Contact: Jon Pittam, ext 7400 and Andrew Smith, ext 7826

1 Summary

1.1 The following decisions are sought:

1 That the Cabinet approve the updated Capital Strategy, attached as Appendix 1 of the main report

2 That the Cabinet recommend to County Council that the draft Annual Investment Strategy for 2004/05, set out in Appendix 2 of the main report, be approved.

2 Reason

2.1 The Capital Strategy prepared last year needs to be updated for use as background to the forthcoming consultations with stakeholders on the County Council's budget and capital programme. An up-to-date Capital Strategy, prepared in the light of past guidance from the Government, will also support the County Council's Comprehensive Performance Assessment.

2.2 Under the Local Government Act 2003, the Government also requires local authorities to prepare an Annual Investment Strategy for approval by the full Council.

2.3 Both documents support all the Aims of the Council's Corporate Strategy, in particular, Aim 5 of Improving Services.

3 Other options considered and rejected:

3.1 Not applicable

4 Conflicts of interest declared by the decision maker or a member or officer consulted

4.1 Not applicable.

5 Dispensation granted by the Standards Committee

5.1 Not applicable.

6 Reason(s) for the matter being dealt with if urgent

6.1 Not applicable.

Approved by: ................................... ... Date: .........................

Councillor T K Thornber

Contact: Jon Pittam, ext 7400 and Andrew Smith, ext 7826

1 Capital Strategy and corporate Asset Management Plan

1.1 In 2001 and 2002, the Government required all local authorities to prepare a Capital Strategy and corporate Asset Management Plan (AMP) to its specification and to submit them to their regional Government Office for assessment. This requirement was relaxed in 2003 for `excellent' authorities, who were required to submit only a summary extract.

1.2 The Government has now removed the requirement to submit any part of the two documents for 2004 but it is clear that the Government still considers them to be important manifestations of sound asset management. Keeping the Capital Strategy and corporate AMP up-to-date and relevant will also continue to be key considerations under the Comprehensive Performance Assessment.

1.3 A draft version of the Capital Strategy for 2004 is attached for approval as Appendix 1.

1.4 The more detailed corporate AMP focuses on the County Council's property assets and an updated version for 2004 will be reported to the Executive Member for Policy and Resources for approval. It complements the Local Transport Plan for highways and transport assets, and the Education AMP for schools.

1.5 The County Council's existing capital programme for 2004/05 to 2007/08 is reviewed in a separate report on this Agenda.

2 Annual Investment Strategy

2.1 The Cabinet approved a Treasury Management Strategy for the County Council at its budget meeting in February 2004. It deals primarily with the management of the County Council's borrowings but does include a short section on the investment of temporarily surplus funds. It includes a Treasury Management Policy Statement which was subsequently approved by the County Council.

2.2 In March 2004, the Government issued guidance on local authority investments under section 15(1)(a) of the Local Government Act 2003. This guidance took effect on 1 April 2004, replacing statutory controls on the range and nature of local authority investments, which were repealed. It applies to local authorities' investments for treasury management purposes. Pension fund investments are covered by a separate regulatory regime.

2.3 Central to the new guidance is a requirement for the full County Council to approve an Annual Investment Strategy before the beginning of each financial year. However, in view of the late publication of the guidance, the Government has agreed that, for 2004/05 only, formal approval by the Council should be obtained as soon as possible after the start of the financial year. In future, the draft Annual Investment Strategy will be reported to Cabinet with the other Budget papers in February.

The guidance

2.4 The Government's guidance categorises the investments available to local authorities into two types, `specified' and `non-specified'.

2.5 Specified investments are those that offer both high security and liquidity. They are sterling investments with no more than one year to maturity and include:

· fixed-term or call deposits with other local authorities

· gilt-edged stocks issued by the Government

· fixed-term or call deposits made with financial institutions awarded `high credit ratings', including money market funds.

2.6 All other investments are `non-specified'. These include company shares and bonds, and loans to other organisations for capital expenditure purposes. They are deemed to offer lower security and liquidity. Such investments are not currently used by the County Council and there are no plans to do so in the future.

2.7 The Government's guidance recommends that the Annual Investment Strategy should consider the policy for investing in each of these categories. The Strategy for the use of specified investments need only be summarised briefly, referring to the minimum credit ratings used for different types of investment, the arrangements for review of the ratings and action if they change. If non-specified investments are used, then the Strategy would need to consider these in greater detail, setting clear limits and risk parameters.

