Agenda item

To consider the recommendations of the Executive on the 8 February 2021 to the Council on varying its Minimum Revenue Provision Policy as a result of the review undertaken by Link Asset Services.

Members considered the recommendations from the Executive on proposals to vary the Minimum Revenue Provision Policy as a result of the review undertaken by Link Asset Services.  It was reported that the assessment was in line with current guidance on capital debt liability.

Motion: Councillor L Williams proposed (and Councillor Taylor seconded):

‘1.      To approve the revised Minimum Revenue Provision Policy 2020/21 set out within Appendix 5b to the Executive report.

2.       That in approving the revised Minimum Revenue Provision Policy, Council endorses the following amendments which had been included in the document:

i.          The Council has accepted the principle that any capital receipts which it determines in future should be set aside in order to reduce the outstanding amount of capital debt liability may, if desired, be taken to represent a debt liability reduction that has been made in lieu of a corresponding amount of prudent provision that would otherwise have been made in a particular financial year. Any such setting aside of capital receipts will not, however, apply to those capital receipts which represent the repayment of loan principal amounts in respect of loans made in earlier financial years which have been treated as capital expenditure, but not subjected to an Minimum Revenue Provision charge.

ii.         The policy changes reflected above will in future be represented as a new local Option for the ongoing determination of an amount of Minimum Revenue Provision which is considered each year to be prudent.

iii.       In respect of new capital debt liability incurred after 1st April 2008, the Authority’s Policy continues to adopt the principles outlined in Option 3 (asset life method) that are exemplified in the Minimum Revenue Provision Guidance, whereby the liability will be charged over a period that is reasonably commensurate with that over which the new capital expenditure is estimated to provide a benefit to the Authority.

iv.       Any credit arrangements or expenditure treated as capital expenditure under Direction or Regulation will either have Minimum Revenue Provision determined under Option 3, or otherwise related to the estimated life of the underlying asset.   For example, a loan granted to a third party towards “capital expenditure” will, where Minimum Revenue Provision is considered to be necessary, be related to the life of the asset towards which the financial assistance is being provided.

v.         Whether any charges are appropriate for this type of activity after taking account of the different powers available to it.

vi.       Minimum Revenue Provision will not be charged (voluntarily) on any Part II (Housing Revenue Account related) housing debt.

vii.     Minimum Revenue Provision will not be charged on loans made to wholly owned subsidiaries or other third parties where such loans are treated as capital expenditure in cases where there are satisfactory and supportable repayment obligations attached to those loans. Unlike other types of capital receipt, the capital receipts that will arise from these repayments will be set aside generally or specifically to reduce the outstanding amount of capital debt liability in respect of these loans.  The anticipated receipts will be kept under review on an annual basis in order to ensure that the deferment of Minimum Revenue Provision remains prudent.

viii.   Following the identification of savings in respect of financial years 2004/05 – 2018/19, totalling £23.808m, (in respect of an increase of £34.743m to Adjustment A, and earlier year revenue contributions to capital of £13.054m, (adjusted for alternate Minimum Revenue Provision liability)), the Council will determine for any subsequent financial year the extent to which they propose to reduce the amount of Minimum Revenue Provision liability that would have arisen, but for these savings.  Additionally, the Council will continue to apply the higher amount of Adjustment A indicated above to have been identified’.

Motion carried: The motion was submitted to the Council and carried.