The Department for Communities and Government yesterday released details of a scheme to relax the normal rules which prevent councils using capital receipts for revenue projects.

Councils will be allowed to bid for the right to access a share of £200 million of capital flexibilities, which will be supported by a further £105 million revenue grant.

The cash, allocated through the Transformation Challenge Fund, can be used on reshaping services, including shared services and ICT initiatives.

In a document released yesterday, the DCLG said: “The fund is designed to support local authorities take forward ambitious and transformational plans that deliver better services and improve the lives of local people.”

The capital flexibility will be distributed through a bidding process, with councils required to provide expressions of interest by  1 July.

Councils will only be allowed to sell property and other assets if the sales are additional to existing plans, the document said.

It said: “The policy is to ensure additional resources are made available, not the existing receipts or receipts from planned sales which should otherwise be rightfully used for an authority’s planned capital expenditure.”

Proposals must be submitted in partnership with at least one other partner, either a council, other public authority, a voluntary and community group, or the private sector.

An additional amount of £15 million has also been made available for 2014/15, which can be used to help councils working with other public sector partners to reform services and make a return during the year.

Separately, the government also announced this week that £83 million of unused capitalisation provision has also been transferred to councils for 2013/2014 to provide additional revenue for every authority to invest in local service integration and transformation.