1. Local Government Revenue Expenditure and Funding
Day-to-day expenditure of the local authority is referred to as revenue expenditure.
Net Revenue Expenditure is the element funded through General Funding (which is made up of General Revenue Grant, Council Tax and Non-Domestic Rates).
Gross Revenue Expenditure is the total expenditure less inter/intra-authority transfers.
- Gross revenue expenditure on services increased by 0.7% to £15.3 billion in 2015-16;
- Net revenue Expenditure on services increased by 0.7% to £10.1 billion;
- Net Revenue Expenditure on Education increased by 2.7% to £4.7 billion;
- Net Revenue Expenditure on Social work increased by 1.9% to £3.2 billion;
- Financing and Investment expenditure increased by 2.5% to £1.5 billion;
- General Funding increased by 0.7% to £12 billion;
- Service income increased by 0.9% to £5.2 billion.
1.1 Total Revenue Expenditure and Funding
The two main local authority accounts are the revenue account and the capital account. The revenue account is used for day-to-day costs, such as paying salaries, bills and rent. The capital account is used to fund expenditure that creates an asset, such as building schools or new roads. Capital income and expenditure are presented in Chapter 2.
Figures are presented in cash terms throughout the publication, i.e. they have not been adjusted for inflation. Where income is presented alongside expenditure, the convention of presenting income in (brackets) and expenditure without brackets is used.
Table 1.1 summarises revenue income, expenditure, funding and balances for 2015-16.
Total Gross Revenue Expenditure on services by Scottish local authorities in 2015-16 was £15,335 million, 0.7% higher than in 2014-15. Of this, £660 million was for the provision of housing through the Housing Revenue Account ( HRA).
Total service income raised by local authorities in 2015-16 was £5,230 million, an increase of 0.9% on the previous year. £1,150 million of this was raised through the Housing Revenue Account.
Net Revenue Expenditure is the element of expenditure on services to be funded by taxation and non-specific grant income (General Revenue Grant, Council Tax and Non-Domestic Rates), with any remaining expenditure to be met from reserves. Net revenue expenditure is calculated as gross service expenditure minus service income. This is sometimes referred to as the Net Cost of Service. Total Net Revenue Expenditure in 2015-16 is £10,105 million, which is an increase of 0.7% on 2014-15.
The largest service area is education with gross expenditure of £4,946 million and service income of £210 million in 2015-16, which gives a net revenue expenditure on education of £4,736 million, an increase of 2.7% on 2014-15.
The second largest service area is social work with gross expenditure of £4,044 million and £875 million of service income. Net Revenue Expenditure on social work is £3,169 million, 1.9% higher than in 2014-15.
Education and Social work account for three quarters of General Fund net revenue expenditure on services, with Education accounting for 45% and Social Work accounting for 30% of General Fund net revenue expenditure.
Total net Financing and Investment Expenditure for 2015-16 was £1,451 million, an increase of 2.5% on the previous year. Of this, £832 million was for paying interest on debt and £715 million was for repaying debt. Authorities received income from investments and trading operations of £96 million.
Total taxation and non-specific grant income available to authorities in 2015-16 was £12,003 million, 0.7% higher than in 2014-15. Of this, £7,147 million was General Revenue Grant, £2,791 million was Non-Domestic Rates and £2,055 million was from Council Tax with £10 million of other funding.
The surplus or deficit on the provision of services is calculated by taking the net revenue expenditure on services then adding to this financing and investment costs, then deducting funding from taxation and non-specific grant income, which gives a revenue surplus of £448 million in 2015-16. £340 million of this was used to finance capital expenditure and £34 million was transferred to other reserves (see Chapter 3 for more detail). The remaining £74 million was added to General Fund and HRA reserves which increased from £1,265 million on the 1 st April 2015 to £1,339 million on the 31 st March 2016.
