Agenda item

To consider item 11

The Principal Accountant advised Members that this was the Treasury Management Strategy for 2023/24, which included statements in relation to the Treasury Management Policy, Treasury Management Strategy and Annual Investment Strategy. There were no significant changes to the strategy and Officers would continue to invest surplus funds in secure short-term deposits, maturing on a frequent basis, whilst ensuring the Authority could maintain adequate liquidity and meet short-term expenditure requirements. The current borrowing position, as of 31 December 2022, included loans of £6.177m, with an average interest rate of 4.64% and interest payable of £283k per annum. In May 2022, the Authority repaid a maturing long-term loan (£620k). The next maturing loan was due March 2024 (£1m). These repayments do not directly impact the revenue budget and funds had been set aside to ensure the Authority could repay the loan when due.

Historically, early repayment of loans had not been an option due to the prohibitive penalties on early repayment. However, due to the rise in interest rates since December 2021, it may be more feasible to repay some of the long-term borrowing early. Officers were authorised to make early repayments within the prudential limits where, having consulted with the treasury advisors, there was an opportunity to do this on beneficial terms. Officers would discuss any early repayments with the Lead Member before any final decisions were made.

The current investment position as of 31 December 2022, included investments and bank account balances of £17.598m averaging 1.56% interest between April and December 2022. The investment portfolio included £2m investment in sustainable deposits. Officers would continue to explore sustainable investments when these investment deals mature. The Bank of England’s Monetary Policy Committee had increased the interest base rate on ten consecutive occasions since December 2021, currently at 4%. This had resulted in an increase in the level of returns from investments for the Authority. Therefore, the investment returns budget for 2023/24 would increase to £350k. This figure had been reflected into the MTFP. The treasury advisors were forecasting for the interest base rate to peak at 4.5%. During 2023/24, Officers would continue to monitor the Treasury Management Performance, and this would be reported to the Overview and Audit Committee.

A Member asked about the number of reds ratings in the UK counterparties and so few for the non UK ones. How do we evidence and track those changes.

The Principal Accountant advised that Officers receive weekly notifications from their treasury advisors of all of the counterparties and any movements that had happened in their ratings. In terms of current investments, the Authority had no investments outside of the UK and there was a threshold of plus six months.

A Member asked that with all the good work being done, were all staff members kept up to date with information.

The Chief Fire Officer advised Members, that staff were updated with regular Vlogs, the Authority meetings were recorded and available for all staff to watch on YouTube,  Station visits, leadership group meetings, the Service does try to get all information out to staff.

The Chairman asked about the target benchmark for interest rates of 2%, the previous year hit 2.6%. Given that the benchmark rate looks slightly under ambitious, how do Officers ensure the target was sufficiently ambitious for the Authority.

The Director of Finance and Assets advised that as accountants, they would take a slightly prudent approach, and rather under estimate than over estimate. There would also be a slight lag, as the investments were over a range of maturity dates and interest rates were already locked in. This might be a lower rate than the rate of interest increase, especially when the rate of interest was going up so quickly, but likewise, if interest rates start to drop, there would be a positive lag as the rates start dropping as the longer term deals were locked in. Officers work with the treasury advisors to try and get a prudent benchmark for that rate of return, but obviously try and exceed this throughout the year.

RESOLVED –

That the Authority approve the Treasury Management Policy Statement, Treasury Management Strategy Statement and the Annual Investment Strategy for 2023/24.