Agenda item

A report setting out the Capital Strategy for 2025/26 to 2029/30 together with the indicative capital programme for 2026/27 to 2029/30.

The Cabinet considered a report of the Assistant Director of Finance which set out the Capital Strategy for 2025/26 to 2029/30 and thereby the proposed 2025/26 capital programme, including identified capital investment priorities, together with the indicative capital programme for 2026/27 to 2029/30, having regard to the resources available over the life of the programme.

The Cabinet was informed that the Council’s Capital Strategy and capital programme were set over a five-year timeframe. The proposed Capital Strategy and programme for 2025/26 to 2029/30 takes the essential elements of the 2024/25 to 2028/29 and previous years’ strategies and programmes and moves them forward in the context of the financial and political environment for 2025/26. The Strategy does however include a longer-term vision, a forward look at those projects that are likely to run beyond the timeframe of the five-year strategy and programme period or be initiated subsequently. This covered a timeframe for the 10 years from 2030/31 to 2039/40. 

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 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.

·         The implications for future financial sustainability.

The Capital Strategy was presented at Appendix 1, to the report. It had been 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 are:

1.    The Capital Strategy linked to the Council’s Corporate Plan (Ready for the Future), the Oldham Plan (Pride, Progress, Partnership), 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 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, 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 (Ready for the Future) and the Oldham Plan (Pride, Progress, Partnership). 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 2025/26 to 2029/30.

Annex C of Appendix 1, to the report set out the proposed capital expenditure and financing for the period covered by the Capital Strategy, 2025/26 to 2029/30.

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 2025/26 to 2029/30 revenue budget will utilise up to £2.600m in 2025/26 and up to £2.000m of such funding from capital receipts in each subsequent financial year.  

The 2024/25-month 9 capital monitoring position presented alongside this report includes expenditure projections that are a key determinant of the 2025/26 programme. The projected outturn spending position for 2024/25 is £87.261m. The Place and Economic Growth Directorate, which manages all of the major regeneration projects, constitutes the main area of expenditure. Prudential Borrowing (£47.566m) provides the main source of financing, followed by Grants and Other Contributions (£32.584m). 

Actual expenditure to 31^st December 2024 was £53.478m (61.23%) of the forecast outturn), a lower 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 2025/26 to 2029/30 based on the principles of the Capital Strategy. The Capital Programme and Capital Strategy are 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 month 9, the anticipated capital expenditure over the five-year life of the 2024/25 to 2028/29 strategy was £262.077m, taking 2024/25 aside (£87.260m), this leaves £174.817m for the remainder of the approved 2025/26 to 2028/29 capital programme.  

The revised capital programme includes proposed expenditure for 2025/26 of £108.501m, of which the largest category is £80.617m of expenditure on regeneration, schools, transport and infrastructure projects within Place and Economic Growth Directorate. Total expenditure decreases to £29.991m, £29.680m, £ 6.647m and £5.219m in 2026/27, 2027/28, 2028/29 and 2029/30 respectively.

The Government is continuing to provide significant levels of grant funding. The main sources of grant income are the Levelling Up Fund Grant of £17.763m, Towns Fund at £10.235m, along with Green Heat Network Fund of £7.700m. There are also considerable resources allocated to the Council for Transport related schemes (£17.189m) via the Greater Manchester Combined Authority (GMCA)/Transport for Greater Manchester (TfGM).

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 particular categories of expenditure and therefore are restricted in their use. The 2025/26 capital programme relies on £52.250m of ringfenced and £8.449m of un-ringfenced grants.

Contrary to previous years, the major source of financing is now grant funding and contributions (£60.800m) followed by prudential borrowing (£39.855m), demonstrating a reduced reliance on external borrowing and reducing the impact to the revenue budget. 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 will be a continued review of capital spending requirements as the Council has further Capital investment 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 2025/26 and during the year due to:

•      The outcome of specific grant bids may be announced during the last quarter of 2024/25.

•      The outcome of specific grant bids announced during 2025/26.

•      It is also likely that there will be new initiatives announced in 2025/26.

•      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 Cabinet Members in future reports. 

Options/Alternatives considered:

There were two options that the Cabinet were asked to consider:

A.   To accept the proposed recommendations of Capital Strategy and Capital Programme for 2025/26 to 2029/30, Flexible Use of Capital Receipts Policy, Treasury Management Indicators, and MRP policy.

B.   Suggest an alternative approach to capital investment for 2025/26 to 2029/30, including the revision of capital priority areas.

The preferred Option was A – that the  Cabinet accept the proposed Capital Strategy and Capital Programme for 2025/26 to 2029/30, Treasury Management indicators and MRP policy. 

Resolved:

That the Cabinet approve and commend to Council:

1.    The Capital Strategy for 2025/26 to 2029/30 at Appendix 1 of this report and summarised at section 2.1 of the report.

2.    The capital programme for 2025/26 and indicative programmes for 2026/27 to 2029/30 at Annex C of Appendix 1, to the report and summarised at sections 2.2 to 2.5 of this report.

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

4.    The Minimum Revenue Provision (MRP) Policy Statement 2025/26 and method of calculation and Prudential Indicators detailed in Appendix 2, to the report.