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1 Capital Expenditure

1.1 Table 1 below summarises the extent to which the 2001/02 capital programme has been started and the carry forward implications for 2002/03:

1.2 Appendix 1 provides an analysis of the programme over services and contains details of requests to carry forward further schemes and an analysis of the net balance of the cash limit. Any service's balance remaining at 31 March 2002 is available to offset the cost of inflation arising because of the delayed start of schemes.

1.3 Total capital payments for the 2001/02 starts programme and from schemes in earlier years was £117.3m. This was £9.7m more than was estimated at the revised budget stage. £8m of the higher spending was on schemes funded by Government grants and specific borrowing approval (£3.8m) and contributions from developers and outside agencies (£4.2m). Payments on locally resourced projects were £1.7m higher than forecast, mainly as a result of a revised payments profile on the Enterprise project.

2 Capital financing 2001/02

2.1 The proposed method of financing these payments is set out below:

2.2 Capital receipts during the year amounted to £22m. This was £1.5m more than was estimated due to the timing of some receipts as between 2001/02 and 2002/03. Capital receipts in 2002/03 will therefore be correspondingly lower. All of the receipts can be used to finance new capital expenditure.

2.3 Transport Supplementary Grant (TSG) brought forward at the beginning of the year to meet outstanding payments for land on previous major highway schemes amounted to £0.7m. On the basis of the payments made during the year £0.1m of TSG was applied leaving £0.6m to be carried forward to 2002/03.

2.4 Other Government grants of £17.8m were principally for education (£15.8m) for school conditions funding and devolved formula capital allocation and for Magistrates Courts (£1.8m). Contributions of £8.2m included developer contributions (£2.7m), contributions from other local authorities (£1.7m) and other contributions (£3.8m) including lottery funding and trust funds.

3 Borrowing

3.1 Maximum borrowing is determined by the total credit approvals from the Government adjusted by transfers to and from other authorities. In 2001/02 credit approvals of £1.1m lent by the Hampshire Fire and Rescue Authority (HFRA) and £2m lent by Portsmouth City Council in 2000/01 were returned to those authorities. The amounts lent to the County Council by those authorities in 2001/02 for return in 2002/03 is £0.7m for the HFRA and £1.5m by Portsmouth City Council. These transfers amount to a net transfer from the Authority of £0.9m whereas when the programme was last reviewed it was assumed there would be a net transfer from the Authority of £2.2m. The main reason for the change is that no assumption was made about any lending by Portsmouth City Council in 2001/02. In addition £20,000 credit approval was transferred to Test Valley Borough Council for social housing schemes included in the Social Services capital programme. Other transfers of £180,000 for social housing allowed for when the programme was last reviewed will now be made in 2002/03 as the schemes did not proceed in 2001/02.

3.2 Government departments have until 30 September 2002 to issue some of their approvals for 2001/02 and so it is possible that the approvals still to be received will differ from the estimates in this report. Where there are differences, borrowings will be adjusted and offset by changes to revenue contributions.

3.3 After normal debt repayment of £11.4m the net increases in borrowing for the year was £27.7m Other debt repayments reimbursed by other authorities for deemed debt (transferred services) amounted to £3.1m. The County Council's debt outstanding on 31 March 2002 was £303.8m. This is equivalent to £242 per head of population. The increase in the debt of £27.7m represented an increase of 10% over the year.

3.4 Contributions of £4.6m were budgeted to be made in 2001/02 from the Invest to Save reserve for the costs of the Enterprise Project. A further contribution of £1.7m has been budgeted to be made in 2002/03. In view of the earlier phasing of payments on the project it is recommended that the part of the balance in the Invest to Save reserve for the Enterprise Project also be used in 2001/02. This will increase the contribution in 2001/02 to £6.2m.

3.5 After allowing for borrowing (paragraphs 3.1 and 3.2) and grants and contributions, the balance of the payments to be financed by revenue contributions is £22.9m. This is £1.2m lower than the budgeted revenue contribution and will be added to the capital reserve. Also a planned use of £2.2m from the capital reserve to compensate for the transfer of credit approvals to other authorities was not fully utilised as the transfer only amounted to £0.9m (paragraph 3.1), increasing the capital reserve by a further £1.3m. Both these savings will be required in 2002/03 to contribute towards alternative financing for the extra credit approvals to be returned to Portsmouth City Council and HFRA (£1.3m) and to provide alternative financing for the capital receipts (£1.5m) which were received in 2001/02 instead of 2002/03.

3.6 The trend in outstanding debt and projections for the next three years is set out in the following graph.

4 Capital receipts

4.1 Appendix 1 contains an analysis of capital receipts obtained in 2001/02. Services can retain 25% of capital receipts from the sale of their assets with up to 100% for approved in/out schemes. Receipts from development account or county farm sales though are retained for corporate use. In accordance with this policy, services' share of the 2001/02 capital receipts now due to be allocated amounts to £0.7m as set out in Table 5 of Appendix 1.

5 Determinations by the Cabinet

5.1 Part IV of the Local Government and Housing Act 1989 requires the County Council to make determinations for each year on certain capital issues. These are set out in recommendation 1.2(c).

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1. Published works.

2. Documents which disclose exempt or confidential information as defined in the Act.

TITLE

1. Capital closing file 2001/02.

Appendix 1

Capital starts, payments and receipts in 2001/02

A - Analysis of capital programmes 2001/02 and requests by services to carry forward further schemes to 2002/03