Agenda Document Pack - Council - 27/02/2025
Renfrewshire Council · 27 February 2025
Back to Council — 27 February 2025 and its agenda
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19/02/2025 Notice of Meeting and Agenda Council Date Time Venue Thursday, 27 February 2025 09:30 Council Chambers (Renfrewshire), Council Headquarters, Renfrewshire House, Cotton Street, Paisley, PA1 1AN Membership Provost Lorraine Cameron (Convener): Councillor Iain Nicolson (Leader): Councillor Cathy McEwan (Depute Convener): Councillor Jacqueline Cameron (Depute Leader): Councillor Jennifer Adam: Councillor Fiona Airlie-Nicolson: Councillor Alison Ann-Dowling: Councillor Stephen Burns: Councillor Michelle Campbell: Councillor Graeme Clark: Councillor Carolann Davidson: Councillor Eddie Devine: Councillor Andy Doig: Councillor Audrey Doig: Councillor Chris Gilmour: Councillor Edward Grady: Councillor Gillian Graham: Councillor Neill Graham: Councillor John Gray: Councillor Anne Hannigan: Councillor John Hood: Councillor Lisa-Marie Hughes: Councillor Robert Innes: Councillor Alec Leishman: Councillor Bruce MacFarlane: Councillor James MacLaren: Councillor Kenny MacLaren: Councillor Mags MacLaren: Councillor Colin McCulloch: Councillor Janis McDonald: Councillor David McGonigle: Councillor Jamie McGuire: Councillor Marie McGurk: Councillor Iain McMillan: Councillor John McNaughtan: Councillor Kevin Montgomery: Councillor Sam Mullin: Councillor Will Mylet: Councillor Jim Paterson: Councillor Emma Rodden: Councillor John Shaw: Councillor Ben Smith: Councillor Andy Steel: Members of the Press and Public Members of the press and public wishing to attend the meeting should report to the customer service centre where they will be met and directed to the meeting. Hybrid Meeting Please note that this meeting is scheduled to be held in the Council Chambers. However, it is a hybrid meeting and arrangements have been made for members to join the meeting remotely should they wish. MARK CONAGHAN Head of Corporate Governance
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19/02/2025 Further Information This is a meeting which is open to members of the public. A copy of the agenda and reports for this meeting will be available for inspection prior to the meeting at the Customer Service Centre, Renfrewshire House, Cotton Street, Paisley and online at http://renfrewshire.cmis.uk.com/renfrewshire/CouncilandBoards.aspx For further information, please email democratic-services@renfrewshire.gov.uk Webcasting of Council Meeting This meeting will be filmed for live or subsequent broadcast via the Council’s internet site – at the start of the meeting the Provost will confirm if all or part of the meeting is being filmed. Generally the public seating areas will not be filmed. The cameras focus on the main participants. If you have any queries regarding this please contact Committee Services on democratic-services@renfrewshire.gov.uk. To find the webcast please navigate to: https://renfrewshire.public-i.tv/core/portal/home and select the meeting from the calendar. Information Bulletin To reduce the reporting of routine operational matters to Policy Boards, to allow Boards to focus on major policy issues and to streamline business for Members’ consideration and determination, a Bulletin, issued in line with the Council meeting timetable, is produced. The Bulletin is intended to provide members with a concise summary of significant decisions and action taken by officers in the exercise of their delegated powers, and details of issues which do not require a decision. A copy of the Bulletin has been attached under separate cover to this agenda. Procedures for Budget Meeting Copies of the notes of the procedures to be followed in respect of consideration of (i) the Revenue Estimates and Council Tax; and (ii) the Housing Revenue Account Budgets, Rent Levels and Capital Investment Plans are attached to the relevant reports. Section 112 Statement Members’ attention is drawn to the enclosed statement regarding declarations in terms of Section 112 of the Local Government Finance Act, 1992.
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19/02/2025 Items of business Apologies Apologies from members. Declarations of Interest and Transparency Statements Members are asked to declare an interest or make a transparency statement in any item(s) on the agenda and to provide a brief explanation of the nature of the interest or the transparency statement. 1 Minutes of Meetings of Council, Boards and Panels Council, 12 December 2024 Special Council, 12 December 2024 Communities and Housing Policy Board,14 January 2025 Regulatory Functions Board,15 January 2025 Education and Children’s Services Policy Board, 16 January 2025 Audit, Risk and Scrutiny Board,20 January 2025 Economy and Regeneration Policy Board,21 January 2025 Planning and Climate Change Policy Board,21 January 2025 Infrastructure, Land and Environment Policy Board, 22 January 2025 Petitions Board,27 January 2025 Regulatory Functions Board,6 February 2025 Cross Party Sounding Board, 12 February 2025 Finance, Resources & Customer Services Policy Board, 13 February 2025 Leadership Board,19 February 2025 2 Provost's Update Hear from Provost 3 Revenue Budget and Council Tax 2025/26 Report by Director of Finance & Resources 3 - 36 4 Non-Housing Capital Investment Programme, Prudential Framework and Treasury Management Strategy, and Capital Strategy 2025/26 – 2029/30 Report by Director of Finance & Resources 37 - 92 5 Housing Revenue Account Budget & Rent Levels 2025/26 and Housing Capital Investment Plan 2025/26 to 2029/30 Joint report by the Directors of Environment, Housing & Infrastructure and Finance & Resources 93 - 106
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19/02/2025 6 Scottish Local Authorities Remuneration Committee and Councillors Remuneration Report by Director of Finance & Resources 107 - 112 7 Commissioner for Ethical Standards in Public Life in Scotland – Annual Report 2023/24 Report by Director of Finance & Resources 113 - 118 8 Notice of Motion 1 by Councillors Mylet and Devine "TA Building Renfrewshire Council recognises the importance of maintaining our history and heritage. We condemn the actions taken by the JR Group for the wilful neglect of the former TA Building. Council instructs the Chief Executive to have a full independent public inquiry into this issue." 9 Notice of Motion 2 by Councillors Andy Doig and Hood "Withdrawal of Part of the McGills 307 Johnstone to Lochwinnoch Service “Renfrewshire Council deeply regrets the decision by McGills Buses to withdraw the 307/307a Johnstone to Lochwinnoch service from the Braehead scheme in Lochwinnoch in the evenings and at weekends. Council calls for McGills management to meet with both the appropriate council officers and all local ward Councillors at the earliest opportunity. The purpose of this meeting being to examine how to resolve the issues surrounding the withdrawal of part of the service with a view to restoring it”." 10 Notice of Motion 3 by Councillors McMillan and Ann- Dowling "WASPI Motion Council notes the recent decision by the UK Government not to pay WASPI women compensation, due to the severe strain on the UK economy and national finances following fourteen years of Conservative Government. Council reaffirms its support for the WASPI campaign and believes that this decision should be reconsidered. Women impacted by previous UK Government failure to adequately warn them about changes to the state pension who have been financially disadvantaged should be compensated in line with PHSO report and recommendations."
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19/02/2025 11 Notice of Motion 4 by Councillors McNaughtan and K MacLaren "Renfrewshire’s Listed Buildings In the light of recent losses of important listed buildings within Renfrewshire, Council agrees : 1. To advise the Scottish Parliament Citizen Participation and Public Petitions Committee, which is considering such matters, that additional powers such as Compulsory Sales Orders and clearer guidance are required for local authorities to adequately safeguard our heritage for future generations; 2. While noting that the Buildings at Risk Register has been suspended by Historic Environment Scotland, to instruct officers to report to the appropriate Board, an urgent update on those buildings within Renfrewshire: 3. To develop policy and procedures for the re-use of important remnants and artefacts from any demolitions or partial demolitions of listed buildings, including a record of the storage of such items pending incorporation in new buildings – to ensure such local treasures are not lost through the passage of time; and 4. To consider options open to the Council in respect of tax policy and other incentives to encourage the re-use of listed buildings and avoid empty and deteriorating structures which could have a detrimental impact on communities." 12 Notice of Motion 5 by Councillors J MacLaren and N Graham "Listed Buildings Following the loss of the much-loved TA building and façade, Council laments the loss of another listed building in Paisley. Council calls on the Scottish Government to carry out an urgent review of listed-building regulations and directives."
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LOCAL GOVERNMENT FINANCE ACT 1992 - SECTION 112 RESTRICTIONS ON VOTING BY MEMBERS The attention of Members is drawn to the provisions of Section 112 of the Local Government Finance Act, 1992. This section has the effect of restricting the voting rights of Members on certain issues if they are in arrears with Council Tax payments. The legislation applies to a Member in attendance at a meeting of the Council, or of a Committee or Sub-Committee of the Council or representing the Council’s interest at a Joint Committee meeting or Sub-Committee thereof. If at the time of the meeting a Member is 2 months or more in arrears in payment of the Council Tax, the Member will be restricted in voting on matters which relate to: 1. Setting or adjusting the rate of Council Tax; 2. Matters relating to the administration, enforcement and collection of the Council Tax or Council Water Tax. If a Member falls into arrears as defined by the legislation, the Member is required to disclose this fact at any relevant meeting as soon as practical after it starts. The Member may participate in any debate on the relevant agenda item but the Member should not vote on any matters related to the agenda item. If the Member does not disclose the restriction due to arrears of Tax and/or votes on a restricted issue the Member will have committed an offence, and on convictions, will be liable to a fine not exceeding level 3 on the standard scale (currently £1,000). The Member will not be guilty of the offence if he/she can prove he/she did not know: (a) that Section 112 of the 1992 Act applied to him/her at the time of the meeting; (b) the tax item was the subject of consideration at that meeting. The responsibility for identifying whether a Member is in arrears with Council Tax rests with the Member. Page 1 of 118
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PROCEDURE TO BE FOLLOWED AT THE MEETING OF RENFREWSHIRE COUNCIL TO BE HELD ON 27 FEBRUARY 2025 DURING CONSIDERATION OF ITEM 3 CONCERNING REVENUE ESTIMATES AND COUNCIL TAX FOR THE FINANCIAL YEAR 2025/26 The purpose of this note is to give Members advance notice of the procedure which Provost Cameron has agreed should be followed at the Meeting of the Council on 27 February 2025. 1. The Convener of the Finance, Resources & Customer Services Policy Board (the Convener) will make his budget statement for financial year 2025/26 and move as appropriate. He will then speak to the principal points of his proposals. The motion will require to be seconded. 2. The Leader of the Council will second the motion and may address the meeting then or reserve the right to speak at a later stage of the debate. 3. For the purposes of the subsequent discussion and voting, the Convener's proposals will be taken as one motion. 4. An opportunity will then be given to the Leaders of the opposition groups and any other Members to move, and to have duly seconded, comprehensive amendments to the motion (i.e. taking together proposals for resource allocations, budget proposals, revenue estimates and the level of the council tax for the financial year 2025/26). 5. The motion and any amendments will require to be produced in writing and a copy given to each of the Members present prior to being spoken to at the meeting. Provost Cameron may then adjourn the meeting for 20 minutes to allow Members to consider the terms of the motion by the administration and any amendments by the opposition groups or other Members. Corporate Meeting Rooms have been arranged for the adjournment as follows: Administration – Corporate Meeting Room 2, Labour - Corporate Meeting Room 1, Conservative – Corporate Meeting Room 3, Independents – Communications Room. 6. There shall be no formal restriction upon the length of time given to the Convener and the Leaders of the opposition groups and any other Members to move their respective budget statements and speak in support of the principal points of their proposals. However, Provost Cameron shall have the power to require any person speaking to limit their speech in order to facilitate the conduct of the meeting. 7. Provost Cameron will then invite other Members to take part in the debate including Conveners of the Policy Boards who may wish to take the opportunity to respond concerning the services for which they have responsibility. 8. The debate will conclude with Provost Cameron giving the Convener the opportunity to reply. 9. A vote or votes will then be taken in accordance with the provisions of standing orders. Item 3 Page 3 of 118
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To: Council On: 27 February 2025 Report by: Director of Finance & Resources Heading: Revenue Budget and Council Tax 2025/26 1. SUMMARY 1.1. This report provides Members with an overview of the Council’s anticipated financial position on the General Fund revenue budget and sets out the information required for the Council to set its budget and Council Tax for 2025/26. Members are required to bring forward proposals to secure a balanced budget, and to assist in this, Directors have been providing details of the financial, service and equality implications of any changes to current service levels, as requested by Members. 1.2. Members will be aware that the Council continues to experience a challenging and complex set of financial circumstances. It is recognised that moving into 2025/26 and beyond, the financial environment that local government in Scotland is facing remains difficult, with substantial risks even in the short term in relation to cost growth and income constraints. Longer lasting legacy impacts on service costs, service demand and income streams are anticipated. 1.3. Members will be required to take these circumstances into account when setting the 2025/26 budget, recognising that the Council’s immediate and medium-term challenges remain significant. 1.4. The economic outlook remains volatile. Inflation rates have fallen to target levels, but interest rates have been sustained at a higher level for longer than expected Page 5 of 118
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and economic growth forecasts remain subdued. The year ahead is unlikely to see much improved prospects, as the degree of uncertainty remains high due to geo- political concerns, the outcome of wage settlements and government spending and taxation decisions. 1.5. The Draft Scottish Budget was announced on 4 December, again for one financial year only. Resources were again prioritised to social security, where an additional c£1bn was allocated, which naturally places other areas of the public sector under increased financial pressure. 1.6. The local government settlement is presented in the Draft Budget as having increased by £1bn in 2025/26; however, much of this increase relates to existing or new burdens, e.g. local government pay, teachers’ pay and teachers’ pension uplift, i.e. funding that is not available to local government to address core spend pressures. The additional unearmarked sum amounts to c£289m nationally. While this increase is welcome, and an improvement over the ‘flat-cash’ anticipated grant position, the increase is marginal in terms of the scale of cost growth the Council has experienced in recent years. 1.7. The Council’s allocation has increased from £427m (on which the Council’s 24/25 budget was based) to £464m – a gross £37m or 8.7% increase (excluding unconfirmed funding in relation to eNIC costs). 1.8. The key elements of the Council’s revenue settlement are set out as follows: - i) Circular 10/2024 confirmed Scottish Government revenue grant funding in 2025/26 for the Council of £452.225 million. The local government finance order laid before Parliament on 4 February updated this allocation to £461.758 million. ii) After adjusting for new responsibilities, areas of growing responsibility and other conditional aspects of the settlement, this provides a like-for-like comparison to 2024/25 where the Council’s underlying core grant has increased by £9.9 million (2.3%). iii) Following the Stage 1 debate in the Scottish Parliament on 4 February 2025, extra funding of £144m was announced to help offset the rise in employers' National Insurance from 1 April 2025. This has not yet been reflected in the local government settlement and the distribution is, at the time of writing, still to be confirmed, but the quantum is not expected to fully fund estimated costs. Further detail is included in the report at paragraphs 4.2 and 4.3. 1.9. The Scottish Government also announced a Public Sector Pay Policy for the medium term period 2025/26 to 2027/28. This indicates a 9% pay envelope Page 6 of 118
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covering this period, with flexibility for employers to configure three-year proposals within this range. Despite current lower levels of inflation, pay expectations are significantly above these levels (initial claims received average 6.5%), and will therefore still present a testing environment in which to reach agreement. 1.10. The medium-term financial outlook for the Council remains challenging. Among other significant cost pressures, pay and the revenue grant continue to be the two biggest determinants of the Council’s financial outlook. The Scottish Government block grant is likely to incorporate only very moderate increases over the next few years, giving no assurance that the local government settlement in future years will reflect a sufficient degree of increase to address core budget pressures. The current and forecast challenging financial position of Renfrewshire HSCP, and consequent potential impact on the Council financial position is an increasing concern. 1.11. The Council has consistently and correctly taken a medium-term view of its financial position, agreeing transformation and savings measures that have ensured the Council positively addresses the forecast medium-term budget deficit, whilst supporting temporary investment in priority areas, and this approach continues into 2025/26. 1.12. Applying a central range of assumptions for the three-year period beyond 2025/26, derives a forecast budget deficit range of broadly £25-40 million over this period (before any decisions on the level of Council Tax, but after assumed delivery of known recurring savings). This forecast outlook is based on relatively tight grant and pay assumptions informed by the current financial settlement and information in the UK Government 2024 Budget, as well as likely affordability constraints in relation to future pay awards. It is hoped further detail will be available in the UK Government Spending Review due to be published in the Summer which will provide further clarity. 1.13. For 2025/26, budget assumptions have been updated as appropriate, including the confirmed grant available to the Council and associated conditions, the impact of new obligations, the likely impact of increasing demographic and demand pressures and expected Council Tax yield levels for 2025/26. After taking account of the cumulative impact of each of these issues, there is a recurring budget deficit for 2025/26 of £1.941 million, subject to any further decisions taken by Members. 1.14. Given the ongoing financial sustainability challenge that lies ahead for the Council, in setting the 2025/26 budget, it is strongly recommended that any commitments by Members that would result in additional recurring expenditure (that would have the effect of increasing the projected medium-term deficit in future years) should Page 7 of 118
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be supported by offsetting sustainable savings, or increased resources arising from an increase in Council Tax. Finally, Members are encouraged to take a holistic view of the Council’s total resources, covering both capital and revenue. 2. RECOMMENDATIONS 2.1. Members are asked to:- 2.2. Submit for approval proposals for any savings, investments, and service changes as part of delivering a balanced budget for 2025/26, and in doing so: • to consider the equality impact of any proposed service changes as referred to at paragraph 8.3 • to assess whether adequate provision is being made in the 2025/26 budget to deliver against the specified commitments linked to the Council’s grant settlement for 2025/26, as detailed at section 4. 2.3. Approve the provisions for inflationary pressures, as recommended at section 5. 2.4. Approve the revenue estimates for all services for 2025/26 subject to adjustment for the allocation of specific grants, inflationary allowances and any proposals for service changes approved by Council. 2.5. Approve the financial measures outlined in section 5, including the release of additional resources made available in 2025/26 to Renfrewshire Health and Social Care Partnership. 2.6. Approve the proposals in relation to reserve balances as recommended in section 12. 2.7. Submit for approval the Council Tax banding levels A to H inclusive to apply for 2025/26, noting the information outlined in section 9. 3. FINANCIAL OUTLOOK UPDATE 3.1. Successive reports to the Council have highlighted the increasingly challenging financial and economic environment the Council is facing, predominantly linked to the legacy of recent very high levels of inflation, including wage inflation. 3.2. The year ahead is unlikely to see much improved prospects over that experienced in the past 2-3 years; but the degree of uncertainty remains high depending on several factors such as the global political environment, the outcome of wage settlements, and the (relatively new) UK government’s spending and taxation priorities. The Accounts Commission also recently noted in its Financial Bulletin Page 8 of 118
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2023/24 that “The funding increase for councils recently announced as part of the Scottish Government’s 2025/26 draft budget in December 2024 does not change the fact that the financial outlook remains challenging”. 3.3. In terms of the public finances, and particularly those in Scotland, previous reports to Council have outlined the pressure the Scottish Government budget is under with increasing service demands in the NHS and the transfer of social security benefits under the administration of the Scottish Government bringing additional costs. Therefore, significant medium-term uncertainty remains for the Council in relation to future government grant prospects. It is hoped that publication of the UK Government Spending Review in the Summer will allow the Scottish Government to develop its own medium term financial plan, which may create the circumstances whereby a multi-year settlement for Scottish local government could be agreed, as the absence of this information makes the Council’s longer term financial planning more difficult. 3.4. Beyond 2025/26, the Council’s medium-term financial outlook is based on an assumed flat-cash revenue settlement over the medium term, with a slight improvement anticipated based on the relative population growth of Renfrewshire. However, and as outlined in previous reports, it is cost increases that are driving the extremely challenging financial outlook. Incorporating an affordable level of pay increase over the period 2025/26 to 2027/28, and a reducing level of inflation on supplies and services costs suggests that the Council is facing a £25-40 million funding gap over this period, before any decisions on council tax. Assuming a 6.5% council tax increase in each of these years, this would reduce the funding gap to £5-25 million. A significant level of savings will still be required over the medium term in order to maintain financial sustainability, despite the improved single year settlement in 2025/26. 3.5. Council has previously been advised that since 2010, transformation, efficiency and corporate financing savings in the region of £190 million (including 2025/26), have been achieved, meaning that the Council’s ability to generate further recurring transformation and efficiency savings at this scale without impacting on service delivery or quality will be increasingly challenging. Additionally, over the last decade, nationally set directives as part of grant settlements as well as local priorities, have protected spend in key areas such as Education and Social Care - which constitute around two thirds of the Council’s budget. While transformation and the opportunity for increased efficiency will continue to be key priorities as was outlined in a recent report to the Leadership Board, it is likely that material service reductions and spending cuts across all services could be necessary if the Council is to remain financially sustainable and also create the financial circumstances Page 9 of 118
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which would allow longer term strategic investment in the Council’s property estate and infrastructure. 4. GRANT SETTLEMENT 4.1. On 4 December 2024, the Scottish Government published its draft budget for 2025/26, which is subject to parliamentary approval over the course of February 2025. On 12 December, the draft local government finance settlement was published, as set out in the Local Government Finance Circular 10/2024, which provided details of the provisional revenue and capital funding allocations for 2025/26 for local government across Scotland. Circular 10/2024 confirmed Scottish Government revenue grant funding in 2025/26 for the Council of £452.225 million. The Deputy First Minister (DFM) outlined associated issues in a letter to all Council Leaders that set out specific commitments to be read in conjunction with the detail of the financial settlement, such as the continued prioritisation of financial support for social care. Included within the local government settlement, the Government has provided an additional £131 million nationally to support health and social care as delegated to Integration Joint Boards broken down as follows: • £125m to fund the real Living Wage uplift for adult social care workers in commissioned services via agreed contract uplifts; • £10m to uplift free personal nursing care rates; and • Removal of £3.7m of time-limited funding relating to Mental Health Renewal and Recovery. The government confirmed that taken together, the total increase in funding is to be additional to each Council’s 2024/25 recurring spending delegated to Integration Authorities and not be substitutional i.e. these allocations must be passed to the HSCP for these delegated services. This position is explained further in section 5 below. The Deputy First Minister also outlined a number of other issues: • The Settlement provides full discretion over decisions on council tax, with no freeze and no cap. • The settlement includes £186.5m to continue to maintain teacher and support staff numbers at 2023 levels (an increase of £41m). This is no longer ring-fenced as in 2024/25, but carries the expectation that teacher numbers do not fall below 2023 levels by September 2025. Page 10 of 118
