Appendix E
Prudential Indicator Monitoring Period 6 (September) 2012/13
The 2012/13 prudential indicators were calculated based on the Council’s existing
commitments, current plans for revenue and capital as recommended in the 2012/13
budget report to 6 February 2012 Cabinet. The 2011/12 outturn figures were
reported to Cabinet on 11 June 2012.
A
AFFORDABILITY
A1
Ratio of financing costs to net revenue stream
The outturn for 2011/12 along with the estimates and revised position for
2012/13 for the ratio of financing costs to net revenue stream are as follows:
Ratio
A2
2011/12
2012/13
2012/13
Actual
Estimate
Rev Est (P6)
%
%
%
(3.13)
(1.95)
(1.95)
Estimates of the impact of capital investment decision on Council Tax
The code requires the impact of alternative capital investment decisions on
Council Tax to be calculated, and reflects the incremental impact of new
capital decisions proposed over and above the capital investment decisions
that have already been taken in the past by the Council, and therefore relates
only to the new resources to be committed. These indicators take into
consideration the effects of self-financing and the effects of government
support, along with any associated impact on interest receivable/due as a
consequence of the financing methods used. They also reflect the revenue
implications of capital schemes other than financing costs, such as additional
support contracts for new computer systems. The table below indicates the
incremental impact of the capital investment decisions proposed for 2012/13
based on a Band D property. This is a purely notional calculation designed to
show the effect of changes in capital investment decisions.
Band D
2011/12
2012/13 to
2014/15
2012/13 to
2014/15
Actual
Estimate
Rev Est (P6)
£
£
£
2.65
2.71
1.48
The reduction in this indicator between the original and the revised estimate
at period 6 is mainly due to the reduced interest rates assumed for investment
returns in the future which are used to calculate the cost of the internal
resources to fund the programme.
A3
Affordable Borrowing Limit
Section 3 of the Local Government Act 2003 requires the Council to
determine and keep under review how much it can afford to borrow. The
amount determined is termed the “Affordable Borrowing Limit”.
The Council must ensure when setting this limit that its capital investment
plans remain within sustainable limits, and that the impact upon its future
council tax and rent levels is acceptable.
The limit includes both external borrowing and other forms of liability, such as
credit arrangements.
Appendix E
Affordable Borrowing Limit
2011/12
2012/13
2012/13
Actual
Estimate
Rev Est
(P6)
£,000
£,000
£,000
9,325
9,556
9,556
B
PRUDENCE
B1
Net Debt and the Capital Financing Requirement
This is a key indicator of prudence. In order to ensure that over the medium
term net borrowing will only be for a capital purpose, the Council should
ensure that the net external borrowing does not, except in the short term,
exceed the total of the capital financing requirement in the preceding year
plus the estimates of any additional increases to the capital financing
requirement for the current and next two financial years.
The Council does not intend to enter into any long-term borrowing and
therefore had no difficulty meeting this requirement to date in 2012/13, nor is
there any difficulties envisaged for future years.
C
CAPITAL EXPENDITURE
C1
Capital Expenditure
The capital expenditure estimates for the 2012/13 financial year for the
General Fund takes into account current plans and future commitments as
updated in the Final Accounts 2011/12 report as presented to Cabinet in June
2012, and the revised estimate therefore takes account of any slippage from
the 2011/12 programme.
General Fund
C2
2011/12
2012/13
2012/13
Actual
Estimate
Rev Est (P6)
£,000
£,000
£,000
4,056
10,438
15,186
2011/12
2012/13
2013/14
Actual
Estimate
Rev Est (P6)
£,000
£,000
£,000
0
0
0
Capital Financing Requirement
General Fund
The estimated capital financing requirement takes into account capital
expenditure, the application of useable capital receipts, direct charges to
revenue for capital expenditure, the application of capital grants and the use
of third party contributions towards project costs. It reflects the actual capital
financing decisions taken in relation to the current approved capital
programme. The programme is financed by internal resources and external
grants.
In summary, an increase in the capital financing requirement will reflect
capital expenditure which is not resourced immediately representing an
increase in the underlying need to borrow for capital purposes. Likewise a
reduction in the capital financing requirement will reflect future applications of
capital receipts or grants and contributions or future charges to revenue.
Appendix E
D
EXTERNAL DEBT
D1
Authorised Limit
The figures below are based on assumed actual borrowing, new supported
debt, and maturing and replacement debt. In addition, headroom for
temporary borrowing and borrowing in advance of need has been
incorporated.
Authorised Limit
2011/12
2012/13
2012/13
Actual
Estimate
Rev Est (P6)
£,000
£,000
£,000
9,325
9,556
9,556
The limit set for 2012/13 gives the Authority flexibility to borrow to finance
possible short-term cash flow fluctuations and borrowing in advance of need if
required.
D2
Operational Boundary
The operational boundary is based on the same estimates as the authorised
limit but reflects a more prudent additional headroom figure.
Operational Boundary
2011/12
2012/13
2012/13
Actual
Estimate
Rev Est (P6)
£,000
£,000
£,000
5,328
5,458
5,458
The limits for D1 and D2 will need to be reviewed in the future if the Authority
decides to enter into any long-term borrowing.
D3
Actual External Debt
The Council’s actual external debt as at 30 September 2012 was zero, as
highlighted in C2 above. This reflects the position at one point in time and is
therefore not directly comparable to the authorised limit and operational
boundary.
E
TREASURY MANAGEMENT
E1
Adopt the CIPFA Code of Practice for Treasury Management
The Council has adopted the CIPFA Code of Practice for Treasury
Management in the Public Services.
E2
Interest Rate Exposure – Variable Rates
It was recommended that the Council set an upper limit on its variable interest
rate exposures for 2012/13 of 100% of its net outstanding principal sums
(100% 2011/12). As the Authority is currently debt free and is not intending to
enter into any long-term borrowing in the near future this indicator is not
currently relevant.
E3
Interest Rate Exposure – Fixed Rates
It was recommended that the Council set an upper limit on its fixed rate
exposures for 2012/13 of 100% of its net outstanding principal sums (100%
2011/12). However, as with E3 above, this indicator is not relevant at the
present time.
E4
Appendix E
Maturity Structure of Borrowing
It was recommended that the Council set upper and lower limits for the
maturity structure of its borrowings as follows:
Amount of projected borrowing that is fixed rate maturing in each period as a
percentage of total projected borrowing that is fixed rate
Upper Limit
Lower Limit
Under 12 months
100%
0%
12 months and within 24
100%
0%
months
24 months and within 5
100%
0%
years
5 years and within 10
100%
0%
years
10 years and above
100%
0%
These rates reflected the continuation of current practice but again the
Authority’s debt free status makes this indicator irrelevant at present.
E5
Total principal sum invested for period longer than 364 days.
The indicator for the upper limit for longer-term investments is set at £15m for
2012/13. As at the end of September 2012 the Council had £1.0m invested
for periods longer than 364 days.