Agenda item

Consideration was given to a report of the Director of Finance which set out the Capital Strategy for 2022/23 to 2026/27 and thereby the proposed 2022/23 capital programme, including identified capital investment priorities, together with the indicative capital programme for 2023/24 to 2026/27, having regard to the resources available over the life of the programme.

The Capital Strategy

The Council’s Capital Strategy and capital programme were set over a five year timeframe. The proposed Capital Strategy and programme for 2022/23 to 2026/27 took the essential elements of the 2021/22 to 2025/26 and previous years’ strategies and programmes and moved them forward in the context of the financial and political environment for 2022/23.

The Strategy 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 covers a timeframe for the 10 years from 2027/28 to 2036/37.

The format of the Capital Strategy reflected 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 was managed; and

• The implications for future financial sustainability.

The Capital Strategy was presented at Appendix 1. It was prepared in 15 sections to ensure that Members were presented with the overall long-term capital investment policy objectives and resulting Capital Strategy requirements, governance procedures and risk appetite.

The sections were:

1. Aims of the Capital Strategy and its links to the Council’s Corporate Plan / COVID-19 Recovery Strategy, Creating a Better Place programme, Medium Term Property Strategy, Housing Strategy and Budget and Policy Framework

2. The Principles of the Capital Strategy

3. Priority Areas for Investment

4. Supporting Greater Manchester Devolution and Accessing Levelling Up and Shared Prosperity Fund Resources

5. Affordability, Delivery and Risk Associated with the Capital Strategy

6. Knowledge and Skills

7. Treasury Management

8. Long Term Loans

9. Other Non-Treasury Investments

10. Capital Resources to Support Capital Expenditure

11. Capital Investment and Disposal Appraisal

12. The Prioritisation of Capital Requirements

13. The Procurement of Capital Projects

14. The Measurement of the Performance of the Capital Programme

15. The Capital Investment Programme Board

The Strategy was aligned with the Creating a Better Place programme which was focused on building more homes for the borough’s residents, creating new jobs through regeneration and ensuring Oldham was a great place to visit with lots of family friendly and accessible places to go. This also incorporated the Medium-Term Property Strategy and Housing Strategy and aimed to deliver its ambition in ways that contributed to a reduction in carbon emissions in support of the Council’s Green New Deal strategy.

Section 1 of the Capital Strategy highlighted the impact of the COVID-19 pandemic on programme delivery, summarises the recently announced revisions to Prudential and Treasury Management Codes of Practice and describes how the Capital Strategy is shaped by the ethos of being a Co-operative Council, the Corporate Plan and COVID-19 Recovery Strategy. This section of the report also described more fully the Creating a Better Place programme (encompassing the Medium-Term Property Strategy and Housing Strategy) which accounts for around 2/3rds of planned Capital Expenditure over the five-year period 2022/23 to 2026/27.

The National Infrastructure Strategy (NIS) published alongside the Chancellor’s 2020 Spending Review has, in the last year, overseen the launch of the UK Infrastructure Bank; confirmed a further 15 Towns Deals worth £335 million (including Oldham’s worth £24.4m) to revitalise towns across England; and provided £1.2 billion up to 2024/25 for gigabit broadband rollout across the UK.

The Council would aim to access the maximum level of NIS resources to support projects in Oldham and the wider Greater Manchester region, working with the Greater Manchester Combined Authority (GMCA) and other GM Authorities as necessary

Annex C of Appendix 1 set out the proposed capital expenditure and financing for the period covered by the Capital Strategy, 2022/23 to 2026/27.

The Strategy also advised that the Council was proposing to continue the use the flexibility provided by the Government to use capital receipts to fund the revenue cost of transformation. The 2022/23 revenue budget would rely on up to £2.500m of such funding from capital receipts. Annex D of Appendix 1 presents the Flexible Use of Capital Receipts Strategy.

Capital Programme 2021/22 to 2025/26

The 2021/22 month 8 capital monitoring position presented alongside this report included expenditure projections that are a key determinant of the 2022/23 programme. As many schemes span more than one year, the anticipated level of reprofiling between years sets the underlying position.

