Capitalisation guidance published to help councils deliver early savings
- Published on Friday, 04 March 2011 16:46
- Posted by Scott Buckler
To help councils deliver efficiency savings early through organisational restructuring, the Government is providing £300 million of flexibility - through capitalisation - in the next financial year
Capitalisation is where the Government permits councils, in special circumstances, to treat revenue costs as capital costs. This increases their flexibility, because they can then meet those costs using their existing borrowing powers or capital receipts, for example, from asset sales.
While capitalisation will provide important support, it will be for councils to assess how they best manage costs overall from their own resources, including prudent and appropriate use of their £10bn of reserves.
The nation faces an unprecedented financial situation and every part of the public sector, including local government - which accounts for a quarter of all public expenditure - has a part to play in cutting the deficit.
In order to provide authorities with clarity early in the financial year, the timetable for capitalisation is being brought forward. Decisions can be expected in July, nearly six months earlier than in previous years.
Guidance for how councils should apply has been issued today. The deadline for applications is 12 May.
Mr Neill said:
"Every council knew they would have tough decisions to make to play their part in cutting the deficit because councils account for around a quarter of all public expenditure.
"The majority of councils are planning sensibly for leaner budgets and this round of capitalisation will give councils more flexibility in the coming year, whilst keeping costs within wider public spending plans.
"Prudent use of their £10bn of reserves can help councils to manage transformational change whilst protecting frontline services."