Report of the Deputy Chief Executive and City Treasurer attached

The Executive considered a report of the Deputy Chief Executive and City Treasurer, which provided progress against the delivery of the 2023/24 capital programme to the end of July 2023, the latest forecast of capital expenditure and the major variances since the Capital Programme Outturn report submitted in June 2023and the proposed financing of capital expenditure for 2023/24 and affordability of the Capital Programme.

The Executive Member for Finance and Resources reported that the latest forecast of expenditure for 2023/24 for Manchester City Council was £454.0m compared to the current approved budget of £473.7m.  Spend as of 31 July 2023 was £91.9m.  The main variances related to the  Asset Management Programme, Hammerstone Road Depot, Campfield Redevelopment, Our Town Hall Refurbishment, Home Upgrade Grant, Social Housing Decarbonisation Fund and Varley Street SEND Secondary School.  These variances mostly related to timing differences meaning reprofiling would be required.

A more focussed look at the top 10 projects was provided in Appendix A.  These projects covered 47% of the total programme. The programme also contained some budgets yet to be allocated to specific projects but reserved for a particular purpose, such as Education Basic Need funding, Housing Affordability Fund, ICT Investment Plan and the budget for inflation pressures. These would be allocated once the specific schemes were progressed and approved, or in the case of inflation the business case showing the impact of inflationary pressures on a scheme completed. They would also then be subject to approval through the Council’s capital approval process.

As in previous reports the most significant risk facing the programme and major projects overall was the continued high levels of inflation being experienced.  Inflation in the UK in the 12 months to July 2023, as measured through CPI, was currently 6.8%, down from 7.9% in May and from a recent peak of 11.1% in October 2022.  Whilst this showed a downward trend which was expected to continue, the figure remained elevated.

The current forecasts showed that the financing costs remained affordable within the revenue budget available including reserves with the capital financing reserves being required to meet the costs associated with the borrowing by 2026/27.

In addition, it was reported that there were schemes that had been developed or had received external funding that were now ready for inclusion in the Capital Programme.  The proposals which required Council approval were those which were funded by the use of reserves above a cumulative total of £10 million, where the use of borrowing was required or a virement exceeded £1m. These included the following proposed changes:-

·                Aviva Studios, Home of Factory International - to reach practical completion, a capital budget increase of £22.2m was recommended, funded by borrowing and supported by the Council’s share of all future commercial sponsorship income.

·                Corporate Services - Our New Finance & HRODT System – a revenue budget increase of £17.4m was requested, to be spread across 4 financial years, and funded from the Capital Fund reserve, to replace the Council’s existing HR and Finance System.

·                Neighbourhoods – Manchester Aquatic Centre (MAC) – a capital budget increase of £0.640m was requested, funded by borrowing, to fund additional works deemed essential to address build,  health and safety issues and safeguard the MACs future operations and services, whilst also ensuring that the building remained complaint to host World-Class Events.

·                Growth and Development – Piccadilly Garden Design Phase – a capital budget increase of £0.782m was requested, funded by borrowing, to enable the project cost to progress to end of RIBA Stage 3 / submission of planning application.

The proposals which only required Executive approval were those which were funded by the use of external resources, use of capital receipts, use of reserves below £10.0m, where the proposal could be funded from existing revenue budgets or where the use of borrowing on a spend to save basis is required.  The following proposals required Executive approval for changes to the City Council’s capital programme:-

·                ICT - Digitising Registrars Certificates – a revenue budget increase of £0.244m was requested, funded from the Capital Fund reserve, to deliver a project that will lead the implementation of imaging software to digitise birth, death and marriage certificates, enabling the Registrars service to streamline and automate the current copy certificate process, increase team efficiencies and improve the service offered to customers.

·                ICT - Manchester ContrOCC Client Finance Portal (CFP) and Online Financial Assessments (OFA) Resources – a revenue budget increase of £0.092m was requested, funded from the Capital Fund reserve, to deliver a project that would enable the implementation of the two ContrOCC portals; Client Finance Portal (CFP) and Online Financial Assessment Portal (OFA).

·                ICT – Adults Care Management System – a revenue budget increase of £0.258m was requested, funded from the Capital Fund reserve, to implement a new care management system covering; rostering, care monitoring reporting, electronic medication administration record and mileage wizard for the Reablement and Disability Supported Accommodation Services (DSAS) teams within Adult’s Services.

·                Public Sector Housing – Collyhurst – a budget virement of £3.693m funded from capital receipts, between the Private Sector and Public Sector Housing budgets was requested as the existing budget was no longer required for its original purpose, and there was inflationary pressure in the wider regeneration scheme relating to the construction costs for new homes, a new park and associated infrastructure, and not all of this pressure could be mitigated through value engineering.

Councillor Leech sought clarification as to why the highways budget had been reprofiled and whether this would have any detrimental impact on the maintenance of roads and gullies.  He also expressed concern over the increasing level of borrowing for Aviva Studios and that following its completion the Executive should receive a further report that provided an in-depth detailed analysis as to what the extra funding had been required for.

The Deputy Chief Executive and City Treasurer clarified that the Council did not borrow funding against individual schemes but rather against the whole capital programme.  She also confirmed that there would be a future report to both Resources and Governance Scrutiny Committee and the Executive which would provide an in-depth detailed analysis as to what the extra funding for Aviva Studios had been required for

Decisions

The Executive:-

(1)       Note the Progress against the delivery of the 2023/24 capital programme to the end of July 2023

(2)       Recommends that the Council approve the following changes to the Council’s capital programme:-

·                Aviva Studios, Home of Factory International - a capital budget increase of £22.2m, funded by borrowing.

·                Corporate Services - Our New Finance & HRODT System – a revenue budget increase of £17.4m, to be spread across 4 financial years, and funded from the Capital Fund reserve.

·                Neighbourhoods – Manchester Aquatic Centre (MAC) – a capital budget increase of £0.640m, funded by borrowing.

·                Growth and Development – Piccadilly Garden Design Phase – a capital budget increase of £0.782m, funded by borrowing.

(3)       Approve the following changes to the Council’s capital programme:-

·                ICT - Digitising Registrars Certificates – a revenue budget increase of £0.244m, funded from the Capital Fund reserve.

·                ICT - Manchester ContrOCC Client Finance Portal (CFP) and Online Financial Assessments (OFA) Resources – a revenue budget increase of £0.092m, funded from the Capital Fund reserve.

·                ICT – Adults Care Management System – a revenue budget increase of £0.258m was requested, funded from the Capital Fund reserve.

·                Public Sector Housing – Collyhurst – a budget virement of £3.693m funded from capital receipts, between the Private Sector and Public Sector Housing budgets