Capital Strategy 2025/26

2.3. The main General Fund capital projects include:

•  loans to and share purchase in the Council's wholly owned companies; Equinox Enterprise Ltd and Equinox Property Holdings

• the purchase of assets (for example vehicles and equipment) for lease to the Council's other subsidiary GYS Limited

• North Quay Redevelopment

• Winter-gardens Restoration

• further development of the Operations and Maintenance Campus site on South Denes

2.4. The Council has secured Town Deal, Future High Streets and Levelling Up Funding for the regeneration of Great Yarmouth town centre. Funding of £54m has been confirmed and project budgets have been included in the programme. Details on costs, plans and timing of the projects within the funding envelope available are still subject to change. The capital programme will therefore be amended or updated during the year as projects develop further.

2.5.The Housing Revenue Account (HRA) is a ring-fenced account which ensures that council housing does not subsidise, or is itself subsidised, by other local services. HRA capital expenditure is therefore recorded separately and includes the building and acquisition of new homes over the forecast period to replace sales under Right to Buy in line with government guidance. Programmed capital expenditure is also driven to maintaining and improve the overall stock currently held by the HRA, this is prepared over the medium term and reviewed and updated annually.

2.6.Capital investments include loans and shares made for service purposes and property to be held primarily for financial return in line with the definition in the CIPFA Treasury Management Code.

2.7.Governance: Heads of Service bid annually in October to include projects in the Council's capital programme. Bids are collated by finance who calculate the financing cost (which can be nil if the project is fully externally financed). The Council's Executive Leadership Team appraises all bids based on a comparison of service priorities against financing costs and identifies projects to be put forwards as part of the annual budget setting and those that will be considered separately via a subsequent business case. The final capital programme is then presented to Cabinet and Council in February each year as part of the approval of the budget for the coming financial year.

2.8.For full details of the Authority's capital programme, including the project appraisals undertaken, see Budgets and spending.

2.9.It should be noted that other capital projects may be brought forward during the financial year as business cases which are initially appraised by Executive Leadership Team before being passed for approval to Cabinet. Those capital projects costing over £100,000 would then go onto to Council for final approval. The business cases put forward to Executive Leadership Team have been considered for affordability by Finance and, if relating to an IT project, the IT Investment Group.

2.10.All capital expenditure must be financed, either from external sources (government grants and other contributions), the Authority's own resources (revenue, reserves and capital receipts) or debt (borrowing, leasing and Private Finance Initiative). The planned financing of the above expenditure is as follows:

2.11.Debt is only a temporary source of finance, since loans and leases must be repaid, and this is therefore replaced over time by other financing, usually from revenue which is known as minimum revenue provision (MRP). Alternatively, proceeds from selling capital assets (known as capital receipts) may be used to replace debt finance. Planned MRP and use of capital receipts are as follows:

2.12.The Authority's full minimum revenue provision statement is available here as part of the budget for the year: Budgets and spending.

3.1.Treasury management is concerned with keeping sufficient but not excessive cash available to meet the Authority's spending needs, while managing the risks involved. Surplus cash is invested until required, while a shortage of cash will be met by borrowing, to avoid excessive credit balances or overdrafts in the bank current account. The Authority is typically cash rich in the short-term as revenue income is received before it is spent, but cash poor in the long-term as capital expenditure is incurred before being financed. The revenue cash surpluses are offset against capital cash shortfalls to reduce overall borrowing.

3.2.Due to decisions taken in the past in relation to capital and financing decisions with the General Fund and the Housing Revenue Account, the Council currently has £138.8m borrowing at interest rates between 3.15% to 6.2% and £13.5m treasury investments at interest rates between 0.35% and 4.77%.

3.3.Borrowing strategy: the Authority's main objectives when borrowing is to achieve a low but certain cost of finance while retaining flexibility should plans change in future. These objectives are often conflicting, and the Authority therefore seeks to strike a balance between cheaper short-term loans (currently available at around 4.8% to 5.6%) and long-term fixed rate loans where the future cost is known but higher (currently 5.04% to 5.91%).

3.4.The Authority does not borrow to invest for the primary purpose of financial return and therefore retains full access to the Public Works Loans Board.

3.5.Projected levels of the Authority's total outstanding debt (which comprises borrowing, leases and transferred from local government reorganisation) are shown below, compared with the capital financing requirement (see above).

3.6.Statutory guidance is that debt should remain below the capital financing requirement, except in the short-term. As can be seen from table 6, the Authority expects to comply with this in the medium term.

3.7.Liability benchmark: to compare the Authority's actual borrowing against an alternative strategy, a liability benchmark has been calculated showing the lowest risk level of borrowing.

3.8.Affordable borrowing limit: the Authority is legally obliged to set an affordable borrowing limit (also termed the authorised limit for external debt) each year. In line with statutory guidance, a lower "operational boundary" is also set as a warning level should debt approach the limit.

3.9.The liability benchmark, affordable borrowing limits and further details on borrowing are included within the Treasury Management Strategy.

3.10.Treasury investment strategy: treasury investments arise from receiving cash before it is paid out again. Investments made for service reasons or for pure financial gain are not generally considered to be part of treasury management.

3.11.The Authority's policy on treasury investments is to prioritise security and liquidity over yield, that is to focus on minimising risk rather than maximising returns. Cash that is likely to be spent in the near term is invested securely, for example with the government, other local authorities or selected high-quality banks, to minimise the risk of loss. Money that will be held for longer terms is invested more widely, including in bonds, shares and property, to balance the risk of loss against the risk of receiving returns below inflation. Both near-term and longer-term investments may be held in pooled funds, where an external fund manager makes decisions on which investments to buy and the Authority may request its money back at short notice.

3.12.Further details on treasury investments are in the Treasury Management Strategy.

3.13.The near-term investment balance incorporates the £10m investment balance that needs to be held to ensure the Council maintains its professional client status under the Markets in Financial Instruments Directive (MiFID II) requirements.

4.1.The Council has investments in its subsidiaries (GYS Limited (in the form of leases), Equinox Enterprises Limited (EEL) and Equinox Property Holdings (EPH) in the form of loans), local charities, local businesses, and local residents (in the form of home improvement loans), to support local public services and stimulate local economic growth. The Council also holds shares in EEL & EEH.

4.2.Details of the loans and shares in subsidiaries can be found in the Council's Investment Strategy.

4.3.Details of the Council's discretionary Home Improvement loans are given with the Private Sector Housing Adaptation and Improvement (2021) policy.

4.4.Home Improvement loans made are equity loan agreements, so the Council obtains a share of the equity of the borrower's home as collateral. This reduces the risk of the Council not recovering the loan amount from the borrower.

4.5.Discretionary loans to charities are decided by the Cabinet if the spend is below £100,000 or Council if over this amount. These loans incur interest charges which are set at a market rate to reflect the costs and the level of risks. These loans are equity loans to again to reduce the risk of a borrower defaulting on payment in line with the loan agreement.

• vacancies
• fall in capital value
• lessee not complying with repairs and maintenance terms of lease agreement
• changes in demand for property types (for example offices or industrial)

7.2.Further details on the revenue implications of capital expenditure are included in the 2025/26 revenue budget in the Budgets and spending section.

7.3.Sustainability: due to the very long-term nature of capital expenditure and financing, the revenue budget implications of expenditure incurred in the next few years will extend for up to 50 years into the future. The Section 151 Officer is satisfied that the proposed capital programme is prudent, affordable and sustainable because current and new capital funding decisions have been made in the context of the associated revenue implications.