Cost of living crisis could hit West Berkshire Council spending plans
West Berkshire Council’s spending program foresees an underspending of £11million, mainly due to project delays.
But future plans are likely to face cuts due to the cost-of-living crisis, according to a report to the council’s executive committee.
Current construction inflation forecasts for 2022 point to around 8-10%.
The report says the impact is that current contracts are subject to a “reduction in scope” to deliver within agreed financial terms and the costs of new projects are subject to significant increases.
The government has also tightened the way councils can borrow money to fund projects – to stop them borrowing money to make money.
To comply with the Prudential Code, authorities should not borrow to invest primarily for financial return unless directly and primarily related to the functions of the authority.
This could challenge the council’s wish to borrow around £19m to build a solar farm in Grazeley. It is unclear whether the council is arguing that the solar farm is intrinsic to its operation – a condition which could allow the loan.
Advisors were told the investment could yield up to £3m a year, and was advertised by advisors as much for its green currency as for its tax currency.
The Prudential Code requires authorities to review capital and investment plans in light of the organization’s overall strategy and resources to ensure that decisions are made with sufficient consideration of the financial implications at term and risks for the board.
West Berkshire Council borrowed £191.2 million from the Public Works Loans Board.
Principal repayments of £4.3m are due by March 31, 2023, which will reduce the total level of long-term borrowings to £186.9m if no further long-term borrowings occur. is contracted during the current fiscal year.
In addition, the government crackdown could also see councils selling held business assets to pay for things, rather than borrowing more from the government.
Boards with existing business investments that expect to need to borrow now need to consider options for selling those investments.
West Berkshire Council says it has £969,000 of planned spending to be funded by external borrowing to redevelop its own portfolio of commercial properties,
The 2022/23 Capital Program was approved by Council in March 2022 with a gross expenditure budget of £65.6m split between externally funded expenditure of £28.7m and 36 £.9m council-funded expenditure.
The financial condition and risks associated with the execution of the capital program will be monitored throughout the year by Capital Strategy Group.
Projected underspending on the projects, including the replacement of the Downlands Sports Center and Northcroft Leisure Centres, are attributed to the delays to the projects, as is the planned underspending of £1.4m for the project from the Robin Hood roundabout.
The redevelopment of Newbury station foresees an underutilization of £3 million, with the upgrade of Theale station foreseeing an underutilization of £1.4 million.