The Strategy

2.8 The County Treasurer manages aggregate cash balances on behalf of the County Council, the Hampshire Pension Fund, the Hampshire Police Authority, the Hampshire Fire Authority and a number of trust funds. The overall balance fluctuates from day to day but is expected to be in credit throughout most of 2004/05. The Pension Fund and the Police Authority, in particular, are likely to have cash balances in hand, requiring temporary investment.

2.9 So far in 2004/05, the aggregate balance has ranged between about £50m and £160m. It can vary on a daily basis by as much as £40m, for example, rising on a precept day when district councils pay over the County Council's monthly precept, and falling by a similar amount on the last working day of each month when salaries are paid.

2.10 The County Council's investment policy has always been that security and liquidity are paramount. Accordingly, only `specified' investments have been used so far this year and this will continue. Funds are invested in:

· fixed-term deposits of up to three months with local authorities, the Government's Debt Management Office, or banks rated at least AA3 by Moody's (a Government-recognised rating agency) that are included on the Council's lending list

· call deposits with the Bank of Scotland (rated AA2)

· call deposits with four managed AAA-rated money market funds.

2.11 The Council's lending list includes the major UK clearing banks, four highly-rated European banks and all UK local authorities. The list is reviewed monthly using Moody's ratings and limits are placed on levels of total deposits made with individual institutions. Any changes are approved by the County Treasurer.

2.12 The proposed Annual Investment Strategy for 2004/05 reflects this approach and is attached as Appendix 2.

3 Recommendations

3.1 The recommendations are contained in the decision sheet summary which precedes this main report.

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 FILE

ODPM letter 12 March 2004 on Local Government Investments

i:\ . . . . \ian\docs\cap strategy Cabinet 26Jul04.doc 21 July 2004

Appendix 1

Hampshire County Council

Capital Strategy

1 Introduction

1.1 This Capital Strategy has been approved by the County Council and the Corporate Management Team. It brings together the Council's key policies for managing all its capital assets, including land, buildings and roads, by:

focusing attention on the most effective and efficient use of the Council's capital assets

linking directly to the key aims in the Council's Corporate Strategy and to the Community Strategy

improving the management and use of capital assets alongside the Council's policy and service objectives

providing the strategy for the preparation of the Council's corporate asset management plan (AMP) and capital programme, and for Best Value reviews.

1.2 Core data on the background to the County Council's Capital Strategy are attached as Annex 1.

2 The Vision and Priorities for Hampshire, Community and Corporate Strategies

2.1 The Capital Strategy has been prepared within:

the Council's Vision, which has been given a short-term focus by the Cabinet through the identification of four key priorities,

the Corporate Strategy¹, and

the developing Community Strategies.

2.2 The County Council is working with the eleven Hampshire Local Strategic Partnerships (LSPs), which include district councils, to develop community strategies for each district. In addition, a county-level Hampshire Strategic Partnership has been established to consider matters not dealt with by the district partnerships, involving sub-regional, regional and national partners. The priorities identified at the county level, along with those from district LSPs, will be reflected in future revisions of the Capital Strategy.

2.3 The key themes identified by the Hampshire Strategic Partnership are:

safe and strong communities

health and well-being

economic prosperity and life-long learning

environment, infrastructure and transport.

2.4 The Corporate Strategy translates the Vision and member priorities into action, moving the Council from its present position to where it and the community wants to be. There are six key aims¹ which provide the focus for all the Council's activities:

maximising life opportunities

stewardship of the environment

achieving economic prosperity

building strong and safe communities

improving services

developing councillors and staff.

2.5 In addition, the Cabinet has identified four priorities for the Council in the shorter term:

crime, youth and deprivation

education and skills development

older people

transportation (mobility and accessibility) and economic housing.

2.6 The six key aims and the four priorities have implications for the Council's capital assets. Schemes are not included in the capital programme unless they contribute to meeting one or more of the six aims. For example, during the current financial year, the Council will:

start work to provide 300 of the planned 500 nursing care beds by the end of 2004

start a major investment programme to support the development of discovery centres and the major refurbishment of libraries across Hampshire

complete a £7.7m project to reorganise special school places in Winchester and Eastleigh

undertake major condition repairs at over 250 service units ranging from resurfacing playgrounds to major structural repairs of timber-framed buildings

invest in over 70 local transport schemes to improve safety, traffic management and use by cyclists and pedestrians.

