Agenda item

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 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 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.

The Council had a current underlying need to borrow for the general fund capital programme of £400 million.  No new bids had been received for 2021-22, although it was anticipated that a bid, currently estimated to be around £1 million, would be submitted in respect of the Guildford Economic Regeneration Programme.

Some capital receipts or revenue streams could arise as a result of investment in particular schemes, but in most cases were currently uncertain and it was too early to make assumptions.  Some information had been included in the capital vision highlighting the potential income.  It was likely that there were cash-flow implications of the development schemes, where income would come in after the five-year time horizon and the expenditure would be incurred earlier in the programme.

All projects would be funded by general fund capital receipts, grants and contributions, reserves and, finally, borrowing.  It was not currently known how each scheme would be funded and, in the case of development projects, what the delivery model would be.  To ensure the Council demonstrated that its capital expenditure plans were affordable, sustainable and prudent, Prudential Indicators were set that must be monitored each year.

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The capital programme included a number of significant regeneration schemes, which it was assumed would be financed from General Fund resources.  However, subject to detailed design of the schemes, there might be scope to fund them from HRA resources rather than General Fund resources in due course.  Detailed funding proposals for each scheme would be considered when the Outline Business Case for each scheme was presented to the Executive for approval.

The report to be presented to the Executive would include a summary of the new bid submitted, the position and profiling of the current capital programme (2020-21 to 2024-25) and the capital vision schemes.

The report had also included the Council’s Minimum Revenue Provision (MRP) policy and the Prudential Indicators. 

The Committee was informed 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 in 2021-22 was £1.278 million, based on an average investment portfolio of £77.3 million, at an average rate of 1.57%.  The budget for debt interest paid was £5.637 million, of which £5.05 million related to the HRA.

In relation to non-financial investments and investment strategy, the Executive was informed 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 this was the main purpose). 

The Council had £153.4 million of investment property as per the 2019-20 Statement of Accounts, with rent receipts of £8.4 million and a current yield of 6.3%.

The Council had invested £14.3 million in its housing company – North Downs Housing (NDH), via 40% equity to Guildford Borough Council Holdings Limited (£5.7 million) (who in turn passed the equity to NDH) and 60% loan direct to NDH (£8.6 million) at a rate of base plus 5% (currently 5.1%).  The loan was a repayment loan in line with the NDH business plan.   

The Committee, having noted the corrections and clarifications to the report set out in the Supplementary Information Sheet circulated at the meeting,

RESOLVED: That the recommendations to the Executive and Council in respect of the Capital and Investment Strategy, as set out in the report submitted to the Committee, be endorsed.

Reason:

To enable the Council at its budget meeting on 10 February 2021, to approve

·        the capital and investment strategy for 2021-22 to 2025-26; and

·        the funding required for the new capital investment proposals.