Local government capital
A local authority's capital expenditure is the money it spends on providing and improving significant fixed assets, including land, buildings and equipment, which will be of use or benefit in providing services for more than one financial year.
Capital income is the money gained from selling these assets, and is also known as capital receipts. It can be used to finance other capital expenditure or placed in the capital fund.
Local authorities' expenditure is reported in their accounts, which are based on International Financial Reporting Standards. The funding local authority capital expenditure: framework identifies how different types of expenditure are treated in the national accounts and local authority accounts.
We provide two types of grant to help fund local authorities' capital expenditure:
Details of the grants awarded to each local authority are issued in the finance circulars relating to the Local Government Finance Settlement.
Local authorities may also support their capital expenditure through borrowing.
Specific Capital Grant
Specific Capital Grants are also known as specific purpose grants or ring-fenced grants, and may only be used by local authorities to fund specific types of capital expenditure, and not for general use. The terms and conditions of each grant are set out separately in the grant offer letters.
General Capital Grant
The General Capital Grant is made up a number of former Specific Capital Grants to form a single grant. It allows councils to finance capital investment in a way that ensures the delivery of their Single Outcome Agreement, and contributes to the National Strategic Objectives and Purpose. Councils determine how the grant is used to meet both local and national priorities, in accordance with the terms and conditions set out in the General Capital Grant offer letter issued to individual councils each year.
Local authorities may supplement the capital support they receive from government through borrowing. The maximum amount a local authority can borrow is regulated by the Prudential Code on the basis of indicators such as affordability, prudence and sustainability. Local government borrowing falls into two categories: supported borrowing, in which we provide an element of revenue funding called loan charge support to cover debt charges; and self-financed borrowing.
Find out more on our Local government borrowing: fact sheet.
Under The Local Government Investments (Scotland) Regulations 2010, local authorities are permitted to make investments subject to them gaining consent from Scottish Ministers. Finance circular 5/2010 sets out the requirements attached to the consent when local authorities make investments.