Transcript

It is 10 o'clock, so we'll start the meeting. Do we have any apologies for absence? Apologies have been received from Councillor John O'Reilly. Thank you very much. Is the telecast running? Marvellous, thank you very much. Minutes of the previous meeting have been circulated. Can we agree those as a true and accurate record of the meeting? Thank you very much. Declarations of interest. All members present require to declare at this point of the meeting or assume possible afterwards any disposable pecuniary interests. Are there any pecuniary interests? And other interests arising under the code of conduct in respect of any item of business being considered at the meeting. Are there any other interests anyone wishes to declare? Thank you very much. Questions and petitions. We have one question from Emma. Can I just check if Emma is online and wants to ask a supplementary? I don't believe that she is. Okay, well the answer has been circulated and will be in the minutes of this meeting. Item five, cabinet response to the DB&I recommendations. I see the witnesses are Steve and myself. As colleagues know, all of our recommendations were accepted by the cabinet. I wonder if the cabinet member wants to say anything on the item.

Thank you, Chairman. I think we've discussed this at length over the last few meetings and as you say, the recommendations were fully accepted by cabinet. I have emphasized to officers that as we go forward with any project, future projects, that we just double check to make sure that we are adhering to the recommendations and doing what we said we would do. So I don't think there's much more to say. Thank you. Thank you very much. I'll ask Steve if he wants to come in. Steve, of course, the vice chairman chaired the task and finish group and I said lots of nice things about him in the council and I repeat those. I think his leadership produced the report that is useful for the council going forward for a long time. Every time somebody is wanting to procure a significant IT or data control. And Steve did say I missed a trick in the council by not reminding the council that his report was late, which is very symbiotic with my story, of course. Steve. Thanks, Chair. I'm not quite sure how to follow up, but the actual DB&R report has been circulated many times. We've discussed it at length. Just very, very happy that the cabinet took all of the recommendations and they're basically working on them. We had an idea to make those recommendations tangible and workable within the organization and also for other organizations to maybe learn from our own experience as well. One of the items I think I might mention on full council is that we should have something on the work program to do a check-in and look and just make sure that this is actually working and if there is anything that we need to change, then we can do that. And also you have the stabilization board work that's going on as well. So we'll maybe have a check-in on how that's progressing and seeing if we can help with that as well, possibly for consideration on the future work program. Other than that, no further comment, Chair. Thank you. Thank you. David. Thank you, Chair. I support that. In terms of the stabilization work, I mean, I would suggest that we-- or you don't look at that too early. The intention is that the bulk of that would be completed by the end of March. So in terms of your forward plan, my suggestion to you would be that, you know, how it's gone. And that obviously it's at your discretion to choose the timing, but I think that would be more beneficial to do it then rather than to interrupt it whilst it's on the game. Thank you very much indeed. So the recommendation, Miss any other colleague, is there anything else to raise? Recommendation to note the response to the recommendations are set out in Appendices 3 and 4. Is that agreed? Agreed. With the lead of the committee, I suggest we take items 10 and 11 now. That means we will move from the part 1 discussion on the Strategic Investment Board into the part 2 after we've passed the resolution. I think it's just tidier than going out of the telecast and then coming back into it. Are the committee happy with that? Yes. Yeah. Thank you very much indeed. So item 10. Shall I start? Diane Wilding, Interim Director. Lovely, thank you. Thank you Chairman. Diane Wilding, Interim Director of London Property. I'll pass over to Charles. No, Charles Maxlow Tomlinson, Managing Director of Hasley Garden Property Group. Good morning all. Andy Brown, Deputy Chief Exec and Exec Director for Finance and Corporate Services, Council Section 151 Officer. Thank you very much indeed. Excellent. Yes, Edward. Just before we start on this item, I don't think it's strictly necessary but I will for the record record that I was for two, three years a Council appointed Governor of Hasley Garden Properties. But that's some time ago. But just for the record, I don't have a pecuniary or other interest other than being a member of this Council. Thank you. Thank you very much. We'll record that in the minutes. Would someone like to introduce the report? Thank you. Neil. Yeah. Thank you very much. I'll read through the summary and the conclusions of the part one report. And if I may, as an introduction and then open up to questions. And so as a reminder, the Council wholly owns four companies that are currently trading, being Hasley Garden Property, Hasley Garden Residential, Hendeka Group Limited and Surrey Choices. We also own 50% of Surrey and Kent Commercial Services and minority shareholdings in Trick Consortium and UK Municipal Bonds Agency. The combined pretax net profits, unaudited as yet, were 1.3 million for the year 23-24, compared to 2.4 million in 22-23. This included a 0.7 million reduction in Hasley Garden