Agenda item

Treasury Management Outturn 2019-20

To receive the Treasury Management Outturn 2019-20 report


The Committee received the Treasury Management Outturn 2019-20.


During the discussion of this item, the following points were made:


·         During 2019-2020, the Council had adhered to all of its prudential indicators whilst minimising external debt and creating a significant revenue contribution with robust risk management arrangements.

·         The Treasury Outturn position was a net £380,000 favourable against the projected budgets.

·         Councillor Sargeant asked whether the Table on page 19 was still an estimate.  The Head of Finance indicated that it was not and would be corrected.

·         Councillor Sargeant commented that the report showed another good year of treasury management.  He noted that £1.6million had been brought in through the property investment portfolio.

·         Councillor Ross stated that it was interesting to note that the highest average rate of return percentage was from the investment properties.

·         In response to a question from Councillor Gee regarding the 5.11% rate of return and investment properties, the Head of Finance indicated that the 5.11% return was on the two investment properties that the Council had run through its treasury management portfolio.  These were located outside of the Borough.  The Council was not allowed to borrow to fund these properties so treasury investment funds were used to buy these properties.  The 5.11% was the gross figure coming in from incomes and the Council then charged a notional rate of interest against those properties to offset the financial impact on residents.  The deduction made in terms of the notional rate was 2.75% for the debt financing charges.  A minimum revenue provision of 0.667 was also charged.  The asset repayment was backed by the value of the asset the Council had as it was classed for investment purposes.  The Council was making minimum revenue provision for an anticipated movement in a prudent way should the asset value drop.  Councillor Gee commented that the net return was 2.36% and the amount actually released to the revenue account was 1.695%.  The Head of Finance emphasised that 2.75% was a notional rate which was likely set high to ensure that all the recovery costs were covered.

·         Councillor Gee felt that Table 2, which showed the estimated debt levels, was misleading.  The peak debt was not what could be anticipated in 2023, as more debts and projects would likely be taken on.

·         Councillor Burgess commented that Table 2 was forwards looking and that she was surprised that there was little reference to the impact of Covid 19 within the report.  She was interested to hear the extent the forecasts within Table 2 would have now changed because of the pandemic.

·         The Head of Finance indicated that potentially £105million of capital expenditure would be deferred by 12 months due to the impact of the pandemic on the Council’s cash flows.  Not all the £105million would be funded by debt; some would be funded by developer contributions.  Finance could only work to the Capital Programme as set out for the next 3 years.  The debt would increase up to 2023 and would then start to be paid off through income receipts and capital receipts coming in and some of the regeneration assets.

·         The Head of Finance emphasised that the debt taken out was affordable in terms of the Council’s repayment profile and the value of assets held exceeded the level of debt.

·         Councillor Gee referred to a saving of £380,000 on interest receipt on long-term balances.  However, it also appeared to refer to working balances, which were not referenced within the report.  The Head of Finance explained that the £380,000 was the net position around what the Council had in the budget to pay for debt financing and what the Council had in the budget around expected income receipts from interest on balances that had been invested.

·         Councillor Gee questioned how working balances related to treasury management.  The Head of Finance referred to the Treasury Investment Strategy.  The Council had at any point in time, balances of over £100million coming in via precepts and business rates, which were paid out across the year.

·         Councillor Shepherd-DuBey commented that external borrowing was £52million.  She questioned why this was more than previous years.  The Head of Finance indicated that the Council had approved a larger and more expansive capital programme for regeneration and investment.

·         Councillor Shepherd-DuBey expressed concern around the property investment figure within the report and questioned what would happen if the Council lost a tenant.  The Head of Finance clarified that the properties were the two investment properties outside of the Borough. 

·         The Head of Finance explained that the Property Investment Group managed a wider property investment portfolio.  Councillor Shepherd-DuBey asked how the property investment process was monitored.

·         Councillor Burgess questioned why there were so few investments with fund managers and how the Council could ensure that investments were invested ethically.  The Head of Finance explained that the investments made with fund managers were mostly historic.  The Council was not aware of the ethnical status of the portfolios.  Most local authority investments were for 12 to 24 months whereas fund managers tended to want to invest for longer.  In addition, a local authority could not go bust whilst owing money to another local authority and this would be underwritten by central government. 

·         Councillor Burgess commented that the investment balance on p19 of the agenda referred to £158million and elsewhere in the report, £135million was referenced.  The Head of Finance agreed to come back on this matter.   Following the meeting, he clarified that the £135m referred to the average balance of investments held over the year and the £158m was the actual investment balance as at 31 March 2020.




1)         the report be recommended to Executive on 30th July 2020;


2)         the managed repayment of debt over time which illustrates the increased borrowing required to fund key Council priorities which in turn generate income streams (to repay debt) and provides revenue funding for vital statutory services (see graph in table 2), be noted;


3)         the asset value created through the Council’s capital investments compared to the debt required to generate the asset value (see graph in table 2), be noted;


4)         the capital investments made in the Council’s priorities for its community, by category (see table 1), be noted;


5)         the Treasury Management report in Appendix A, that shows that all approved indicators have been adhered to and that prudent and safe management has been adhered to, be noted.


Supporting documents: