Agenda Item No

The Vale of Glamorgan Council

 

Scrutiny Committee (Housing and Public Protection): 2nd  December 2015

 

Report of the Director of Environment and Housing Services

 

Initial Capital Programme Proposals 2016/17

 

Purpose of the Report

1. To provide an update on the progress of the Capital Programme for 2015/16 and to submit for consultation the initial capital proposals for 2016/17.

Recommendations

It is recommended:-

1. Committee note the changes to the 2015/16 Capital Programme.
2. Scrutiny Committee consider the 2016/17 initial capital budget proposals and forward its recommendations to Scrutiny Committee (Corporate Resources) as the lead Scrutiny Committee.

Reasons for the Recommendations

1. To ensure that Members are aware of the position with regards the 2015/16 Capital Programme, relevant to this Scrutiny Committee.
2. In order that Cabinet be informed of the comments of Scrutiny Committees before making a final proposal on the 2016/17 Capital Programme.

Relevant Issues and Options

2015/16 Capital Programme

2. Appendix A details financial progress on the Capital Programme as at 30th  September 2015.
3. Penarth Renewal Area - The total estimated spend for the Penarth Renewal Area has increased from £100k to £155k, due to the cost of an extra property being added to the contract and also due to unforeseen items of work that were identified during the contract period. A virement of £55k has therefore been requested from the Castleland Renewal Area budget to the Penarth Renewal Area budget.
4. Disabled Facilities Grant (DFG) - There is a predicted shortfall in the capital budget for DFG's. It was envisaged that once the backlog of applications had been dealt with the number of applications being processed would reduce to normal throughput levels. However, there has been a steady increase in the number of applications being received which is a trend that is likely to continue. As a result, Emergency Powers have been used to approve an increase of £200k in the 2015/16 DFG budget, funded by a contribution from the Policy revenue budget. This will ensure that there is sufficient funding to complete this year's applications without creating a new backlog.

2016/17 to 2020/21 Capital Programme

5. The Council's Capital budget is determined largely by the General Capital Funding Settlement (GCF). In previous years, the provisional GCF settlement was received from Welsh Government (WG) during October, with the final settlement being received during December. This year, however, the initial budget proposals have not yet been received.
6. A statement on the timing of the Welsh Government's Budget for 2016/17 was released by the Minister for Finance and Government Business on 6th October 2015. It stated that the late timing of the UK Government's Spending Review presented WG with significant challenges for the preparation and publication of the Draft Budget 2016/17. WG will not know their Budget for 2016/17 until 25th November 2015. WG is facing unprecedented levels of uncertainty and consequently will not publish the Draft Budget for 2016/17 until 8th December 2015 and the Final Budget on 1st March 2016.
7. A joint letter dated 26th October 2015 has been received from the Minister for Public Services and the Leader of the Welsh Local Government Association, outlining the outcome of their joint discussions regarding the timing of the release of the settlement. They provide a timetable which shows that local authorities will be advised of the Provisional Settlement on 9th December 2015 and of the Final Settlement on 2nd March 2016, however, the Final Budget will be debated by WG on 9th March 2016. They consider that the proposed timetable does not result in any legal or financial impediment to the budget process, however, they acknowledge that the timetable does present challenges.
8. Even with a lack of clarity on the funding position for 2016/17 and these unprecedented circumstances, in order to be in a position to meet the statutory deadlines and the requirements for consultation set out in the Council's Constitution, much of the work on quantifying the resource requirements for the Capital programme will still need to be carried out before the initial and final GCF settlement is notified to the Council. Therefore, in line with the approach adopted in the current Medium Term Financial Plan, the proposals assume a reduction of 10% for each year of the programme for 2016/17 and onwards. This has been reflected in the proposed Capital Programme 2016/17 to 2020/21 which is shown in the table in Appendix B.
9. In line with the financial strategy, the Council will mitigate the deteriorating situation by looking to progress only those schemes which are deemed to be a key corporate priority, whilst also seeking to gain assurance that such schemes are delivered on time and within budget.
10. The Major Repairs Allowance (MRA), which is the grant that provides capital funding to the Housing Revenue Account (HRA), for 2016/17 has not yet been announced by the Welsh Government. Members will be advised once the announcement is made. An assumption has been made in Appendix B that the grant will continue at the allocation reflected in the current business plan of £2.76m in 2016/17 and throughout the period of the Capital Programme.
11. In addition to external funding, the Council will finance part of the Capital Programme from its own resources, e.g. capital receipts and reserves.
12. The table below details the General Capital Funding and internal resources required to fund the proposed schemes for the Council as a whole.

