1. This paper updates the analyses of outturn vs budgeted expenditure previously presented in papers WGLGFS(98)2 and WGLGFS(99)2. It focuses on the last three years for which outturn data is available and on 1998/99 in particular, and presents data on the distribution of reserves at the end of 1998/99.
Summary
In broad terms, the pattern of underspending in 1998/99 was similar to that of previous years.
Authorities in aggregate underspent their budgets by £1 billion, 2.0 % (Table 1).
Underspending ranged from 0.9% for shire counties to 8.7% for shire districts (Table 2).
Over half of the underspend was concentrated in the capital financing blocks especially interest receipts(£336m) that, following the pattern of previous years, were considerably higher than budgeted (Table 4). However, the underspend in Education and Police, £170m and£126m respectively, were also significant in absolute terms.
Authorities added £243 million to reserves in 1998/99, compared with budgeted withdrawals of £789 million (Table 5).
Unallocated reserves at the end of 1998/99 as a proportion of the following year’s expenditure were 3.9%, 0.4% less when compared to the previous year (Table 6).
The distribution of unallocated reserves expressed as a proportion of budgeted expenditure from the following year, is very uneven between Total LEA's and Shire Districts. Table 6 shows that for Shire Districts, unallocated reserves accounted for 23.6% of the budgeted whereas only 2.8% for Total LEA's following the same pattern as in 1997/98.
Total underspend and distribution across authorities
2. Outturn expenditure for English local authorities in aggregate has generally been below budgeted expenditure for all years but one (1988/99) since 1981/82. The tendency to underspend appears to have increased in the years immediately after 1990/91 possibly as a result of the introduction of devolved budgets; and reaches a peak in 1993/94. Underspend decreases in the next two following years and rises in 1996/97 and 1997/98, experiencing a small decrease in 1998/99 - see Table 1.
Table 1
Total underspend (a) 1981/82 to 1998/99
£m % 1981/82 404 2.2 1982/83 210 1.1 1983/84 95 0.5 1984/85 105 0.5 1985/86 333 1.5 1986/87 329 1.4 1987/88 155 0.6 1988/89 (94) (0.3) 1989/90 185 0.6 1990/91 666 2.0 1991/92 479 1.3 1992/93 898 2.3 1993/94 1,169 3.1 1994/95 877 2.2 1995/96 798 1.8 1996/97 868 1.9 1997/98 1,055 2.3 1998/99 993 2.0 3. The tendency to underspend is common across most authorities rather than concentrated within a few. All but 94 (19.2%) of authorities, compared with 72 (14.9%) of authorities in 1997/98, recorded an underspend between budget and outturn. The class analysis at Table 2 shows that total underspend in net revenue expenditure has decreased slightly this year. Shire Districts and London Boroughs mainly account for this drop whereas Metropolitan Districts (highest underspend along with Shire Districts) and Unitary Authorities experienced a slight rise with the biggest increase being observed in Police, Fire and Others. Shire districts have consistently recorded the greatest underspend although in absolute terms have decreased in the last 3 years. The analysis of underspend within classes was carried out in more detail and this showed that 170 (71.7%) of shire districts underspent by more than 3% whereas only 35 (23.5%) of LEAs did.
Table 2
Underspend (a) by Class
1996/97 1997/98 1998/99 £m % £m % £m % London Boroughs inc. City of London 78 1.1 191 2.7 65 0.9 Metropolitan Districts 186 2.0 175 1.9 214 2.1 Unitary Authorities (b) 53 2.5 91 2.2 176 2.6 Shire Counties 135 0.8 190 1.2 133 0.9 Shire Districts 321 10.2 292 10.4 211 8.7 Police, Fire and Other 95 1.3 116 1.7 196 2.6 TOTAL (c) 868 1.9 1,055 2.3 993 2.0 (a) Absolute and Percentage difference between outturn and budgeted expenditure.
(b) Based on unitary authorities in existence in each year -,14 in 1996/97, 27 in 1997/98 and 46 in 1998/99
(c) Includes other authorities not shown.4. Although outturn net revenue expenditure has historically been below budget, it has still been higher than provision (GRE in the old system and SSA in the new) in every year since 1981/82. In 1998/99 the excess was 3.9%, the highest along with 1997/98 (at outturn) since 1990/91. Spending was above provision for all service blocks except highway maintenance (6.7% under) and capital financing (48.8% under). The extent to which education net revenue expenditure exceeds provision continues to fall, from almost £600m in 1996/97 to about £260m in 1998/99 - see table 3.