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4.2. The confirmed level of funding in the local government settlement excludes funding for the increase in employers’ national insurance contributions (eNIC) set by the UK Government in their October 2024 budget. The rate is set to increase from 13.8% to 15%, and the threshold after which eNIC is payable reduces from £9,100 to £5,000 from 1 April 2025. This is estimated to cost the Council over £6 million per year for directly employed staff only. 4.3. On 4 February 2025, funding of £144 million was announced by the Scottish Government to support this increased cost for local government, but distribution is yet to be confirmed. This quantum will fund around 60% of the expected increase in costs for directly employed staff. This leaves the Council to fund the balance of this cost (£1.6 million), and additionally to also fund the expected pressure anticipated from commissioned service providers, such as early years and children’s social care provision. An estimate of these residual pressures has been factored into the draft budget for 2025/26. Within this report, the Revenue Support Grant presented in the tables includes an estimate of the Council’s expected share of this £144 million (£4.7 million). 4.4. The Council’s settlement figure includes a number of adjustments for new spending burdens, responsibilities, and conditional funding totalling £20.483 million, linked primarily to the pass-through of funding to the Integration Joint Board (IJB); and the baselining of funding for the 2024/25 pay award and increases to teachers’ pension contributions. 4.5. After adjusting for these areas of new burdens funding, new responsibilities, conditional funding and timing differences in the distribution of funding, the Council’s 2025/26 core grant figure as set out in the provisional local government finance settlement has, on a like-for-like basis, increased by 2.3% from 2024/25, still above the flat cash assumption which the Council had been working to. The Council’s share of the overall local government revenue funding settlement has increased marginally from 3.25% to 3.28%. 4.6. The total revenue grant funding therefore available to the Council is set out in Table 1 below: Table 1 – Grant Settlement 2025/26 Summary of Revenue Estimate 2025/26 2025/26 £000 £000 Specific Revenue Grants 7,306 Non Domestic Rate Income 108,844 Revenue Support Grant * 352,919 Total Government Grant anticipated 469,069 * inclusive of an estimate of the Council’s share of £144m for eNIC costs Page 11 of 118
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4.7. At the time of writing, the Budget Bill remains to be approved by the Scottish Parliament. 4.8. As reported to the recent Infrastructure, Land & Environment Policy Board, the Council has been notified of an allocation of funding from the UK Government Department for Environment, Food and Rural Affairs (DEFRA) in relation to packaging extended producer responsibilities. This framework aims to improve sustainability and waste management processes associated with packaging. Under the new framework, packaging producers are responsible for covering the costs of dealing with the waste created by their products, from when they enter the market through to the end of their life. This includes the cost of waste collection, treatment and recycling. Notification of funding of £3.054m has been received for 25/26; however there is no information to suggest this funding can be baselined within Council budgets, nor what future allocations may be. In addition, there is further clarity required as to any conditions associated with the funding. Given this uncertainty, this funding has not been incorporated into the base budget position outlined in this report; and it would be intended that once details are confirmed, a future report will be brought to the relevant Policy Board. 5. SPENDING AND DEMAND PRESSURES 5.1. An analysis has been enclosed with this report detailing, for each service, the proposed budget changes between 2024/25 and 2025/26. The budget has been adjusted to reflect: i) the continuing costs of the current level of service, including inflationary costs related to current service levels; ii) the financial impact of any decisions already taken by the Council or its Policy Boards, as well as required adjustments to budgets to reflect specific aspects included within the financial settlement. 5.2. Demographic, socio-economic and inflationary factors continue to play a major role in driving core spending pressures for the Council. As has been reported over the course of the year, the legacy of high inflation, along with specific service pressures, has led to overspends across some services in 2024/25; however, sustained high interest rates have resulted in higher than budgeted levels of investment income, bringing the overall position back to break-even for the first time in a number of years, as outlined in further detail in section 12 below. 5.3. Given the very significant financial challenges and risks facing the Council over the medium term, and in line with historic practice, general non-pay inflation is not provided for in the 2025/26 budget. However, where specific price and cost pressures are obvious, additional budget provision has been incorporated into the Page 12 of 118
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draft position outlined in this report. The Bank of England currently forecasts that the level of CPI inflation will increase to c3.7% in late 2025, falling back to around the 2% target thereafter. 5.4. The recommended 2025/26 base budget position detailed in Table 3 includes a provision for pay inflation that reflects what is affordable for the Council (3%). It is noted that initial pay claims received by COSLA exceed the level of provision incorporated into the budget, and the position remains subject to negotiation. 5.5. The Financial Regulations require charges for services to be reviewed at least annually. The overview of the Council’s spending in Table 3 makes provision of £0.293 million for a general inflationary uplift to charges at 5%. Adult Social Care 5.6. In terms of the core Adults and Older People Services budget, the IJB most recently reported a 2024/25 forecast year-end overspend position of £6.2m, which is expected to be funded from IJB reserve balances. This position remains subject to change over the remainder of the 2024/25 financial year. The HSCP is also indicating that it faces significant financial pressures moving into 2025/26 and is currently expecting to achieve a balanced budget by relying heavily on the use of reserves and the delivery of savings options recently agreed by the IJB. 5.7. The HSCP is currently forecasting recurring gross pressures of £33m in 2025/26. It should be noted that this is based on the most up-to-date projections and is subject to change as more detail emerges around prescribing pressures and eNIC funding. Scottish Government funding pass-throughs from both local government and the NHS are expected to amount to £11 million, and the second (and final) year of the employer superannuation contribution reduction will avoid £4 million of costs. The IJB recently agreed a programme that should generate savings of around £8 million in 2025/26, assuming they are fully implemented. All of these mitigating actions may still lead to a planned budget gap of £10 million, which could be funded from IJB reserve balances in-year. 5.8. This will, however, deplete the available IJB reserve balances leave the HSCP with little financial resilience as it enters 2026/27, and despite a continued drive to achieve savings through its Sustainable Futures programme, a recurring budget gap of £25-30m is expected in 2026/27, with minimal reserve balances available to support this position. It is therefore possible that the HSCP may be required to consider financial recovery measures, perhaps even during the course of 2025/26. The Integration Scheme states that should the IJB be unable to achieve a balanced budget for future years, it would be required to seek additional funding from its Partner Bodies. Page 13 of 118
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5.9. As outlined above, there are specific conditions within the local government settlement which mandate the pass-through of funds related to social care to Integration Authorities. In 2025/26 there is a total of £131.3 million within the settlement nationally which requires to be passed through: Table 2 Funding National £m Renfrewshire £m Free Personal and Nursing Care 10.0 0.321 Living Wage (commissioned) 2025/26 125.0 5.388 Mental Health Renewal and Recovery* (3.7) (0.115) Total pass-through 131.3 5.594 *relates to time-limited funding no longer included in the settlement 5.10. In addition, the draft Council budget proposes to transfer a proportion (£0.500 million) of funding received to support the increase in employers’ national insurance contributions from 1 April 2025 to the HSCP on a recurring basis. This figure will be confirmed when the Council’s share of the £144m available nationally is determined. Children’s Services 5.11. Funding in relation to teacher numbers has been included within the grant allocation from the Scottish Government, with the national sum increased to £186.5 million. While the prior year ring-fencing is now removed, the funding still carries an expectation that teacher numbers are held at September 2023 levels at the next census. Specific Attainment Challenge funding has again reduced. 5.12. In terms of known pressures within Education, the increased costs of pupil transport are noted and provision has been included within the draft budget to address this. The Scottish Government has also indicated an aspiration to begin a phased reduction in class contact time, beginning in the 2025/26 school year. This is an emerging pressure as reduced class contact time will potentially impact on the number of teachers required. There is no allocated funding within the local government settlement to address this cost, and the issue will continue to require close monitoring. It is anticipated that any costs which may be incurred to implement a reduction in class contact time will require to be funded from the funding available for teacher numbers. 5.13. Within the wider Children’s Service, additional budget provision has been made in line with increased funding for Additional Support for Learning staff, the full year Page 14 of 118
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impact of the increase to teachers’ pension rates, and an increase to the Whole Family Wellbeing Fund. 5.14. The Council approved a 20-year Learning Estate Strategy in August 2024. Work has since been ongoing to develop a long term financial model which will underpin this strategy and clearly outlines the scale of investment that would be required as and when decisions are made about investment priorities. The Council will require to make a significant commitment to increasing its borrowing capacity if it is to progress the level of investment required over the longer term. 5.15. Table 3 - Summary of Recommended Base Budget Adjustments 2025/26 2025/26 Impact of previous Council and Board Decisions £000 £000 Right for Renfrewshire Savings (146) Financial Sustainability Workstreams (1,382) Directorate Targets (3,518) Corporate budget adjustments (2,000) Total Reductions (7,046) Add Unavoidable Pressures: Financial Settlement adjustments HSCP 5,594 HSCP estimated share of eNIC funding (tbc) 500 Financial Settlement adjustments Other 13,389 Staff related 3,492 Contract Payment Adjustments 3,753 Requisition Adjustments 817 Other Unavoidable Pressures 2,565 30,111 Long-term debt budget 1,350 Net Increase in Provision for inflationary pressures (pay) 11,471 Net Base Budget Increase 35,885 6. FINANCING COSTS AND LONG-TERM BORROWING 6.1. The provision for financing costs includes both debt charges payable as a result of the Council's capital investment programme and the interest gained on temporary investment of cash. In setting the 2022/23 budget, Members agreed to adjust the base budget by £7.5 million, in the knowledge that this position would require to be unwound over the medium to longer term. Page 15 of 118
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6.2. The proposed base budget for 2025/26 incorporates the continued re-building of the loans charges budget, with a provision of £1.350 million included. Provision on this scale will require to be made over the medium to longer term in order to rebuild the core loans charges budget; with non-recurring support as required being provided through a draw on the ringfenced Loan Charges Flexibility fund. The actual position will be influenced by the progress of capital investments, with any rephasing of spend on capital projects in effect deferring the requirement to draw from balances. 6.3. Renfrewshire Council has one of the lowest debt to spend ratios in Scotland. At 31 March 2024, the ratio of financing costs to net revenue stream (General Fund) was 3.1% and the Scottish average sat around 5.5%. 6.4. In order to support the funding of the Learning Estate Strategy over the next 20 years, the Council should consider the level of loan charge budget it requires to build within its annual revenue estimates decisions. For indicative purposes, borrowing £25 million at current PWLB rates would incur an annual cost of around £2 million in loan charges. The existing learning estate new build programme in delivery over the next four years is currently estimated at approximately £175 million, covering a new build secondary, two primary schools and a secondary school extension. The scale of investment need in the whole learning estate over this much longer-term period will be significantly greater by comparison. 7. SAVINGS 7.1. Reports to Council over the course of 2024 and previous years have outlined a range of service transformation activity alongside the development of a range of financial sustainability workstreams which aim to achieve savings over the medium term. Due to both the time taken to recommence transformation activity after the pandemic pause and, more acutely, the significant increase in cost pressures over the years since, the Council’s development and delivery of savings has fallen behind the level required to support overall financial sustainability. 7.2. Council previously agreed an £8 million departmental savings target each year for three years from 2025/26. This scale of recurring savings is necessary to ensure that the Council returns to a position of recurring financial balance over the medium term. Directors and their management teams are developing options to deliver savings at this scale; however, the implementation of proposals is now expected to be phased towards later years. Based on work undertaken by services to date, and that for which specific plans are being developed over the next two years, it is estimated that £3.5 million of savings can be confidently incorporated into the 2025/26 base budget. Page 16 of 118
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7.3. The Council will continue to require to generate savings at scale to ensure ongoing financial sustainability over the medium term, and a recent report to the Leadership Board outlined the next phase of transformation and change, building on a long period of successive change programmes which the Council has undertaken since 2009. 7.4. As in 2024/25, a temporary, non-recurring saving has been possible through the reduction in employer pension contributions for the local government workforce. Council has previously agreed that this will be utilised to support the Council’s medium-term financial position, and will therefore be transferred to the Financial Sustainability Fund in-year. 7.5. Taken together, the above savings, as well as the full-year impact of increased income from interest on cash balances, and legacy Right for Renfrewshire and Financial Sustainability workstreams, will provide £7.046 million of recurring support to the 2025/26 revenue budget position. 8. EXPENDITURE OVERVIEW 8.1. The Council approved spending for 2024/25 of £547.262 million. It is estimated that £583.147 million (as detailed in Table 4) is needed to fund the costs of maintaining present service levels, new responsibilities and conditional funding commitments provided as part of the financial settlement, new cost burdens, and addressing known pressures and demands in 2025/26. Table 4 – Estimated Spending Need 2025/26 Summary of Revenue Estimate 2025/26 2025/26 £000 £000 Estimated Funding Estimated Spending need 2024/25 547,262 Adjustments per Table 3 Budget reductions (7,046) Unavoidable budget increases 30,111 Long-term debt budget provision 1,350 24,415 Base Budget 2025/26 571,512 Inflationary cost provision (pay) 11,471 Estimated Spending Need 2025/26 583,147 Page 17 of 118
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8.2. Significant cost pressures are anticipated to persist beyond 2025/26 for the Council. Members will continue to be updated on the medium-term financial position but should be aware that in setting the 2025/26 budget, any commitments to additional recurring expenditure will increase the projected deficit in future years, unless they are offset by recurring savings, or increases in Council Tax or other income. Similarly, any decision taken now to address the future year budget deficits provides greater certainty for service planning and the workforce, and also supports the future financial stability of the Council. 8.3. Where the Council is making decisions in relation to its spending priorities, it is obliged to comply with the public sector equality duty set out in the Equalities Act 2010. This means that the Council must have due regard to the need to: • Eliminate unlawful discrimination, harassment and victimisation and other prohibited conduct; • Advance equality of opportunity between people who share a relevant characteristic and those who do not; and • Foster good relations between people who share a protected characteristic and those who do not. 8.4. To meet this requirement, where necessary the Council must assess the impact of applying a new policy or decision against these three needs and at the point where a decision is made, elected members must have sufficient information available to them to assess that impact. Members, in considering their budget proposals prior to presentation at the Council meeting, are therefore encouraged to seek advice from Directors on the equality implications of each proposal, including any which are covered by the Fairer Scotland duty. Specific service areas may also need to be impact assessed in relation to Armed Forces Covenant duties or the Environmental Assessment (Scotland) Act 2005. 9. COUNCIL TAX 9.1. The Council’s level of Council Tax (Band D) for 2024/25 is £1,436.17 and is £7.91 (0.6%) above the Scottish average. It is estimated that in 2025/26 each £1 of Council Tax will yield £77,732 gross (£63,741 net of adjustment for Council Tax Reduction), higher than 2024/25. The increase in the yield reflects anticipated growth in the number of dwellings charged (the Council Tax base). 9.2. A maximum net gross yield of £111.6 million can be anticipated from the forecast Council Tax base and present Council Tax levels. Within the context of the current service resources, specific collection initiatives continue to be implemented to support the collection of Council Tax, including the recovery of arrears for prior Page 18 of 118
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years. It is anticipated that £0.500 million will be collected next year from prior year levies. 9.3. Members will recall from the financial update report to Council in September, the assumed level of council tax increase was 6.5% over the next four financial years. Increases at this level (assuming all other assumptions hold true) may still leave the Council with a substantial structural deficit over this period, even after planned savings are assumed to have been delivered. 9.4. Given that the 2024/25 council tax freeze placed the Council further behind in terms of meeting its challenging financial outlook, Members should consider options for a level of council tax increase in 2025/26 which will return the Council to a recurring balanced budget position. 9.5. Members are required to determine the level of Council Tax for Bands A to H inclusive, which should apply for 2025/26. 10. RESOURCE ALLOCATIONS 10.1. Appendix 1 attached summarises the provisional resource allocation for each service. The resource allocations will be subject to amendment to reflect the Council's views on budget proposals, inflationary pressures and the allocation of central support costs, specific grants and capital charges. 11. BUDGET OVERVIEW 2025/26 11.1. The overview budget position for the Council for 2025/26, prior to any changes in service levels or Council Tax levels, is outlined in Table 5 below. For clarity, this position includes an estimated £4.723 million in funding from the Scottish Government to support the increase in employer’s national insurance contributions (not yet confirmed). This overview position confirms a recurring budget deficit position before any council tax decision, which could be temporarily addressed through the application of the ring-fenced Financial Sustainability Fund. As members are aware, the use of ring-fenced reserves can only ever be a temporary solution to the financial position and should only be agreed while substantive measures are taken to move the Council’s finances back to recurring financial balance. Page 19 of 118
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Table 5 – Budget Overview 2025/26 Summary of Revenue Estimate 2025/26 2025/26 £000 Estimated Funding Total Government Grant advised 469,069 Council Tax Income 111,637 Council Tax / Community Charge Arrears Recovery 500 Total Income 581,206 Total Estimated Spending Need 583,147 Estimated Recurring Deficit (1,941) 12. PROBABLE OUTTURN 2024/25, BALANCES AND RESERVES 12.1. Appendix 1 to this report details an overview of the Probable Outturn for 2024/25. The Council’s general fund balances as at 1 April 2024 were £117.620 million (see Table 6 below) and the significant majority of this was earmarked for specific purposes. This balance also reflects the previously agreed de minimis in unallocated balances of £10 million. As reported to Members over the course of 2024/25, a small year-end underspend position in the order of £0.1 million is projected for the Council (Period 8, excluding adult social care services), owing to a forecast of increased investment income. 12.2. It remains important that the Council maintains sufficient unallocated reserves to provide an appropriate degree of financial protection and immediate financial resilience moving forward, and that the level of unallocated reserves held is guided by the risk profile faced by the Council. The Financial Sustainability Fund was established for this primary reason, to support the financial position of the Council in circumstances where, in the short term, savings have not been generated at the scale or pace required to ensure financial balance. 12.3. It is recognised that the financial risk profile for the Council has increased significantly over the past number of years and in this context the Council previously approved to maintain unallocated balances at a minimum £10 million. The actual outturn on unallocated balances in 2023/24 of £10.279 million represented 2.0% of the Council’s budgeted net expenditure. It is estimated that this balance will remain broadly static in closing the 2024/25 financial year - a level that remains both prudent and appropriate for the Council’s circumstances. As always, the Accounts Commission will continue to closely monitor the Council’s position in respect to unallocated reserves as part of its wider assessment of the Council’s financial stability and resilience. Page 20 of 118
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12.4. Table 6 below summarises the forecast movement and year-end position of General Fund balances, including those earmarked for agreed purposes and estimated future liabilities. It should be noted this forecast is subject to some volatility as the 2024/25 financial position is closed out. Table 6 – General Fund Balances 2024/25 Summary of Usable Reserves 2024/25 Balance at 1/4/2024 Forecast Movement Forecast Balance at 31/03/2025 General Fund Balances £000 £000 £000 Alcohol and Drugs Commission 767 (259) 508 Children's Services 5,005 (1,503) 3,502 City Deal 1,903 (824) 1,079 Civil Contingencies Shared Service 126 - 126 Culture Bid Legacy 2,009 (641) 1,368 Development Contribution Paisley Town Centre 519 (297) 222 Digital Infrastructure 1,441 (1,000) 441 Early Years Change Fund 2,100 - 2,100 Employability 10,590 (621) 9,969 Environment & Infrastructure 790 (450) 340 Fairer Renfrewshire Programme 2,855 (1,138) 1,717 Financial Sustainability Fund 13,244 13,038 26,282 Leisure: Inclusive Play Facility 7 - 7 Loan Charges Flexibility Fund 48,759 1,000 49,759 Local Authority Economic Recovery Fund 100 - 100 Paisley Town Centre Heritage Asset Strategy 334 (322) 12 Private Sector Housing Grant 2,308 (214) 2,094 Pupil Equity Fund 524 - 524 Resettlement and Asylum Fund 1,429 (285) 1,144 School Music Participation Funding 276 (179) 97 Service Modernisation and Reform Fund 10,662 (3,029) 7,633 Sustainable Communities Fund 394 (96) 298 Villages Investment Fund 200 (200) - Welfare Reform 999 (113) 886 Unallocated General Fund Balance 10,279 - 10,279 Total General Fund Balances 117,620 2,867 120,487 Page 21 of 118
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12.5. As previously reported to Council in its consideration of the annual accounts, and as detailed in Table 7 below, other specific reserves continue to be maintained. Table 7 – Specific Reserves 2024/25 Summary of Specific Reserves Balance at 1/4/2024 Forecast Movement Forecast Balance at 31/03/2025 Specific Reserves £000 £000 £000 Insurance Fund 2,901 - 2,901 DHN Repair and Renewal Fund 186 - 186 Reservoir Repair Fund 341 - 341 Education Capital Items Fund 1,454 (65) 1,389 Investment Programme Capital Fund 86,035 (4,631) 81,404 Total Specific Reserves 90,917 (4,696) 86,221 Total Usable Reserves 208,537 (1,829) 206,708 12.6. The Insurance Fund covers the main classes of insurance and is earmarked for insurance purposes such as the cost of insurance excesses and premiums. 12.7. The DHN Repair and Renewal Fund is earmarked for future component replacement of the District Heating Network at the Advanced Manufacturing Innovation District Scotland (AMIDS). 12.8. The Reservoir Repairs Fund represents funding received from a developer for repairs in perpetuity in relation to the Thornly Dam. 12.9. The Education Capital Items fund is earmarked for specific schools for the planned purchases of a capital nature such as computers and information communication technology equipment. 12.10. The Investment Capital Fund is used to hold planned contributions to the delivery of the ongoing capital investment programmes, as well as resources that support the long-term debt smoothing strategy. These debt smoothing resources are utilised to manage both the debt levels linked with the capital investment programme and the associated debt servicing costs i.e. principal repayments, chargeable to the revenue account each year. 13. BUDGETARY CONTROL 13.1. Directors are expected to manage their approved budgets on a bottom-line basis in accordance with the Financial Regulations. If an overspend emerges during the Page 22 of 118
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year on any approved budget line the Director is expected to take corrective action, seeking Policy Board approval for any policy changes involved in such actions. Members should also be aware that, given the reliance on non-recurring reserves to produce a balanced budget, any further decisions taken by the Council or Policy Boards to increase spend over the course of the year must give consideration to how this spend will be funded. 14. FURTHER ACTION 14.1. Members wishing clarification of the details of this report or the enclosed Revenue Estimates pack should contact the Director of Finance & Resources or the Chief Executive or any Director in relation to their specific service responsibilities. 14.2. Members wishing advice on budget proposals should contact the appropriate service Director. ————————————————————————————————————— Implications of the Report 1. Financial - The report and enclosures provide the background information on the 2025/26 revenue budget, identifying a recurring deficit position in year, with a significant budget deficit of up to £25-40 million forecast over the following three years. Council is required to set council tax levels for 2025/26. 2. HR & Organisational Development - implications will be subject to any budget proposals agreed. 3. Community/Council Planning – implications will be subject to any budget proposal agreed. Members should however keep in mind that over the medium term the Council is anticipated to have to continue to increasingly make key choices to direct resources to support the delivery of those outcomes of greatest priority as defined in the Council Plan. 4. Legal – the Council is legally required to set a balanced budget by 11 March each year. 5. Property/Assets - implications will be subject to any budget proposals agreed. 6. Information Technology - implications will be subject to any budget proposals agreed. 7. Equality & Human Rights - Where the Council is making decisions in relation to its spending priorities, it is obliged to comply with the public sector Page 23 of 118