(Surplus)/Deficit on Provision of Services:
General Fund and HRA Revenue Reserves:
Table 1.1: Revenue Expenditure, Income and Balances, 2015-16
|Gross Expenditure||Gross Income||Net Expenditure|
|Expenditure on Services|
|Culture and Related Services||690,792||(92,615)||598,177|
|Social Work Services||4,044,181||(874,836)||3,169,345|
|Roads and Transport||620,464||(202,187)||418,277|
|Planning and Development Services||424,310||(181,394)||242,916|
|Housing Services (Non- HRA)||2,398,253||(2,104,025)||294,228|
|Housing Revenue Account||660,183||(1,150,011)||(489,828)|
|Net Cost of Services||15,334,669||(5,230,071)||10,104,598|
|Financing and Investment|
|Interest Payable and Similar Charges||831,736|
|Interest Receivable and Similar Income||(56,035)|
|Statutory Repayment of Debt||714,878|
|(Surplus) or Deficit from Trading Operations||(40,002)|
|Financing and Investment Income and Expenditure||1,450,577|
|General Revenue Grant||(7,146,854)|
|Surplus (-) / Deficit on Provision of Services||(447,551)|
|Balance at 1 April 2015||(1,265,418)|
|(Surplus) or Deficit for the year||(447,551)|
|Capital Expenditure Funded from General Fund/ HRA||339,864|
|Movement in Reserves||34,033|
|(Increase) or decrease in reserves||(73,654)|
|Balance 31 March 2016||(1,339,072)|
1.2 General Fund Revenue Expenditure and Income
Chart 1.1 provides a breakdown of General Fund net revenue expenditure by service. The HRA has been excluded from this analysis as it is a separate, self-financing account. Education and social work account for three quarters of General Fund net revenue expenditure. The largest is Education with 45% (£4,736 million) of General Fund net revenue expenditure. Of this, £1,834 million was spent on primary education and £1,865 million on secondary education with the remainder spent on pre-primary, special and community education.
Social work is the next largest service with net revenue expenditure of £3,169 million (30% of General Fund net expenditure). Data on social work expenditure is collected on the basis of client groups. Of the client groups identified in the Local Financial Returns ( LFRs), older persons has the highest expenditure with £1.344 million followed by children and families with £900 million and adults with learning disabilities with £527 million.
A full breakdown of expenditure by sub-service is available in the accompanying excel tables.
Chart 1.1: General Fund Net Revenue Expenditure on Services: 2015-16
Table 1.2 provides a time series of net revenue expenditure by service. Education and Social Work are the only service areas that have shown increases in expenditure each year since 2011-12. Roads and Transport is the only service area where expenditure has decreased each year since 2011-12.
Over the period from 2011-12 to 2015-16, net revenue expenditure on Social Work increased by 10% from £2,871 million in 2011-12 to £3,169 million in 2015-16. Planning & Development Services showed the largest percentage fall (16%) from £289 million in 2011-12 to £243 million in 2015-16.
Table 1.2: Net Revenue Expenditure by Service, 2011-12 to 2015-16
|Cultural & Related Services||613||609||614||643||598|
|Roads & Transport||460||457||436||420||418|
|Planning & Development Services||289||279||279||278||243|
|Central Services 1, 2||428||386||484||439||468|
|Non- HRA Housing||323||306||321||342||294|
|General Fund Net Expenditure||10,156||10,208||10,400||10,504||10,594|
|Housing Revenue Account||(389)||(425)||(439)||(465)||(490)|
|General Fund + HRA Net Revenue Expenditure||9,767||9,783||9,961||10,039||10,105|
|Central Services (Police & Fire) 1, 2||(22)||(50)|
|General Fund + HRA Net Revenue Expenditure||10,540||10,540||9,961||10,039||10,105|
1. Police and Fire Board expenditure has been separated out of
the General Fund to allow for time series comparison. Previous
publications will have included Police and Fire board expenditure
as General Fund Expenditure; however the Police and Fire Reform
(Scotland) Act 2012 replaced Police and Fire Boards with Police
Scotland and the Scottish Fire and Rescue Service which are
classified as Central Government.
Source: Local Financial Returns - LFR 00
Type of Expenditure
The element with the highest gross revenue expenditure is operating costs (which includes property costs, supplies and services costs, transport and payments to agencies and other bodies) which account for £6,723 million of expenditure. The second largest element was employee costs which account for £6,284 million.
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 around £1,875 million of the total of £2,077 million.
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. This adjustment ensures that expenditure is not counted twice.
Support services include Finance, Legal, Human Resources, IT, Internal Audit, Procurement and Asset Management.
Local authorities can receive service income from a variety of sources.
The largest element of service income is Customer and Client Receipts, with £2,423 million of income. Of this, £1,141 million is from the Housing Revenue Account, the vast majority of which will be rent income.
The second largest element of service income is Government Grants (excl General Revenue Grant) with £2,036 million, however £1,835 million of this is under Non- HRA Housing which will mostly be a grant from the DWP to be used by authorities to pay out Housing Benefit.
