Agenda item

The report allows the Audit and Governance Committee to consider and comment on the Council’s Capital Strategy 2019/20 to 2021/22 before adoption by Full Council.

The Financial Services Manager reiterated that this was the first year that the Council had had to provide a Capital Strategy which would develop over time.

In presenting this report, the Financial Services Manager drew Members’ attention to some key points:

§  The aim of this Strategy was to balance capital expenditure needs and expectations with the limited resources available to the Council.

§  It formed the framework for capital investment decisions over the next three years and was closely linked to the Treasury Management Strategy; the Investment Strategy and the Borrowing Strategy.

§  Whole life costing for Capital Schemes was required when making capital expenditure decisions by the Council. This meant that any appraisal of a proposed capital project would need to consider not just the initial capital cost but all costs and income streams associated with the project, that were likely to occur in future years, including possible replacement or disposal costs. This was vital to ensure that the Council was not committing itself to future liabilities that were unsustainable.

§  Capital expenditure was funded from a variety of sources all of which were extremely limited.

§  There were separate capital programmes for the GF and HRA as they were separate funds.

§  Housing Revenue Account (HRA) capital programme for 2019/20 and 2021/22 was driven by the approved HRA Business Plan. One of the key priorities of this Plan was the acquisition of 250 new dwellings over the 10 year life of the Plan. This would be funded from ‘1 for 1’ Right to Buy receipts (30%) and borrowing (70%). However a recently published Government consultation paper proposed a number of changes to the way that retained Right to Buy receipts could be used and so it was outlined that this could have significant implications for the planned programme.

§  The Council had a core annual programme for the General Fund (GF) which included asset management (all non HRA assets), Information Technology and Disabled Facilities Grants (DFG’s). DFG’s paid for essential adaptations to help people with disabilities to stay in their own homes – this was entirely funded by Government Grant whereas the Asset Management and Information Technology programmes were funded by revenue contributions.

§  As with other local authorities Arun was facing a challenging financial climate and so it was therefore essential that systems were in place to ensure that scarce resources were allocated in the most effective way.  High priority would be given to the replacement of business critical IT systems and all new schemes would be subject to rigorous appraisal and would require a sound business case.

     Possible sources of funding for capital schemes were:

§  Grants

§  Section 106 contributions

§  Capital receipts

§  Direct Revenue contributions

§  Borrowing

§  Looking at specific resource issues, Grants and Section 106 contributions were generally used to fund specific capital schemes linked to the conditions imposed by the relevant grant or Section 106 contribution. There was little latitude in the way this funding could be applied. It was the Council’s Policy to use capital receipts to support the General Fund capital programme. A specified proportion of these receipts would be earmarked for the Property investment Fund (PIF). With the exception of 1 for 1 Right to Buy Receipts which could only be used for new social housing. Revenue contributions were a flexible source of funding, but they could put an immediate strain on the General Fund balance and therefore should only be used to a limited extent. Borrowing would spread the cost over a number of years, however loan servicing costs and the overall level of debt exposure needed to be considered and clearly flagged in a business case.

The Chairman referred Members to Section 1.2 of the report as this allowed authorities to delegate the detailed management of Treasury Management, including this Strategy, to a Sub-Committee.  This responsibility had now been delegated to the Audit and Governance Committee facilitating more active discussion of this Strategy and its implementation, however pointing out that overall responsibility would at all times remain with Full Council.

In considering the report, there was some discussion on the Property Investment Fund and it was agreed by the Committee that as the Property Estates Manager was not present at this this meeting that a detailed update should be submitted to a future meeting of the Committee. 

The Committee then

RECOMMEND TO FULL COUNCIL

That the Capital Strategy 2019/20 to 2021/21 be approved.