Full scale of Highland Council's financial headache revealed
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A report into Highland Council’s capital programme shows the full extent of its investment worries revealing that many projects may need to be cancelled, scaled back or delayed.
And if the current financial climate does not improve, council finance bosses say there will be 'significant reductions' to the capital plan.
Members of the corporate resources committee are due to meet on Wednesday to consider this latest financial update.
The council has assessed all its capital projects in terms of the risk to costs, timing and scope. Every item is rated ‘red’ for costs.
All capital spend on roads, active travel, lighting and ICT are rated red for all three measures. This means they may not be deliverable.
At the same time, eight new Highland school builds are listed as ‘to be confirmed’ while the council awaits a funding decision from the Scottish Government.
The council has already admitted that its current capital plan is unaffordable.
Senior councillors and officials have been working behind the scenes to see what can be saved.
But at the same time, both the main capital budget and the separate housing revenue account is actually underspent.
By the end of this financial year, the general fund is forecast to have spent just under £119 million. That’s a £38.5 million underspend.
The housing revenue account looks set to come in £5.6 million under budget too.
Highland Council says the significant underspends are down to the limited availability of contractors, consultants and building materials.
It is now taking as long as two years for new fleet to be delivered, and tenders for housing jobs are often not returning any bids at all. The bids that are coming in are sky high.
The council says these are global supply chain issues, and they have caused big delays with many capital investments.
Highland Council has provided a RAG (red amber green) risk assessment alongside its capital monitoring report.
Costs are in the red across the board.
However, roads structural capital works, road surface dressing, bridges, wells and culverts, active travel investment and lighting are all rated at risk for costs, timescales and scope.
The council’s ICT transformation is also rated red on all fronts.
Several of these may need to be scaled back or cut completely from the capital plan.
New school projects also look uncertain.
Highland Council was counting on funding from the Scottish Government’s Learning Estate Investment Plan (LEIP) but has not had any news.
The council had expected to have funding confirmed by the end of last year. Without clarity over LEIP funding, the council says it is impossible to set its capital programme.
It has already had to cancel its 1 February budget meeting and now says members will get an update in March.
However, all the LEIP funded schools now look shaky. Nairn Academy, Culloden Academy and Charleston Academy alongside Beauly, Broadford, Dunvegan and Park primary schools and St Clement’s school are all marked red for costs and ‘to be confirmed’ in every other risk category.
Like all councils, Highland needs to borrow money to invest.
In addition to much-needed new schools, it has the longest road network in the country and a commitment to deliver 490 new council houses in the next year.
But borrowing is now sitting at over £1.1 billion, with loans accounting for 69 per cent of its capital funds.
Council finance boss Ed Foster has highlighted that the council will have to pay back that sum for more than 60 years. And with interest rates on the rise, it is a significant risk to financial sustainability.
When they meet next month, Highland councillors will have to try to find the balance between investing in growth, and keeping costs manageable.