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equality duty set out in the Equalities Act 2010. Further detail is outlined in Section 8 of this report. 8. Health & Safety – none arising directly from this report. 9. Procurement – none arising directly from this report. 10. Risk - As outlined in the report, the Council continues to be faced with significant financial risk in setting its 2025/26 budget. The financial outlook over the medium term remains loaded with downside risks, and the scale of cost reduction necessary to align Council spending with available resources over the medium term brings with it additional risk for the Council. In recognition of this it is critical that the Council’s financial resilience is maintained and that decisions taken by the Council pay due regard to the medium-term financial outlook. 11. Privacy Impact - implications will be subject to any budget proposals agreed. 12. Cosla Policy Position – implications will be subject to any budget proposals agreed. 13. Children’s Rights - implications will be subject to any budget proposals agreed. 14. Climate Risk – implications will be subject to any budget proposals agreed. Author: Alastair MacArthur, Director of Finance & Resources Page 24 of 118
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APPENDIX 1 2025/26 Net Expenditure Approved Estimates Revised Estimates* Probable Outturn Estimates COMMUNITIES AND HOUSING SERVICES £000 £000 £000 £000 Children's Services 253,831 261,618 262,519 262,720 Adult Services 106,490 106,810 111,453 112,584 Environment, Housing and Infrastructure 58,924 61,854 63,014 61,925 Finance and Resources 44,488 42,694 43,641 46,107 Miscellaneous Services 6,750 23,590 20,590 22,827 Leisure Services 13,243 13,406 13,406 13,945 Chief Executive Services 10,580 12,168 12,041 10,612 Loans Fund 7,201 7,201 7,201 6,551 Strathclyde Passenger Transport 3,238 3,265 3,265 3,352 Renfrewshire Valuation Joint Board 1,665 1,665 1,665 1,672 Corporate Items 41,502 15,016 15,016 40,852 Total Estimated Spending Need 547,912 549,287 553,811 583,147 Funding Income (per Table 5) (538,628) (544,963) (544,963) (581,206) Budget Deficit/ (Surplus) 9,284 4,324 8,848 1,941 * Includes £2.025m of non-recurring funding. The recurring revised Budget Deficit in 2024/25 is £2.299m RENFREWSHIRE COUNCIL PROVISIONAL RESOURCE ALLOCATION STATEMENT (subject to amendment for any budget proposals approved by Council) 2024/25 Page 25 of 118
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RENFREWSHIRE COUNCIL PAPER 1 SUMMARY OF 2025/26 REVENUE ESTIMATES ENVIRONMENT, HOUSING AND INFRASTRUCTURE Analysis of Change between 2024/25 and 2025/26 £ 2024/25 Estimates 58,923,974 Adjustment to Current Year Estimates Settlement Adjustments: Free School Meals P6-7 337,000 337,000 Unavoidable Pressures: CWRR Operational Team, insurance and maint contracts 1,000,000 Property Lifecycle Maintenance increase 1,000,000 POPS/WUDS Disposal 500,000 Environment and Place recurring funding 550,000 Waste collection - increased households 135,000 Contract Price Increase for Waste Disposal 126,000 Inflation on vehicle hire and Streetscene supplies 210,000 Sustainability Lead Officer 80,000 Transport Costs Soft FM (School meals) 43,000 Online cashless schools system (ParentPay) 24,000 National Assistance Act burials 20,000 Network Rail charges (bridge maintenance) 33,000 Fire Dampers contract and Property Condition surveys 100,000 3,821,000 Proposed Savings: Right for Renfrewshire (88,000) Financial Sustainability Workstreams (189,000) Service Redesign and staff restructure (722,000) Temporary Accomodation cost recovery (158,000) (1,157,000) 2025/26 Estimates (before Council decisions) 61,924,974 Page 30 of 118
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RENFREWSHIRE COUNCIL PAPER 1 SUMMARY OF 2025/26 REVENUE ESTIMATES STRATHCLYDE PASSENGER TRANSPORT Analysis of Change between 2024/25 and 2025/26 £ 2024/25 Estimates 3,237,698 Adjustment to Current Year Estimates Transfers (to) / from other Services: Inflationary increase in SPT requisition 114,000 114,000 2025/26 Estimates (before Council decisions) 3,351,698 Page 31 of 118
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RENFREWSHIRE COUNCIL PAPER 1 SUMMARY OF 2025/26 REVENUE ESTIMATES RENFREWSHIRE VALUATION JOINT BOARD Analysis of Change between 2024/25 and 2025/26 £ 2024/25 Estimates 1,665,150 Adjustment to Current Year Estimates Settlement Adjustments: Increase in Barclay requisition to RVJB 7,000 7,000 2025/26 Estimates (before Council decisions) 1,672,150 Page 33 of 118
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RENFREWSHIRE COUNCIL PAPER 1 SUMMARY OF 2025/26 REVENUE ESTIMATES LOANS FUND Analysis of Change between 2024/25 and 2025/26 £ 2024/25 Estimates 7,201,176 Adjustment to Current Year Estimates Unavoidable Pressures: Loan Charges rebuild 1,350,000 1,350,000 Proposed Savings: Investment Income (2,000,000) (2,000,000) 2025/26 Estimates (before Council decisions) 6,551,176 Page 35 of 118
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RENFREWSHIRE COUNCIL PAPER 1 SUMMARY OF 2025/26 REVENUE ESTIMATES FUNDING INCOME Analysis of Change between 2024/25 and 2025/26 £ 2024/25 Estimates (Gross) (538,627,624) Adjustment to Current Year Estimates Settlement Adjustments GRG Increase (46,691,200) Specific Grant adjustment 4,796,000 Council Tax base growth (683,538) (42,578,738) 2025/26 Estimates (before Council decisions) (581,206,362) Page 36 of 118
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___________________________________________________________________ To: Council On: 27 February 2025 ___________________________________________________________________ Report by: Director of Finance & Resources ___________________________________________________________________ Heading: Non-Housing Capital Investment Programme, Prudential Framework and Treasury Management Strategy, and Capital Strategy 2025/26 – 2029/30 ___________________________________________________________________ 1. Summary 1.1. This report details the planned Non-Housing Capital Investment Programme for projects across all service areas of the Council, except Council Housing. Funding available to support this investment includes prudential borrowing and capital grant, as well as contributions from revenue, partners and external funding bodies. 1.2. The draft Scottish Government budget for 2025/26 was published on 4 December 2024, with a provisional local government finance settlement outlined in Finance Circular 10/2024, published on 12 December 2024. The recurring General Capital Grant for Renfrewshire Council in 2025/26 is £12.861m, which now includes Play Park Renewal grant funding of £0.768m (£0.462m in 2024/25). This represents a 10.5% increase from the 2024/25 level of £11.639m. The Specific Capital Grant of £0.813m for Cycling Walking and Safer Streets (CWSS) has increased marginally (0.5%) from £0.809m last year. 1.3. The level of recurring general capital grant allocated to local government in the draft Scottish Budget for 2025/26 (£601m) represents a like-for-like reduction of 2.1% from the 2024/25 allocation. In the context of this funding environment, the scope for any investment in assets, including lifecycle maintenance, is significantly reduced, unless other sources of funding can be accessed including, for example, realised capital receipts, sustainable prudential borrowing funded by recurring revenue savings, or external grant Item 4 Page 37 of 118
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funding. The £581m general capital grant for Scotland includes £81m (for Flooding and Coastal Change) that has not yet been distributed. 1.4. It should also be noted that £40m of non-recurring capital grant related to the climate emergency has been confirmed. The Council’s share has been advised as £1.167m and this has been included in the programme. A range of projects will be developed to support the Council’s journey towards Net Zero by 2030.. 1.5. There is likely to be limited opportunity for generating capital receipts as a source of income to the capital plan, suggesting potentially a greater reliance on borrowing as the main source of capital funding outwith the capital grant settlement. Increased borrowing, however, will result in revenue pressures at a time when the revenue fund is also severely constrained. 1.6. It should be noted that the capital plan outlined in this report extends beyond 2025/26, yet no capital grant from 2026/27 onward has been confirmed; therefore an estimated annual general capital grant level of £12.500m and specific grant (CWSS) level of £0.800m have been assumed for future years. Approved programmes already in place that are funded by other arrangements, e.g. prudential borrowing or specific funding related to the City Deal, are also included. It should be further noted that this approach does not preclude the Council from taking further investment decisions as part of the budget process where separate funding arrangements are established. 1.7. The Prudential Code and Treasury Management Code both play a key role in capital finance within local authorities; they require the Council to set Prudential and Treasury Management indicators for the following three years to ensure that the Council’s capital investment plans are affordable, prudent and sustainable. The Treasury Management Code further requires the Council to approve, annually in advance, a strategy for its treasury management activities, while the Prudential Code also requires full Council approval of the Capital Strategy, setting out the long-term context within which capital investment decisions are made to improve capital, revenue and balance sheet planning. 1.8. Details of the proposed Prudential Indicators and Treasury Management Strategy are attached at Appendix 3; and the proposed Capital Strategy is attached at Appendix 4. __________________________________________________________________ 2. Recommendations 2.1 It is recommended that Council: Page 38 of 118
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(a) Approves the Capital Investment Programme covering the period up to 2029/30, as summarised in Table 2 of this report and detailed in Appendices 1 and 2 attached; (b) Notes the level of capital grant available in 2025/26 and also that estimates of general and specific grant have been included within the planned programme beyond this financial year, in the absence of formal confirmation; (c) Delegates authority to the relevant Heads of Service in consultation with the Director of Finance and Resources to adjust, where appropriate, resources across individual components of the lifecycle maintenance, cultural infrastructure, roads and structures, and schools investment programmes respectively; (d) Approves the Prudential Indicators set out in Appendix 3 to this report, subject to any required adjustments arising from decisions taken by the Council in relation to the capital and revenue budget reports being presented to this Council meeting; (e) Approves the Treasury Management Strategy Statement 2025/26, including the treasury management indicators, set out in Appendix 3 to this report; and (f) Approves the Capital Strategy set out in Appendix 4 to this report. 3. Overview of Capital Resources and Proposed Programme 3.1 The update to the capital programme outlined in this report focuses on the 2025/26 financial year and includes: • Confirmation of the roll forward of projects already approved as part of the existing Capital Investment Plan, including major projects already underway as part of the existing investment programme; • This includes £45m for a new build primary in the Dargavel area, and £36m for an extension to Park Mains High School (supported by an assumed £18m contribution from BAE Systems). Council recently agreed an updated learning estate strategy which will inform the next phase of the school estate investment plan and longer term strategic estate requirements, based on updated condition survey work which has been undertaken over recent months. Future investment plans will require to be considered based on available capital resource and the Council’s capacity for further borrowing to support capital investment; • In line with the Council’s agreed medium-term financial planning principles, the General Capital Grant for 2025/26 is directed firstly to maintain the delivery of the Council’s rolling lifecycle maintenance programmes across the Council’s key asset classes as follows: Page 39 of 118
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o lifecycle maintenance programme for the Council’s property portfolio (£3m); o maintaining an annual replacement programme for the Council’s vehicle fleet (£2.1m); o maintenance programmes for the Council’s transport infrastructure covering roads & footpaths (£4m), bridges and streetlighting/traffic lights (£0.893m); o maintenance and refresh of the Council’s ICT estate (£0.750m) and Schools & Early Years ICT equipment and infrastructure (£0.6m); o renewal of play parks in line with confirmed funding (£0.768m) o maintaining delivery of the Private Sector Housing programme (£0.750m). • Specific Capital Grant for 2025/26 is for the following purposes: o Cycling, Walking and Safer Streets (£0.813m). 3.2 Table 1 and Table 2 below provide a high level summary of the current resources and investment programmes over this period with full details outlined in Appendices 1 and 2. Table 1: Resource Availability 2025/26 - 2029/30 2025/26 2026/27 2027/28 2028/29 2029/30 £000s £000s £000s £000s £000s Prudential Borrowing 72,775 32,784 13,858 400 400 Total Borrowing 72,775 32,784 13,858 400 400 Specific Grants 813 800 800 800 800 General Capital Grant 12,093 12,500 12,500 12,500 12,500 General Capital Grant - Renewal of Play Parks 768 0 0 0 0 Climate Projects (Grant Funded) 1,167 0 0 0 0 BAE contribution (Park Mains) 6,000 12,000 0 0 0 Usable Capital Receipts (previously committed) 10,203 13,275 0 0 0 Usable Capital Receipts 3,595 0 0 0 0 Capital Funded from Current Revenue (CFCR) 21,555 31,250 0 0 0 Total Resource Availability 128,969 102,609 27,158 13,700 13,700 Page 40 of 118
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Table 2: Programme 2025/26 - 2029/30 2025/26 2026/27 2027/28 2028/29 2029/30 £000s £000s £000s £000s £000s Major Programmes Schools Estate Programme 75,225 70,877 0 0 0 Schools Transformation & ICT 1,000 1,000 1,000 1,000 1,000 Lagoon Internal Play Centre 1,000 0 0 0 0 Community Halls Refurbishment 280 390 0 0 0 City Deal Projects 50 0 0 0 0 AMIDS South 11,923 15,042 12,775 0 0 Paisley Museum 17,435 0 0 0 0 Town Centre Capital Fund 79 0 0 0 0 Town Centre Capital Regeneration 154 1,800 0 0 0 Place Based Fund 1,095 0 0 0 0 Asset Lifecycle Maintenance Programmes General ICT Replacement 1,023 800 800 800 800 Buildings Capital Lifecycle 7,002 3,800 3,683 3,000 3,000 Kitchen Refurbishment for Expansion of School Meals 1,270 0 0 0 0 Private Sector Housing Grant (PSHG) 750 900 900 900 900 Vehicle Replacement 2,100 2,100 2,100 2,100 2,100 Roads & Footpaths 4,000 4,000 4,000 4,000 4,000 Traffic Management 253 0 0 0 0 Cycling, Walking and Safer Streets 813 800 800 800 800 Renewal of Play Parks 1,167 200 200 200 200 Bridges 293 300 300 300 300 Lighting columns and traffic signals 600 600 600 600 600 Underwood Depot Upgrades 150 0 0 0 0 Climate Projects (Grant Funded) 1,167 0 0 0 0 Nature Restoration Fund 140 0 0 0 0 Total Planned Spend 128,969 102,609 27,158 13,700 13,700 4. Cultural and Heritage Infrastructure Programme 4.1 The Council has been undertaking an ambitious programme of investment in its cultural and heritage assets. As reported to the Economy and Regeneration Policy Board on 5 November 2024, construction and refurbishment works in historic buildings are intrinsically subject to a higher degree of cost volatility due to the nature of the works and the fact that the complexity and detail of the works required are in many instances not fully known until the works are in progress and the building condition is fully understood. Page 41 of 118
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4.2 Paisley Museum Reimagined will be a world class destination, telling inspirational stories of Paisley’s people and pattern, and showcasing its internationally significant collections. The completion date is beyond the initial estimated completion when the project commenced, due to the complexity of the works, as well as the project being significantly impacted by the pandemic construction shutdown, subsequent restricted working conditions, and labour and materials shortages in the period following the pandemic, all of which resulted in extreme levels of construction cost inflation that has only recently begun to moderate. 4.3 To mitigate these pressures, Council approved additional funding of £12.5m on 12 December 2024 for the Paisley Museum Reimagined project, which is reflected in Appendix 2. 5. Lifecycle Maintenance of Existing Assets 5.1 The Council has committed to a financial planning principle that capital grant resources are directed in the first instance to support lifecycle maintenance programmes to protect the Council’s existing assets and infrastructure. Annual lifecycle investment across the Council’s key asset classes during 2025/26 is included within the capital programme detailed in Appendix 2. Property Lifecycle Maintenance 5.2 The Council’s property portfolio was predominantly built prior to statutory and Health & Safety legislation and guidance, and as such the current identified priorities focus primarily on undertaking investment to improve health and safety standards, compliance with statutory duties and improving energy efficiency across the property portfolio. The amount of funding available to undertake component replacement and major maintenance remains very constrained and it is increasingly difficult to maintain the condition of the current estate. Determining the future scale of the property estate in terms of the affordability of such maintenance obligations is a serious consideration for the Council. 5.3 It is recognised that a sufficient degree of flexibility in the management of the lifecycle maintenance fund is required to address changing priorities that may emerge. It is therefore proposed that the Head of Facilities and Property Services, in consultation with the Director of Finance and Resources, is delegated authority to adjust the allocation of resources within this proposed programme, with appropriate reporting to the Finance and Resources Policy Board. There is a carry forward of prior year funding as well as an allocation of £3m of General Capital Grant reflected in the 2025/26 budget. Roads and Footpaths 5.4 This report recommends that £4m of General Capital Grant is allocated to Roads and Footways in 2025/26 and, similar to property lifecycle maintenance, it is proposed that the Head of Climate, Public Protection and Page 42 of 118
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Roads, in consultation with the Director of Finance and Resources, is delegated authority to adjust the allocation of resources within this programme. Streetlighting, Bridges and Other Road Structures 5.5 In order to maintain the overall condition of street lighting columns, bridges and structures, an allocation of £0.893m of General Capital Grant for the rolling replacement programme is proposed for 2025/26. Vehicle and Plant Replacement Strategy 5.6 The Council has invested significant capital resources in recent years to support a vehicle replacement strategy. Continued investment is required in order to sustain planned vehicle replacement cycles and maintain the ability of the existing vehicle and plant fleet to meet the needs of services and mitigate against increased revenue pressures arising from additional maintenance and temporary hire costs due to increased vehicle failure rates. This includes a full review of the Building Services fleet. It is proposed that £2.100m of the General Capital Grant is allocated for this purpose in 2025/26. Private Sector Housing Grant (PSHG) 5.7 The PSHG is utilised to support a range of support programmes for private sector housing owners and is funded through a mix of revenue and capital funding. A priority component of this programme has been to support owner occupiers in meeting the costs of common works being delivered in mixed tenure blocks. This is a key enabler with regards the implementation of the housing regeneration programme. It is proposed to maintain the grant allocation at £0.750m in 2025/26. 6. Prudential Framework for Capital Finance and Treasury Management Strategy Statement 2025/26 6.1 The Local Government in Scotland Act 2003 and supporting regulations require local authorities to have regard to the following codes of practice issued by the Chartered Institute of Public Finance and Accountancy (CIPFA): • The Prudential Code for Capital Finance in Local Authorities (“the Prudential Code”); • Treasury Management in the Public Services Code of Practice and Cross-Sectoral Guidance Notes (“the Treasury Management Code”). 6.2 The Prudential Code and Treasury Management Code play a key role in capital finance in local authorities. Local authorities determine their own programmes for capital investment in assets that are central to the delivery of services. The Prudential Code and Treasury Management Code were developed to support local authorities in taking decisions relevant to their capital investment plans. Page 43 of 118
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6.3 Their key objectives are to ensure that: • capital expenditure plans and investment plans are affordable and proportionate; • all external borrowing and other long-term liabilities are within prudent and sustainable levels; • the risks associated with investments for commercial purposes are proportionate to their financial capacity; and • treasury management decisions are taken in accordance with good professional practice. 6.4 The Prudential Code and the Treasury Management Code require the Council to set prudential and treasury management indicators for the following three years to ensure that the Council’s capital investment plans are affordable, proportionate, prudent and sustainable. 6.5 In addition, the Treasury Management Code further requires the Council to approve, annually in advance, a strategy for its treasury management activities. This strategy sets out the Council’s policies and plans for the year ahead in relation to the management of cashflows, money market and capital market transactions (including borrowing and investing), the effective control of the risks associated with those activities and the pursuit of optimum performance consistent with those risks. 6.6 Attached at Appendix 3 to this report are full details of the Council’s Prudential Indicators and Treasury Management Strategy Statement for 2025/26, based on the details outlined in this report. 7. Capital Strategy 7.1 The Capital Strategy provides an overview of how capital expenditure, capital financing, and treasury management activities contribute to the provision of public services in local government, along with an overview of how associated risk is managed, and implications for future financial sustainability. 7.2 Development, and full Council approval, of the Capital Strategy is a requirement of the Prudential Code, with the intention that the strategy sets out the long-term context within which capital investment decisions are made, and to improve capital, revenue and balance sheet planning. 7.3 The Capital Strategy is attached at Appendix 4 to this report. 8. Equalities 8.1 Where the Council is making decisions in relation to its spending priorities, it is obliged to comply with the public sector equality duty set out in the Equalities Act 2010. This means that the Council must have due regard to the need to: Page 44 of 118
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• Eliminate unlawful discrimination, harassment and victimisation and other prohibited conduct; • Advance equality of opportunity between people who share a relevant characteristic and those who do not; and • Foster good relations between people who share a protected characteristic and those who do not. 8.2 To meet this requirement, where necessary the Council must assess the impact of applying a new policy or decision against these three needs, and at the point of decision-making, elected members must have sufficient information available to assess that impact. Members, in considering their capital investment proposals prior to presentation at the Council meeting, are therefore encouraged to seek advice from Directors on the equality implications of each proposal. ___________________________________________________________________ Implications of the Report 1. Financial: the Capital Plan outlines the planned investments in council assets over a five-year period; along with associated funding sources. The Capital Plan, Prudential Framework, Treasury Management Strategy and Capital Strategy ensure that investment in council assets is undertaken in a prudent and financially sustainable manner, is consistent with the Council’s priorities and agreed financial planning principles, and is affordable for the Council now and in future years. The General Capital Grant confirmed for 2025/26 is £12.861m, including £0.768m for Renewal of Play Parks. 2. HR & Organisational Development: none arising directly from this report. 3. Community/Council Planning: the investments outlined in these reports contribute to all strategic themes within the Council Plan objectives; their delivery will ensure that the Council’s assets and infrastructure are fit for purpose and provide the people of Renfrewshire with access to facilities that improve their environment and opportunities, while ensuring the Council is financially sustainable by applying prudential rules. 4. Legal: the Local Government in Scotland Act 2003 and supporting regulations require local authorities to have regard to the Prudential Code for Capital Finance in Local Authorities, and the Treasury Management in the Public Services Code of Practice and Cross-Sectoral Guidance Notes, both issued by the Chartered Institute of Public Finance and Accountancy. 5. Property/Assets: the Capital Plan outlines significant investment in Council assets and infrastructure over the medium term in order to ensure as far as possible within the resources available they remain fit for purpose and support efficient service delivery. Page 45 of 118
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6. Information Technology: the Capital Plan outlines investment in ICT assets that will ensure the Council continues to have access to secure, efficient ICT services. 7. Equality & Human Rights: where the Council is making decisions in relation to its spending priorities, it is obliged to comply with the public sector equality duty set out in the Equalities Act 2010. 8. Health & Safety: the Capital Plan outlines investment in Council assets and facilities to ensure they remain safe and accessible in line with statutory obligations. 9. Procurement: the Capital Plan outlines significant investment in Council assets which will conform to all relevant contract standing orders and procurement legislation. 10. Risk: investment in Council assets ensures they remain fit for purpose and meet all statutory requirements in terms of accessibility, sustainability and safety. 11. Privacy Impact: none arising directly from this report. 12. Cosla Policy Position: none arising directly from this report. 13. Climate Risk: investment in Council assets improves energy efficiency, reducing the Council’s carbon footprint and helping it achieve its Net Zero by 2030 target. _____________________________________________________________ Author: Alastair MacArthur, Director of Finance & Resources List of Appendices to this report: Appendix 1 Summary of Capital Income and Expenditure 2025/26 to 2029/30 Appendix 2 Capital Investment Programme 2025/26 to 2029/30 Appendix 3 Prudential Framework and Treasury Management Strategy Statement 2025/26 Appendix 4 Capital Strategy 2025/26 to 2027/28 Page 46 of 118
