Financial Crisis Affecting Affordability Of Council's Capital Programme
24th October 2022
A number of reports to Council have set out the context of the ongoing financial crisis across the UK. Members will consider the latest impacts on the Capital Programme at the Council meeting on 27 October.
A range of factors, including the pandemic, Brexit, the war in Ukraine, and related impacts continue to affect the Council and communities across Highland.
Key challenges affecting the current approved Capital Programme, include cost pressures arising from inflation levels, shortage of products and materials, and lack of availability of contractors and sub-contractors. The recent unforeseen rises in interest rates have had a further significant impact on the affordability of the Programme, along with the rising costs of materials and labour costs.
Rising interest rates pose a risk to future revenue budgets for decades to come. Interest rates continue to be volatile and it is therefore difficult to predict the future trend with any degree of certainty.
As an example, to illustrate the impact of these factors, the total cost payable for a primary school project financed by borrowing costing £15m at a 2% interest rate would have been £22.9m. If the capital cost of that project has now risen to £20m and with interest rates now approximately 5% the overall project cost increases to £50.7m, an increase of £27.8m, and more than double the original payback cost.
Leader of The Highland Council, Cllr Raymond Bremner said: "We can't underestimate the wider impacts of the present fast-moving financial crisis we find ourselves in. When the current Programme was set in December 2021, interest rates continued to remain at historically low levels and, on average, long-term borrowing for up to 60 years could be obtained at an interest rate of around 2%.
"There is much in the Capital Programme we need and want to progress. However, this is a phenomenal situation which has the potential to worsen in the coming months. It is imperative that we have a full understanding of the long-term consequences of any decisions we make."
Members will consider the risks highlighted in the report at Council on 27 October prior to the capital programme being brought back to the December Council meeting following a full review.
Read the Capital paper HERE
Related Businesses
Related Articles
At the Highland Council Economy and Infrastructure Committee. (Thursday 2 May 2024) Members had the opportunity to review the work the Council is doing to progress active travel and improve road safety before approving the next steps.
At the meeting of the Economy and Infrastructure Committee members had the opportunity to review the last two years of the Community Regeneration Funding Programme before agreeing changes to how the 2024/25 programme will be delivered. Committee Chair, Cllr Ken Gowans said: "Following a successful two years, it is a good time to review what has gone well and what can be done better so we can continue to build on success, and seamlessly move the focus onto how best to support the delivery of projects." "With 279 live projects and over £6million of committed funds still to be claimed, there is no doubt as to the value and impact of the programme's potential.
The Highland Council's In-House bus service pilot project was launched in January 2023. The success of its first year of operation in delivering savings and creating a valued and reliable service was highlighted at today’s Economy and Infrastructure Committee.
Members of Highland Council's Economy and Infrastructure Committee today (2 May 2024) approved the local authority's draft Ecology Strategy and Action Plan which will now move forward to an 12-week public consultation. The Ecology Strategy sets out an ambitious set of actions to tackle biodiversity loss and address the ecological emergency.
Economy and Infrastructure Committee members today (2 May 2024) agreed to direct £100K from the Council's share of the UK Shared Prosperity Fund (UKSPF) to fund a new staff training programme at the Inverness Castle Experience. The funding will enable the project team to provide specialist visitor attraction training to young people identified through partners at Developing the Young Workforce (DYW) and the University of the Highlands and Islands (UHI).
The Housing and Property Committee met on Wednesday 1 May 2024 and noted the Housing Service performance report 2023/24 that met the agreed priorities and associated initiatives in the Local Housing Strategy 2023-2028. The report highlighted a number of achievements in 2023/24 in increasing housing supply.
Kate Lackie, Malcolm MacLeod and Allan Gunn have been appointed as Assistant Chief Executives with The Highland Council. Convener of the Council, Cllr Bill Lobban said: "I am delighted to say that Kate Lackie, Malcolm MacLeod and Allan Gunn have been appointed as Assistant Chief Executives with The Highland Council.
As intimated in Highland Council's budget plan, a new senior management structure is to be implemented following approval by Council 14th March. It reconfigures the senior management team into two layers, rather than three and brings Highland Council into line with other benchmarked authorities.
Today, Morrison Construction introduced some of their local apprentices who are working on the UK Governments' Levelling Up Funded refurbishment project at the Northern Meeting Park in Inverness. All these apprentices have been recruited from the Highland area.
The by-election to elect a councillor to represent Ward 19 - Inverness South on The Highland Council has been won by Duncan Cameron McDonald - Independent who was one of the eight candidates who contested the vacancy. Voters in the ward went to the poll yesterday (Thursday 11 April) and the by-election count was held this morning in The Highland Council Headquarters in Inverness.