Property due to the loss of ongoing rent and other impacts, one-off impacts from the disposal of a property in the Hasley Garden Property Group. And the prior year having benefited from a bad debt provision release, again, as a one-off item. A further 0.4 million reduction was in Hendeka due to an increase in staffing, changes in the mix of business and one-off costs. Surrey and Kent Commercial Services, which trades as Connect to Surrey, produced a small profit that was in its second year of trading. Interest of 14.8 million was paid to the Council on loans to subsidiaries, predominantly from Hasley Garden Property. The Council makes a commercial return on these arms-length loans by charging interest to subsidiaries at a commercial market rate that is higher than its own cost of financing. Dividends of 22,000 pounds were paid to the Council during the year being from Trick Consortium. This compares to 430,000 pound received in 22-23 from Hendeka and Trick Consortium, most of which from the former. And in conclusion, the companies continue to generate income for the Council through commercial loans and the current performance, risk, governance and long-term out of the companies continues to be monitored by the shareholder investment panel and the strategic investment board-- shareholder investment board, sorry. Then I'll open that up for questions if I may. Thank you very much, Neil. Just to preface before we go to the questions. The committee recognizes there may be a certain answer that can be given in part one and officers may want to add to those in part two. And we understand that. So the first question which I think you've largely answered in my name. The paper states that unaudited pretax net profits of 1.3 million were achieved this year, a reduction of 1.1 million on last year. You talked about overall performance but can you add in the notes about property disposal and bad debt provision that preceded this? Yeah. So the main-- the biggest part of that 1.1 million drop came from House Yartin property which is the largest entity. A large amount of that is to do with the disposal of Melchamp which was a positive outcome for the council and for the company in that it disposed of an asset that had an element of long-term risk surrounding it. And it was sold at a profit on the original purchase price. However, due to I guess vagaries of certain bits of accounting, there were certain aspects to that that meant that there was a drop in profit in the year. Firstly, the fact that, you know, it was disposed partway through the year and therefore we don't have any ongoing rent from that property. And that was I think around about 0.7 million pound for 10 months. Now offsetting that pounds of additional interest by the fact that we then had more cash in the account. But the biggest item was 0.8 million of rental incentive that was due to be amortized over the whole lease which was 0.8 million impact at that particular point. So, although it was a positive outcome for disposal of the property, it did mean some unwinding of some unamortized amounts for the rental incentive which had an impact in the year. There was also a 400,000 pound difference year on year because of bad debt. Again, not a negative story in itself in that there was a significant release in the prior year due to a particular debtor that has now paid off all of their debt accumulated during the COVID period. So that was a one-off benefit that it had in 22-23 that was not repeated in the following year. It also had a bit of a benefit, you know, offsetting some of those negative issues, had a benefit from having lower voids through having less vacancies around the portfolio. So all in all, there was not 0.7 million pound year on year drop in HDP but those were particular items that were related to one-off events or the disposal of that property. There was a further 0.4 million drop in Hendeka that I talked through on the cover report. Again, a mixture of some one-off items and a change in the mix of business slightly. And if there are any further questions on that, I'll take that in part too if I may. Okay, thank you very much, David. [ Pause ] Chairman, I have a question but I think it probably should be taken in part too, is that okay, you know, before you close him off? It's okay with you and the officers, it's okay with me. Okay. Okay, thank you. I've got some other questions but I'll take-- I'll do those later. If we can move to question two, Hazel. Thank you, Chairman. What is-- it's in future years and have any mitigations been put in place to prevent any further reductions? Thank you. If I could-- is that okay? Okay, Hazel, let me engage-- happy with that. We'll move to question three, Leslie. Thank you, Chair. I've had to look at this question again, I'm afraid. Can I ask for some clarification on the figures for returns on investments? As I see on page 62 for 23-24, the returns are quoted at 14.3 million whereas on page 49 returns are quoted at 14.8 which means there's a difference of others on those figures. Is there a reason for the disparity? Yeah, the page 62 is in relation to Halsey Garten property. Yeah. The amount that comes from that each year is 14.3 million pounds in interest to the council. And the 14.8 million includes circa 0.4 million from Halsey Garten residential and circa 0.1 million from Surrey choices in interest. All right, okay, so that-- so the 14.8 refers to all of the subsidiaries and the 14.3 is just HDP. Yeah, that isn't clear from item four on the paper. Apologies if we can correct that. But that's fine. So the question is really is what were the trends exhibiting with this piece? Yeah, the expectation is that those loans and the interest that accumulates from those, those are long-term loans so those are expected to continue year