Agenda item

Rob Mahon, Service Director, Financial Services, to report

Consideration was given to the Annual Treasury Management Report, presented by Natalia Govorukhina, Head of Corporate Finance, which was the final treasury report for 2025-26. Its purpose was to review the treasury activity for 2025-26 against the Strategy agreed at the start of the year. The report also covers the actual Prudential Indicators for 2025-26 in accordance with the requirements of the Prudential Code.

The Council received an Annual Treasury Strategy Report in advance of the 2025-26 financial year at its meeting on 5th March, 2025, and the Committee received a mid-year report at its meeting on 25th November, 2025, representing a mid-year review of treasury activity during 2025-26. In addition, quarterly updates were received by Audit Committee on 29^th July, 2025 and 17^th March, 2026.

This report meets the requirements of both the CIPFA Code of Practice on Treasury Management and the CIPFA Prudential Code for Capital Finance in Local Authorities.

The Council was required to comply with both Codes through regulations issued under the Local Government Act 2003.

Appendix 1 of the report submitted gave a summary of the Prudential Indicators for the Council.

The underlying economic and financial environment remained difficult for the Council to predict.  Inflation had fallen back from historic highs in recent years and the Bank of England continued to cut interest rates.  However, market sentiment had been heavily influenced by the Middle East conflict.  Commentators anticipated a growing risk of inflation meaning interest rates would likely not be cut for some time and may increase to counteract inflationary pressures arising from steepening energy costs.  The cost of long term borrowing form PWLB had also increased during the year, in part reflecting this sentiment.  With regard to investments, the main challenge was concerns over investment counterparty risk.  This background encouraged the Council to continue maintaining investments short term and with low risk counterparties.

During 2025-26 the Council had continued to pursue its short-term borrowing strategy in line with advice from its Treasury advisers.  Borrowing was taken only as needed and would be refinanced in the next few years.  This had resulted in a significant increase in the net under borrowed position.  The Council would continue to monitor the interest position with a view to taking out further long term borrowing if there were dips in the long term borrowing rates but currently was utilising short-term borrowing to cover immediate borrowing need in anticipation of lower rates in the future.  This process was separate from the Council’s financial monitoring which tracked planned and actual expenditure against planned budgets.

The Council had reduced its investment balances in recent years as funds had been used to meet loan maturities rather than refinancing at historically high interest rates.  In 2025-26 the Council had borrowed an additional £142M from local authorities and PWLB.  In addition the Council had repaid £110.2M of principal on a mix of local authority and PWLB loans. 

It was noted that the report would be considered by Cabinet at its meeting on 6^th July, 2026.

The Chair queried how much of the closing CFR (£25.7M less than approved via the Mid-Year report)  was due to slippage on a number of capital schemes or was it due to grant funding.  It was explained that wherever possible attempts would be made to maximise external funding sources which sometimes had an impact on the Council’s Capital Financing Requirement (CFR) as it did not need to borrow.  The Chair would be provided with a breakdown of the figures. 

Resolved:-   That the Treasury Management Prudential Indicators outturn position, as set out in Section 2 and Appendix 1 of the report submitted, be noted.