The Tees Valley Combined Authority expects to use up more than £100m of its reserves in the next four years.

Concerns were raised about the financial projections in a cabinet meeting, alongside discussions of a £1.2bn investment plan which runs until 2029 and its financial plan until 2027. The authority’s finance director responded the money was “expected to be consumed” and Tees Valley Mayor Ben Houchen said projects had been delivered on their budgets.

Cabinet member Councillor Bob Cook, leader of Stockton Council, said: “Current borrowing is £295m with plans to increase that to £457m over the medium term. The cost of borrowing is fluctuating, it’s a lot higher than what it was. Is it affordable with the interest rates and revenue payments that we need to make?”

Gary MacDonald, group director of finance and resources, replied: “As we stand with the plans today, yes. Obviously I can’t crystal ball changes in the future in terms of the broader economy. We’ve made assumptions in the financial plan, sometimes we borrow below that number, sometimes we borrow over that number and obviously it averages out across the plan.

“We keep that under very careful observation. We’ve got specialist advisors as well. If we feel there’s changes required we put proposals forward to cabinet.”

Cllr Cook went on: “Currently it has £104m in reserves. The plan is to give most of this over the next four years, leaving just £2m. It’s such a small amount for a budget of that size.

“Have you done a risk assessment on that? It gives less flexibility in the investment plan. If there’s unexpected financial pressure on the investment plan, would that have to be reduced?

“We know inflation rates are high and a lot of this is capital costs, and the cost for construction is getting a lot higher. With that £2m, would that leave us vulnerable to cut some of the investment plan?”

Mr MacDonald said: “The funding we get often can be in advance. We get it at the beginning of the year or for a two-year project.

“Our earmarked reserves are for sums of money we have received where projects have still got to deliver. That’s why you see the drop-off. They’re expected to be consumed because they’re earmarked for those projects.”


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He said they kept a modest amount in general reserves, just over £1m, for core operating costs. He added things were kept under review and if there was an impact from interest rates the investment plan could be adjusted accordingly: “We obviously take a long to medium-term view on that. It’s not a knee-jerk short-term view.”

Mr Houchen said the authority worked differently to a council and managed things in a different way, and pots of money for major projects had been allocated before Covid: “We’ve had lots of inflation, lots of impact from the global economy, never mind the national economy, and all of those have been delivered on existing budgets.

“I think the team… should be very very proud that actually we’re delivering projects where the funding was allocated pre-Covid in a different world with a different financial situation, and those budgets have been met without having to come back for millions and millions of pounds more.”