2.7 The Capital Strategy takes account of the context of the Local Public Service Agreement¹ (PSA) with the Government, covering the period from 2002/03 to 2004/05. The additional capital investment required by the Local PSA, financed in part by unsupported borrowing approvals, has been included in the capital programme.

3 Framework for managing assets and the capital programme

3.1 The County Council approves the Capital Strategy, the corporate AMP and capital programme following consideration by the Cabinet. All these documents are subject to scrutiny by the Council's policy review committees. Responsibility for asset management within the Cabinet is allocated to the Executive Member for Policy and Resources.

3.2 At officer level, the Asset Management Group provides a corporate approach to asset management. The Group is responsible for preparing the Council's Capital Strategy and corporate AMP. It is led by the Director of Property, Business and Regulatory Services (PBRS) and the County Treasurer, and reports to the Corporate Management Team. The Group includes senior representatives of service departments, as well as officers responsible for preparing the Council's Community Strategy to make sure that all the strategies are fully integrated.

3.3 The Director of PBRS manages and monitors the implementation of the capital programme for building works, together with service chief officers, in line with the Council's financial regulations, standing orders on contracts and the conditions agreed by the Council when the capital programme is approved. Project appraisals are prepared for major schemes at feasibility and design stages, before contracts are let. Regular reports monitoring the capital programme are considered by the Executive Member for each service. The overall progress on implementing the programme, including the resources to finance it, is reported to the Corporate Management Team and the Executive Member for Policy and Resources.

3.4 Chief officers responsible for individual capital schemes work with colleagues from other services and disciplines to maximise the benefit for all services from capital investment. The involvement of other departments is a key part of the project appraisal process for capital schemes. This makes sure that solutions that cut across the boundaries between services are identified at an early stage.

4 Existing strategies on capital matters

4.1 The County Council's approach to managing its assets and planning the capital programme recognises the corporate and integrated nature of asset management, with a framework based on a `corporate landlord'. The Executive Member for Policy and Resources is responsible as landlord for the Council's land and buildings. Users and occupants similarly have responsibilities as `tenants'. The Capital Strategy builds on this existing platform to provide high quality and effective assets, in support of the delivery of services, that are safe and fully accessible for all users and the public.

4.2 The Council considers that maintaining its existing assets is very important. Under its Strategy for the Built Estate, the Council identifies properties for which there is a long-term need and then invests in their maintenance to make sure they are maintained to appropriate standards. Planned programmes are then carried out to maintain their condition. Budgets for all the Council's repairs and maintenance of buildings, both capital and revenue, are controlled centrally as part of the Strategy. All community schools buy-back a comprehensive revenue property management service through a service level agreement. A particular issue at present is the repair and refurbishment of system-built buildings which are nearing the end of their life. Having completed a 10 year programme to replace the heating systems, the Council has approved a medium-term strategy for re-cladding and re-roofing the earliest marks of these buildings. Some of these system-built buildings are used for social services and investment is required in homes for older people built in the 1960s and early 1970s. A planned approach is also adopted for the structural maintenance of highways assets.

4.3 The Council has clear objectives for holding land and property and these provide the context for a rolling programme of property reviews. This systematic review started six years ago and has been completed and reported for all services. It has identified opportunities for the re-use or disposal of surplus properties, rationalisations and issues regarding the suitability of premises for future service delivery. Sale proceeds are reinvested in the core building stock or other corporate priorities. The Council continues to give incentives to services to encourage them to recycle assets by allowing them to retain part of the proceeds for reinvestment. This makes sure that assets are suitable for their purpose, meet corporate and service objectives and are used efficiently and effectively.

5 Service plans

5.1 The strategic approaches adopted within each of the Council's service areas for capital investment and asset management are derived from the Council's Corporate Strategy and this Capital Strategy. The level of investment planned over the next four years for the main service areas is summarised in the covering context sheet.

5.2 An education AMP¹ has been prepared as required by the Department for Education and Skills, working closely with schools and governing bodies under the Council's Management Partnership arrangements. The key aims are to:

Contribute to raising educational standards, including new provision for early years education with private and voluntary sector partners.