after year. So for Halsey Garten property it's a fixed rate of interest at approximately 6 percent and that will return 14.3 million again each year for the duration of those loans as long as the company continues to service those. Slightly different for Halsey Garten residential in that it's an annuity loan but so it's a slight difference between the principal and interest each year. And the money, the 0.1 million approximate from Surrey choices and that I think runs until 2029. So I think it's again on a reduced-- it reduces each year because they pay principal but broadly the 14.8 million is expected to repeat each year. So there's no trend upwards on those figures 'cause they're more or less fixed. Now all of the-- the only-- the item that's more variable is to do with dividends. So we had I think 0.4 million in dividends in 22-23. There was a drop just down to 22,000 in 23-24. The main reason for that is that Hendeka, their profit has dropped so they're no longer in the position where they can pay dividends. And the Trix consortium, it's been very consistent over a number of years to be sort of round about 70, 80, 90 thousand pound but there was particularly a few one-off items in their P&L in the 23-24 which meant they were unable to pay a significant dividend. They still paid a smaller dividend but that is expected to return back to where it was. If I could ask a supplementary on that. You mentioned, Neil, Halsey Garden residential. I think it's right, carefully done that divesting assets in this. But in the third point, this is on page 64, it says retain and repurpose existing asset forecasts to deliver SCC policies. I wonder which policies it is serving. Yeah, I'll take that to start with and Charles you may want to add a little more if appropriate. There was some interest in essential worker housing going back probably about a year or so ago when this strategy was produced and there was a thought that we could repurpose some of our properties to use to support an essential worker policy. Since then that has been put on hold and the intention is that those properties that we do not think could serve an essential worker policy for the council we decided to start the process of disposal of those or where we think that the property is no longer financially viable for us to hold. And then at a future point we would revisit what that policy need might be from the council and clearly that would need to come in the next sort of 12 months and then decide whether we do have a need as a council to repurpose those or whether we should potentially dispose of more of those properties. The decision was partly based on the returns that we were getting from this group of properties were potentially-- we're in line with the business case but it was felt that we could potentially get better returns by using that money, disposing of properties and using that money to offset our net borrowings as a council. So, it's something we need to return to as a strategy in the next 12 months. I don't know if Charles you can weigh in with a little bit more comment around that. Charles, thank you Neil. Thank you, I'm not sure there's much more I can add other than to say that there are central government legislation that legislate changes, the Renters Reform Bill, the Decent Home Standards legislation, that's making it more expensive for landlords to retain or to hold residential property for the leasing market across the United Kingdom and it's no different throughout here it has a garden residential. As Neil said, there was an idea that we made look to repurpose in some of these assets for an essential work or key worker housing policy in the event that is what our shareholder wanted to do. Our shareholder has decided not to do that at the current time and therefore, the agreed company strategy for the short to medium term is to divest their properties when tenancies come up for you. Thank you both, this is very helpful. Edward. Thank you Chairman, it might be a part two question, but I was interested, bearing on how these, a large number of these properties came into house and garden housing, the taxation implications of selling on of a large scale disposal program of those residential properties and it may be something that you want to really come back to on part two. I'd also interested in the number of returns and the disposals, you know, the program of disposal of how they're going anyway. I can maybe just give a, we'll come back to the timing of the disposals in a part two, but as a comment around the taxation, we don't have, we took tax advice at the time, we do not have a tax impact from disposing of the properties within, you know, that we have within house and garden residential. The freehold is still retained by SCC, but because it's a related party, even though we're disposing of the long leasehold in HGR, there is no, there's no taxation impact back on HGR when those are disposed. Not sure whether that was the question you're specifically asking. Yes, to a degree, yes it does, but I was thinking, because these were, these came, if I'm right, to house and garden from an outside body, which supported-- Wildlife trust was part of it, yeah. And it was how, if that circle was complete or if there was a potential issue there, that's what I was really trying to, just get my mind around. I'm not aware of anything that will-- If I might come in near, if I might come in, please could we take this in part two? Please, because of the sensitivities surrounding the process of acquisition. That's partially what I was thinking, but that's why I prefaced my comments about really being part two, I thought that might be the case, so thanks. That's fine, thank you very much. I'd be grateful, thank you very much. Okay, no, that's fine. Question for Tim. I think this