Content

DECLARATIONS OF INTEREST MADE FOR THIS ITEM:
 
None
 
RESOLVED:
 
That Cabinet:
1.   
Noted the proposed Capital Strategy 2026–2036
(Appendix A) and agree to recommend that Full Council approve and
adopt the strategy as the Council’s overarching framework for
capital investment, financing and governance.

2.   
Noted that the Strategy would be reviewed annually
alongside the MTFS and TMSS and reported to Cabinet and Full
Council.

3.   
Endorsed the Capital Framework and governance
arrangements.
Reasons for
decision
The Capital Strategy set out the
Council’s statutory responsibility to define a clear approach
for capital investment and financing. The 2026–2036 strategy
built on previous iterations to reinforce affordability, prudence
and sustainability in line with the CIPFA Prudential Code. It
underpinned financial resilience by aligning the Council’s
strategic objectives with the Treasury Management Strategy to
provide a coherent framework supporting investment in delivering
the Borough Vision 2035 outcomes through the Capital
Programme.
The Strategy provided a framework for
long?term investment, setting out an evidence?led approach to
allocating limited capital resources to projects that fulfilled the
Council’s legal and health and safety obligations, met
contractual commitments and, where affordable, delivered its
strategic priorities. It responded to significant financial
challenges, including:
Rising inflation and higher interest
rates, which had significantly increased the cost of borrowing and
future debt?servicing pressures.
Continuing growth in demand for housing, adult social care and
temporary accommodation.
Limited government funding, alongside the use of Exceptional
Financial Support (EFS), which was used to fund immediate budget
pressures but increased long?term revenue commitments through
higher capital financing costs and long?term debt for the
Council.
In this context, the Capital Strategy
set out a disciplined approach to capital investment, prioritising
schemes essential for the delivery of statutory services, health
and safety compliance and the reduction of long?term revenue
pressures. A significant proportion of the capital programme was
funded through borrowing, and the year?on?year increase needed to
be reversed to protect the Council’s financial sustainability
and ensure affordability within prudential limits.
The Strategy brought together the
Housing Revenue Account and the General Fund into a single
strategic portfolio view for governance and reporting, while fully
maintaining statutory and ring?fencing requirements.
It embedded robust business planning,
risk management and benefits?realisation arrangements,
strengthening transparency and confidence in decision?making. By
prioritising affordability while retaining flexibility, the
Strategy supported long?term financial sustainability and enabled
the Council to respond effectively to changing economic conditions
and strategic priorities.
Financing and
Affordability
The Capital Strategy, alongside the
Treasury Management Strategy Statement (TMSS) and the Medium Term Financial Strategy (MTFS), set the
parameters for a financially sustainable capital programme.
Borrowing had to remain within approved prudential limits, with the
Council prioritising external grant funding, ringfenced Housing
Revenue Account resources and capital receipts before undertaking
prudent borrowing in accordance with the Prudential Code. The
Council remained within its approved prudential limits set out in
the Treasury Management Strategy Statement elsewhere on the agenda,
but debt levels were high compared to others, and the capital
financing costs of the capital programme alone amounted to
£55m for the General Fund and £32m for the
HRA.
The use of Exceptional Financial Support
(EFS) was a measure that increased future debt?servicing costs. The
Strategy therefore sought to reduce reliance on EFS over time and
prioritised investment in schemes mitigating longer?term revenue
pressures, such as housing delivery to reduce temporary
accommodation costs and energy?efficiency measures to lower utility
expenditure.
All capital schemes were required to
demonstrate affordability on a whole?life basis, including robust
revenue implications, realistic contingency provision and
sensitivity analysis. Clear mitigation or reprofiling options
needed to be identified where affordability was affected by funding
changes, cost inflation or delivery risk, ensuring the overall
programme remained affordable, prudent and sustainable.
Governance,
Assurance and Delivery
Delivery of the Strategy was supported
by the Council’s Capital Delivery Framework and capital
governance model, adopted in July 2025, which provided a consistent
approach to business?case development, approval, monitoring and
benefits?realisation across the General Fund and Housing Revenue
Account programmes.
Cabinet held overall strategic oversight
of the Capital Strategy and Capital Programme. Regular scrutiny and
due diligence were provided through quarterly capital monitoring
reports to the Corporate Leadership Team, Cabinet and Scrutiny,
enabling Members to oversee affordability, delivery performance,
risks and alignment with corporate priorities. Operational
oversight was exercised through the Strategic Capital Board and
Directorate Capital Boards, which managed programme delivery,
interdependencies and escalation.
Assurance was provided through a layered
monitoring and reporting framework, including:
Monthly project and programme
monitoring, providing detailed performance, financial and risk
oversight at Capital Programme Board level; and
Quarterly portfolio?level capital monitoring and assurance,
providing Members with a consolidated view of spend, forecast,
risks, benefits and compliance with prudential indicators and
governance requirements.
Risk
Management
The Council maintained a low?risk
appetite for borrowing and exposure to market volatility,
reflecting financial context and the need to safeguard long?term
financial resilience. Capital investment decisions were informed by
robust risk assessment and mitigation planning at both scheme and
portfolio level.
Key risks and mitigating actions
included, but were not limited to:
Interest rates
and inflation: Use of prudent
financial assumptions, regular benchmarking and realistic
contingency allowances.
Legislative and policy
change: Horizon scanning and early compliance
planning to mitigate cost and delivery impacts.
Capital receipts and grant
dependency: Conservative forecasting, active
disposals management and strict compliance with grant
conditions.
Delivery capacity and
supply chain: Investment in internal
project?management capability, robust procurement and due?diligence
processes and risk?sharing contract forms.
Where affordability or deliverability
was challenged, the Council took early action to reprofile or pause
lower?priority schemes, while protecting statutory compliance and
projects already in delivery to avoid sunk costs and reputational
risk.
Alternative options
considered
Do Nothing
– Not Recommended
Failing to adopt a Capital Strategy would have undermined
compliance with the CIPFA Prudential Code, which required local
authorities to maintain an up?to?date capital strategy. It would
have increased the risk of uncoordinated and unaffordable
investment decisions and reduced transparency and assurance in the
public interest. In the context of sustained financial pressure,
this would have significantly heightened the risk of an
unsustainable capital programme, adversely affecting the
Council’s financial resilience and its ability to deliver
outcomes for residents.