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Appendix 1 2025/26 – 2029/30 Capital Investment Programme (NB: 2025/26 includes some carried forward budgets from earlier years). General Services Capital Programme 2025/26 2026/27 2027/28 2028/29 2029/30 £000s £000s £000s £000s £000s Schools and Early Years Investment 76,225 71,877 700 1,000 1,000 Leisure Estate 1,280 390 0 0 0 Environment and Infrastructure 10,683 8,000 8,000 8,000 8,000 Economic Development 18,763 1,800 0 0 0 City Deal 11,973 15,042 12,775 0 0 Corporate Projects 9,295 4,600 4,483 3,800 3,800 Private Sector Housing Grant 750 900 900 900 900 Total General Services Programme 128,969 102,609 27,158 13,700 13,700 Capital Resources £000s £000s £000s £000s £000s Prudential Borrowing 72,775 32,784 13,858 400 400 Total Borrowing 72,775 32,784 13,858 400 400 Specific Grant (CWSS) 813 800 800 800 800 General Capital Grant 12,093 12,500 12,500 12,500 12,500 General Capital Grant - Renewal of Play Parks 768 0 0 0 0 Climate Projects (Grant Funded) 1,167 0 0 0 0 BAE contribution (Park Mains) 6,000 12,000 0 0 0 Usable Capital Receipts - Committed 10,203 13,275 0 0 0 Usable Capital Receipts - Uncommitted 3,595 0 0 0 0 Capital Funded from Current Revenue (CFCR) 21,555 31,250 0 0 0 Total Resource Availability 128,969 102,609 27,158 13,700 13,700 Page 47 of 118
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Appendix 2 2025/26 – 2029/30 Capital Investment Programme by Project Schools and Early Years Investment 2025/26 2026/27 2027/28 2028/29 2029/30 £000s £000s £000s £000s £000s Paisley Grammar New Campus 47,550 4,206 0 0 0 Dargavel New Build 13,325 31,250 0 0 0 Thorn Primary New Build 4,850 8,921 0 0 0 Park Mains Extension 9,500 26,500 0 0 0 Total Schools Investment Programme 75,225 70,877 0 0 0 Other Programmes Technology Replacement Strategy ICT 1,000 1,000 1,000 1,000 1,000 Total 76,225 71,877 1,000 1,000 1,000 Leisure Estate 2025/26 2026/27 2027/28 2028/29 2029/30 £000s £000s £000s £000s £000s Lagoon Internal Play Centre 1,000 0 0 0 0 Community Halls Refurbishment 280 390 0 0 0 Total 1,280 390 0 0 0 Page 49 of 118
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Environment and Infrastructure 2025/26 2026/27 2027/28 2028/29 2029/30 £000s £000s £000s £000s £000s Programme Funded By Specific Grant Cycling, Walking & Safer Streets (CWSS) 813 800 800 800 800 Total Programme Funded By Specific Consent 813 800 800 800 800 Asset Lifecycle Maintenance Programmes Vehicle Replacement Programme 2,100 2,100 2,100 2,100 2,100 Bridge Assessment/Strengthening 293 300 300 300 300 Roads/Footways Upgrade Programme 4,000 4,000 4,000 4,000 4,000 Lighting Columns Replacement 600 600 600 600 600 Traffic Management 253 0 0 0 0 Other Major Programmes Underwood Depot Upgrades 150 0 0 0 0 Nature Restoration Fund 140 0 0 0 0 Climate Projects 1,167 0 0 0 0 Renewal of Play Parks 1,167 200 200 200 200 Total 10,683 8,000 8,000 8,000 8,000 Page 50 of 118
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Economic Development 2025/26 2026/27 2027/28 2028/29 2029/30 £000s £000s £000s £000s £000s Paisley Venue and Town Centre Infrastructure Paisley Museum 17,435 0 0 0 0 Town Capital Fund 79 0 0 0 0 Town Centre Regeneration 154 1,800 0 0 0 Place Based Fund 1,095 0 0 0 0 Total 18,763 1,800 0 0 0 City Deal 2025/26 2026/27 2027/28 2028/29 2029/30 £000s £000s £000s £000s £000s City Deal Clyde Waterfront & Renfrew Riverside 50 0 0 0 0 Total City Deal 50 0 0 0 0 City Deal Related Programmes AMIDS South 11,923 15,042 12,775 0 0 Total 11,923 15,042 12,775 0 0 Page 51 of 118
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Corporate Projects 2025/26 2026/27 2027/28 2028/29 2029/30 £000s £000s £000s £000s £000s ICT Programme ICT Infrastructure Maintenance and Renewal Programme 1,023 800 800 800 800 Other Corporate Programmes Lifecycle Capital Maintenance (LCM) Fund 7,002 3,800 3,683 3,000 3,000 Kitchen Refurbishment for Expansion of Universal Free School Meals 1,270 0 0 0 0 Total 9,295 4,600 4,483 3,800 3,800 Page 52 of 118
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APPENDIX 3 - Prudential Framework for Capital Finance 2025 to 2028 and Treasury Management Strategy Statement 2025/26 1. Summary 1.1 The Local Government in Scotland Act 2003 and supporting regulations require local authorities to have regard to the following codes of practice issued by the Chartered Institute of Public Finance and Accountancy (CIPFA): • The Prudential Code for Capital Finance in Local Authorities (“the Prudential Code”); • Treasury Management in the Public Services: Code of Practice and Cross-Sectoral Guidance Notes (“the Treasury Management Code”). 1.2 The Prudential Code and the Treasury Management Code require the Council to set prudential and treasury management indicators for the following three years to ensure that the Council’s capital investment plans are affordable, prudent and sustainable. 1.3 The Treasury Management Code further requires the Council to approve, annually in advance, a strategy for its treasury management activities. This strategy (from section 8 onwards) sets out the Council’s policies and plans for the year ahead in relation to the management of cashflows; money market and capital market transactions, including borrowing and investing; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks. 1.4 CIPFA published updated Prudential and Treasury Management Codes on 20 December 2021 which have been fully implemented by the Council. 2. Prudential framework for capital finance: Purpose, governance and affordability considerations 2.1 The Prudential Code plays a key role in capital finance in local authorities, who determine their own programmes for capital investment in fixed assets. The Prudential Code was developed by the Chartered Institute of Public Finance and Accountancy (CIPFA) as a professional code of practice to support local authorities in taking decisions relevant to their capital investment plans. 2.2 The key objectives of the Prudential Code are to ensure that: • capital investment plans are affordable and proportionate; • all external borrowing and other long-term liabilities are within prudent and sustainable levels; • the risks associated with investments for service and commercial purposes are proportionate to their financial capacity; • treasury management and other investment decisions are taken in accordance with professional good practice; and • the Council is accountable, by providing a clear and transparent framework. Page 53 of 118
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2.3 To demonstrate that local authorities have fulfilled these objectives, the Prudential Code sets out key indicators that must be used and the factors that must be taken into account. The Prudential Code does not suggest indicative limits or ratios; these are for the Council to set itself. 2.4 The indicators required by the Prudential Code are designed to support and record local decision-making. They are not designed to be comparative performance indicators, and the use of them in this way would be likely to be misleading. In particular, local authorities have widely different debt positions and these differences are likely to increase over time as the result of local decisions. The system is specifically designed to support such local decision-making in a manner that is publicly accountable. 2.5 The Prudential Code sets out a clear governance procedure for the setting and revising of prudential indicators. This will be done by the same body that takes the decisions for the Council’s budget, i.e. full Council. The Chief Finance Officer is responsible for ensuring that all matters required to be taken into account are reported to the decision- making body for consideration and for establishing procedures to monitor performance. 2.6 Prudential indicators for previous years are taken directly from the Council’s Annual Accounts. If any item within the Accounts that is relied upon for a prudential indicator is the subject of audit qualification, this must be highlighted when the prudential indicators are set out or revised. No such qualification has been stated. 2.7 The Local Government in Scotland Act 2003 refers to affordability. The Council must consider the affordability of its capital investment during all the years in which it will have a financial impact on the Council. In doing so, the Council needs to pay due regard to risk and uncertainty. Risk analysis and risk management strategies should be taken into account. The Prudential Code also requires local authorities to have regard to wider management processes (option appraisal, asset management planning, strategic planning and achievability) in accordance with good professional practice. 2.8 The fundamental objective in the consideration of the affordability of the Council’s capital plans is to ensure that the total capital investment of the Council remains within sustainable limits, and in particular to consider its impact on the Revenue budget of the Council. Affordability is ultimately determined by judgement about acceptable levels of Council Tax or, in the case of the Housing Revenue Account, acceptable rent levels. 2.9 In considering the affordability of its capital plans, the Council is required to consider all of the resources currently available to it and those expected in future years, together with the totality of its capital plans, revenue income and revenue expenditure forecasts for the forthcoming years. The Council is also required to consider known significant variations beyond this timeframe. This requires the development of a three-year revenue forecast, and a rolling five-year capital investment plan. Page 54 of 118
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2.10 Prudential indicators in respect of external debt must be set and revised taking into account their affordability. It is through this means that the objectives of sustainability and prudence are addressed year-on-year. 2.11 It is also prudent that treasury management is carried out in accordance with good professional practice. The Prudential Code requires compliance with the Treasury Management Code. 2.12 A soundly formulated capital programme must be driven by the desire to provide high quality, value-for-money public services. The Prudential Code recognises that in making its capital investment decisions the Council must have explicit regard to option appraisal, asset management planning, strategic planning for the Council and achievability of the forward plan. 2.13 The Prudential Code does not specify how the Council should have regard to these factors; they all represent elements of good practice for which guidance has already been provided by CIPFA and other authoritative sources. The Prudential Code instead concentrates on the means by which the Council should demonstrate that its proposals are affordable, prudent and sustainable. 2.14 The Prudential Code promotes transparency in decision-making by using information contained within the Council’s Annual Accounts and by having definitions for prudential indicators that are consistent with the definitions used within the Accounts. 3. Prudential framework for capital finance: Prudential indicators for capital expenditure 3.1 Capital expenditure Capital expenditure is defined in the CIPFA Code of Practice on Local Authority Accounting in the United Kingdom 2025/26 and must be consistent with financial reporting standards for accounting purposes. In addition, under the Local Government in Scotland Act 2003, local authorities have a duty to observe proper accounting practices. 3.2 Under section 35(1) of the Local Government in Scotland Act 2003, it is the duty of the Council to determine and keep under review the maximum amount it can afford to allocate to capital expenditure. 3.3 The Council is required to make estimates of the capital expenditure it plans to incur for the forthcoming financial year and at least the following two years, and to keep these estimates under review. Separate estimates should be made for the Housing Revenue Account (“Housing”) and for General Fund (“Non-housing”) services. Details of the planned investment programmes for Housing and Non-housing services are presented in this report and take account of the capital resources that will be made available to the Council from the Scottish Government through the local government settlement 2025/26. Page 55 of 118
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3.4 In addition to the approved capital investment plans, there may be projects that emerge throughout the year that can take advantage of the opportunities arising from the flexibility offered by the Prudential Code, and as a consequence the capital expenditure totals may change. Any required changes to the prudential indicators arising from new projects will be considered as part of regular reports presented to Policy Boards or to the Council. It is recommended that the Council approves the following as the indicator for capital expenditure for the next five financial years: Estimated Capital Expenditure 2025/26 2026/27 2027/28 £000 £000 £000 Non-Housing 128,969 102,609 27,158 Housing 61,336 67,620 67,724 Total 190,305 170,229 94,882 3.5 The capital investment plans are to be funded from various sources, such as general and specific capital grants, contributions from revenue resources and secured capital receipts, as well as long-term borrowing. Owing to risks inherent in the disposal of surplus land, and in line with practice adopted in previous years, there is no reliance on the funding of the capital investment plans from unrealised capital receipts. 3.6 After the year-end, the actual capital expenditure incurred during the financial year will be reported for Housing and for Non-housing. These figures will be included in the Council’s Annual Accounts, along with explanations of significant variations from expectations. The actual capital expenditure incurred in 2023/24 was £125.484m. 3.7 Capital Financing Requirement (CFR) Local authorities have access to a number of ways of financing traditionally procured capital investment. This does not refer to the payment of cash, but the funding sources that are applied to ensure that the underlying amount arising from capital plans is absolutely in place, whether at the point of spend or over the longer term. Some available financing options involve resourcing the investment at the time that it is incurred. These are: • the application of usable capital receipts; • a direct charge to the revenue budget; • the application of capital grants; • up-front contributions from project partners. 3.8 Capital expenditure that is not financed by one of the above methods will increase what is known as the Capital Financing Requirement (CFR) of the Council. It has often been referred to as capital expenditure financed by borrowing; however this is incorrect, as borrowing provides cash, not the asset, since borrowing has to be repaid. Also, the term borrowing in this context does not necessarily imply external debt since, in accordance with best professional practice, the Council has an integrated Treasury Management Strategy and therefore does not associate borrowing with particular items Page 56 of 118
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or types of expenditure. The Council will at any point in time have a number of cashflows, both positive and negative, and will be managing its position in terms of its borrowing and investments in accordance with its Treasury Management Strategy. 3.9 In measuring external debt, as detailed in section 4, the Prudential Code encompasses all borrowing, whether for a capital or for a revenue purpose. In day-to-day cash management, no distinction is made between ‘revenue cash’ and ‘capital cash’. External borrowing arises as a consequence of all financial transactions of the Council and not simply those arising from capital spending. In contrast, the CFR reflects the Council’s underlying need to borrow for a capital purpose. 3.10 The Council is required to make reasonable estimates of its CFR at the end of the forthcoming financial year and the two subsequent years, showing figures for Housing and Non-housing separately, and keep this under review. 3.11 The CFR will increase whenever capital expenditure is incurred. If this capital expenditure is resourced immediately, through usable capital receipts, direct financing from revenue or application of capital grants/contributions, then the CFR will reduce at the same time that the capital expenditure is incurred, resulting in no net increase to the CFR. The CFR also will be reduced by charges to the revenue account in respect of past capital expenditure, or where the Council may initiate voluntary early charges to revenue as part of longer term financial planning decisions. 3.12 Where capital expenditure is not resourced immediately, this will result in a net increase to the CFR that represents an increase in the underlying need to borrow for a capital purpose. This will be the case whether or not external borrowing actually occurs. 3.13 It is recommended that the Council approves the following as the indicator for the CFR at the end of each of the next three financial years: 3.14 After the year-end, the actual CFR as at 31 March will be calculated for Housing and for Non-housing and these figures will be included in the Council’s Annual Accounts, with explanations for significant variations from expectations. At 31 March 2024 the Capital Financing Requirement was £510.099m. 3.15 Statutory repayment of loans fund advances The Council is required to set out its policy for the statutory repayment of loans fund advances prior to the start of the financial year. This ensures that the Council makes a prudent annual provision to pay off an element of loans fund advances accumulated Capital Financing Requirement 2025/26 2026/27 2027/28 £m £m £m Non-Housing 523.960 550.486 557.677 Housing 173.411 219.633 269.219 Total 697.371 770.119 826.896 Page 57 of 118
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from previous financial years. For all new loans fund advances, the policy for repayment is as follows. Asset Life Method: Loans fund advances are repaid with reference to the life of an asset, using an average life of 40 years for General Fund assets and 30 years for HRA assets. There are exceptions to this, such as assets constructed under City Deal arrangements, which have differing asset lives, and loans fund repayments are therefore proposed over 50- 60 years for those. The annuity rate applied to current loans fund repayments has also been revised and is based on an annuity rate of 6.00% and similar average life periods to those referred to above. This is considered to be a prudent approach to ensure the loans fund repayments continue for a period that is reasonably in line with that over which the asset provides benefits to the Council. 4. Prudential framework for capital finance: Prudential indicators for external debt 4.1 External debt is referred to as the sum of external borrowing and other long-term liabilities, such as finance leases. The prudential indicators for external debt must be set and revised taking into account their affordability. It is through this means that that the objective of ensuring that external debt is kept within sustainable prudent limits is addressed year on year. 4.2 External debt indicators are at two levels: an Operational Boundary and an Authorised Limit. Both of these must be consistent with the Council’s plans for capital expenditure and financing and with its Treasury Management Statement and Practices. 4.3 Operational Boundary This is the focus of day-to-day treasury management activity within the Council and is an estimate of the most likely, but not worst case, scenario in terms of cashflow. Risk analysis and risk management strategies are taken into account, as are plans for capital expenditure, estimates of the CFR and estimates of cashflow requirements for all purposes. It is possible that this boundary could be breached occasionally and this should not be regarded as significant. However, a sustained or regular trend of such would be significant and require investigation and action. 4.4 The Council is required to set for the forthcoming financial year and the following two years an Operational Boundary for its total external debt (gross of investments), identifying separately borrowing from other long-term liabilities. It is recommended that the Council approves the following as the indicator for the Operational Boundary over the three-year period 2025/26 through 2027/28: Page 58 of 118
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Operational Boundary 2025/26 2026/27 2027/28 £m £m £m Borrowing 602.451 677.551 736.826 Other long-term liabilities 94.920 92.568 90.069 Total 697.371 770.119 826.895 4.5 Authorised Limit This is based on the same assumptions as the Operational Boundary, with sufficient headroom to allow for unusual or exceptional cash movements. This headroom ensures sufficient capacity to allow for cashflow management without breaching the limit. 4.6 The Authorised Limit will be reviewed on an annual basis and any changes require to be approved by Council. 4.7 The Council is required to set for the next three financial years an authorised limit for its total external debt (gross of investments), identifying separately any borrowing from other long-term liabilities. It is recommended that the Council approves the following as the indicator for the authorised limit over the three-year period 2025/26 to 2027/28: 4.8 After the year-end, the balance of actual external debt as at 31 March will be calculated and reported to Council, with borrowing and other long-term liabilities being shown separately. 4.9 The Council’s actual external debt at 31 March 2024 was £386.1m of which £324.4m related to borrowing and £61.7m to outstanding obligations on finance leases and guarantees. 4.10 The actual external debt is not directly comparable to the Authorised Limit nor to the Operational Boundary since the actual external debt reflects the position at a point in time. In addition, the indicators are set based on the Council’s potential external borrowing requirements for capital investment purposes. However, as part of the ongoing Treasury Management Strategy, the Council may utilise internal borrowing where it is deemed appropriate to avoid unnecessary exposure to interest rate risk. The adoption of this strategy results in the Council’s net external borrowing being lower than the CFR. The projected external debt compared to the estimated CFR for the three-year period 2025/26 through 2027/28 is detailed at section 10.4. Authorised Limit 2025/26 2026/27 2027/28 £m £m £m Borrowing 632.574 711.429 773.667 Other long-term liabilities 94.920 92.568 90.069 Total 727.494 803.997 863.736 Page 59 of 118
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4.11 A new international accounting standard “IFRS 16: Leases” was announced in December 2018 by CIPFA/LASAAC. The practical effect of adopting this is that any contract the Council has signed that provides the right to rent or lease exclusive use of an asset, such as property or vehicles, will be recognised as an asset on the Council’s balance sheet, with a corresponding debt liability recognised at the present value of the future lease payments. 4.12 This liability will be treated as additional borrowing, therefore increasing the Capital Finance Requirement and other associated Prudential Indicators such as the Operational Boundary and Authorised Limit. The Council implemented the revised accounting standard for IFRS 16: Leases in 2024/25. An impact assessment has concluded, and the estimated effect of the implementation of IFRS 16 has been included in tables 3.13, 4.4 and 4.7 above. 5. Prudential framework for capital finance: Prudential indicator for treasury management 5.1 The prudential indicator in respect of treasury management is that the Council has adopted the CIPFA Treasury Management in the Public Services: Code of Practice and Cross-Sectoral Guidance Notes (“the Treasury Management Code”). This requires that the annual Treasury Management Strategy Statement is approved by Council, along with treasury limits for the three-year period 2025/26 to 2027/28. 5.2 In adopting the Treasury Management Code, the aim is to ensure that treasury management is driven by a clear and integrated Treasury Management Strategy and a recognition of the existing structure of the Council’s borrowing and investment portfolios. The primary policy objectives of the Council’s investment activities are the security and liquidity of funds, and the avoidance of exposure of public funds to unnecessary or unquantified risk. The Council should consider the return on its investments; however, this should not be at the expense of security and liquidity. It is therefore important that the Council adopts an appropriate approach to risk management with regard to its investment activities. 5.3 Borrowing more than, or in advance of, the Council’s need purely to profit from the investment of the extra sums borrowed should not be undertaken. In those circumstances where borrowing is taken in advance of need, the security of such funds must be ensured and consideration should be given as to whether value-for-money can be demonstrated. These principles should be borne in mind when investments are made, particularly for the medium to long term. 5.4 The Treasury Management Code requires that the Council approves, annually in advance, a strategy for its treasury management activities. The Treasury Management Strategy for 2025/26 is set out in this report from section 8 onward. Page 60 of 118
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6. Prudential framework for capital finance: Prudential indicators for prudence 6.1 It is possible that, while a council’s financial strategy may be affordable in the short term, it is imprudent and unsustainable in the medium term because it would, if pursued, be dependent on the use of borrowing to fund revenue expenditure. For this reason the Prudential Code makes it necessary, if a financial strategy is to be prudent, that it is one in which medium-term net borrowing is only to be used for capital purposes. 6.2 In the Prudential Code, this requirement must be demonstrated through a comparison of net borrowing with the CFR. Except in the short term, net external borrowing should not exceed the total CFR in the previous year, plus the estimate of any additional CFRs for the current and next two financial years. 6.3 The projected CFR at 31 March 2028 is £827m (section 3.13). Net external borrowing should not exceed this level and the projected Operational Boundary at 31 March 2028 is £830m (section 4.4). The Council had no difficulty in meeting this requirement at 31 March 2024 and no difficulties are anticipated in meeting it in the future. 6.4 In addition, ensuring that treasury management is carried out in accordance with good professional practice is an essential feature of prudence. The treasury management indicators required by the Treasury Management Code are designed to help demonstrate prudence. The prudential indicator is that the Council has adopted CIPFA’s Treasury Management Code. 7. Prudential framework for capital finance: Prudential indicators for affordability 7.1 A key measure of affordability is the incremental impact of investment decisions on Council Tax or housing rents. Estimates of the ratio of financing costs to net revenue stream provide an indication of how much of the Council’s revenue budget is committed to the repayment of debt. The estimated ratios for the next three financial years are: Non-housing estimates for 2026 to 2028 are currently based on the 2025/26 settlement figures because the current spending review does not extend beyond this year. 7.2 Financing costs include the interest payable with respect to borrowing, interest payable on finance leases, interest and investment income, loans fund and finance lease Ratio of financing costs to net revenue stream (estimated) 2025/26 2026/27 2027/28 % % % Non-Housing 2.73% 2.94% 3.02% Housing 24.53% 19.98% 23.36% Page 61 of 118
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principal repayments and gains/losses on the repurchase or early settlement of borrowing. 7.3 Revenue streams relate either to the amounts received in terms of government grant and local taxpayers for Non-housing, or to the amounts received from tenants in respect of housing rents for Housing. 7.4 The estimate of the incremental impact of the capital investment proposals outlined in this report for Non-housing services and as outlined in the Housing Capital Investment Plan for Housing services are: 7.5 The impact on Band D Council Tax is nil due to the fact that the financing costs resulting from any additional capital expenditure and related borrowing will be funded from government grant support and savings in other areas of expenditure. 8. Treasury Management Strategy Statement and the Prudential Code 8.1 In order to comply with the treasury management requirements of the Prudential Code, local authorities are required to adopt the Treasury Management Code. 8.2 This report covers the requirements of the latest (December 2021) version of the Treasury Management Code, including the treasury management indicators as defined therein, and the requirements of the Local Government Investments (Scotland) Regulations 2010 with regards consent from Scottish Ministers in respect of local authority investments. 8.3 The Council’s Treasury Management Strategy Statement for 2025/26 is set out here at sections 8 to 12, and constitutes the Council’s annual strategy and plan in relation to its treasury management activities, as defined by the 2021 version of the Treasury Management Code. 9. Treasury Management Strategy Statement: Objectives and responsibility for decision-making 9.1 The overall objectives of the Council’s treasury management strategy are: For borrowings: • to minimise the revenue costs of borrowing; • to manage the borrowing repayment profile; • to assess interest rate movements and borrow accordingly; Impact of capital investment decisions on: 2025/26 2026/27 2027/28 Band D Council Tax £0.00 £0.00 £0.00 Weekly Housing Rents £0.51 £1.69 £2.94 Page 62 of 118
