Section 119 to 121: Capital receipts and mutual grants
213.Sections 119 to 121 make provision for capital receipts and mutual grants. The sums received by a local authority which are capital receipts are described in section 58 of the LGHA 1989. They include the proceeds of disposal of assets and investments and the repayment of capital grants and loans made for capital purposes. A part of a capital receipt received by a local authority may have to be set aside as provision to meet credit liabilities (but, at present, this is generally confined to receipts from disposals of houses). The balance of capital receipts after such deductions have been made is called the usable part of the authority's capital receipts, and that part is available for meeting capital expenditure.
214.Section 119 confers on the Secretary of State power to make regulations to confer on the Mayor power to direct the payment to the Authority by a functional body of part of the functional body's usable capital receipts. Amounts paid to the Mayor under such a direction could only be used to meet capital expenditure of another functional body or of the Authority.
215.The regulations may prescribe the maximum percentage of usable capital receipts that may be specified in such a direction, or the portion in respect of which a direction may be issued (for example, the amount by which the usable part of capital receipts has increased during a financial year). The regulations may also enable the Mayor to require the body which has the benefit of a redistribution to apply the amount paid to it towards meeting expenditure for capital purposes of a particular description.
216.Section 120 authorises the GLA to pay grants to a functional body towards meeting expenditure for capital purposes, and authorises the functional bodies, with the Mayor's consent, to pay grants towards meeting expenditure for capital purposes of another functional body or of the GLA. Such a grant may be used by the body to which it is paid for any expenditure of that sort incurred for the purposes of or in connection with its functions.
217.Section 121 authorises the GLA to pay grants to a functional body towards meeting any expenditure which is not for capital purposes, and authorises the functional bodies, with the Mayor's consent, to pay grants towards meeting any expenditure of another functional body or of the GLA which is not for capital purposes. Such a grant may be used by the body to which it is paid for any expenditure of that sort incurred for the purposes of or in connection with its functions.
218.These sections are intended to facilitate the efficient use of the resources of the GLA and the functional bodies as a whole by providing administrative means for overcoming the restriction that a local authority may not use its capital resources to meet expenditure which is not for capital purposes.
219.For example, a body which at any time has available capital grants or capital receipts and a pressing need to incur expenditure towards which it cannot apply such amounts (because it is not expenditure for capital purposes) could arrange with the Authority or another functional body to receive a grant it could use towards that expenditure in return for making a capital grant to the body concerned.