The Five-Year Capital Programme 2022/23 to 2026/27
Capital Programme and Core Major Asset Plan
The Council strategically manages its operational properties through the Core and Major Asset Plan. The Council's operational properties include office accommodation, depots, yards and venues such as the markets and open space facilities. In addition, the City has a Victorian legacy of the Grade I listed Harris Museum, cemetery, urban parks and dock estate.
The Core and Major Asset Plan is informed by regular stock condition surveys to establish a rolling programme of improvement and refurbishment. In addition, we have a major repairs programme. Both of these take account of the need for efficiency and environmental impact issues.
The Council has an investment property portfolio managed to generate income to support the revenue budget and maximise opportunities for regeneration. Performance of this portfolio is reported quarterly to the Cabinet Member. Further details can be found in the investment strategy and the capital strategy.
The Council has a five-year programme; however, the core and major asset programme extends over 10 years. There is a significant amount of capital expenditure required in the future which is outside the current programme.
Background to the Capital Programme
The Council has a five-year capital-spending programme. The programme includes capital expenditure scheduled for the Council's operational assets. The Council ensures all capital expenditure is directly linked to the Council's priorities, affordable and delivered through key corporate projects. Any spend on the Council's operational assets is scheduled in line with the Council's Core Major Asset Plan.
Expenditure in respect of grants or financial assistance is included if the nature of expenditure, when incurred by the Council, is classed as capital expenditure.
Capital expenditure is usually of a one-off nature; it can be a significant amount and can span over a number of financial years. Examples of capital schemes include the purchase and installation of a new lift or major construction works that includes extending the life of a building e.g. new waterproof roof. Other examples include the purchase of a new vehicle or the refurbishment of a park and open space.
The Capital Programme is updated continually for agreed changes and reported to the Cabinet Member (Resources and Performance) during the financial year on a quarterly basis and to Cabinet and Council as part of any financial forecast updates. A prudent approach is taken when preparing the programme to ensure that financing resources are only estimated for when there is relative certainty that they will be received.
In accordance with CIPFA's Prudential Code the Council's Chief Finance Officer is required to have full regard for affordability, sustainability and prudence when making recommendations about the Council's future capital programme. Such consideration includes the level of long-term revenue commitments.
The Council considers the affordability of capital investment and the impact on revenue forecasts when formulating its capital spending plans.
Capital schemes are directly linked with the Council's priorities. Major items of enhancement or renewal are identified via the Council's Core and Major Asset Plan.
The latest Capital Programme is attached at Appendix G.
The planned spend over the life of the programme is continuously reviewed and any scheme profiling changes are reflected in quarterly update reports.
The information below sets out the latest Capital Programme summary. This has been updated for agreed changes up to the end of December 2021:
Capital Investment Programme Summary 2022/23 to 2026/27:
The table below highlights spend in relation to the Council's key priorities.
|Fairness for You
Capital spending over the next five years by Priority:
- Fairness for You - £8.9 million - 9%
- Your City - £84.1 million - 80%
- Your Council - £11.8 million - 11%
Examples of capital schemes by Council Priority
The following below shows planned capital spending by Council priority:
- Parks and Open Spaces - £2.1m
- Harris Museum - £14.9m
- City Centre Investment - £3.2m
- Towns Fund Projects (including Animate) - £53.4m
- Community Infrastructure Levy - £8.2m
- UK Shared Prosperity Fund - £1.0m
- Regeneration and Safer Streets - £1.3m
Fairness for you
- Housing Schemes - £7.9m (Including Disabled Facilities Grants, Renovation Grants and Empty Dwellings)
- Community Bank - £1m
- Fleet/Vehicle Replacement - £8.0m
- Council Buildings - £3.2m
- Climate Change/Energy Efficiency £0.6m
Capital Programme - Financing the Capital Programme
The Council has estimated the following financing sources will be available to fund the capital investment programme:
- Disabled Facilities Grant - £6.9 million
- Towns Fund - £18.5 million
- Community Infrastructure Levy £8.0 million
- Borrowing £50.1 million
- External Contributions £15.2 million
- Capital Receipts £5.1 million
- Revenue Funding £1.0 million
The Capital Strategy
The Capital Strategy reports gives a high-level overview of how capital expenditure; capital financing and treasury management activity contribute to the provision of local public services along with an overview of how associated risk is managed and the implications for future financial sustainability.
Decisions made this year on capital and treasury management will have financial consequences for the Council for many years into the future. They are therefore subject to both a national regulatory framework and to a local policy framework as summarised in the Capital Strategy appendix.
Conclusions - Capital Programme
The Capital Programme reflects the latest reported position which includes the Towns Fund Schemes. Members should note the Levelling Up Fund schemes are not yet included. A separate report will be presented at Budge Council requesting approval of the Levelling Up Fund Memorandum of Understanding. On approval the schemes will be included within the Capital Programme.
