The
prudential framework for self-management of capital finance focuses upon the
following elements:
The
prudential indicators are designed to support and record local decision making
in these three areas.
In the
Prudential Code, the indicators are set out according to whether they are
indicators of affordability or prudence. This is necessary for an understanding
of the role each indicator plays in the overall decision-making framework. The
indicators are listed below:
- Estimate of the incremental impact of capital
investment decisions upon Council Tax. It is important to note that all
associated borrowing is supported and any saving through not undertaking the
programme would be a one off, as a result of the probable loss of FSS for later
years.
- Ratio of financing costs to net revenue stream
- Net borrowing and the capital financing
requirement
- Confirmation that treasury
management is carried out in accordance with good professional practice
- External debt within prudential
and sustainable limits
Capital Expenditure
- Estimates
of Capital expenditure
- Capital
financing requirement
External Debt
- Authorised
limit
- Operational
boundary
Treasury
Management
- Interest
rate exposures
- Maturity
structure of borrowing
- Total
principal sums invested for periods in excess of 364 days
The
prudential indicators are not designed to be comparative performance
indicators, and to use them in this way would be misleading. It is only
intended that they be used to measure performance within the authority over
time. It also needs to be borne in mind that the indicators need to be
considered collectively, rather than individually.
NOTES
1. Ratio
of financing costs to net revenue stream is the total of capital financing
costs divided by the Councils total income from Council Taxpayers and
Government Grants as contained in its Consolidated Revenue account
2. The
Capital Financing Requirement (CFR) is a new measure introduced by the
Prudential Code, which represents the amount of capital spending which has yet
to be financed.
3. The
operational boundary for external debt represents the maximum level of
borrowing that the Council is planning to have outstanding from its spending
plans. The authorised limit on borrowing is set at a higher level in order to
cover any unavoidable and unforeseen borrowing that may become necessary due to
adverse cash flow movements.
The
following sets out, for approval, the mandatory indicators recommended by the
Prudential Code –
|
Indicator |
Basis |
Period |
Definition |
SCC Methodology |
Unit |
2005/06 |
2006/07 |
2007/08 |
|
Affordability |
|
|
|
|
|
|
|
|
|
Estimates
of ratio of financing costs to net revenue stream |
Estimate |
Years 1,
2 and 3 |
Estimate
of financing costs / estimate of net revenue stream x 100% |
Interest
payable re. borrowing + interest payable re. finance leases + gains/losses on
early settlement of borrowing - interest on investments + MRP |
% |
7.53% |
8.10% |
8.77% |
|
Estimates
of the incremental impact of capital investment decisions on Council Tax |
Estimate |
Years 1,
2 and 3 (and longer as necessary) |
(i)
forecast the total budgetary requirements for the authority based on no
changes to the existing capital programme |
(i)
Council Tax requirement under existing plans |
£ per Band D Equivalent |
9.44 |
45.93 |
85.17 |
|
(ii)
forecast the total budgetary requirements for the authority with the changes
proposed to the capital programme |
(ii)
Council tax requirement including proposed capital scheme |
% |
0.95% |
4.61% |
8.55% |
|||
|
(iii)
addition or reduction to Council Tax as a result of the difference between
(i) and (ii) |
(ii) -
(i) |
|||||||
|
Capital
Expenditure |
|
|
|
|
|
|
|
|
|
Estimates
of capital expenditure |
Estimate |
Years 1,
2 and 3 (and longer as necessary) |
Estimate
of total capital expenditure to be incurred |
Capital
