Local Government Finance

Question 1

Difference between capital and revenue spending?

Answer 1

Capital = Expenditure which is money spent on long-term durable assets.
Revenue = Expenditure on items which will last for a year or less than a year - running costs, salaries, heating costs, interest payments.

Question 2

Local authority revenue sources?

Answer 2

1. Grants from central Government - both general (the all-important Revenue Support Grant - RSG) and specific ring-fenced grant funding e.g for schools ( non- building costs)
2. Council Tax
3. Rents – money paid to the council for use of council-owned property : homes, business premises, land, garages.
4. Fees, charges, fines and cash reserves - (parking fines, car park charges, equipment hire fees, late library book fee etc.)
5. Business Rates - (Also known as national non-domestic rates [NDDR] or Unified Business Rates)

Question 3

Where does capital funding come from?

Answer 3

• capital receipts
• prudential borrowing
• Government capital grants
• former EU regional funding
• public-private partnerships

Question 4

What is capital spending?

Answer 4

Capital spending is money spent on building/creation of infrastructure.
Infrastructure is things which have an enduring quality. They will be there next year, the year after, the year after that.
For example, this could be such things as new schools or school buildings, new roads, new social housing, council offices, public facilities, sports centres etc.