Rules and restrictions on how we can spend our budget

There are a number of rules and restrictions that set out how councils can spend their money.  

It can sometimes appear that a council could

• cancel a large infrastructure project or;
• introduce new charges 

to make funds available to cover a budget gap. There are, however, rules and restrictions on spending mean that this is often not the case.  

Revenue and capital spending 

The council’s main budget for annual spending is called the ‘revenue’ budget. We use this for day-to-day services. It is funded through government grants, Council Tax, and business rate payers. 

The council also has a ‘capital’ budget. This is used to create, buy or improve infrastructure and council assets. This could be for buildings, schools and transport. This tends to be funded from specific government funding pots, capital receipts (such as receipts from the sale of land) and borrowing.  

As a general rule, councils are not allowed to use their capital budget to fund revenue spending.  

The Local Government Association explains this difference in more detail on their website.

Ringfencing is a term used to describe money that can only be spent on a specific thing.  

For example, within the revenue budget are grants given by the government for the council to spend on

• schools
• public health 
• housing benefits

The council cannot spend public health funding on potholes, for example. 

Ringfencing on larger projects

Ringfencing can also apply to funding secured from the government to deliver a specific project. 

This is often true for larger transport schemes, such as the Banwell Bypass project. 

Other examples include

• updates to the Tropicana
• Birnbeck Pier
• Bus Service Improvement Programme

These grants can only be spent on the scheme awarded the funding. 

Though we are able to raise Council Tax and make changes to existing charges, we cannot introduce all new charges without the support of the government or legislation.  

If we want to pursue a larger project, such as a change to infrastructure, we can apply to central government for funding.

The government makes specific funding pots available for these types of projects. Some examples include

• Housing Infrastructure Fund
• Bus Service Improvement Plan
• formerly the Levelling Up Fund

Councils can then submit bids to the government, setting out how they would use the funding to improve and support their local area.   

The government will take a decision on which of the bids best meet their funding criteria. Funding is then split between the councils who have submitted the winning bids.  

When developers build on council land, they are often required to make funding contributions to the council. These contributions are called Section 106 or Community Infrastructure Levy (CIL) monies.  

There are rules around how and where we spend these funds. 

They can only be used to deliver things that the new communities need. 

For example, things such as:

• new roads
• school places
• libraries
• parks and open spaces

These reduce the impacts of what the developers build. They can’t be used to fund other council services such as filling in potholes, park services or adult social care.