Agenda item

A report that sets out the Capital Strategy for 2024/25 to 2028/29 and thereby the proposed 2024/25 capital programme, including identified capital investment priorities, together with the indicative capital programme for 2025/26 to 2028/29.

The Cabinet considered a report of the Director of Finance which set out the Capital Strategy for 2024/25 to 2028/29 and thereby the proposed 2024/25 capital programme, including identified capital investment priorities, together with the indicative capital programme for 2025/26 to 2028/29, having regard to the resources available over the life of the programme.

The report set out the Council’s Capital Strategy and capital programme over a five-year timeframe. The proposed Capital Strategy and programme for 2024/25 to 2028/29 took the essential elements of the 2023/24 to 2027/28 and previous years’ strategies and programmes and moved them forward in the context of the financial and political environment for 2024/25. The Strategy did include 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 2029/30 to 2038/39.

The format of the Capital Strategy reflected the requirements of the Prudential and Treasury Management Codes issued by the Chartered Institute of Public Finance and Accountancy (CIPFA). The strategy therefore presented:

a.    A high-level long-term overview of how capital expenditure, capital financing and treasury management activity contribute to the provision of services.

b.    An overview of how the associated risk is managed.

c.    The implications for future financial sustainability.

The Capital Strategy was presented at Appendix 1, to the report. It was prepared in 14 sections and ensured 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. The 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. Affordability, Delivery and Risk Associated with the Capital Strategy

5. Knowledge and Skills

6. Treasury Management

7. Long Term Loans

8. Other Non-Treasury Investments

9. Capital Resources to Support Capital Expenditure

10. Capital Investment and Disposal Appraisal

11. The Prioritisation of Capital Requirements

12. The Procurement of Capital Projects

13. The Measurement of the Performance of the Capital Programme

14. The Capital Investment Programme Board (CIPB).

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 is 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, aiming 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 highlighted 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 2024/25 to 2028/29. Annex C of Appendix 1 set out the proposed capital expenditure and financing for the period covered by the Capital Strategy, 2024/25 to 2028/29.

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 2024/25 revenue budget will utilise up to £2.600m of such funding from capital receipts.

The 2023/24-month-8 capital monitoring position presented alongside this report included expenditure projections that were a key determinant of the 2024/25 programme. The projected outturn spending position for 2023/24 is £78.633m. The Place and Economic Growth Directorate, which managed all of the major regeneration projects, constitutes the main area of expenditure. Prudential Borrowing provides the main source of financing (£40.644m) followed by Grants and Other Contributions (£29.069m).

Actual expenditure, to 30^th November 2023, was £46.267m (58.84% of the forecast outturn), a higher spending profile than that in previous years. The position will be kept under review and budgets will continue to be managed in accordance with forecasts.

The Council has set out its capital programme for the period 2024/25 to 2028/29 based on the principles of the Capital Strategy. The Capital Programme and Capital Strategy were 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 the 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 the anticipated capital expenditure over the five-year life of the 2023/24 to 2027/28 strategy was £332.173m, taking 2023/24 aside (£78.633m) this leaves £253.540m for the remainder of the approved 2024/25 to 2027/28 capital programme. The capital programme includes proposed expenditure for 2024/25 of £99.683m of which the largest category is £83.226m of expenditure on regeneration, schools, transport and infrastructure projects within Place and Economic Growth Directorate. Total expenditure decreases to £81.076m, £34.838m, £35.640m and £2.000m in 2025/26, 2026/27, 2027/28 and 2028/29 respectively.

The Government is continuing to provide significant levels of grant funding. The main sources of grant income are the Towns Fund at £11.808m, Levelling Up Fund Grant of £18.273m, along with Future High Street Fund grant of £7.656m 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 (£6.847m) and estimated Local Transport Programme - Highway Maintenance Grant which totals £14.292m 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 9 of the Capital Strategy. The majority of capital Government Grant funding is ringfenced. Resources classified as ringfenced must be utilised to finance categories of expenditure and therefore are restricted in their use. The 2023/24 capital programme relies on £33.506m of ringfenced and £10.145m of un-ringfenced grants.

As in previous years, a major source of financing remains prudential borrowing. The amount required in 2024/25 (£49.638m) 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.

There was to 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 was, however, possible that the capital position may change prior to the start of 2024/25 and during the year:

a.    The outcome of specific grant bids may be announced during the last quarter of 2023/24.

b.    The outcome of specific grant bids announced during 2024/25.

c.    It is also likely that there will be new initiatives announced in 2024/25.

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

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

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

There had been consultation with the members of the Capital Investment Programme Board on the proposed Capital Strategy and Capital Programme for 2024/25 to 2028/29. The proposed Capital Strategy and Capital Programme for 2024/25 to 2028/29 was presented to, and considered by the Governance, Strategy and Resources Scrutiny Board’s meeting on 25^th January 2024, which formed a key element of the consultation process. The Board was content to commend the report to Cabinet. Any, subsequent comments from Cabinet members will be incorporated into the report presented to Council on 28^th February 2024.

Options/Alternatives considered:

1.    That Members accept the proposed recommendations of Capital Strategy and Capital Programme for 2024/25 to 2028/29, Treasury Management indicators and MRP policy.

2.    That Members suggest an alternative approach to capital investment for 2024/25 to 2028/29, including the revision of capital priority areas.

Resolved:

That Cabinet approves and commend to Council:

1.    The Capital Strategy for 2024/25 to 2028/29 at Appendix 1 of this report and summarised at section 2.1 of the report.

2.    The capital programme for 2024/25 and indicative programmes for 2025/26 to 2028/29 at Annex C of Appendix 1 and summarised at sections 2.2 to 2.6 of the submitted report.

3.    The Flexible Use of Capital Receipts Strategy as presented at Annex D of Appendix 1, to the submitted report.

4.    The Minimum Revenue Provision (MRP) Policy Statement 2024/25 and method of calculation and Prudential Indicators detailed in Appendix 2, to the submitted report.