Agenda item

To receive the Treasury Management Mid Year Report 2022-23.

The Committee received the Treasury Management Mid Year Report 2022-23.

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

·       The level of internal borrowing continued to remain higher than detailed in the Treasury Management Strategy, reflecting the current financial climate.  It also reflected a delay in the Capital Programme and allowed a review going forwards.

·       A new Treasury Management Strategy would be presented in February.

·       Councillor Kaiser questioned whether the Council was close to a point where the level of internal borrowing could be considered unsafe, and was informed that it was not.  There was a profile of some debt which was renewing in the next year so there was some flexibility going forwards.  It was important to take the right decisions according to the conditions of the economy.

·       In response to a question from Councillor Kaiser as to whether the Council was moving quick enough to move money out of accounts as necessary to maximise investments, the Assistant Director Finance commented that there was a balance.  Many current arrangements had default costs.  Officers regularly met with external advisors to look at potential opportunities.  The current issue was making those commitments in the long term and having the best possible forecast as to whether rates would go up or down.

·       Councillor Gee commented that she had previously requested more detail in the Treasury Management reports.  She wanted information on the borrowing structure over different periods with the interest rates and the maturity dates of those borrowings.  The Assistant Director Finance stated that Officers would be working with external experts to consider whether to bring this in for the next year. 

·       Councillor Gee responded that it was difficult to ascertain how liquid the Council was, what was invested, the maturity structure of investments and the maturity structure of borrowing, and the total level of borrowing.

·       Councillor Gee commented that there was no reference to the changes to Minimum Revenue Provision within the report.  The Assistant Director Finance explained that the changes had been proposed for some time.  Further clarification as to what they would or would not encompass was required.  The scheme had been delayed and there would not be any changes prior to April 2024.

·       In response to a question from Councillor Gee, the Assistant Director Finance explained that the Town Centre regeneration business case had included the requirement to provide funding and for the return of income and the sale of properties to repay the debt and interest charges.  A higher interest rate had been included in the business case.  As the work was nearing completion a detailed review had been undertaken.  The level of charge was higher than the Council was reflecting and the charges of interest to that fund had been amended.  Councillor Gee queried whether this was a switch on the return of community investments and the financing costs in the General Fund.  The Chief Accountant agreed to check this, but confirmed it was a movement as to which line this was classified on.  The net cost to the Council would remain the same.

·       Councillor Harper asked whether there was a list of capital expenditure projects that were being delayed and was informed that there had been some reprioritisation of projects.  The Executive received Capital Monitoring reports and Members could be sent links to these.

·       Mike Drake agreed it would be useful to have information on the interest rates for the different maturities of the borrowings.

·       Mike Drake referred to Table A and noted that the annual benefit to the taxpayer had decreased by £0.5million.

·       Councillor Smith commented that the average interest rate of external borrowing for 2022/23 was forecast to be 1.56%.  He queried how this would change going into 2023/24.  The Assistant Director Finance indicated that there were a number of long-term loans and borrowing arrangements in place.  It was important to understand the future capital requirements, the level of internal borrowing and the best time to borrow if additional funds were required.

·       Councillor Kaiser stated that a lot of the borrowing was forward funding of infrastructure which would be paid as CIL was collected from developers.  The Assistant Director Finance confirmed that some of the funding would be from this.

·       Councillor Gee requested further narrative in the report about what was certain and what was uncertain.

·       Councillor Smith referred to the table regarding the Council’s net indebtedness, and questioned whether Officers were happy with the level of movement.  The Assistant Director Finance confirmed that they were.

RESOLVED: That the Audit Committee support the Treasury Management Mid Year Report 2022-23 and recommend it to Council and note that:

1)    all approved indicators set out in the Treasury Management Strategy have been adhered to; with the exceptions of internal borrowing which is forecast to be higher than set out in the strategy and ratio of financing costs to net revenue stream – General Fund;

2)    due to the current uncertainty in the interest rate market, the internal borrowing parameter is being reviewed with our external treasury management advisors and will be reported back as part of treasury management strategy;

3)    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 £15.29 per band D for 2022/23. This income is used by the Council to continue to provide priority services for the borough residents;

4)    As at the end of September 2022, the forecast for the total external general fund debt was £112m at March’23, which reduces to £81m after taking into account cash balances (net indebtedness) reducing interests costs in the current economic climate;

5)     The Executive agreed on 27th October 2022, recommendation 3 of the Capital Monitoring 2022/23 – Q2 report ‘note that due to the current uncertainty surrounding higher interest rates, as part of our financial management process, a review is to be undertaken to determine what capital projects can be postponed this year, to minimise exposure to borrowing at high rates. Any postponement is to be agreed at Executive.’