To seek the views of the Scrutiny Management Board on the draft capital investment budget and capital strategy proposals for 2025/26.

The Cabinet Member Finance and Corporate Services provided an overview of the capital investment report. The key points are detailed below:

The council's capital programme aligned with the council plan, covering infrastructure, public services, and strategic development projects. Details of the key projects and budget allocations were provided:

·       Western Bypass 1^st Phase (Southern Link Road) – £30 million allocated.

·       Children’s Play Area – £1 million to enhance child-friendly infrastructure.

·       IT Upgrades – Ensuring digital systems were updated.

·       Public Realm Contract Renewal – Funds set aside to make contracts more accessible to local contractors.

·       Care Homes and Building Improvements – Investment to upgrade facilities.

·       Flood Mitigation – Over £2 million to address long-standing flooding issues.

·       Road Resurfacing and Safety – £5 million allocated for resurfacing and another £5 million for infrastructure upgrades, including addressing three accident-prone “black spots.

·       School Transport Fleet and Planning Software – £50,000 for school route planning software and investments in new school transport.

·       Infrastructure Investment for Growth – Projects intended to support housing and business expansion.

It was explained that the council aimed to increase capital spending from around £80 million in the current year to £134 million next year.

The discussion was opened up to the committee, with key points of debate being listed below:

1. The committee raised concerns about the feasibility of such a rapid increase and highlighted historical delays in capital project execution.

2. Concerns were raised about the risk of overburdening project managers and external factors such as material costs and contractor availability.

o   The Cabinet Member Finance and Corporate Services stated that the administration was confident that the new leadership and staffing structures would be able to drive efficiency.

o   It was explained that previous increases in capital programme delivery had shown improvement, with the current year already surpassing the previous year’s total.

o   The programme had ambitious targets to drive economic growth and to address long-standing infrastructure deficits.

3. The committee noted that phase one of the Western Bypass had been allocated £40 million (£30 million in new funding + £10 million already spent) and asked whether phase one provided value on its own, or whether it was only justifiable as part of the full bypass.

4. The committee pointed out that the project would add £1.5 million per year in repayments over 40 years to the council’s revenue budget and was concerned about how this might impact the council’s financial flexibility and what would happen if the full bypass was never completed.

o   The Cabinet Member Finance and Corporate Services stated that the administration considered it a necessary first step in delivering long-term transport infrastructure. It was suggested that the bypass would be essential in diverting traffic away from Hereford’s city centre, supporting economic growth and new housing, and reducing congestion and pollution.

5. The committee acknowledged these points but countered that the cost of the project might become unsustainable and that there were question marks around secure funding for the full bypass.

6. Certain committee members suggested that alternative infrastructure solutions should be considered.

7. The committee considered the council’s borrowing plan and enquired whether the £40 million for the Western Bypass phase one might affects future borrowing ability, particularly for affordable housing projects and public transport improvements.

o   The Cabinet Member Finance and Corporate Services stated that borrowing remained low relative to financial and other assets, meaning that there was still capacity for additional loans. Repayment costs had been built into the medium-term financial plan (MTFP).

8. There was debate within the committee about the project, with some members suggesting that long-term borrowing should prioritise social housing over roads, others felt that infrastructure such as the bypass would increase business activity and potentially raise future revenue.

9. The committee voiced concerns about an apparent lack of strategic integration, with members struggling to see clear connections to the capital programme, the revenue budget and the council’s strategic priorities.

10. The committee called for better reporting to show how capital spending would support key council objectives such as housing, climate and transport. A request was made for a clearer explanation of how investment decisions would align with council priorities.  

11. Some committee members felt that the Capital Strategy document lacked vision and was more like a project delivery plan than a forward-looking strategic roadmap.

12. The committee discussed the use of a £3.4 million government grant for waste and recycling that had been Intended to help local authorities prepare for handling additional recyclable waste.

o   The Cabinet Member Finance and Corporate Services explained that the administration had reallocated the funding into general revenue, arguing that the council had already met its waste responsibilities and there were no immediate additional costs for handling new waste streams.

13. Some members of the committee suggested that the money should be ring-fenced for its intended purpose and called for greater transparency regarding how the money was being spent

14. The committee discussed treasury management and investment income and queried whether the budget had underestimated investment income from council reserves. It was noted that the previous administration had allocated these funds for targeted support, such as assisting struggling households, but the current administration had not clearly stated how the additional income would be used.

15. The committee requested that the council should be more transparent about financial projections and contingency plans.

At the conclusion of the debate, the committee discussed potential recommendations and the following resolutions were agreed:

Resolved:

1. That Herefordshire Council provide a report to Scrutiny Management Board on the planned improvements around adult social care, an assessment of the likely impact they will have on mitigating future budget pressures in the medium-term financial strategy, and any analysis of the future demands on the service.
2. That the council’s capital programme be reprofiled over the lifetime of the programme.
3. That the council’s budget includes a more realistic estimate of the interest likely to be received through treasury management.
4. Restating the Scrutiny Management Board recommendation from 2024 that future draft budgets should be accompanied by a draft delivery plan.
5. The capital strategy should be developed to show more clearly how the capital programme will deliver council plan priorities.