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• to monitor and review the level of variable rate loans held in order to take advantage of interest rate movements; and • to reschedule borrowing to improve the Council’s repayment profile or to reduce the revenue costs of borrowing. For temporary investments: • to protect the capital security and liquidity of the invested funds; and • to obtain an acceptable market rate of return subject to protecting capital security and liquidity of invested funds. These objectives are set within the context of the Council’s overarching objective in relation to treasury management activities: the effective management and control of risk. 9.2 The Council has a contract with MUFG Corporate Markets (formerly Link Asset Services Limited), for the provision of treasury management consultancy services. It is recognised that there is value in employing such external service providers in order to acquire access to specialist skills and resources; however, responsibility for treasury management decisions remains with Renfrewshire Council at all times and undue reliance is not placed upon our external service providers. 9.3 The proposed Treasury Management Strategy for 2025/26 is based on a view of interest rates, supplemented by market forecasts provided by MUFG Corporate Markets, and covers the following aspects of the treasury management function: • treasury limits in force that limit the treasury risk and activities of the Council; • prudential and treasury management indicators; • the current treasury position; • the identified borrowing requirement; • prospects for interest rates; • the borrowing strategy; • policy on borrowing in advance of need; • debt rescheduling; • the investment strategy; • creditworthiness policy; and • policy on use of external service providers. Page 63 of 118
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10. Treasury Management Strategy Statement: Borrowing strategy 10.1 Current external borrowing position The Council’s external borrowing position as at 24 January 2025 was as follows: External borrowing position As at 31 March 2024 As at 24 January 2025 Change in-year £m average interest rate £m average interest rate £m Long-term borrowings PWLB: fixed rate 243.592 3.84% 237.825 3.77% (5.767) PWLB: variable rate 0.000 0.00% 0.000 0.00% 0.000 Market loans 46.766 4.70% 46.766 4.70% 0.000 Total long-term borrowings 290.358 3.98% 284.591 3.92% (5.767) Total short-term borrowings 0.000 0.00% 0.000 0.00% 0.000 Total of all external borrowings 290.358 3.98% 284.591 3.92% (5.767) 10.2 To date there has been no new borrowing via the Public Works Loan Board (PWLB) in 2024/25. 10.3 There has been no new borrowing on the local authority market during 2024/25. 10.4 Projected Borrowing Position The Council’s anticipated borrowing position for 2025/26 and the two subsequent financial years is summarised in the following table. This shows the projected external debt compared to the estimated Capital Financing Requirement (the underlying need to borrow for a capital purpose) at the end of each of the next three financial years. Estimated Borrowing Position 2025/26 2026/27 2027/28 £m £m £m Borrowing 397 465 524 Other long-term liabilities 95 93 90 Total External Debt 492 558 614 Capital Financing Requirement 697 770 827 Under Borrowing 205 213 213 10.5 Several of the prudential indicators are designed to ensure that the Council carries out its treasury management activities within well-defined limits. One of these indicators shows that gross external debt does not, except in the short-term, exceed the total of the Capital Financing Requirement in 2024/25, and the estimated additional Capital Financing Requirement for 2025/26 and the two subsequent financial years. This allows some flexibility for limited early borrowing for future years, but ensures that borrowing is not taken to fund revenue expenditure. Page 64 of 118
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10.6 The Council complied with this prudential indicator during 2024/25 and it is expected that this will remain the position over the forthcoming three-year period. As detailed in the table above, it is anticipated that the borrowing strategy will continue to progress based on using internal borrowing where possible over the medium term to mitigate both interest rate risk exposure for the Council and also risks associated with maintaining adequate capacity with appropriate investment counterparties. Some shorter-term borrowing may be required to fund the City Deal projects, however. This is required because the grant income for City Deal is phased over a 20-year period from 2015/16, while the project expenditure is incurred from 2015/16 to 2025/26. The requirement for borrowing to cover this period in advance of grant receipt is continually monitored and refined as projects are delivered, and this requirement is incorporated into the Council’s overall borrowing forecast. 10.7 Liability Benchmark Indicator The treasury prudential indicator introduced as part of the Treasury Management Code 2021 is the Liability Benchmark (LB). The Council is required to estimate and measure the LB for the next three financial years, as a minimum. CIPFA recommends that the LB is produced for at least 10 years and should ideally cover the full debt maturity period of the Council. There are four components to the LB: • Existing loan debt outstanding: the Council’s existing loans that are still outstanding for future years; • Loans CFR: this is calculated in accordance to the Capital Finance Requirement definition in the Prudential Code described in 3.7, excluding other liabilities; • Net Loans Requirement: this will show the Council’s gross loan debt less treasury management investments projected into the future, and is based on approved net capital expenditure and planned loans fund principal repayments; • Liability Benchmark: this equals the net loans requirement plus any short-term liquidity requirements. The Loans CFR is only allowed to reflect capital expenditure and loan fund repayments approved by Council, therefore only for net capital expenditure up to 2029/30. As the debt maturity profile extends well beyond this period, the usefulness of the liability benchmark as a prudential indicator is diminished beyond 10 years. Therefore, the liability benchmark is shown below for the 10-year period that CIPFA recommends, rather than for the full debt maturity period. The LB shown in the graph below is the total of PWLB and Market Loans for part of 2025/26. The LB is currently forecast to cross over current borrowing levels around this period largely as a result of the increase in the Capital Finance Requirement in 3.13, illustrating the likelihood that the Council will require additional external borrowing from 2025/26 to 2029/30. Page 65 of 118
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10.8 Interest Rate Forecast As part of MUFG’s treasury management consultancy service to the Council, assistance is provided in preparing a forecast of short-term and longer-term fixed interest rates. Current interest rate forecasts for the official bank rate paid on commercial bank reserves (the “Bank Rate”) and for PWLB borrowings rates are based on the Certainty Rate (the standard rate minus 20 bps), which has been accessible to the Council since 1 November 2012. 10.9 The central forecast is that the Monetary Policy Committee (MPC) will gradually reduce the interest rate although this is expected to be a slower process due to the current economic climate. 10.10 However, there is a high level of uncertainty over the timing of these forecasts as it involves a lot of judgement over the best time to start reducing rates. Doing so too early could lead to an increase in inflationary pressures, but delaying this action could prolong any downturn or recession. Interest rate forecast Mar 2025 Jun 2025 Sep 2025 Dec 2025 Mar 2026 Mar 2027 Dec 2027 Bank Rate 4.50% 4.25% 4.25% 4.00% 3.75% 3.50% 3.50% Although the CPI measure of inflation has now approached 2%, the Bank of England’s Monetary Policy Committee must exercise fine judgment as to the degree of inflation flowing from the 30 October 2024 budget and the US presidential election in late 2024. £0 £100,000 £200,000 £300,000 £400,000 £500,000 £600,000 £700,000 £800,000 £900,000 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Total Am ount (£'000) Liability Benchmark PWLB Loans Market Loans (excl LOBO loans) Existing Loan Debt Outstanding Net Loans Requirement (forecast net loan debt) Loans CFR Liability Benchmark (Gross Loans Requirement) Page 66 of 118
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Furthermore, geo-political events may play a meaningful part in impacting monetary policy over the coming months. 10.11 Forecasts for PWLB rates Whilst the yield curve for PWLB rates is anticipated to fall back over the period set out below, there does remain some short-term volatility within the market whenever there is new financial data on the economy released. Interest rate forecast Mar 2025 Jun 2025 Sep 2025 Dec 2025 Mar 2026 Mar 2027 Dec 2027 5-year loans 4.90% 4.80% 4.60% 4.50% 4.50% 4.10% 3.90% 10-year loans 5.10% 5.00% 4.80% 4.80% 4.70% 4.30% 4.10% 25-year loans 5.50% 5.40% 5.30% 5.20% 5.10% 4.70% 4.50% 50-year loans 5.30% 5.20% 5.10% 5.00% 4.90% 4.50% 4.30% 10.12 Borrowing Decisions The main borrowing decisions to be made for 2025/26 are: • when to borrow; • for how long to borrow; and • whether to borrow externally or to use cash balances. 10.13 The Capital Investment Programme indicates that the Council may need to borrow up to £76m, either to fund new capital expenditure during 2025/26, or to replace loans due to mature that year. It should be noted, however, that consideration is given to the extent to which external borrowing is actually required, as detailed below. 10.14 The Council’s borrowing strategy will give consideration to new borrowing in the following order of priority: (i) The cheapest borrowing is currently internal borrowing, accessed by running down cash balances. However, where long-term borrowing rates are forecast to increase at a later date, consideration will also be given to locking in lower rates by borrowing earlier. The investment rate of return is also a deciding factor here; (ii) PWLB borrowing for a term of less than 10 years, potentially covering only the period where there is a need for cash. This offers a range of options for new borrowing which will spread debt maturity away from a concentration at longer- dated time periods; (iii) Short-dated borrowing from non-PWLB sources; (iv) Long-term borrowing arranged in advance in order to achieve certainty on future borrowing costs and reduce exposure to interest rate risk; (v) Long-term fixed rate market loans at rates significantly below PWLB rates for the equivalent maturity period (where available), with due regard to maintaining an appropriate balance between PWLB and market debt in the debt portfolio. Page 67 of 118
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10.15 Sensitivity of the interest rate forecast Council officers, in conjunction with the Council’s treasury advisers, will continually monitor both the prevailing interest rates and the market forecasts, and will respond appropriately to material changes in interest rate forecasts, for example: • If it was believed that there was a significant risk of a sharp fall in long- and short- term interest rates than that currently forecast, then long-term borrowings would be postponed, with focus shifting to consideration of short-term borrowing to meet the Council’s need along with any opportunities for rescheduling; • If it was believed that there was a significant risk of a much sharper rise in long- and short-term interest rates than that currently forecast, then the portfolio position will be reappraised with a possible move to take on required borrowing whilst interest rates were still relatively low. 10.16 The forecast debt maturity profile at 31 March 2025 per the graph below shows the amount of debt maturing in future years. The Council has less than 15% of its total borrowings redeeming in any one of the next 25 years, with one year beyond this period having a repayment just below 15% (14.21% in 2048/49). This will be monitored and likely rescheduled well in advance of this date to ensure there is no risk that it rises above 15%. This is well within the Council’s treasury indicators for debt maturity and therefore gives the Council the flexibility needed to structure new borrowing in a manner that minimises debt interest costs. Page 68 of 118
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10.17 Since the Council has a capital investment plan covering the period to 2029/30 and detailed investment and borrowing analyses, advantage can be taken of opportunities that may arise to minimise interest rate risk. The Council will not borrow more than or earlier than required, with the primary intention to profit from the investment return of the extra sums borrowed. Pre-borrowing of this nature will only be taken for risk management reasons and subject to sound justification. The timing of any new borrowing of this nature will take into account the management of liquidity and counterparty risk and also the projected movement in interest rates. 10.18 Caution will continue to be exercised and the Director of Finance and Resources will monitor the interest rate market. Should long-term rates start to rise or fall sharply, the debt portfolio position will be reappraised and appropriate action taken. 10.19 Debt Rescheduling opportunities The purpose of debt rescheduling is to reorganise existing borrowings in such a way as to amend the repayment profile of the borrowing portfolio, or to secure interest rate savings. 10.20 As short-term borrowing rates will be considerably cheaper than longer-term rates, there may be potential opportunities to generate savings by switching from long-term debt to short-term debt. However, such potential savings will be considered in the light of their short-term nature and risks associated with potential longer-term costs of refinancing those short-term loans once they mature. 10.21 Consideration will also be given to the potential for making savings by running down investment balances to repay debt prematurely, as short-term rates on investments may be lower than rates paid on current debt. 11. Treasury Management Strategy Statement: Annual Investment Strategy 11.1 Investment Policy In carrying out investment activities, the Council has regard to the Local Government Investment (Scotland) Regulations 2010, the accompanying Scottish Government Finance Circular 5/2010, the 2021 Treasury Management Code, and the CIPFA Treasury Management Guidance Notes 2021. 11.2 The Council’s investment priorities are: • the security of capital; and • the liquidity of its investments. 11.3 The Council will also aim to achieve the optimum return on its investments commensurate with proper levels of security and liquidity. The risk appetite of the Council is low-to-medium, with absolute priority given to the security of its investments. In the current economic climate, it is considered appropriate to keep investments short- Page 69 of 118
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term to cover cashflow needs. However, where appropriate, the Council will also consider the value available in periods up to 24 months with high credit rated financial institutions, as well as wider range fund options. 11.4 The borrowing of monies purely to invest or on-lend to make a return is prohibited and the Council will not engage in such activity. 11.5 In the current economic climate, it is considered appropriate to maintain a degree of liquidity to cover cash flow needs but also consider investments for periods up to 12 months with high credit rated institutions, whilst investment rates remain elevated, as well as a wider range of fund options. 11.6 Investment instruments identified for use in the financial year are listed in Annex A, and counterparty limits will be set as defined within the Council’s Treasury Management Practices (TMPs) documentation. 11.7 External Investment Position The Council’s external investment position as at 24 January 2025 was as follows: External investment position As at 31 March 2024 As at 24 January 2025 Change in-year £m average interest rate £m average interest rate £m Temporary investments 99.242 5.51% 76.361 4.68% (22.881) The decrease in the Council’s short-term, or temporary investments during the period reflects increased spending predominantly due to the capital programme, particularly the ongoing investment into the learning estate programme and Paisley Museum. 11.8 The average rate of interest received on the Council’s temporary deposits has decreased by almost 1%. The decrease reflects that the Bank of England base rate has peaked and is now gradually dropping resulting in lower returns, which is expected to continue in the coming few years. The Council will continue to monitor future rate movements and when appropriate will lock into longer term temporary deposit deals with counterparties of particularly high creditworthiness, securing a higher overall rate of return across the portfolio without compromising the security of investments. 11.9 Creditworthiness Policy In order to maintain an approved list of counterparties (institutions with which the Council will invest funds), the Council applies the creditworthiness service provided the Council’s treasury advisers and are based on the credit ratings from the three major credit rating agencies: Fitch, Moody’s and Standard & Poor’s. The Council understands that credit ratings are a good, but not perfect, predictor of investment default. Full regard will therefore be given to other available information on the credit quality of the organisations in which it invests, including: Page 70 of 118
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• credit default swap (CDS) spreads, to give early warning of likely changes in credit ratings; • financial statements; • sovereign ratings, to select counterparties from only the most creditworthy countries; • credit ratings relevant to the specific investment or class of investment, where available; and • the financial press. 11.10 This modelling approach combines credit ratings, credit watches and credit outlooks in a weighted scoring system which is then combined with an overlay of CDS spreads for which the end product is a series of colour-coded bands indicating the relative creditworthiness of counterparties. These colour codes are used by the Council to determine the suggested duration for investments, and are shown in Annex B. 11.11 The approved list of counterparties (Annex B) also defines a maximum limit on the aggregate value of deposits placed with each counterparty. The purpose of this is to ensure that the Council does not deposit an excessive proportion of its funds with any single institution. The counterparty limit for each bank and building society has been set at 10% and the limits for Money Market Funds and enhanced cash funds has been set at 10% of the total cash balances held by the Council at the time the investment is made. Some institutions have a lower % limit depending on their credit rating. This approach allows the Council to meet its cashflow management objectives whilst appropriately spreading investment risk over a range of counterparties and underlying investment instruments. The limits will be continually reviewed for appropriateness throughout 2025/26. 11.12 All credit ratings are monitored daily. MUFG alerts the Council to rating changes made by any of the three rating agencies, and should a downgrade result in the counterparty or investment scheme no longer meeting the Council’s minimum criteria, its further use as a new investment will be withdrawn immediately. 11.13 Sole reliance is not placed on the use of this external service: the Council will make its own judgement based on the adviser’s suggestions, but will also use market data and market information, the quality financial press, information on government support for banks and the credit ratings of that government support. 11.14 The Renfrew Bridge project requires the Council to make payments in Euros during 2025/26. This will involve holding balances in Euros in order to meet these payments. The Creditworthiness Policy for holding Euros will be the same as outlined from 11.9 to 11.13. Page 71 of 118
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Investment Decisions 11.15 The current forecasts from MUFG (see point 10.9 above) indicate that the Bank Rate is likely to gradually reduced over the year to 3.75% in March 2026 and 3.50% beyond this until at least December 2027. 11.16 Investments will be made with reference to core balance and cashflow requirements and the outlook for short-term interest rates (i.e. for investments up to 12 months). Greater returns are usually achievable by investing for longer periods. While most cash balances are required in order to manage variations in cashflow, careful consideration is given to investing identified cash sums for longer periods, where appropriate. 11.17 The majority of the Council’s temporary cash balance is currently invested in short-term deposits with the Debt Management Office, Money Market Funds and short-term deposits with banks. The Council will continue to invest with these institutions; however, if attractive rates become available with counterparties of particularly high creditworthiness, making longer-term deals worthwhile and within the risk parameters set by the Council, then longer-term investments will be considered. 11.18 Investment decisions will require to take account for balances held in Euros as per paragraph 11.14. The Council will closely monitor exchange rate movements and may use risk management tools or instruments available, such as a forward contract or advance purchase of foreign currency to hold in an account until such time as required; always providing that these measures are used only for the prudent management of the Council’s financial affairs and not for any speculative purpose. Investment Performance 11.19 The Council will use an investment benchmark to assess the investment performance of its investment portfolio based on the 7-day compounded SONIA rate. 11.20 SONIA (Sterling Overnight Index Average) is a single rate published each day by the Bank of England, reflecting overnight rates paid on eligible sterling denominated deposit transactions conducted the previous day. 11.21 It should be noted that, provided the Bank of England base rate remains stable, the Council’s investment rate performance should be close to SONIA, particularly given the current short-term nature of the Council’s deposits, which averaged 34 days as at 24 January 2025. Page 72 of 118
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12. Treasury Management Strategy Statement: treasury management indicators 12.1 The Guidance Notes for Local Authorities that accompany the CIPFA Treasury Management Code specify four treasury management indicators covered by the Prudential Code: (i) authorised limit for external debt; (ii) operational boundary for external debt; and (iii) liability benchmark Details of these indicators can be found in sections 4 and 10 of this Appendix. 12.2 The Guidance Notes for Local Authorities that accompany the Treasury Management Code specify an additional treasury management indicator: the maturity structure of borrowing. 12.3 Maturity Structure of Borrowing The Council is required to set, for the forthcoming financial year, both upper and lower limits with respect to the maturity structure of its borrowing. This is to ensure that the Council is not exposed to large concentrations of debt maturing in a single year that require to be replaced when interest rates could be unfavourable. It is recommended that the Council approves the following limit as the Maturity Structure of Borrowing indicator for the forthcoming financial year: Maturity structure of borrowing 2025/26 lower limit upper limit under 12 months 0% 15% 12 months and within 24 months 0% 15% 24 months and within 5 years 0% 45% 5 years and within 10 years 0% 50% 10 years and above 0% 100% Page 73 of 118
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Annex A: Permitted Investments The Council approves the forms of investment instrument for use as permitted investments as set out in tables 1, 2 and 3. Please also refer to section 11 above. A.1 Table 1 lists the permitted investments of a cash-type nature, available for use by the Council’s in-house Treasury Management team: Permitted Investments Table 1 Description / Objectives Minimum Credit Criteria Liquidity Risk Market Risk Maximum Share of Total Investments Maximum Maturity Period Debt Management Account Deposit Facility (DMADF) Offers the lowest risk form of investment available to local authorities as it is effectively an investment placed with central government. It is also easy to use because it is a deposit account and avoids the complications of buying and holding UK Government-issued treasury bills or gilts. As it is low risk it also earns low rates of interest and is useful where there may be a short-term priority to avoid credit risk. The longest term deposit that can be made with the DMADF is six months. Not applicable Term No 100% 2 years Longer-term deposits with local authorities Similar to term deposits with other local authorities (below) except that deposits are placed for longer periods: between 2 and 5 years. For longer term deposits, the decision to include any given local authority on the counterparty list will be based on the outcome of due diligence undertaken on that local authority by the Council’s treasury advisers. Similar to term deposits with local authorities, no more than £10m can be placed with any one institution or group. Per approved counterparty list Term No 20% 10 years Call accounts and notice accounts with banks and building societies Offer access to recalling cash deposited over short call periods (call account periods vary from short-term such as 7 days, but can extend to 32- and 95-day notice periods). This generally means accepting a lower rate of interest than that which could be earned from the same institution by making a term deposit. However, call accounts can offer interest rates two to three times more than term deposits in the DMADF. A certain level of call account use is highly desirable to ensure that the Council has ready access to cash when required. Per approved counterparty list Instant / notice period No 100% Up to 100 days Term deposits with banks and building societies Includes callable deposits, whereby the principal deposited is protected and earns a fixed rate of interest but can be terminated early at the bank’s discretion. Per approved counterparty list Term No 100% Per approved counterparty list Page 75 of 118
