Agenda item

The Leader Introduced the annual report focusing on the Council’s capital expenditure plans, the financial impact of those in terms of borrowing, and investment strategy for the year.

It was important to note that full Council ultimately approved the borrowing limits and prudential indicators contained within the report. Cabinet however, were requested to approve the detailed capital programme itself.

It was also important to note that the Governance and Audit Committee also considered the report in their most recent meeting and provided comments. In this case, their comments simply endorsed the proposed strategies, with no concerns raised.

In terms of the report itself, there were a number of key points highlighted:

§  The Council was entering a new capital programme window, with the current programme ending in March of this year and a new five-year programme taking effect from April.

§  Previously, the programme was reviewed once every five years, however the proposal was to move to a rolling approach to capital programme management, meaning that the overall programme, and borrowing affordability, be reviewed annually.

§  This change would introduce more flexibility in managing the programme and was accompanied by strengthened governance arrangements, detailed in the report.

§  Because of the extremely challenging financial context, the proposed programme contained only ongoing and previously approved schemes, which were being carried forward from the existing programme, and annual sums, which included activities such as annual asset maintenance and fleet renewal.

§  Whilst there were no new schemes being included, the programme, especially in years 1 and 2, was still significant and contained a number of the Cabinet’s highest priority schemes.

§  Due to the affordability challenges, there was no new borrowing headroom included in the strategy, meaning that capital headroom (used to pursue new schemes or address cost increases on existing schemes) was limited. As a result, every opportunity needed to be taken to boost the headroom via one-off sources to continue to respond to emerging pressures as and when they arose.

§  Whilst there was no new borrowing included in this programme, previously approved borrowing would be incurred over the next few years, increasing the overall Capital Financing Requirement and the Council’s level of debt.

§  The borrowing limits proposed took this into account and the revenue consequence of additional borrowing (e.g. interest payable on loans) was already budgeted for, following a budget investment made in 2021/22. The programme proposed was therefore affordable, prudent and sustainable.

§  In terms of Treasury Management, the report detailed the Council’s approach to borrowing and investing.

§  It confirmed that the Council would pursue an internal borrowing strategy, using available cash resources to defer external borrowing for as long as possible, and would only undertake borrowing in advance of need where there was a clear financial rationale for doing so.

§  For investing, the Council would continue to prioritise security, liquidity and yield, in that order strike an appropriate balance between risk and return.

§  A minimum investment balance of £10m was required and longer term investments, often with a higher return, would continue to be explored.

The Head of Finance commentary within the covering report directly addressed the question of affordability, prudence and sustainability and confirmed that the proposed strategy and programme met all of those criteria.

Comments of Cabinet Members:

§  Councillor D Davies welcomed the new capital strategy and it’s ten-year context as there was so much change, the annual review was a good way forward. It was also good news that the Band B Capitol programme would also be completed.

Decision:

That Cabinet recommend to Council for approval

§  The Capital Strategy (Appendix 2), including the proposed Capital Programme within it (shown separately in Appendix 1), and the borrowing requirements/limits needed to deliver the proposed programme.

§  The Treasury Management Strategy and Treasury Management Indicators, the Investment Strategy and the Minimum Revenue Provision (MRP) policy for 2023/24. (Appendix 3)

As part of the above, Cabinet

§  Noted the increasing debt, and corresponding revenue cost of this, in delivering the new Capital Programme, and the implications of this over both the short and medium-long term with regard to affordability, prudence and sustainability.

§  Noted the Head of Finance comments that borrowing needed to be limited to that required to fund ongoing and previously approved schemes brought forward from the current Capital Programme only, and the recommended prudential indicators on borrowing limits to achieve this.

§  Noted and commented on the proposal to prioritise annual sums funding over any new schemes, unless unavoidable. 

Noted the feedback provided by the Governance and Audit Committee on 26 January 2023 (paragraph 5).