Optimise the use of capital and other financial resources.

Reflect the current and anticipated future needs of the curriculum.

Underpin the County Council's strategy for the maintenance, repair and improvement of school buildings.

Address the capital funding implications of falling school rolls.

5.3 The first full local transport plan¹ was submitted to the Department for Transport, Local Government and the Regions (DTLR) in July 2000. The main thrust of the plan tackles the following key transport policy concerns:

Maintaining the transport network, dealing with essential repairs and making the network safe and efficient for all users.

Reducing dependence on the private car and encouraging alternative modes of transport such as cycling, walking and public transport.

Implementing the first element of South Hampshire Rapid Transit¹ (SHRT) between Fareham-Gosport-Portsmouth to address the severe transport problems and development pressures in southern Hampshire.

5.4 The priorities for the Council's social services assets are:

Making sure that all facilities comply with the requirements of the Care Standards Act 2000.

Modernising the Council's homes for older people, developing intermediate and respite care and reducing the number of delayed transfers from hospital to the minimum level practically achievable.

Using the Council as lead agency to assist the development of supported housing with district councils, in pursuit of the `Supporting People' objectives of independent living and social inclusion.

Modernising services for people with learning disabilities in line with the objectives of the White Paper `Valuing People'.

Refurbishing and upgrading the premises used to provide residential care for children.

Meeting the requirements of health and safety, disability discrimination, equality and other legislation.

Developing an integrated community equipment service.

Providing 500 new nursing care beds in new homes and extensions to existing care homes.

6 Cross service plans

6.1 Equally important are County-wide strategies including:

The County Structure Plan¹, which identifies areas of significant growth in new housing over the next ten years. Schools, transport and community facilities will be needed and included in future capital programmes and bids. Substantial levels of additional resources will be required.

The Corporate Sustainable Development Strategy¹, which promotes policies and actions to achieve sustainable development. Agenda 21 principles underpin the Council's actions and services, including capital investment. In addition, the regeneration of older urban areas and country towns supports the Council's policies for long-term land use and travel, improving the quality of life in those areas.

The Corporate Water Action Plan¹. The Council adopts the best practice in the effective and efficient use of energy and water in its own properties.

The Corporate Equalities Plan and Race Equalities Scheme¹, including access to services and facilities.

The Council's e-government strategy¹ for delivering local government online across all of its services.

The office accommodation strategy, which makes sure that all offices are fully used.

The land disposal strategy, investing in roads and other infrastructure where these advance works will maximise returns. The Council also retains control over developments through the quality of the design and the use of planning policies to fulfil its environmental stewardship aims.

7 Links to the Performance Plan

7.1 The County Council's programme of reviews is set out in the Performance Plan¹. This programme looks at cross-cutting themes that affect all services across the Council. Issues of sustainability, equalities, community safety and e-government are considered for each review and reported in the Plan overall. The Capital Strategy sets the background for the consideration of capital issues in Best Value reviews. The outcome of the reviews is fed back to the Capital Strategy and the capital programme, along with recommendations from audit and other independent inspections.

8 Working with partners

8.1 The County Council works closely with all partner organisations on service matters that affect capital issues. These include district councils, neighbouring local authorities, the police and fire authorities, school governing bodies, the diocese, community and voluntary bodies, the health service, the lottery boards, national organisations such as Sport England, as well as the business sector including developers.

8.2 The joint working with district councils and others to develop the Community Strategy reinforces the wide range of existing partnership arrangements concerning capital schemes. The Council's close links with district councils and the neighbouring unitary authorities in Portsmouth and Southampton include the provision of community and leisure facilities in schools, local area transport strategies, a joint office strategy, the regeneration of older urban areas, integrated waste management facilities, coast protection, museums, special needs housing, community safety and disability discrimination. All involve capital investment or the use of assets. As an example of community planning in practice, the feasibility of relocating a secondary school in an urban area of Hampshire is currently being investigated with the local district council to make the redevelopment of the area more viable, sustainable and inclusive, as well as providing extra housing to meet Structure Plan targets. The concept of Discovery Centres is being developed with partners to provide library services, adult learning and community use in one building, leading to wider service use of existing assets for longer hours.

