Agenda item

(Director of Resources) To consider the attached report (FPM-004-2016/17).

The Assistant Director (Accountancy) advised the Cabinet Committee that the report set out the Council’s capital programme for 2015/16, in terms of expenditure and financing, and compared the provisional outturn figures with the revised estimates. The revised estimates which were based on the Capital Programme represented those adopted by the Council on 18 February 2016.

The Council’s total investment on capital schemes and capital funded schemes in 2015/16 was £37,298,000 compared to a revised estimate of £49,917,000 and represented an underspend of 25%. The largest underspends were experienced on General Fund projects, in particular on the planned developments at St John’s Road, the Langston Road Retail Park and the Oakwood Hill Depot.

The Director of Resources advised that the funds available to finance capital programmes were applied in line with any restrictions avoid the potential loss of funds. Another element of capital receipts known as ‘attributable’ or ‘allowable’ debt could be used to fund either General Fund or HRA expenditure in any proportion..

The previous decision to use 30% for housebuilding had been decided by the Housebuilding Cabinet Committee, although the Cabinet may not have had the opportunity to fully consider other options at that time and the latest 30 year plan suggested £869,000 would be available for replacement housing schemes. An alternative approach would be to take 30% of the assumed debt figure of £1,218,950 as a basis for ascertaining the amount to be used for housebuilding and this would make £366,000 available.

Currently, none of these resources had been applied to the housebuilding programme as 1-4-1 capital receipts, capital grants and private contributions were applied in the first instance and they had been sufficient to cover all costs to date. Hence a change to the alternative approach was recommended to liberate additional capital resources of £503,000 to be invested in General Fund schemes.

The use of capital receipts to finance expenditure was £2,672,000 higher than estimated and the year-end balance on the Capital Receipts Reserve had fallen to £3,790,000 as at 31 March 2016.  All of this balance had been set aside for the Council’s housebuilding programme. Due to all the capital receipts currently available to fund General Fund schemes, being fully utilised, internal borrowing had been made available from the HRA. In total, the General Fund had borrowed around £4,000,000 from the HRA and would be required to pay interest on the sum for the duration of the loan. The internal borrowing had been made on a temporary basis only and future borrowing requirements would continue to be monitored closely.

In summary, the Cabinet Committee were requested to recommend to Cabinet the approval of the budget overspends, savings, carry forwards and brought forwards. There was one General Fund budget saving of £7,000 on Revenue Expenditure financed from Capital under Statute and two areas where spending was higher than estimated totaling £160,000 on the HRA, which were proposed to be brought forward from 2016/17. The carry forwards requested total £9,227,000 on the General Fund; £3,698,000 on the HRA capital programme; £41,000 on Capital loans and £83,000 on REFCuS. The Cabinet Committee was also asked to approve the other amendments of £37,000 on the General Fund and £229,000 on REFCuS.

With regards to the use of direct revenue funding, the HRA contribution of £4,900,000 was in line with the revised budget. However, the use of funds from the Major Repairs Reserve was £3,097,000 lower than estimated reflecting the underspend on HRA capital schemes. The impact of this off-set was that the balance on the Major Repairs Reserve was £2,896,000 higher than expected at £11,997,000 as at 31 March 2016.

RESOLVED:

(1)          That the provisional outturn report for 2015/16 be noted;

RECOMMENDED:

(2)          That retrospective approval for the over and underspends in 2015/16 on certain capital schemes as identified in the report be recommended to Cabinet;

(3)          That approval for the carry forward of unspent capital estimates into 2016/17 relating to schemes on which slippage occurred be recommended to Cabinet;

(4)          That approval of the funding proposals outlined in the report in respect of the capital programme in 2015/16 be recommended to Cabinet;

(5)          That the in principle decision to meet a funding requirement for the purchase of street properties in 2016/17 from HRA underspends in 2015/16 be recommended to Cabinet; and

(6)          That an amendment to the position regarding the use of the attribute debt element of the retained capital receipts as set out in the report be recommended to Cabinet.

Reasons for Decision:

The funding approvals requested were intended to make best use of the Council’s capital resources that were available to finance the Capital Programme.

Other Options Considered and Rejected:

The Council’s current policy was to use all HRA capital receipts from the sale of assets, other than Right to Buy Council House sales, to fund the Council's house building programme. However, Members had the option to use these capital receipts for other HRA or General Fund schemes if they chose. This option had been rejected to date because, unless HRA receipts were applied to affordable housing schemes, 50% of each receipt would be subject to pooling i.e. the council would have had to pay 50% of the receipts to central government.

The Council retained an element of the right to buy receipts classified as ‘allowable’ debt. It had been agreed that 30% of this receipt should be set aside to help finance the HRA housebuilding programme; this represented a sum of £869,000 as at 31 March 2016. However, none of this sum had been utilised to date and the Council was reconsidering this position.