Comment: The importance of capital and revenue in public debate


"Capital” and “revenue” are words we in local government do not give a second thought to when discussing expenditure on the highways we manage.

To the public however, it is not always clear why a council might have money to undertake a major and expensive road improvement scheme (that may also cause frustrating congestion) while at the same time not be able to provide day-to-day services such as pothole repair or gully emptying to the standard that we did before 2010.

 This is certainly something that is at the front of our minds at Oxfordshire County Council. Post-summer the council as a whole is focusing afresh on how to make what could potentially prove to be up to £60m of cuts that we believe may have to be made as a result of the Treasury’s forthcoming round of new savings in public expenditure.

Some of that is bound to fall the way of those working on maintaining the 2800 miles of road for which Oxfordshire is responsible.

We at Oxfordshire CC are already in the process of saving around £290m up to 2018. Yet at the same time we are undertaking major road improvements in and around Oxford and at the Milton Interchange on the A34 – at the cost of millions of pounds.

There have been plenty of other roadworks schemes completed over the last 18 months. All have made predictable local newspaper headlines of the 'traffic gridlock' variety.

We’ve also recently unveiled an ambitious Local Transport Plan covering the period up to 2031 which is reliant on capital expenditure and on successfully bidding for Government grants.

It can be guaranteed that when we consult with the public on new budget cuts up to 2020 they’ll challenge us as regards our expenditure on the road maintenance and new schemes that are causing them to sit in traffic jams during their daily journeys. They’ll want to know why we can’t we spend that money on filling in all the potholes or cutting the grass verges and emptying gullies more regularly?

Our answer will be that we’re good at bidding for government capital grants, that we need to plan for the future of Oxfordshire’s transport infrastructure and that Government understands the contribution we can make to the national economy .

We have often sought to explain the situation by relating it to our household budgets – your revenue budget is the food and drink you put in to the fridge and the electricity to pay for its running, your capital budget is the one-off chunk of cash you use if your fridge breaks down or you want to upgrade it. It is likely that this answer will be heard but not always clearly understood.

As local government practitioners we should never assume that the difference between capital and revenue is understood. It’s so easy for us to make such assumptions given that the distinction is the bread and butter of our daily operation.

The Government’s current direction is to seek to balance the nation’s finances through cuts to public expenditure, while at the same time investing in infrastructure. For as long as this remains the situation, this potential misunderstanding is going to exist.

It is critically important that we are successful in explaining the difference. Failure would mean our residents and electors may long labour under the misapprehension that we are making bad choices on their behalf.

Mark Kemp is deputy director (commercial) for environment and economy at Oxfordshire CC

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