Agenda item

Capital and Investment Strategy 2024-25 to 2028-29


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 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).


The HRA capital programme was split between expenditure on existing stock and either development of or purchase of dwellings to add to the stock.  A lot of work had been done on stock condition surveys and the results were being analysed with a view to having a robust stock condition assessment which provided 100% stock data over a rolling 5-year programme and allowed for effective assessment against Regulatory and legislative standards.  This would allow compliance with the new building safety legislation and standards.   

Improved building safety standards across social housing had resulted in a national drive to improve standards and safety. Guildford had started to respond to this and had spent a significant sum on its properties.  The budget for 2024-25 and ongoing would see budgets return to more modest levels seen in the past.  The capital programme would be funded from HRA capital receipts and reserves.  There was also £121 million between 2023-24 and 2028-29 included for development projects to build or acquire new housing (including WUV).

Officers had recommended the removal of the Bright Hill scheme from the HRA programme, as previously reported to Councillors, due to the change in the scope of the scheme being delivered.



The main areas of major repairs and improvement expenditure were:

·      refurbishment, replacement & renewal programme of existing stock, £1.3 million, which included kitchen & bathroom upgrades, void property refurbishment and roof works,

·      works to existing stock to comply with changes to standards and legislation, £3.4 million, including replacement fire doors, electrical testing and fire protection works,

·      mechanical and electrical works £400,000, including central heating systems, and

·      other works of £1.2 million including disabled adaptations.


The main HRA development projects included:

·      Guildford Park Car Park: £39 million,

·      WUV: £49 million, and

·      Foxburrows: £11 million.


The Council noted that officers carried out the treasury management function within the parameters set by the Council each year and in accordance with the approved treasury management practices.


The budget for investment income for 2024-25 was £3 million, based on an average investment portfolio of £86 million, at a weighted average rate of 5%.  The budget for debt interest paid was £14.8 million, of which £5.4 million related to the HRA and £7.9 million was being capitalised and added to the cost of schemes in the capital programme, which was a net cost to the General Fund of £1.5 million for the year.

The Council noted that councils could invest to support public services by lending to or buying shares in other organisations (service investments) or to earn investment income (commercial investments, where earning a return was the primary purpose). 

Investment property (the primary purpose of which was to earn a yield) had been valued at £178 million, as per the 2022-23 unaudited Statement of Accounts, with rent receipts of £9.2 million and a yield of 5.7%.  The Council was not making any future purchases solely for yield, which was in line with government guidelines. The Council had also invested £25.3 million in its housing company North Downs Housing Ltd (NDH), via 40% equity to Guildford Borough Council Holdings Ltd (£10.1 million) who, in turn, passed the equity to NDH, and 60% repayment loan direct to NDH (£15.3 million) at an interest rate of 5%.  The loan was a repayment loan in line with the NDH business plan.  There was no further investment planned within this capital and investment strategy.

The report had also included the Council’s Minimum Revenue Provision (MRP) policy and the Prudential Indicators and had set out the updated flexible use of capital receipts policy.  This policy, if approved by the Council, would permit the use of any capital receipts received in year to be used to fund any service transformation costs incurred in the same year. 

The Capital and Investment Strategy 2024-25 to 2028-29 had also been considered by the Joint Executive Advisory Board at its meeting on 11 January 2024, and by the Corporate Governance and Standards Committee at its meeting on 18 January 2024. 

At its meeting on 25 January 2024, the Executive also considered this matter and endorsed the recommendation contained in the report submitted to the Council.  The Executive had also resolved:

(1)         That, subject to Council approval, the new bids set out in Appendix 2 to the report be approved for inclusion in the capital programme as indicated.

(2)         That the Bright Hill scheme be removed from the HRA approved and provisional programmes as previously reported to Councillors.

Upon the motion of the Lead Councillor for Finance & Property, Councillor Richard Lucas, seconded by the Leader of the Council, Councillor Julia McShane, the Council: 


(1)    That the General Fund and HRA capital estimates, as shown in Appendices 3 and 4 to the report submitted to the Council, as amended to include the bids 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 the report, be approved.

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

(4)         That the updated flexible use of capital receipts policy, as set out in Appendix 9, be approved.


To enable Council to approve the capital and investment strategy for 2024-25 to 2028-29, and the funding required for the new capital schemes proposed.


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