Table 1.3: Net Revenue Expenditure by Service and Type of Income / Expenditure, 2015-16
|Education||Culture and Related Services||Social Work||Roads and Transport||Environmental Services||Housing (non- HRA)||Central and Other||Total General Fund||Housing Revenue Account||Total General Fund plus HRA|
|Adjustment for Inter Account and Inter Authority Transfers||(37,413)||(30,153)||(52,247)||(158,535)||(29,454)||(26,618)||(267,267)||(601,687)||(15,328)||(617,015)|
|Government Grants (excl GRG)||(47,330)||(5,461)||(85,098)||(4,440)||(1,878)||(1,834,648)||(50,293)||(2,029,148)||(6,553)||(2,035,701)|
|Other Grants, Reimbursements and Contributions||(40,029)||(18,326)||(525,659)||(12,322)||(7,106)||(109,738)||(51,618)||(764,798)||(2,738)||(767,536)|
|Customer and Client Receipts||(122,477)||(68,826)||(264,079)||(182,978)||(123,825)||(159,635)||(360,153)||(1,281,973)||(1,140,720)||(2,422,693)|
|Net Revenue Expenditure||4,735,788||598,177||3,169,345||418,300||684,135||294,228||694,453||10,594,426||(489,828)||10,104,598|
Chart 1.2: Gross Expenditure by Service, 2015-16, £thousands
Chart 1.3 shows net revenue expenditure on services per head of population by council. Valuation Joint Boards, Tay Road Bridge and Regional Transport Partnerships have been excluded from the figure here. The chart shows that on average in Scotland local government spent £1,881 per person in 2015-16, up slightly from £1,877 in 2014-15.
Chart 1.3: Net Revenue Expenditure per Head Population by Local Authority, 2015-16 (£)
Source: Local Financial Returns - LFR 00 and NRS Mid-Year Population Estimates (2015)
1.3 Funding Revenue Expenditure
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 (Customer and Client Receipts)
The main source of revenue income for local government is General Revenue Grant, (formerly referred to as the Revenue Support Grant). General Revenue Grant ( GRG) is paid by the Scottish Government to support the delivery of local services.
Local taxation contributed almost £4.8 billion to the funding of local government in 2015-16 and further information on these taxes is set out in the following sections. General Revenue Grant and local taxation combined together are referred to as "Taxation and non-specific grant income". 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, 2011-12 to 2015-16
|General Revenue Grant||7,790||7,782||7,225||7,167||7,147|
|Council Tax 2||2,301||2,319||1,978||2,022||2,055|
|Government Grants (excl GRG)||2,561||2,640||1,974||1,984||2,040|
|Other Grants, Reimbursements and Contributions||856||807||774||833||768|
|Customer and Client Receipts||2,287||2,330||2,317||2,368||2,423|
|Total Revenue Income||18,188||18,320||16,790||17,108||17,233|
1. Figures for 2013-14 and later are not comparable with prior
years due to changes to the way that Police and Fire are funded
following the formation of Police Scotland and the Scottish Fire
and Rescue Service. See section 5.2 for more details.
2. Pre-2013-14 Council Tax figures are not comparable with later years as Council Tax Reduction ( CTR) was introduced from 1 April 2013 to replace Council Tax Benefit ( CTB), which was abolished by the UK Government as part of its welfare reform programme. Due to differences in the administration of the two schemes, Council Tax figures before 2013-14 include CTB, whereas figures from 2013-14 onwards do not include CTR.
Source: Local Financial Returns ( LFRs): LFR 00
Chart 1.4: Revenue Income and Funding, 2015-16
Source: Local Financial Returns ( LFRs): LFR A0 and 00
1.4 Council Tax
In 2015-16, Council Tax bills were issued to 2.46 million dwellings in Scotland. Over £2 billion of Council Tax revenue was raised across all local authorities in Scotland in 2015-16.
Council Tax was introduced in Scotland on the 1 st April 1993 to replace the Community Charge. It is a tax system based on dwellings and is used as a source of funding in addition to that received from other sources (General Revenue Grant, Non-Domestic Rates, ring-fenced revenue grants and other locally raised income from rent, fees and charges).
There are three factors that determine the amount of Council Tax that a dwelling is liable for. These are:
1. The market value of the dwelling as at the 1 st April 1991. Each dwelling is placed into one of eight bands from A to H, with Band A dwellings liable for the lowest rates of Council Tax and Band H attracting the highest.
2. The Band D rate which is set by the local authority, with other bands calculated as a ratio to Band D. These ratios will change after 2016-17.
3. A range of exemptions, discounts and reductions that are available in certain circumstances, or in some cases an increase in Council Tax due to the application of a levy.
The valuation range and ratio for each band is given in Table 1.5.
Table 1.5: Council Tax data by band
|Valuation band ranges as at 1 st April 1991||Ratio to Band D (to 2016-17)||No. of chargeable dwellings as at September 2016||Proportion of chargeable dwellings|
|Band A||Under £27,000||6/9||504,715||21%|
|Band B||£27,001 to £35,000||7/9||571,217||23%|
|Band C||£35,001 to £45,000||8/9||397,023||16%|
|Band D||£45,001 to £58,000||9/9||328,309||13%|
|Band E||£58,001 to £80,000||11/9||329,682||13%|
|Band F||£80,001 to £106,000||13/9||189,367||8%|
|Band G||£106,001 to £212,000||15/9||122,158||5%|
|Band H||Over £212,000||18/9||12,936||1%|
Collection and Potential Yield of Council Tax
Local authorities are responsible for billing and collecting Council Tax. Before the start of each financial year, local authorities issue Council Tax bills to householders in each dwellings. Each bill is calculated by applying the appropriate band rate for the local authority, then applying any discounts, exemptions, reductions or increases: further details are provided in Tables 1.10 and 1.11. Chart 1.4 illustrates the breakdown of the gross Council Tax potential yield into Council Tax billed and the amounts not billed due to Council Tax Reduction ( CTR), discounts and exemptions.
