Agenda item

To set out the Capital Strategy for 2023/24 to 2027/28 and thereby the proposed 2023/24 capital programme, including identified capital investment priorities, together with the indicative capital programme for 2024/25 to 2027/28.

Consideration was given to a report of the Director of Finance which sets out the Capital Strategy for 2023/24 to 2027/28 and thereby the proposed 2023/24 capital programme, including identified capital investment priorities, together with the indicative capital programme for 2024/25 to 2027/28, having regard to the resources available over the life of the programme.

 

The Council’s Capital Strategy and capital programme are set over a five year timeframe. The proposed Capital Strategy and programme for 2023/24 to 2027/28 takes the essential elements of the 2022/23 to 2026/27 and previous years’ strategies and programmes and moves them forward in the context of the financial and political environment for 2023/24. The Strategy does however include a longer-term vision, a forward look at those projects that are likely to run beyond the five year strategy and programme period or be initiated subsequently. This covers a timeframe for the 10 years from 2028/29 to 2037/38. The format of the Capital Strategy reflects the requirements of the latest Prudential and Treasury Management Codes issued by the Chartered Institute of Public Finance and Accountancy (CIPFA). The strategy therefore presents:

 

• 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; and

 • The implications for future financial sustainability. The Capital Strategy is presented at Appendix 1. It is prepared in 15 sections and ensures that Members are presented with the overall long-term capital investment policy objectives and resulting Capital Strategy requirements, governance procedures and risk appetite. The sections are:

 

1. Aims of the Capital Strategy and its links to the Council’s Corporate Plan and the Oldham Plan (Our Future Oldham), Creating a Better Place (CaBP) Programme, Medium Term Property Strategy (MTPS), Housing Strategy (HS) 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,

    UK Shared Prosperity Fund (UKSPF) and Decarbonisation 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 (CIPB)

 

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

 

Section 1 of the Capital Strategy highlights the aims of the Capital Strategy and its links to the Council’s Corporate Plan and the Oldham Plan (Our Future Oldham). This section of the report also describes more fully the Creating a Better Place programme (encompassing the Medium-Term Property Strategy and Housing Strategy) which is a significant element of the Council’s planned Capital Expenditure over the five-year period 2023/24 to 2027/28.

 

Annex C of Appendix 1 sets out the proposed capital expenditure and financing for the period covered by the Capital Strategy, 2023/24 to 2027/28

 

The Strategy also advises that the Council is proposing to continue the use the flexibility provided by the Government to use capital receipts to fund the revenue cost of 3 transformation. The 2023/24 revenue budget will rely on up to £2.600m of such funding from capital receipts.

 

The Strategy also advises that the Council is proposing to continue the use the flexibility provided by the Government to use capital receipts to fund the revenue cost of transformation. The 2023/24 revenue budget will rely on up to £2.600m of such funding from capital receipts.

 

Capital Programme 2022/23 to 2026/27

 

The 2022/23 month 8 capital monitoring position presented alongside this report includes expenditure projections that are a key determinant of the 2023/24 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 2022/23 is £59.113m. The People and Place Directorate which manages all of the major regeneration projects, constitutes the main area of expenditure. Grants and Other Contributions (£37.327m) followed by Prudential Borrowing provide the main source of financing (£15.533m).

 

Actual expenditure to 30 November 2022 was £29.531m (49.96% of the forecast outturn). This spending profile is in line with that in previous years, however the position will be kept under review and budgets will continue to be managed in accordance with forecasts.

 

Capital Programme 2023/24 to 2027/28

 

The Council has set out its capital programme for the period 2023/24 to 2027/28 based on the principles of the Capital Strategy. The Capital Programme and Capital Strategy have been influenced by the level of resources considered available. The level of prudential borrowing included reflects the financing available in the revenue budget, capital receipts align with forecasts and grant funding and other contributions are based on already notified allocations or best estimates at time of preparation. If additional resources become available, projects that meet the Council’s strategic capital objectives will be brought forward for approval.

 

As at the month 8 capital monitoring position, the anticipated expenditure over the five year life of the 2022/23 to 2026/27 strategy was £354.898m, taking 2022/23 aside (£59.113m) leaves £295.785m for the remainder of the approved 2023/24 to 2026/27 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 2023/24 to 2027/28 totals £300.335m.

 

The capital programme includes proposed expenditure for 2023/24 of £96.509m of which £71.148m, is the largest area of expenditure being on regeneration, schools, transport and infrastructure projects within Place and Economic Growth Directorate. Total expenditure increases/decrease to £98.838m, £44.872m, £55.562m and £4.554m in 2024/25, 2025/26, 2026/27 and 2027/28 respectively.

 

Resources Available to Support the Capital Programme

 

The Government is continuing to provide significant levels of grant funding. The main sources of grant income are the Towns Fund at £11.266m, along with Education-related Basic Need Capital grant provision of £4.662m over the life of the programme. There are also considerable resources allocated to the Council via the Greater Manchester Combined Authority (GMCA) including the Mayors Cycling and Walking Challenge Fund(£10.232m) and estimated Local Transport Programme - Highway Maintenance Grant totals £17.968m over the strategy period.

 

The grant funding provided by Government can 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 is un-ringfenced. Resources classified as ringfenced have to be utilised to finance particular categories of expenditure and therefore are restricted in their use. The 2023/24 capital programme relies on £18.668m of ringfenced and £10.853m of un-ringfenced grants.

 

As in previous years, a major source of financing remains prudential borrowing. The amount required in 2023/24 (£59.041m) includes borrowing attributed to schemes that have slipped from prior years as well as new borrowing associated with the regeneration programme. The timing of the borrowing is linked to the cash position of the Council and may therefore not mirror the spending/financing profile set out above.

 

 

 

 

On-going Review of the Capital Programme

 

There will be a continued review of capital spending requirements as the Council has further regeneration ambitions, but affordability and deliverability will be a key consideration in this regard. It is, however, possible that the capital position may change prior to the start of 2023/24 and during the year as:

• The outcome of specific grant bids may be announced during the last quarter of 2022/23.

 • The outcome of specific grant bids will be announced during 2023/24.

 • It is also likely that there will be new initiatives announced in 2023/24.

 • There may also be the opportunity to bid for additional funding.

 • The Council may identify other funding sources, including capital receipts, to finance additional capital expenditure.

 

Therefore, the overall capital programme position will be kept under review and any new information regarding funding allocations will be presented to Members in future reports.

 

Members were informed that the Strategy itself sets out how the Council’s Capital Expenditure and Capital financing and Treasury Management will contribute to the provision of services and also incorporates an overview of how risk is managed because in the context of the planned expenditure there is always an element of risk.

 

Referring to a question, Members were informed that the Council was still awaiting feedback on the XXX bid.

 

RESOLVED that the following be accepted and commended to Cabinet

 

i) The Capital Strategy for 2023/24 to 2027/28 at Appendix 1 of this report and summarised at section 2.1;

 

ii) The capital programme for 2023/24 and indicative programmes for 2024/25 to 2027/28 at Annex C of Appendix 1 and summarised at sections 2.2 to 2.6 of this report; and 

 

iii) The Flexible Use of Capital Receipts Strategy as presented at Annex D of Appendix 1.