Agenda item

The Board considered a draft report to the Corporate Governance and Standards Committee in respect of the Council’s Capital and Investment Strategy 2021-22 to 2025-26 which included recommendations to both the Executive and full Council, subject to the latter approving the budget at its meeting on 10 February 2021.  The report explained that the Strategy gave a high-level overview of how capital expenditure, capital financing and treasury management activity contributed to the provision of local public services together with an overview of how associated risk was managed and the implications for future sustainability.  Details of any new capital programme bids together with 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 Statutory Guidance were included in the report.

The related presentation by the Lead Specialist – Finance introduced and provided the context to the Capital and Investment Strategy and advised that although this report would normally be before the Board to invite it to review each new capital bid, no new capital bids had been received to date owing to the present financial constraints.  However, a new bid in respect of the Guildford Economic Regeneration Programme was expected.  A summary regarding the current capital programme focused on four schemes, namely, the Museum, public realm, Bike Share scheme and town centre gateway regeneration, which were recommended for deletion from the programme, where they had been included for some time, as the related business cases originally approved were no longer relevant and the schemes were now subject to the new governance process featuring new business cases outlining new remits.  This was not an indication that the schemes would not proceed at some point in the future if considered appropriate.  The Board’s attention was drawn to a detailed summary of the capital programme in the report and supporting appendices, the internal / external borrowing line and the liability benchmark which showed the overall net borrowing amount required for capital purposes and was split between the General Fund (GF) and Housing Revenue Account (HRA).

The Lead Councillor for Resources provided supplementary information and explanations advising that the report constituted a high level overview of Council expenditure covering both financing and treasury management together with the checks and balances utilised to ensure scrutiny and apposite financial control.

The underlying borrowing to fund the capital programme was approximately £400 million (m) and all projects would be funded by GF capital receipts, grants, contributions, reserves and borrowing with scope to utilise HRA funds.  The main areas of expenditure consisted of strategic property acquisitions (£24m), town centre transport schemes (£32m), Ash road bridge (£25m), North Downs Housing Limited and Guildford Borough Council Holdings Limited (£42m), Midleton Industrial Estate development (£14m) and Wisley Urban Village scheme (£265m).

In terms of treasury management, the budget for investment income in 2021-22 was £1.684m based on an average investment portfolio of £79.8m giving a typical return rate of 2.18%.  The budget for debt interest paid was £5.656m, of which £5.06m related to the HRA, where the majority of Council reserves lay.  Commercial assets had been valued at £153.4m in 2019/20 generating rent receipts of £8.4m providing a yield of 6.4%.

To enable the Council to approve the Capital and Investment Strategy for 2021-22 to 2024-25 and the funding required for the new capital investment proposals, the Joint EAB indicated its endorsement of the three following recommendations to the Executive set out in the report:

(1)         That the following schemes be removed from the capital programme because the remit of the schemes, if they were to proceed, would be different to the business case that was originally approved in the programme:

·              Museum £18.26m

·              Public realm £1.6m

·              Bike Share Scheme £530,000

·              Town centre gateway regeneration £3.473m

(2)         That should any of the schemes be moved forward in future, a new business case be presented to councillors.

(3)         That the affordability limit for schemes to be funded by borrowing be set as per paragraph 4.32 in Appendix 1 to the report.

The following points arose from related questions and discussion:

·             Notwithstanding the current economic downturn, partly due to COVID-19, the yield generated from the lease of the Council’s commercial property acquisitions was favourable largely due to the portfolio’s concentration on industrial units, which remained in demand, over office and retail elements.  The Commercial Property Team was thanked for its good work in this area.

·             It was difficult to anticipate the impact that Brexit might have on the Council’s Capital Investment Strategy and the local economy.  Although recent economic forecasts and anticipated fiscal growth rates regarding the United Kingdom were optimistic, the Council would need to monitor the situation carefully and respond accordingly to safeguard its financial position.

·             Significant demand from local businesses for start up premises in the Borough from which small companies could develop and expand had been observed and it was hoped that the Commercial Property Team was aware of this market trend.

·             The importance of engaging with, and supporting, local companies where possible was highlighted and acknowledged.