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The Five-Year Capital Programme 2020/21 to 2024/25

Investment plan diagram

Capital Programme and Core Major Asset Plan

The Council strategically manages its operational properties through the Core and Major Asset Plan.

The Council's operational properties include office accommodation, depots, yards and venues such as the markets and open space facilities.

In addition the City has a Victorian legacy of the Grade I listed Harris Museum, cemetery, urban parks and dock estate.

The Core and Major Asset Plan is informed by regular stock condition surveys to establish a rolling programme of improvement and refurbishment.

In addition we have a major repairs programme. Both of these take account of the need for efficiency and environmental impact issues.

The Council has an investment property portfolio managed to generate income to support the revenue budget and maximise opportunities for regeneration. Performance of this portfolio is reported quarterly to the Cabinet Member.

Further details can be found in the investment strategy and the capital strategy.

The Council has a five-year programme; however the core and major asset programme extends over 10 years. There is a significant amount of capital expenditure required in the future which is outside the current programme.

You can download a full copy of the Icon for pdf Achieving Preston's Priorities (APP) 2022/23 [2.5MB] document here.

Background to the Capital Programme

The Council has a five-year capital-spending programme. The programme includes capital expenditure scheduled for the Council's operational assets.

The Council ensures all capital expenditure is directly linked to the Council's priorities, affordable and delivered through key corporate projects. Any spends on the Council's operational assets is scheduled in line with the Council's Core Major Asset Plan.

Expenditure in respect of grants or financial assistance is included if the nature of expenditure, when incurred by the Council, is classed as capital expenditure.

Capital expenditure is usually of a one-off nature, it can be a significant amount and can span over a number of financial years. Examples of capital schemes include the purchase and installation of a new lift or major construction works that includes extending the life of a building e.g. new waterproof roof.

Other examples include the purchase of a new vehicle or the refurbishment of a park and open space.

The Capital Programme is updated continually for agreed changes and reported to the Cabinet Member (Resources and Performance) during the financial year on a quarterly basis and to Cabinet and Council as part of any financial forecast updates.

A prudent approach is taken when preparing the programme to ensure that financing resources are only estimated for when there is relative certainty that they will be received.

In accordance with CIPFA's Prudential Code the Council's Chief Finance Officer is required to have full regard for affordability, sustainability and prudence when making recommendations about the Council's future capital programme. Such consideration includes  the  level  of  long-term  revenue  commitments.  

The  Council  considers the affordability of capital investment and the impact on revenue forecasts when formulating its capital spending plans. Capital schemes are directly linked with the Council's priorities. Major items of enhancement or renewal are identified via the Council's Core and Major Asset Plan.

The latest Capital Programme is attached at Appendix G.

The planned spend over the life of the programme is continuously reviewed and any scheme profiling changes are reflected in quarterly update reports.

The information below sets out the latest Capital Programme summary. This has been updated for agreed changes up to the end of December 2021:

Capital Investment Programme Summary 2021/22 to 2025/26:

The information below highlights spend in relation to the Council's key priorities.

Your Council

  • 2021/22 - £1.6 million
  • 2022/23 - £6.7 million
  • 2023/24 - £2.7 million
  • 2024/25 - £1.1 million
  • 2025/26 - £0.7 million
  • Total = £12.8 million

Your City

  • 2021/22 - £6.1 million
  • 2022/23 - £19.2 million
  • 2023/24 - £20.4 million
  • 2024/25 - £4.5 million
  • Total = £50.2 million

Fairness for You

  • 2021/22 - £1.7 million
  • 2022/23 - £2.6 million
  • 2023/24 - £2.9 million
  • 2024/25 - £1.7 million
  • 2025/26 - £1.7 million
  • Total = £10.6 million

Estimated Expenditure

  • 2021/22 - £9.4 million
  • 2022/23 - £28.5 million
  • 2023/24 - £26.0 million
  • 2024/25 - £7.3 million
  • 2025/26 - £2.4 million
  • Total = £73.6 million

