To recommend to Council for approval the revised capital investment budget and capital strategy for 2026/27 onwards.

 

It was noted that Councillor Harvey had to leave the meeting and Councillor Hitchiner acted as substitute for Group Leader for the remaining items.

 

Councillor Stoddart, cabinet member for finance and corporate services introduced the report. 

 

The Cabinet received the final version of the 2026/27 Capital Investment Budget and accompanying Capital Strategy. It was noted that the capital programme reflects long?term investment (over one year) and that inclusion in the programme does not constitute approval to proceed; all projects will be subject to full governance and business case processes.

 

No changes had been made since the draft report was previously presented on 20 January 2026.

 

Public consultation (November to December 2025) showed strong support for the proposed additions, particularly for maintaining investment in highways maintenance and street lighting. The Scrutiny Management Board (SMB) reviewed the programme on 23 January 2026 and had no comments on the capital programme.

 

The proposed additions to the 2026/27 Capital Programme will enable the Council to:

• Increase temporary and emergency accommodation (£10m).
• Address revenue pressures through alternative school provision and Pupil Referral Units.
• Improve technological infrastructure and innovation.
• Support housing growth through new infrastructure.
• Strengthen school and property assets.
• Improve public rights of way access.
• Continue investing in the county’s road network.

 

Appendix A set out the 14 capital proposals totalling £44m, funded through prudential borrowing, capital receipts, and revenue reserves.

 

It was noted that responding to housing needs remains a high priority; an additional £10m has been allocated to deliver new housing solutions, reducing reliance on temporary accommodation and lowering revenue costs by £1.7m per year. The Strategic Housing Team has supported the delivery of over 1,491 homes since April 2020.

 

A new £5m Historic Building Fund has been created to support works at key heritage buildings. The S151 Officer will allocate funds once final contract prices are confirmed.

 

A review of the current capital programme took place which has removed or re?funded several projects (identified at paragraph 13 of the report), releasing £2.65m and reducing reliance on borrowing.

 

The Capital Strategy (Appendix D) has been developed in line with CIPFA guidance and outlines the Council’s approach to prioritisation, borrowing, and risk.

 

The Cabinet Member endorsed the report, highlighting alignment with the Council Plan and the administration’s commitment to delivering for Herefordshire, and commended the three recommendations to Cabinet for approval.

 

No comments from cabinet members. 

 

Group Leaders were invited to offer their views:

 

The Liberal Democrat Group outlined their views and noted that:

 

Support was expressed for progressing Phase One of the bypass, noting it should have been completed years earlier to avoid the current revenue impact. They also welcomed the temporary accommodation investment for affordable housing, recognising the benefits for homeless individuals and families. However, they highlighted the absence of significant investment in expanding social and affordable housing within the capital programme. Although work on a housing development company had been ongoing since December 2023, and a business plan indicated longer?term viability, no capital funding had been allocated. It was raised whether remaining barriers were financial rather than structural and suggested that a lack of political will was preventing progress. The Group urged Cabinet to reconsider and include meaningful investment in social and affordable housing.

 

The Green Group outlined their views and noted:

 

Concerns were raised about elements of the capital budget, noting that while some proposals such as borrowing for strategic housing and investment in alternative and SEND education provision would help reduce future revenue costs, other areas were more problematic. Particular concern was expressed about the proposed £5m loan for the Southern Link Road, with the total cost now estimated at £45.3m. It was argued that this financial burden would fall entirely on Herefordshire taxpayers without evidence of value for money, a full business case or transport modelling.

 

It was emphasised that previous administrations had not received or returned government funding for the scheme, and that the project would not deliver a river crossing or meaningful reductions in congestion.

 

They noted that repaying the loan would reduce the council's ability to fund measures that benefit residents particularly young people. Reference was made to the council's previous commitment to explore extending college bus passes for 16–19?year?olds; however, members were advised that the proposal had been withdrawn and would not proceed. Concerns were raised that this decision undermined support for young people in accessing education, training and leisure opportunities.

 

It was highlighted a £1.2m reduction in spending across market towns due to changes in public realm investment, pending clarification. They commented that while parts of the capital programme were positive, the overall package required the council to accept proposals they found deeply concerning.

 

The Independent for Herefordshire Group outlined their views and noted:

 

Councillor Hitchiner declared an interest due to owning property near the bypass.

