Agenda item

The Leader introduced the Council’s treasury management activity for 2022/23 and confirmed that treasury activities during the year complied with the Treasury Strategy previously considered and set by Members.

The report also compared activity with the year-end position for 2021/22 and detailed the movement throughout 2022-23, along with the reasons for those movements. This is the second of two reports that Cabinet receives on treasury management during the year.

The report presented the following information:

·              The treasury strategy previously agreed.

·              Details of borrowing and investment activity throughout the year

·              Wider economic considerations such as the pandemic and economic climate

·              An update to the International Treasury code on commercial investment funding

·              A medium to long term outlook for borrowing need.

and

·              concludes with an examination of activity against prudential indicators, confirming compliance.

The report also confirms that the Council invested in three covered bonds within the year 2022-23, totalling £10m, in line with the Council’s Treasury Management Strategy.

The report was presented to Governance and Audit Committee in May and was endorsed for onward consideration by Cabinet, and ultimately, the Council.

Key highlights include the level of borrowing, which was £138.6m as at 31 March 2023, and had decreased by £3.5m in comparison to 2021-22 outturn levels.

This decrease was in relation to several loans which were repaid in instalments over the life of the loan and, the redemption of a small Public Works Loan Board (PWLB) maturity loan at the end of September, which did not need to be re-financed.

The level of investments also decreased by £11m to £47.2m, as the Council used up such resourcing as a more cost-effective alternative to arranging new external borrowing.

Within the report was a forward-looking indicator called the Liability Benchmark, which provided a graphical illustration of the Council’s existing and future borrowing requirement. In future, this would be shared with Cabinet on a regular basis following recent changes in guidance. This was an important indicator as it demonstrated the impact that current decisions taken on capital expenditure have on the long-term net borrowing requirement.

To highlight some of the important points, this indicator showed that between 2023 and 2025, the gross need to borrow increased, but the calculated need for actual/real borrowing increased more sharply. This was because the Capital Programme commitments added to the need to borrow but, at the same time, the internal borrowing capacity was predicted to reduce as reserves were utilised and investment levels reduced.

During the same window, actual borrowing held reduced as loans were repaid. The combination of this, and the sharp increase in the need to borrow, meant that actual new borrowing in the region of £50m could be required by the end of 2025.

The Council’s underlying long term need to borrow, coupled with the need to refinance existing loans, meant the Council could be exposed to a higher level of interest rate than experienced over recent years. Because of this, the Council would continue to defer the need to take out long-term borrowing for as long as possible. It was hoped that, by adopting this approach, interest rates may have reduced from their current levels by the time new borrowing was required, reducing to some extent the impact upon the revenue budget of undertaking new borrowing. Any decision regarding undertaking additional long-term borrowing will be made in line with advice from the Council’s treasury advisors and only where there was a clear financial benefit and need to do so.

The final aspect to outline was Prudential Indicators. The Authority measured and managed its exposure to treasury management risks using various indicators which could be found in Appendix A. The report confirmed that the Council complied with the Prudential Indicators set for 2022/23.

Comments of Cabinet Members:

§  Councillor Hughes thanked the finance and budget staff for their work during a period of many challenges.

§  The Leader echoed Councillor Hughes’ comments and thanked the team for their financial management.

Decision

To note the report on treasury management activities for the period 2022-23 and provide comments to Council.