Report of the City Treasurer attached

The Executive considered a report of the City Treasurer, which outlined the capital outturn position for 2023/24 including total expenditure and funding, confirmed that funding sources had been managed to best utilise resources available to fund the capital programme; and presented a revised capital programme for the 2024/25 financial year after taking into account the final outturn position as reported.

The outturn for the Council’s Capital Programme in 2022/23 was £353.36m compared to the current approved budget of £510.5m.  This represented one of the largest deliveries of capital spend in the Council’s history and was much higher than in previous years. It represented the continued significant investment in Manchester with over 300 live projects progressing during the year.

The Executive Member for Fnance and Resources reported that the main variances related to Our Town Hall Refurbishment, This City Housing Delivery Vehicle, Public Sector Housing Programme, Social Housing Decarbonisation Fund, Asset Management Programme, Back of Ancoats Mobility Hub and Public Realm and Varley Street SEND Secondary School. Details of these variances were contained in the report.

In regard to any unused grant, it was reported that, subject to conditions, these had been carried forward into 2024/25 and would be matched against future spend. The programme was managed to ensure that any grant with a risk of claw back due to time constraints or other factors was fully utilised in 2023/24. Similarly, any external contributions that have not been used will be carried forward into 2024/25. 

The balance of available capital receipts carried forward from 2022/23 was £154.0m. A further £23.3m receipts were received in 2023/24 including pooled receipts from the sale of Council housing. Drawdown from capital receipts was £49.3m with the balance of £128m committed to the current approved programme of which £89.6m relate to Housing. Any new receipts generated in 2024/25 would be available for use in future programmes and added to the amount available. The Housing receipts were expected to support the achievement of the Council’s housing strategy and plans for their use will come forward in due course.

Insofar as revenue contributions to capital expenditure, a £1.5m revenue contribution to capital expenditure was made. In addition, £21.4m from the Major Repairs Reserve part funded expenditure on the HRA capital programme. The use of this reserve included self-financing revenue from the HRA revenue budget. 

In relation to the HRA Capital programme, long-term borrowing of £166.8m had been used to fund the programme this year. This borrowing figure represented the amount to be funded by borrowing in the long term and was not necessarily borrowed in year. The Council’s approach to actual borrowing drawn down in year was governed by its Treasury Management strategy. This reflected an approach to debt which considered volatility of interest rates during the year and the forecast changes to the Bank of England base rate. The Council had funded a large amount of its long-term borrowing from internal cash balances and was in an under borrowed position. A total of £295m of long-term external debt was borrowed in 2023/24. 

It was noted that inflation in the UK in the 12 months to March 2024, as measured through CPI, was currently 3.2%.  This was 0.2% lower than February 2024, down from a peak of 11.1% in October 2022. The impact of inflation on the capital programme would continue to be managed, monitored and reported and the unallocated inflation budget set aside would remain at £30.0m. 

Unlike the Revenue Budget the Capital Budget was subject to change as new schemes and /or external funding was received.  The budget was prepared in February each year on the best estimate of the start date and spend profile for each scheme and was refreshed in June for the Outturn Position.  Most capital schemes covered multiple years and as schemes developed the spending profile across financial years changed to reflect the agreed start on site date and delivery of the work packages.  Based on the monitoring information, it was proposed that the capital programme budget was re-phased to reflect the planned delivery of projects in 2023/24 to 2027/28.  The future programme would be reviewed throughout 2024/25 to reflect changes to the proposed profile of spend.

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 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:-

·            Children’s Services - Schools Capital Maintenance Programme. A capital budget increase of £3.971m in 2024/25 was requested, funded by Government Grant to address condition needs identified in the Council’s estate of maintained schools which includes community, voluntary controlled and foundation schools

·            Estates – Asset Management Programme. A capital budget increase of £0.500m in 2024/25, £0.250m in 2025/26 and £0.250m in 2026/27 was requested, funded by Capital Receipts to address numerous pressures emerging from business areas and specific buildings relating to repair or replacement of end-of-life office fixtures, as well as changes required due to a change in ways of working and new technology deployed

·            Highways Services - Removal of Obstructions – Decluttering.  A capital budget decrease of £0.200m was requested and approval of a corresponding transfer of £0.200m to the revenue budget, funded by Capital Fund to review the existence of street furniture within the city centre initially with the intention to remove or combine where appropriate and effectively declutter the footways to make them safer and more accessible for all users

·            Public Sector Housing – Housing Operations Programme 2024-25. A capital budget increase of £3m in 2024/25 and £1.4m in 2025/26 was requested, funded by HRA Reserve to undertake a series of specific investment works in response to immediate priorities resulting from asset condition, demand and/or surveys

·            Private Sector Housing – Disabled Facilities Grant. A capital budget increase of £9.253m in 2024/25 was requested, funded by Government Grant for home adaptations for people with disabilities.

Councillor Leech sought confirmation as to whether there was any expectation that any of the uncompleted schemes would increase in cost to deliver.  He also sought clarification on the costs of some of the projects.  The Executive Member for Finance and Resources agreed that specific costing details on projects could be provided after the meeting and provided an assurance that where some projects required rephasing, these were monitored closely and any mitigation required was implemented accordingly.

Decisions

The Executive:-

(1)       Recommend that Council approve the virements over £0.5m between capital schemes to maximise use of funding resources available to the City Council as set out in Appendix 3 of the report.

(2)       Approve the budget changes to the Council’s capital programme as follows:-

·                Children’s Services - Schools Capital Maintenance Programme. A capital budget increase of £3.971m funded by Government Grant.

·                Estates – Asset Management Programme. A capital budget increase of £0.500m in 2024/25, £0.250m in 2025/26 and £0.250m in 2026/27 was requested, funded by Capital Receipts.

·                Highways Services - Removal of Obstructions – Decluttering.  A capital budget decrease of £0.200m was requested and approval of a corresponding transfer of £0.200m to the revenue budget, funded by Capital Fund.

·                Public Sector Housing – Housing Operations Programme 2024-25. A capital budget increase of £3m in 2024/25 and £1.4m in 2025/26 by HRA Reserve.

·                Private Sector Housing – Disabled Facilities Grant. A capital budget increase of £9.253m in 2024/25 funded by Government Grant.

(3)       Note the outturn of capital expenditure 2023/24 is £353.3m.

(4)        Note the decisions of the City Treasurer regarding the funding of capital expenditure in 2023/24.