Council’s building projects could be at risk due to inflation impact

By Elgan Hearn   |   Local democracy reporter   |
Wednesday 3rd August 2022 4:00 pm
County Hall in Llandrindod Wells
County Hall (B&R )

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Grant funding for building projects needs to be used quickly before it goes “out of date” and forces Powys County Council to borrow money to make up the shortfall.

The cost-of-living crisis, inflation and higher interest rates could be putting many of the council’s building projects in jeopardy.

At a meeting of council’s Finance Panel, on Friday July 29, discussion turned to the Capital Budget report for first quarter of 2022/23  up to the end of June.

The allocation for this financial year is now £115.311 million, and up to the end of June £11.22 million had been spent.

Panel lay member Gareth Hall said: “Inflation in double digits is a whole new phenomenon for a lot of people, and I notice that over 40 per cent of the funding is from Welsh Government grants.

“In periods of inflation grants will be out of date very quickly.

“Over 50 per cent of funding is from borrowing and due to the cost increases the council will need to borrow more money to make these projects happen.”

He wondered if the Welsh Government are asked for more funding to make up any shortfall especially as all the business case hoops had been jumped through to get the grant in the first case.

Mr Hall said: “The council will have to make decision whether or not to go ahead with some of these projects.”

Mr Hall pointed out that some grants are only available for a limited time which means they need to be used as soon as possible

Mr Hall said:  “You’re under pressure to follow the grant,  and the grant is the tail that can wag the dog.

“I could have major implications.”

Head of finance, Jane Thomas said: “If it’s short term and a small project.

“The cost and funding that we’ve got now, there’s a reasonable level of assurance that we can deliver that.”

Ms Thomas explained that on bigger projects the council had already seen the ramifications of inflation on a contractor who had submitted a tender for a school building project.

Ms Thomas said: “Inflation was going up and up and the contractor could not stand by their bid.

“As it was funded through the 21st Century’s Schools Programme, we did go back to the Welsh Government and have that conversation with them.”

She added that other contracts were fixed, and the contractors are “carrying that risk” of dealing with rising costs.

Cabinet member for finance, Cllr David Thomas said: “We must not lose sight of the fact that we’re heading for an economic storm here because not only have we this high level of inflation, but interest rates are rising, there are so many unknowns.”

The cabinet had noted the report and approved a number of virements -which is moving money from one council account to another, worth a total £780,000 at their meeting on July 26.


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