Agenda item

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

3.1       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 December Month end.  The monitoring tables were contained in Appendix 1 to the report on actual expenditure to 31 December 2023 and the key issues and highlights identified in those numbers were summarised.  The December month end position reflected a projected outturn of £96.9m against a budget of £116.6m, giving a net budget variance of £19.7m.  That budget variance included net timing movements from 2023/24 into future years of £22m offset by funding increases of £2.4m from external funding for the Borders Innovation Park (£0.836m), insurance receipt for Peebles Swimming Pool (£0.481m), additional budget for Plant & Vehicle from the Fund (£0.720m) and increased capital receipts which partially offset the Planned Programme Adjustments (£0.465m).  Further timing movements from 2023/24 may occur at year end as the construction materials supply chain continued to experience disruption causing delays in sourcing essential materials and impacting on project timelines. 

3.2       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 forecasted 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 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 remaining balance to be addressed in 2023/24 was £0.368m following some small underspends in projects and the application of capital receipts.  Appendix 2 to the report contained a list of the block funding allocations approved for this 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 a list of estimated whole project capital costs for projects which in the main would not be completed in the current financial year.  As detailed within the approved 2023/24 Financial Plan there was a requirement for the Council to borrow to fund the Capital Programme and that would be actioned during the final quarter of the year, in line with the Treasury Strategy and advice from our external advisors.  The latest version of the CIPFA Prudential Code, published in December 2021, required from financial year 2023/24 onwards that quarterly monitoring of prudential indicators should be reported by Councils.  To meet that, quarters 2 and 4 of each financial year would continue to be reported through existing treasury management reports.  Quarters 1 and 3, which were not previously reported, were included in the report and Appendix 4 to the report provided an updated position on key treasury indicators as at the 31 December 2023 quarter end.  The information provided was a snapshot at the end of quarter 3. There were no concerns to highlight.   The Director – Finance and Procurement, Mrs Suzy Douglas, presented the report and responded to questions.  In response to a question regarding the proposed level of borrowing, Mrs Douglas explained that plans were in place for £30m of borrowing, however further borrowing in 2024/25 was expected.  Regarding the anticipated expenditure on Borderlands projects, Mrs Douglas undertook to discuss matters and provide an explanation following the meeting.  Members commended Mrs Douglas for her work in difficult circumstances and expressed their hope that capital could be deployed to fund the provision of utilities and services to industrial sites in the future. 

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;

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

(d)        to note the requirement to borrow funding during Q4 of 2023/24 to fund capital expenditure as detailed in Appendix 1 to the report; and

(e)        to note the update on key Treasury indicators at the 31 December 2023 as contained in Appendix 4 to the report.