Agenda item

Consideration was given to the report presented by Rob Mahon, Assistant Director, outlining the mid-year treasury review which also incorporated the needs of the Prudential Code to ensure adequate monitoring of the capital expenditure plans and the Council’s Prudential Indicators.

The review, as set out in the Appendix submitted, provided detail of mid-year performance against the plan, the key changes to the Council’s capital activity (the PIs) and the actual and proposed treasury management activity (borrowing and investment).

With regard to investments, the primary governing principle remained security over return and the criteria for selecting counterparties continued to reflect this.

The Council would maintain its strategy of being under-borrowed against the capital financing requirement.  The Council borrowed £227M of long term PWLB funds during 2021/22 to take advantage of the low PWLB interest rates available at the time.  This replaced short term borrowing as it matured.  No borrowing had taken place during 2022/23 as the Council had cash balances remaining from the borrowing taken in 2021/22 that it had been able to invest on a short term basis to general additional income for the Council.  Making use of the current financial market conditions had lifted investment returns.

It was not expected that the Council would need to borrow any funds for the remainder of the 2022/23 financial year and, as a result, had made significant savings on borrowing costs against the plan set out in the Medium Term Financial Strategy as the Council had not been required to borrow in the current high interest rate market.  The borrowing position would remain under review and an update of the Strategy would be submitted to Members within the Budget and Council Tax 2022/23 report to Council in March 2022.

All governance, strategies and monitoring were undertaken by the Audit Committee.

The report illustrated how, whilst the Council’s approach to Treasury Management in recent year had in particular been to utilise short term borrowing which had generated significant savings for the Council, essential to achieving balanced budgets, the future outlook was more challenging.  With increasing bank rates for borrowing, when the Council did need to borrow it would be at much higher levels than had been assumed in the Medium Term Financial Strategy.  It was expected that borrowing rates would reduce over the next couple of years linked to the projections that inflation would return to the Bank of England’s target 2% level.

PWLB rates fluctuated; during 2022/23 to date the rates had seen highs of 5.5% for a 50 year PWLB loan and lows of 2.42% with the 50 year rate currently standing at 3.87%.  This further emphasised the positive deals that the Council took during 2021/22 with the £227M being borrowed at an average of 1.53%.  Short term borrowing rates had also increased with 6 month borrowing rates standing at around 3.1% compared with 0.02% September 2021.  This had not affected the Council’s borrowing costs during 2022/23 as no borrowing had been taken and rates had not changed on existing loans. 

The Council continued to keep interest rates under constant review within its borrowing strategies and decisions on the mix of long term and short term borrowing.

It was confirmed that the basis of the Treasury Management Strategy, the Investment Strategy and the PIs had not changed from that set out in the approved Treasury Management Strategy (March 2022). 

Resolved:-  That the report be noted.