An extra £100m of capitalisation allowances for redundancy costs has been funded from Treasury reserves, not local government funding.
Ministers had earlier announced the amount would be increased from £200m to £300m following lobbying by the Local Government Association.
Communities secretary Eric Pickles had warned that any increase in the allowance, which lets councils use capital assets to fund organisational restructuring, would mean a corresponding reduction in the sector’s financial settlement.
However, Budget papers reveal that the “upfront cost” has been met through a reduction in the Treasury’s capital reserve. The extra allowance would “help councils to deliver efficiency savings through organisational restructuring”, according to the ‘Red Book’.
The LGA welcomed the move but said that it would lobby for even more flexibility over capital resources.