Capital spending over the next five years by Priority:

  • Fairness for You  - £10.6 million  - 14%
  • Your City  - £50.2 million  - 68%
  • Your Council -  £12.8 million  - 17%

Examples of capital schemes by Council Priority

The following below shows planned capital spending by Council priority:

Your City

  • Parks and Open Spaces - £2.3 million
  • Harris Museum  - £22.1 million
  • City Centre Investment - £15.5 million
  • City Deal Community Infrastructure Levy - £10.8 million
  • Winckley Square Townscape Heritage Initiative -  £0.1 million
  • Regeneration (including Traffic Management)  - £1.1 million

Fairness for you

  • Housing Schemes - £9.6 million - Including Disabled Facilities Grants, Renovation Grants and Empty Dwellings
  • Community Bank  - £1 million

Your Council 

  • Fleet and Vehicle Replacement  - £8.6 million
  • ICT Schemes  - £0.5 million
  • Council Buildings - £3.4 million

Capital Programme - Financing the Capital Programme

The Council has estimated the following financing sources will be available to fund the capital investment programme:

  • Disabled Facilities Grant - £8.4 million
  • Towns Fund - £19.4 million
  • Community Infrastructure Levy £10.8 million
  • Borrowing £21.2 million
  • External Contributions £11.0 million
  • Capital Receipts £0.4 million
  • Revenue Funding £2.4 million

Conclusions - Capital Programme

The Capital Programme reflects the latest reported position. Members should note that there is no surplus on the Capital Programme and this assumes £21m of prudential borrowing.

Note, this excludes any borrowing for the City Centre leisure scheme. The Capital Programme to be updated following final approval of the scheme planned for summer.

An annual strategic review of the Capital Programme including a review of the Council's investment assets and operational assets is undertaken.

The annual review takes into consideration; works identified from stock condition surveys (over a 10-year time frame), impact of savings proposals e.g. inclusion of capital receipts from potential sale of assets, and whether any of the Council's operational assets transferred etc.

In addition, the Council reviews how the financing of the programme including levels of prudential borrowing and available capital receipts.

The Towns Fund and City Centre Asset Schemes are being presented to Members as individual decisions/reports during 2021/2022 along with a number of urgent health and safety schemes.

The CIPFA accounting code of practice requires that any Community Infrastructure Levy (CIL) payments made by the Council are recorded in the Capital Programme.

The Capital Programme includes a scheme for CIL payments to be made to Lancashire County Council as part of the City Deal; the scheme is financed by CIL payments from developers within the City Deal areas.

Treasury Management Strategy

Treasury management is the management of the Council's cash flows, borrowing and investments, and the associated risks.

The Council has borrowed and invested substantial sums of money and is therefore exposed to financial risks including the loss of invested funds and the revenue effect of changing interest rates.

The Treasury Management Strategy has been prepared in line with the Chartered Institute of Public Finance and Accountancy (CIPFA) Treasury Management Code of Practice.

This report sets out the proposed Treasury Management Strategy for 2022/23 to be approved, as required by CIPFA.

It includes the Council's borrowing and investment strategies, together with the treasury management prudential indicators which seek to ensure that the Council's borrowing levels remain both sustainable and affordable.

The Council's borrowing strategy continues to use internal resources (also known as internal borrowing) as a more cost effective approach in the short term although borrowing limits have been increased to facilitate any potential borrowing on the Animate Capital project.

The Treasury Management Strategy is fully set out within the appendices to this document.

Investment Strategy

The investment strategy will be fully set out in appendices to the Achieving Preston's Priority document being presented at Budget Council February 2022. It will be in line with statutory guidance that covers service investments (lending or buying shares in other organisations to support local public services) and commercial investments.

The Council does not hold any loans or shares in other organisations that provide a commercial investment return.

The Council invests in land and property within its boundary with the intention of facilitating economic development and regeneration.

