Issue - meetings

To provide Members with an update on changes to the Statutory Guidance: “Capital Finance: Guidance on Minimum Revenue Provision” and its impact on the Council (report of the Deputy Chief Executive – Corporate Development (S151) enclosed).

Consideration was given to the report of the Deputy Chief Executive – Corporate Development (S151) which provided members with an update on changes to the Statutory Guidance: “Capital Finance: Guidance on Minimum Revenue Provision” and its impact on the Council.

The Interim Treasury Manager (PSPS) introduced the report which included:

• That recent changes to the statutory guidance were to be mainly effective from the 2025/2026 financial year;
• That the guidance prescribed how councils calculated their annual Minimum Revenue Position (MRP) charge for all unfinanced capital expenditure, which made up its Capital Financing Requirement (CFR);
• That the update impacted how MRP was to be calculated on the unfinanced capital equity investments in respect of Welland Homes, the consequence of which represented an increased budget pressure for the council; and
• Appendix 1 outlined Welland Homes Equity MRP based on an annuity rate of 5.94% over 50 years. The column figures were correct as stated and not represented in £’000s as indicated.

Members considered the report and made the following comments:

• Members referred to Appendix 1 and queried whether the ‘MRP charge @ annuity’ column represented unusable revenue.
  • The Interim Treasury Manager (PSPS) clarified that the column represented the amount charged annually to the Revenue Account; and
  • The Deputy Chief Executive – Corporate Development (S151) added that:
    • The government had adopted a methodology which discouraged councils from undertaking share capital and investment activities, such as Welland Homes, in that any benefit received was to be offset by the MRP charge;
    • Under the new methodology, the MRP charge had become irreversible and thereby created a double prudence approach to the value of assets. Even where value was asset-backed, councils were being forced to write-off the benefit; and
    • Although the consequence of this approach increased the value of councils’ cash balances, these could not be spent for revenue. 

AGREED:

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

2)    That the proposed changes to the 2025/26 MRP Policy, to be recommended to Council as part of the budget setting report (included in the Treasury Management Strategy 2025/26) which detailed how MRP will be calculated on the unfinanced capital equity investments in Welland Homes, be noted; and

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