MPA/MPS Capital Strategy

Report: 10
Date: 19 July 2007
By: Director of Strategic Finance on behalf of the Commissioner and Treasurer

Summary

This purpose of this report is to present the updated Capital Strategy for members’ comments and approval. The draft capital spending and borrowing plan for 2008-9 onwards will be based on this strategy.

A. Recommendations

That

1. Members consider and approve the updated Capital Strategy 2008 to 2011.

B. Supporting information

1. The Capital Strategy has been reviewed and updated and is attached at Appendix 1.

2. The Strategy is to be regarded as a ‘living’ document and will need to be subject to regular annual review. The MPS Capital Programme Review Board (CPRB) is in the process of further enhancing the Strategy as part of the work to develop how the MPS manages the capital programme. These developments are part of the longer-term development of the medium term financial planning process. Any significant changes to the Strategy will be brought back to the MPA.

Background

3. The Capital Strategy is an integral part of the strategic financial and service planning of the MPA/MPS. It is also part of the annual budget setting process and supports decisions relating to the Authority’s capital investment under the prudential borrowing system.

4. The MPA/MPS is continuing to integrate its business planning with its capital and revenue budget planning processes so that coherent decisions can take place on the level of borrowing that is prudent, affordable and sustainable. A robust capital programme requires the bringing together of strategic planning, asset management planning, option appraisal and the identification of investment needs (including opportunities and priorities). This all needs to be set in the context of available capital resources and the contribution towards the achievement of MPA/MPS strategic priorities. There is also a requirement to ensure that the benefits identified within business cases are actually delivered.

5. In addition to recognition of the revenue/operational expenditure consequences of the overall capital proposals, financial planning needs to take into account the range of options for revenue funding and capital investment by establishing whether:

• it is considered affordable and prudent to bear the additional future revenue cost of additional investment;
• the use of existing or new revenue resources to finance capital investment should have precedence over other competing needs for revenue expenditure; and
• there is scope for capital investment to generate future revenue savings or income.

The Capital Strategy provides a focus for a corporate wide analysis of overall affordability, prudence and sustainability as required by the Prudential Borrowing Code.

6. Underspending in the Capital Programme as a result of slippage in project delivery and inadequate capacity to deliver key schemes as required are areas that have proved of serious concern over recent years. The Strategy sets out through short and long-term measures how these difficulties will be addressed.

C. Race and equality impact

There are no direct equality or diversity implications resulting from this report. However, members will note the inclusion of sustainability, diversity and environmental objectives within the Capital Strategy. These will aim to promote the sustainable procurement agenda across all areas of MPA/MPS capital expenditure in line with the GLA Statement on Sustainable Procurement approved by the MPA in June 2006.

D. Financial implications

Financial implications are discussed in the main body of the report.

E. Background papers

• Capital Strategy report to MPA Finance Committee July 2004
• Draft Capital Programme progress report to MPA Finance Committee February 2007

F. Contact details

Report author: Anne McMeel – Director of Strategic Finance, MPS.

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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