Decision status: For Determination
Is Key decision?: No
Is subject to call in?: Yes
Consideration was given to a report of the Director of Finance which set out the Capital Strategy for 2020/21 to 2024/25 and thereby the proposed 2020/21 capital programme, including identified capital investment priorities, together with the indicative capital programme for 2021/22 to 2024/25, having regard to the resources available over the life of the programme.
The Council’s Capital Strategy and Capital Programme were set over a five-year timeframe. The proposed Capital Strategy and Programme for 2020/21 to 2024/25 took the essential elements of the 2019/24 and previous years’ strategies and programmes and moved them forward in the context of the financial and political environment for 2020/21.
The Strategy also included a longer-term vision, a forward look at those projects that were likely to run beyond the five-year strategy and programme period or be initiated subsequently. This covered a timeframe for the 10 years from 2025/26 to 2034/35.
The format of the Capital Strategy reflected the requirements of the latest Prudential and Treasury Management Codes issued by the Chartered Institute of Public Finance and Accountancy (CIPFA). The Strategy therefore presented:
• A high-level long-term overview of how capital expenditure, capital financing and treasury management activity contribute to the provision of services
• An overview of how the associated risk is managed
• The implications for future financial sustainability
The Capital Strategy ensured that all Council Members were presented with the overall long-term capital investment policy objectives and resulting Capital Strategy requirements, governance procedures and risk appetite. The Strategy incorporated the refreshed and updated elements of the Medium-Term Property Strategy, the Creating a Better Place Strategy, Commercial Property Investment Strategy and Fund, Housing Strategy and Income Strategy. The Strategy also advised that the Council was proposing to continue the use of the flexibility provided by the Ministry of Housing, Communities and Local Government (MHCLG) to use capital receipts to fund the revenue cost of transformation. The 2020/21 revenue budget would rely on up to £3.750m of such funding from capital receipts.
Members were informed that the projected outturn spending position for 2019/20 was £63.945m. The People and Place Directorate, which managed all of the major regeneration projects, constituted the main area of expenditure (£33.406m). Ringfenced and Un-ringfenced grants (£29.888m) followed by Prudential Borrowing provided the main source of financing (£18.967m). Actual expenditure to 30 November 2019 was £33.031m (51.63% of forecast outturn). This spending profile was in line with previous years, the position would be kept under review and budgets would continue to be managed in accordance with forecasts.
The Council had set out its Capital Programme for the period 2020/21 to 2024/25 based on the principles of the Capital Strategy. The Capital Programme and Capital Strategy had been influenced by the level of resources considered available at the time of preparation. If additional resources became available, projects that met the Council’s strategic capital objectives would be brought forward for approval.
The Capital Strategy 2020/21 to 2024/25 had seen a significant increase in the level of investment compared to that previously projected. This was due to the incorporation of the spending plans associated with the recently approved Creating a Better Place strategy which encompassed housing initiatives together with town centre and borough wide regeneration. It also includes the findings of the independent review of the Medium-Term Property Strategy.
The Capital Strategy reflected the refreshed Commercial Property Investment Strategy and the Income Strategy as well as the approved Housing Strategy.
Members were informed that, as at the month 8 capital monitoring position, the anticipated expenditure over the five year life of the 2019/20 to 2023/24 strategy was £272.939m, taking 2019/20 aside (£63.945m) leaves £208.994m for the remainder of the approved 2020/21-2023/24 Capital Programme. Following the approval of the new and refreshed strategies including Creating a Better Place, and moving forward the planning period by one year, the Capital Strategy for 2020/21 to 2024/25 totalled £479.108m. A significant increase in investment to deliver change for Oldham was therefore evident.
A review of the Capital Programme had highlighted that there was already a full range of commitments for the period 2020/21 to 2024/25 but additional funding allocations totalling £270.114m had been added to support the ambitious regeneration programme.
The Capital Programme included proposed expenditure for 2020/21 of £147.159m, with the largest area of expenditure being on regeneration, transport and infrastructure projects within the People and Place Directorate. Total expenditure decreased to £131.467m in 2021/22, then to £102.510m and £40.999m in 2022/23 and 2023/24 respectively, and in the final year of the current programme 2024/25 spend increased to an estimated £56.973m.
The Government continued to provide significant levels of grant funding, after an initial reduction at the start of the austerity period. The main source of grant income remained education-related with Basic Need Capital grant funding allocations totalling £25.535m over the life of the programme. The 2020/21 capital programme relied on £22.031m of unringfenced and £11.209m of ringfenced grants
As in previous years, a major source of financing remained prudential borrowing. The amount required in 2020/21 (£99.070m) included borrowing attributed to schemes that had slipped from prior years and the new borrowing associated with the regeneration programme. It was expected that £30m of this prudential borrowing would be financed by income provided from property acquisition and investment. In addition, the timing of the borrowing was linked to the cash position of the Council and may therefore not mirror the spending/financing profile as set out.
The Cabinet noted there would be a continued review of capital spending requirements as the Council had further regeneration ambitions but affordability and deliverability would be key considerations in this regard. It was possible that the capital position may change prior to the start of 2020/21 and during the year. The overall Capital Programme position would be kept under review and any new information about funding allocations would be presented to Members in future reports.
Members could choose to accept the proposed Capital Strategy and Capital Programme or revise and suggest an alternative approach to capital investment including the revision of capital priority areas.
RESOLVED - That the Cabinet accepted and commended to Council:
Publication date: 11/02/2020
Date of decision: 10/02/2020
Decided at meeting: 10/02/2020 - Cabinet
Effective from: 19/02/2020