Agenda item

To submit a report by the Director of Function (Resources)/Section 151 Officer.

The report of the Director of Function (Resources)/Section 151 Officer incorporating the initial capital budget for 2021/22 was presented for the Executive’s consideration.

Councillor Robin Williams, Portfolio Member for Finance introduced the report by explaining that as part of the budget setting process the initial proposed capital budget along with the draft revenue budget proposals under the subsequent item will be the subject of formal consultation with the Corporate Scrutiny Committee and the general public following which the Executive will make its final 2021/22 budget recommendations to the County Council. The Full Council meeting on 9 March, 2021 will then approve a budget and related Council Tax demand for 2021/22.

The Portfolio Member said that formulating the capital budget has been made more difficult this year due to a funding shortfall meaning that additional funds will have to be identified in order to realise the recommended capital projects in full. The General Capital Funding received from Welsh Government for 2021/22 (excluding the 21st Century Schools programme and the Housing Revenue Account) based on the provisional Local Government settlement figures totals £4.321m. From this allocation, £4.167m is required to support the programme for refurbishing and replacing existing assets in line with the Council’s adopted Capital Strategy.  Four one off capital projects are recommended for inclusion in the capital programme for 2021/22 and these amount to £1.105m which exceeds the available funds by £921k. A potential underspend in the revenue budget for 2020/21 may mean an additional £1m could be added to the general reserve which could be used to fund the additional capital expenditure in 2021/22. However, this is not guaranteed and should the revenue budget position deteriorate over the second half of the financial year, the level of funding available may be less than £1m. Of the 4 one off schemes detailed in Table 4 of the report the match funding for Economic Development projects (£95k) and the purchase of chrome books for pupils (£305k) are considered a priority which means that if sufficient reserves are not available then the other two schemes – resurfacing play areas and flood relief schemes may have to be scaled back. A total capital programme of £36.155m is proposed for 2021/22.

The Director Of Function (Resources) and Section 151 Officer advised that one of the key  principles of the Capital Strategy is that capital funding will be allocated each year to ensure investment in the Council’s existing assets to protect them for the future; this priority  has been  delivered in the main through Welsh Government’s  Capital Grant and supported borrowing. These two headings have remained fairly constant over a number of years with Welsh Government supporting specific capital expenditure projects through grant funding. This means that the core funding available for capital purposes has in effect been reducing year on year making it more difficult to fund investment in existing assets. The Council has in the past used capital receipts as a source of additional capital funding; however the potential for any significant capital receipts is now limited as the majority of any remaining assets which remain unsold have already been earmarked to fund existing or future capital projects e.g. 21st Century schools, leisure improvements and smallholdings. Likewise in previous years funding has been available from an earmarked reserve which was specifically set up to fund capital projects. Use of this funding over the past few years means that the balance has fallen considerably and the remaining balance will be held to fund any emergency capital works which may arise during the year or to provide match funding if the offer of significant grant funding was received during the year which requires a small amount of match funding. The capital budget is therefore becoming increasingly constricted hence the proposed application of a potential underspend from the revenue budget to the capital programme. This is not sustainable in the long term and without a change of strategy by Welsh Government in terms of increasing core capital funding, it will become increasingly difficult to fund any new items of capital expenditure in future.

The Vice-Chair sought clarity with regard to the potential progress of the Red Wharf Bay Flood Risk  scheme and whether in the event of its slipping due to shortage of capital funds, it would be re-visited and the timeline for doing so.

The Director of Function (Resources)/Section 151 Officer advised that the Welsh Government’s grant funding of 85% for the scheme must be spent in the next financial year; should the Council be unable to provide the remaining 15% match funding then the grant will have to be renegotiated with Welsh Government.

Councillor R.G. Parry, OBE, FRAgS, Portfolio Member for Highways, Waste and Property commented that he thought it important that the scheme should proceed given the availability of 85% funding to enable that to happen; however the crux of the matter is whether the grant funding will still be available in the 2022/23 financial year should the Council be unable to match fund the scheme in 2021/22.

The Deputy Chief Executive suggested that it may be advisable for the Portfolio Member for Highways, Waste and Property to write to Welsh Government Ministers to highlight the pressure on the capital budget and to request that they therefore consider fully funding flood risk schemes in future. He added that it is important that grant funding should not be lost especially when it is at a level of 85%.

The Chair agreed that setting the capital budget for 2021/22 is a challenge and further in light of this, she proposed that the Portfolio Member for Finance write to the Welsh Government to make representations about the capital budget situation in Anglesey due to there having been no increase in the capital allocation for many years and its implications for the Council’s capital expenditure in future. The Executive was agreed that the suggested representations should be made.

It was resolved -

·      To recommend the following capital programme for 2021/22 to the Full Council –

2020/21 Schemes Brought Forward           £3.970m

Refurbishment/Replacement of Assets     £4.167m

New One Off Capital Projects (Priority

Projects)                                                        £   780k

New One Off Capital Projects (subject to

Funding being available)                             £   325k

21^st Century Schools                                    £6.6m

Housing Revenue Account                         £20.313m

Total Recommended Capital Programme

2021/22                                                           £36.155m

Funded By:

General Capital Grant                                  £2.163m

Supported Borrowing General                    £2.158m

General Balances                                         £596k

General Balances

(if sufficient funding available)                   £325k

21^st Century Schools Supported

Borrowing                                                     £2.897m

21^st Century Schools Unsupported

Borrowing                                                    £498k 

HRA Reserve & In Year Surplus                 £15.639m

HRA Unsupported Borrowing                     £2.0m

External Grants                                             £5.909m         

2020/21 Funding Brought Forward            £3.970m

2021/22 Total Capital Funding                    £36.155m

·                To note the potential future funding requirements for 2022/23 onwards as set out in Appendix 1, Table 3 and paragraph 5.3 of the report.

·                That in light of the pressure on the capital budget, the Portfolio Member for Highways, Waste and Property make representations by letter to the Welsh Government’s Minister for Environment, Energy and Rural Affairs that for the future, local authority flood prevention/mitigation schemes are 100% funded by Welsh Government grant, and

·                That the Portfolio Member for Finance make representations by letter to the Welsh Government’s Minister for Finance to highlight the pressure on the capital budget in Anglesey due to the lack of increase in the general capital allocation over a number of years and the limitations this is likely to place on the Council’s future capital activities and investment.