Table 3
NRE over SSA (a) by Service
1996/97 1997/98 1998/99 £m % £m % £m % Education 595 3.3 397 2.2 256 1.3 PSS 535 7.7 654 8.8 699 8.9 Police 145 2.4 251 4.0 141 2.2 Fire 111 9.4 112 9.1 114 8.8 Highway Maintenance -47 -2.7 -101 -5.7 -119 -6.7 EPC Services 719 9.7 1,131 14.8 1,452 18.7 Capital Financing -460 -21.5 -724 -45.3 -731 -48.8 TOTAL 1,599 3.7 1,720 3.9 1,812 3.9 Distribution of underspend by service
5. Table 4 disaggregates the underspend over the last three years by SSA block, with interest receipts separated out from the rest of EPC Services and Capital Financing. Some more detailed disaggregations are presented in the following paragraphs, but differences between the budget and outturn forms, and in the way authorities complete the forms, make comparisons increasingly problematic as the level of disaggregation increases. A particular issue arises with recharges from central services; in theory these should be handled in the same way on the budget and outturn forms but the treatment on the outturn forms is more explicit. If some authorities are not recording them as expected on the budget return, the effect would be to overstate the budgeted expenditure on the Other Services Block.
Table 4
Underspend (a) by Service
1996/97 1997/98 1998/99 £m % £m % £m % Education 48 0.3 177 1.0 170 0.9 (exc CERA) 60 0.3 161 0.9 188 0.9 PSS 37 0.5 21 0.3 9 0.1 (exc CERA) 45 0.6 13 0.2 21 0.2 Police 39 0.6 40 0.6 126 1.9 Fire & Civil Defence 3 0.2 11 0.8 17 1.2 Highway Maintenance 40 2.3 68 3.9 86 5.0 EPC Services exc IR 148 1.7 207 2.3 47 0.5 Interest Receipts 210 -23.4 318 -30.4 336 -41.6 Capital Financing exc IR 343 18.1 214 11.1 202 6.9 TOTAL 868 1.9 1,055 2.3 993 2.0 6. In 1998/99 there were underspends (or more correctly avoidance of overspends) in all services blocks, those for Education, Personal Social Services and EPC Services excluding Interest Rates being 1 per cent or under. The most significant change amongst these in absolute terms was in EPC Services excluding Interest Receipts, where the underspend of £207m in 1997/98 dropped to £47m 1998/99. This is mainly due to reductions in the difference between budget and outturn CERA estimates, and in expenditure on mandatory rent allowances not met by grant within this block. Police features the most proportionally significant increase in underspend rising from £40m in 1997/98 to £126m in 1998/99 mainly due to increases in underspend of Metropolitan Police Authority(£55m) and Greater Manchester Police Authority (£16m). Education is relatively stable at just £27m over its previous value in 1997/98 (exluding CERA). Appropriations to LMS reserves were £32m at outturn. However the level of LMS reserves at 1 April 1999 at outturn was £532m, an increase of some £57m compared to the £475m estimated at budget, and £33m more than at 1 April 1998.
7. The underspends in Highways Maintenance increased reaching 5.0% of its budgeted Net Revenue Expenditure ( £86m) and nearly £20m more than in 1997/98. Over half of the apparent underspend can be attributed to financing items( interest receipts+capital financing) which, despite accounting for similar underspend altogether from last year, it features a noticeable change in its composition. Expenditure on capital financing was £202m less than budgeted although this continues to fall back from the exceptionally high level recorded in 1995/96(£467m). Interest receipts were higher than expected by £336m accounting for a 41.6% of budgeted and experiencing an increase of 11.2% from 1997/98.
Level of reserves
8. Table 5 compares the use of reserves recorded at budget, provisional outturn and outturn since 1990/91. In 1993/94 and 1994/95 authorities added £642 million and £119 million respectively, to reserves. Between 1995/96 and 1997/98 authorities have budgeted to withdraw almost £1bn in reserves, but at outturn, have withdrawn by £153 million and £116 million in the first two years and added £54 million in the last. The 1998/99 budgeted withdrawal was lower at less than £800 million, but at outturn some £250 million was added.