Chart 1.5: Council Tax Potential Yield (£ millions), 2015-16
Local authorities collect Council Tax relating to these bills over the year, and also continue to collect late amounts from previous billing years. The provisional in-year Council Tax collection rate for 2015-16 was 95.7 per cent and the total amount collected for Scotland as a whole (after CTR) was £2.055 billion, including late amounts for previous years. Table 1.6 shows the amount of Council Tax collected by each local authority in 2015-16. More information about bills issued in 2015-16 and the provisional amounts collected are available in the statistics publication 'Council Tax Collection Statistics, 2015-16' which is available at: http://www.gov.scot/stats/bulletins/01224
Table 1.6: Council Tax income after CTR by local authority, 2015-16 a
|Local Authority||Net Council Tax income (£'000s)|
|Argyll & Bute||43,373|
|Dumfries & Galloway||56,228|
|Edinburgh, City of||216,351|
|Perth & Kinross||69,494|
a Figures relate to income collected in financial year 2015-16, which can include amounts that were billed in previous years.
Source: Local Financial Returns, 2015-16
Table 1.7 shows the number of dwellings in Scotland for each September from 2011 to 2016. There was a total of 2.575 million dwellings in Scotland in 2016, of which 120,000 dwellings were exempt for Council Tax purposes. This gave 2.455 million chargeable dwellings in 2016: an increase of around 2.8 per cent (66,000 dwellings) since 2011.
Table 1.7: Total number of dwellings in Scotland, 2011 to 2016
|Total Dwellings||Exempt Dwellings||Chargeable Dwellings|
Source: CTAXBASE Return
Chart 1.5 shows the distribution of chargeable dwellings across Council Tax bands in each local authority. Across the whole of Scotland, just under three-quarters of all chargeable dwellings are in Bands A to D. The distribution varies across local authorities due to variations in property market values. Eilean Siar has the largest proportion of dwellings in Bands A to D (90 per cent), whereas East Renfrewshire has the lowest proportion in Bands A to D (44 per cent). Dwellings in Band E to H, just over a quarter of the total, will be subject to revised ratios, and therefore higher charges, from 2017-18.
The three local authorities with the highest number of chargeable dwellings were Glasgow, Edinburgh and Fife, with over a quarter of the chargeable dwellings in Scotland between them. Further data on the number of chargeable dwellings by local authority and Council Tax band can be found in the supplementary tables.
Chart 1.6: Percentage of chargeable dwellings by Council Tax band for each local authority as at September 2016
Council Tax Rates & Average Bills
Each local authority determines their own Band D rate of Council Tax as part of their budget setting process. The rate for other bands is then calculated as a set ratio of the Band D rate: the ratios up to and including 2016-17 can be found in Table 1.5. As a result, each local authority has different Council Tax rates. The Band D Council Tax levels for each local authority are shown in Chart 1.6, and range from £1,024 in Eilean Siar to £1,230 in Aberdeen City.
Chart 1.7: Band D Council Tax rate by local authority, 2015-16 (£)
Since 2007-08, Scottish Government and local government have worked in partnership to freeze Council Tax rates each year. The one exception is Stirling, where the council reduced the Band D rate from £1,223 in 2007-08 to £1,209 in 2008-09, and subsequently to £1,197 in 2012-13. The Council Tax freeze has caused the Scotland average Band D Council Tax rate to remain steady at £1,149 since 2007-08 - a fall in real terms.
Table 1.8 shows how the average Band D Council Tax bill for Scotland has changed each year from 2010-11. The average Council Tax bill per dwelling in 2015-16 was £991. This differs from the average Band D rate due to the distribution of dwellings across Council Tax bands, as can be seen in Table 1.5 and Chart 1.5, and the application of discounts.
Table 1.8: Average Council Tax bills, 2010-11 to 2015-16
|Average CT bill per dwelling|
|Before CTB/ CTR||After CTB/ CTR|
Source: CTAS, CTAXBASE Returns and Local Financial Returns ( LFR 12)
Council Tax Reduction ( CTR)
Scotland's CTR scheme was introduced in 2013 following localisation of Council Tax support and the UK Government's abolition of Council Tax Benefit ( CTB). The CTR scheme reduces the Council Tax liability of vulnerable people in Scotland, including people on low incomes, pensioners and lone parents. The impact of CTB/ CTR on the average Council Tax bill is also shown in Table 1.8. After taking these reductions in liability into account, the average bill per dwelling for 2015-16 reduced by £135 from £991 to £856.
