Agenda item

The EAB considered a report detailing the Council’s Capital and Investment Strategy, including the Capital  Programme new bids plus the requirements of the Prudential Code and the Investment Strategy covering Treasury Management investments, commercial investments plus the requirements of the Treasury Management Code and the Ministry of Housing, Communities and Local Government (MHCLG) Statutory Guidance.  The related presentation of the Financial Services Manager provided an introduction and covered capital, treasury management and other items.  The introduction addressed the new requirement for a capital strategy, non-financial investments and asset management, the Investment Strategy, the Borrowing Strategy, new Minimum Revenue Policy (MRP) requirements with effect from 1 April 2019 and both local and MHCLG Indicators.  The Local Plan and the Economic, Housing and Town Centre Regeneration Strategies fed into the Corporate Plan which informed service strategies and service and project delivery plans and led to bids for funding and detailed budgets in accordance with the Capital and Investment Strategy and medium term financial plan.

In terms of capital, the net cost of the new General Fund bids, which were detailed in the report, was £6.4 million.  All bids had been considered by the Corporate Management Team (CMT) and the Joint EAB Budget Task Group and new bids would increase the General Fund underlying need to borrow to £339 million.  The net cost of bids relating to the Housing Revenue Account (HRA) was £28.3 million.  It was anticipated that the Council would run down its investments and externally borrow £6 million in 2019-20.  The capital programme was split between essential and investment schemes and setting a limit on essential schemes was suggested.  There was an addition to the Strategy in relation to a policy reflecting new flexible use of capital receipts to offset some of the revenue implementation costs of transformation projects, this was included to give the Council flexibility in the funding for the Future Guildford transformation project.  The key impact of the capital programme on the revenue account was the borrowing and interest costs.  The MRP was estimated to be £0.966 million in 2019-20, £2.127 million in 2020-21 and £3.158 million in 2021-22.  The process involved officers submitting bids in September which were reviewed by CMT in October before being reported to the Joint EAB Budget Task Group in November and to this EAB and the Executive in January for agreement by Council in February.  Officers then implemented the approved programme whilst business cases were prepared in respect of the provisional programme.

With regard to treasury management, interest paid was estimated to be £5.755 million, £5.1 million of which related to the HRA.  Investment income was estimated to be £1.5 million with a 3% weighted average investment rate.

The following points arose from questions and discussion:

·                  The General Fund Budget report provided indicators of the Council’s financial health which was in a strong well managed position with plenty of housing reserves in the HRA and earmarked reserves in the General Fund.  As capital reserves were more limited it was necessary to borrow to fund the capital programme using investment income from capital assets to repay the loan interest.  The Council’s gearing ratio of debts compared to assets was reasonable.  However, owing to a reduction of 50% in Government funding, equating to approximately £4 million, it was necessary for the Council to identify savings and efficiencies.  Although the Government grant received in the past had now ceased, the Council was able to retain some of the Business Rates collected in the Borough. It was anticipated that the Government would move towards funding statutory services only in the future leading to district councils’ funding being frozen or reduced further.  Ministers had been lobbied in this regard.

·                  The capital bids in respect of High Street protection and regularising car parking and reduction of encroachments at Shalford Common were not fully supported and the need for them was questioned.  In the case of High Street protection, it was felt that too many precautions led to people feeling unsafe.  This bid had arisen from a recommendation resulting from reviews by Surrey Police and the Safer Guildford Partnership in response to concerns raised.

·                  There was no bid in respect of the student housing project as this had been abandoned.

·                  Many bids were at an early stage and would return to the EAB for further consideration once the details had been developed in time.