Falkirk Council must take a number of difficult decisions if it is to continue to balance the amount of money it spends on key services with the amount of money it gets from the Scottish Government and other income sources such as Council Tax.

Preparation for how we will spend the money available to us next year (2023/24) is well underway. Councillors will take final decisions on this in March 2023.

We have created this page to help you understand how Council services are funded – where the money comes from and how it is currently spent.

Our budget

Capital and revenue are words that you will often hear when we talk about our budget.

Put simply, to the average household, revenue costs would be day-to-day costs such as your energy bills, petrol in your car or paying your TV licence. Capital would be big investments such as buying a house or building an extension.

As a Council, our revenue budget is used to pay for things like staff wages, building maintenance, and the cost of running bin lorries. Whereas our capital budget is used to pay for things like major road improvement schemes, a school extension or the purchase of vehicles and IT equipment.

Each year Councillors agree how the Council will spend the revenue and capital money available to it over a 12 month period.

Budget gap

At the moment, there is a lot of talk about our budget gap. This relates to our revenue budget. It means we have a shortfall between the amount of money needed to run services and the amount of money available to us to spend. This shortfall is forecast to total £67m over the next four years, with £30m of that gap in 2023/24.

To make that easier to understand, if we do not change how we deliver services we would expect to spend £30m more than the money available to us next year. That means difficult decisions will need to be made about the services we provide.

Most Councils are facing a similar financial challenge. There are a number of reasons for this including a significant rise in inflation and energy costs which make it more expensive to provide services.

Year	£'m
2023/24	30
2024/25	20
2025/26	9
2026/27	8

Revenue budget

Most of the Council's revenue budget comes from the Scottish Government as part of the Local Government Finance Settlement, with around 14% of funding raised from Council Tax. The Scottish Government announced its budget on 15 December. We expect to have all the information on how much funding we will receive early in 2023.

For a number of years, the funding received from the Scottish Government has not increased in line with inflation and savings have had to be found to help balance the budget. The Council's total revenue funding in the current year (2022/23) is £518m, with the main funding streams summarised below.

Revenue Grant

This funding is received from the Scottish Government to support the cost of services provided by the Council. The funding includes a share of non-domestic rate income and makes up the most significant part of the Council's income.

Council Tax Income

Council Tax is a tax set by the Council to help fund services. The money raised through Council Tax contributes around 14% to the Council's revenue budget.

Specific Government Grants

These are grants received from the Scottish Government for specific purposes including early years provision, pupil equity funding for schools and criminal justice. This funding cannot be used to fund any other services.

Other Income

Other income includes a number of grant funding streams to help deliver services such as social care and those that help local people find a job or training opportunity to progress their careers. It also includes fees and charges for a number of areas, such as school meals, crematorium, parking and sport and fitness.

Reserves

The Council has a cash reserve to deal with unexpected events and circumstances. As part of the 2022/23 budget the Council decided to use £11m of these reserves to help prevent further reductions to service provision. However, over the long term, it is not sustainable to use cash reserves to meet everyday spending commitments because the cash will simply run out.

Source	£'m
Revenue Grant	308
Council Tax	73
Specific Grants	25
Other Income	101
Reserves	11

The Council groups the services it provides under four main areas.

Children's Services spends £258m on primary, secondary and special schools, early learning childcare, children's social care services and sports facilities.

The Falkirk Health and Social Care Partnership spends £127m on social care services, including home care and residential care. The Partnership has its own board, the Integration Joint Board, which decides how it should spend its funding.

Place Service spends £69m on a wide range of frontline services, including roads, waste management, planning and building standards, economic development, environmental health, parks and museums.

Transformation, Communities and Corporate Services spends £54m on central support services, including, accountancy, audit, legal, information, communications, technology, human resources and procurement. In addition to these support services, there are also teams delivering welfare benefits and debt advice, some housing related spend and the provision of libraries.

In terms of the Council’s overall expenditure, over 50% is spent on employee costs and 30% is paid to external providers, largely care provision for both adults and children.

Source	£'m
Children's Services	258
Falkirk Health and Social Care Partnership	127
Place Services	69
Transformation, Communities & Corporate Services	54
Borrowing Costs	10

Children's Services

Source	£'m
Employee expenses	172
Property expenses	15
Transport expenses	5
Supplies and services	8
Third Party payments	51
Other payments	7

Falkirk Health and Social Care Partnership

Source	£'m
Employee expenses	34
Property expenses	3
Transport expenses	1
Supplies and services	3
Third Party payments	85
Other payments	2

Place Services

Source	£'m
Employee expenses	37
Property expenses	5
Transport expenses	5
Supplies and services	6
Third Party payments	13
Other payments	3

Transformation, Communities & Corporate Services

Source	£'m
Employee expenses	33
Property expenses	5
Transport expenses	0.05
Supplies and services	12
Third Party payments	3
Other payments	0.4

Capital Budget

The capital budget covers the investment in the Council's assets, such as premises, vehicles and roads. The Council sets two capital budgets. One for housing and the other for the rest of Council Services (often called the General Fund).

Capital investment must be accounted for separately to the revenue budget (the day-to-day spend of the Council) and there are strict rules around this. Capital expenditure is funded by capital grants, receipts from asset sales and borrowing. The cost of borrowing has to be paid from our revenue expenditure, and this is expected to cost the revenue budget £10m for the current financial year.

The Council cannot use capital grants, receipts from assets sales or borrowing for day-to-day spend on revenue services. The Council cannot for example borrow money to help run schools or leisure facilities. Similarly, the Council cannot sell assets or use capital grants to pay for revenue costs.

The Council sometimes receives specific funding, for example Levelling Up Funding which is used for capital investment. This funding will usually be for specific projects and cannot be transferred to cover revenue costs or other capital investment.

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Housing

Falkirk Council has around 16,660 council houses that it rents out.

The Council has a separate housing account (this is often called the Housing Revenue Account or HRA). The Council receives income from housing rents that can only be spent on services for Council tenants. Legally the Council has to account for this money separately.

There is a separate capital budget for housing known as the Housing Investment Programme. Housing rents can be used to repay borrowing that is used to pay for large housing improvement projects. Housing services consult with their tenants separately on both the revenue and capital budgets.