Report of the Local Government Efficiency Review Group

2.3.10 In terms of capital spending, local authorities have responsibility for
providing a range of capital works such as social housing, water and
sewage treatment, collection and distribution networks and road
construction and maintenance. Capital expenditure is financed
largely (about 80%) by Government grants, with the balance being
funded from borrowings and by local authorities’ own locally raised
resources (for example, through development contributions).
Development contributions are invested in public infrastructure,
including roads, waste water and water treatment facilities, drains
and watermains, public transport, the provision of open spaces,
recreational and community facilities, etc. Income from development
contributions has been reducing significantly in recent years due to
the fall-off in construction activity.
2.3.11 The extent to which local authorities can invest in public
infrastructure is determined by the amount of funding made available
for these purposes from central government. The element of the
capital programme funded from central funds can pose financial
difficulties for authorities where they bear the financial costs of
preliminary planning and payments to contractors etc., in advance of
recoupment, and where they are expected to provide an element of
matching funding in some projects.
2.3.12 While capital expenditure on infrastructure is met largely through
Government grants, it should be noted that the expansion and
improvement of infrastructure can have significant knock-on
implications for current expenditure by local authorities especially in
terms of operation and maintenance costs.
2.4 Local Government Current Expenditure
2.4.1 Local Government current expenditure is divided across the eight
local government ‘service divisions’, reflecting the different areas of
local government service provision.
2.4.2 The breakdown of local authority budgeted current expenditure for
2010 is illustrated in Figures 2.5 and Table 2.3. Further details on
local government expenditure by local authority are included in
Appendix 3. A breakdown of actual audited expenditure for 2008,
according to pay and pensions, various operating costs,
administration and other expenses is illustrated in Table 2.4.
26