 

Concerns were raised about the deteriorating condition of roads and the recurrence of potholes despite previous repairs. The appropriateness of committing to high levels of capital expenditure when reserves were projected to fall significantly, noting that continued reductions could leave very limited funds in future years was queried. Ongoing investment in school projects at Aylestone Hill and Peterchurch were welcomed.  It was suggested that further opportunities may exist for capital investment that delivers future savings, while acknowledging that decisions on major schemes must be made carefully and should not place undue pressure on council resources.

 

In responding to the comments raised, the Cabinet Members noted that:

The importance of continued partnership working with housing providers to expand the supply of social and affordable housing was emphasised. It was reported that the Strategic Housing Team had supported the delivery of 1,298 homes between 2020 and March 2025, with a further 193 homes delivered so far in 2025/26, including social rent, affordable rent, shared ownership, low?cost market housing and first homes. The administration reaffirmed that housing remained a priority and highlighted ongoing work to bring empty properties back into use.

It was further noted that investment in new housing solutions will significantly improve the lived experience of individuals and families currently placed in temporary accommodation, providing better quality support than existing arrangements. Such investment was also expected to have longer?term benefits by helping people stabilise their lives and potentially reducing future demand on adult social care services.

 

In relation to affordable housing, it was confirmed that while significant work had been undertaken to progress a business case, current budget pressures prevented the council from investing at the scale originally intended. However, the commitment to work with partners and make best use of available resources remains, and further progress in leveraging partnership arrangements will become increasingly evident to councillors and residents as work continues.

 

The recent spike in potholes was acknowledged, noting that this is typical during periods of wet and cold weather. It was emphasised that this must be viewed in the context of the record levels of investment being made in road improvements. Ongoing resurfacing, patching and surface?dressing works were being delivered based on condition intelligence, with a more strategic approach helping to address recurring defects where previous repairs had failed.

 

It was reported that there had been around 9,000 pothole reports in January, of which approximately 3,000 had already been repaired. The increase in defects was attributed in part to historic under?investment in the network over the last five to six years. By comparison, £46–47m had been invested in 2025/26, whereas £27m had been invested in the previous year. It was noted that the backlog caused by earlier under?investment was still being addressed.  It was further noted there was severe deterioration on certain routes due to longstanding issues. Upcoming works were referenced, including a three?week closure for essential repairs and preparation for future surface?dressing. Seasonal increases in potholes were acknowledged as a recurring annual issue, and the current strategy for addressing them was reaffirmed.

 

The comments around continuation of investment in schools was welcomed, with education and support for young people identified as a key priority.

 

It was noted that all capital projects were assessed for their potential to reduce future revenue expenditure. In Children and Young People services, the proposed investments in alternative provision and the Pupil Referral Unit (PRU) were highlighted as clear spend?to?save initiatives. The current cost of educating a child within Herefordshire is approximately £17,000 per year, compared with around £75,000 when placements are made outside the county. With 60–75 children currently placed externally, at an estimated transport and placement cost of around £60,000 per child, the new facilities will significantly reduce these high ongoing revenue pressures.

 

Regarding the bypass it was stated that previous administrations had been working to secure funding for the scheme, including pursuing support from the Treasury for a £180m package, but that this funding did not progress following changes in administration at the end of 2019. It was also noted that earlier proposals for an Eastern River crossing had been assessed and found to be significantly more expensive than suggested. It was additionally noted, following a Freedom of Information request, that £2.3m had been repaid to the LEP under an agreed arrangement.

 

In relation to the proposal for extended bus passes for young people, it was clarified that the bus service team had undertaken detailed work to assess the potential costs. The figures indicated that delivering the offer at scale would be unaffordable within the current budget. Work remains ongoing with local bus operators to explore options for a feasible pilot scheme within the next 12 months, though no scheme has yet been identified.  Assurances were made that all options will be considered to keep all councillors appraised regarding bus passes for young people.

 

The Leader of the Council concluded the discussions. Councillor Stoddart proposed the recommendations and the Leader of the Council seconded the proposal for the decision before them which is that Cabinet:

 

Recommendations:

That: Cabinet recommends the following to Council

a)    To approve the revised capital programme for 2026/27 attached at appendix C;

 

b)    Approve the capital strategy at appendix D; and

 

c)    Approve the Flexible Use of Capital Receipts of up to £1.0 million in 2026/27, to support transformation to generate ongoing revenue savings and reduce service delivery costs in future years.

 

The recommendations were unanimously approved.