Capitalisation direction to fund transformation costs approved in principle by Government

Shropshire Council’s application for a capitalisation direction of up to £26.9m has now been approved in principle by the Government, along with 29 other councils who have made similar applications. This allows the council to generate capital receipts to support its transformation programme over the next year. 

Shropshire Council’s transformation programme aims to improve efficiency across the council by enhancing digital services and resizing, as the council reduces its size by around 540 full time equivalent posts.  

Capitalisation directions enable local authorities to cover revenue costs using capital resources. The requested amount will be funded by selling property and other assets to generate capital receipts. The council anticipates needing less than the requested amount as capital receipts are realised to match the investment in transformation. 

The capitalisation direction will not be used for day-to-day service costs. The council’s primary budget strategy aims to address a £22.8 million funding gap in 2025/26 for these operational costs. The council has already reduced its 2024/25 day-to-day spending budget by £46 million, following £41 million in savings in 2023/24, with further savings still required. 

The transformation work that supports these savings can be funded through grants and capital receipts or, with this approval, temporarily through borrowing. 

Gwilym Butler, Shropshire Council’s cabinet member for finance and corporate resources said, 

“Shropshire is one of many councils all over the country that have been granted support as the budget pressures in local government continue to be felt. 

 “In Shropshire’s case, the capitalisation direction will allow us to invest now to make the long term savings we need to make, as we become the modern, efficient and sustainable council we need to be for our communities. 

 “This decision takes us a step further in our transformation journey.”