Agenda item

Report from the Strategic Director of Finance and Customer Services.

Recommendations:

1.    To note the Treasury Management Prudential Indicators outturn position as set out in Section 3 and Appendix 1.

2.    To agree that the report is forwarded to Audit Committee for information.

Consideration was given to the report which provided details of the review on the treasury activity for 2023/24 against the strategy agreed at the start of the year. The report also covered the actual Prudential Indicators for 2023/24 in accordance with the requirements of the Prudential Code.

The Council received an annual treasury strategy report in advance of the 2023/24 financial year at its meeting on 1 March 2023 and Audit Committee received a mid-year report at its meeting on 28 November 2023, representing a mid-year review of treasury activity during 2023/24.

This report met 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.

The underlying economic and financial environment remained difficult for the

Council to predict. Whilst inflation was reducing, the Bank of England Base Rate was being held, keeping borrowing and investment rates high. On investments 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 increased from 4.25% to 5.25% during 2023/24

as the Bank of England increased interest rates to control inflation. As at 31 May 2024 the base rate remained at 5.25%. This had resulted in increased rates of investment returns during 2023/24.

The Council’s use of long term Public Works Loans Board (PWLB) borrowing

during 2021/22 (£227m) resulted in the level of short term borrowing gradually

falling as existing short term borrowing matured as the Council then held large

cash balances. In 2023/24 the Council continued its strategy of utilising the cash balance to minimise the requirement for additional borrowing in the current interest rate environment. As a result there was no requirement for the Council to borrow until December 2023. In 2023-24 the Council borrowed an additional £55m from South Yorkshire Mayoral Combined Authority (SYMCA) and PWLB. In addition, the Council repaid £31.2m of principal on a mix of PWLB and Lender Option Borrower Option (LOBO) loans on which the lender exercised its option to increase interest rates to above market rates.

The factors outlined had had a beneficial outcome to the Council’s treasury strategy and enabled additional interest income to be generated during 2023/24. Taken together, the additional return on investments reduced borrowing need and further slippage on the Council’s Capital Programme have enabled the Council to transfer £11.3m to support the Council’s Budget and to support the Council’s Medium Term Financial Strategy to 2026/27 as approved within the Council’s Budget and Council Tax Report 2024/25.

During the meeting it was confirmed that recommendation 1 should reference Section 2, not Section 3.

Resolved:

That Cabinet:

1. Note the Treasury Management Prudential Indicators outturn position as set out in Section 2 and Appendix 1.
   
   
2. Agree that the report is forwarded to Audit Committee for information.