8.3 The partnership between the Council's social services and the health service over the use of assets is long established. Current examples include:

The joint initiative to provide 500 new nursing care beds during 2004/05.

Planning the construction of two jointly managed residential facilities for children with severe disabilities.

Development of information systems to support joint mental health services across Hampshire.

Exploring the development of shared office premises through a Local Improvement Finance Trust.

Development of an integrated community equipment service.

The establishment of joint mental health and learning disability team bases.

8.4 The voluntary sector continues to play a key role in many of the Council's capital projects, through the Hampshire Compact¹ developed with voluntary and community bodies. Examples of the voluntary sector's involvement include community and leisure facilities, village halls, local transport and social services facilities. The Council is also working with voluntary and private sector partners to provide early years education.

8.5 The Council is developing new partnerships with industry, including the use of longer-term contracts. It will also continue to work closely with specialist suppliers and contractors. The Quality Partnerships with bus, rail and freight operators are improving public and freight transport in the County. The Council also plays a leading role in the Hampshire Economic Partnership, which brings together local government, central government and training organisations to promote key economic development.

8.6 One of the most important partnerships is with central Government itself, and many of the Council's capital schemes result from close working with Whitehall departments and the Government Office for the South East (GOSE), as well as the European Union.

9 Consultation with the public and partners

9.1 The County Council consults widely with the public, its partner organisations, the business community, the voluntary sector and the Council's staff as part of the process of developing the Performance Plan and Community Strategy. This includes focus groups, opinion surveys, Citizens' Panel, response cards enclosed with the Performance Plan and the Council's flagship magazine for the public, `Hampshire Now'. The Council also consults residents' groups, trade unions and the business sector about the budget, including the capital programme. Following discussions with representatives of the business community in July 2001, it was agreed that the key objectives in the business plans of the Chambers of Commerce should be matched with the Council's key aims in its Corporate Strategy. The priorities for business are skills, employment, transport, infrastructure, housing and the constraints of planning on enterprise. The Chambers confirmed their involvement in consultation on area transport plans and via the Hampshire Economic Partnership.

9.2 An important part of the Council's consultation processes are the extensive and innovative discussions held at the planning and feasibility stage of each capital proposal with all partners and stakeholders. From these detailed, ground-level consultations, and from those on service plans, vital and practical information is drawn together to build up the Capital Strategy, supplementing the more broadly-based `top-down' consultations.

9.3 All these consultation processes are ongoing. The Council will continue to analyse the results and they will influence the content of both the Community Strategy and future capital strategies.

10 The capital programme

10.1 The County Council prepares and publishes a rolling four-year capital programme¹ within limits set by Government borrowing approvals and the Council's assessment of available local resources and the revenue implications of the proposed programme. The Council uses the later years of the programme to plan and prepare schemes. This includes work on design, land acquisition, and obtaining planning approvals and Government support.

10.2 The Council has refined its techniques for assessing priorities between schemes, evaluating options for capital investment that make the best use of its assets in terms of the benefits for services and financial returns. All schemes are developed to meet needs identified in the Capital Strategy and corporate AMP process, and must contribute to meeting the Council's key aims set out in the Corporate Strategy. If necessary, the Council top-slices resources to protect essential parts of the capital programme. Final judgement on political priorities, in the light of public consultation, are made by the County Council. This process has been applied to all schemes in the current programme as well as those currently being considered for inclusion. Full details of the process for assessing priorities are set out in the corporate AMP.

10.3 Linked to the four-year capital programme, the Council has incorporated the key financial elements of the Capital Strategy in its Financial Management Policy. It has also revised its financial control procedures, including the project appraisals and progress monitoring. This makes sure that the need for each scheme and its links to the Corporate Strategy and Best Value are fully considered by members of the Council before approval is given.

10.4 The Council's existing capital assets are reviewed during the preparation of the corporate AMP to see if they are still appropriate and give value for money, taking account of the investment necessary to maintain those assets.

11 Resources for capital and procurement

11.1 In the context of its financial strategy, the County Council will continue to use in full the borrowing approvals for which the Government provides grant support. In addition, the Council will maximise the use of capital resources from other bodies, provided that the proposed schemes are compatible with the overall Capital Strategy. This will include submitting bids to central Government, the European Union, health authorities and the National Lottery. The Council will encourage partner organisations to reflect their involvement in capital schemes by contributing to the costs, where appropriate.