Table 5
Use of Revenue Reserves, including LMS reserves
Budget
£mProvisional
Outturn
£mOutturn
£m1990/91 -750 -731 -91 1991/92 -593 -781 -171 1992/93 -580 -571 276 1993/94 -536 -447 642 1994/95 -775 -899 119 1995/96 -967 -1003 -153 1996/97 -994 -1041 -116 1997/98 -998 -924 54 1998/99 -789 -679 243 1999/00 -810 n/a n/a 9. The level of reserves at the end of 1998/99 is now estimated at £6.10 billion, of which £0.53 billion was LMS reserves. In cash terms the overall level has changed from £6.21 billion recorded at the end of 1997/98 to £6.10 billion. This implies a slight decrease in real terms and as a proportion of expenditure. More detailed analysis on balances showing the distribution between class at the end of 1998/99 are given in Table 6, 7 and 8. The distribution is very uneven across and within classes, repeating the pattern seen in earlier years. Unallocated reserves at 1 April 1999, i.e. before any drawdown for 1999/00, as a proportion of the following year’s expenditure were 3.9%, down on the 4.3% as at 1 April 1998. They remain for the second year uncomfortably low for LEAs at 2.8% at 1 April 1999. 85 LEAs have unallocated reserves less than 3% of their expenditure and a further 32 are in the marginal 3-5% range. However taking all non-LMS reserves into account (Table 8) LEA’s reserves were a more comfortable 7.8% of expenditure. 24 authorities show a deficit of unallocated reserves at 1 April 1999, two authorities above the number yielded in table 8 then Earmarked Reserves are included. By contrast only 20 shire districts have unallocated reserves less than 5% of their expenditure and 195 have reserves in excess of 10%.
Table 6
Estimated reserves at 1 April 1999 by type of reserves and by class
Earmarked
ReservesUnallocated
ReservesTotal
Non-IMS
ReservesIMS
ReservesTotal
ReservesUnallocated
as % of
Budgeted
Revenue
Expenditure
in 1999/00£m £m £m £m £m % City of London 108 83 190 0 190 72.6 London Boroughs 491 234 725 76 801 3.0 Metropolitan Districts 584 306 890 97 987 2.8 Unitary Authorities & Isles of Scilly 419 352 771 99 870 4.7 Shire Counties 543 231 773 258 1,031 1.4 TOTAL LEAs 2,144 1,205 3,350 530 3,880 2.8 Shire Districts 965 618 1,583 2 1,585 23.6 Police, Fire and Other 389 251 641 0 641 3.1 ALL AUTHORITIES 3,498 2,075 5,573 532 6,105 3.9 Table 7
Distribution of authorities on basis of unallocated reserves at 1 April 1999 as a percentage of budgeted Revenue Expenditure for 1998/99
City of London London Boroughs Metropolitan Districts Unitary Authorities & Isles of Scilly Shire Counties TOTAL LEAs Shire Districts Police, Fire & Other TOTAL %<0 0 3 3 2 0 8 6 10 24 0<=%<3 0 15 16 15 31 77 11 60 148 3<=%<5 0 7 10 13 2 32 3 15 50 5<=%<10 0 5 5 12 1 23 23 9 55 %>=10 1 2 2 5 0 10 195 6 211 Total 1 32 36 47 34 150 238 100 488 Average for Class % 84.1 3.1 3.0 5.1 1.5 2.8 26.8 3.3 3.9 Table 8
Distribution of authorities on basis of non-LMS reserves at 1 April 1999 as a percentage of Revenue Expenditure
City of London London Boroughs Metropolitan Districts Unitary Authorities & Isles of Scilly Shire Counties TOTAL LEAs Shire Districts Police, Fire & Other TOTAL %<0 0 2 0 1 0 3 5 14 22 0<=%<3 0 7 3 4 7 21 2 26 49 3<=%<5 0 2 6 3 9 20 0 7 27 5<=%<10 0 7 18 17 17 59 2 23 84 %>=10 1 14 9 22 1 47 229 30 306 Total 1 32 36 47 34 150 238 100 488 Average for Class % 193.1 9.2 8.0 10.9 4.9 7.8 68.9 7.9 10.4
Last updated on 13 November 2000
Return to Local Government Finance Statistics Index
Return to Local Government Finance Home Page
Return to Local and Regional Government Index
Return to DTLR Statistics Index
Return to DTLR Home Page
DTLR Web Site Terms