Agenda item

(Director of Resources) To consider the attached report (FPM-004-2017/18).

The Assistant Director (Accountancy) advised that the report sets out the Council’s capital programme for 2016/17, 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, represent those adopted by the Council on 21 February 2017.

The Council’s total investment on capital schemes and capital funded schemes in 2016/17 was £36,957,000 compared to a revised estimate of £43,077,000, which represented an underspend of 14%. With regard to the General Fund projects, there was an overall underspend of £1,675,000 or 9%.

Overspends totaled £248,000 on the General Fund and £388,000 on the HRA, while there were savings of £11,000 on the General Fund and £467,000 on the HRA. In terms of slippage, carry forwards were recommended for totals of £1,995,000, £3,288,000, £4,000 and £1,063,000 for the General Fund, HRA, loans and REFCuS respectively; and brought forwards were recommended for totals of £41,000 and £5,000 for the General Fund and HRA respectively. Other variations total of £42,000 on the General Fund, which represent additional expenditure funded from external and direct revenue sources and the other variations of £162,000 on the HRA were offset by an equivalent sum on REFCuS.

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. This 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 had to be used within three years of receipt and as a consequence, the maximum sum allowable had been applied to the 2016/17 HRA house building programme.

Another element of capital receipts available for capital funding known as ‘attributable’ or ‘allowable’ debt, allows the Council to use all, none or indeed a portion of this money to fund HRA expenditure. The Cabinet 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. In total, grants of £1,799,000 were used last year compared to an estimated sum of £1,466,000, representing an increase of £333,000, which resulted primarily from the increase in private funding made available by more section 106 monies having been received for funding the new housebuilding programme.

The generation of capital receipts was £1,041,000 higher in 2016/17 than had been anticipated, which was due to more council houses being sold than expected, following a dip in 2015/16 and the steep rise of 2014/15 when the level of maximum allowable discount under the Right to Buy (RTB) scheme was raised significantly. A total of 46 properties were sold in 2016/17 compared to 20 in 2015/16. The Council retained more of the RTB capital receipts than expected as a result of the decision to lift the moratorium on phases 4 to 6 of the housebuilding programme. As a result of these factors, plus the decision to partially fund investment in the new shopping park from HRA capital receipts, the total use of capital receipts was £6,635,000 higher than estimated. As a consequence the year-end balance on the Capital Receipts Reserve was reduced to zero as at 31 March 2017. 

The external borrowing had been avoided in 2016/17, partly by means of the internal borrowing of HRA capital receipts by the General Fund, and partly by utilising other General Fund reserves of £9,300,000. However, the Council would need to borrow externally in 2017/18 to be able to fund its General Fund capital programme.

With regard to the use of direct revenue funding, the HRA contribution of £5,477,000 was higher than the revised budget by £110,000. However, the use of funds from the Major Repairs Reserve was £3,104,000 lower than estimated reflecting the underspend on HRA capital schemes. The impact of this, combined with an increase in the Major Repairs Allowance transfer, was that the balance on the Major Repairs Reserve was £3,561,000 higher than expected at £12,704,000 as at 31 March 2017.

The Cabinet Committee requested further details on the overspend at Oakwood Hill Depot. The Director of Resources advised that a report would be submitted to Cabinet once the final figures had been determined.

RECOMMENDED:

(1)        That the provisional outturn report for 2016/17 be noted;

(2)        That retrospective approval for the over and underspends in 2016/17 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 2017/18 relating to schemes on which slippage has occurred be recommended to Cabinet; and

(4)        That approval of the funding proposals outlined in this report in respect of the capital programme in 2016/17 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 choose. 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 to pay 50% of these receipts to central government.

The Council retains 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.