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Treasury Management Panel

Paper from the Scottish Executive

Local Authority Capital Finance

General

The Scotland Act 1998 granted powers to the Scottish Ministers to make legislation within devolved competence. Local government finance is a devolved matter.

Local Authority Capital Finance

• Local authority capital expenditure in Scotland is subject to the provisions of section 94 of the Local Government (Scotland) Act 1973. Under section 94 local authorities require the consent of Scottish Ministers before they incur a liability to meet capital expenses.

• Consent to meet capital expenses is conveyed by means of an annual section 94 consent letter that specifies how much capital expenditure the Government will support (the capital allocation). In addition the letter conveys a general consent to spend capital receipts and use revenue for capital purposes.

• There is no equivalent of the Local Authority Capital Finance Regulations in Scotland. The conditions that apply to capital expenditure - definition of capital receipts, leasing rules, PFI provisions - are set out in an Annex to the consent letter.

  Local Authority Borrowing and Lending Powers

• Local Authority Powers to Borrow and Lend Money etc are contained in Schedule 3 of the Local Government (Scotland) Act 1975. Subordinate provisions on borrowing are contained in regulations.

• Powers were taken in the Local Government etc. (Scotland) Act 1994 to replace the provisions of Schedule 3.

  The Future

  As part of the modernisation agenda Scottish Ministers have undertaken to review the current system for dealing with local authority capital expenditure. It is anticipated that this will follow closely the work currently being undertaken by the DETR.

  Should primary legislation be required to replace section 94, there is a window of opportunity in the forthcoming Local Government Bill.

  Scottish Executive/LGF&P3
  May 2001

 

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