Agenda item

Consider report by Director – Finance and Procurement. (Copy attached.)

With reference to paragraph 3 of the Minute of the meeting held on 15 August 2023 there had been circulated copies of a report by the Director – Finance and Procurement which provided an update on the progress of the delivery of the 2023/24 Capital Financial Plan and sought approval for the virements and reallocation of funds required following the review of funding and forecasts as at the September Month end.  The monitoring tables on actual expenditure to 30 September 2023 and the key issues and highlights identified in those numbers were summarised within the report.  The September month end position reflected a projected outturn of £116.6m against a budget of £130.4m, a net budget variance of £13.8m.  That budget variance included net timing movements from 2023/24 into future years of £17.0m offset by funding increases of £3.2m.  Further timing movements from 2023/24 were likely as the year progressed and the delivery timescales of major projects became clearer.  The construction materials supply chain continued to experience disruption which was causing delays in sourcing essential materials and impacting on project timelines, therefore spend projections should be viewed as indicative and may change materially. However, experience had demonstrated it was likely that significant slippage would be experienced at the year-end compared to initial budgetary estimates. That would offset pressures in year but delay them into future years.  A number of macro-economic factors continued to affect the Capital Plan in 2023/24.  Recent 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, material shortages and longer lead times. The impact on tender prices for major projects and the wider Capital Plan continued to be assessed and built into forecast costs as they were identified.  Current legally committed projects had a smaller risk of impact and block programmes of work could operate within a cash constrained budget and were considered lower risk; although it was likely to impact on the scale of project delivery within the blocks.  The most significant risk lay in the contracts that were being tendered this year, including Galashiels Academy, Peebles High School and Tweedbank Care Home, which would result in budget pressures in future years - as had been highlighted through reports taken to Council during the first 6 months of the year.  The financial implications from those unfavourable market conditions would continue to be reported through the regular budget monitoring cycle with the longer-term impacts reflected in the financial planning process. During the 2023/24 budget setting process a Planned Programming Adjustment budget line was added to the Financial Plan, that was offset where unspent project budgets became available through the year.  The balance to address in 2023/24 remains at £0.833m as no further budget had been identified as available since the Q1 report was completed.  As highlighted to Council through separate reports, pressures in new build projects at Earlston Primary School, Galashiels Academy, Peebles High School, and Tweedbank Care Village had increased the Planned Programming Adjustment in future years of the plan by £19.8.5m. The funding of those pressures would be considered as part of the 2024/25 financial planning process.  Appendix 2 to the report contained a list of the block funding allocations currently approved for the year as well as the approved projects, actual spend to the end of September and the movement requiring virements within the blocks. Appendix 3 to the report contained the list of estimated whole project capital costs for projects which in the main would not be completed in the current financial year.  In response to a question regarding potential capital receipts for the 2023/24 financial year, the Director – Finance and Procurement, Mrs Suzy Douglas, explained that no buildings were expected to be disposed of in the current year.  The Director – Infrastructure and Environment explained that whilst there were no assets due to be disposed in the year, work was ongoing regarding future sales and a report on the rationalisation of the Council’s estate would be brought to a future meeting.

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 in Appendix 2 to the report and approved the required virements; and

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