Agenda item

To consider and note the contents of the report.

Consideration was given to the report presented by Natalia Govorukhina, Head of Corporate Finance, which detailed how the regulatory framework of treasury management required the Council to produce a mid-year treasury review, in addition to the forward looking annual treasury strategy and backward looking annual treasury outturn report. It was also now a requirement that the prudential indicators as at the end of June 2024/25 were reported.

This mid-year review for 2024/25 incorporated the needs of the Prudential Code to ensure adequate monitoring of the capital expenditure plans and the Council’s prudential indicators (PIs).

It was also a requirement that any proposed changes to the 2024/25 prudential indicators were approved by Council.

The monitoring as set out in the Appendix to the report was structured to highlight the key changes to the Council’s capital activity (the PIs) and the actual and proposed treasury management activity (borrowing and investment).

Reference was made to the key messages for investments, borrowing and governance.

Whilst the Council’s approach to Treasury Management in recent years, utilising short term borrowing in particular, had generated significant savings for the Council, essential to achieving balanced budgets, the future outlook was more challenging. The current strategy was to delay all new borrowing as late as possible and to only enter into short term borrowing in order to minimise the interest cost to the Council.  There was a discounted rate with the PWLB for borrowing long term funds specifically for HRA purposes which was available until March 2026.  The borrowing position would remain under review and an update of the strategy would be presented to Members within the budget and Council Tax 2025/26 report to Council in March 2025.

The underlying economic and financial environment remained difficult for the Council; on investment the main challenge related to concerns over investment counterparty risk.  This background encouraged the Council to continue maintaining investments short term and with low risk counterparties.  The Bank of England base rate dropped from 5.25% to 5% during the first half of 2024/25 and was cut to 4.75% on 7^th November, 2024.

The Council’s use of long term PWLB borrowing during 2021/22 resulted in the level of short term borrowing gradually falling as short term borrowing matured.  The proceeds of this borrowing had since been fully utilised and further financing has been required.  With interest rates expected to be cut in the coming months, the Council has delayed as much borrowing as possible and only committed to short term borrowing. 

The continuing approach to treasury management had been discussed with the Council’s external Treasury Management Advisers, Link Asset Services, who had confirmed this was a prudent approach given current market conditions.  Link Asset Services would continue to monitor borrowing rates and inform the Council if there were opportunities to borrow at advantageous rates.

It was noted that information with regard to the Minimum Revenue Provision (MRP) was part of the Treasury Management Strategy which was considered by Council when setting the Budget and Council Tax for the forthcoming financial year.  Discussion would take place as to what could be presented to the Audit Committee and the timing thereof due to the linkage with Capital Programme investments and the associated commercial/confidentiality issues.

Resolved:-  (1)  That the report be received and the contents noted.

(2)  That a report be submitted to a future meeting of the Committee on the Minimum Revenue Provision.