Agenda item

The Council considered a report on the 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 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. This report therefore included details of the capital programme, including one new bid (Guildford Economic Regeneration Programme), plus the requirements of the Prudential Code and the investment strategy covering treasury management investments, commercial investments including the requirements of the Treasury Management Code and the Ministry of Housing, Communities and Local Government (MHCLG) Statutory Guidance.

The Council had an ambitious Corporate Plan and in order to achieve the targets within that, investment in assets was required, via capital expenditure. The Council had a current underlying need to borrow for the general fund capital programme of £400 million.   Some capital receipts or revenue streams may arise as a result of investment schemes but in most cases, these 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 would be cash-flow implications of the development schemes, where income would come in after the five-year time horizon and the expenditure 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 had been set and monitored each year, details of which were shown in Appendix 1 to the report.

The capital programme included several significant regeneration schemes, 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.

Details of the main areas of expenditure in the capital programme were set out in the report. The report included 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 policy and the Prudential Indicators. 

In relation to treasury management, 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 Council noted that 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 Council noted that local authorities 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).  Investment property was valued at £153.4 million 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 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 Capital and Investment Strategy 2021-22 to 2025-26 had also been considered by the Joint Executive Advisory Board at its meeting on 7 January 2021, by the Corporate Governance and Standards Committee at its meeting on 14 January 20201 and by the Executive on 26 January 2021.

Upon the motion of the Lead Councillor for Resources, Councillor Tim Anderson, seconded by the Leader of the Council, Councillor Joss Bigmore, the Council

RESOLVED:

(1)    That the General Fund capital estimates, as shown in Appendices 3 and 4 to the report submitted to the Council (current approved and provisional schemes), as amended to include the new capital bid in respect of the Guildford Economic Regeneration Programme, Appendix 5 (schemes funded from reserves) and Appendix 6 (s106 schemes), be approved.

(2)    That the Minimum Revenue Provision policy, referred to in section 5 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.

Reasons:

·       To enable the Council to approve the Capital and Investment strategy for 2021-22 to 2025-26

·       To enable the Council, at its budget meeting on 10 February 2021 to approve the funding required for the new capital investment proposals