11.2 The Council will consider all methods of procuring and financing its capital programme. It will adopt a public-private partnership (PPP) approach, including the private finance initiative (PFI), if this can be shown to be the best value for money and consistent with the Capital Strategy. This is more likely to be the case for larger schemes with an income stream, such as the South Hampshire Rapid Transit¹ scheme.

11.3 The Council has continued to develop its procurement strategy and is now procuring around half of its capital and major refurbishment programmes through partnerships and framework agreements. Partnership arrangements with mechanical and electrical design engineering consultants have recently been concluded, thus extending the Council's successful partnerships with consultants.

11.4 The outcomes of two major partnership projects demonstrate the benefits.

John Hanson School was completed on time and the school took occupation as planned in September 2002. In addition agreement of the final account was achieved in parallel with completion of the project, £600,000 below the available funding.

The Sir Harold Hillier Gardens Visitor Pavilion was successfully completed with the final account agreed within the Contract Sum. The success of the project is attributable to close teamwork with significant evidence of joint problem solving and co-operation to reach this outcome. With traditionally procured work of this size, final account negotiations could have run for long periods of time and consume valuable resources which would otherwise be directed towards new opportunities.

11.5 To date the Council has found that the newer procurement methods compare favourably to traditional tendering, particular benefits have included:

greater commitment by contractors to jointly resolve issues and reduce costs

major disputes leading to claims have been avoided

higher quality products with fewer technical issues

project programme objectives are being achieved

costs compare favourably to competitive tendering and with a higher degree of certainty.

11.6 The Council has prepared an Agenda 21 environmental policy statement for property. Under this policy, buildings should be developed with consideration for environmental issues at all stages of their life cycle. A new primary school at Great Binfields in Basingstoke has been built to environmentally sensitive standards as a pilot scheme for the County Council. Similarly, for social services, a project to replace Alton Day Services for people with learning disabilities will incorporate solar heating, rain water harvesting and other sustainable development initiatives.

11.7 The Council will continue to make full use of its own resources to finance the capital programme, primarily from capital receipts and by using revenue finance mainly for capital repairs and structural highway maintenance, within the context of its overall financial strategy. The rolling programme of land reviews will continue to identify land and buildings no longer required which can be sold to provide resources for reinvestment. Where appropriate, the Council will `invest to save', especially in new IT technology. If the Government reforms its capital control system to allow additional borrowing, the Council will consider using such loans for suitable invest-to-save and for in/out projects, subject to appropriate business cases and revenue costs being contained within cash limits.

11.8 As part of its culture of partnership, the Council works closely with other organisations to maximise benefits from their capital investment. This includes joint transport investment by the Highways Agency, bus companies and the Strategic Rail Authority. For example, the Council is improving the infrastructure for the A3 road in conjunction with Portsmouth City Council and a bus company that has provided new buses and services for the route. The joint schemes listed in paragraph 8.2 reflect the close working of health authorities and social services.

11.9 The County Council will be looking for substantial additional resources from the Government over the next ten years to help provide the facilities required for the significant growth in new housing in the Hampshire County Structure Plan for 2001 to 2011 and the emerging Regional Spatial Strategy.

12 Performance measurement

12.1 The Council has adopted the national performance indicators (PIs) for property published by the DTLR in March 2001. The results for all five national PIs have been calculated for the second year and published in the corporate AMP in July 2003. In addition, the County Council has continued to publish the results for its own local property PIs, which include user satisfaction, contractor performance, energy and water use and asset performance. These local PIs are used in conjunction with the national PIs for benchmarking with other providers. This includes the Egan construction indicators and use of the National Best Value Benchmarking Scheme. The local performance framework has been reviewed for 2003/04 with new performance targets established. PI information is being shared with SECAMP, the South East County Asset Management Plan network, enabling comparisons to be made with other county councils in the South East. Specialist consultants were commissioned to undertake a benchmarking exercise prior to letting the new engineering contracts worth £25m. Once longer-term trends are available, increasing use will be made of the results from the PIs and benchmarking work to help the Council to monitor and evaluate progress on implementing its Capital Strategy and corporate AMP.

