Money Matters – A Short Explanation of Vital Facts
Many people wonder why the amount of their council tax bill that goes to South Molton Town Council (SMTC) is so high.
SMTC has a number of properties: for example the Town Hall and Assembly Rooms, the Pannier Market, the Amory Centre and the Old Library. All of these buildings play a substantial role in the life of the town and that of the surrounding community.
The Pannier Market, in particular, as well as being used by locals on market days, brings a great many tourists into the town and the Assembly Rooms are a much used community asset.
The Pannier Market, Town Hall and Assembly Rooms are very old listed buildings which currently require a great deal of maintenance to ensure that they remain safe and don’t deteriorate.
Because of the way that central government has decided that town halls (and other local authorities and public bodies) must organise their finances, SMTC has to divide its expenditure into capital expenditure and current expenditure.
Capital expenditure is money spent by a business or organization on acquiring or maintaining fixed assets, such as land, buildings, and equipment. For example, if South Molton Town Council (SMTC) buys a van, that’s capital expenditure.
Current expenditure is recurring spending, in other words, spending on items that are consumed and only last a limited period of time. For example, when the van that SMTC has bought is serviced that’s classified as current expenditure, as is the insurance and the road fund licence. All the maintenance work that has to be carried out on SMTC’s buildings is also classified as current expenditure.
The issue facing SMTC, along with many local authorities, is that money that they receive from selling capital assets (i.e. land and buildings) can only be spent on buying other assets and not on reducing the precept or on day-to-day running costs. This is not a decision made by the town council but is foist on them by central government.
Often organisations may have money in a capital account so that they can build facilities, but then find that they don’t have enough income (i.e. current account money) to to maintain and use the facilities (the Youth Resource Centre is a good example).