Issue - meetings

Prior to consideration of the budget related reports, of which the Capital and Investment Strategy was the first, the interim Chief Finance Officer made a presentation to the Council, which provided information about the strategic context within which the budget had been prepared, the medium-term financial plan, the robustness of the estimates, adequacy of reserves and budget risks. 

The Council considered a report on the Council’s capital and investment strategy, which gave a high-level overview of how capital expenditure, capital financing and treasury management activity contributed to the provision of local public services along with an overview of how associated risk was managed and the implications for future financial sustainability.

Decisions made now, and during the period of the strategy on capital and treasury management would have financial consequences for the Council for many years into the future. The report therefore included details of the capital programme, any new bids/mandates submitted for approval plus the requirements of the Prudential Code and the investment strategy covering treasury management investments, service investments, and commercial investments.  The report had also covered the requirements of the Treasury Management Code and the prevailing DLUHC Statutory Guidance.

Councillors noted that in order to achieve the ambitious targets within the Corporate Plan, the Council needed to invest in its assets, via capital expenditure, which was split into the General Fund (GF) and Housing Revenue Account (HRA).

All projects, regardless of the fund, would be funded by capital receipts, grants and contributions, reserves, and finally borrowing.  When preparing the budget reports, it was not known how each scheme would be funded and, in the case of regeneration projects, what the delivery model would be.  The report showed a high-level position.  The business case for each individual project would set out the detailed funding arrangements for the project.

The Council noted that some capital receipts or revenue income streams might arise as a result of regeneration schemes, but in most cases the position was currently uncertain, and it was too early at this stage to make assumptions.  It was likely that there would be cash-flow implications of the development schemes, where income would come in after the five-year time horizon of the report and the expenditure incurred earlier in the programme.

The Council had an underlying need to borrow for the General Fund capital programme of £202 million between 2023-24 and 2028-29.  Officers had put forward bids, with a net cost over the same period of £9.8 million, increasing this underlying need to borrow to £211.8 million should these proposals be approved for inclusion in the programme.

The capital programme included several significant regeneration schemes, which it was assumed would be financed from GF resources.  Detailed funding proposals for each scheme would be considered when their Outline Business Case was presented to the Executive for approval.

The main areas of expenditure (shown gross), as set out in the report, were:

·      £258 million Weyside Urban Village (WUV)

·      £35 million Ash road bridge and footbridge (total gross cost £44 million, external  ...  view the full minutes text for item 109

Decision:

1.     Approved the new bids set out in Appendix 2 for inclusion in the capital programme as indicated, subject to Council approval.

2.     Approved removing the Bright Hill scheme on the HRA approved and provisional programmes as previously reported to Councillors; and

3.     Recommended (to Full Council meeting on 7 February 2024)

(1)         That the General Fund and HRA capital estimates, as shown in appendices 3 to 12, as amended to include such bids as may be approved by the Executive at its meeting on 25 January 2024, be approved.

(2)         That the Minimum Revenue Provision policy, referred to in section 9 of this report, be approved.

(3)         That the capital and investment strategy, specifically the investment strategy and Prudential Indicators contained within this report and Appendix 1, be approved.

(4)         That the updated flexible use of capital receipts policy, as set out in Appendix 8, be approved.

Reason(s):

To enable Council, at its budget meeting on 7 February 2024, to approve the capital and investment strategy for 2024/25 to 2028/29, and the funding required for the new capital schemes proposed.

Other options considered and rejected by the Executive:

The alternative investment options set out in paragraph 22 of the report.

Details of any conflict of interest declared by the Leader or lead councillors and any dispensation granted:

None.

The capital and investment strategy gave an overview of how capital expenditure, capital financing and treasury management activity contributed to the provision of local public services.  The strategy also detailed how associated risks were managed and any implications for future sustainability.

The Executive considered the report that included details of the capital programme.  It was noted that £96.9 million had been removed from the capital programme by Full Council in December 2023 which left around £212 million of capital investment remaining. There was just under £10 million worth of new bids/mandates submitted for approval. The report set out the requirements of the Prudential Code and the investment strategy covering treasury management investments, service investments and commercial investments. 

In terms of the Housing Revenue Account (HRA), £121 million of capital investment was proposed for the next five years to support development projects to build or acquire new housing (including Weyside Urban Village).

The report also covered the requirements of the Treasury Management Code and the prevailing DLUHC Statutory Guidance. Treasury Management income for the coming year was £3 million which was slightly down on what had been expected as interest rates had fallen.

The flexible use of capital receipts had been extended for the coming year should the council wish to do so.

The Minimum Revenue Provision (MRP) remained unchanged from last year’s budget.

The report had been considered by the Corporate Governance and Standards Committee on 18 January 2023 and the comments arising from that meeting were set out in the Supplementary Information Sheet. A typo (missing words ‘budget process’) was noted on page 9 of this supplementary paper which would be corrected before the report was submitted to Full Council. The sentence referred to an individual councillor’s observational comment of the existing scrutiny process in regard to the budget. The Executive was informed that the scrutiny process for the present budget was in line with that conducted over the previous 4-5 years. There could be future recommended changes to this process as a result of the Council’s ongoing close monitoring of all expenditure.

It was observed that close monitoring of expenditure and the actions undertaken by the Council to manage its budget had resulted in a significant reduction in projected expenditure of £200 million. However, the portfolio holder for Finance and Property acknowledged that there was still much work to be done to further reduce the Council’s outgoings.

