Guidance on flexible use of capital receipts

This is an updated direction and statutory guidance to extend the freedom for local authorities to use eligible capital receipts to fund the revenue costs of projects that deliver ongoing savings or improved efficiency.

The This direction allowsrevokes authorities to break from these normal restrictions and usereplaces the proceedsdirection from asset sales to fund the revenue costs of projects that will reduce costs, increase revenue or support a more efficient provision of services. This is an extension of the flexibilitysame thatname hasissued beenon in4 placeApril since 2016, and will allow this freedom to continue to 2024/25 to help authorities plan for the long-term.2022.

Capital receipts are the money councils receive from asset sales, the use of which is normally restricted to funding other capital expenditure or paying off debt. The receipts cannot usually be used to fund revenue costs. The direction introduces a new restriction that authorities may not use the flexibility to fund discretionary redundancy payments, i.e. those not necessarily incurred under statute. This does not affect other types of severance payments and, to be clear, does not restrict, including pension strain costs, which may still be qualifying expenditure.

The direction alsoallows includesauthorities to use the proceeds from asset sales to fund the revenue costs of projects that will reduce costs, increase revenue or support a newmore efficient provision of services. This is an extension of the flexibility that has been in place since 2016, and will allow this freedom to continue to 2024/25 to help authorities plan for the long-term.

This direction clarifies that the capital receipts obtained must be disposals by the local authority outside the “group” structure.

As introduced in the direction issued on 4 April 2022, this direction includes the requirement to submit the planned use of the flexibility in advance of use for each financial year. This condition can be met by sending the authority’s own strategy documents provided they contain the detail asked for in the direction. This is not an approval process, and authorities can still freely use the flexibility as before, but the information must be sent to ensure transparency and allow proper monitoring by central government.

Submissions of this information must be made by the DELTA system (Open Collection Request) and authorities must make sure they are able to do so. Queries on use of the DELTA system should be sent to dluhc.digital-services@levellingup.gov.uk.

If you have any questions, please contact CapitalReceiptsFlexibility@levellingup.gov.uk.