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Agenda item
Minimum Revenue Provision method change 2022-23
(Simon Jones - Deputy Chief Finance Officer)
(Council Decision)
Decision:
Cabinet is asked to recommend the following to full Council:
1) The MRP method for supported borrowing is revised to the annuity method using average PWLB rate for the year (01/04/2022 to 31/03/2023).
2) The MRP method for unsupported borrowing is revised to the annuity method using average PWLB rate for the year (01/04/2022 to 31/03/2023) weighted combined basis.
3) That the revised MRP Policy Statement shown at Appendix C is approved for 2022/23.
4) That the revised MRP Policy Statement shown at Appendix C becomes the default MRP Policy for the Council going forward pending annual review as part of the Treasury Management Strategy.
Reasons:
These revisions to the methods for calculating MRP will result in reduced charges to the General Fund revenue account helping to reduce costs and preserve vital local services at a time when budgets are under severe pressure. The in-year savings made can be taken now to reduce the MRP charge, and hence pressure on the budget, used to make Voluntary Revenue Provision (VRP) charges that can be used to offset MRP charges in future years to alleviate budget pressures then or a combination of the two approaches.
The changes will also align the Council’s policy to what is considered best practice by CIPFA and is determined as more prudent. It is also considered fairer to Taxpayers as it results in the debt liability being repaid earlier and doesn’t leave future generations to foot the bill for assets that were purchases many years ago where the economic benefits have been fully consumed
Minutes:
The Chief Finance officer explained that as part of Budget setting planned to have MRP reviewed. The Deputy Chief Finance Officer introduced the report. The Councils treasury management advisors Link Group completed a review of the Councils MRP to identify opportunities to move to a more suitable and cost effective MRP strategy whilst ensuring that the provision remains prudent and compliant with statutory guidance. The Deputy Chief Finance officer explained that there is a difference between supported borrowing (prior to 2008) and unsupported borrowing with most of the Councils borrowing being unsupported. The Council has supported borrowing at 8.4% of overall capital financing requirement with unsupported borrowing at 88.4%. There are other borrowings like finance leases which make up the other 3.2%. The proposed change in the policy will reduce the Council's 2022/23 MRP payment by £867k and reduced the MRP charges in earlier years and increased them in later years. The changes will also align the Council's policy to what's considered best practice by CIPFA. To alleviate the increases in MRP in future years, its proposed to make voluntary revenue payments for 22/23 of 80k.
Councillors asked regarding CIPFA. The Deputy Chief Finance Officer explained it’s the Chartered Institute of Public Finance and Accountancy. They are a UK-based international accountancy membership and standard-setting body. CIPFA write the Prudential code and they write the Treasury Management code
Councillors asked regarding changing MRP on previous years. The Deputy Chief Finance Officer explained you cannot make changes to your policy that affect MRP for previous years.
The Councillors debated gave thanks to the Finance Officers for their work.
Proposed by Councillor Willis and seconded by Councillor Cannon
RESOLVED (unanimously):
Cabinet is asked to recommend the following to full Council:
1) The MRP method for supported borrowing is revised to the annuity method using average PWLB rate for the year (01/04/2022 to 31/03/2023).
2) The MRP method for unsupported borrowing is revised to the annuity method using average PWLB rate for the year (01/04/2022 to 31/03/2023) weighted combined basis.
3) That the revised MRP Policy Statement shown at Appendix C is approved for 2022/23.
4) That the revised MRP Policy Statement shown at Appendix C becomes the
default MRP Policy for the Council going forward pending annual review as part of the Treasury Management Strategy.
Reasons:
These revisions to the methods for calculating MRP will result in reduced charges to the General Fund revenue account helping to reduce costs and preserve vital local services at a time when budgets are under severe pressure. The in-year savings made can be taken now to reduce the MRP charge, and hence pressure on the budget, used to make Voluntary Revenue Provision (VRP) charges that can be used to offset MRP charges in future years to alleviate budget pressures then or a combination of the two approaches.
The changes will also align the Council’s policy to what is considered best practice by CIPFA and is determined as more prudent. It is also considered fairer to Taxpayers as it results in the debt liability being repaid earlier and doesn’t leave future generations to foot the bill for assets that were purchases many years ago where the economic benefits have been fully consumed
Supporting documents:
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