Agenda item

To consider the Treasury Management Outturn 2021-22.

The Committee considered the Treasury Management Outturn 2021-22.

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

·       Graham Cadle highlighted the performance against the Strategy.  The income generated on the investments still provided a net benefit to the Council although it had reduced because of market pressures and additional MRP contributions. 

·       The General Fund debt had reduced and was lower than had been expected.

·       Graham Cadle highlighted the level of realisable assets.

·       Councillor Gee commented that the percentage of internal borrowing to CFR was 44% when the Strategy was 29%.  She felt that unless this was an exception the Committee could not agree recommendation one of the report.  Graham Cadle agreed that it was outside the target but emphasised that it was not a negative impact because of the reprofiling of the capital expenditure, an increase in and the timing of inward grants had meant that the Council had had to borrow less.  He suggested a specific comment around that target in the report.  Councillor Gee agreed that it needed to be noted as an exception and an explanation as to why and the fact that it was positive, included.

·       With regards to Table A and the net annual benefit to the tax payer, Councillor Gee felt that the information provided was misleading.  She felt that the taxpayer would incur a cost because the subsidiaries would have an interest cost in their accounts.  When the Council and the subsidiaries were consolidated the benefit would disappear.  Graham Cadle disagreed that the value should be removed.  He stated that with regards to the subsidiaries it was an element of their costs of which they would be charging an income and delivering a service to make them an ongoing concern.  They were a separate entity and overall would deal in a profit situation over a long period of time.  

·       Councillor Gee questioned whether losses were being accumulated in the subsidiaries whilst increases were being recorded in the General Fund, in recording the figures as such.  Graham Cadle emphasised that the subsidiaries had been set up to run as a self-financing model. 

·       In response to a further query from Councillor Gee, Graham Cadle responded that there were rules around the interest rates that the Council could charge the subsidiaries.  He felt that the information had been correctly reflected.

·       Councillor Davies commented that he appreciated Councillor Gee’s concerns but felt that a valid approach had been taken.

·       The Chair questioned whether information could be included under Table A to address the concerns raised by Councillor Gee.  Councillor Gee suggested that the net annual benefit to the tax payer be clarified between the amount that was accruing to the Council and also the offset.

·       With regards to Table A, Mark Thompson commented that although the income for the companies for the loans that the Council had made to them was being shown, in the top row of the table was the cost to the Council of providing that expenditure to the companies through a loan.  A note could be added to the net margin that the Council would make.

·       Councillor Gee indicated that in the previous year’s report the income of £700,000 had been included.  She was of the view that the income to the Council was effectively cancelled by the cost to the housing companies, and that when looking at the Council as a whole then there was no net benefit to the tax payer.  She believed that the income should be noted as a cost in the subsidiaries.  Graham Cadle expressed concern that this would not reflect that the cost was enabling an income stream and investment.

·       The Chair noted that the total gross finance cost had increased to £8.8million but borrowing had decreased.  She questioned the reason for this.  Mark Thompson explained that the Council had borrowed less money so debt costs had reduced.  In addition, since the mid-year, interest rates had started to increase.  At the point of the mid-year estimates the 2020/21 accounts were still being closed. Part of the work with the auditors had been looking at the Town Centre and in particular at what point assets became operational.  The Council’s policy was that as soon as assets were operational MRP was charged on them.  Therefore, in the Outturn report, on revieing the Town Centre position a greater amount of MRP had been provided on some assets than originally estimated.

·       In response to a question from Councillor Harper regarding the graph on page 50 of the agenda, it was confirmed that the figures were correct.

·       The Committee agreed that an explanation would be added to the report to explain that the internal borrowing was outside of the range, and that this wording would be agreed by the Chair.

·       The Committee approved recommendation 1) (“that all approved indicators set out in the treasury management strategy have been adhered to”) but wanted it noted that in fact the indicator for % of internal borrowing to CFR (29%) had not been met, with the outturn indicator at 44%.  It was agreed this was in fact a positive reflecting a reduction in required external borrowing (reprofiling of the capital programme) and increase in cashflow of grants received.)

RESOLVED:  That the Treasury Management Outturn Report 2021/22 be supported and recommended to Council, and that the Committee note:

1)    that all approved indicators set out in the Treasury Management Strategy have been adhered to, noting the exception that the percentage of internal borrowing to CFR is 44%, which is outside of the range noted in the Strategy, but that this is a positive movement;

2)    the contents of “Table A”, as set out in the report, which shows the net benefit per council tax band D equivalent, from the income generated less the financing costs on all borrowing to date equates to £22.25 per band D for 2021/22. This credit provides income to the Council to invest in its priority services.

3)    As at the end of March 2022, the total external general fund debt was £196m, which reduces to £72m after taking into account cash balances (net indebtedness).

4)    the Council’s realisable asset value of approximately £443m, of which its commercial assets are estimated at approximately £249m.