Agenda item

To consider the attached report (FPM-005-2018/19).

The Assistant Director (Accountancy) advised that the report set out the Council’s capital programme for 2017/18, 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 the 22nd February 2018.

The overspendstotalled £13,000 on the General Fund, £144,000 on the HRA, and £37,000 on REFCuSschemes. There were savings of £35,000 on the General Fund and £355,000 on the HRA. In terms of slippage, carry forwards were recommended for totals of £799,000, £2,468,000, £67,000 and £30,000 for the General Fund, HRA, loans and REFCuS respectively; and brought forwards were recommended for totals of £1,355,000 and £15,000 for the General Fund and HRA respectively. Other variations total £11,000 on the General Fund and £5,000 on the HRA which represented additional expenditure funded from external and direct revenue sources.

The Assistant Director (Accountancy) advised that the funds available to finance the capital programme include Government grants, other public sector grants, private contributions to capital schemes, capital receipts and direct revenue funding from the General Fund and HRA. Initially any specific grants and private contributions made for particular projects were used to finance the appropriate projects, taking into account any restrictions with regard to usage and time scales. Other sources of capital finance, which carried restrictions, were also applied at the earliest opportunity in order to avoid losing potential funds and included the element of capital receipts generated from the sale of council houses, which was available solely for replacement affordable housing (often referred to as 1-4-1 receipts) and must be used within three years of receipt. As a consequence, the maximum sum allowable had been applied to the 2017/18 HRA house building programme.

Another element of capital receipts available for capital funding was known as ‘attributable’ or ‘allowable’ debt. The Council was free to use all, none or indeed a portion of the money to fund HRA expenditure. Cabinet had made a decision to use part of this sum for the new housebuilding programme, based on 30% of the ‘assumed’ debt of Council dwellings, calculated when the new self-financing regime was introduced in April 2012. The sum calculated for 2017/18 was £104,000.

In total, grants of £788,000 were used last year compared to an estimated sum of £666,000, representing an increase of £122,000. This resulted primarily from the increase in private funding made available by more section 106 monies having been received for funding the new housebuilding programme. Other private contributions utilised included a section 106 sum of £23,000 relating to the St John’s school site used by Epping Town Council to renovate the Jack Silley pavilion, a contribution of £30,000 for an improved retail unit in Loughton Broadway and a contribution of £14,000 for the Shopping Park.

The generation of capital receipts was £2,533,000 higher in 2017/18 than had been anticipated, which was mostly due to more council houses being sold than expected. A total of 42 properties were sold in 2017/18 compared to 46 in 2016/17. Consequently the total 1-4-1 capital receipts retained for replacement homes was £1,908,000 higher than anticipated. In addition to this, the Council received further capitals receipts after the budgets were prepared, the largest of which was the repayment of a loan to Brentwood Borough Council. As a result of the higher level of capital receipts, more funds were available to finance the capital programme than anticipated and the unused HRA capital receipts were used to partially fund the new shopping park by way of an internal loan. This meant that the year-end balance on the Capital Receipts Reserve was maintained at zero as at 31 March 2018. 

The external borrowing had been avoided in 2017/18, partly by means of the internal borrowing of HRA capital receipts by the General Fund and partly by utilising other General Fund reserves of £13,239,000. However, the Council would need to borrow externally in 2018/19 to be able to fund its General Fund capital programme.

With regard to the use of direct revenue funding, the HRA contribution of £6,171,000 was higher than the revised budget by £991,000. The use of funds from the Major Repairs Reserve was £922,000 lower as a result. However, there was a reduction in the Major Repairs Allowance transfer, which resulted an overall reduction in the in the Major Repairs balance to £11,693,000 as at 31 March 2018. On the other hand, no funds had to be withdrawn from the HRA Self-financing Reserve, so maintaining the balance at £12,720,000.

The Cabinet Sub-Committee noted the report.

RECOMMENDED:

(1)                  That the provisional outturn report for 2017/18 be noted;

(2)                  That retrospective approval for the over and underspends in 2017/18 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 2018/19 relating to schemes on which slippage had occurred be recommended to Cabinet;

(4)                  That approval of the funding proposals outlined in this report in respect of the capital programme in 2017/18 be recommended to Cabinet;

(5)                  That the approval to enhance the 2018/19 HRA structural schemes budget by £653,000 via a combination of virements of £494,000 from other budgets in 2018/19 and £159,000 of savings generated in 2017/18 be recommended to Cabinet;

(6)                  That the approval for other virements within the HRA capital programme totalling £372,000 to supplement the windows, doors and roofing budget and the disabled adaptations budget as detailed in the report be recommended to Cabinet;

(7)                  That the approval to bring forward a budget of £30,000 for an urgent planned maintenance project from 2020/21 to 2018/19 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 for Action:

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 be required to pay 50% of these 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 the ‘assumed debt’ part of this element should be set aside to help finance the HRA housebuilding programme. The percentage applied to the housebuilding programme was seen as reasonable but could be amended.