Scotland's CTR scheme is funded by the UK Government, Scottish Government and local government. In 2015-16, CTR funding from government totalled £343 million (£320 million from UK Government and £23 million from Scottish Government). Local authorities agreed to contribute up to £17 million additional funding from their own budgets to the cost of the scheme, as part of the joint commitment between Scottish Government and local government to mitigate the 10% funding cut by the UK Government.
The amounts distributed to each local authority and the final total costs are shown in Table 1.9. The total cost of the CTR scheme across Scotland in 2015-16 was around £330 million. This figure is £13 million less than the £343 million funding provided by the UK Government and Scottish Government.
Table 1.9: CTR funding and final liability for local authorities, 2015-16
|Local Authority||UKG and SG funding (£'000s)||Final total reduction in liability (£'000s)|
|Argyll & Bute||£5,485||£5,269|
|Dumfries & Galloway||£8,497||£8,326|
|Edinburgh, City of||£26,621||£24,927|
|Perth & Kinross||£6,628||£6,287|
Source: Local Financial Returns, 2015-16
Changes to Council Tax Liabilities
Not all dwellings are liable to pay the full rate of Council Tax; discounts, exemptions and increased rates can be charged for certain types of dwellings, and the CTR scheme is available to support vulnerable people in meeting their Council Tax liabilities. Table 1.10 summarises the range of discounts, exemptions and reductions available and the change in liability that applies to each type. Please note that, in some cases, more than one type of discount, exemption or reduction may apply. The examples given in Table 1.10 are typical but not exhaustive. For a full explanation of Council Tax discounts and exemptions, go to: www.gov.scot/Topics/Government/local-government/17999/counciltax/Secondhomes.
Table 1.10: Council Tax discounts, exemptions, reductions and increases
The actual change in liability
depends on local authority policy. In 2013-14, local authorities
gained the discretionary power to remove the empty properties
discount or set a Council Tax increase of 100% on properties which
have been empty for more than 12 months.
2 For example, an eligible Band D rate property would be charged the Band C rate.
3 The exact change in liability is dependent on a means-test.
Table 1.11 shows the number of dwellings eligible for Council Tax discounts and reductions. Of the 2.46 million chargeable dwellings in Scotland, around 1 million were eligible for a discount in 2016. The most common type of discount was the Single Person Discount, with around two-fifths of chargeable dwellings entitled to the discount in 2016. The CTR scheme supports half a million dwellings, or around one-fifth of chargeable dwellings, in meeting their Council Tax liability.
Around 62,000 dwellings are classified as second homes or long
term empty properties: further statistics on these are available
Table 1.11: Number of dwellings 1 in receipt of Council Tax discounts and reductions as at September
|Type of Support||2011||2012||2013||2014||2015||2016|
|All chargeable dwellings||2,389,029||2,401,869||2,410,331||2,427,805||2,440,518||2,455,406|
|Single Person Discount||945,515||948,208||952,251||953,612||955,505||963,297|
|Second Homes 2||39,250||40,599||35,734||27,879||27,317||26,140|
|Long Term Empty (empty > 6 months)||25,356||25,454||27,327||31,884||36,419||35,725|
|Occupied entirely by disregarded adults||1,910||1,809||1,579||2,802||1,378||1,411|
|Dwellings not subject to a discount||1,376,998||1,385,799||1,393,440||1,411,628||1,419,899||1,428,833|
|CTR/ CTB 3||565,730||560,880||548,070||533,980||512,340||495,660|
1 Some dwellings may be eligible for more than one type
of support, in these cases the dwelling will be counted under each
type of support it is eligible for.
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
3 CTB figures to 2012 were published by DWP and are available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/229795/hbctb_release_may13_revised.xls
Source: CTAXBASE Return, CTR Extract and DWP CTB figures
1.5 Non-Domestic Rates
Non-Domestic Rates ( NDR) is a property tax paid by the owner/occupier or tenant of a non-domestic property.
In 2015-16, the income raised from NDR was £2.581 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. Examples include business premises and third and public sector properties.
The value given to a property for NDR purposes is called its rateable value ( RV).