Overall Conclusions

The forecast includes a number of significant risk areas which are set out within the document.

Assumptions have been made on the long-term impact of Covid 19 however this position will need to be closely monitored and the forecast updated accordingly when more information on the longer-term impact is known. There was an announcement of a three-year spending review in October 2021 however the draft Local Government Finance Settlement published in December 2021 is allocating funding for a one-year period only 2022/23.

This brings significant risk as it is difficult to forecast with any certainty the future Government funding levels.

Depending on the shift/outcome of these risks there could be a major movement on the financial forecast set out at Appendix E.

The current reported forecast sets out that ongoing savings of £500k from 2023/24 are required to be identified to ensure a balance budget over the life of the forecast.

The Budget Working Group will closely monitor the highlighted risk and will work towards formulating the next savings plan during 2022.

The Council has previously identified a contingency list of savings which can be called upon in the event that savings are urgently required. However, the Council would seek to implement further efficiencies through its digital agenda were possible first.

Members should be aware that the Council has ambitions for the City Centre and City Centre Assets, aiming for the ultimate achievement of regeneration and growth in the City.

The impact of Covid 19 means that there will be a higher level of financial risk going forward and therefore it will be paramount that any major projects/spending areas are fully evaluated and have business cases which have input from external expert advisors to ensure the Council is being prudent in its ambitious decisions.

The Council undertakes longer term financial planning when considering major schemes, business cases are prepared covering a long-term period such as 30 to 40 years.

The Council considers whether spend is affordable and how sensitive it is to change both external and internal.

The Council has a 10-year vehicle replacement programme and a 10-year capital expenditure forecast and treasury plans are reviewed over the length of the remaining borrowing terms. The forecast is also reviewed for sensitivities in underlying long-term assumptions.

The ultimate aim for the Council is to work towards bridging the gap (shortfall between how much the Council spends and how much the Council receives in funding) over the long term to ensure long-term sustainability for the Council and an ongoing balanced budget.

The Council currently has a significant level of non-earmarked reserves, however these are shown to reduce over the forecast to minimum recommended levels. The Council hold a number of earmarked reserves which may be used as a last resort to phase in future saving requirements.

The forecast includes a proposed 1.99% Council Tax increase in 2022/23 and thereafter. The capping rules allow for setting the Council Tax up to the 2% in 2022/23. If the Council set Council Tax above this percentage then it would be required to hold a referendum which would cost in excess of £110k.

The Council carefully considers and monitors the risks set out in this report and in the Corporate Risk Register.

Financial Assurance Statement

In setting the budget the Council must act in accordance with its statutory duties and set a balanced budget for the following financial year by the statutory deadline. As the Council's designated Finance Officer, I have a legal duty to report to Full Council in February 2022 on the robustness of the Council's budget and the adequacy of reserves.

I have considered the major items of expenditure and income and their sensitivity to change especially taking into consideration the impact of the Covid 19 Pandemic, Government funding, Towns Fund and City Centre regeneration, the Cabinet budget proposals and the level of reserves.

It is my opinion that the estimates have been prepared and reviewed utilising the most up to date and accurate information available and that all assumptions made are reasonable in the current climate.

I can confirm the recommendations contained in this report will provide the Council with a robust financial position in 2022/23. I am of the view that the Council is pursuing a sound financial strategy in the context of the challenging financial position. However, there is still a significant level of uncertainty from the major risks, e.g. long-term impact of Covid 19 on the economy, unknown levels of future Government funding.

There is major development in the Harris Quarter and City Centre which will assist in major regeneration and growth for the City of Preston however this will also bring a higher level of financial risk. Additional governance and monitoring arrangements are being put in place to help mitigate this risk. There are also a number of contingent liabilities which, if they materialise will have a significant impact.

The Budget Working Group will be working to formulate the plans for identifying the £500k savings requirement during 2022 and will continue monitoring the Covid-19 impact and the Towns Fund scheme.

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