is part two. All right. I think that's perfectly reasonable. Okay, we'll move that to part two. [ Pause ] Question five from Steve. Thanks Chair, hopefully not part two, but we'll get something in part one. Just a little bit of a question and exploration around the localism act to generate revenue for council in future years. And a question about how well do the council's trading and investment activities help to improve our financial resilience? And in light of previously referenced decreases in dividends and pretax profits, how are we looking to explore the freedoms awarded by the localism act to generate revenue for the council in future years? So it's a little bit of a risk-based kind of forward thinking, looking down the timeline piece as well, but just to explore that in a little bit more detail if you can, please. So we do intend to carry out a, I guess a refreshed view of all of our investments over the next 12 months just to have a bit of a, I guess a refresh and a cohesive strategy of what's our view across all of these companies. And clearly we've had these entities in place for a while. We have looked at two of the entities on an individual case over the last 12 months where we've carried out financial reviews of them. And those are, the recommendations from that are currently in train, so it's not something you want to talk about specifically today. Or if there are sort of certain things in part two, then we can perhaps talk a little bit more about that, sorry. But just to give a little bit of confidence that, you know, it isn't something where we just have subsidiaries and then they simply stay there. We are, we have taken a look at two of them in particular. But also just to alleviate some of the concerns around the largest entity of HGPi, although we've talked today that there is a drop in profit, those do relate to specific one-off items. So when we take a look at the long-term financing of HGPi in particular, we will take a look at, we will do the sort of whole strategy for our investments to see how that sits in, is it going to deliver that long-term financial resilience that we have at the moment. I think we're comfortable with the level of income that we get. We're not massively exposed. It's a relatively small proportion of the council's overall net budget. But we need to ensure that against other options that we might want as a council, is it delivering the purpose that we wish, you know, we have other options of what we could do with our money. We have higher net borrowings that are heading our way as part of our capital plan, through alternative uses of that money. So, yeah, it's really something, in short, yes, we are going to produce an updated strategy and that will consider alternative or particularly focus on some. Chair, if I might just come back. Thanks, Sir. A couple of points. You probably know where I'm going to go with this. If you have that refresh review, if we can look at getting that on the forward plan to bring that forward to see what that looks like, how that's basically shaping up. It's probably next year you mentioned, but again, let's see if we can get it planned in. And the other items about the two entities being reviewed, we'll probably pick those up in part two and just have a look at those in a bit more detail if that's okay. Yeah, sure. Lovely. That's great. Thank you. Thanks, Chair. Thank you very much. Question six, Edward. [ Pause ] Yeah, thanks very much. Looking at page 59 of the report, it makes mention to the changes to the PWLB. I have my own views on those, the change of the wording, which is worse than useless and you can drive a coach and horse you through it, to be honest. But that's my overview and I think most people will take a similar-- I think it's the comment I made to a previous Secretary of State. He wasn't impressed. Anyway, what do you feel the long-term effects have on the Council's ability to generate revenue through local authority trading companies by keeping within the sloppy loose frame-- I mustn't show my bias here, within the framework that's issued by the previous government and I assume this current government is going to take a similar stance. Yeah, I think you're probably right in that last statement in that given that the financial pressures that Councils up and down the country are facing, it's unlikely that they're going to loosen those rules. So, what we are still able to do is for the assets that we have, we haven't already invested in, we're able to protect and maintain those assets. So, to give you an example, if we've got a particular building within House of Garten, for example, then if we needed to put some investment into one of those buildings and we needed-- and the company itself wasn't able to fund it, then we would be able to add further investment in as a Council in order to protect that value and ensure that we got the best return from that. What we're not able to do is buy a new property, as you probably aware within House of Garten if it required funding from the Council to do that. Now, at the moment, you have the sort of the major capital project that House of Garten has been working on has been the redevelopment of the former Winchester-- former Debenham site in Winchester where it's used some of the proceeds from its Melchian disposal so it hasn't needed to come to the Council and to ask for further investment. But, yeah, so what it-- I'm not sure, I mean, I can't speak on retrospectively on behalf of the Council what we would or wouldn't have done. But my view is that the level of risk that we have as a Council at the moment, I'm not sure we would have wanted to go and put more money into property assets or other commercial assets that we're now not able to do due to the prudential and PWB rule changes. Obviously, that's