Local government spending

Supporting detail:

Investment in local government capital assets

Councils need to invest in their buildings and equipment so that people can continue to receive high-quality local services. We will ensure that the system gives councils the resources and flexibilities to make this investment.

Local authorities receive central government funding for a major part of their capital investment in the form of capital grants. They can also use income from their own capital assets to finance capital spending.

The new Prudential system encourages local authorities to invest in the capital assets that they need to improve their services. It allows them to raise finance for capital expenditure without government consent as long as they can afford to service the debt out of their revenue resources.

Local authorities must have regard to the ‘Prudential code for capital finance in local authorities’ when setting and reviewing their affordable borrowing limit.

The following guidance documents on capital finance are also available:

Capital finance: guidance on local government investments (second edition) Capital finance: guidance on minimum revenue provision (third edition)