Agenda item

The Committee will consider two reports that were presented at Audit and Governance Committee on 23 November 2022.

Contributors:

Councillor John Chilver, Cabinet Member for Accessible Housing & Resources

Dave Skinner, Service Director for Finance (Section 151 Officer)

Mark Preston, Assistant Director of Finance (Pensions, Procurement and Revenues & Benefits)

Papers:

Treasury Management Mid-Year Update

Treasury Management Loans to Other Local Authorities

The Chairman invited Councillor J Chilver, Cabinet Member for Accessible Housing and Resources, to introduce the reports and noted that Councillor R Newcombe, Chairman of the Audit and Governance Committee, may also want to highlight comments made by the Audit Committee.

The following points were highlighted by the Cabinet Member:

• The treasury management report showed that the net borrowing position was £99m, a reduction of around £30m million in net borrowing since the start of the financial year. The analysis in section 2.12 showed that the level of investment in other local authorities is projected to reduce going forward. In terms of investments, the strategy dictated that the priority was first placed on security, then liquidity and then yield. The average investment return was marginally below the mark due to recent increases in interest rates. The annual treasury management strategy statement was approved by Full Council in February, and the Council had been fully compliant with it. No new borrowing had been undertaken since the Council became a Unitary authority. The strategy was to use surplus cash instead to reduce risks and keep external financing costs low. The net forecast position on interest was an improvement of £2.8m against the budget due to both an increase in interest receivable and a reduction in interest payable.
• The second report sought to emphasise the protection given to Councils who lend to other local authorities. It outlined the additional controls implemented and their specific protections under the Local Government Act of 2003, which stated that all loans were secured on future revenues, and legal action could be taken for non-repayment. It was noted that no local authority had defaulted on a loan. Additional controls were also put in place and the Council maintained a watch list of local authorities at risks. A letter of confirmation had been received from the Section 151 Officer that the outstanding loan would be fully repaid by January 2023.

The following points were noted during the Committee’s discussion:

• Treasury management advisors had noted that continuous investments in local authorities were secure and beneficial for mitigating risks as no local authority had ever defaulted on these loans. Additionally, the Section 151 Officer at Thurrock had assured repayment of the loan.

·       A Member asked why the Council did not refinance its £10m Public Works Loan Board (PWLB) loan at a lower interest rate in July when the interest rate was forecast to rise for a considerable period of time. It was noted that the strategy was to use surplus cash instead of borrowing to reduce risks and moderate financing costs and use internal borrowing rather than take out new borrowing. Alternative options to refinancing were being considered in terms of the loan portfolio and the PWLB loan rates being offered were under constant review.

·       The Audit and Governance Committee felt that the Treasury Management Strategy was being complied with. Members had benefited from training on treasury management investment and borrowing which may also be useful for Members of the Finance & Resources Select Committee.

The Chairman thanked the Cabinet Member for the reports, noting that the papers gave confidence in the council’s treasury management.