Analysis of Net Funding Required for the Indicative 2016/17 Capital Programme

GENERAL FUND                                                                                   £'000                 £'000

Welsh Government Resources

Supported Borrowing                                                                           3,058

General Capital Grant                                                                          1,861

4,919

Council Resources

Capital Receipts                                                                                  7,199

Reserves/Leasing                                                                                9,135 Unsupported Borrowing                                                                           528

16,862

Net Capital Resources                                                                                                 21,781

HOUSING REVENUE ACCOUNT                                                            £'000                 £'000

Housing Reserves 3,910

Housing Unsupported Borrowing 19,434

Net Capital Resources                                                                                                23,344

Capital Bids 2016/17 to 2020/21

13. New capital bids were invited for return by 30th September 2015 and the number of bids received was low (3 from Learning and Skills, 12 from Social Services, 11 from Environment and Housing and 2 from Managing Director and Resources). Departments were requested to rank their own bids in order of importance before submission and bids from each Department were forwarded to the Corporate Asset Management Group (CAMG) for evaluation.
14. The CAMG used the criteria set out in the Budget Strategy so the bids were prioritised in terms of their corporate priority and the risk they pose to the Council if they are not pursued. Following this the prioritisation of bids was reviewed by the Budget Working Group. The risk assessment element was undertaken in line with the Council's Corporate Risk Management Strategy as follows:

Possible Impact or Magnitude of Risk	Catastrophic	MEDIUM	MEDIUM/HIGH	HIGH	VERY HIGH
	High	MEDIUM/LOW	MEDIUM	MEDIUM/HIGH	HIGH
	Medium	LOW	MEDIUM	MEDIUM	MEDIUM/HIGH
	Low	VERY LOW	LOW	MEDIUM/LOW	MEDIUM
Risk Matrix		Very Unlikely	Possible	Probable	Almost Certain
		Likelihood/Probability of Risk Occurring

15. Taking into account the nature of capital schemes, the following criteria were applied to assess corporate priority:

Corporate Priority	Score
Commitments and areas where the Council has no control over the expenditure, e.g. contractual and legal commitments, absolute minimum statutory service, taxes, etc.	3
Very high priority (publicly announced commitment e.g. items included in the Community Strategy, Corporate Plan etc.)	2
"Invest to Save" and preventative expenditure	2
Statutory expenditure above the absolute minimum and other priorities	1
Low Priority	0

16. Only those schemes assessed as corporate priority 1 or higher and medium risk or higher are included in these proposals.

• Renewal Area - An award of specific grant funding has been received from WG to enable capital works to be undertaken in the Castleland Renewal Area during 2016/17. It has been requested that £677,981 is included in the 2016/17 Capital Programme for this grant.
• Disabled Facilities Grants (DFG) - A capital bid amendment form has been submitted to request additional funding in future years for DFG's. This will ensure that there is sufficient funding to complete future year's applications without creating a new backlog. It has been requested that the Capital Programme is increased by £400k in 2016/17 and £450k in 2017/18, to be funded from a reserve set up from a revenue underspend in 2015/16.
• The changes detailed above have been reflected in Appendix B.

• Housing Improvement Plan

  20. The 2015/16 Housing Improvement Programme budget totals £87.011m and £63.156m of this allocation relates to the buy-out from the housing subsidy system. The funding of the 2015/16 programme has been amended as set out in the table below: -

  Funding	Current 2015/16 £'000	Amended 2015/16 £'000
  Major Repairs Allowance Grant	2,760	2,760
  Other Grant	2,069	2,069
  Housing Capital Receipt	754	897
  Housing Reserves	2,676	5,334
  Unsupported Borrowing (Including HRA Buyout)	78,752	75,951
  Total	87,011	87,011

  Next Steps

  21. The next stage is for the estimates to be submitted to Scrutiny Committees for consultation. Corporate Resources Scrutiny Committee is the lead Scrutiny Committee and is asked to consider both the Initial Budget Proposals and any recommendations that other Scrutiny Committees have made. The responses of Scrutiny Committee must be made no later than the 15th December 2015.
  22. Each Scrutiny Committee will be asked to first consider the Initial Capital Programme proposals as shown in Appendix B and to make any recommendations for changes. If they wish to make a change, the reason for this needs to be recorded in order to assist the Cabinet and the Budget Working Group (BWG) draw up the final proposals.
  23. Managers will be asked to revisit the schemes included in Appendix B and to confirm final costs and spend profile prior to the final proposals being presented to Cabinet.
  24. Currently the approved timetable requires Cabinet to approve the final budget proposals by no later than the 22nd February 2016 and that Cabinet's final budget proposals will be considered by Council at a meeting to be held on 2nd March 2016.
  25. As the Final Settlement will not be received from WG until 2nd March 2016, this timetable is now under review and will have to be revised.

  Resource Implications (Financial and Employment)

  26. The total net capital expenditure of the proposed programme for the Council as a whole over the 5 years, is approximately £104.525m.
  27. If all proposed schemes for the Council as a whole are approved, the effect on General Fund useable capital receipts will be as shown in the following table.

