Cost of living crisis could hit West Berkshire Council spending plans

West Berkshire Council’s spending programme is forecasting an £11m underspend – largely because of delays to projects.

But future projects are at risk of cuts because of the cost of living crisis, according to a report to the council’s executive committee.

Current construction inflation forecasts for 2022 indicate around eight to 10 per cent.

The report says the impact is that current contracts are subject to a "reduction in scope" to deliver within agreed financial terms and that costs for new projects are subject to significant increases.

The Government has also tightened up how councils can borrow money to fund projects – to stop them borrowing money to make money.

To comply with the Prudential Code, authorities must not borrow to invest primarily for financial return unless directly and primarily related to the functions of the authority.

This could see plans for the council’s wish to borrow around £19m to build a solar farm at Grazeley questioned. It is unclear if the council is arguing that the solar farm is intrinsic to its operation – a condition which could permit the loan.

Councillors have been told the investment could bring in as much as £3m a year, and it has been heralded by councillors as much for its green currency as its fiscal one.

The Prudential Code requires authorities to look at capital and investment plans in light of overall organisation strategy and resources to ensure that decisions are made with sufficient regard to the long-term financing implications and risks to the council.

West Berkshire Council has borrowed £191.2m 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 borrowing to £186.9m if no further long-term borrowing is taken out during the current financial year.

Furthermore, the Government clampdown could also see councils sell owned commercial assets to pay for things, rather than borrowing more from the Government.

Councils with existing commercial investments that expect to need to borrow must now review the options for selling these investments.

West Berkshire Council says it has £969,000 of planned spending to be funded by external borrowing to refit its own commercial property portfolio,

The 2022/23 capital programme was agreed by the council in March 2022 with a gross expenditure budget of £65.6m split between externally funded expenditure of £28.7m and £36.9m of council funded expenditure.

The financial position and risks associated with delivery of the capital programme will be monitored throughout the financial year by Capital Strategy Group.

Forecast underspends in projects including the Downlands Sport Centre replacement and Northcroft Leisure Centres are attributed to delays in the projects as is the £1.4m projected underspend on the Robin Hood Roundabout scheme.

The Newbury Station redevelopment forecasts an underspend of £3m, with the Theale Station upgrade forecasting a £1.4m underspend.