What is the primary source of capital for local authorities, excluding interest payments?

The primary source of capital for local authorities, excluding interest payments, is borrowing. This is mainly due to the need for local authorities to finance capital projects, such as infrastructure developments, public facilities, and essential services that require significant up-front investment. Local authorities often issue bonds or take out loans to fund these expenses, allowing them to manage cash flow over time while spreading the cost of large projects.

Borrowing provides local authorities with the necessary flexibility to meet their funding requirements, especially when immediate funds for projects are not available through other means. While local taxes, private investments, and grants do contribute to local authority funding, they may not provide the same level of capital necessary for larger projects when compared to the amount that can be raised through borrowing. For instance, local taxes can be a significant revenue stream but are usually used for operational costs rather than capital investments. Therefore, borrowing is recognized as the primary mechanism for securing capital needed to support long-term projects in local governance.