The projected outturn spending position for 2021/22 was £52.558m. The People and Place Directorate which managed all of the major regeneration projects, constituted the main area of expenditure. Grants and Other Contributions (£19.850m) followed by Prudential Borrowing provided the main source of financing (£26.294m).

Actual expenditure to 30 November 2021 was £23.801m (45.29% of the forecast outturn). This spending profile was in line with that in previous years, however the position would be kept under review and budgets would continue to be managed in accordance with forecasts.

Capital Programme 2022/23 to 2026/27

The Council had set out its capital programme for the period 2022/23 to 2026/27 based on the principles of the Capital Strategy. The Capital Programme and Capital Strategy had been influenced by the level of resources considered available. The level of prudential borrowing included reflected the financing available in the revenue budget, capital receipts align with forecasts and grant funding and other contributions were based on already notified allocations or best estimates at time of preparation. If additional resources became available, projects that meet the Council’s strategic capital objectives would be brought forward for approval.

As at the month 8 capital monitoring position, the anticipated expenditure over the five year life of the 2021/22 to 2025/26 strategy was £368.705m, taking 2021/22 aside (£52.558m) leaves £316.147m for the remainder of the approved 2022/23 to 2025/26 capital programme. Following the refresh of existing strategies and the Creating a Better Place programme, and moving forward the planning period by one year, the Capital Strategy for 2022/23 to 2026/27 totalled £347.387m.

The capital programme included proposed expenditure for 2022/23 of £100.248m of which £81.465m, was the largest area of expenditure being on regeneration, schools, transport and infrastructure projects within the People and Place Directorate. Total expenditure decreased to £86.993m, £64.253m, £48.810m and £47.083m in 2023/24, 2024/25, 2025/26 and 2026/27 respectively.

Resources Available to Support the Capital Programme

The Government was continuing to provide significant levels of grant funding. The main sources of grant income were the Towns Fund at £24.400m (£24.200m over the period 2022/23 to 2026/27), along with Education-related Basic Need Capital grant provision of £10.104m over the life of the programme. There were also considerable resources allocated to the Council via the GMCA including the Mayors Cycling and Walking Challenge Fund (£10.125m in 2022/23) and Local Transport Programme - Highway Maintenance Grant totals £14.812m over the strategy period.

The grant funding provided by Government could be split into two categories: un-ringfenced and ringfenced resources, as explained in Section 10 of the Capital Strategy. The majority of capital Government Grant funding was un-ringfenced. Resources classified as ringfenced have to be utilised to finance particular categories of expenditure and therefore are restricted in their use. The 2022/23 capital programme relies on £11.714m of un-ringfenced and £33.787m of ringfenced grants.

As in previous years, a major source of financing remained prudential borrowing. The amount required in 2022/23 (£46.990m) includes borrowing attributed to schemes that had been reprofiled from prior years as well as new borrowing associated with the regeneration programme. The timing of the borrowing was linked to the cash position of the Council and may therefore not mirror the spending/financing profile set out above.

There will be a continued review of capital spending requirements as the Council had further regeneration ambitions, but affordability and deliverability would be a key consideration in this regard.

Options/alternatives considered

Option 1 - Cabinet accepts the proposed Capital Strategy and Capital Programme for 2022/23 to 2026/27 and commends it to Council

Option 2 - Cabinet suggests an alternative approach to capital investment for 2022/23 to 2026/27, including the revision of capital priority areas.

RESOLVED - That Cabinet approved and commended to Council the:

1.    The Capital Strategy for 2022/23 to 2026/27 at Appendix 1 of this report and summarised at section 2.1.

2.    The capital programme for 2022/23 and indicative programmes for 2023/24 to 2026/27 at Annex C of Appendix 1 and summarised at sections 2.2 to 2.6 of this report.

3.    The Flexible Use of Capital Receipts Strategy as presented at Annex D of Appendix