Agenda item

The Leader introduced the report which detailed the capital programme and treasury management, i.e., how the Council deals with its borrowing and investment activities. In previous years, this information was incorporated within the revenue budget report to provide a holistic budget report.  However, there is now a requirement on all Councils to have a capital strategy which has resulted in the need for a separate report.

The Leader confirmed the Treasury Management Strategy and Capital Strategy are required to be approved by full Council.

The treasury strategy of the Council is closely aligned to the Council’s capital programme and spend; the report states that the revenue budget consequences arising from the borrowing requirements detailed in the report are included in the revenue budget and medium term financial projections as set out in the previous report to Cabinet.

The Leader confirmed the report and the strategies contained therein have been reviewed by the Audit Committee and the Committee’s comments are noted in the report. 

As mentioned at the start of the report, the Capital Strategy is a new requirement for all Councils, the content of the report is prescribed by regulation.  The strategy deals with: (i) the Council’s capital programme, (ii) the governance of that, (iii) commercialisation issues, an increasing feature across Local Government, (iv) the links between the Capital and Treasury Management strategies of the Council; the capital strategy required to take a long term view.  (The Strategy is at Appendix 2 of the report). 

The Cabinet report focuses on the capital programme element of the strategy both for the current programme and prospects for costs and funding beyond.

The current programme to 2022/23 amounts to £176m which represents very significant investment by the Council in the city and its infrastructure.  New schemes identified within the report:

·         New community hubs for delivering services

·         Better recycling facilities

·         New schools and expanded schools

·         Better and more local facilities for looked after children

·         More highways’ maintenance

·         Better broadband across the region

The report also confirmed the £17m headroom for further schemes.  There is a revenue cost increase to support this level of investment and this is built into the medium term financial projections in the revenue budget.

Beyond the period 2022/23, the report identified a challenging environment as costs to fund the programme increase into the future, this is before adding in more capital spend. This will need careful planning when developing the next programme.

The Council’s approach to commercialisation and generating income is being developed separately which will be reflected in the strategy in due course.  The strategy also identifies where demand for capital resources arise, which will require further development in how to bridge the gap between demand and available resources and bring forward solutions to address that.  Further work and development will need to be completed going forward, but the Leader was pleased to report that the Council had complied with the requirement to have the Strategy in place.

The Cabinet report deals with Treasury Management and sets out the various prudential indicators that the Council is required to set and adhere to.  It confirms that the Council will continue to internally borrow, but that internal borrowing will reduce as the limit of being internally borrowed has been reached; the spending of reserves, which enables the Council to be internally borrowed, will need to be replaced with real borrowing.  This will inevitably lead to further cost pressures in the future and this is explained in more detail in the report.  Whilst the end of internal borrowing is a significant change in the Council’s position – the overall Treasury Management strategy is consistent with the current and previous years’ approach.

The Leader confirmed the Council is due to re-finance its £40m Bond in April and this provides a saving opportunity as it will lead to a lower rate of borrowing.  The Head of Finance will work with the Council’s treasury advisers regarding further borrowing. 

With regard to investment, the Council will carry on investing surplus cash, mindful of security, liquidity and returns.  The parameters of the Council’s investment are set out in the report.

The report and the Capital and Treasury Management Strategies, in particular the borrowing limits, require the approval of full Council and the Leader asked her Cabinet colleagues to join her in recommending the report is now endorsed for passing to full Council.

Decision:

Cabinet agreed:

i)              To approve the updated current five-year capital programme ending 2022/23, and the current level of headroom available for future capital expenditure, noting the associated increased revenue costs within the current Medium Term Financial Projections for funding the cost of borrowing (MTFP) (Appendix 1 of the report);

ii)             To recommend to Council the first Capital Strategy for approval including Prudential Indicators and recommended borrowing limits coming from the capital programme; (Appendix 2 of the report);

iii)           To recommend to Council the Treasury Management Strategy and Treasury Management Indicators, the Investment Strategy and the Minimum Revenue Provision (MRP) for 2019/20. (Appendix 3 of the report).