Agenda item

The purpose of the report was to consider the Draft Capital Strategy 2019/20.

This capital strategy was a new report for 2019/20, giving a high-level overview of how capital expenditure, capital financing, and treasury management activities contributed to the provision of local public services along with an overview of how associated risk is managed and the implications for future financial sustainability.

For comparison purposes the tables set out in the report show the combined position for Taunton Deane Borough Council and West Somerset Council for the years up to and including 2018/19.

Through Capital Expenditure, the Council spends money on assets, such as property or vehicles, which would be used for more than one year. In local government this includes spending on assets owned by other bodies, and loans and grants to other bodies enabling them to buy assets. The Council has limited discretion on what counts as capital expenditure, for example assets costing below £10k are not capitalised and are charged to revenue in the year.

In 2019/20, the Council was planning capital expenditure of £20.309m as set out below:

Table 1: Prudential Indicator: Estimates of Capital Expenditure

The main General Fund capital projects also included £16.6m for growth projects.

The Housing Revenue Account (HRA), being a ring-fenced account which ensured that council housing does not subsidise, or is itself subsidised, by other local services. HRA capital expenditure was, therefore, recorded separately.

Service managers bid annually in September to include projects in the Council’s Capital Programme. Bids are collated by Finance and the final Capital Programme is then presented to Scrutiny, the Executive and to Full Council in February each year.

Full details of the Council’s capital programme was contained in the Draft General Fund Revenue Budget and Capital Estimates 2019/20 and the Housing Revenue Account (HRA) Budget Estimates 2019/20.

All capital expenditure must be financed, either from external sources (government grants and other contributions), the Council’s own resources (revenue, reserves and capital receipts) or debt (borrowing, leasing and Private Financing Initiative). The planned financing of the above capital expenditure was set out: 

Table 2: Capital Financing

Debt was a temporary source of finance, due to loans and leases needing to be repaid this is, therefore, replaced over time by other financing, usually from revenue which is known as minimum revenue provision (MRP).  Alternatively, proceeds from selling capital assets (known as capital receipts) could be used to replace debt finance. Planned MRP repayments and the use of capital receipts were set out as follows:

Table 3: Replacement of Debt Finance

The Council’s MRP policy was available as Appendix A.

The Council’s cumulative amount of debt finance is measured by the Capital   Financing Requirement (CFR). This increased with new debt-financed capital expenditure and reduced with MRP repayments and capital receipts used to replace debt. Based on the above figures for expenditure and financing the Council’s estimated CFR was as followed:-

During the discussion of this item Members made comments and statements and asked questions, and the following main points were raised:

·         New Investments would go through the Democratic path.

·         The project risk due to the lack of commercial expertise was considered

RESOLVED that The Shadow Executive:-

1)    Recommend the draft 2019/20 Capital Strategy for approval by Shadow Council.

2)    Recommends the Council’s Minimum Revenue Provision policy for approval, as set out in Appendix A for approval by Shadow Council.