The RV of a property is a legally defined valuation provided by the Assessor, broadly based on the rental values the property could achieve. As such it is not necessarily a reflection of the profitability, turnover or output of the business. It is established at revaluation where the Scottish Assessors assess rateable values for all non-domestic properties in Scotland, taking account of the type and nature of the property. All non-domestic properties and their corresponding RVs are listed on the Valuation Roll, which is maintained by the Scottish Assessors. Rateable values are periodically updated at non-domestic rate revaluations. Scottish Assessors will undertake a non-domestic rates revaluation in 2017, assigning updated rateable values to all non-domestic properties in Scotland.
NDR bills are calculated using the rateable value ( RV) of non-domestic properties, multiplied by a poundage set nationally by Scottish Ministers, less any relief or exemption entitlement.
For properties with a rateable value greater than £35,000, the Large Business Supplement ( LBS) applies in addition to the poundage (the poundage is effectively increased slightly by adding the LBS). From 2017/18, the Large Business Supplement will apply to properties with rateable value greater than £51,000.
Table 1.12 shows the composition of properties (and associated RV) on the Valuation Roll by property type. As at 1 st April 2016, there were 225,259 properties with a total RV of £6.8 billion. Shops were the most prevalent type of property on the valuation roll, making up nearly a quarter (24%) of the number of properties and RV on the roll. Industrial subjects and offices are the next two largest categories in terms of numbers and RV. Together, these three categories account for 63% of properties on the valuation roll, and 58% of the RV.
Table 1.12: Non-Domestic Rates Properties by Classification (as at 1 April 2016)
|Number of properties||Rateable value||% of Properties on Valuation Roll||% of RV on Valuation Roll|
|CATEGORY||1st April 2016||1st April 2016||1st April 2016||1st April 2016|
|Education and Training||3,710||513,986,635||2%||8%|
|Garages and Petrol Stations||4,281||65,180,995||2%||1%|
|Health and Medical||3,196||207,582,765||1%||3%|
|Leisure, Entertainment, Caravans etc.||21,758||243,908,733||10%||4%|
|Not in Use||1||36,000||0%||0%|
|Public Service Subjects||10,011||321,714,128||4%||5%|
|Quarries, Mines, etc.||686||19,933,315||0%||0%|
|Total All Non-Domestic Properties||225,259||6,795,958,275||100%||100%|
Source: Scottish Assessors Valuation Roll, 1st April 2016
Table 1.13 provides a breakdown of properties on the Valuation Roll by local authority and RV band.
In terms of the Small Business Bonus Scheme and the application of the Large Business Supplement, £18,000 and £35,000 currently represent the rateable value thresholds for small and large businesses respectively  .
Around 78% of all properties (176,216 properties) have a Rateable Value less than or equal to £18,000.
Table 1.13: Non-Domestic Rates Subjects by Local Authority (as at 1 April 2016) 1
|Local Authority||Rateable Value Band||Total Non-Domestic Properties|
|<= £18,000||£18,001 to £35,000||> £35,000|
|Argyll & Bute||7,712||352||349||8,413|
|Dumfries & Galloway||8,271||483||552||9,306|
|Edinburgh, City of||13,918||2,411||3,910||20,239|
|Perth & Kinross||7,191||572||720||8,483|
1. Includes a small percentage of properties with zero rateable
Source: Scottish Assessors Valuation Roll, 1st April 2016
Table 1.14 shows a time series of annual NDR Income, total Rateable Value, and Poundage Rate. Revaluations typically take place on a 5-year cycle and are intended to be 'revenue neutral'. 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 was delayed, and is taking place this year and new rateable values come into effect in April 2017.
Table 1.14: Non-Domestic Rates Income, Total Rateable Values and Poundage Rate
|Non Domestic Rates Income (£m) 2||2,010||2,138||2,251||2,347||2,367||2,511||2,579|
|Total Rateable Value (£m)||5,299||6,612||6,678||6,718||6,716||6,681||6,719|
|Poundage Rate (pence)||48.1||40.7||42.6||45.0||46.2||47.1||48.0|
|Large Business Supplement (pence) 3||0.4||0.7||0.7||0.8||0.9||1.1||1.3|
1. Revaluation occurred in 2010
2. All income figures, including 2015-16, are the final audited income collected by councils, and paid to SG. These figures are net of reliefs awarded by the SG, but gross of any local reliefs, or top-ups to discretionary reliefs that the councils award themselves.
3. The Large Business Supplement is applied in addition to the poundage for properties with a rateable value over £35,000
Source: NDR Income - Non-domestic Rate Income Returns, Rateable Value - Scottish Assessors Valuation Roll as at 1st April
Table 1.14 also shows that the total RV has increased slightly since the 2010 revaluation from £6.61 billion to £6.72 billion in 2015-16. 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  . 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, along with other factors such as the poundage rate and backdated revaluation appeals losses which also affect the final income.