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Permitted Investments Table 1 Description / Objectives Minimum Credit Criteria Liquidity Risk Market Risk Maximum Share of Total Investments Maximum Maturity Period Term deposits with local authorities The most widely used form of investment used by local authorities, it offers a much higher rate of return than the DMADF (dependent on the deposit term) and, now that measures have been put in place to avoid any over-reliance on credit ratings, there is greater confidence that the residual risks around using local authorities, banks and building societies are at a low, reasonable and acceptable level. The Council ensures diversification of its portfolio of deposits by having no more than 10%* (£20m for other Scottish local authorities and £15m for other local authorities) of the total portfolio placed with any one institution or group. Longer-term deposits offer an opportunity to increase investment returns by locking into relatively high interest rates ahead of an expected fall in rates. Longer-term rates can also offer good value when the markets incorrectly assess the speed and timing of interest rate increases. Offers flexibility and a higher level of earnings than the DMADF; however, once a longer-term investment is made, cash is ‘locked in’ and cannot be accessed until the maturity date. Not applicable Term No 100% 2 years Treasury bills Short-term bills (up to 12 months) issued by the Government and so backed by the sovereign rating of the UK. The yield is higher than the rate of interest paid by the DMADF and another advantage is that they can be sold if there is a need for access to cash at any point in time. However, there is a spread between purchase and sale prices, so early sales could incur a net cost during the period of ownership. UK sovereign rating T+1 Yes 75% 1 year Certificates of deposit issued by banks and building societies Shorter term securities issued by deposit taking institutions (mainly financial institutions). They are negotiable instruments, so can be sold ahead of maturity and also purchased after they have been issued. This liquidity can come at a price, where the yield could be marginally less than placing a deposit with the same bank as the issuing bank. Per approved counterparty list T+1 Yes 10% Per approved counterparty list Page 76 of 118
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Permitted Investments Table 1 Description / Objectives Minimum Credit Criteria Liquidity Risk Market Risk Maximum Share of Total Investments Maximum Maturity Period UK Government gilts Longer-term debt issuance by the UK Government, backed by the sovereign rating of the UK. The yield is higher than the rate of interest paid by the DMADF and they can be sold if there is a need for access to cash at any point in time. However, there is a spread between purchase and sale prices, so early sales may incur a net cost. Market movements that occur between purchase and sale may also have an adverse impact on proceeds. An advantage over Treasury bills is that they generally offer higher yields the longer it is to maturity (for most periods) if the yield curve is positive. UK sovereign rating T+1 Yes 75% 2 years Money Market Funds (MMFs) By definition, MMFs are AAA-rated (the highest security rating available) and widely diversified, using many forms of money market securities including types that the Council does not have the expertise or risk appetite to hold directly. However, due to the high level of expertise of the fund managers and the significant amounts of funds invested in MMFs, and the fact that the weighted average maturity (WAM) cannot exceed 60 days, MMFs offer a combination of high security, instant access to funds, high diversification and good rates of return compared to equivalent instant access facilities. Particularly advantageous in a falling interest rate environment as their 60-day WAM means they have locked-in investments earning higher rates of interest than available in the market. MMFs also help an organisation diversify its own portfolio, for example a £2m investment placed directly with a specific bank is a 100% risk exposure to that specific bank, whereas £2m invested in an MMF may result in only 1% being invested with a specific bank. MMFs offer an effective way of minimising risk exposure, while still getting better rates of return than available through the DMADF. Long-term AAA volatility rating Instant No 75% Not applicable Ultra-short dated bond funds Similar to MMFs, these can still be AAA-rated, but have variable net asset values (VNAV) as opposed to a traditional MMF which has a Constant Net Asset Value (CNAV). They aim to achieve a higher yield and to do this either take more credit risk or invest for longer terms, so they are more volatile. Can have WAMs and Weighted Average Lives (WALs) of 90–365 days or longer. Investment in these funds would only be undertaken in the event funds could be “locked out” for a minimum of 3-6 months in order to mitigate short-term fund value fluctuations. Bond fund rating T+1 to T+5 Yes 75% Not applicable Page 77 of 118
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Permitted Investments Table 1 Description / Objectives Minimum Credit Criteria Liquidity Risk Market Risk Maximum Share of Total Investments Maximum Maturity Period Pooled funds other than money market / ultra-short dated bond funds Shares or units in diversified investment vehicles covering property, bond and equity investments. Pooled funds whose value changes with market prices and/or that have a notice period will be used for longer investment periods. MMFs are included in Table 1, but the Council, given the extent of its long-term investment balances, may use this vehicle to diversify an agreed proportion (capped at a maximum of 25% of total investment balances) of its investment balances into longer term assets (property, bonds and equity) utilising pooled funds. Pooled funds have the advantage of providing wide diversification of investment risks, including credit risk and interest rate risk, coupled with the services of a professional fund manager in return for a fee. Property, bond and equity funds offer enhanced returns over the longer term, but their prices are more volatile in the short term, leading to the risk that they could be sold at below their purchase price. This risk is mitigated by only placing cash that is available for 3-5 years into more volatile funds. The Council’s officers in conjunction with its treasury advisers have determined that a proportion of the Council’s investments have and will remain available for longer term investment in the future. The funds selected will be subject to further scrutiny and suitability, drawing on the experience and advice of the Council’s treasury advisers. Long-term AAA volatility rating Various Yes 20% Not applicable * In recognition of the restricted number of approved counterparties that now meet our more stringent lending criteria, there is an added degree of flexibility introduced to the maximum deposit level. The deposit level with any one institution can now extend to a maximum of 15%, where the element which exceeds the 10% threshold is deposited on the basis of a call account deposit with the institution. Other types of investment instrument available to the Council: (i) Forward foreign exchange contracts and options: These are only utilised in order to manage specific known exchange rate risks and not for speculative purposes. A forward contract may be entered into in order to hedge against exchange rate risk where the amount and date of a payment in a foreign currency is known in advance. An option is a premium paid product which gives the right, but not the obligation, to purchase a pre agreed EUR amount, at a pre agreed rate and date. (ii) Operational bank accounts: The Council may incur operational exposures, for example though current accounts, collection accounts and merchant acquiring services, with its main operational bank (Clydesdale) with credit ratings of BBB+. These are not classed as investments, but are still subject to the risk of a bank bail-in, and balances will normally be kept below £100,000 however, for short periods normally over public holidays this balance may be higher with the approval of the Director of Finance and Resources. Page 78 of 118
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A.2 Table 2 lists the permitted investments of a cash-type nature, available for use by the investment managers of the Council’s Insurance Fund: Permitted Investments Table 2 Minimum Credit Criteria Liquidity Risk Market Risk Maximum Share of Total Investments Maximum Maturity Period Equities Delegated to investment managers Term Yes‡ 33% ±10% Not applicable Fixed-interest securities Delegated to investment managers Term Yes‡ 33% ±10% Not applicable Other assets Delegated to investment managers Term Yes‡ 33% ±10% Not applicable ‡ Market risk is mitigated since investment managers have been instructed to maintain low volatility by investing in a diversified portfolio which incorporates (i) a broad spread of equities, both directly and indirectly (through pooled funds), and (ii) a proportion of fixed-interest securities and cash. A.3 Table 3 lists the permitted investments of a non-cash nature available for use by the Council: Permitted Investments Table 3 Treasury Risks Mitigating Controls Maximum Share of Total Investments Share holdings, unit holdings and bond holdings, including those in a local authority-owned company Service investments that may exhibit market risk; likely to be highly illiquid Each equity investment requires Member approval and each application will be supported by the service rationale behind the investment and the likelihood of loss Policy driven, managing all associated risks; authorised limit and operational boundary apply Loans to a local authority-owned company or other entity formed by a local authority to deliver services Service investments either at market rates of interest or below (soft loans); may exhibit credit risk; likely to be highly illiquid Each loan to a local authority company requires Member approval and each application will be supported by the service rationale behind the loan and the likelihood of full or partial default Policy driven, managing all associated risks; authorised limit and operational boundary apply Loans made to third parties, including soft loans (for example, employee loans) Service investments either at market rates of interest or below (soft loans); may exhibit credit risk; likely to be highly illiquid Each third party loan (or tranche of loans) requires Member approval and each application will be supported by the service rationale behind the loan and the likelihood of full or partial default Policy driven, managing all associated risks; authorised limit and operational boundary apply Page 79 of 118
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Permitted Investments Table 3 Treasury Risks Mitigating Controls Maximum Share of Total Investments Investment property Non-service properties which are being held pending disposal or for a longer-term rental income stream; these are highly illiquid assets with high risk to value Property holding will be revalued regularly and reported at appropriate periodic intervals for a property investment portfolio in respect of rental levels; in terms of surplus assets held for disposal, the Council has an active surplus property disposal strategy which ensures a coordinated and managed approach is adopted to the disposal of such sites in a way which is reflective of current and future anticipated market conditions, seeks to maximise market interest in site disposals and secures best value for the Council Policy driven, managing all associated risks; authorised limit and operational boundary apply A.3 Treasury risks All investment instruments listed in Tables 1 and 2 above are subject to the following risks and their mitigating controls: Treasury Risk Description Mitigating Controls Credit and counterparty risk: The risk of failure by a counterparty (bank or building society) to meet its contractual obligations to the Council, particularly as a result of the counterparty’s diminished creditworthiness, and the resulting detrimental effect on the Council’s capital or current (revenue) resources. There are no counterparties where this risk is zero although AAA-rated organisations have a very high level of creditworthiness. The Council has set minimum credit criteria to determine which counterparties and countries are of sufficiently high creditworthiness to enable investments to be made safely. Liquidity risk: The risk that cash will not be available when it is needed. While it could be said that all counterparties are subject to at least a very small level of liquidity risk, as credit risk can never be zero, in this document liquidity risk has been treated as whether or not instant access to cash can be obtained from each form of investment instrument. The Council has a cashflow forecasting model to enable it to determine the duration for which individual investments can be made, and how much can be invested. Page 80 of 118
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Treasury Risk Description Mitigating Controls Interest rate risk: The risk that fluctuations in the levels of interest rates create an unexpected or unbudgeted burden on the organisation’s finances, against which the organisation has failed to protect itself adequately. The Council has set limits for its fixed and variable rate exposure in its treasury indicators as detailed in this report. The Council manages this risk by having a view of the future course of interest rates and formulating a treasury management strategy accordingly. The strategy aims to maximise investment earnings consistent with control of risk and minimise expenditure on interest costs on borrowing. Legal and regulatory risk: The risk that the Council, or an organisation with which it is dealing in its treasury management activities, fails to act in accordance with its legal powers or regulatory requirements, and that the Council suffers losses accordingly. The Council will not undertake any form of investing until it has ensured that it has all necessary powers to do so. The Council will ensure that it complies with all applicable regulations in carrying out its treasury management operations. Exchange rate risk: The risk that fluctuations in foreign exchange rates create an unexpected or unbudgeted burden on the Council’s finances, against which it has failed to protect itself adequately. The Council will closely monitor exchange rate movements and may use risk management tools or instruments available, such as a forward contract or advance purchase of foreign currency to hold in an account until such time as required; always providing that these measures are used only for the prudent management of the Council’s financial affairs and not for any speculative purpose. Market risk: The risk that, through adverse market fluctuations, the value of investments may decline over a given time period simply because of economic changes or other events that impact large portions of the market. Asset allocation and diversification can protect against market risk because different portions of the market tend to underperform at different time times. The Director of Finance and Resources has the authority to invest the funds of the Insurance Fund in such investments, securities or property as deemed fit. The Director and officers rely on professional investment managers (currently Aberdeen Standard Capital) for the day-to-day management of the assets of the Council’s Insurance Fund. The investment managers are responsible for the allocation of assets between types of investments and the selection of individual stocks within each type of investment. The investment fund’s principal objective is achieving moderate capital growth in combination with low volatility to mitigate the impact of market risk. To achieve this, the investment managers operate within predefined asset allocation limits, as outlined in Table 2 above. Page 81 of 118
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Annex B: Renfrewshire Council Counterparty List Counterparty Country of Domicile % Limit £M Limit Max Investment period UNITED KINGDOM: BANKS & BUILDING SOCIETIES Virgin Money / Nationwide (Clydesdale Bank) GB 10% 20.0 100 days Bank of Scotland PLC / Lloyds (RFB) GB 10% 20.0 6 months Barclays Bank UK PLC (RFB) GB 10% 20.0 6 months Goldman Sachs International Bank GB 10% 20.0 6 months Handelsbanken PLC GB 10% 20.0 12 months HSBC Bank PLC (RFB) GB 10% 20.0 12 months Royal Bank of Scotland / NatWest PLC (RFB) GB 10% 20.0 12 months Santander UK PLC GB 10% 20.0 6 months SMBC Bank International PLC GB 10% 20.0 6 months Standard Chartered Bank (includes sustainable) GB 10% 20.0 6 months UNITED KINGDOM: OTHER INSTITUTIONS UK Local Authorities GB 100% 100% 2 YEARS UK Government GB 100% 100% 50 years COMMONWEALTH OF AUSTRALIA AU Australia and New Zealand Banking Group AU 10% 20.0 12 months Commonwealth Bank of Australia AU 10% 20.0 12 months Macquarie Bank Ltd. AU 10% 20.0 12 months National Australia Bank Ltd AU 10% 20.0 12 months Westpac Banking Corporation AU 10% 20.0 12 months GOVERNMENT OF CANADA CA Bank of Montreal CA 10% 20.0 12 months Bank of Nova Scotia CA 10% 20.0 12 months Canadian Imperial Bank of Commerce CA 10% 20.0 12 months National Bank of Canada CA 10% 20.0 12 months Royal Bank of Canada CA 10% 20.0 12 months Toronto-Dominion Bank CA 10% 20.0 12 months FEDERAL REPUBLIC OF GERMANY DE Bayerische Landesbank DE 10% 20.0 12 months Landesbank Hessen-Thueringen Girozentrale DE 10% 20.0 12 months Page 82 of 118
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Counterparty Country of Domicile % Limit £M Limit Max Investment period MONEY MARKET FUNDS Aberdeen Euro Fund Income Class J3 LUX 10% 20.0 Call Aberdeen Sterling Fund Income Class L1 LUX 10% 20.0 Call Aviva Investors GBP Liquidity Class 3 IR 10% 20.0 Call Aviva Investors EUR Liquidity Class 8 IR 10% 20.0 Call BlackRock ICS Euro Liquidity Fund IR 10% 20.0 Call BlackRock ICS Sterling Liquidity Fund IR 10% 20.0 Call CCLA - Investment Management Ltd (Sterling) GB 5% 10.0 Call Federated Short-Term Euro Prime Fund GB 10% 20.0 Call Federated Short-Term Sterling Prime Fund GB 10% 20.0 Call Deutsche Managed Euro Fund IR 10% 20.0 Call Deutsche Managed Sterling Fund IR 10% 20.0 Call Goldman Sachs Euro Liquid Reserves IR 10% 20.0 Call Goldman Sachs Sterling Liquid Reserves IR 10% 20.0 Call Insight Liquidity Funds PLC - EUR Liquidity Fund IR 10% 20.0 Call Insight Liquidity Funds PLC - GBP Liquidity Fund IR 10% 20.0 Call Royal London Sterling Liquidity Fund (Sterling) GB 10% 20.0 Call Page 83 of 118
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Appendix 4: Capital Strategy 2025 to 2028 1 Introduction ..................................................................................................................... 1 2 Purpose and Aims ........................................................................................................... 1 3 Overview ......................................................................................................................... 2 4 Capital Expenditure and Financing ................................................................................. 2 5 Asset Management ......................................................................................................... 5 6 Treasury Management .................................................................................................... 5 7 Commercial Activities ...................................................................................................... 6 8 Other Long Term Liabilities ............................................................................................. 6 9 Governance .................................................................................................................... 7 10 Knowledge and Skills ...................................................................................................... 8 1 Introduction 1.1 This Capital Strategy report gives an overview of how capital expenditure, capital financing and treasury management activity contribute to the provision of public services in local government, along with an overview of how associated risk is managed and sustainability implications for the future. 1.2 Decisions made now on capital and treasury management will have financial consequences for the Council for many years to come. They are therefore subject to both a national regulatory framework and to local policy framework, summarised in this report. 2 Purpose and Aims 2.1 Following consultation, the Chartered Institute of Public Finance and Accountancy (CIPFA) published an updated version of the Prudential Code for Capital Finance in Local Authorities (“the Prudential Code”) in December 2021. 2.2 The key objectives of the Prudential Code are to ensure, within a clear framework, that; • capital expenditure plans and investment plans are affordable and proportionate; • all external borrowing and other long-term liabilities are within prudent and sustainable levels; • the risks associated with investments for commercial purposes are proportionate to their financial capacity; and • treasury management decisions are taken in accordance with good professional practice. Page 84 of 118
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2.3 In keeping with the objectives above, the purpose of this Capital Strategy is to demonstrate that the Council takes capital investment decisions in line with service objectives that properly take account of value for money, prudence, sustainability and affordability, setting out the context in which capital expenditure, capital financing and treasury decisions are being made, and has given due consideration to risk. 3 Overview 3.1 An understanding of what constitutes capital expenditure and how it is financed is fundamental to realising the benefits and mitigating the risks to the Council under the prudential framework. 3.2 Capital expenditure is the investment in new or existing assets, such as property or vehicles, that will generate economic benefits or service improvements that will be realised by the Council for a period of more than one year. 3.3 All capital expenditure must be financed, either from external sources (government grants and other contributions), internal sources (current revenue and capital receipts) or debt (borrowing and leasing). 3.4 Financing capital expenditure through debt offers the opportunity to spread the cost over future revenues through loans fund repayments. However, due to the interest payments associated with debt, the total cost is usually higher than other methods of capital financing. Therefore, careful planning and monitoring procedures must be in place to ensure capital investment decisions offer value for money and are affordable and sustainable for current and future revenue budgets. 4 Capital Expenditure and Financing 4.1 The Council is obliged to determine the maximum it may allocate to capital expenditure, in line with statutory guidance. The planned limits are shown in the table below. The Housing Revenue Account (HRA) is a ring-fenced account, which ensures that council housing does not subsidise, or is not itself subsidised by, other local services. HRA capital expenditure is therefore recorded and reported separately. Estimated Capital Expenditure 2025/26 2026/27 2027/28 £000s £000s £000s Non-Housing 128,969 102,609 27,158 Housing 61,336 67,620 67,724 Total Resource Availability 190,305 170,229 94,882 4.2 The Council Plan "Creating a fairer Renfrewshire built on innovation, wellbeing and opportunity" was agreed in September 2022 and outlines five strategic priorities for the Council over the period to 2027. The Council Plan provides a “golden thread” that ensures these priorities translate into specific spend programmes. Page 85 of 118
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4.3 The Plan contains an over-arching theme of “improving outcomes for children and families”. Every one of the five strategic priorities should directly contribute to this outcome and demonstrate that services are working together to get it right for children, families and communities. 4.4 Below is a summary of the five strategic themes from the Council Plan, and some related projects within the Capital Plan 2025 to 2028: Place – working together to enhance wellbeing across communities £17.4m investment in cultural and economic infrastructure, in particular completing the transformation of Paisley Museum. £5.7m investment in regeneration through a mixture of projects leading to transformative investments which will drive economic activities and re-purpose town centres to become more diverse, successful and sustainable. £23.8m of improvements in infrastructure within Renfrewshire improving roads, traffic management, bridges and street lighting and £14.5m investment in property lifecycle maintenance. Economy – building an inclusive, green and resilient economy Continued investment in completing the City Deal projects which will lead to total spend of £39.8m on infrastructure in Renfrewshire, translating into an improved local economy and improved connectivity. Fair – nurturing bright, happy and healthy futures for all A schools investment programme totalling £150.3m, including part-funding under the Scottish Government Learning Estate Investment Programme that will lead to a new build community campus at Renfrew Road, Paisley to replace Paisley Grammar school, and new build projects for the Dargavel area. £1m investment for an internal play centre at the Lagoon and £0.6m investment in community halls refurbishment allowing access for all to congregate, explore, play and learn in a safe and exciting environment. Green – leading Renfrewshire to Net Zero Investment in parks, play areas, outdoor access and nature restoration of £2.8m Living our values – making a difference together £2.6m investment in new ICT equipment and software to improve Council services 4.5 A full copy of the Council Plan is available on the Council’s website by following Your Council > Information, performance and statistics > Plans, policies and strategies. Renfrewshire Council Plan. Page 86 of 118
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4.6 As stated in 3.3, all capital expenditure must be financed either from external sources, internal sources or through borrowing. The planned financing of the above expenditure is shown on the table below: 2025/26 2026/27 2027/28 £000s £000s £000s Prudential Borrowing 72,775 32,784 13,858 Total Borrowing 72,775 32,784 13,858 Specific Grant 813 800 800 General Capital Grant 12,093 12,500 12,500 General Capital Grant – Renewal of Play Parks 768 0 0 Climate Projects (Grant Funded) 1,167 BAE contribution (Park Mains) 6,000 12,000 0 Usable Capital Receipts 13,798 13,275 0 Capital Funded from Current Revenue (CFCR) 21,555 31,250 0 Total Resource Availability 128,969 102,609 27,158 4.7 Debt is only a temporary source of finance, since loans and leases must be repaid, and it is replaced over time by other financing, usually from revenue, which is known as loans fund repayments. 4.8 The Council’s cumulative outstanding amount of debt finance that will be charged to future revenue budgets is measured by the Capital Financing Requirement (CFR). The CFR increases with new debt-funded capital expenditure and reduces with loans fund repayments; capital receipts can also be used to reduce the CFR. Based on the above figures for expenditure and financing, the Council’s estimated CFR is as follows: Capital Financing Requirement 2024/25 2025/26 2026/27 £000s £000s £000s Non-Housing 523,960 550,486 557,677 Housing 173,411 219,633 269,219 Total 697,371 770,119 826,896 4.9 The loans fund repayments, combined with interest payable on loans, forms the total charge to revenue, known as financing costs. An estimate of the total financing costs as a percentage of net revenue (the amount funded from Council Tax, government grants, business rates, or rental income in the HRA), is shown in the table below. Ratio of financing Costs to net revenue stream (estimated) 2024/25 2025/26 2026/27 % % % Non-Housing 2.73% 2.94% 3.02% Housing 24.53% 19.98% 23.36% Total Page 87 of 118
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5 Asset Management 5.1 The Council’s Corporate Asset Strategy (CAS) sets out a high-level framework for the management for all the Council’s Assets. It guides the development and upkeep of strategies and plans for all classifications of assets. The strategy states an overall principle that all assets are owned corporately by the Council, and their management is co‐ordinated across the organisation to maximise the benefits for Renfrewshire, as well as to support the achievement of the vision for the area and the Council’s key objectives. 5.2 The Council is conducting a Strategic Property Review as part of its work around financial sustainability. The objective of this review is to assess the optimum size and shape of the Council’s property estate, reducing its carbon footprint and using buildings more efficiently to provide its services the findings of which will inform future capital plans. 5.3 The Council has recently agreed a learning estate strategy which outlines the principles which will inform the development of investment proposals in the schools and learning estate. This ambitious strategy will require the Council to also agree a clear and affordable longer term funding approach which will underpin planned investments, and will require the Council to make adequate provision within revenue budgets to support any required increase in borrowing capacity. 6 Treasury Management 6.1 Treasury management is concerned with keeping sufficient, but not excessive, cash balances to meet the Council’s spending requirements, whilst managing the risks involved. Surplus cash is invested until required, while temporary cash shortages will be met by borrowing. 6.2 The Council’s Treasury Management Strategy Statement (TMSS) contains objectives for borrowing and investments, with the overarching objective in relation to treasury management activities being effective management and control of risk. The full TMSS can be found within Appendix 4 of this report. 6.3 The main objectives of borrowing are to achieve a low, but certain cost of finance, while retaining flexibility should plans change in the future. Statutory guidance states that debt should remain below the CFR, except in the short-term. As can be seen from the table below, the Council expects to comply with this during the period 2025-28. Estimated Borrowing Position 2025/26 2026/27 2027/28 £m £m £m Borrowing 397 465 524 Other long-term liabilities 95 93 90 Total External Debt 492 558 614 Capital Financing Requirement 697 770 827 Page 88 of 118
