Capitalisation means councils being able to use their assets to pay for spending that might otherwise be classed as revenue. Councils have to seek a ‘capitalisation direction’ from the Government for this kind of spending.

An increase in capitalisation has been announced which increases by 50% the amount available to £300m. Cllr Richard Kemp, Leader of the Liberal Democrats in Local Government said:

I am delighted that Lib Dems in Government are listening to the pleas of local government.

It has been agreed following intense discussions between Lib Dem council leaders and Andrew Stunell the Lib Dem Minister in DCLG and Danny Alexander, Chief Secretary to the Treasury. It is not as much as we would have liked but is a lot more than we had originally been told.

This announcement is good news for local authorities with the most difficult settlements, as the money is expected to be handed out based on a council’s level of reserves and overall financial position. Lib Dems in local and central government and the Local Government Association have been lobbying hard for this.

Capitalisation, often of a council’s own money, means no hand outs from Government but an intelligent way of using available resources to ensure the minimization of disruption to services and the maximization of efficiency savings.

We hope other Ministers will listen to our sensible requests in the way that Andrew and Danny have done.

More on capitalisation.