Capital Investment Programme
North Lanarkshire Council · 1 December 2022
Back to Policy and Strategy Committee — 1 December 2022 and its agenda
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North Lanarkshire Council Report Policy and Strategy Committee Does this report require to be approved? ☒ Yes ☐ No Ref DB/EK/GT Date 11/10/22 Capital Investment Programme Update From Elaine Kemp, Head of Financial Solutions E-mail kempe@northlan.gov.uk Telephone 07939 280601 1. Background 1.1 The Council’s updated five-year Strategic Capital Investment Programme from 2021/22 to 2025/26 was approved at Policy and Strategy Committee in March 2022. This programme totalled £725.354m and was underpinned by significant funding from the Council’s Community Investment Fund (£261.147m). 1.2 As the Committee will be aware, the Community Investment Fund is subject to annual review based on a number of factors including the rate of new house building, Council Tax rises and the cost of borrowing. The most recent review was presented to Policy Executive Summary The Community Investment Fund Annual Update report to Policy and Strategy Committee in September 2022 highlighted the requirement to reduce the Council’s capital investment programme by £22.076m to ensure that programme activity matches funding availability. This report presents the outcome of the review of the capital programme undertaken by the Council’s Strategic Capital Delivery Group while ensuring alignment with the Council’s previously agreed capital prioritisation matrix and, therefore, the Plan for North Lanarkshire. Recommendations It is recommended that Committee: (1) Approves the recommended budget reductions outlined in paragraph 2.10 and in Appendix 1, (2) Acknowledges the ongoing capital programme funding risks linked to wider economic factors, and (3) Endorses the approach to the development of a future strategic capital programme as outlined in paragraphs 2.13 to 2.15. The Plan for North Lanarkshire Priority Improve North Lanarkshire's resource base Ambition statement (25) Ensure intelligent use of data and information to support fully evidence based decision making and future planning
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and Strategy Committee on 29 September 2022 and highlighted a projected reduction of £42.241m over the 10-year planning period. The impact on the current 5-year capital planning period is a reduction of £22.076m. 1.3 With the reduction in resources available to support the current capital investment programmes, the Council’s Strategic Capital Delivery Group (SCDG) was tasked with reassessing priorities with a view to reducing the programme to match funding available. 2. Report Review Process 2.1 The Council’s SCDG met on several occasions throughout September and October 2022 to agree the scope and principles of the review and to finalise the recommendation to Committee. 2.2 The review process has been guided throughout by the prioritisation matrix agreed for the development of the initial five-year Strategic Capital Investment Programme as approved at Policy and Strategy Committee in March 2021. 2.3 The agreed scoring methodology gave every proposed project for the current capital programme a weighted score to demonstrate its contribution to the Council’s priority outcomes and additional criteria linked to contribution to issues such as financial sustainability, environmental sustainability and asset management planning. 2.4 The previous scoring process also included an assessment of unavoidable commitments. Unavoidable commitments were defined as projects that had already commenced, had been committed as a result of a committee decision or those of strategic importance. These projects were top sliced from the available resources, with the remaining bids assessed in accordance with their relative weighted score and matched with the funding available. Therefore, no project scoring below 50% was allocated funding unless it was deemed to be unavoidable. 2.5 Given the Council’s priority outcomes have not changed, and the additional criteria are still as relevant now as they were when they were established in December 2020, SCDG agreed that this should be the basis for the review of the capital programme. In effect, SCDG agreed to focus its attention on the projects with the lowest priority score to identify budget reductions of £22.076m to match funding availability. 2.6 In addition, given the scale of the challenge SCDG also agreed to review where there was potential for reductions in core Council funding where additional grant support had been received. Review Outcome 2.7 Potential budget reductions totalling £31.531m were identified from the review; £14.520m from a review of prioritisation and £17.010m from potential grant synergies. 2.8 Removing the Council’s capital contingency of £2.781m reduces the required budget reduction target from £22.076m to £19.295m. 2.9 The SCDG met on 6 October 2022 to RAG the options as follows: • Green – agreement from the Group on recommending a budget reduction, • Amber – sufficient uncertainty or risk associated with the potential budget reduction so agreement to not to recommend a budget reduction, and