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Under Borrowing 205 213 213 6.4 The Council is required to set an Operational Boundary for external debt. This is an estimate of the maximum external debt of the Council according to the probable events contained in the Council plans, budgets and strategies. Sustained or regular borrowing above the Operational Boundary would be a significant matter, requiring investigation and action. 6.5 The Authorised Limit for external debt is based on the same assumptions as those used to calculate the Operational Boundary; however, it is higher to allow sufficient headroom for unusual or exceptional cash requirements. The Authorised Limit reflects a level of borrowing that could be afforded in the short-term, but that would not be sustainable in the long-term. The Operational Boundary and Authorised Limits are as follows: Limits on External Debt 2025/26 2026/27 2027/28 £m £m £m Operational Boundary 697 770 827 Authorised Limit 727 804 864 6.6 Treasury investment requirements arise due to cashflow timings, i.e. receiving cash before it is due to be paid out again at a later date. The main objectives of treasury investments are to obtain an acceptable market rate of return, subject to protecting capital security and liquidity of invested funds. The focus is therefore on minimising risk rather than maximising returns. 7 Commercial Activities 7.1 These are investments made outside the normal treasury management activity, such as property investments, with the sole objective of making a financial surplus. The Council has no such investments at this time. 8 Other Long Term Liabilities 8.1 In addition to the borrowing detailed in 6.3 above, the Council is party to a Public Private Partnership for the provision and maintenance of educational and other facilities, including a Residual Waste facility. The Council has also adopted IFRS 16 from 1 April 2024 (see paragraph 4.11 of Appendix 3). The total anticipated liability for these arrangements at the 31 March 2025 is £65m. 8.2 The Local Government Pension Scheme in Scotland (LGPS) is a funded, defined benefit, statutory occupational pension scheme. For Renfrewshire Council, the regional pension fund is the Strathclyde Pension Fund. As a funded scheme, the Council and its employees pay contributions into the fund, calculated at a level intended to balance the scheme’s pension liabilities with the scheme’s investment assets. Following an assessment by Strathclyde Pension Fund’s actuaries, Hymans Robertson, the value of the Council’s share of the net pension asset at 31 March 2024 was estimated at £495m. Page 89 of 118
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The surplus position was restricted in the annual accounts by an asset cap owing to accounting regulations, and this adjusted value was reported as a pension liability of £75m, representing the unfunded obligations of the scheme. 8.3 Provisions are made when an event has taken place that gives the Council a legal or constructive obligation that will probably require a settlement, usually in cash, but can be other economic or service benefits. At 31 March 2024 the Council had set aside long-term provisions of £4.6m related to holiday pay compensation and insurance claims. The long-term provisions will be reviewed for the 2024/25 Annual Accounts. 9 Governance 9.1 Capital Programmes: Potential capital projects will be assessed for strategic fit, achievability, affordability, practicality, revenue impact and non-monetary impacts such as future economic growth, environmental or social well-being. 9.2 Once the capital projects have been considered, the Capital Plan is approved annually by the full Council, setting out the funding available, means of financing and Prudential Indicators. No capital expenditure can be authorised unless it has been provided for in the approved capital plan or is within an officer’s delegated authority. The Financial Regulations set out the framework for transferring money between budgets. 9.3 Capital budget monitoring reports from the Director of Finance and Resources are considered by the relevant Policy Board and include explanations for any significant variances from budget targets. Policy Boards will consider and approve any actions required to bring financial performance within approved limits. 9.4 Each capital programme is assigned a responsible officer who will approve and monitor expenditure. They receive support from a variety of sources, for example, to receive capital budget reports; to ensure that the expenditure complies with the statutory definition of capital; that any external contracts agreed comply with the Standing Orders of the Council; or to obtain any advice on legal matters. 9.5 Treasury Management: Decisions on treasury management investment and borrowing are made daily and are therefore delegated to the Director of Finance and Resources and relevant staff, who must act within the parameters set out in the Treasury Management Strategy approved annually by full Council. A mid-year review of treasury management activity is presented each year to the Finance, Resources and Customer Services Policy Board, with a full year review reported to Council. 9.6 Commercial Activities: Property investments would be classified as capital expenditure and therefore included as part of the capital plan. Any commercial investment decisions would be made by the Council in line with its Financial Regulations and Standing Orders. Page 90 of 118
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10 Knowledge and Skills 10.1 The Council employs professionally qualified and experienced staff with responsibility for making capital expenditure, borrowing and investment decisions, and ensures that its qualified staff meet their continuous professional development requirements. 10.2 The knowledge and experience of Council staff is supplemented by the use of external advisors and consultants that are specialists in their field. The Council currently has a contract with MUFG Corporate Markets (formerly Link Asset Services) for the provision of treasury management consultancy services. This approach is more cost effective than employing such staff directly and ensures that the Council has access to knowledge and skills commensurate with its risk appetite. Page 91 of 118
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PROCEDURE TO BE FOLLOWED AT THE MEETING OF RENFREWSHIRE COUNCIL TO BE HELD ON 27 FEBRUARY 2025 DURING CONSIDERATION OF ITEM 5 CONCERNING THE HOUSING REVENUE ACOUNT BUDGET, RENT LEVELS 2025/2026 AND HOUSING CAPITAL INVESTMENT PLAN 2025/2026-2029/2030 The purpose of this note is to give Members advance notice of the procedure which Provost Cameron has agreed should be followed at the Meeting of the Council on 29 February 2024 viz: 1. The Convener of the Communities and Housing Policy Board (the Convener) will make her budget statement for financial year 2025/2026 and move as appropriate. She will then speak to the principal points of her proposals. The motion will require to be seconded. 2. For the purposes of the subsequent discussion and voting, the Convener's proposals will be taken as one motion. 3. An opportunity will then be given to the Leaders of the opposition groups and any other Members to move, and to have duly seconded, comprehensive amendments to the motion (i.e. taking together budget proposals, the rent levels and the capital investment plans). 4. The motion and any amendments will require to be produced in writing and a copy given to each of the Members present prior to being spoken to at the meeting. Provost Cameron may then adjourn the meeting for 20 minutes to allow Members to consider the terms of the motion by the administration and any amendments by the opposition groups or other Members. Corporate Meeting Rooms have been arranged for the adjournment as follows: Administration – Corporate Meeting Room 2, Labour - Corporate Meeting Room 1, Conservative – Corporate Meeting Room 3, Independents – Communications Room. 5. There shall be no formal restriction upon the length of time given to the Convener and the Leaders of the opposition groups and other Members to move their respective budget statements and speak in support of the principal points of their proposals. However, Provost Cameron shall have the power to require any person speaking to limit their speech in order to facilitate the conduct of the meeting. 6. Provost Cameron will then invite other Members to take part in the debate. 7. The debate will conclude with Provost Cameron giving the Convener an opportunity to reply. 8. A vote or votes will then be taken in accordance with the provisions of standing orders. Item 5 Page 93 of 118
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___________________________________________________________________ To: Council On: 27 February 2025 ___________________________________________________________________ Report by: Director of Environment, Housing & Infrastructure and Director of Finance & Resources ___________________________________________________________________ Heading: Housing Revenue Account Budget & Rent Levels 2025/26 to 2027/28 and Housing Capital Investment Plan 2025/26 to 2029/30 ___________________________________________________________________ 1. Summary 1.1 This report details the proposed Housing Revenue Account (HRA) budget for financial year 2025/26 and sets out the information which allows consideration of a multi-year rent strategy for 2025/26 to 2027/28. 1.2 The report highlights the impact of economic pressures on the HRA and sets out any operational pressures that have emerged, and the adjustments to budgets and resources required to deal with these pressures. 1.3 The report also provides members with results from the consultation process with tenants, regarding the multi-year rent setting process. The consultation process provided two options for tenants to select from. 1.4 The majority of tenants (69%) support a 7.5% rent increase in 2025/26, 7.5% rent increase in 2026/27 and 7.0% in 2027/28 as opposed to (31%) who supported an 8.0% rent increase in 2025/26, 8.0% rent increase in 2026/27 and 7.0% in 2027/28. 1.5 The preferred option includes additional investment to double the capacity of the Neighbourhood improvements teams to four teams – one for every Local Area Housing Team - making environmental improvements to the grounds and areas around our homes. 1.6 The preferred option also includes additional investment to establish a £600,000 YouDecide Tenant Fund for tenants to decide how it is best spent over the three years from 2025 to 2028. Page 95 of 118
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1.7 The report also details the Housing Capital Investment Plan for 2025/26 to 2029/30, which will deliver a total investment of £292m in the Council’s housing stock over the 5-year period. It is anticipated that this level of investment will attract £34m of government grant for new builds and this results in a net capital programme amounting to £258m. 1.8 In setting the 2025/26 HRA budget, members may wish to consider the medium and longer-term financial context for the HRA and note the planning assumption of CPI+1% rent increases in the financial years beyond the 3-year period 2025/26 to 2027/28 as well as considering the ongoing risks and challenges outlined in this report. ___________________________________________________________________ 2. Recommendations It is recommended that the Council: 2.1 considers the report and approves the three-year rent strategy which includes an average weekly rent increase of £7.15, which equates to 7.5% for all house rents and lock-ups for 2025/26; 2.2 notes the findings of the recent Tenant Consultation exercise; 2.3 approves the Housing Revenue Account Budget for financial year 2025/26 as detailed in Appendix 2; 2.4 approves the Housing Capital Investment Plan 2025/26 to 2029/30 as detailed in Appendix 3 of the report; 2.5 approves the increased services charges for 2025/26 as detailed in section 4.11. within the report; and 2.6 notes the continuing requirement to achieve best value in the commissioning of works by having an optimum workflow over the 5 years of the investment plan and authorises the Director of Environment, Housing and Infrastructure to liaise with the Director of Finance and Resources to re-profile the capital programme and available resources, as necessary, in line with the appropriate limits established under the Council’s capital prudential framework arrangements. ___________________________________________________________________ 3. Background and Medium-Term Financial Context 3.1. The HRA operates a rolling 30-year Business Plan model, which is the standard operating practice amongst local authorities and Registered Social Landlords. The 30-year basis of the model reflects the need for a long-term planned approach to the replacement of major items such as rewiring, central heating, etc., aligned to the lifecycles of these elements. 3.2. The model ensures that planned rental income from the estimated 11,606 average number of lettable properties in 2025/26 is sufficient over the term of the plan to cover debt and servicing capital expenditure, including significant Page 96 of 118
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investment and regeneration initiatives, together with funding the annual costs of maintaining the housing stock and all HRA annual operating costs including staffing. 3.3. The Business Plan model is reviewed to take account of the adjusted base budget position from the previous year and to update any key assumptions, economic factors and known or emerging risks. This review process allows consideration to be given to the setting of rent levels for the forthcoming and future financial years through effective scenario planning. 3.4. The 30-year Business Plan model currently assumes 2.2% CPI (Consumer Price Index model) for the 2025/26 financial year, as in previous years, this reflected the rate in September of the current financial year. The Business Plan assumes that CPI is on a decreasing trend until reaching the Bank of England’s 2.0% target by 2026/27. 3.5. Different levels of inflation have been applied to the main cost drivers for 2025/26 to reflect the expected impact more accurately on Renfrewshire’s cost base. This is reviewed annually across the cost drivers to reflect the actual levels of inflation impacting on the base costs. Over the longer term, cost increases revert to the assumed CPI forecasts noted in 3.4. 3.6. In the past three-years while inflation on costs within the HRA has risen considerably, the HRA maintained lower than inflationary rent increases during this period to minimise the in-year impact further on our tenants. 3.7. The three-year rent strategy provides tenants with a longer-term perspective on planned rent increases, moving away from the previous annual proposals. However, these proposals introduce a risk that inflation could exceed the projected levels. While some contingency is included within the forecasts, the level of inflation will need to be closely monitored to determine if corrective action is required in future years. 3.8. Members will recall that following a strategic review of the HRA it was determined that there was capacity in the HRA to fund an additional £100m investment and regeneration programme over the next decade. Council approved the proposals to take forward this first phase of investment, focusing on eight areas and around 1,100 council properties. Members will also recall that the plan also includes over £30m of investment required in high-rise accommodation. The cost of repayment on borrowing to deliver this ambition increased because of the economic climate creating higher interest rates. To ensure sufficient funding in the long term, an assumption of 1% above CPI as an uplift to rents is assumed for every year beyond 2025/26 to 2027/28 across the 30-year plan. 3.9. If a tenant is in receipt of benefits covering housing costs, they will likely be mitigated from any increased costs. Renfrewshire has close to 76% of tenants in receipt of some form of support for their housing costs. A rent increase would result in some tenants receiving more Housing Benefit and some existing non-claimants becoming entitled to Housing Benefit. Therefore, unless their personal circumstances change, most tenants will continue to pay the same amount towards their rent, with Housing Benefit covering the Page 97 of 118
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remaining cost. The tenancy support fund established in 2023/24 to provide additional support to tenants in financial hardship remains within the budget proposals. ___________________________________________________________________ 4. HRA Budget Planning Assumptions for 2025/26 4.1. The rental income generated by the HRA must support service delivery, the costs of appropriately maintaining the housing stock, and the loan debt related costs to service the capital investment required in HRA assets. 4.2. The proposed budget adjustments for 2025/26 are shown across the high level HRA categories in summary form on Appendix 1 and analysed into the Policy Board revenue monitoring format in Appendix 2. To supplement the information contained in these appendices, additional contextual commentary is provided below, and this can be read in conjunction with Appendices 1 and 2. Revenue Expenditure 4.3. Supervision and Management includes the operational inflation and additional costs covering areas such as pay increases for housing staff, energy costs and insurance costs. Budget is also required for council tax, reflecting void levels which are forecast to reduce in year due to improved void performance targets. The impact of the changes to employer National Insurance contributions in 2025/26 is estimated to cost an additional £0.236m. This also includes both the allocation to increase the Neighbourhood improvements teams from two to four and £0.150m for year one of the YouDecide Tenant fund as per the budget consultation. The overall combined impact of these pressures and additional investment is an increased net budget requirement of £1.291m for 2025/26. The temporary removal of employer pension contribution budget of £1.029m in 2024/25 will require to be reinstated in 2026/27. 4.4. Housing Repairs and Maintenance is an area of budget that has been under considerable pressure due to both cost increases and post pandemic recovery demands. This includes pressures such as rising material, fuel, and labour prices to repair, maintain, and improve tenants’ homes. The budget has increased overall by £0.670m to take account of the very real and significant challenges around increasing costs. The temporary removal of Building Services employer pension contribution budget of £0.551m last year, will require to be reinstated in 2026/27. 4.5. The new grounds and estates maintenance standards, introduced in recent years are now fully implemented. An additional £0.046m has been added to the budget to cover inflation. 4.6. The void rent loss movement of £0.029m reflects the expected void rent loss projections based on the revised operational targets and the revised income collection levels. In terms of void rent loss, this reflects a targeted improvement in void performance from the 2024/25 budget. Page 98 of 118
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4.7. The bad debt provision has been increased by £0.140m, reflecting the increased income collection levels and to reflect the associated risk in relation to increasing levels of bad debt. This budget continues to include funding to provide support to tenants in financial hardship, as approved last year. In terms of bad debt levels, this reflects the same operational target as the 2024/25 budget. 4.8. The net financing costs Loan charges budget has reduced by £0.383m, and the Contribution to Capital Programme line has increased by £0.665m. The net £0.282m increase is managed through reserves movements and from the overall rent increase required in 2025/26. Revenue Income 4.9. The gross increase in Rental income (£3.770m), reflects the 7.5% increase on both house and lock-up rents. The stock movement assumptions for both houses and lock-ups are based on regeneration, demolition, and investment plans, reflected in the income assumptions. 4.10. In relation to lock-up rents, the average charge per lock-up is currently £23.15 per month and the 7.5% increase represents an average of £1.74 increase per month. A review of the existing lock-up portfolio is underway and a report on the findings of the review will be brought to the Communities and Housing Policy Board. 4.11. Other income increases by (£0.065m), reflecting minor adjustments, mainly for recovery of staffing related costs managed within the revenue expenditure budget but recovered by income. In last year’s Budget Proposals, we indicated the necessity to review the recharge models for the recovery of service charges. It was emphasised that the ongoing impact of increasing costs necessitated a review of the recovery models to ensure that costs are fairly allocated to the direct users of these additional services. In most cases, the operating costs still exceed the income recovery levels. Therefore, it is proposed to increase charges this financial year as we look to address the shortfalls across future years budgets as we transition back to full cost recovery models. Service Charge Owners Tenants 2024/25 2025/26 District Heating Calside 173 0 £13.59pm £25.11pm Sheltered Heating 0 191 £36.51pm £43.82pm Sheltered Laundrette 0 103 £2.94pm £3.52pm Laundrettes Council 0 1,704 £3.18pm £3.82pm Laundrettes Private 843 0 £16.46pm £19.76pm 4.12. The level of contingency held at the end of the year is forecast to be £5.158m within the HRA to meet future and unforeseen cost pressures, including the housing management ICT system replacement, and it is deemed that this revised level of reserves remains prudent. The housing management ICT system reserves will be utilised in part during the financial year as the project moves towards phase one implementation with drawdowns being reported to the Communities and Housing Policy Board. Page 99 of 118
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4.13. In the 2024/25 budget proposals, we noted a potential £2.000m cumulative budget deficit forecasted by 2027/28. Subject to approval, this deficit is now being addressed through the revised three-year rent strategy, which includes proposed rent increases to tackle the previously identified shortfall caused by prior years below inflation increases. ___________________________________________________________________ 5. Tenant Consultation for 2025/26 – 2027/28 Rent Increase 5.1 Renfrewshire Council has a statutory duty to consult tenants before increasing rents. To help inform the decision on rents for 2025 to 2028, consultation was undertaken during December 2024 and January 2025 involving discussion with tenant representatives and an online survey of Council tenants. 5.2 All tenants were advised by letter of the survey and by email to tenants where we hold an email address, and 1,031 tenants took part in the consultation. The survey was for a multi-year rent strategy with two options for tenants to select from. The result of the consultation was as follows: Option 1: Year % Votes Increase rent in (average £7.15 a week) 2025/26 7.5% Increase rent in 2026/27 7.5% 709 Increase rent in 2027/28 7.0% (69%) Neighbourhood improvements Double the capacity to four teams – one for every Local Area Housing Team - making environmental improvements to the grounds and areas around your homes. YouDecide Tenant Fund Establish a £600,000 YouDecide Tenant Fund for you to decide how it is best spent over the three years from 2025 to 2028. Option 1: Year % Votes Increase rent in (average £7.63 a week) 2025/26 8.0% Increase rent in 2026/27 8.0% 322 Increase rent in 2027/28 7.0% (31%) Neighbourhood improvements Double the capacity to four teams – one for every Local Area Housing Team - making environmental improvements to the grounds and areas around your homes. YouDecide Tenant Fund Establish a £1,500,000 YouDecide Tenant Fund for you to decide how it is best spent over the three years from 2025 to 2028. 5.3 The proposed rent increase of 7.5% in 2025/26 will allow the high level of planned investment to continue across the 30-year plan, and to continue to focus on this over the next 5 years to deliver improvements to energy efficiency, the delivery of the housing regeneration programme, and the implementation of the additional Neighbourhood improvement teams and YouDecide Tenant Fund set out above. ___________________________________________________________________ Page 100 of 118
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6. Housing Capital Investment Plan – 2025/26 to 2029/30 6.1 Overview 6.1.1 The proposed Housing Capital Investment Plan for the 5-year period from 2025/26 to 2029/30 is attached at Appendix 3. The gross value over the 5- year period in the council’s housing stock is £292.432m. It is anticipated that this level of investment will attract £34.522m of government grant for new builds, etc., and this results in a net capital programme to be funded of £257.910m. The programme includes allowances for new build homes, related Scottish Government grants, regeneration and renewal, and the planned investment programmes required to ensure council house stock is maintained at the appropriate standards. 6.1.2 The planned net capital investment for each year is as follows: Financial Year Gross £m Income £m Net £m 2025/26 61.336 (5.000) 56.336 2026/27 67.620 (8.134) 59.486 2027/28 67.724 (4.618) 63.106 2028/29 42.498 (8.385) 34.113 2029/30 53.254 (8.385) 44.869 5-Year Total 292.432 (34.522) 257.910 The plan will be reviewed on an annual basis, incorporating an ongoing assessment of risk. 6.1.3 Authority is granted to the Director of Environment, Housing, and Infrastructure in consultation with the Director of Finance and Resources, to flexibly manage the capital investment programme as necessary to ensure optimum use of resources within the approved limits of prudential borrowing. It is proposed that this delegation remains in place over the life of the new 5- year plan detailed in Appendix 3. 6.1.4 The table below sets out the proposed composition of the plan for 2025/26 and how it will be funded. Financial Year 2025/26 Expenditure £m Income £m Net £m Planned Investment Programmes 34.431 0.000 34.431 Regeneration and New Build, etc. 26.905 0.000 26.905 Government New Build Grant 0.000 (5.000) (5.000) Other Income 0.000 (0.575) (0.575) CFCR 0.000 (4.934) (4.934) Prudential Borrowing 0.000 (50.827) (50.827) Total 61.336 (61.336) 0.000 Page 101 of 118