there to stop any local authority putting further investment purely for commercial purposes. But I think we were reasonably comfortable with the level that we had. So it means we-- there's nothing to say that we need to divest of anything. I know, you know, there was a bit of concern that we might be forced to divest. I think that would be hugely detrimental for a number of Councils for certain reasons. So, you know, we're comfortable with our level of investment where we need to. We can protect those assets to invest more. We're not suggesting that at the moment. But so I think we've got the reasonable amount of scope to do what I think we want to do at the moment. Yeah. I quite agree with that. But, I mean, there are plenty of scenarios where, I mean, property at the present time and if you look at all the various indices which I'm sure you all do, and it probably is-- is not about investment, it's a long-term one for sure. But it's showing better returns on the IPC indices than it has in previous years. But the-- you touched on you can't invest for profit. You can invest to support services. Yeah. Which is why I prefaced my remarks about it being very badly worded. So you can still go-- Halsey Garson can still go to the Council in the form of David there and say we need to borrow X sums to pay for that. You wouldn't necessarily go to the public works loan body next as a first port of call because of the interest rates they charge which are punitive. You go to the market and get money from local authorities. You can get which is cheap money. But there's nothing stopping you going out and borrowing money for purchase of property or improvement of property which you touched on under the current rules if you so minded, is there? If it's for a service purpose or if it's for regeneration is another-- another of the items that's open to us. But if we wanted to do it, yeah, for-- as with most of the properties or all of the properties that are in Halsey Garson today, in Halsey Garson property, the commercial side of it, those are all there purely to drive a commercial return. If it was something where we wanted, you know, if we were so minded, we wanted to regenerate a town center and put money into that, that's something that we could do where it would be deemed that profit was the-- was a secondary benefit from that. [ Pause ] Okay. Question 7, please. Thank you, Chairman. What assessment has been made of the quality of the services provided by the different investment vehicles and how cost effective are they in light of it? I'll come back to you with a figure in respect of-- I think you talked about how cost effective. And probably one example of that would be connected to Surrey whereby we pay a lower rate for our recruitment than we would have done under the previous third party arrangement. I don't have a figure to hand but I'm happy to provide that subsequently. From a quality perspective, I carry on in respect of connect to Surrey. I've sort of jotted down some of the summary benefits of the current model versus the third party provider. C2S connect to Surrey recruit exclusively for the council and for no other competing local authorities. The rates of pay and markups and margins are fixed by a framework. They can't be influenced by larger recruitment agencies as can happen with private sector providers. Improved IR35 compliance and transparency. Direct liaison with our heads of service. The fact that it's-- you know, they sit-- the team sit within Woodhatch and so it's a lot closer relationship. The social value initiatives are proactively discussed at service and at board level to ensure roll out can be successfully achieved such as skills for Surrey, careers, affairs, et cetera, again, it's much more joined up relationship. And additional support for districts and boroughs and other partnerships create potential future support more broadly across the county. So as far as connect to Surrey is concerned then, yes, there's a clear-- yeah, we'll be able to provide you the figure afterwards. There's a clear financial benefit to us and I think in terms of how we work with that entity, it's a closer relationship than we would be able to get through a third party arrangement. In-- just in respect of Surrey choices, are there any further questions just before that? That or maybe it's been subject to a financial sustainability review including an approximate comparison to market pricing. The contract runs to the end of March 2025. A revised commissioning strategy is being prepared with a procurement on exercise likely to follow. And although the council has a technical exemption whereby we don't necessarily have to take this to market, it's deemed proven to relook at the market alternatives. So that will be part of the bigger exercise that will be coming through some full council and cabinet in due course. Yes, thank you very much. That's really helpful. And what about the other organizations that provide services? So for example, Trix and-- there may be others. Thank you. We haven't on Trix as yet. Trix mostly-- I'm not sure of the mix of business but most of their business is outside of Surrey County Council. There are six partners, local property partners as you might be aware. So-- and as well as providing to those six shareholders, they provide the wider market which I believe is the largest part of their business. So from a service perspective, you know, we don't-- we're not compelled to use them. I guess we-- you know, I don't know the details of what other alternatives are available in the market. I believe it's quite-- may not necessarily be completely unique. I'm not sure but it's quite a specific product in how it-- in what it offers. So I'm not quite sure whether there are any other competitors that are out there. We do have