Inflation is a key driver of growth in NDR income as the poundage rate, set nationally by Scottish Ministers  , 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 (those with a RV greater than £35,000) 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 1.3p in 2015-16. For the period 2012-13 to 2014-15, large retailers with RV of £300,000 or more that sold both alcohol and tobacco also paid the Public Health Supplement ( PHS) - an additional 13p on the poundage rate in 2014-15. These supplements increase the amount paid in NDR bills. Conversely, exempt properties (which do not pay rates), and relief schemes such as the Small Business Bonus Scheme can significantly reduce the amount paid in NDR bills, and therefore the NDR income.
Table 1.15 summarises the total number of properties and rateable value as at 1 st April 2016 and the NDR income collected in 2015-16 by local authority (net of reliefs). This is net of reliefs paid by Scottish Government, but gross of all local reliefs and top-ups to discretionary reliefs paid by councils themselves. Consequently, it is slightly greater than the net amount actually paid by businesses.
Table 1.15: Non-Domestic Rates Properties, Rateable Values and Income By Local Authority 1
|Non-Domestic Rateable Values
|Non-Domestic Rate Income
|Argyll & Bute||8,413||89,955||31,364|
|Dumfries & Galloway||9,306||118,827||43,961|
|Edinburgh, City of||20,239||908,513||341,540|
|Perth & Kinross||8,483||148,938||52,824|
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. Audited income collected by councils. This is net of reliefs paid by Scottish Government, but gross of all local reliefs, and top-ups to discretionary reliefs paid by councils themselves.
Source: Number of Properties and Rateable Value - Scottish Assessors Valuation Roll 1st April 2016 NDR Income - Non-domestic Rate Income Returns provided by Councils
Table 1.15 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. To avoid the need for revisions, only final (audited) NDR income figures are included in this publication. The deadline for NDR income returns was accelerated for 2014-15 and subsequent years to allow audited NDR income data to be included.
There are a number of types of NDR relief that reduce the NDR bill for qualifying properties. Table 1.16 shows the main types of relief available  and the amount of relief provided each year from 2010-11 to 2015-16. It should be noted that the reliefs here are both mandatory reliefs, and the element of discretionary relief paid by Scottish Government. Local reliefs and any top-ups to discretionary reliefs awarded by the local authorities themselves are not included.
Table 1.16: Amount of Non-Domestic Rates Relief Provided by Relief Type 1,2
|Empty Property Relief||145,936||157,862||169,134||146,496||140,962||141,604|
|Disabled persons relief||51,901||54,372||57,580||58,299||59,648||60,599|
|Rural Rate Relief||4,129||4,218||4,305||4,323||4,244||4,235|
|Renewable Energy Relief Scheme 3||3,560||4,126||4,811||7,333||9,280||9,545|
|New Start 4||130||484||188|
|Fresh Start 5||189||536||573|
1. Estimates include mandatory and discretionary elements of
relief where applicable, but exclude backdated payments of relief
2. Reliefs for all years, including 2015-16, are final audited figures.
3. The Renewable Energy Relief Scheme was introduced at 1 April 2010.
4. The new start relief scheme was introduced at 1 April 2013 and will run for 3 years.
5. The fresh start relief scheme was introduced at 1 April 2013.
6. Other includes Hardship and Enterprise Areas.
Source: Non-domestic Rate Income Returns from Councils
The gross amount of relief provided has increased substantially from £501 million in 2010-11 to £626 million in 2015-16. 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. Other reasons for change 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 the introduction of the new relief schemes). Changes were made to Empty Property Relief ( EPR) in 2013, reducing the amount of EPR for non-industrial properties from 100% for 3 months and then 50% thereafter to 100% for 3 months then 10% thereafter, resulting in decreases to the cost of Empty Property Relief in the last three years.
Table 1.16a shows the amount of relief paid in each local authority area in 2015-16.
Table 1.16a: Amount of Non-Domestic Rates Relief Provided by Relief Type, by Local Authority, 2015-16 1,2
|Authority||Empty Property Relief||Charities||Sports Clubs||Disabled persons relief||SBBS||Religious Exemption||Rural Rate Relief||Renewable Energy Relief Scheme 3||Other 4||All reliefs|
|Argyll & Bute||568||2,197||238||623||5,280||441||245||737||3||10,332|
|Dumfries & Galloway||2,068||2,019||352||1,053||6,346||478||254||371||7||12,947|
|Edinburgh, City of||20,248||33,833||1,477||7,297||18,092||3,769||-||-||127||84,843|
|Perth & Kinross||1,453||5,093||383||2,448||6,920||803||101||766||9||17,975|
1. Estimates include mandatory and discretionary elements of
relief where applicable, but exclude backdated payments of relief.
Figures exclude local reliefs, or top-ups to discretionary reliefs
which the local authorities award themselves.
