Agenda item

To present the report of the Director of Function (Resources)/Section 151 Officer.

The report of the Head of Democracy was presented for the Committee’s consideration. The report outlined the context to the 2026/27 Capital Budget setting process along with the key issues and questions for Scrutiny in evaluating the Executive’s final draft capital budget proposals. The report of the Director of Function (Resources)/Section 151 Officer summarising the final capital spending proposals for 2026/27 was attached at Appendix 1.

Councillor Gary Pritchard, Leader and Portfolio Member for Economic Development presented the report noting that the capital budget remains tight which limits the Council’s ability to progress new projects. Borrowing is an option, but it carries financial risk and ongoing costs to the revenue budget.

The Director of Function (Resources)/Section 151 Officer explained that the capital budget is guided by the Capital Strategy 2026-2031 which prioritises protecting and maintaining current assets, maximising external funding, meeting statutory responsibilities and continuing to support the Communities for Learning Programme. Although the General Capital Funding allocation from Welsh Government for 2026/27 is £155k (3.15%) higher than in 2025/26, it does not make up for the erosion in value  caused by inflation. The Council may borrow to fund capital spending but borrowing generates revenue costs because loans must be repaid. Treasury Management rules set limits on borrowing to ensure that councils borrow responsibly.

While the Welsh Government’s Capital Grant is largely absorbed by the need to maintain existing assets, the capital programme and budget also include other key projects -  improvements to Menai Bridge Pier and Pontoons (£225k); Phase 2 of the Plas Arthur Leisure Centre refurbishment (£1.65m), and upgrades to Penhesgyn and Gwalchmai recycling centres (£3.806m) funded largely through the eEPR scheme funding. In addition, the Council has received £1.5m from the UK Government’s Pride in Place Fund to deliver community led improvement initiatives.

The proposed Housing Revenue Account Capital Programme for 2026/27 totals £31.572m and is focused on continued investment in existing housing stock to maintain compliance with WHQS (£15.71m); a new extra care and residential facility in Menai Bridge (£14.001m); new housing developments (£1.498m but with the potential for further additions during the year); and replacement vehicles for the Housing Maintenance Unit (£363k). HRA funding is ring-fenced meaning that both revenue and capital resources must be used for housing purposes only. When combined with the General Fund capital budget, the total proposed capital budget for 2026/27 is £54.084m.

Councillor Geraint Bebb, Chair of the Resources Scrutiny Panel reported on the outcome of the Panel’s meeting on 12 February 2026 at which the final  draft capital budget proposals for 2026/27 were considered. In reviewing the proposed capital programme and budget the panel had noted that General Fund capital expenditure prioritises existing assets including Council buildings, schools, vehicles, IT infrastructure, highways and Disabled Facilities Grants. Having reviewed  the documentation presented by the Director of Function (Resources)/ Section 151 Officer, the Panel had resolved to support the final draft capital budget proposals for 2026/27 as presented and to recommend them to the Corporate Scrutiny Committee.

Councillor Gary Pritchard, Leader responded to a request for clarification on how the HRA operates, how rental income is used and the extent to which rents are subsidised, explaining that while the exact figures were not immediately available, they could be provided. He highlighted that one of the main challenges facing the HRA is that rent increases in recent years have been capped by Welsh Government at levels below inflation meaning that  rental income, which is the HRA’s main source of funding, has not kept pace with rising costs. As a result, there is reduced capacity to invest in existing stock, develop new housing and continue meeting the WHQS. The Executive acknowledges the importance of ensuring that rents remain affordable and that based on the Joseph Rowntree Living Rent methodology, the Council’s rents remain within affordability thresholds.

The Director of Function (Resources)/Section 151 Officer outlined the purpose of the HRA, the way it is funded and the types of expenditure it supports and also explained the collaborative relationship with housing associations as key partners in delivering new social housing.

Councillor Carwyn Jones, Portfolio Member for Housing and Community Safety noted that the Council has contributed towards Welsh Government’s target of delivering 20,000 additional social homes during the current Senedd term through joint working with housing associations. While the Council is committed to continuing the development of new social housing in line with the HRA Business Plan, the Plan will come under increasing pressure unless the current rent cap is lifted, additional funding is made available or capital and decarbonisation schemes are deferred. He emphasised that borrowing within the HRA must remain affordable.

Having scrutinised the final draft Capital Budget proposals for 2026/27 and having regard to the matters raised in discussion and the responses provided by the Officers and Portfolio Members it was resolved to support the 2026/27 final draft Capital Budget proposals as presented and to recommend them to the Executive.