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6.2 Planned Investment Programmes 6.2.1 Since achieving compliance with the Scottish Housing Quality Standard (SHQS) in April 2015, there has been an ongoing requirement to ensure that housing stock continues to be maintained at least at this standard. 6.2.2 The capital programme for 2025/26 to 2029/30 as per the attached Appendix 3 will deliver a total of £147.034m in planned investment programmes in existing housing stock, £31.821m in New Supply of housing stock outwith the regeneration areas and a further £113.577m included as part of the Regeneration and Renewal Plan including New Supply within regeneration areas. The capital programme for the same period will attract £34.522m of income from government grants. 6.2.3 The Council is required to ensure that the HRA has capacity to deliver on regulatory requirements and standards, including ensuring that properties meet requirements such as SHQS and EESSH. In March 2024, 85.75% of Council housing stock was compliant with the EESSH1 target (after applying allowable exemptions). 6.2.4 The Scottish Government had introduced a higher EESSH2 standard to be met by 2032, however, this has been suspended, and the review of 2023 introduced the Social Housing Net Zero Standard (SHNZS). The SHNZS proposes the replacement of EPC targets with a minimum heat demand target for homes to achieve and the replacement of heating systems with clean heating alternatives. The standard aligns with net zero requirements and fuel poverty targets. The consultation is complete, and the bill is progressing through its parliamentary stages. This bill, once enacted, will determine the final agreed targets for heat demand level and backstop dates for clean heating. This standard will impact on the housing asset management strategy post 2025, however current retrofit projects will be in line with expected standards. 6.2.5 The capital investment programme has an allowance of £28.473m for the investment requirements in high-rise properties over the next five years, including cladding, roofing, window and door replacements, foyer improvements and lift refurbishments. 6.2.6 There will continue to be a programme of heating renewals in 2025/26 as well as programmes of kitchen, bathroom, and rewiring combinations, in tenanted and void properties. 6.2.7 The main categories of planned investment programmes are: • External improvements, which include renewal of roofs, rainwater goods and external fabric; • Internal improvements, which include replacing or upgrading kitchens, bathrooms, electrical wiring, and heating systems; • Multi storey flat and sheltered housing improvements; • Other investment including disabled adaptations, asbestos removal and rotworks. Page 102 of 118
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6.2.8 The main elements of the planned investment programme for next year will include the following: 2025/26 Planned Improvements Number of Properties External fabric upgrading (existing stock) 250 External fabric upgrading (regeneration programme) 250 Window and door improvement programme 250 Kitchen, bathroom, and rewiring replacement 600 Heating renewals 750 6.3 New Build and Regeneration 6.3.1 The Housing Led Regeneration and Renewal Plan covering eight communities across Renfrewshire was approved by the Communities, Housing and Planning Policy Board on 18 January 2022. The Capital Investment Plan outlines the anticipated timetable for this significant regeneration programme for the next five years. 6.3.2 As part of the Housing-Led Regeneration and Renewal Programme, formal award of contract was issued to McTaggart Construction for the delivery of seventy new build Council homes for rent in the Howwood Road Area. 6.3.3 Over and above the Housing-Led Regeneration and Renewal Programme, a contract has also been entered into for the delivery of sixty-five new build Council homes in Gallowhill. 6.3.4 The Strategic Housing Investment Plan 2025-30 approved by the Communities and Housing Policy Board on 29 October 2024, includes provision for Scottish Government grant funding for Council new build projects within four of the eight Housing-Led Regeneration areas and two areas outwith, namely, Gallowhill and Foxbar. 6.3.5 The new build grant benchmark rate for local authorities is a 3-person equivalent benchmark of £87,763 per unit, adjusted according to the size of accommodation being delivered. The new build specification has been updated to include the quality measures required to maximise grant claims where possible (silver level as a minimum, balconies to flatted developments, space for home working / study, digital enablement, fire suppression and zero emission heating). These additional measures will incur higher capital costs but will also attract additional grant funding over and above the 3-person equivalent benchmark rate to assist the ongoing delivery of energy efficient affordable new build Council homes for tenants. ___________________________________________________________________ Page 103 of 118
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Implications of the Report 1. Financial The report and appendices detail the proposed HRA budget and average weekly rent increase for 2025/26 and the Housing Capital Investment Plan for 2025/26 to 2029/30. 2. HR & Organisational Development While staffing budgets form a significant proportion of the Council’s revenue budgets, there are no direct staffing implications arising from the recommendations in this report as the expansion of the neighbourhood investment service will be provided to the service. 3. Community/Council Planning Community Plan Our Renfrewshire is thriving. Enabling communities to have their voices heard and influence the places and services that affect them by consulting tenants on the proposed changes to rents for 2025/26. The Council’s revenue and capital spend ensures that its facilities are fit for purpose and safe for the community, to maximise accessibility. Our Renfrewshire is well. Our Renfrewshire is fair. Our Renfrewshire is safe. Council Plan Reshaping our place, our economy, and our future Consulting tenants on the proposed changes to rents for 2025/26 including creating a YouDecide Tenant Fund. Improving and maintaining housing conditions for the benefit of tenants and providing assistance to tenants to mitigate the impacts of any Welfare Reform changes. Continuing housing regeneration programmes across Renfrewshire to create sustainable communities. Building strong, safe, and resilient communities Tackling inequality, ensuring opportunities for all Creating a sustainable Renfrewshire for all to enjoy Accessing supplementary external funding where available to support the achievement of the minimum energy rating under the Energy Efficiency Standard for Social Housing. Page 104 of 118
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4. Legal The council is required to set an HRA budget for 2025/26 and agree any rent changes for notification to tenants. The Council must give tenants at least 28 days’ notification in advance of any changes. 5. Property/Assets The report proposes the Housing Capital Investment Plan for 2025/26 to 2029/30. The capital expenditure noted in this report will result in lifecycle maintenance improvements to existing properties and replacement of ICT assets and infrastructure. 6. Information Technology ICT assets and revenue costs are included within these budgets, and the costs associated with the replacement of the Housing Management system including ongoing revenue and capital budget impacts. 7. Equality & Human Rights The recommendations contained within this report have been assessed in relation to their impact on equalities and human rights. No negative impacts on equality groups or potential for infringement of individuals’ human rights have been identified arising from the recommendations contained in the report. If required following implementation, the actual impact of the recommendations and the mitigating actions will be reviewed and monitored, and the results of the assessment will be published on the Council’s website. 8. Health & Safety The Capital Plan outlines investment in Council assets and facilities to ensure they remain safe and accessible in line with statutory obligations. 9. Procurement The proposed Capital Investment Plan for 2024/25 to 2028/29 will include procurement of contracts. 10. Risk The HRA Business Plan remains subject to a number of risks and economic factors such as interest rates and inflation. While these risks are reviewed as part of the HRA business planning process, a high level of uncertainty remains relating to external economic factors. This risk increases with the setting out of a 3-year rent strategy and will remain under review annually. 11. Privacy Impact There are no direct implications arising from the recommendations in this report. Page 105 of 118
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12. Cosla Policy Position Not applicable. 13. Children’s Rights There are no direct implications arising from the recommendations in this report. 14. Climate Risk Investment in Council assets improves energy efficiency, reducing the Council’s carbon footprint and helping it achieve its Net Zero by 2030 target. ___________________________________________________________________ List of Background Papers Housing Revenue Account Budget & Rent Levels 2024/25 and Housing Capital Investment Plan 2024/25 to 2028/29, 29 February 2024. ___________________________________________________________________ Author: Gordon McNeil, Director of Environment, Housing, and Infrastructure Author: Alastair MacArthur, Director of Finance& Resources Page 106 of 118
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___________________________________________________________________ To: Council On: 27 February 2025 ___________________________________________________________________ Report by: Director of Finance & Resources ___________________________________________________________________ Heading: Scottish Local Authorities Remuneration Committee and Councillors Remuneration ___________________________________________________________________ 1. Summary 1.1 The Scottish Local Authorities Remuneration Committee (SLARC) was reconvened in April 2023 to undertake an independent review of councillor remuneration, having last reported in 2011. 1.2 SLARC reported to the Scottish Government in February 2024. The Scottish Government accepted the majority of the recommendations made and advised they would bring forward regulations implementing those recommendations. 1.3 The Local Governance (Scotland) Act 2004 (Remuneration) Amendment Regulations 2025 were published in January 2025. This report sets out the changes to Councillors’ Remuneration arising from those revised Regulations and asks Council to consider the matters where the Council has discretion. _________________________________________________________________ 2. Recommendations 2.1 It is recommended the Council: (a) Notes the content of the report and the revised remuneration levels for the Leader of the Council and Elected Members. (b) Agrees the revised remuneration for the Civic Head of the Council. Item 6 Page 107 of 118
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(c) That Council consider the proposed revised structure of payments to Senior Councillors as set out in the Appendix to this report. 3. Background 3.1 The Scottish Local Authorities Remuneration Committee (SLARC) was reconvened in April 2023 to undertake an independent review of councillor remuneration, having last reported in 2011. 3.2 SLARC reported to the Scottish Government in February 2024. Their report made a number of recommendations in respect on the roles of councillors, the remuneration they should receive and how many senior councillors councils should have. Some of these recommendations had no direct effect on the Council as there were no proposals to change Renfrewshire Council’s banding or maximum number of senior councillors. 3.3 However, a number of the recommendations were of direct interest to the Council. SLARC recommended that the salaries of councillors be set at 80% of the median salary for all employees in the public sector in Scotland as published in the Annual Survey of Hours and Earnings (ASHE). Using this metric they proposed an annual salary of £24,581 with effect from 1 April 2024. They further recommended that the salaries of Council Leaders in the current Band D (Glasgow and Edinburgh) be benchmarked at the salary of a Member of the Scottish Parliament (MSP), with the salaries of Council Leaders in the current Band C be set at 85% of the salary of those in current Band D; and those in the combined Bands A and B be set at 70% of the salary of those in the current Band D. They also recommended that the salaries of Civic Heads and Senior Councillors continue to be set at up to a maximum of 75% of the salary of their Council Leader. 3.4 The Scottish Government accepted the majority of the recommendations made and advised they would bring forward regulations implementing those recommendations with effect from April 2025. 3.5 The Local Governance (Scotland) Act 2004 (Remuneration) Amendment Regulations 2025 were published in January 2025. 3.6 The Regulations have set the remuneration for the Leader of the Council at £50,063. They have also set the level of Councillors’ remuneration at £25,982. 3.7 The Regulations also set the new maximum remuneration level for the Civic Head of the Council at £37,458. However, it should be noted that the Scottish Government have confirmed that this figure is incorrectly stated in the Regulations and that revised regulations will be issued to correct this figure to £37,548. Council previously agreed at the statutory meeting on 19 May 2022 that the Civic Head would receive remuneration at the maximum level prescribed in the Regulations applicable at that time. It is therefore proposed that the level set out in the revised 2025 Regulations will be applied. Page 108 of 118
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3.8 In respect of senior councillor allowances the Regulations provide that Renfrewshire Council can have a maximum of 14 Senior Councillors for remuneration purposes. This figure is unchanged from the previous position. However, a further restriction when allocating remuneration to Senior Councillors is that payment of Senior Councillors’ remuneration comes out of a sum of money, the amount of which is calculated using a formula set out in the Regulations. For Renfrewshire Council the formula now brings out an aggregate yearly amount payable of £444,705 available for the payment of remuneration for all Senior Councillors. The Council has flexibility to determine which positions should be considered “Senior Councillors” meriting the higher remuneration. At the Council meeting on 30 June 2022 the Council agree that 13 roles which would receive a senior councillor allowance. It is proposed that those roles remain and are paid the revised allowances detail in the Appendix to this report. There is an existing delegation to the Director of Finance and Resources to apply the same percentage increase in remuneration for Senior Councillors as that applied by regulations to the basic rate of Councillors’ remuneration in future years. 3.9 The Scottish Government have also confirmed that there was an omission from the Regulations in that they have not revised the figures payable to conveners and vice-conveners of joint boards such as Renfrewshire Valuation Joint Board. They have advised that further regulations setting these fixed payments will be issued in due course. ___________________________________________________________________ Implications of the Report 1. Financial – The report sets out the revised councillor allowances provided for in the revised Regulations referenced in the report. 2. HR & Organisational Development – none. 3. Community/Council Planning – none. 4. Legal – The Council is statutorily required to put in place appropriate arrangements for the remuneration of its elected members, including the appointment of the Leader of the Council, Civic Head and various Senior Councillors as deemed appropriate. 5. Property/Assets – none. 6. Information Technology – none. 7. Equality & Human Rights - none 8. Health & Safety – none. 9. Procurement – none. Page 109 of 118
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10. Risk – none. 11. Privacy Impact - none 12. Climate Risk - none 13. Cosla Policy Position – none. 14. Children’s Rights – none _________________________________________________________ List of Background Papers: Report to Council 19 May 2022: Remuneration, Expenses and Pensions for Elected Members Report to Council 30 June 2022: Governance Arrangements ___________________________________________________________________ Author: Mark Conaghan Head of Corporate Governance 0141 618 7177 mark.conaghan@renfrewshire.gov.uk Page 110 of 118
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Appendix Proposed Revised Remuneration of Senior Councillors That elected members holding the following positions be remunerated as Senior Councillors, with renumeration as detailed: • Conveners of the following 6 Policy Boards: Education and Children’s Services Infrastructure, Land and Environment; Finance Resources and Customer Services Communities and Housing Economy and Regeneration Planning and Climate Change (£36,885) • Conveners of the following 4 Regulatory Boards: Audit, Risk and Scrutiny Board Appeals Board Regulatory Functions Board Licensing Board (£29,924) • Chair/Vice Chair of the Renfrewshire Integrated Joint Board (£36,885) • The Chair of OneRen (£36,885) • The Leader of the largest Opposition Group (£29,924) Page 111 of 118
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To: Council On: 27 February 2025 Report by: Director of Finance & Resources Heading: Commissioner for Ethical Standards in Public Life in Scotland – Annual Report 2023/24 1 Summary 1.1 The Commissioner for Ethical Standards in Public Life in Scotland has issued his 2023/24 annual report. The report is available on the Commissioner’s website at https://www.ethicalstandards.org.uk/node/2213 1.2 The report provides details of investigations of complaints about the conduct of councillors, members of devolved public bodies and MSPs and scrutiny of Scotland’s Ministerial public appointments process. Where there has been contravention of the relevant Code, the Commissioner reports this, in the case of councillors and members of public bodies, to the Standards Commission for Scotland and in the case of MSPs and in relation to lobbying complaints, to the Scottish Parliament. 1.2 The report advises of revised governance arrangements, reinstated transparency reporting and a new rolling biennial business covering all office functions. 2 Recommendations 2.1 That the 2023/24 Annual Report by the Commissioner for Ethical Standards in Public Life in Scotland be noted; and 2.2 That the actions taken in Renfrewshire in relation to the Code of Conduct development as detailed in paragraph 11.2 of the report be noted. Item 7 Page 113 of 118
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3 Background 3.1 The 2022/23 annual report was the first published by Ian Bruce since his appointment as Commissioner for a six-year period from 1 March 2023. 4 Complaint Volumes In 2023/24 4.1 Nationally, during 2023/24 the Commissioner received a total of 344 complaints, compared with 156 in 2022/23 and 330 in 2021/22. 4.2 The report advised that at the start of 2023/24, there were a large number of complaints and cases already open as a result of the backlog of cases that had built up in the previous year. Over the course of the year, the Standards Team completed a total of 141 cases, an increase of 12% from the previous year despite a 29% rise in the number of active cases under consideration in 2023/24 compared to 2022/23. Complaint volumes during 2023/24 and previous two years 2023/24 2021/22 2020/21 Already open at 1 April (beginning of financial year) 961 150 24 Received 344 156 330 Active during year 440 306 354 Completed 209 218 208 Cases remaining open at 31 March, (end of financial year) 231 88 146 1. There are minor differences in the carry forward totals from 2021/22 to 2022/23 and from 2022/23 to 2023/24. This is due to a small number of cases either being re-opened or additional complaints being added to existing cases Case Volumes during 2023/24 and previous years 2023/24 2021/22 2020/21 Already open at 1 April (beginning of financial year) 671 86 8 Received 184 109 164 Active during year 251 195 172 Completed 141 127 88 Cases remaining open at 31 March, (end of financial year) 110 68 84 1. There are minor differences in the carry forward totals from 2021/22 to 2022/23 and from 2022/23 to 2023/24. This is due to a small number of cases either being re-opened or additional complaints being added to existing cases 5 Categories of Complaints Received 5.1 The categories of complaints received, and the number of complaints received for 2023/24 are indicated below with disrespect towards employees and the public being the most common type of complaint received. This remains unchanged from previous years. Taking together cases in relation to disrespect towards both councillors/members, employees and the public accounted for 55% of the total complaints received during 2023/24. Page 114 of 118
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Complaints Received During 2023/24 (Total 344) Type of complaint 2023/24 Disrespect towards employees/public 157 Outwith jurisdiction 47 Disrespect towards other councillors/members 33 Quasi-judicial or regulatory applications 30 Other 28 Breach of confidentiality 20 Failure to declare an interest 13 Fubabcuak nuscibdyct/Misuse of council facilities 10 Failure to register an interest 5 Breach of key principles 1 NOTE: Outwith jurisdiction complaints are complaints which are about conduct which, following assessment, does not fall within the remit of the Code. They are distinct from complaints which we cannot accept as they are outwith the jurisdiction of the Commissioner’s office, such as a complaint about a Councillor in England 6 Origin of Complaints 6.1 The pie chart provides details of who made complaints to the Commission in 2023/24. Complaints from members of the public accounted for almost 80% of the total number of complaints received during 2023/24 and this figure is similar to previous years. 7 Complaints About Conduct of Councillors 7.1 The Commission saw a reduction in the number of new complaints received during the year and this allowed them to dedicate more staff time to reducing their backlog. The report advised that the backlog had significantly reduced such that it was now taking up to four months, instead of the previous wait of 11 months, for an initial complaint to be assessed. In the interests of transparency, their website now has a banner and a supporting page which sets out waiting times and investigation times for all complaints. 7.2 The report noted that when several complaints were received about the same or closely related issues, they combined these complaints together and assessed Page 115 of 118
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and/or investigated them as a single case. 7.3 The Standards Commission for Scotland (SCS) Direction of March 2021 requires the Commission to investigate all complaints received about councillors or members, except in fairly narrow circumstances. In essence, any conduct which has happened in the 12 months prior to the complaint being made and where, on the face of it, a breach of the applicable code has taken place must be investigated. This Direction was renewed for a five-month period in March 2023. The SCS agreed not to renew the Direction beyond August 2023 following agreement from the Ethical Standards Commissioner that the Commissioner would include wording from it on the face of the ESC Investigations Manual. The Commission continues to investigate all complaints that could, on their face, represent a breach of the Code. This has increased the number of complaints being investigated since the start of 2021/22. 8 Outcome of Complaints Nationally 8.1 Nationally a total of 45 cases (79 complaints) progressed to full investigation and were reported on and finalised during the year, with 17 being breach reports (regarding 9 cases) which were heard by the Standards Commission, and 62 being reported on as non-breach (regarding 36 cases). Outcome from complaints completed in 2023/24 and previous two years 2023/24 2021/22 2020/21 Initial Assessment 121 56% 125 60% 227 82% Full Investigation 79 36% 75 36% 49 18% Breach 17 8% 6 3% 39 14% No Breach 62 28% 69 33% 10 4% Withdrawn 18 8% 8 4% 1 0% Total completed 218 208 277 Outcome from cases completed in 2023/24 and previous two years 2023/24 2021/22 2020/21 Initial Assessment 69 54% 56 64% 132 84% Full Investigation 45 36% 26 29% 24 15% Breach 9 7% 5 6% 17 11% No Breach 36 28% 21 23% 7 4% Withdrawn 13 10% 6 7% 1 1% Total completed 127 88 157 9 Outcome of Complaints relating to Renfrewshire Council 9.1 Information has been received separately from the Commissioner that, during the period covered by the report, five complaints were received regarding Renfrewshire Council in 2022/2023. Two of these related to disrespect towards the public/council employees, one related to disrespect towards other councillors and two other complaints related to general disrespect and a conflict of interest. Page 116 of 118
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9.2 Two of the complaints were dismissed at the admissibility stage and did not progress to investigation. Two of the complaints progressed to investigation where the Commissioner found the Councillor had not breached the Code of Conduct. The fifth is still under an open investigation. 10 Hearings 10.1 Under current Directions, the Commissioner reports the outcome of all investigations to the Standards Commission for Scotland (SCS). They may hold a hearing, direct the Commissioner to conduct further investigation or do neither. If the SCS concludes at a hearing that a breach of the Code has occurred, they must impose a sanction. 10.2 Nationally, 36 reports where the Commissioner found there was no breach were submitted to the SCS. There were a further 9 reports which were referred to the SCS where the Commissioner found that a breach had occurred. Renfrewshire Council were not involved in any reports referred to SCS. 11 Code of Conduct 11.1 On 16 August 2023, as part of the programme of events and development opportunities for Councillors, the Head of Corporate Governance provided an annual update to Members on the Code of Conduct/Standards Commission. 11.2 The Council’s Head of Corporate Governance is available for members should they wish to seek advice on the Code of Conduct generally and specifically in relation to the registration and declaration of interests. 12 Public Appointments 12.1 The Commission regulates how Scottish Ministers make appointments to the boards of public bodies that are within their remit. 12.2 The ESC report recognised that further improvements could be made in order to achieve effective boards that were reflective of the communities that they served. The revised Code of Practice for Ministerial Appointments came into effect October 2022 and was making a difference to practices. 12.3 Training was now obligatory for selection panel chairs and for independent panel members and the ESC were happy to assist the Scottish Government in the design of that training programme and it had been received well. The respective roles and responsibilities of everyone engaged in the appointments process was clearer, with considerably more responsibility vested in the panel chair, who fulfils that role on behalf of the appointing minister. There were signs that the new process was reducing bureaucracy, which was one of the intentions, but also that panel chairs were taking considerably more ownership of the appointment process. They were required to report on reasons for the success or failure of the appointment rounds for which they have responsibility. 13 Future Plans 13.1 Having reviewed and completely revised their governance arrangements during the course of the prior year, the ESC are now in a period of relative stability and are Page 117 of 118
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operating to a revised strategic plan for 2021-24 and a new rolling biennial business plan covering all office functions. 13.2 The business plan continues to demonstrate progress against each of the external and internal auditors’ recommendations and they have drafted a new strategic plan to run from 2024-28. Implications of the Report 1 Financial - None 2 HR & Organisational Development – None 3 Community Planning – None 4 Legal - None 5 Property/Assets – None 6 Information Technology - None 7 Equality & Human Rights – The Recommendations contained within this report have been assessed in relation to their impact on equalities and human rights. No negative impacts on equality groups or potential for infringement of individuals’ human rights have been identified arising from the recommendations contained in the report. If required following implementation, the actual impact of the recommendations and the mitigating actions will be reviewed and monitored, and the results of the assessment will be published on the Council’s website. 8 Health & Safety – None 9 Procurement - None 10 Risk – None. 11 Privacy Impact – None 12 Climate Risk – None 13 COSLA Implications – None 14 Children’s Rights – none Author: Dave Low, Democratic Services & Elections Manager 0141 487 1118 Email: david.low@renfrewshire.gov.uk Page 118 of 118