  Capital Receipts	General	Ringfenced Social Services	Ringfenced Education
  	£000's	£000's	£000's
  Anticipated Balance as at 1st April 2016	8,122	1,348	1,065
  Anticipated Requirements - 2016/17	-5,515	0	-1,684
  Anticipated Receipts - 2016/17	0	0	7,500
  Balance as at 31st March 2017	2,607	1,348	6,881
  Anticipated Requirements - 2017/18	0	-1,348	0
  Anticipated Receipts - 2017/18	0	0	2,800
  Balance as at 31st March 2018	2,607	0	9,681
  Anticipated Requirements - 2018/19	0	0	0
  Anticipated Receipts - 2018/19	0	0	0
  Balance as at 31st March 2019	2,607	0	9,681
  Anticipated Requirements - 2019/20	-4	0	-1,404
  Anticipated Receipts - 2019/20	0	0	0
  Balance as at 31st March 2020	2,603	0	8,277
  Anticipated Requirements - 2020/21	-223	0	-7,686
  Anticipated Receipts - 2020/21	0	0	0
  Balance as at 31st March 2021	2,380	0	591
  Anticipated Requirements between 2021/22 and 2026/27	0	0	-5,250
  Anticipated Receipts between 2021/22 and 2026/27	0	0	4,750
  Balance as at 31st March 2027	2,380	0	91

  28. In line with the overall strategy and specific suggestions proposed by the BWG, in order to resource the Capital Programme, reserves will be utilised over the period of the Capital Programme 2016/17 to 2020/21.
  29. The Project Fund will be used to fund schemes assessed on an invest to save basis, and in certain circumstances business critical schemes may also be funded from this reserve with the prior approval of the Head of Finance. The projected usage of this reserve over the period of the Capital Programme is shown below:

  Project Fund	£'000
  Anticipated Balance as at 1st April 2016	2,918
  Anticipated Requirements - 2016/17	-858
  Anticipated Receipts - 2016/17	50
  Balance as at 31st March 2017	2,110
  Anticipated Requirements - 2017/18	-100
  Anticipated Receipts - 2017/18	50
  Balance as at 31st March 2018	2,060
  Anticipated Requirements - 2018/19	0
  Anticipated Receipts - 2018/19	50
  Balance as at 31st March 2019	2,110
  Anticipated Requirements - 2019/20	0
  Anticipated Receipts - 2019/20	50
  Balance as at 31st March 2020	2,160
  Anticipated Requirements - 2020/21	0
  Anticipated Receipts - 2020/21	50
  Balance as at 31st March 2021	2,210

  30. The above forecast balances need to be seen in the context of significant pressures for spending which are not yet included in the Capital Programme. These include the backlog of school, highways and buildings improvements.

  Sustainability and Climate Change Implications

  31. The bids must also be evaluated for Sustainable Development. The four areas of Sustainable Development to be considered are:
  • Living within environmental limits
  • Ensuring a strong, healthy and just society
  • Achieving a sustainable economy
  • Promoting good governance
  32. Sustainability checklists will be requested from Project Managers for each of the proposed bids included in Appendix B. These will be reviewed by members of the Sustainable Development Working Group, with a view to ensuring that wherever possible the four sustainable targets are addressed. The results will be incorporated into the Final Capital Programme Proposals report in February 2016.

  Legal Implications (to Include Human Rights Implications)

  33. The Council is required to show that capital expenditure is covered by identified resources.

  Crime and Disorder Implications

  34. The obligations of the Council with regard to Section 17 need to be fully considered in the budget decision making process.

  Equal Opportunities Implications (to include Welsh Language issues)

  35. Additional finance improves the Council's opportunities for assisting disadvantaged members of society.

  Corporate/Service Objectives

  36. Contributes to the corporate priority of Community Leadership by the provision of sound financial management.

  Policy Framework and Budget

  37. This report follows the procedure laid down in the constitution for the making of the budget. The 2016/17 budget proposals will require the approval of Council. Some of the proposals for amendments to the 2015/16 Capital Programme are the responsibility of Cabinet and others are for Council. These are identified in the recommendations to this report.

  Consultation (including Ward Member Consultation)

  38. All Scrutiny Committees will be consulted on the proposals.

  Relevant Scrutiny Committee

  39. The lead Scrutiny Committee is Corporate Resources.

  Background Papers

  Bids received from departments

  Correspondence received from the Welsh Government

  Contact Officer

  Victoria Lloyd, Capital Accountant

  Officers Consulted

  The following Officers have been consulted on the contents of this report:-

  Corporate Management Team

  Responsible Officer:

  Miles Punter, Director of Environment and Housing Services