Contact: Nick Gibbins, ext 7544, [email protected]

(With the concurrence of the Executive member under Section 100 (B) (4) (b)

of the Local Government Act 1972, this matter was included on the agenda to

enable the capital programme to be submitted to the Cabinet on 11 February

2005)

1 Summary

1.1 This report proposes a Policy and Resources capital programme for 2005/06 to 2008/09 (shown as Appendix 1).

2 Introduction

2.1 The following guideline limits were set by Cabinet at its meeting on 13 December 2004 for the locally resourced programme for Policy and Resources.

2.2 The guidelines include an addition of 2.5% for inflation, in line with the non-pay inflation assumption for the revenue budget. However, Executive members have been requested to review the scope for achieving cashable efficiency savings of up to 1.25% on the procurement of capital works. The target for savings relating to this service's locally resourced capital programme are:

2.3 Executive members may vary the guidelines between years provided their total four-year guideline is not exceeded and bunching of payments in any one year or front-loading is avoided.

2.4 Executive members may propose supplementing their capital guidelines under the `prudential framework' agreed by Cabinet at its meeting on 24 November 2003, thereby integrating more closely decisions on revenue and capital spending in support of Corporate Aims. The additions may include:

· invest to save proposals generating cost savings or additional income within the Executive Member's revenue budget, which can be transferred to meet the capital financing costs.

· temporary unsupported borrowing, to provide bridging finance in advance of capital receipts or other contributions, with the cost of servicing the unsupported borrowing in the interim being met from the Executive member's revenue budget.

· use of unsupported borrowing to fund trading unit capital expenditure, the cost of servicing being recovered in charges to service users.

2.5 In addition, Executive members may propose additional schemes funded from:

· use of Executive member's share of capital receipts obtained in 2003/04 as allocated by the Cabinet in June 2004 (if not already used for the 2004/05 programme)

· anticipating their share of capital receipts obtained in 2004/05 provided the receipt has actually been received.

2.6 The 2005/06 guideline has been increased to include additional provision of £754,000 for school capital repairs funded by revenue contributions to capital charged against the School's block, continuing the allocation in 2004/05.

3 Capital programme 2005/06 to 2008/09 - locally resourced schemes

3.1 The programme proposed for 2005/06 to 2008/09 is based upon the allocation of resources between priorities in the current 2004/05 to 2007/08 capital programme. The main corporate priority continues to be the maintenance of the core buildings in the County Council's built estate through the capital repairs programme, which support the corporate aim of improving services countywide.

3.2 The 2005/06 capital programme also contains the major provision agreed by the Cabinet in July required to fund the provision of infrastructure at North Popley, in conjunction with the construction of a replacement John Hunt of Everest Secondary School, to facilitate the disposal of the County Council's adjoining land for residential development. The planned programme of disposals at North Popley is expected to provide the main support to the County Council's capital programme in the next few years from capital receipts. Provision has also been included in the 2007/08 programme for a contribution towards a community centre at Sherborne St John, proposed elsewhere on the agenda.

3.3 The Buildings Land and Procurement Panel reviewed the phasing of the capital repairs programme in the autumn in the light of changes in the Government's approach to providing support for school modernisation. It is proposed to allocate £16m for locally resourced capital repairs in 2004/05 and £11.754m in 2005/06 (including the addition to the guidelines for school repairs referred to in paragraph 2.6). This has the effect of allowing spending of up to £19.9m in 2006/07 on capital repairs and further consideration will be given later in the year to the profiling of capital repairs spending in 2006/07 and later years. The review will take into account the effect of tender price inflation and other landlord funding pressures on the capacity to meet repair liabilities, particularly in the non-Education estate. The effect of these changes to the phasing of the capital programme is to result in amended guidelines for the locally resourced capital programme of:

3.4 A target of achieving of 1.25% efficiency savings across all areas of procurement activity has been included within the provisional budget strategy and this target has been extended to the locally resourced capital programme. The effect of reducing the capital programme by 1.25% on the basis of assumed efficiency improvements would effectively be to reduce the inflation uplift applied this year to 1.25%. Construction costs have been increasing at a significantly faster rate than the underlying rate of inflation in recent years and are forecast to continue to do so in 2005/06, so that it seems unlikely that the increase in construction costs will be limited to 1.25%. Nonetheless the target saving could be implemented by relying on continued improved procurement and a tightening of scheme cash limits.

Business unit schemes

3.5 The locally resourced guidelines can be enhanced to include any approved business unit schemes funded from business unit reserves or from prudential borrowing. Hampshire Printing Services, HC3S, Hampshire Transport Management and County Supplies are proposing in their business plans improvements costing £641,000 in 2005/06, of which £140,000 is carried forward from 2004/05. County Supplies business plan will also identify the need for a review of its accommodation which is not at this stage allowed for in the capital programme.

3.6 Any proposals for use of prudential borrowing for business unit purposes will be submitted to future meetings for approval.

4 Capital programme 2005/06 to 2008/09 - New Deal for Schools conditional funding

4.1 The Department for Education and Skills has announced allocations for 2006/07 and 2007/08 from its New Deal for Schools (NDS) Modernisation Fund to bring buildings up to the standards required to teach the modern curriculum. Funding for 2005/06 had already been announced last year. The overall allocation is intended to cover suitability (improvement) work, which is managed within the Education capital programme and funding to address the backlog of building condition work, which is managed by Policy and Resources. Resources are currently allocated in the ratio of 54% to condition and 46% to suitability.

4.2 The Government is introducing in 2005/06 a new programme, Building Schools for the Future, to target investment on schools for secondary age pupils in specific local authority areas on a rolling basis over 10 to 15 years. This will reduce the allocations made available to all authorities from the Modernisation Fund for condition work and the County Council's condition funding will reduce from £17.2m in 2004/05 to £11.3m in 2005/06. No further reduction has been implemented in 2006/07 however and funding in 2006/07 and 2007/08 increases to £12.6m and £12.8m respectively. In accordance with the proposals to rephase the capital repairs payments profile reported to the Building, Lands and Procurement Panel, the proposed New Deal for Schools condition funding programmes for 2004/05 to 2007/08 are as follows:

Electronic Government

4.3 The final allocation of Government grant for implementing electronic government (IEG) is due to be received in 2005/06, to fund work identified in the IEG statement.

5 Private finance initiative schemes

5.1 There are no Policy and Resources schemes currently under consideration that would generate PFI credits from the Government.

6 Capital Programme Summary

6.1 On the basis of the position outlined above, the total value of the capital programmes submitted for consideration for the four years to 2008/09 are:

7 Revenue Implications

7.1 The revenue implications of the proposed capital programme are as follows:

7.2 The total revenue implications for the four years of the starts programme, including capital charges, represent a real term increase of 16.9% over the 2004/05 original budget of this service.

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.

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