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”.
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Capital and revenue spending are different but have a direct impact on each other.
For example, using capital funds to improve the energy efficiency of council-owned buildings could save money in the revenue budget through lower energy bills. This is often called “invest to save”.
The opposite is also true. Building a new hospital or medical centre (capital) might require an increase in spending on staff and care (revenue).
Both capital and revenue spending are affected by inflation. The rising cost of materials might impact capital spending, while wage demands and rising energy bills might impact revenue spending.
There are grey areas too. Maintenance and repairs can be counted as both capital and revenue expenditure depending on what sort of work is carried out. Replacement would be capital spending, while refurbishment would often count as revenue spending.