budgets |
£000 |
25,607 |
31,691 |
19,429 |
|
Estimates
of capital financing requirement (CFR) |
Estimate |
Years 1,
2 and 3 |
Estimate
of underlying need for credit as at the end of years 1, 2, 3 |
Fixed
assets + deferred charges + FARR + Capital Financing Reserve + government
grants deferred + credit arrangements |
£000 |
164,793 |
184,663 |
191,041 |
|
External
Debt |
|
|
|
|
|
|
|
|
|
Authorised
limit (for borrowing) |
Estimate |
Years 1,
2 and 3 |
Authorised
limit for borrowing. |
Estimates
of borrowing + other long term liabilities (3rd party balances, provisions,
amounts outstanding on leases, government grants deferred and other
contributions deferred) |
£000 |
181,000 |
203,000 |
210,000 |
|
Authorised
limit (for other long term liabilities) |
Estimate |
Years 1,
2 and 3 |
Authorised
limit for other long term liabilities |
Estimates
of borrowing + other long term liabilities (3rd party balances, provisions,
amounts outstanding on leases, government grants deferred and other
contributions deferred) |
£000 |
10,000 |
10,000 |
10,000 |
|
Authorised
limit (for total external debt) |
Estimate |
Years 1,
2 and 3 |
Authorised
limit for borrowing + authorised limit for other long term liabilities |
Estimates
of borrowing + other long term liabilities (3rd party balances, provisions, amounts
outstanding on leases, government grants deferred and other contributions
deferred) |
£000 |
191,000 |
213,000 |
220,000 |
|
Operational
boundary (for borrowing) |
Estimate |
Years 1,
2 and 3 |
Operational
boundary for external debt |
As above
less contingency provision. |
£000 |
165,000 |
185,000 |
191,000 |
|
Operational
boundary (for other long term liabilities) |
Estimate |
Years 1,
2 and 3 |
Operational
boundary for external debt |
As above |
£000 |
10,000 |
10,000 |
10,000 |
|
Operational
boundary (for total external debt) |
Estimate |
Years 1,
2 and 3 |
Operational
boundary for external debt + operational boundary for other long term
liabilities |
As above |
£000 |
175,000 |
195,000 |
201,000 |
|
Treasury
Management |
|
|
|
|
|
|
|
|
|
Adoption
of the CIPFA Code of Practice for Treasury Management in the Public Services |
|
|
The Local
Authority has adopted CIPFA's Code of Practice |
|
ADOPTED FEBRUARY 2003 |
ü |
ü |
ü |
|
Fixed
interest rate exposure - upper limit |
Estimate |
Years 1,
2 and 3 |
Interest
payable on borrowing at fixed rates - interest receivable on fixed rate investments
or principal sums outstanding in respect of borrowing at fixed
rates - principal sums outstanding in respect of investments at fixed rates |
Upper
limit |
% |
100% |
100% |
100% |
|
Variable
interest rate exposure - upper limit |
Estimate |
Years 1,
2 and 3 |
Interest
payable on borrowing at variable rates - interest receivable on variable rate
investments or principal sums outstanding in respect of borrowing at variable
rates - principal sums outstanding in respect of investments at variable
rates |
Upper
limit |
% |
20% |
20% |
20% |
|
Maturity
structure of borrowing (upper and lower limits) |
Estimate |
All years |
Amount of
projected borrowing that is fixed rate maturing in each period / total
projected borrowing that is fixed rate x 100% |
Ranges
for each period |
|
See below |
See below |
See below |
|
Total
principal sums invested for periods longer than 364 days |
Estimate |
All years |
Total
principal sum invested to final maturities beyond the period end |
|
£000 |
10,000 |
10,000 |
10,000 |
|
Maturity Structure of Borrowing |
|
|
|
|
2005-06 |
Future Years |
|
|
Period |
|
|
|
Upper Limit |
Lower Limit |
Upper Limit |
Lower Limit |
|
Under 12
months |
|
|
|
10% |
0% |
10% |
0% |
|
12 months
and within 24 months |
|
|
|
10% |
0% |
10% |
0% |
|
24 months
and within 5 years |
|
|
|
20% |
0% |
20% |
10% |
|
5 years
and within 10 years |
|
|
|
50% |
25% |
50% |
25% |
|
10 years
and above |
|
|
|
95% |
50% |
95% |
50% |