You’ve probably all seen this. You’ve probably all said this.
When spending decisions are debated or announced – whether it’s at a council, Welsh Government or UK Government level – someone will trot out these immortal lines:
“What a waste of money!”
“Nice to know my taxes are going to good use!”
Or my personal favourite:
“We should be spending this on the NHS/social care/fixing potholes/housing veterans etc. etc.”
The politics of priorities always comes into this. There are certain spending decisions that people are never going to agree with. More often than not though, the anger might be misplaced because of the mix up between capital and revenue spending.
Politicians (of all colours; this isn’t a party issue) want you to be confused about this because they think your anger around certain spending decisions will benefit them in some way or rally people to a “cause”.
We naturally assume that public spending works the same as personal or household spending. There’s a single pot of money (like a bank account) and it’s spent however you like.
At home or in a smaller business, if your day-to-day revenue spending increases (i.e. mortgage, bills, taxes, rent), then you can redirect some of your capital spending to meet the shortfall (i.e. delaying buying a new TV, new car, new furniture).
The public sector usually can’t do this. Recent plans announced by the Welsh Government to do this in order to boost health spending are highly unusual and they almost certainly wouldn’t let a local council do the same thing. I’ll go into some of the reasons why later.
Let’s say a government or council announces – for argument’s sake – that they want to use £32million of capital spending to introduce a default 20mph speed limit in built-up areas.
You would think that the £32million is coming out of the same funding pot as social care, the NHS or fixing potholes. That’s not the case at all.
When councils and governments draft their budgets, their capital and revenue spending plans are separate. So capital spending doesn’t normally redirect funding from spending on services.
