of Reserves held 1 April 2014 (1,089,257) (116,106) (163,783) (82,645) (361,521) (1,813,312)
Surplus or Deficit on provision of services 265,119 115,052 380,171
Statutory Adjustments (317,434) (132,161) (449,595)
Total Surplus or Deficit (52,315) (17,109) (69,424)
Movement between Reserves (4,147) 6,064 (6,553) (3,091) 12,828 5,101
Capital Expenditure funded from Reserves 151 3,957 4,108
Other Movements in Reserves 8,858 (2,789) (10,108) (759) (190) (4,988)
Movement in Reserve 4,711 3,426 (12,704) (3,850) 12,638 4,221
Level of Reserves held 31 March 2015 (1,136,861) (129,789) (176,487) (86,495) (348,883) (1,878,515)

Source: Local Financial Returns (LFR 23)

Table 3.1 (continued) - Movements in Reserves by Account, 2014-15

£thousands

Capital Reserves Total Capital Reserves
Capital Fund Capital Receipts Capital Grants Unapplied
Level of Reserves held 1 April 2014 (411,837) (30,779) (85,464) (528,080)
Increase of Decrease in year (13,110) (13,110)
Movement between Reserves (24,916) 19,815 (5,101)
Capital receipts for the year (8,029) (85,853) (93,882)
Capital Expenditure funded from Reserves 30,561 41,486 26,604 98,651
Other Movements in Reserves (392) 3,583 3,191
Movement in Reserve (2,776) (20,969) 13,494 (10,251)
Level of Reserves held 31 March 2015 (414,613) (51,748) (71,970) (538,331)

Source: Local Financial Returns (LFR 23) and Capital Return Final

3.2 Fixed Assets

Capital Expenditure creates local authority assets. The value of Local Authority fixed assets is shown in Table 3.2 below. At 31st March 2015, local authorities held a total of £39.4 billion of assets, an increase of 1.4% (£535 million) on 31st March 2014.

Table 3.2 - Value of Fixed Assets, 31st March 2011 to 31st March 2015

£thousands

Value of fixed assets as at 31 March 2011 Value of fixed assets as at 31 March 2012a Value of fixed assets as at 31 March 2013 Value of fixed assets as at 31 March 2014 Value of fixed assets as at 31 March 2015
Operational Assets
Council dwellings 9,780,140 9,475,119 10,450,805 10,839,706 10,535,999
Other land and buildings 19,132,148 18,955,480 18,978,739 18,276,923 18,866,921
Vehicles, plant and machinery 928,814 937,152 1,022,046 1,003,162 1,178,814
Infrastructure assets 4,335,085 4,432,109 4,751,596 4,987,041 5,361,011
Community assets 177,755 165,502 168,819 161,728 169,971
Heritage assets2 417,174 1,804,230 1,803,074 1,840,245
Total operational assets 34,353,942 34,382,536 37,176,235 37,071,634 37,952,961
Non-operational assets
Assets under construction 1,275,873 1,456,501 1,271,111 1,200,830 845,627
Surplus assets held for disposal 492,701 397,053 377,632 365,120 336,021
Investment properties 209,196 205,613 205,220 197,445 207,027
Total non-operational assets 1,977,770 2,059,167 1,853,963 1,763,395 1,388,675
Intangible Assets 18,052 77,184 19,747 23,913 52,306
Total Assets excluding Police & Fire 35,560,848 36,299,949 38,214,124 38,858,942 39,393,942
Total Assets 36,349,764 37,168,112 39,049,945 38,858,942 39,393,942

a. Total Assets for 2011-12 includes £649,225 thousand for South Ayrshire Council that couldn't be broken down into the above categories.

2. Heritage assets was collected as a category from 2012-13 onwards.

Source: Capital Returns (CR Final)

3.3 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. a finance lease or a Public-Private Partnership (PPP) or Private Finance Initiative (PFI)) a debt liability is created to be repaid by a 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 is 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 3.3 and the level of credit arrangements outstanding is set out in Table 3.4.

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, near-final data was collected and, as such, the loans fund advances outstanding on 31st March may not match the loans fund advances outstanding on 1st April.

The all Scotland value of loans fund advances outstanding at 31st March 2015 was £13.18 billion (of which £9.96 billion was General Fund and £3.22 billion was HRA). General Fund loans fund advances outstanding increased by £26.1 million (0.3%) between 1st April 2014 and 31st March 2015. HRA loans fund advances outstanding rose by £195 million (6.5%) between 1st April 2014 and 31st March 2015.

At 31st March 2015, the Scottish average General Fund loans fund advances outstanding was equal to £1,862 per person (down 0.1% on 31st March 2014) and the average HRA loans fund advances outstanding was equal to £10,138 per HRA dwelling (up 6.3% on 31st March 2014).

Table 3.3 - General Fund and HRA Loans Fund Advances Outstanding, 2010-11 to 2014-15

£thousands

2010-11 2011-12 2012-13 2013-14 2014-15
General Fund
Loans Fund advances outstanding 1 April 8,710,450 9,118,442 9,608,327 9,650,825 9,932,872
ADD New advances from the Loans Fund 808,181 918,890 852,238 788,568 518,296
LESS: Repayments in year 438,378 455,689 475,952 469,823 462,945
LESS: Additional Voluntary Repayments in Year 5,335 68,547 45,299 34,546 27,437
Transfer of assets between funds (transfers out are negative) 32,442 258 -292 -1,411 -1,773
Total Loans Fund advances outstanding (£ thousands) 9,107,360 9,513,353 9,939,022 9,933,613 9,959,013
Per Head (£) 1,744 1,810 1,870 1,865 1,862
Housing Revenue Account
Loans Fund advances outstanding 1 April 2,209,527 2,384,118 2,619,354 2,835,741 3,024,509
ADD New advances from the Loans Fund 305,748 342,578 313,149 316,958 311,404
LESS: Repayments in year 91,038 97,820 96,475 127,585 105,602
LESS: Additional Voluntary Repayments in Year 8,354 7,414 2,920 9,956 12,411
Transfer of assets between funds (transfers out are negative) -32,442 -258 292 1,411 1,773
Total Loans Fund advances outstanding (£ thousands) 2,383,441 2,621,205 2,833,400 3,016,569 3,219,673
Per HRA dwelling (£) 7,502 8,284 8,973 9,533 10,138
Total (GF + HRA) Loans Fund advances outstanding 11,490,801 12,134,558 12,772,422 12,950,182 13,178,687

