Council funding explained
Posted on by chelseykirklees
The difference between ‘capital’ and ‘revenue’ budgets
In UK local authorities, the terms ‘capital budget’ and ‘revenue budget’ refer to two distinct types of financial planning and spending:
- Capital Budget: The capital budget is focused on funding long-term investments in physical assets e.g. buildings, land, vehicles, plant and machinery and infrastructure. These are usually large-scale projects that have a lasting impact and are expected to provide benefits over an extended period of time. Capital spending involves the creation, enhancement, or purchase of assets that contribute to the overall development of the local area. Examples of capital projects include building new schools, roads, parks, and other major infrastructure projects, including town centre regeneration projects.
Capital budget:
- Long-term projects and investments.
- Funding used to buy, improve, or create assets.
- Typically involves borrowing funds, through a mix of grants from external bodies (Government, West Yorkshire Combined Authority), borrowing and capital receipts generated through the sale of land and buildings.
- Capital budgets are often less flexible and subject to longer planning and implementation processes.
- Revenue Budget: The revenue budget, on the other hand, focuses on day-to-day operational expenses and the provision of ongoing services. This budget covers the costs associated with running various services, such as education, social services, waste collection, and maintenance of existing infrastructure. Revenue spending is related to the regular and recurring activities of the council.
Revenue budget:
- Short-term operational expenses.
- Funding used for salaries, supplies, maintenance, and other ongoing costs.
- Generally financed through recurring income sources like council tax, business rates, fees, and grants.
- Revenue budgets are more flexible and subject to adjustments based on changing needs and priorities.
The main difference between capital and revenue budgets in UK councils is their focus and purpose. Capital budgets fund long-term investments in infrastructure and assets, while revenue budgets cover the day-to-day operational expenses of providing essential services.
Both types of budgets play a crucial role in ensuring that local authorities can effectively manage their finances and meet the needs of their communities.
- Our main funding sources
- The difference between ‘capital’ and ‘revenue’ budgets
- Why we can’t use the capital budget to ease pressures on the revenue budget
- Can the council reallocate grant funding to cover costs?
- How is the council still spending money on regeneration projects if there is a budget problem?