the intention of doing a review into our shareholding and Trix coming up shortly. We've engaged with the manager and director of that particular business. Because there are five other parties, it's not quite as simple as just bringing them into our shareholder investment panel and having a discussion. It's something we would have to make sure they afforded the same opportunity to their other shareholders. So what we intend to do is ask for a sort of annual general meeting style review of-- OK. Thank you. Can I ask about one of the companies, Surrey Choices. During 2013, I was involved in a number of discussions about what Surrey Choices would and wouldn't be. And I'm not sure that when it started, it was surprising to me it lost quite a lot of money because it didn't seem to know even what the knitting was, never mind sticking to it. And so I'm pleased it's returned to profitability and delivering for the council. I just wonder what the view is about employability which is part of it, which seems to me to still be potentially neither one thing nor the other. I'm not quite sure what it achieves for the council's objectives. I'll take that question away if I may. I'm not close enough to know the quantitative aspects of employability. I thought you'd say that. I think that's the right answer. Thank you very much. If we can move to question eight, Hazel again. Thank you, Chairman. Page 14 of the annual report, which is page 64 of the agenda pack, makes reference to, and I quote, pending legislation changes which were considered to be a significant risk. And I'd like to know what are these expected legislative changes and what are their likely effects? [ Pause ] I'm happy to take that one. That's okay, Chairman. Yeah. Please do, Charles. Thank you. So, thank you. The really, the main one is the renter's reform bill that is currently traveling through central government at the moment and the effects of and the ability to remove tenants that are disruptive and causing issues to the properties and to their neighbors, and also to the decent home standards legislation just coming through, which whilst I am totally supportive of it, as you would imagine, it is going to be expensive for some landlords to comply, particularly with the changes to EPC levels. And we are certainly not immune to that in HGR given that the vast majority of our properties have not been maintained to, you know, a 100% high standard. They've been well maintained. We've never had any complaints from tenants, but they won't comply with EPC levels simply because of the style of property they are, their old properties. They don't have the latest double glazing and air source boilers, etcetera. So, we believe it'll cost a minimum of 10,000 pounds per property to just bring them up to the required decent home standards, and that's an estimate across the board. So, you know, some average, rather, a number of cases, it's considerably more. So, it is, the new legislation coming forward is really renters' reform, decent home standards. It's going to make it much more onerous upon landlords across the UK and for HGR. I hope that answers your question, Hazel. Thank you for that answer. That's very helpful. I just would like to know what the plans are to tackle those issues. Thank you. Thank you. So, what we've done in the budget, on our forward-going budget, we've identified each, in each individual property case the current, its current condition. We've got individual condition reports on every asset. We've provided a cost against that of what we believe the future legislation and standards are going to be, and we've put in place anywhere between 10,000, and it goes up to about 100,000 pounds on any specific asset of our expected cost to comply with the new legislation. We've taken, we're taking it into account. We now need to really wait and see what the actual legislation does say. But we have forward, we have made some of these in the accounts to bring our properties up to the appropriate standard. Just one further question. I mean, to what extent is that affordable? Thank you. In all honesty, it's not very affordable, which is why in the company strategy, which was approved by SIB last June, the two-year company strategy, you will note that it does say that that is the real reason why we are looking to not renew properties and to divest assets because it is not sustainable for the viability of the company going forward for us. So that is the principal reason why we are seeking to divest assets. And that is not, of course, just us at HGR. It is across the board in the United Kingdom that landlords are divesting from buy-to-net residential investments. Okay. That's very helpful, Charles. Thank you very much. I see no other questions on that. If we could move to question nine. Steve. Thanks, Chair. This question touches on risk mitigation options, levels, appetite. And given what's happening with other councils, I think it's a valid question to explore. The report refers to the fact that expenditure plans in the medium-term financial strategy are dependent on achieving certain net investment returns. If these aren't achieved, what steps will be taken or are being taken or being considered to remedy the shortfall and what effects may this have on our expenditure going forward and the related services. So just to explore that horizon scanning aspect, the mitigation steps that are being considered and how that's being considered into our MTFS and obviously our budget going forward. So if we can explore that a little bit, please, that would be helpful. Thank you. Yeah. So as we mentioned earlier, the majority of the income at the moment, 14.3 out of the 14.8 plus the dividends or, you know, say 15 million or whatever typically, that comes from HGPI, so that's commercial property. So we