Source: Capital Returns (CR Final), Housing Revenue Account: Local authority housing income and expenditure, NRS Mid-Year Population Estimates (2013)

Table 3.4 - Credit Arrangements, 2010-11 - 2014-15

£thousands

2010-11 2011-12 2012-13 2013-14 2014-15
General Fund
Balance brought forward 1 April 2,706,195 2,846,858 2,865,124 2,845,843 2,800,193
ADD: New credit arrangements in year 103,972 106,888 14,055 30,625 42,701
LESS: Repayments of principal in year 81,361 97,269 84,955 90,802 92,895
Credit arrangements outstanding 31 March 2,728,806 2,856,476 2,794,224 2,785,666 2,749,999
Per Head (£) 523 544 526 523 514
Housing Revenue Account
Balance brought forward 1 April 17,364 14,226 10,508 7,132 4,965
ADD: New credit arrangements in year 0 0 0 0 0
LESS: Repayments of principal in year 4,059 3,683 3,380 2,167 1,496
Credit arrangements outstanding 31 March 13,305 10,543 7,128 4,965 3,469
Per Head (£) 42 33 23 16 11
Total (GF + HRA) Credit Arrangements Outstanding 2,742,111 2,867,019 2,801,352 2,790,631 2,753,468

Source: Capital Returns (CR Final)

Table 3.5 - Total Debt, 31st March 2011 - 31st March 2015

£thousands

31st March 2011 31st March 2012 31st March 2013 31st March 2014 31st March 2015
General Fund
Loans Fund Advances Outstanding 9,107,360 9,513,353 9,939,022 9,933,613 9,959,013
Credit Arrangements 2,728,806 2,856,476 2,794,224 2,785,666 2,749,999
Total General Fund Debt 11,836,166 12,369,830 12,733,246 12,719,279 12,709,012
Per Head (£) 2,267 2,354 2,396 2,387 2,377
Housing Revenue Account
Loans Fund Advances Outstanding 2,383,441 2,621,205 2,833,400 3,016,569 3,219,673
Credit Arrangements 13,305 10,543 7,128 4,965 3,469
Total HRA Debt 2,396,746 2,631,748 2,840,528 3,021,534 3,223,142
Per HRA Dwelling (£) 7,544 8,317 8,995 9,549 10,149
Total Debt 14,232,912 15,001,577 15,573,774 15,740,813 15,932,155

Source: Capital Returns (CR Final)

3.4 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 such as 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.

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 £0.39 billion (2.7%), from £14.59 billion at the 1st April 2014 to £14.98 billion at the 31st March 2015. 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 falling from 98% at 31st March 2011 to 93% at 31st March 2015.

Table 3.6 - Prudential Information, 2010-11 to 2014-15

£thousands

2010-11 2011-12 2012-13 2013-14 2014-15
Capital Financing Requirement at 1 April 13,094,369 13,988,396 14,674,452 14,893,146 15,863,207
Capital Expenditure to be financed by borrowing or credit arrangements 1,217,901 1,368,356 1,179,442 1,136,151 872,402
Capital Expenditure to be financed by borrowing 1,113,929 1,261,468 1,165,387 1,105,526 829,701
Capital Expenditure to be financed by credit arrangements 103,972 106,888 14,055 30,625 42,701
Loans Fund principal repayments 529,416 553,509 572,427 597,408 568,548
Credit arrangements principal repayments 85,420 100,952 88,335 92,969 94,391
Additional voluntary contributions of principal repayments 13,689 75,961 48,219 44,502 39,848
Change in Capital Financing Requirement 589,376 637,934 470,461 401,272 169,615
Capital Financing Requirement at 31 March 13,683,745 14,626,330 15,144,913 15,294,418 16,032,822
Borrowing at 1 April 9,897,347 10,800,370 11,290,176 11,558,504 11,897,475
Other long term liabilities at 1 April 2,723,559 2,920,001 2,875,632 2,852,975 2,690,905
Total External Debt at 1 April 12,620,906 13,720,371 14,165,808 14,411,479 14,588,380
Borrowing at 31 March 10,702,661 11,340,431 11,706,550 11,816,384 12,332,169
Other long term liabilities at 31 March 2,742,111 2,925,936 2,801,352 2,790,631 2,645,977
Total External Debt at 31 March 13,444,772 14,266,367 14,507,902 14,607,015 14,978,146
Operational boundary for external debt at 31 March 15,002,188 16,223,733 16,571,358 16,684,872 16,779,418
Authorised limit for external debt at 31 March 15,896,793 17,223,932 17,553,906 17,749,541 17,787,296
Total External debt as a percentage of the Capital Financing Requirement at 31 March 98% 98% 96% 96% 93%

Source: Capital Returns (CR Final)

Chart 3.1 - Prudential Indicators: 31st March 2011 to 31st March 2015

Chart 3.1- Prudential Indicators: 31st March 2011 to 31st March 2015

Source: Capital Returns (CR Final)

Contact

Email: Euan Smith

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