Agenda item

To consider the Capital Investment Strategy for the 2019/20 financial period and, where appropriate, provide feedback for consideration by the Executive.

Members considered the Capital Investment Strategy for the 2019/20 financial period and provided feedback for consideration by the Executive.

The Executive Member for Finance, Councillor T. Schofield presented the latest Capital Investment Strategy. This forms a key part of the Council’s governance arrangements. It provides a mechanism by which investment and financing plans can be prioritised, ensuring that capital decisions took account of stewardship, value for money, prudence, sustainability and affordability. An Outline Capital Investment Strategy was approved by the Executive in March. This report reflects work carried out over recent months, overseen by the Commercial Ventures Executive Sub-Committee (CVESC) and Commercial Ventures Officer board. There will be further work to complete going forward. The Strategy will be used to support the 2020/21 Service and Financial Planning process when prioritising future capital investment plans and identification of new sources of income to address the forecast budget gap.

Members had a number of questions and comments on the report, relating to the following topics:

·       Work plan – the Chair commented that this was still work in progress. The Strategy had started to develop the numbers required to help meet the Council’s financial objectives. It was expected to develop further as priorities in the new Corporate Plan and Housing Strategy were finalised. This was set out in a logical sequence as the Council started to look at Budget gaps, set out its final plans and proposed commercial investments.

·       Feasibility studies – Members asked about progress during recent months, including the allocation of £25m in the Capital Programme for investment in corporate priorities in 2019/20 onwards and the creation of an earmarked reserve of £250k that was available to fund feasibility studies. The report confirmed that the Commercial Ventures Executive Sub-Committee now has delegated authority to approve investment of these funds. It was commented that the feasibility studies were revenue expenditure as opposed to the £25 million which is capital investment. It was confirmed that the wording would be amended to clarify this.

·       Commercial Ventures Executive Sub-Committee (CVESC) – the Chair made the point that there was on-going work to evaluate the risk profile and capital investment criteria which had been overseen by the CVESC. A lot of work had been undertaken by the CVESC at informal meetings but so far nothing had formally come to that Committee so far. He asked for assurances that a report would be formally put forward and that the Overview and Scrutiny Committee would be consulted. This was a very important area as it was looking at management information about investment performance as well as setting criteria for future investment. The Overview and Scrutiny Committee would also want to comment on proposals. The Executive Member for Finance gave those reassurances. CVESC, since its establishment in May, worked in both a formal and informal setting. These items would eventually come through to a formal meeting for discussion.

·       Social and environmental impacts – Members asked if the Council reviewed any undue environmental impact of capital investment schemes while looking at both risk and economic appraisal. If there were two schemes to invest in and both had the same financial benefits but one might have more benefit than other in social or environmental terms, was there an appraisal process to maximise the opportunity in terms of wider social benefit and environmental benefit? The Executive Member for Finance said that the social side and community benefits formed a large part of CVESC discussions. Where there were two similar cases, if one had a lesser community social benefit, it was likely to come second.
 

·       Influences on Investment – Members asked for more information, when it was available, about how it would ensure that service delivery was supported by fit for purpose assets (page 74 of the report). It was asked what was meant by the proposal for the Council to adopt transformational approaches to the delivery of services with and by local communities. How would it improve business performance? It was noted that work was on-going to fully analyse what assets the Council had, which wards they sat in and the benefit from these – either social or financial.

Members asked about progress on investments in property and capital scheme developments over the last five years. Results would come out of the current review of assets and returns. Progress over recent months was reported for major schemes including Marketfield Way, Cromwell Road, Lee Street and Pitwood Park developments. It was noted that it would be useful for local Members to understand the current timescales for these projects. These would be shared with Members outside the meeting.
 

·       Brexit – Members asked what impact Brexit might have on planning for capital investments. Were there any factors that could benefit or detract from current or planned investments? It was identified that Brexit risks were a consideration when planning investments but this was not made explicit in the report. There was risk that the value of assets could go down but this was always a transient cycle and it was regularly reassessed.

·       Property team – Members noted that there were gaps in permanent staff in the property team which was not at full strength and needed more people with the appropriate skills. This was a risk to the Council that needed highlighting. Projects like Marketfield Way needed people with the right skills.  It was identified that the property review was now complete and the external consultant’s report on the required staffing would be considered. Members were surprised that the absence of a full property team was not regarded as a “red risk” at this time (page 104 of the report). Officers commented that the Council had good interim staff on the team.

·        Purchase of shares/Provision of loans – the report referred to the option of making loans to and buying shares in service providers and local businesses to promote economic growth.  Members had concerns about this statement. The Council made small grants to local businesses but investing in shares in local businesses, while worthy, was concerning. It said the Council should be very cautious and proposals should be scrutinised if it does this.

Members asked if the Council used the £25 million in the approved capital programme that is available for new investments, how much of this would be borrowed? It was confirmed that all of this sum will be funded through borrowing. It noted that capital growth requirements will be considered as part of the service and financial planning process, and would be subject to review by this Committee. It drew attention to the Non-specified investments sentence in the report, concerning the purchase of shares, and asked how such purchases were being planned to work to the Council’s benefit. It would require a significant amount of rigour and due diligence before purchases were contemplated. It was confirmed that the Council would start borrowing in this financial year. It was noted that the Council had not said it would buy any Non-specified investments.

RESOLVED – that the Capital Investment Strategy for the 2019/20 financial period was noted including the Committee’s observations and comments for consideration by the Executive.