The initial intention (ignoring the other motives clearly at play) doesnt seem to have been discussed so far?
Restricting the generation of surplus funds from traffic contraventions.
Personally I dont think its good to allow councils to generate major income/funds from fines. While it seems good at first glance all it will lead to is a cost-benefit approach. So all those cycle lanes blocked by the odd parked car etc. will never get resolved (i know majority dont anyway) as the councils will focus on city centers and such. These issues need to be tackled BECAUSE they are an issue, not becasue they generate revenue directly for the local authority.
The same goes for those wanting the money ringfenced for Active travel. I cant think of anything worse. Little effort would be made to police traffic contraventions if it only raises money for things they dont want (active travel). Not to mention that will undoubtedly mean no central funding for active travel, as 'there is already a method for local authorities to create that budget'. Far better for active travel budgets to come from a central pot (which surplus funds would contribute to anyway).
Of course if you dont trust the government to correctly manage this 'excess' then there is no chance local authorities will either, so there is no way to win.