Cabinet considered the report detailing the draft capital programme for 2023/24 onwards including proposed new capital bids and planned expenditure for bids previously approved by Council. Together with the capital strategy and capital cashflow, it provided an overview of the Council’s proposed capital planning and expenditure.

Councillor Hilton advised that the report set out the draft Capital Strategy and proposed capital programme for 2023/24 – 2025/26.  Once agreed the Council could confirm the implications on its future borrowing and the implications on its final revenue budget and Medium Term Financial Strategy. He explained the programme was linked closely to two other strategies: the draft Treasury Management Strategy setting out how the Council would fund and afford its planned level of capital investment in 2023/24 and beyond and the Medium Term Financial Strategy 2023/24 – 2027/28 which sets out the Council’s revenue spending for the next fiscal year and indicative spending plans for 2024/25 – 2027/28. Both were reviewed by the Audit and Governance Committee in October.

The draft Capital Strategy as set out in Appendix B provided a high-level overview of how capital expenditure, capital financing and treasury management activity contribute to the provision of services; along with an overview of how associated risk was managed and the implications for future financial sustainability.  It demonstrated how revenue, capital and balance sheet planning were fully integrated. The draft strategy was also reviewed by Audit and Governance Committee in October.

He stated that the current volatile political and economic climate created a high level of uncertainty and had driven the high level of interest rates and increased borrowing costs. The Capital Review Board had met regularly to review the existing capital programme to ensure that unnecessary schemes were dropped and agreeing optimal financing arrangements on all schemes to reduce the pressure on the revenue budget.

Councillor Hilton advised that with interest rates at 5% a £10m increase in capital expenditure would result in an increase in annual borrowing costs of £500,000 on the revenue budget so for 2023/24 the Council had focused on:

•                fully funded schemes, where the cost of the scheme is fully or largely met by external funding.

•                unavoidable capital investment – predominantly relating to immediate requirements to replace or enhance essential fixed assets for service delivery, such as IT assets for business continuity.

Using this strategy, the Capital Programme was prioritised into four key areas: regeneration schemes, major strategic acquisitions, efficiency projects and operational schemes. These would be funded by:

•           capital grants

•           developer contributions in the form of s106 & CIL

•           partner contributions, and

•           capital receipts

Table 3 set out the 2023/24 Capital programme in detail with sources of funding. The total draft Capital Programme for 2023/24 was currently £40,950,000, of which the largest share (£13,756,000) related to the ongoing cost of existing capital schemes. New capital investment amounts to £13,357,000 for fully funded schemes and £3,377,000 for corporately funded schemes.  The net cost of the 2023/24 programme to be funded from borrowing was currently £27,593,000.

The overall three-year draft Capital Programme would increase expenditure by £62,838,000, of which the largest share of £47,518,000 related to schemes approved in previous years. The Capital cash flow information was detailed at Appendix E.

Councillor Hilton concluded by reflecting that the £3,377,000 for corporately funded schemes was approximately £3m less than previous years and demonstrated how the Council had decided to manage its budget to keep interest costs down.

Councillor Johnson, Leader of the Council seconded the report stating that it reflected the current economic climate and would be further discussed as part of the Overview and Scrutiny discussions being held on 14 December. 

UNANIMOUSLY RESOLVED that the report be noted including:

i)               the draft Capital Strategy 2023/24 – 2025/26 (as set out in Appendix B of the Cabinet report);

ii)             the proposed new schemes (as set out in Appendix D of the Cabinet report); and

iii)            the capital cash flow (as set out in Appendix E of the Cabinet report).