The Interim Head of Finance and Section 151 Officer sought approval to discontinue with the decision of Cabinet of 18 December 2018 in respect of pursuing Option 2 for the financial delivery of Band B of the School Modernisation Programme.  She apprised Cabinet of the change to the Welsh Government grant intervention rate for the Mutual Investment Model (MIM); sought approval to pursue Option 3 for the financial delivery of Band B of the School Modernisation Programme, prior to submission to Council and for the Council’s participation in the MIM procurement process.  

She reported that school modernisation has been established as one of the Council’s main strategic programmes.  He informed Cabinet of the background to the school.  In 2010, Cabinet approved the recommended schemes included in each of the four bands of the School Modernisation Programme (A-D), which were subsequently detailed in the 21^st Century Schools Strategic Outline Programme (SOP).  Cabinet in July 2017 discontinued the original Band B schemes identified in November 2010 and approved a revised list, based on the increasing demand for places, the requirement to promote the Welsh language and building condition.  In order to prepare for Band C of the programme, Cabinet also gave approval to undertake area reviews and options appraisal work during the Band B period.  In January 2017, approval in principle was received from the Welsh Government for the second wave of investment of £68.2m.  In January 2018, Council approved in principle the financial commitment required for Band B.  The Welsh Government MIM intervention rate at that time was 75%, paid to the authority in the form of a revenue grant.  Cabinet was advised in November 2018 of the Welsh Government’s review of the Mutual Investment Model.  

The Interim Head of Finance and Section 151 Officer reported that the Welsh Government had announced a change to the capital grant intervention rate where its contribution for Band B has increased to 75% for special school and pupil referral units and 65% for all other schemes.  The Mutual Investment Model intervention rate would remain at 75%.  In December 2018, Cabinet abandoned the decision made in November 2018 and gave approval to pursue an option whereby all schools within band B would be funded via capital grant, subject to sufficient resources being identified and allocated to meet the match funding commitment. 

The Interim Head of Finance and Section 151 Officer reported that in February 2019, the Welsh Government had made a change to the intervention rate for Band B MIM schemes, the revised model benefitting from a 6% increase on the intervention rate from 75% to 81%.  Due to the change in rate, officers had re-worked the figures and in progressing Band B MIM, there is a requirement for the Welsh Government to formalise the procurement of the PSDP which local authorities had been requested to confirm their commitment.  She stated that the Welsh Government had requested that consideration be given to the following options:

Option1 – Initial Programme Participants

Option 2 – Potential Future Participants

Option 3 – Non-Participation

The Interim Head of Finance and Section 151 Officer reported that Council had approved a programme envelope of £71.3m covering Band B new school builds of £68.2m and potential highways works of £3.1m, with all schemes funded from capital grant.  She highlighted a comparison of MIM and capital grant schemes together with 4 funding options and an analysis made of options 2 and 3.  She stated that option 2 will require some borrowing to meet the capital commitment, which for option 3 will be minimal and whichever option was pursued, it would create pressure on the Council’s capital and revenue budgets.

The Leader commented that the school modernisation programme will be the Council’s biggest capital commitment and is the Council’s flagship project.  He also commented that there was a need for flexibility as the financial model has changed. 

The Cabinet Member Wellbeing and Future Generations requested clarification of the potential impact of interest rate increases.  The Interim Head of Finance and Section 151 Officer stated that she would provide

additional information to Cabinet on the impact potential interest rate increases would have on the delivery of Band B of the School Modernisation Programme.  

RESOLVED:           That Cabinet:

·               discontinued with the Cabinet decision made on 19 December 2018 in respect of pursuing Option 2 for the financial delivery of Band B of the School Modernisation Programme;

·               noted the change to the Band B WG grant MIM intervention rate;

·               gave approval to pursue Option 3 for the financial delivery of Band B, subject to sufficient resources being identified and allocated to meet the match-funding commitment; 

·               gave approval for a report to be submitted to Council to amend the capital programme to reflect the above; and

·               gave the Interim Chief Executive authority to sign a letter of intent in respect of the MIM delivery model, subject to the outcome of Legal Services’ review and agreement of the WG contract/agreement documentation in this regard.