Agenda item

(A report by Christine Marshall, Deputy Chief Executive – Corporate Development (S151))

The Treasury & Investments Manager (PSPSL) presented the update on changes to statutory guidance on minimum revenue provision. The new guidance required the Council to make an annual MRP charge based on the lifetime of the asset, with a maximum useful life of 20 years for equity investments. The Council would use a 50-year term for property fund investments.

The Treasury & Investments Manager (PSPSL) highlighted the following key points:

·       Background: The Council was required to approve its MRP policy each year as part of the budget setting report. The MRP was the annual charge to the revenue account for the repayment of debt.

·       New Guidance: The Secretary of State issued new guidance on 10^th April 2024, effective from 1^st April 2025. This guidance impacted how the Council calculated its MRP, particularly for unfinanced capital loans and equity investments.

·       Unfinanced Capital Loans: The Council currently had no unfinanced capital loans, so this change did not affect the Council.

·       Unfinanced Equity Investments: The Council must now make MRP for unfinanced equity investments, including property funds. The Council currently made an annual MRP charge of £50,000 for its property fund investments.

·       MRP Calculation: The Council could use either the straight-line method or the annuity method for calculating MRP. The recommendation was to use the annuity method based on a 50-year term and the PWLB annuity rate at the date of the policy change.

·       Financial Impact: The new MRP policy was to increase the annual MRP charge, starting with an additional £5,248.52 in 2025-26.

Councillor Paul Gleeson queried whether there was a need to set aside money for investments. The Deputy Chief Executive - Corporate Development (S151) advised that the new guidance aimed to ensure that councils were prudent in their financial planning. Even if the assets retained or increased in value, the MRP ensured that the debt associated with them was repaid over time.

Councillor Chris Mountain queried when the policy was to take effect and whether it was a control tactic from central government. The Deputy Chief Executive - Corporate Development (S151) advised that the policy was due to come into effect on 1^st April 2025. She added that it was a measure to ensure councils were cautious with their investments and to discourage excessive risk-taking.

Councillor Anton Dani queried what was to happen to the Council’s assets should a local government reorganisation take place. The Deputy Chief Executive - Corporate Development (S151) advised that the in the event of a reorganisation, the assets would be transferred to the new unitary authority, and the balance sheets would be combined.

The recommendation was moved by Councillor Anton Dani and seconded by Councillor Chris Mountain.

RESOLVED:

1.     That the changes to Statutory Guidance “Capital Finance: Guidance on Statutory Minimum Revenue Provision” be noted;

2.     That any feedback be provided to Cabinet on 19th February 2025 and Full Council on 3rd March 2025 as part of the Annual Budget report; and

3.     That the increased MRP budget pressure on the Council, in relation to its total unfinanced capital equity investment in Property Funds starting from the 2025/26 financial year, be noted.