Agenda item

To consider the Capital Strategy for 2021/22 to 2023/24, incorporating the Property Investment Strategy for 2021/22.

Mr Steve Thompson, Director of Resources, advised that this was the Council’s third annual Capital Strategy following its recent introduction by Chartered Institute of Public Finance and Accountancy (Cipfa) in response to the increasing commercial activities of local authorities. The purpose of the Strategy was to provide long term context, a high level overview of capital expenditure and treasury management and to look at potential risks and remediation. It aligned with the Capital Programme which was updated on a three-year rolling basis.

He noted that the Strategy also included details on the governance process, how decisions would be made, what informed decisions, what skills were required to take those decisions and the long term liabilities and potential consequences. Additionally, debt and borrowing and commercial activity were detailed.

The Leadership Board was advised that capital expenditure schemes had a lifespan of more than one year and a threshold of £15,000, with revenue spend being the day-to-day spending on services. Mr Thompson noted that some areas of spending fell into both categories such as maintenance of buildings and that it was technically easier to fund capital from revenue than revenue from capital.

In relation to commercial investment, it was reported that the Council held only two investments outside of the borough, not including Blackpool Airport which sat just over the boundary in Fylde. It was further noted that there were four different kinds of assets – operational, community, regeneration and investment and that the Council had set the geographical area for its potential investments as that of the Lancashire Economic Partnership (LEP) of which it was a member.

Mr Thompson advised that funds for capital developments came from many sources including contributions from developers and the sale of assets with 50% coming from external grant funding for specific projects in the previous financial year.

Members commended the Capital Strategy and queried the flexibility on the loans offered by the Council to businesses. In response, Mr Thompson advised that the Business Loan Fund had been established to boost the economy and create jobs and therefore the Council tried to be as flexible as possible with applicants. Typically the loans offered were on a fixed term but with no penalties for early redemption. A six-month payment holiday had been offered during 2021 in response to the difficulties caused by the pandemic. He further advised that all loans were underwritten by assets which were reviewed as required.

The Leadership Board further queried the due diligence carried out and the costs of independent advice required with regards to the provision of loans. Mr Thompson reported that costs relating to due diligence were passed on to applicants and that the level of due diligence required varied depending on the size and complexity of the loan. He noted that there had been a small number of failures and that the risk of the loan was reflected in the interest rate charged. In addition, the scheme included allowance for bad debt which allowed for cross-subsidisation within the scheme. In answer to a further question, Mr Thompson advised that the maximum unsecured loan would be no more than £15,000.

In response to a further question in relation to interest rates, Mr Thompson noted that borrowing was currently undertaken at a rate of about 0.1% whilst the budget was based on a rate of 1% and that it was expected that any future increases in interest rates would be incremental rather than a significant step change allowing for the scheme to adequately respond. He noted that 75% of Council borrowing was currently short-term.