The Corporate Director – Education and Family Support and Interim Head of Finance and Section 151 Officer presented a joint report, the purpose of which, was to:

• update Council with regards to the outcome of Welsh Government’s review of the Mutual Investment Model (MIM) Band B funding mechanism and revised capital grant intervention rates;
• seek Council endorsement of the revised financial commitment required for the delivery of Band B of the School Modernisation Programme; and
• approve a change to the capital programme to reflect the updated commitment.

Paragraph 2 of the report set out the principles, as approved by Cabinet in March 2015, adopted by officers in shaping the advice contained in the current report.

The Corporate Director – Education and Family Support reminded Members of the key objectives of the School Modernisation Programme, as promoted by Council in 2006, as were shown in paragraph 3.4 of the report.

In order to shape our approach to school modernisation, officers have also worked with a range of partners to carefully consider:

• the condition of buildings;
• the maintenance backlog;
• population growth;
• projections of pupil population; and
• housing developments identified within the Local Development Plan (LDP).

Members will be aware that Bridgend’s school modernisation programme has been very successful to date with 6 new provisions already being built within Band A with Ysgol Calon y Cymoedd due to open in January 2019.

In October 2017, Cabinet was presented with a report detailing the outcome of the work of the school modernisation workstream and the revised SOP submission.

Cabinet considered the proposed Band B schemes, and determined to approve the following, based on the increasing demand for places, the requirement to promote the Welsh language and building condition:

·           Bridgend North East (2 form entry (FE)) - capital grant

·           Bridgend South East (2.5FE) - capital grant

·           Bridgend Special School (270 places) – Mutual Investment Model

·           Bridgend West – Welsh-medium (2FE) - capital grant

·           Bridgend West – English-medium (2FE) - capital grant            

In addition, in order to promote the Welsh language and support Welsh Government’s Cymraeg 2050 commitment, Welsh Government made available £30m capital grant across Wales which Councils were asked to bid against. Officers identified the need for the creation of Welsh-medium child care facilities which would deliver Welsh language opportunities to areas of the county borough where there is currently insufficient provision (that is: Ogmore and Garw Valleys, Bridgend and Porthcawl). Welsh Government approval in principle has now been received for Bridgend’s £2.6m bid.

At its meeting on 31 January 2018, Council approved, in principle, the financial commitment required for Band B of the School Modernisation Programme.

The overall programme was estimated to be in the region of £68.2m, of which approximately £43.2m was anticipated to be capital funded (circa £23m funded by Bridgend County Borough Council), the balance proposed to be funded through the Welsh Government Mutual Investment Model (MIM).

Welsh Government had advised local authorities that MIM, a new approach to investment in public infrastructure in Wales, whereby private partners will build and maintain schools in return for a fee, will cover the cost of construction, maintenance and financing the project.

The Welsh Government intervention rate for the MIM is 75%, which will be paid to the local authority in the form of a grant. The remaining 25% is to be met from the local authority revenue budgets over a 25-year contract period. The local authority was also required to meet 50% of the up-front capital costs for furniture, equipment and IT.

At the end of a specified period of time, the asset will be transferred to the local authority. Welsh Government had advised that it will present packages of schemes to the market as design and build projects made up of a number of schemes within a geographical area (including across local authority areas) and be of sufficient monetary size overall in order to attract large companies (eg £100m).

Since the approval of the strategic outline plan, Welsh Government has reviewed the schemes that have been proposed for MIM.

Welsh Government has stated that it is not value for money to include small or very complex schemes (such as special schools) through the MIM route.

Consequently, Bridgend Special School is now deemed unsuitable for delivery under this funding model.

It is important to note that this is purely in relation to Welsh Government’s recent decision to remove special schools from MIM funding rather than any fault of the local authority.

In light of Welsh Government’s decision, the funding approach to Bridgend County Borough Council’s Band B schemes needed to be re-considered and a decision taken on the way forward. Hence, a report was presented to Cabinet on the 20^th November for approval for a revised funding approach, before seeking approval from full Council on the 21^st November.

On the 20^th November, Cabinet approved a revised funding package based on funding 2 primary school schemes through the MIM route, and 2 primary schools and the special school scheme through the capital grant route.

However, prior to the report being submitted to Council, Welsh Government announced a change to the capital grant intervention rate. Welsh Government contributions for Band B increased to 75% for special school and pupil referral unit schemes, and 65% for all other schemes; the MIM intervention rate would remain set at 75%.

As the change in intervention rate would have a positive impact for the Council on the cost of delivering Band B, it was determined to defer the Council report, as the detail was no longer factually correct and the change in intervention rate could impact the proposed delivery method; this would allow Cabinet an opportunity to review their decision in this regard. I am indebted to members for me to bring this paper back to this meeting.

Members will recall that when this matter was taken to full Council in January 2018, capital match funding of around £23m was requested to meet the four primary school schemes identified at that time.

A comprehensive comparison of the capital grant and MIM schemes is available at Table 1 in the report.

It is important to note that while figures cannot be firmed up at this point in time, unsupported borrowing will not be drawn upon until such time as general capital funding, section 106 funding and available capital receipts and earmarked capital reserves have been exhausted, as this will require a recurrent revenue budget to meet the borrowing costs.

Paragraph 8.4 of the report outlines the four options considered by officers.

Paragraph 8.6 summarises the full revenue and capital implications of each of the revised funding options based on current assumptions.

It is important to note these costs are estimates based on information available at the current time, and MIM information received from Welsh Government, and will change in line with inflationary and interest rates rises.

The Corporate Director Education and Family Support then expanded upon the various funding options (Options 1 to 4) considered by Officers as outlined in paragraphs 8.4 to 8.11 of the report, and the reasons why Option 2 had been considered as the preferred option.

A Member stated that he hoped that any proposed new builds of schools would be of good quality and to the standards required as part of Bridgend’s 21^st Century School Project.

RESOLVED:                  That Council approved the revised budget required in respect of Band B of the School Modernisation Programme to be incorporated into the Capital Programme.