have 55, sort of 55 tenants across, I think 16 buildings now. So that gives us a degree of, you know, diversification. If you like, we're not-- it's not like if you imagine a woking scenario where you've got one or two big projects that, you know, and if those projects fail, then clearly you've got a major problem. So there is an element of being able to absorb because we've got multiple tenants, multiple shopping centers, office buildings, industrial buildings, all those sorts of things. So, we try and plan ahead in thinking what might be the risk around these. Melcham is perhaps a good example of asset planning, of recognizing that whilst we had a tenant, it was in a building that was sort of not the most, I guess, attractive from a wider market perspective. It's something that suited that one tenant and we have just-- it was just one tenant in there. So if that tenant were to leave, we recognize that that might be a problem in trying to backfill that. So we try and head off potential issues by sort of, I guess, forward asset planning that Charles and the team will do. However, it is commercial property and we do have some tenants, some buildings where, you know, we know they're more bespoke than others and we need to be aware that at some point, we might have to reinvest in a building or repurpose it in order to make it more attractive to tenants. Or it might be that we decide that this isn't the building that we want to remain in. And if that's the case, then our ability to service the loans that are there at the moment and to continue to pay the 14.3 million of interest could well be impacted in the long term. But in order to give an element of comfort, it's not a question of-- it's not a binary thing if we're paying 14.3 million or we're paying nothing. It's more a question of maybe we need as a council to make sure that is sustainable in the long term. So when we're doing the piece of work looking around, looking at our strategy in the long term financing of HDPI, one thing that we need to be mindful of is thinking about what those bumps in the road might be, thinking about what reinvestment requirements might-- there might need to be to make sure we plan for that. And it's possible that the outcome of that could be that we say actually it's not affordable 14.3 million in long term. Maybe it's 14.0 million, maybe it's 13.8 million, whatever that might be. You know, I don't want to prejudice what that outcome would be. But we're looking ahead and that's something that Charles carries out is asset planning. So we understand what those are and we can factor those into the long term financial planning of the council. What we-- you know, what hopefully we won't get into the situation is by looking ahead is that suddenly came to realization that we are-- we've got a big hole, we've got a big vacancy, we've got void cost, we've got no rent coming in. I'm going to-- there's always the risk that a big tenant could, you know, could fail. But hopefully by the fact that we got it spread across 16 buildings, we-- you know, Charles and his team will keep an eye on how the market is, if there's any tenants we think we might have risk around. And if we think that we've got too many eggs in one basket, then it may well be that we take a decision to divest of that or repurpose it in order to mitigate our risk. So it's not that risk ever completely goes away but we try and manage it as best we can and I think it's more a situation of it may not be 14.3 million in the long term but it's not a question of suddenly everything falls apart and it's zero. So as long as we factor that into our long term planning, then I think we've done our job to mitigate that risk. Okay, so I mean having the-- having it spread across 55 or so tenants does give you some-- some element of comfort as it were. But you mentioned that say if a big tenant were to fail, has that been considered, has that scenario been considered and work through, you know, from my point I would look at that and say if that did happen, what would the impact be on council, what would the impact be on HDPI and the short term, long term and what are the mitigation steps on that side of it. So if you can talk to us a little bit about that as well, please, that would be helpful. Thank you. So the current forecast-- Charles, sir. Sorry, Neil, I was wondering if Charles and myself could come in on some of these points. Charles, thank you. Thank you. What we do each year as part of the company, we write an annual business plan that is submitted and-- or endorsed by SHIP and then approved by SIB. The purpose of that sets out the risk of each individual tenant and asset we undertake detailed business analysis and the business review of each individual asset within the portfolio. We then also model that assuming what happens with the highest risk assets, what would happen in the event that a tenant entered administration or something happened to that property. So yes, all of that is analyzed at least once a year. We submit that annual business report to SIB in April each year. And so we do have a very good idea of what would happen if we've identified all of those risks. And if I could add that we've taken extra care to make sure we've got the correct commercial expertise. That was one of the reasons we employed Charles as managing director. And secondly, just making sure that we've got the right sector balance because we know what the market is doing across industrial commercial retail. And then we're just making sure that we've got that right balance to make sure we've not got too much risk across the different sectors, if that's helpful. Steve. It is-- it is helpful. I mean mentions made about annual business reports at SIB and so forth and I was just wondering if we-- if that comes to us or if we get