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 an update on progress against the delivery of the 2023/24 capital programme to the end of September 2023, the latest forecast of capital expenditure and the major variances since the Capital Programme Outturn report submitted in September 2023 and the proposed financing of capital expenditure for 2023/24 and affordability of the Capital Programme.

The Executive Member for Finance and Resources advised that the latest forecast of expenditure for 2023/24 was £401.0m compared to the current approved budget of £496.3m.  Spend as of 30 September 2023 was £141.7m.  The main variances related to the Asset Management Programme, Back of Ancoats Mobility Hub and Public Realm, Our Town Hall Refurbishment, This City Housing Delivery Vehicle, Public Sector Housing Programme, 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.  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.

It had previously been reported that many projects in the capital programme had faced an extremely challenging two year period with intense pressures on costs due to extraordinary levels of inflation and unprecedented pressure on the supply chain (labour and materials availability). These pressures continued to be seen and remained a significant risk across the capital programme.  Inflation in the UK in the 12 months to September 2023, as measured through CPI, was currently 6.7%, which was static from August 2023, but down from 6.8% in July 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 relatively elevated.

The current forecasts showed that the financing costs remained affordable within the revenue budget available including reserves. The capital financing reserves would start to be drawn down to meet the costs associated with the borrowing by 2026/27, however, the model was based on a significant number of assumptions, including the timing of future borrowing and forecast future interest rates and the position was subject to change.

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:-

·                Children’s Services - Levenshulme High School for Girls – 2024 Expansion.  A budget increase of £2.5m was requested, funded by borrowing, to deliver an additional 100 places of secondary education for Manchester residents at Levenshulme High School, increasing the total capacity of the school from 1,000 to 1,100 places

·                Children’s Services – Chorlton High School (CHS) South – 2024 Expansion.  . A budget increase of £4.2m was requested, funded by borrowing, to deliver an additional 150 places of secondary education for Manchester residents at CHS South by creating additional classrooms within a new teaching block

·                Growth and Development - Carbon Reduction Programme 2024-25.  A budget increase of £0.5m was requested, funded by borrowing on a invest to save basis, to allow for further surveys to be commissioned across the Councils corporate estate to allow for the creation of a 15-year fully costed roadmap to zero carbon.

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 – Next Generation End User Experience.  A revenue budget increase of £0.068m was requested, funded from the Capital Fund reserve, to upgrade all end user devices to windows 11, which was required as windows 10 would be at end of life in 2025.

·                Private Sector Housing – Disabled Facilities Grant (DFG).  A capital budget increase of £3.166m was requested, funded by £0.740m Government Grant and £2.426m external contribution, to facilitate home adaptations for people with disabilities to enable them to live as independently and safely as possible in their homes.

·                Growth and Development - New Smithfield Market.  A Capital budget of £0.248m in was requested, funded by £0.124m RCCO from the New Smithfield Market reserve fund and £0.124m Capital Receipts, to contribute to the unidentified ground remediation costs which had been arisen during the demolition process by the incoming tenants.

·                Highways Services - Patching Defect Repairs 2023-24 additional funding.  A capital budget increase of £1.5m was requested, funded by external contribution, to continue with the delivery of the patching programme to fulfil the Council’s legal obligation to maintain the carriageway and footway network by repairing actionable defects identified during safety inspections.

The report also provided an update on delivery of the Manchester Cycleway Construction (Fallowfield Loop and Yellow Brick Road) following a successful bid for £2.52m funding from Tranche 4 of the Department for Transport Active Travel Fund (ATF4).

Councillor Leech welcomed the additional funding for highways patch defect repairs and queried if this would be deliverable within the current financial year.  He also sought clarification as to whether officers were confident that the Factory project would be delivered on budget without the need for any further budget increases.

Decisions:-

The Executive:-

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

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

·                Children’s Services - Levenshulme High School for Girls – 2024 Expansion.  A budget increase of £2.5m funded by borrowing

·                Children’s Services – Chorlton High School (CHS) South – 2024 Expansion.  . A budget increase of £4.2m funded by borrowing

·                Growth and Development - Carbon Reduction Programme 2024-25.  A budget increase of £0.5m funded by borrowing on a invest to save basis

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

·                ICT – Next Generation End User Experience.  A revenue budget increase of £0.068m funded from the Capital Fund reserve.

·                Private Sector Housing – Disabled Facilities Grant (DFG).  A capital budget increase of £3.166m funded by £0.740m Government Grant and £2.426m external contribution.

·                Growth and Development - New Smithfield Market.  A capital budget increase of £0.248m, funded by £0.124m RCCO from the New Smithfield Market reserve fund and £0.124m Capital Receipts.

·                Highways Services - Patching Defect Repairs 2023-24 additional funding.  A capital budget increase of £1.5m funded by external contribution.