Councils allowed to spend capital receipts on IT projects

The Department for Communities and Local Government (DCLG) has confirmed that local authorities will be able to raise money for IT efficiency projects by selling off capital assets from April.

The move, first announced in last year’s Autumn Statement by the chancellor, applies with effect from 1 April 2016. Councils have been told they can use the money as part of the flexible use of capital receipts from selling property, plant and equipment from April 2016 to March 2019. But they will not be able to use capital receipts from earlier sales or to borrow money for the costs of service reform.


Draft guidelines

DCLG has recently published Draft Guidance on the Flexible Use of Capital Receipts, and qualifying expenditure examples include:

  • Sharing back-office and administrative services with one or more other council or public sector bodies;
  • Improving systems and processes to tackle fraud and corruption;
  • Driving a digital approach to the delivery of more efficient public services and how the public interacts with constituent authorities where possible;
  • Setting up commercial or alternative delivery models to deliver services more efficiently and bring in revenue.

According to the guidance document, the spending can be justified under a ‘qualifying expenditure’ list if it will generate ongoing savings. Councils will have to list every project that they believe qualifies for the use of capital sales receipts, and also produce a cost/benefit analysis to go alongside each project. Thereafter, in 2017-18, the councils will have to look back at whether approved projects have delivered the estimated savings and adjust their strategies accordingly.

A DCLG spokesperson said: “As part of this we’re giving councils new flexibility to use up to 100% of the receipts from the sale of land and buildings to reinvest in local services. Our plans will support local government to implement radical and historic reform so councils can save money, while improving services.”

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