Agenda item

The Committee received a report which formed part of the monitoring of the Treasury function and reviewed the implementation of the Treasury Management Strategy in compliance with CIPFA code of practice. Councillor Tim Butcher, Deputy Cabinet Member for Accessible Housing and Resources and Hasina Shah, Assistant Director of Finance presented the report.

The report, which was appended to the agenda pack, detailed the treasury position, including cash position, investments, borrowing, and CCLA local authorities’ property pooled fund. The report also covered capital expenditure along with compliance with treasury limits and prudential indicators, a review of borrowing strategy and debt rescheduling, and an economic update. 

As of 30 September 2023, the net cash position was £177m, an increase of £63m on the position at 31 March 2023, this was detailed within the report. The Council’s investment strategy sought to achieve a return on its investments in line with the Sterling Overnight Index Average (SONIA) rate. During the first half of the year the average investment return was 4.34% compared to the SONIA Rate of 4.84%. This underperformance against the benchmark was expected in the rising rate environment. The Council’s investment portfolio had fixed rate investments which were placed before the rate rise and therefore were at the lower rate. As these investments matured the Council was now securing higher rates on its investment portfolio and was expecting to meet its benchmark for the second half of the year.

During the first half of the year the Council repaid £3.489m of PWLB loans and the estimated repayment for the second half of the year is £3.512m. This will bring the borrowing down to £285.728m by 31 March 2024.

There was an anticipated decrease in the capital programme of £42m with current forecast spend of £124m. During the summer months the Council undertook the Annual Review of the Capital Programme in line with the practice of recent years. The review identified a requirement for significant re-profiling across a number of schemes. Most of the re-phasing moved into the years 2024/25.

Points raised during discussion included:

·       Members queried the graph contained at paragraph 5.2 of the report, it was said that there appeared to be nine indicators on the graph, although only six appeared to be visible. There was some difficulty noted in the interpretation of the contents of the paragraph and as such the Committee requested that a brief paper be prepared for Members to define the debt liability benchmark indicator and to aid the understanding of it.

ACTION: Mr D Skinner / Ms H Shah to produce a paper for the Committee and discuss its contents at the next training session for Members when arranged.

·       A Member noted that the interest rate on investments was slightly below the SONIA rate for the second year running. It was explained that this was linked to the rising rate environment and that as rates dropped there was expected to be an increase to the rate achieved, however it was requested that when the Treasury Management report for the full 2023/24 financial year was presented that it contained historic performance data against the SONIA rate to allow for ease of comparison.

ACTION: Mr D Skinner / Ms H Shah to include historic investment performance data against the SONIA rate within the full 2023/24 Treasury Management report when it was presented.

·       The Committee was advised that it would be a significant concern if interest rates continued to rise dramatically as some of the longer-term borrowing would need to be repaid or replaced and if rates were significantly higher than it would detrimentally affect the Council’s finances. It was, however anticipated that long term rates would fall again, and this was factored into the medium-term financial plan.

·       The material adjustment to capital expenditure agreed by Cabinet at its meeting in November 2023, was questioned and the Committee was informed that local authorities faced challenges accurately profiling their capital programmes. Over recent years there had been a similar quantum of reprofiling, made further difficult this year by the increasingly challenging economic landscape.

·       It was confirmed that the Council had not breached its operational boundary limit.

RESOLVED:

That the report be noted.