An annual strategic review of the Capital Programme including a review of the Council's investment assets and operational assets is undertaken. The annual review takes into consideration; works identified from stock condition surveys (over a 10 year time frame), impact of savings proposals e.g. inclusion of capital receipts from potential sale of assets, and whether any of the Council's operational assets transferred etc. In addition, the Council reviews the financing of the programme including levels of prudential borrowing and available capital receipts.
The CIPFA accounting code of practice requires that any Community Infrastructure Levy (CIL) payments made by the Council are recorded in the Capital Programme. The Capital Programme includes a scheme for CIL payments to be made to Lancashire County Council as part of the City Deal; the scheme is financed by CIL payments from developers within the City Deal areas.
Treasury Management Strategy
Treasury management is the management of the Council's cash flows, borrowing and investments, and the associated risks. The Council has borrowed and invested substantial sums of money and is therefore exposed to financial risks including the loss of invested funds and the revenue effect of changing interest rates.
The Treasury Management Strategy is prepared in line with the Chartered Institute of Public Finance and Accountancy (CIPFA) Treasury Management Code of Practice. The strategy fulfils the Council's legal obligation under the Local Government Act 2003 to have regard to the CIPFA Code.
This report sets out the proposed Treasury Management Strategy for 2023/24 to be approved, as required by CIPFA. It includes the Council's borrowing and investment strategies, together with the treasury management prudential indicators which seek to ensure that the Council's borrowing levels remain both sustainable and affordable.
The Treasury Management Strategy is fully set out within the appendices to this document.
The investment strategy, in line with statutory guidance, covers service investments (lending or buying shares in other organisations to support public services) and commercial investments.
The Council does not currently hold any loans or shares in other organisations that provide a commercial investment return.
The Council invests in land and property within its boundary with the intention of facilitating economic development and regeneration.
The forecast includes a number of significant risk areas which are set out within the document. The Government announced a two-year deal during December 2022 however for the period 2023/24 to 2024/25 the Local Government Finance Settlement published 7 February 2023 had actual allocations for 2023/24 only.
The current reported forecast sets out that ongoing savings of £600k from 2024/25 are required to be identified to ensure a balance budget over the life of the forecast. The Budget Working Group will closely monitor the highlighted risk and will work towards formulating the next savings plan during 2023.
The Council has previously identified a contingency list of savings which can be called upon in the event that savings are urgently required. However, the Council would seek to implement further efficiencies through its' digital agenda were possible first.
The Council undertakes longer term financial planning when considering major schemes, business cases are prepared covering a long-term period such as 30 to 40 years. The Council considers whether spend is affordable and how sensitive it is to changes both external and internal. External expert advice is sought when necessary. The forecast is reviewed for sensitivities in underlying long-term assumptions.
The ultimate aim for the Council is to work towards bridging the gap (shortfall between how much the Council spends and how much the Council receives in funding) over the long term to ensure long-term sustainability for the Council and an ongoing balanced budget. The Council currently has a significant level of non-earmarked reserves; however these are shown to reduce over the forecast to minimum recommended levels.
The Council holds a number of earmarked reserves which may be used as a last resort to phase in future saving requirements. The earmarked reserves have been unusually high due to the business rates compensation funding received from the Government during Covid, a majority of which is being refunded to Government imminently. This has distorted the level of earmarked reserves available for use by the Council for its own purposes.
The forecast includes a proposed 2.99% Council Tax increase in 2023/24 and thereafter. The capping rules allow for setting the Council Tax up to the 3% in 2023/24. If the Council set Council Tax above this percentage, then it would be required to hold a referendum which would cost in excess of £110k.
The Council carefully considers and monitors the risks set out in this report and in the Corporate Risk Register.
Financial Assurance Statement
In setting the budget the Council must act in accordance with its statutory duties and set a balanced budget for the following financial year by the statutory deadline. As the Council's designated Finance Officer, I have a legal duty to report to Full Council in February 2023 on the robustness of the Council's budget and the adequacy of reserves.
I have considered the major items of expenditure and income and their sensitivity to change, such as the current economic position, high inflation, the Cost of Living Crisis, unknown levels of future Government funding, the financial risks associated with the major City Centre regeneration, the Cabinet budget proposals and the level of reserves. It is my opinion that the estimates have been prepared and reviewed utilising the most up to date and accurate information available and that all assumptions made are reasonable in the current climate.
I can confirm the recommendations contained in this report will provide the Council with a robust financial position in 2023/24.
I am of the view that the Council is pursuing a sound financial strategy in the context of the challenging financial position. However, there is a high level of uncertainty.
The current economic position of high inflation and interest rates changes means the Councils financial forecast position is constantly changing. Depending on the shift/outcome of these risks there could be a major movement on the financial forecast set out at Appendix E.
The major development in the City Centre Harris Quarter is bringing major regeneration to the City however it does bring a higher level of financial risk. Risk mitigations have been adopted where possible and Towns Fund governance and monitoring arrangements have been put in place. There are a number of contingent liabilities which, if they materialise will have a significant impact, these are closely monitored.
The Budget Working Group will be working to formulate the plans for identifying the £600k savings requirement during 2023 and will continue monitoring the current economic position.