Capital and Investment Strategy 2022 to 2023

7.1
Cost Inflation – as well as general inflation, there is also the added HS2 construction cost pressures in the area. This is mitigated by ensuring there is sufficient contingency provided in capital project cost estimates and undertaking value engineering to stay within agreed budgets when cost pressures emerge. Funding can only be released where an appropriate business case is provided to release capital funding to the relevant capital governance board.

7.2
Capital Maintenance – Our assets will deteriorate if we do not invest sufficient capital maintenance in our existing assets. Work is still being undertaken to get condition surveys for our entire property portfolio, but when completed an assessment of the maintenance needs and provision will made and maintenance expenditure closely monitored in the meantime for our property and highways assets.

7.3
Capital Receipts – A shortfall in the generation of capital receipts would impact on the available investment in the capital programme. Realisation of capital receipts is closely monitored and if there was any shortfall the programme would be reviewed for reductions to future years when looking at future years’ capital programmes if alternative funding could not be found.

7.4
Government Capital Grants – Although the grant funding assumptions in the capital programme are prudent and realistic, there is always the risk that the Government’s Levelling Up agenda could reduce the level of capital grant funding the council receives. Again, any shortfall in grant funding would be adjusted for when reviewing the capital programme each financial year if alternative funding could not be found

7.5
Capital Slippage – If capital expenditure isn’t profiled accurately then there is the risk of significant underspend against the programme. The profile of expenditure is reviewed and challenged each year to try and get it as accurate as possible. This is much more of a service delivery risk than a financial risk, but there can be financial implications from the delay in the delivery of benefits.

7.6
Interest Rate Increases – A prudent assumption is made for the likely interest rates for any borrowing costs in the programme or bids for prudential borrowing. The biggest impact could be on those capital schemes that the Council would like to support but which are only marginally viable, where any rise in interest rates may make a bid against the Prudential Borrowing facility unviable.