Agenda item

The Presiding Member invited the Leader to introduce the report.

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

It was important to note that, although Cabinet approved the detail capital programme, full Council ultimately approved the borrowing limits and prudential indicators contained within the report.

The Governance and Audit Committee have 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.

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

Whilst the programme was reviewed once every five years, it was proposed to move to a rolling approach to capital programme management, meaning that the overall programme, and borrowing affordability, was to be reviewed annually.

The change would introduce more flexibility in managing the programme, accompanied by strengthened governance arrangements, detailed in the report.

Due to the extremely challenging financial context, the proposed programme contained only ongoing and previously approved schemes, which were carried forward from the existing programme, and annual sums, including activities such as annual asset maintenance and fleet renewal.

Because of 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.

It was important for Council to note that, whilst there was no new borrowing included in the programme, previously approved borrowing would be incurred over the next few years, this increased the overall Capital Financing Requirement and the Council’s level of debt. The borrowing limits proposed in the report, which Council was required to approve today, took account of this.

In addition, the revenue consequence of additional borrowing (eg interest payable on loans) was already budgeted for, following a budget investment made in 2021/22.

It was vital that the proposed strategy was affordable, prudent, and sustainable. The fact that the revenue budget required to pay capital financing costs confirmed that the strategy was affordable.

Prudence could be achieved by ensuring that the level of capital expenditure being incurred was proportionate in the context of the overall budget.  Additionally, the recommended borrowing limits aligned with the broader capital expenditure plans.

Sustainability was achieved by ensuring that the long-term commitment to incur capital financing costs was reflected within the medium-term financial plan and the necessary revenue funding was in place for the duration of the financial commitment.

In terms of Treasury Management, the report detailed the Council’s approach to borrowing and investing. An internal borrowing strategy would still be pursued by using available cash resources to defer external borrowing for as long as possible. Borrowing would only be undertaken in advance of need where there was a clear financial rationale for doing so.

For investing, the Council continued to prioritised security, liquidity, and yield, in that order and would 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 continued to be explored.

It was important that close attention was paid to the Head of Finance commentary within the covering report, which directly addressed the question of affordability, prudence and sustainability and confirmed that the proposed strategy and programme met all the criteria.

The report was seconded by Councillor Davies.

Comments from Councillors:

§  Councillor D Davies welcomed the new strategic plan, particularly as it meant adopting a simple approach for annual review giving the current difficult financial context. As Cabinet Member for Education and Early Years, Councillor D Davies was excited to see the plan for school improvement would continue to be delivered.

Resolved:

That Council unanimously

§  Approved the Capital Strategy (Appendix 2), which incorporated the approved capital programme, and the borrowing requirements/limits needed to deliver the approved programme.

§  Approved 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:

·          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 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).