The Executive,

RESOLVED:

1.     To approve the new bids set out in Appendix 2 to the report submitted to the Executive for inclusion in the capital programme as indicated, subject to Council approval.

2.     To approve the removal of the Bright Hill scheme on the HRA approved and provisional programmes as previously reported to Councillors.

3.     To recommend (to Full Council meeting on 7 February 2024):

(a)      That the General Fund and HRA capital estimates, as shown in appendices 3 to 12, as amended to include the new bids referred to in 1. above, be approved.

(b)     That the Minimum  ...  view the full minutes text for item 51

The Committee considered a report on the Council’s capital and investment strategy, which gave a high-level overview of how capital expenditure, capital financing and treasury management activity contributed to the provision of local public services along with an overview of how associated risk was managed and the implications for future financial sustainability.

Decisions made now, and during the period of the strategy on capital and treasury management would have financial consequences for the Council for many years into the future. The report therefore included details of the capital programme, any new bids/mandates submitted for approval plus the requirements of the Prudential Code and the investment strategy covering treasury management investments, service investments, and commercial investments.  The report had also covered the requirements of the Treasury Management Code and the prevailing DLUHC Statutory Guidance.

The Committee noted that in order to achieve the ambitious targets within the Corporate Plan, the Council needed to invest in its assets, via capital expenditure, which was split into the General Fund (GF) and Housing Revenue Account (HRA).

All projects, regardless of the fund, would be funded by capital receipts, grants and contributions, reserves, and finally borrowing.  When preparing the budget reports, it was not known how each scheme would be funded and, in the case of regeneration projects, what the delivery model would be.  The report showed a high-level position.  The business case for each individual project would set out the detailed funding arrangements for the project.

The Committee noted that some capital receipts or revenue income streams might arise as a result of regeneration schemes, but in most cases the position was currently uncertain, and it was too early at this stage to make assumptions.  It was likely that there would be cash-flow implications of the development schemes, where income would come in after the five-year time horizon of the report and the expenditure incurred earlier in the programme.

The Committee also noted that Prudential Indicators were set to ensure that the Council could demonstrate that its capital expenditure plans were affordable, sustainable, and prudent.

The Council had an underlying need to borrow for the General Fund capital programme of £202 million between 2023-24 and 2028-29.  Officers had put forward bids, with a net cost over the same period of £9.8 million, increasing this underlying need to borrow to £211.8 million should these proposals be approved for inclusion in the programme.

The capital programme included several significant regeneration schemes, which it was assumed would be financed from GF resources.  Detailed funding proposals for each scheme would be considered when their Outline Business Case was presented to the Executive for approval.

The main areas of expenditure (shown gross), as set out in the report, were:

·      £258 million Weyside Urban Village (WUV)

·      £35 million Ash Road bridge and footbridge (Total gross cost £44 million, external funding, £36 million, net cost to GBC £8 million)

The report contained a summary of the new bids submitted and the position and profiling of the current programme (2023-24 to 2028-29).  ...  view the full minutes text for item 60

The Joint Executive Advisory Board (JEAB) considered a report concerning the Council’s Capital and Investment Strategy 2024-25 to 2028-29.  Bids in respect of the 15 proposed capital schemes outlined within the appendices to the report were a particular focus for the JEAB.

The Lead Specialist for Finance introduced the report and sought comments from the JEAB in respect of the capital bids.  The treasury management activity function fell to the Corporate Governance and Standards Committee for consideration.

The JEAB was advised that the Capital Programme linked into the Council’s treasury management activities which were then fed into the Revenue Account which was the reason for having an Integrated Capital and Treasury Strategy.  Decisions made now in respect of the Capital Programme would have a long term impact on the Council’s finances.  In December 2023, the Council had agreed to delete £96 million from the existing Capital Programme.

The Council was required to satisfy various Codes of Practice, the main one in this case being the CIPFA Prudential Code to ensure the Capital Programme was affordable, sustainable, prudent and proportionate.  As the Council’s internal reserves and capital receipts were limited, external borrowing was necessary and this equated to £202 million over the period.  Officers had put forward bids of £9.8 million which would increase the borrowing total to approximately £212 million.  The main areas of existing expenditure were the two largest schemes in the Programme, namely, Weyside Urban Village and Ash Road Bridge.  The Table in paragraph 8.14 of the report had been amended to delete an item, pavilion refurbishment at Sutherland Memorial Park, from the Capital Vision, which consisted of schemes at an early stage which were not sufficiently developed to progress onto either the provisional or approved Capital Programme.

Although there were no new bids to the Housing Revenue Account (HRA), annual major repairs works needed to be included in the Capital Programme.  Whilst an expanded HRA budget had been agreed in respect of the previous two years, the proposed budget for 2024/25 reduced the amount to approximately £5.5 million reflecting the amount of budgets of previous years.  The existing Capital Programme also contained substantial new build and redevelopment schemes which were the primary reason for the reduction in the Council’s reserves.  The report recommended the deletion of the Bright Hill scheme due to changes in its proposed delivery, which was now unlikely to be undertaken by the Council.

Having regard to Treasury Management in the interests of completeness, it was estimated that there was £3 million of investment income and debt interest approaching £15 million.  The latter consisted of £5.5 million which related to the HRA whilst approximately £8 million was being capitalised to the General Fund Programme, creating a £1.5 million impact on the General Fund.  The Council would be seeking approval of the updated flexible use of the Capital Receipts Policy for 2024/25 to enable expenditure in respect of transformation to be funded from Capital Receipts.

The following points arose from questions, comments and discussion relating  ...  view the full minutes text for item 11