12.2 The results for all property PIs are reported to members, service managers and partners as appropriate. Once completed and in operation, capital schemes are evaluated with users and lessons fed back to the preparation of future schemes. The Council's financial and business systems are currently being replaced in a major capital investment known as the Enterprise Project¹. Social services' core systems are also in the process of being replaced by the SWIFT system in a £5.2m project. They will conform to the DoH's `Information for Social Care' specification and will assist with the achievement of Local PSA targets. The integrated new systems will improve the collection and dissemination of performance measurement information. The first two phases of SWIFT implementation will be completed by the end of July 2004 and the completion of the project overall is on schedule for January 2005.

Annex 1

Capital Strategy - Core Data

13 Revenue budget 2004/05

	£m
Gross revenue budget	1,335
Net budget after income and specific grants	1,050
Budget requirement	1,052

14 Assets - net book value at 31 March 2004

	Number	Gross Floor	Value
		Area (GIA)	31 Mar 2004
		sq m	£m
Operational assets
Schools	547	1,244,000	1,640
Libraries	69	35,000	57
Residential homes and day centres	89	88,000	93
Offices and administrative buildings	63	90,000	37
Museums and art galleries	26	28,000	26
Other land and buildings	29	2,000	99
	-------------	-------------	--------
Land and buildings	823	1,487,000	1,952
Vehicles, plants and equipment	-	-	59
Infrastructure - roads and bridges	-	-	238
Community assets - parks etc	37	36,000	10
	-------------	-------------	--------
	860	1,523,000	2,259
Non-operational assets	57	73,000	64
Work in progress	-	-	79
	-------------	-------------	--------
Totals	917	1,596,000	2,402
	-------------	-------------	--------

15 Maintenance liabilities - land and buildings

As at July 2003	Total	Priority levels
	Cost	1	2	3	4
		Urgent	Essential	Desirable	Long-term
		to prevent	within	in	beyond
		closure	2 years	3-5 years	5 years
	£m	£m	£m	£m	£m
Education	250	-	50	124	76
Libraries	7	-	3	4	-
Social services	15	-	5	9	1
Offices	17	-	6	9	2
Other services	21	-	7	12	2
	----------	----------	----------	----------	----------
Total	310	-	71	158	81
	----------	----------	----------	----------	----------

Maintenance liabilities - roads and bridges

	£m
Roads	169		see note below
Footways	25
Highway drainage	67
Street lighting column replacement	50
Bridges	7
Road signs and markings	3
	--------
Total	321
	--------
This is an assessment of the amount that would need to be spent to eliminate the backlog of maintenance work that has reached critical `intervention' lvel of deterioration, ie, where failure to carry out maintenance works will result in disproportionate increases in future maintenance costs.

16 Capital programme

16.1 The County Council's four-year capital programme for 2004/05 to 2007/08 is summarised on the following page. Full details of the programme are published in the Council's Budget Book for 2004/05. The estimated capital payments on the programme and on schemes already in progress are also shown together with details of how the County Council expects to finance them. The minor shortfall of resources in 2006/07 will be addressed when the capital programme is reviewed later in 2004.

16.2 The Government's current spending plans SR2002 cover the period to 2005/06 only and so the Council's programmes for 2006/07 and 2007/08 are currently set at a minimum level. It is likely to increase when the Government's detailed SR2004 spending plans are announced later in 2004.

Capital programme - value of schemes starting 2004/05 to 2007/08
	2004/05	2005/06	2006/07	2007/08
	£m	£m	£m	£m
Schools	58.0	41.3	41.8	41.8
Local transport *	172.2	62.0	70.3	65.3
Libraries, museums, arts, countryside, sport etc	3.1	2.6	0.8	0.8
Social services	1.3	1.3	0.7	0.7
Capital repairs of buildings funded from the
County Council's own resources	14.7	13.9	13.9	13.9
Regeneration of older urban areas, household
waste recycling centres, magistrates' courts
and other schemes	5.7	4.5	4.4	4.4
Development land	-	10.2	-	-
	----------	----------	----------	----------
Total starts programme	255.0	135.8	131.9	126.9
	----------	----------	----------	----------
* includes the South Hampshire Rapid Transit scheme which is expected to involve both conventional and Private Finance Initiative funding
Capital payments and financing
	2004/05	2005/06	2006/07	2007/08
	£m	£m	£m	£m
Payments on the starts programmes for 2004/05
to 2007/08 and works in progress	201.9	176.9	177.0	176.0
	----------	----------	----------	----------
Financed by:
Loans	76.7	54.1	53.9	52.0
Capital receipts	15.5	6.7	6.3	6.3
Grants and contributions	73.3	83.2	84.0	90.1
Contributions from revenue and reserves	36.4	32.9	31.3	27.6
Resources still to be identified	-	-	1.5	-
	----------	----------	----------	----------
Total financing	201.9	176.9	177.0	176.0
	----------	----------	----------	----------

