Agenda item

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 a requirement that any proposed changes to the 2025/25 Prudential Indicators were approved by Council.  

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.

With regard to investments, the primary governing principle remained security over return and the criteria for selecting counterparties continued to reflect this.  With regard to borrowing, the Council will maintain its strategy of being under-borrowed against the capital financing requirement.  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 submitted to Members within the Budget and Council Tax 2026/27 report to Council in March 2026.

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, however, the future outlook remained challenging. The Bank of England had started to cut Base Rate and the cost of short term borrowing had reduced as a result with further reductions expected in the near future.  The costs for long term borrowing, however, remained high reflecting the yield on UK gilts.

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

The current strategy was to maintain the Council’s position of being under-borrowed against the Capital Financing Requirement.  The Council was forecast to require additional borrowing before the end of 2025/26 financial year.  This borrowing would be taken on a short term basis to avoid exposure to currently high interest rates in anticipation of lower rates in future years.  There was a possibility of taking some long term borrowing from the PWLB at the discounted HRA rate.  A further update would be provided as part of the Council’s Treasury Management Strategy for 2026/27.

Discussion ensued with the following issues raised/clarified:-

-        Work was taking place with the Procurement Team with regard to the appointment of Treasury Management advice as the contract held by MUFG (formerly Link Asset Services Treasury Solutions) ended in January, 2026.  Tenders were currently being evaluated

-        Regular meetings were held with the Treasury Management Team and the cash flow forecast reviewed, timing of when the Authority needed to borrow considered and the best value rates on the market at that point discussed.  It could be that a local authority may not be able to lend the full amount desired so consideration was given to borrowing from other lenders at the same time

-        The budget reflected what needed to be taken into account for the requirement for the Capital Programme.  Savings could be made in-year if a project slipped and the allocated budget not required allowing the funds to be invested and no interest costs payable  

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