Councils can spend capital receipts on shared services and digital efficiency projects from April

Government specifies which type of projects capital receipts can be spent on

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

Currently, local authorities are prohibited from using capital receipts on services. But in last year's Autumn Statement, George Osborne stated that this would change.

Now, DCLG has given examples of what kinds of projects the receipts can be spent on, and these include shared services projects and digital reforms.

Qualifying expenditure examples include:

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

Other examples that aren't related to IT include investment in service reform feasibility work; sharing chief-executives, management teams or staffing structures; and, funding the cost of service reconfiguration, restructuring or rationalisation.

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, as part of new efficiency strategies that they will have to draw up.

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.

The new powers will come into effect in April, and councils will not be allowed to use receipts from capital sales that are made before this point.