sight of that and if not, if we're able to see that. Because again, there does seem to be a lot of the mitigation steps we're looking at or, you know, diving into probably too much detail possibly. But if this work is being done, I don't doubt it is, to look at the business plans and so forth, it might be useful if members were able to see that and walk through that and be assured. Can I just follow up on that question? So, currently what comes into this committee is the annual report which is largely retrospective but to go to your point there, we've had discussions with ASMAT and the Dem Services Team. So, what we intend to do in future is exactly that. So, bring in something around about midyear, it's about halfway between the annual reports where we talk about the business plans of each business and probably bring that in as a part to report and bring it to this committee so that you have foresight of what those plans are. So, hopefully that will give you what you're looking for there. That's reassuring to hear. The-- my obvious next follow-up step is the previous year's annual business reports for these entities, are they available as well? Yes, we can share those with you. Thank you, that would be appreciated. Thank you. David. Thank you, Chairman. Yes, I get asked by financially savvy members of public from time to time. They say, We know-- we understand that you do this sort of stuff and that's contributes to keeping the counter-attacks down and all those good things. But a very simplistic question they asked me is what is the total amount of capital you've invested into this general activity, you know, your whole scope, and what has been the last year's income arising from those? Are you able to-- question one, are you able to tell me that and question two, if so, am I able to say that to a member of the public? Yes, it's the amount of income that comes into the council on a company by company basis, you would see that-- you'd see that in the statutory accounts of how much interest is paid, certainly. Yeah, HDPI is the largest so you'd be able to see from the statutory accounts. They're not looking at that because they're used to having multi-businesses within their own activities, most of these people as I did once actually. And I always looked at the total first and then if I don't like the answers at the total level, if I do like the answers at the total level, carry on, do more. And if I didn't like the-- then I break it up. It's probably-- I would need to go away and give you an exact answer. I would imagine that it's identifiable within the group's statutory accounts for the council but it might be a little bit-- might be rolled in with other things so I'd have to go back and give you an exact answer to that. I think Charles-- Really sorry. Yeah, thank you. Hi, David. I was just going to respond on that as well but just specifically in terms of Hasley-Gart property investments and Hasley-Gart residential, we do have specific company accounts which I'm sure are available. I forget whether it's in part one or part two that sets out the total income coming into each of those companies and the-- well, the total capital invested, the total annual income received across the company. So, we set out a very simple, you know, the net initial yield return on an annual basis so we can provide very easily and I believe it is actually provided I think in the part two papers. And just to add to that, I think it's useful to always caveat the fact that this is long-term investment, values go up as well as down, different years will show different returns, et cetera. So, as long as we caveat that on any questions and put a full explanation together, I think it's in the public domain. Thank you. Thank you. Thank you very much. Chairman-- sorry, can you just say-- Of course. I would have thought-- thank you, Chairman. I would have thought the accounts would be contained within the consolidated accounts for the council and maybe part and parcel of that is it's-- it is a public document and public money. I would have thought suggest looking at David. I think the accounts is to my knowledge are in the public domain and they actually go through the orders and governance committee as well. So, we scrutinize them. So, you know, as Charles said, they're published accounts and I think they're totally in the public domain. Yeah, on an individual basis, absolutely, it's completely in the public domain and you can obtain what you need from that. It's just-- I think your question was around as a whole. Definitely, it will be within the council's group accounts but it-- how it's worded and whether one or two other things that are thrown into there at the same time, I'm not sure. You're right. I mean, the question is about strategy not about the individual cases which, you know, that's up to you guys. Okay, thank you very much indeed. We can come to the recommendations. There are some things I would like to recommend but they relate to matters that are still confidential. My suggestion to the committee is that we note the report and that we do a more comprehensive set of recommendations in part two. Is everybody happy with that? Okay. So, the recommendation is we note the report. Does that agree? Agreed. Thank you very much. Item seven, exclusion of the press and public. Before moving the recommendation, I'll say that the next meeting of the committee is on the sixth of December and I recommend that under section 100A of the local government act, 1972, the public be excluded from the meeting for the following items of business on the grounds that they involve the likely disclosure of exempt information under the relevant paragraphs of part one of schedule 12A of the act. Is that agreed? Thank you very much indeed. If we could stop the telecast please.