Agenda item

Context:

To scrutinise the proposed capital budget for 2018/19 and the indicative capital budgets for the three years 2019/20 to 2021/22.

Key Issues:

Capital Medium Term Financial Plan (MTFP) issues:

• The four year capital programme is reviewed annually and updated to take account of any new information that is relevant.

• The major component of the Capital MTFP for the next few years is completion of the Council’s Tranche A Future schools programme.  Colleagues are working through options in relation to a future Welsh Government Tranche B programme.  No presumption has been made to add such costs into this next four year window as yet, as costs of proposals and their affordability are still to be established.

• As part of the 2017/18 budget setting process, Members identified five additional priorities that had not been costed at the time of budget setting, but for which they added an unhypothecated borrowing assumption of £500,000 per annum to the 2017/18 budget.

• During this year, some of those scheme costs have crystalised and the following indicates the related presumption within the capital programme together with an indication of the revenue consequences.  In all cases an asset life of 25 years has been presumed:

-       Monmouth Pool – commitment to re-provide the pool in Monmouth as a consequence of the Future Schools Programme,  £7.3 million project afforded by £1.9 million Future Schools Programme, £985,000 Section 106 funding, core treasury funding in the region of £835,000, and £3.58 million prudential borrowing afforded by the Leisure Service through additional income predictions.

-       Abergavenny Hub – commitment to re-provide the library with the One Stop Shop in Abergavenny to conclude the creation of a Hub in each of the towns.  £2.3 million.

-       Disabled Facilities Grants – the demand for grants is currently outstripping the budget, work is being undertaken to assess the level of investment required to maximize the impact and benefit for recipients.  Members ultimately chose to put a one year commitment of £300,000 into the base capital programme in 2017/18.

-       City Deal - 10 Authorities in the Cardiff City region are looking at a potential £1.2 billion City Deal. Agreement to commit to this programme is being sought across the region in January 2018 and would impact on the capital MTFP. The potential impact on individual authority budgets is currently being modelled in advance of decisions on specific projects and profiles in order for authorities to start reflecting the commitment in their MTFPs.  The potential is for the 10 authorities to provide collectively £120 million over time, with individual contributions being reflective of populations.  Monmouthshire’s indicative liability during the forthcoming capital MTFP is likely to be:

Contributions predicted during forthcoming MTFP window:

Year                       Amount

2018-19                £83,000

2019-20                £482,000

2020-21                £472,000

2021-22                £729,000

Contributions predicted following the MTFP window:

2022-23                £729,000

2023-24                £1,207,000

2024-25                 £1,206,000

2025-26                £1,206,000

2026-27                £1,206,000

Total                      £7,320,000

MRP is presumed to start in the year after the contribution in made.

-       J and E Block – the office rationalization programme is being considered to see if there is a solution that would enable the Magor and Usk sites to be consolidated, releasing funding to pay for the necessary investment to bring the blocks into use. The current presumption included in Treasury figures is £1.4million expenditure with MRP starting in 2020/21.   No revenue savings from central accommodation or the Magor building have been presumed in the capital modelling, as those savings are unlikely to be realized until that building is vacated.

·      A strategy that enables the core programme, Future Schools and the above schemes to be accommodated is being developed. Notwithstanding this, there will still remain a considerable number of pressures that sit outside of any potential to fund them within the Capital MTFP and this has significant risk associated with it.  Cabinet has previously accepted this risk. 

·      The current policy is that further new schemes can only be added to the programme if the business case demonstrates that they are self- financing or the scheme is deemed a higher priority than current schemes in the programme and therefore displaces it.

In summary the following other issues and pressures have been identified:

·      Long list of back log pressures – infrastructure, property, DDA work and Public rights of way.  None of these pressures are included in the current capital MTFP, but this carries with it a considerable risk.

·      In addition to this, there are various schemes / proposals (e.g. Alternative Delivery Model for Leisure, Tourism and Culture Services, Tranche B Future Schools, any enhanced DFG spending, waste fleet vehicle replacement, community amenity site enhancement) that could also have a capital consequence, but in advance of quantifying those or having Member consideration of these items, they are also excluded from current capital MTFP.

·      Capital investment required to deliver revenue savings – this is principally in the area of office accommodation, social care, property investment and possibly Additional Learning Needs. The level of investment is currently being assessed. However, in accordance with the principle already set, if the schemes are not going to displace anything already in the programme then the cost of any additional borrowing will need to be netted off the saving to be made.

·      The IT reserve is depleted so funding for any major new IT investment is limited.  Any additional IT schemes will need to either be able to pay for themselves or displace other schemes in the programme.

·         Base interest rates were increased by 0.25% to 0.5% on 2^nd November 2017.  That pressure is more likely to be felt in the Revenue MTFP as it will increase the cost of borrowing over time. However, it may also impact adversely upon the viability of capital business case developments and their ability to demonstrate self-affordability.  Given this very recent change, it hasn’t been possible to fully work through the consequences in the initial revenue and capital MTFP.  That will instead manifest itself through the budget setting process.

Member Scrutiny:

·         In response to a Member’s question, it was noted that the allowance included annually for capital maintenance is £2,000,000.  The backlog of repair on Monmouthshire’s schools portfolio is in the region of £22,000,000.

·         With regard to the new 21^st Century Schools in Monmouthshire, a lower routine maintenance consequence is anticipated. In relation to existing comprehensive schools, property maintenance decides the maintenance priorities for these schools throughout the year.

·         To avoid confusion in the table within appendix 1 of the report in respect of capital budget pressures, there could be an indication of what is budgeted for as well as having an indication of what the Authority would like to do if appropriate funding was available, i.e., in an ‘ideal scenario’. The Assistant Head of Finance stated that he would amend the appendix accordingly for future reports.

·         In response to a question raised, it was noted that all of Monmouthshire’s school kitchens were complying with environmental health standards.