Agenda item

Consider report by Acting Chief Financial Officer. (Copy attached.)

There had been circulated copies of a report by the Acting Chief Financial Officer which provided an update on the progress of the 2022/23 Capital Financial Plan and sought approval for virements and the reallocation of funds.  The monitoring tables in Appendix 1 to the report reported on actual expenditure to 30 September 2022.  Key issues and highlights identified in those tables were summarised within the report.  The September month end position reflected a projected outturn of £98.011m with a net budget variance of £15.379m.  This included net timing movements from 2022/23 of £8.860m.  An outturn spend of over £98m in 2022/23 would be challenging to deliver and represented a higher capital spend than had ever been delivered previously.  Work continued with project managers to ensure 2022/23 forecasts were as realistic as possible, any further movement in forecasts would be presented through future monitoring reports.  The report explained that a number of macro-economic factors continued to affect the Capital Plan in 2022/23.  Unprecedented levels of inflation along with disruption in the construction materials supply chain continued to impact on the wider economy and consequently the Council.  A surge in demand coupled with constraints on supply had led to price increases, shortages and longer lead times.  The impact of that on tender prices for major projects and the wider Capital Plan continued to be assessed.  Current legally committed projects had a small risk of impact and block programmes of work could operate within a cash constrained budget and were considered lower risk, however would impact on the scale of project delivery from the blocks.  The most significant risk therefore lay in the contracts being tendered this year which could result in a budget pressure.  Any financial implications from those market conditions would be reported through the regular budget monitoring cycle with any longer term impacts reflected in the financial planning process.  In anticipation of inflationary pressures an inflation contingency of £1.253m was established at the 2021/22 year end to support potential budget pressures. This contingency was increased by £0.179m at the first quarterly monitoring and was being increased by a further £0.317m in the second quarterly monitoring, giving a revised contingency of £1.749m to support the Capital Plan as the year progressed. Appendix 2  to the report contained a list of the block allocations approved for the year and the various approved and proposed projects to be allocated from them within the 2022/23 Capital Plan.  Appendix 3 to the report contained a list of estimated whole project capital costs for single projects which would not be completed in the current financial year.  Members welcomed the report and acknowledged that difficult decisions remained outstanding regarding the Plan, and how to balance the ongoing financial pressures related to inflation and procurement difficulties.   In response to a question regarding properties demolished in Ednam, Kelso, the Director, Infrastructure and Environment undertook to confirm whether those demolitions related to temporary school buildings.  Regarding surfacing works at the old canteen, the Director explained that concerned ongoing works at Council Headquarters to install solar panels, electric vehicle charging station and to surface the area with tarmac as part of a wider smart grid project. 

DECISION

AGREED:-

(a)        the projected outturn in Appendix 1 to the report as the revised capital budget and approved the virements required;

(b)       to note the list of block allocations detailed in Appendix 2 to the report; and

(c)        to note the list of whole project costs detailed in Appendix 3 to the report.

MEMBER

Councillor Rowley re-joined the meeting following the discussion of the item above.