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• Red – the Group agreed that it could not recommend a budget reduction at this stage. 2.10 The outcome is presented on Appendix 1 with explanations and notes on each of the budget lines. In summary, the SCDG was able to identify £19.295m of recommended budget reductions (highlighted in Green in the Appendix) with £12.236m not recommended for reduction at this stage (see those highlighted in Amber and Red). Note that given the recommendation of removal of the Shared Campus budget allocation from the current 5-year capital planning cycle there is an allowance made for essential, unavoidable health and safety and legislative works to be undertaken at the Civic Centre. Risks 2.11 The Community Investment Fund Annual Update report presented to Policy and Strategy Committee on 29 September 2022 highlights the impact of significant increases in the Bank of England base interest rate may have on the Council’s cost of borrowing. It is highlighted that an increase in the average rate of Council borrowing to 4.75% would reduce overall funding available by £64.896m. 2.12 As part of its proactive Treasury Management Strategy, the Council is continually reviewing its cash balances and loan debt profile to minimise borrowing costs. However, Committee should be aware that if interest rates continue to rise, or stay at higher levels for a sustained period of time, the Council will be required to undertake further reviews to ensure the capital programme matches funding available. Future Capital Programme Development 2.13 The Council is nearing the end of the second year of its five-year capital planning period. It was always the intention of the SCDG to undertake a review of the 2021/22 to 2025/26 capital programme during the first three years with a view to developing a new five-year programme, or potentially a plan covering a longer period of time. 2.14 Therefore, SCDG will seek to work with Services to develop a new, reset capital programme to commence from 2024/25. It is hoped that there will be more economic certainty at that stage in relation to issues such as interest rates, house building etc. 2.15 The new capital programme will also aim to reflect the updated Programme of Work and will be driven by the recently approved Corporate Asset Management Plan which creates the potential that funding available for the Council’s ambitions is maximised. 3. Measures of success 3.1 Ensuring that capital programme plans are prioritised in line with the Council’s priority outcomes whilst ensuing that programme activity matches available funding. 4. Supporting documentation Appendix 1 – Capital Programme Review Elaine Kemp Head of Financial Solutions
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5. Impacts ( http://connect/report-template-guidance ) 5.1 Public Sector Equality Duty and Fairer Scotland Duty Does the report contain information that has an impact as a result of the Public Sector Equality Duty and/or Fairer Scotland Duty? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? If Yes, has an assessment been carried out and published on the council’s website? https://www.northlanarkshire.gov.uk/your-community/equalities/equality-and-fairer- scotland-duty-impact-assessments Yes ☐ No ☐ 5.2 Financial impact Does the report contain any financial impacts? Yes ☒ No ☐ If Yes, have all relevant financial impacts have been discussed and agreed with Financial Solutions? Yes ☒ No ☐ If Yes, please provide a brief summary of the impact? Financial impacts are outlined throughout the report. 5.3 HR policy impact Does the report contain any HR policy or procedure impacts? Yes ☐ No ☒ If Yes, have all relevant HR impacts have been discussed and agreed with People and Organisational Development? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.4 Legal impact Does the report contain any legal impacts (such as general legal matters, statutory considerations (including employment law considerations), or new legislation)? Yes ☐ No ☒ If Yes, have all relevant legal impacts have been discussed and agreed with Legal and Democratic Solutions? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.5 Data protection impact Does the report / project / practice contain or involve the processing of personal data? Yes ☐ No ☒ If Yes, is the processing of this personal data likely to result in a high risk to the data subject? Yes ☐ No ☐ If Yes, has a Data Protection Impact Assessment (DPIA) been carried out and e- mailed to dataprotection@northlan.gov.uk Yes ☐ No ☐ 5.6 Technology / Digital impact Does the report contain information that has an impact on either technology, digital transformation, service redesign / business change processes, data management, or connectivity / broadband / Wi-Fi? Yes ☐ No ☒
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If Yes, please provide a brief summary of the impact? Where the impact identifies a requirement for technology, has an assessment been carried out (or scheduled) by the Enterprise Architecture Governance Group (EAGG)? Yes ☐ No ☐ 5.7 Environmental / Carbon impact Does the report / project / practice contain information that has an impact on any environmental or carbon matters? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 5.8 Communications impact Does the report contain any information that has an impact on the council’s communications activities? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 5.9 Risk impact Is there a risk impact? Yes ☒ No ☐ If Yes, please provide a brief summary of the key risks and potential impacts, highlighting where the risk(s) are assessed and recorded (e.g. Corporate or Service or Project Risk Registers), and how they are managed? Through SCDG the Council will be managing ongoing risk associated with the strategic capital investment programme, including but not limited to: • Failure to spend in-year capital grant which may result in any unspent portion being returned to the Scottish Government. However, given the significant level of Community Investment Fund activity this risk is deemed to be low at this stage. • Project delays and programme issues that impact on the delivery of the programme and result in increases costs or reduced outcomes. • Reductions in funding available through the Community Investment Fund as a result of external factors facing the Council. This is managed through regular monitoring of CIF assumptions and sensitivity analysis / scenario planning.