17 Unsupported borrowing

17.1 The Government introduced a new prudential capital control system from April 2004 that allows local authorities to raise additional loans for capital purposes, unsupported by Government grant. The County Council has agreed that unsupported borrowing may be used to finance invest-to-save projects that generate ongoing savings to cover the additional costs of borrowing and reinvestment or in/out projects for which the replacement asset is required in advance of the capital receipt.

17.2 Schemes using unsupported borrowing that have been approved so far include funding part of the scheme to provide additional nursing care beds, an accommodation unit at Calshot Activities Centre and provision for early years children with special needs at Nightingale Primary School, Eastleigh. The County Council has also agreed to use unsupported borrowing for the South Hampshire Rapid Transit scheme, provided the unsupported borrowing is a last resort after other available funding sources and there is a strong business case.

18 Hampshire - profile

18.1 Hampshire is a large county of 368,000 hectares with a mixture of significant urban and extensive rural areas. Although less than 10% of the county is urban, 87% of the population lives in urban areas.

18.2 Hampshire's population of 1,244,400 (mid 2002) ranks as the third largest for shire counties in England. The age-profile is similar to the national average.

18.3 Between 2001 and 2011, the population is forecast to grow by 2.9%, assuming that the number of dwellings built in the County is consistent with the Government's current Regional Planning Guidance. The population aged under 45 years is expected to decline by 3.9% during this period, while the population aged 45 and over is expected to increase by 12.5%, including a 39.1% increase in the population aged 85 and over. The number of households in Hampshire is forecast to increase by 9.2% between 2001 and 2011, three times the present increase in population.

18.4 Further details of Hampshire can be found in "A Profile of Hampshire" published by the County Council in December 2001 and available from the address at the foot of the page.

Footnote [note: these links will be updated following the Cabinet meeting]

¹ Links to the documents mentioned in the Capital Strategy can be found on the County Council's Capital Strategy website at: http://www.hants.gov.uk/TC/capitalstrategy/contents.html

For further information, please write to Ian Howell, County Treasurer's Department, Hampshire County Council, The Castle, Winchester, Hampshire SO23 8UB, or send an e-mail to [email protected]

Appendix 2

Annual Investment Strategy 2004/05

This Annual Investment Strategy has been prepared in accordance with guidance issued on 12 March 2004 by the First Secretary of State under section 15(1)a of the Local Government Act 2003.

The County Council's investment policy will continue to treat security and liquidity as paramount. Accordingly, only `specified investments' will be used in 2004/05, as follows:

· fixed-term deposits of up to three months with:

- local authorities

- the Government's Debt Management Office

- banks rated at least AA3 by Moody's (a Government-recognised rating agency) that are included on the County Council's lending list

· call deposits with the Bank of Scotland (rated AA2)

· call deposits with four managed AAA-rated money market funds.

The `call deposits' may be recalled by the County Council at any time. The County Council's cash flow position will be monitored on a daily basis and adjustments made as necessary to the funds placed on call.

Banks currently included on the Council's lending list include the major UK clearing banks and four highly-rated European banks.

The lending list is reviewed monthly using Moody's ratings. Institutions will be removed immediately from the lending list if any doubt is cast on their credit worthiness, pending confirmation of the position by Moody's.

Limits are placed on the levels of total deposits that may be made with individual institutions.

An overall review of the lending list, including the money market funds, and the investment limits will be undertaken annually.

Changes to the lending list and the limits on investments will be subject to the approval of the County Treasurer.

Other, or `non-specified', investments will not be used.

Treasury management staff operate within detailed parameters set out in an internal code of practice, which takes account of the Code of Practice on Treasury Management and other guidance issued by the Chartered Institute of Public Finance and Accountancy. They are fully trained before participating in investment work.

July 2004