Agenda item

Report of the Deputy Chief Executive (Place)

The Cabinet considered a report of the Director of Finance and Corporate Services, which set out the final revenue and capital outturn position for 2016/17 and reviewed treasury management activity and 2016/17 Prudential Indicators under the Prudential Code for Capital Finance.

The Cabinet noted that the Audit and Procurement Committee would also be considering the report at their meeting on 26^th June 2017.

The report indicated that the overall financial position included a revenue overspend of £0.7m, which was required to be funded by a contribution from the Council reserves.  At quarter 3 there had been a projected overspend of £4.8m and the report identified the underlying movements between quarter 3 and outturn which had resulted in an overall underlying net underspend of £4.1m in the final quarter and led to the overall overspend of £0.7m.

The Cabinet were advised that, consistent with the approval of the programme of staffing reductions approved by them in November 2015, £6.7m of costs had been incurred as a result of early retirement and voluntary redundancy decisions.

There had been a Capital Programme expenditure of £71m, which was £52m less than envisaged at the start of the year.  The quarter 3 monitoring report to Cabinet on 21^st February 2017 approved a revised capital budget of £81m for 2016/17.  Since then, there had been a net programme increase of £1.3 giving a final budget for the year of £82.3m.  Since February, a total of £12.5m net rescheduled spending had arisen on directorate capital programmes.  The report provided a scheme by scheme analysis of the rescheduling and accelerated spend.

The report sought retrospective approval for a change to the Capital Programme, reflecting final scheme costs on the completed Whitley Infrastructure, Friargate Bridgedeck and South West Coventry Junction Improvement schemes delivered by Costain.

There was also a reduction in the level of Council revenue reserves from £57m to £51m and an increase in balances held relating to capital grants and capital receipts to fund future projects from £12m to £30m.  Table 2 of the report provided a summary of reserve movements during the year.

In relation to Treasury Management Activity, the report indicated that political uncertainty had been the main driver of the economic landscape during 2016/17.  Uncertainty over the outcome of the US Presidential election and the UK’s future relationship with the EU resulted in significant market volatility during the year.  UK Inflation continued to be subdued in the first half of 2016/17, however, a sharp fall in the Sterling exchange following the EU referendum had an impact on import prices which resulted in inflation rising from 0.3% in April 2016 to 2.3% in March 2017.  Despite this uncertainty, the UK GDP grew steadily during the year and the unemployment rate dropped to 4.7% in February, its lowest level in 11 years.  The fall out from the EU Referendum also caused the Bank of England Base rate to be cut to 0.25% from 0.5%.  Current forecasts expected the base rate to stay at 0.25% until at least June 2020, with a further reduction to close to zero more likely than a rate rise in the meantime. 

Given the interest rates provided by the Public Works Loans Board, it continued to be cheaper for local authorities to use short rather than long term funds for financing.  At outturn, the Capital Financing Requirement, which indicated the authority’s underlying need to borrow for capital purposes, had reduced by £11m.  No new long term borrowing was taken out during 2016/17, however, some borrowing would be required in the future to support current expenditure plans and the need for any such borrowing would be kept under review in 2017/18.

Appendix 3 of the report submitted set out the ratio of financing costs to Net Revenue Stream, highlighting the revenue impact of the capital programme.  This showed the Council’s revenue costs of financing its capital expenditure as a proportion of its income from Government grant and Council Tax.  The actual was 13.09% against a forecast of 14.03% in the Treasury Management Strategy.  This reflected a lower level of borrowing than anticipated to fund the Capital Programme and higher levels of investment balances.  The Appendix also provided Capital and Treasury Management Related Prudential Indicators, including authorised limit for external debtp; operational boundary for external debt; gross debt v “Year 3” capital financing requirement; and debt maturity structure, interest rate exposure and investments longer than 364 days.

RESOLVED that the Cabinet:

1.  Approve the final revenue outturn position of a £0.7m overspend, balanced to nil by a £0.7m contribution from Corporate reserves.

2.  Approve the final capital expenditure and resourcing position, incorporating expenditure of £71m against a final budget of £82.3m; £12.5m expenditure rescheduled into 2017/18 and a net over-spend of £1.3m

3.  Give retrospective approval for a £1.4m virement reflecting final unfunded scheme costs on the completed Whitley Infrastructure, Friargate Bridgedeck and South West Coventry Junction Improvement schemes.

4.  Approve the outturn Prudential Indictors position as set out in section 2.4.4 and Appendix 3 of the report submitted.