How Councils Get Their Money

Can’t tell your NDR from your GRG? Then help is at hand. In plenty of time for this year’s budget, on December 12th, the Scottish parliament’s information team have produced a guide to local government finance. It will help non-finance professionals understand how much money local authorities have to spend, the various sources of that money and how it is distributed across authorities.

First things first: NDR is Non Domestic Rates, frequently referred to as business rates and GRG is General Resource Grant. This is the money that the Scottish government allocates to local authorities. GRG is the bulk of local authority budgets.

The guide covers revenue spending: the money that pays for the day-to-day running of services. The funding provided for capital (building things) and any money borrowed are not included in the guide.

The guide covers both the money from Scottish government and via local taxes and charges. This includes non domestic rates and council tax. So you can read about how the GRG is arrived at. Which is via "discussions" with COSLA followed by calculation of individual council allocations using “Estimated Service Expenditure" and "Total Estimated Expenditure". On top of those calculations there are “funding floors”. Working out estimated service expenditure involved Grant Aided Expenditure (GAE) which is a “needs based” calculation. Needs based means that is should take account of the relative needs of the populations of each local authority including for example relative poverty rates. Handily there is also more detail on what "Estimated Service Expenditure" etc mean.

Lack of well written papers on the complexities on local government finance make it harder for people to participate in discussions and campaign against cuts to local government budgets. Even a quick read of the two page executive summary will help those trying to make sense of the debate round cuts and service funding. Taking the time to read the full paper would be time well spent.