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Appendix 1 Capital Programme Review Total £m Reduction to be identified 22.076 Removal of contingency 2.781 Balance to be identified 19.295 Review of Prioritisation (recommended budget reductions): Demolitions 1.000 G HoS assessment that it is possible to reduce within the current 5 year planning period but requires consideration for future capital planning rounds IT 6.01 Minor (application dependancy software) 0.006 G HoS assessment that this would be a low risk reduction SEPA funding Garrellburn 0.112 G Additional funds from SEPA to contribute towards the project overspend. Note the project overspend was absorbed in NLC funds during 21/22 therefore this balance now available to allocate in 22/23. Traffic Signals 0.150 G Budget for A73 Corridor Improvements no longer required Design Fees underspend 22/23 Environmental Assets 0.381 G Based on 22/23 forecast. Sufficient budget remains in future years to support costs Design Fees underspend 22/23 Asset and Procurement Solutions 0.056 G Based on 22/23 forecast. Sufficient budget remains in future years to support costs Shared Campus 6.000 G Current economic climate with increased costs of construction and increased borrowing costs have resulted in an agreement to pause work on the Shared Campus proposals until external market conditions improve. A consequence of the reprofiling of work on the Shared Campus proposal would be the requirement to review essential, unavoidable maintenance on the Civic Centre building to include issues such as lifts, roof works, limited window works, electrical improvements etc. ASC - Aids and adaptations 0.650 G Based on forecast spend levels in 22/23 - thereby reducing future 3 years allocation to £2.2m per annum City Deal - Ravenscraig North 4.762 G RIA (North and South) allocated £17.6m in current 5 year programme. Deferral of some expenditure to beyond the current capital planning period linked to latest information from transport assessments IT3.04 Co-ordinated Interactive Panels Installations 0.303 G Schools to contribute more towards the replacement / renewal of current smart board estate IT5.04 - Immersive Experience Pods 0.181 G Funding pressures on capital programme necessitates a longer-term deployment of the additional immersive experience rooms across Council locations. This reduction enables immersive experience rooms to be deployed to a further two towns, with locations determined following a rigorous option appraisal and assessment against the Town and Community Hub design and delivery principle IT3.05 Co-ordinated Education End User Device Hardware Upgrade 0.920 R HoS recommendation this is reduced as very last resort. The current budget allocation supports refresh of hardware across the Council to ensure compatability with the current network infrastructure Sub Total 14.520
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Review of external funding synergies: Community Board Project Investment Fund - SG Play grant and Shared Prosperity Fund 4.016 G £7.5m allocation over the 5 year period but significant additional funding received via NLC investments / Covid recovery, Scottish Government grants to support play area renewal / upgrades and Shared Properity Fund. Active travel / Infrastructure & Transportation Improvements 1.116 A Additional funding included in the Shared Prosperity Fund bid and additional funding from Scottish Government for Cycling, Walking and Safer Routes (CWSR) are in excess of full 5 year NLC 'priority allocation' for Active Travel. There is the potential to remove core NLC budget, however, recognition that NLC resource levers additional funding from Sustrans and SPT Economic Regeneration - Town Centres - Placed Based Investment Programme 1.678 G £1.678m represents the 'priority allocation' value. Consideration of known future Scottish Government capital grant allocations: 22/23 £2.436m, 23/24 £1.698m, 24/25 £1.698m Traffic Signals 0.500 R HoS recommendation that there is no reduction at this stage LUF - Cumbernauld Town Centre 9.700 R Currently assumed to be funded from Economic Regeneration (Town Centre) allocation and Committee approval so a successful LUF bid could 'release' this allocation. Note: £9.7m represents the purchase of the site(s) only. 17.010 Total Potential Solutions Identified 31.531 Balance to be identified / (excess) (12.236) Summary: Green 19.295 Amber 1.116 Red 11.120