Consideration was given to report of the Director of Finance which 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, 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 2023/24 to 2027/28 took the essential elements of the 2022/23 to 2026/27 and previous years’ strategies and programmes and moved them forward in the context of the financial and political environment for 2023/24.
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 covered a timeframe for the 10 years from 2028/29 to 2037/38.
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; and
• The implications for future financial sustainability.
The Capital Strategy was presented at Appendix to the report. It was prepared in 15 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 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. This also incorporated the Medium-Term Property Strategy and Housing Strategy and aimed 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 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 transformation. The 2023/24 revenue budget would rely on up to £2.600m of such funding from capital receipts.
The 2022/23 month 8 capital monitoring position presented alongside this report included expenditure projections that were 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 Place and Economic Growth Directorate which managed all of the major regeneration projects, constituted 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 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 2023/24 to 2027/28
The Council had 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 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 met 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 2022/23 to 2026/27 strategy was £380.019m, taking 2022/23 aside (£59.113m) leaving £320.906m 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 total was £325.460m.
The capital programme included proposed expenditure for 2023/24 of £110.305m of which £83.936m, is the largest area of expenditure being on regeneration, transport and infrastructure projects within Place and Economic Growth Directorate. Total expenditure increases/decrease to £108.378m, £46.661m, £55.562m and £4.554m in 2024/25, 2025/26, 2026/27 and 2027/28 respectively.
The Government was continuing to provide significant levels of grant funding. The main sources of Capital grant income are the Levelling Up Fund £20.000m, 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), City Region Sustainable Travel Settlement (£4.470m) and estimated Local Transport Programme - Highway Maintenance Grant totals £17.986m 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 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 £29.696m 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 (£61.186m) included 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 was, 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 would be kept under review and any new information regarding funding allocations will be presented to Members in future reports.
Consultation
There has been consultation with the Members of the Capital Investment Programme Board on the proposed Capital Strategy and Capital Programme for 2023/24 to 2027/28. The consideration of the proposed Capital Strategy and Capital Programme for 2023/24 to 2027/28 by the Policy Overview and Scrutiny Committee on 26 January 2023 was a key element of the consultation process. The Committee was content to commend the report to Cabinet.
Option/alternatives considered
Option 1 - Cabinet accepts the proposed Capital Strategy and Capital Programme for 2023/24 to 2027/28
Option 2 - Cabinet suggests an alternative approach to capital investment for 2023/24 to 2027/28, including the revision of capital priority areas.
RESOLVED – That:
1. The Capital Strategy for 2023/24 to 2027/28 at Appendix 1 of this report and summarised at section 2.1 of the report be approved and commended to Council.
2. 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. of the report be approved and commended to Council.
3. The Flexible Use of Capital Receipts Strategy as presented at Annex D of Appendix 1 of the report of the report be approved and commended to Council.