2. Figures are final audited figures.
3. The Renewable Energy Relief Scheme was introduced at 1 April 2010.
4. Other includes Hardship and Enterprise Areas, new start and fresh start.
Source: Non-domestic Rate Income Returns from Councils
Most of the NDR income collected by local authorities is pooled at the Scotland level and then redistributed back to local authorities. There are two exceptions to this.
A Business Rates Incentivisation Scheme ( BRIS) was introduced from April 2012 to incentivize councils to maximise existing business rates income and attract new economic growth by allowing all authorities that exceed their annual business rates target to retain 50% of any additional income. In 2015-16 the amount retained under this scheme was £1.9 million (£5.4 million in 2014-15).
The Scottish Government is also piloting Tax Incremental Financing ( TIF) which allows local authorities to fund public sector infrastructure, which unlocks private sector investment, contributing to sustainable and inclusive economic growth. This growth is funded from future incremental business rates that are generated as a result of attracting more businesses into the area because of upfront public sector enabling investment.
Six pilot TIF schemes were developed through secondary legislation under existing provisions of the Local Government Finance Act (1992). The pilot approach has allowed this model to be tested in Scotland, with four pilot projects currently in place, of which three have received full approval (Argyll & Bute, Falkirk and Glasgow) and one (Fife) has received approval in principle. In 2015-16 the amount of NDR retained by local authorities for TIF projects was £0.9 million (£0.9 million in 2014-15).
Each council reports to the Scottish Government the amount of NDR collected which is to be included in the central pool. The amount to be re-distributed to each authority 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 sees Councils retain the amount estimated they will collect in business rates (the previous policy saw NDR redistributed on the basis of population shares). As the combined total of NDR income and General Revenue Grant ( GRG) 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 GRG and vice versa. Any changes from the assumed collection amount in any year is paid out or recovered from Councils in the calculation of future years distributable business rates totals. The Distributable Amount is based upon an estimate of the NDR income made prior to the year start, and includes prior year adjustments. It will not therefore match exactly the income received by the Scottish Government in any year (as given in tables 1.14 and 1.15), nor the total eventual contributions to the pool for any year.
The calculation of the distributable amount for 2015-16 is given in Annex F and the 2015-16 distributable amount per local authority is shown in Table 1.17.
Table 1.17: Non-Domestic Rates Distributable Amount 1 by Local Authority, 2015-16
Non-Domestic Rate Distributable Amount
|Argyll & Bute||27,840|
|Dumfries & Galloway||50,827|
|Edinburgh, City of||390,862|
|Perth & Kinross||59,337|
Source: Amendment Order Scotland (2015)
1. The Distributable Amount is the amount distributed to local authorities as part of the GAE; it is based upon an estimate of the NDR income, including prior year adjustments. It is not guaranteed to match the income eventually received by the SG that year (as given in tables 1.14 and 1.15)
1.6 Customer and Client Receipts
Local authorities receive income from sales, rents, fees and charges as a result of providing a range of services. The amount of income associated with each service is detailed in Table 1.18 below.
The total customer and client receipts received by local authorities has increased by 2.3%, from £2.37 billion in 2014-15 to £2.42 billion in 2015-16. In the General Fund this has increased by 2.1%, from £1.26 billion in 2014-15 to £1.28 billion in 2015-16. Almost half (47%) of customer and client receipts are attributable to the HRA which has seen receipts increase by 2.6% from £1.11 billion to £1.14 billion in 2015-16.
Table 1.18: Customer and Client Receipts - 2011-12 to 2015-16
|Cultural & Related Services||77,479||70,728||71,185||72,567||68,826|
|Roads & Transport||171,756||154,197||175,384||182,690||182,978|
|Planning & Development Services||118,518||116,541||121,077||120,161||134,682|
|Non- HRA Housing||179,116||165,412||160,800||155,076||159,635|
|Total General Fund ( GF) Customer and Client Receipts excluding Police & Fire||1,254,801||1,183,586||1,244,030||1,255,620||1,281,973|
|Housing Revenue Account ( HRA) 1||965,920||1,034,306||1,073,362||1,112,210||1,140,720|
|Total GF + HRA Customer and Client Receipts, excluding Police & Fire||2,220,721||2,217,892||2,317,392||2,367,830||2,422,693|
|Police, Fire & Emergency Planning||66,575||111,992|
|Total GF + HRA Customer and Client Receipts||2,287,296||2,329,884||2,317,392||2,367,830||2,422,693|
1. The Housing Revenue Account (
income and expenditure relating to the provision of Local Authority
b. The Police and Fire Reform (Scotland) Act 2012 created Police Scotland and Fire Scotland, which replaced the former Police and Fire Boards. These new bodies are classified as Central Government, rather than Local Government.
Source: Local Financial Returns ( LFRs)
Email: Euan Smith