Issue - meetings

(a)       That the following be approved for Council Fund (CF)

• Option 3 (Asset Life Method) be used for the calculation of the MRP in financial year 2020/21 for the balance of outstanding capital expenditure funded from supported borrowing fixed as at 31 March 2017.  The calculation will be the ‘annuity’ method over 49 years.

• Option 3 (Asset Life Method) be used for the calculation of the MRP in 2020/21 for all capital expenditure funded from supported borrowing from 1 April 2016 onwards.  The calculation will be the ‘annuity’ method over an appropriate number of years, dependent on the period of time that the capital expenditure is likely to generate benefits.

• Option 3 (Asset Life Method) be used for the calculation of the MRP in 2020/21 for all capital expenditure funded from unsupported (prudential) borrowing or credit arrangements.

(b)       That the following be approved for Housing Revenue Account (HRA) 

• Option 2 (Capital Financing Requirement Method) be used for the calculation of the HRA’s MRP in 2020/21 for all capital expenditure funded by debt.

(c)        That MRP on loans from the Council to NEW Homes to build affordable homes through the Strategic Housing and Regeneration Programme (SHARP) (which qualify as capital expenditure in accounting terms) be approved as follows:

• no MRP is made during the construction period (of short duration) as the asset has not been brought into use and no benefit is being derived from its use.

• once the assets are brought into use, capital repayments will be made by NEW Homes.  The Council’s MRP will be equal to the repayments made by NEW Homes.  The repayments made by NEW Homes will be classed, in accounting terms, as capital receipts, which can only be used to fund capital expenditure or repay debt.  The capital repayment/capital receipt will be set aside to repay debt, and is the Council’s MRP policy for repaying the loan.

The Corporate Finance Manager introduced the report to seek approval for setting the Council’s annual policy for the Minimum Revenue Provision for the prudent repayment of debt for the financial year 2020/21.   He provided background information and advised that the Council, as part of the budget strategy, conducted a detailed review of its MRP policy in 2016/17 and 2017/18 and had amended the policy as a result.  The Corporate Finance Manager advised that local authorities were legally required to set a policy for each financial year and it was recommended that the 2020/21 MRP policy remained the same as that of 2019/20 

Councillor Glyn Banks moved the recommendations in the report and this was seconded by Councillor Billy Mullin.

Councillor Richard Jones referred to the concerns he had raised at a previous meeting around the MRP and said he felt it was unfair to pass the burden of higher repayments onto future generations.  He suggested that the Council revert back to the ‘straight-line’ graph to alleviate pressure in the future and asked Officers if he could be told the cost to do that.  The Chief Executive agreed that this could be taken into account during  consideration of the Medium Term Financial Strategy.   

RESOLVED:

(a)       That the following be approved for Council Fund (CF)

• Option 3 (Asset Life Method) be used for the calculation of the MRP in financial year 2020/21 for the balance of outstanding capital expenditure funded from supported borrowing fixed as at 31 March 2017.  The calculation will be the ‘annuity’ method over 49 years.

• Option 3 (Asset Life Method) be used for the calculation of the MRP in 2020/21 for all capital expenditure funded from supported borrowing from 1 April 2016 onwards.  The calculation will be the ‘annuity’ method over an appropriate number of years, dependent on the period of time that the capital expenditure is likely to generate benefits.

• Option 3 (Asset Life Method) be used for the calculation of the MRP in 2020/21 for all capital expenditure funded from unsupported (prudential) borrowing or credit arrangements.

(b)       That the following be approved for Housing Revenue Account (HRA) 

• Option 2 (Capital Financing Requirement Method) be used for the calculation of the HRA’s MRP in 2020/21 for all capital expenditure funded by debt.

(c)        That MRP on loans from the Council to NEW Homes to build affordable homes through the Strategic Housing and Regeneration Programme (SHARP) (which qualify as capital expenditure in accounting terms) be approved as follows:

• no MRP is made during the construction period (of short duration) as the asset has not been brought into use and no benefit is being derived from its use.

• once the assets are brought into use, capital repayments will be made by NEW Homes.  The Council’s MRP will be equal to the repayments made by NEW Homes.  The repayments made by NEW Homes will be classed, in accounting terms, as capital receipts, which can only be used to fund capital expenditure or repay debt.  The capital repayment/capital receipt will  ...  view the full minutes text for item 112