Blog: The difference between capital and revenue budgets
Capital and revenue are words that you will often hear when we talk about our budget.
Put simply, to the average household, revenue costs would be day-to-day costs such as your energy bills, petrol in your car or paying your TV licence. Capital would be big investments such as buying a house or building an extension.
As a council, our revenue expenditure includes things like staff salaries, building maintenance and the costs of running refuse vehicles. Whereas, our capital expenditure includes things like a major road improvement scheme or the purchase of significant assets which have a productive value.
Capital and revenue
Our Financial Strategy sets out a number of savings we propose to make over the next five years in order to balance our (revenue) budget, but we are also investing in things using capital money that will future-proof our infrastructure as our county grows, and generate much-needed income which can be used for day-to-day costs. Our 2018/19 budget consultation is open until 21 February 2018: https://shropshire.gov.uk/get-involved/2018-19-budget-consultation/
As Government funding dwindles, choosing where to make savings is getting more and more difficult, especially as demand on the services we provide for our most vulnerable residents increases.
Government grants
It may seem that a simple solution would be to stop spending money on capital schemes and spend the money instead on the running of our day-to-day services.
The trouble is that it’s not that simple! We’re not permitted to spend capital money in this way. Plus, the Government offers many incentives such as special grants and the ability to borrow money more cheaply to allow councils to invest in capital projects to support economic, housing and population growth, and offer a better return on investment than just keeping money in a bank.
Savings and investments
All that we ask is that you keep an open mind when we spend money on things like major road improvements, refurbishing old inefficient buildings like Shirehall and the Shrewsbury shopping centres, even though we say we have less than we did before – we do (our budget shortfall is £59.3m in five years’ time).
Reducing running costs
We will continue to invest in those things that support our county’s economic growth and prosperity, as well as explore commercial interests so that we can plough returns back into the day-to-day.
But we will also continue to make savings, while constantly striving to do things differently so that we can provide the services that you value the most.
Watch the video blog by Nic Laurens, Shropshire Council’s Cabinet member for economic growth, to find out his take on the difference between capital and revenue, and our plans to future-proof the county by investing in our economy.
httpv://www.youtube.com/watch?v=bcvOzoelLpg&feature=em-share_video_user
