Agenda item

Councillor John Chilver, Cabinet Member for Accessible Housing and Resources presented to the Committee a report which detailed the Council’s approach to loaning funds to individual local authorities, the parameters for which were set in the Council’s Treasury Management Strategy. The report was brought before the Committee due to recent publicity around loans to other local authorities who had found themselves in financial difficulties. The Committee was advised that there was minimal risk to funds loaned to other local authorities, even those under significant pressures. There was specific protection under the Local Government Act 2003 which made clear that all loans were secured on future revenues and this included the ability to take legal action if any debts were not repaid.

Members were informed that no local authority had ever defaulted on a loan and the Council’s Treasury Management Strategy, agreed in February 2022 tightened the control procedures around new investments in local authorities who were issuing Section 114 notices or requested capitalisation directives to require approval from the Section 151 Officer and relevant Cabinet Member.  No such proposals had been made this financial year and measures had been strengthened further to require approval from the Leader and Chief Executive of the Council prior to making any local authority loan. There was a Treasury Management watch list held which included authorities who had requested capitalisation directives or where commissioners had been appointed regardless of any formal notices or directives.

The Treasury Management Strategy 2023/24 would be updated to reflect the actions from the 27^th September Audit and Governance Committee meeting and would be presented to the Committee at its meeting on 1 February 2023.

During discussion, key points raised included:

·    The Treasury Management watch list was kept under regular review and local authorities were added as necessary. Members were reminded that a previous investment in Slough Borough Council, who had issued an S114 notice was recovered in full on time. The thorough due diligence review that the Council would now undertake before a local authority loan was made would complement the watch list and act as an additional measure before making a decision on whether to add an authority to the watch list.

·    The Council’s Treasury Management Advisors advice was still for Local Authorities to be continued with as a counterpart investment option. Members were assured that there was every confidence Thurrock would repay their loan when it matured in January, as noted in the minute for the previous item.

·    A question was raised around whether the Council was made aware what the investment would be used for by the borrowing Local Authority. The Committee was advised that the Council would not take account of what the funds would be used for when making a decision, and would focus on ensuring the overall financial standing of that local authority was satisfactory.

·    The Committee raised concern that there was a reputation risk to the Council in lending to authorities who ultimately issued Section 114 notices or found themselves in financial difficulties and were assured by the Cabinet Member that the Council would not expose itself to unnecessary risk.

RESOLVED:

That the additional controls implemented for loans to other Local Authorities be noted. It was further noted that the Treasury Management Strategy 2023/24 would take into account the new range of government interventions and not just the capitalisation directives and S114 notices.