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COUNCILS TO RECEIVE£2.6BN INVESTMENT BOOST FOR LOCAL INITIATIVES

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Schools, housing and local transport initiatives across the country...
Schools, housing and local transport initiatives across the country

are set to benefit next year from£2.6bn of new investment - up

from£2.3bn received by councils this year. There will also be

a substantial increase in unringfenced investment - local government

minister Nick Raynsford announced today.

Basic Credit Approvals (BCAs) are unringfenced resources that allow

councils to borrow to invest in key capital projects in their areas,

with the government meeting most of the costs. Unringfenced resources

are allocated through the Single Capital Pot.

Up to now, the Single Capital Pot has only included BCAs. But,

following a review, all unringfenced resources for capital spending

will now be channelled through the Pot, allowing councils maximum

flexibility in the way they use their resources. In particular,

unringfenced capital will increase from£2.3bn this year, to

£3.6bn for 2003-04. This means that, for next year other

resources have been added to the Single Capital Pot, amounting to

another£1bn on top of BCAs.

Mr Raynsford said:

'This announcement is very good news for local government and comes

after the excellent settlement for local government that I announced

last week. The Spending Review has allowed us to increase resources

to local government this year and this will allow authorities to

invest even more in schools, housing stock and local transport

projects.

We also made a commitment to look at the scope for increasing

unringfenced resources. The increase from£2.3bn to£3.6bn for next year demonstrates how we are delivering our

commitment to reducing ring-fencing. This will give councils far

greater freedom in managing their capital programmes, to deliver

their priorities faster, more flexibly and for better value for

money.'

One objective of the Single Capital Pot has been to encourage

councils to develop effective Asset Management Plans and Capital

Strategies. This year's assessments have shown substantial

improvements in the quality of submissions, with 50% rated as 'good'.

In line with the White Paper commitment on plan rationalisation,

councils who received a 'good' rating will no longer have to submit

their Asset Management Plans or Capital Strategies to government.

With the reduction in the number of plans to be submitted and the

development of other means of rewarding and incentivising performance

associated with the CPA process, after this year councils' capital

allocations will not include a 'discretionary element'. But, as now,

performance in delivery of services will continue to be a factor in

allocating resources.

NOTES

1. BCAs and RTIAs

The annual allocations of Basic Credit Approvals (BCAs) are part of

the un-ringfenced capital support to local authorities under the

'Single Capital Pot'. BCAs allow local authorities to borrow for all

types of capital expenditure, and the government meets most of the

costs of the borrowing. The service areas covered by BCAs are

transport, education, personal social services, housing and

environmental, protective and cultural services (capital). These

account for 95% of total allocations; the remaining 5% is allocated

on the basis of assessments of the quality of councils' asset

management plans and capital strategies, and of their performance in

using capital assets to support the delivery of the relevant

services.

Up till April 2002, a proportion of each local authority's receipts

generated from asset sales were taken into account in setting the

levels of authorities' BCAs through a system known as the Receipts

Taken Into Account (RTIAs) process. The unpopular RTIAs system was

abolished in April as part of the government's commitment to remove

unnecessary controls, and to incentivise authorities to dispose of

surplus or under-utilised assets.

Because the RTIAs calculations worked on forecast, not actual

receipts data, for the 2003/04 BCA allocations, Prior Year

Adjustments (PYA) have been applied to take account of updated

information on the proceeds of asset sales provided by local

authorities for 2001/02 and previous years. This approach was adopted

after consultation with the local government associations.

A table showing individual local authorities' BCA allocations is

here.

2. Outcome of the capital ring-fencing review

The 2001 Local Government White Paper contained a commitment to

reduce ringfencing so as to make progress towards delivering the bulk

of capital resources through the Single Capital Pot. In 2001-02

unringfenced resource accounted for just under half relevant local

authority capital.

A review of ringfenced capital has been undertaken and, as a result,

from 2003-04 the single capital pot is being expanded to cover all

unringfenced resource, including some capital grants and

supplementary credit approvals as well as BCAs. The table below shows

the detailed outcome of the review for all authorities. The result is

a substantial switch from ringfenced to unringfenced support, with

the majority of capital now being delivered as unringfenced funding.

In addition, as announced on 26 November,

councils who receive excellent or good Comprehensive Performance

Assessment ratings will receive all of their capital as unringfenced

resource, except for that which has to be passported direct to

schools.

Notes to the table.

a) The single pot applies only to multi-purpose authorities and not

to single purpose authorities such as Police and Combined Fire

Authorities.

b) The table includes all currently available figures for 2003/4 for

all relevant expenditure for multi-purpose authorities. Relevant

expenditure covers all government support for capital that is

intended for use by the authority. It excludes European Funding,

where the conditions are laid down by the EU; funding for London

Borough transport projects which is allocated by the GLA, and Housing

Disabled Facilities Grant which is demand led.

c) The table does not cover PFI, because the capital resources are

provided by the private sector. Government support, in the form of

PFI Special Grant is revenue funding and is identified in Part 1 of

this Annex.

d) DfES is currently reviewing priorities for the allocation of

education capital and has not yet reached firm conclusion on how

funding will be allocated beyond the coming year. Details of

allocations for years 2 and 3 will be announced before the beginning

of the new financial year.

e) The classification of LA funding for flood and coastal protection

(worth£60m in 2003/4) is still being considered.

f) In addition to resources allocated for Housing Investment

Programmes which go through the single pot, the Government has yet to

decide on how other housing resources provided in SR2002 will be

distributed between the various housing providers. There may

therefore be some further resources to be allocated to local

authorities for housing purposes. Decisions on this and on housing

allocations for years 2 and 3 of the Spending Review are expected to

be announced in January.

4. Local Authority Investment Overview

A more complete picture of government plans and policies for local

authority capital investment, including summaries of the relevant

parts of individual Departmental Investment Strategies, has also been

published today. The Local Authority Investment Overview can be

accessed here.

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