Agenda item

Report of the Director of Finance.

The Committee received a report of the Director of Finance on the Capital Strategy for 2019/20, which provided an overview of how capital expenditure, capital financing and treasury management activity contributed to the provision of local public services and how the associated risks were managed.

An officer introduced the report and informed Members that the Strategy set out a high level view and drew attention to the appendix to the report.  He added that non-treasury commercial investment was proportionate to the budget requirement and that only 5% of the Council’s revenue budget had been invested in a commercial portfolio.  Therefore, the associated risks were low in relation to the size of the revenue budget.  He added that a further outturn information report would be submitted to the July 2019 meeting of the Committee.

Members asked a number of questions in relation to the various tables set out in the appendix to the report.  They enquired about the impact on the Council’s finances (table 6 referred) and the increase in debt of 70% (tables 3 and 4 referred) and whether this was the Council’s recommended strategy.

In response to the questions, the Director of Finance stated that the tables reflected the Council’s approved capital programme borrowing requirement.  The intention was to minimise the cost of borrowing.  The Director explained that some capital projects were self-financing, such as the depot and Vernon  Lodge, which would result in at least neutral impact on the revenue budget.  She added that the interest cost of capital borrowing was funded from the revenue budget.  In relation to the debt, the Director explained that the Council had not borrowed for a number of years.  However, £100m had been borrowed in April 2019 and she explained the ensuing challenges.  The Council was conscious of the significant costs of borrowing and was therefore taking advice from the Council’s Treasury Advisers and CIPFA (Chartered Institute of Public Finance and Accountancy) to confirm that  the forecast borrowing level was sustainable.  She pointed out that the Council would need to invest in the Capital Programme and it would be unusual not to  review of capital schemes.

Questions from Members also related to the authorised level of debt (table 5 referred) and why more had been budgeted for, and whether capital financing requirements boundaries could exceed (table 4 referred).  In response, the Director of Finance and an officer stated that there was a ceiling set on borrowing by the Council as part of its Treasury Management report.  The Director added that the operational boundaries might be exceeded for example as a result of exceptional events, such as  debt refinancing but this would be reported to the Committee at outturn should it occur.  It was not anticipated that the capital financing requirement would be breached. 

The Director of Finance acknowledged that various tables set out in the appendix required clarity in presentation and she undertook to provide Members with additional information.

The Chair welcomed the comments from Members and noted that an action plan would be submitted to the next meeting together with clarity in presentation.

RESOLVED:  That the report be noted.