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% |