Agenda item

The Presiding Member invited the Leader to present the Capital and Treasury Management Strategy for 2024/25.

The Leader stated that this is an annual report focusing on the Council’s capital expenditure plans, the financial impact of those in terms of borrowing, and investment strategy for the year.

The Council was asked to approve both strategies for the year, including the prudential indicators and limits within them.

It was noted that both the Cabinet and the Governance and Audit Committee considered the report in their most recent meetings. Governance and Audit Committee endorsed the proposed strategies, with no concerns raised.

It was also noted that this version of the strategy was updated to reflect the announcements made in Cabinet on 14 February, in relation to additional annual sums investment and an increase in borrowing capacity.

In terms of the report itself, there were a number of key points to draw Council’s attention to the 5-year capital programme was managed on a rolling basis, meaning that a new year (2028/29) was added to the programme.

The programme itself continued to reflect the challenging financial circumstances and, as such, continued to comprise ongoing and previously approved schemes, as well as annual sums (for activities such as asset maintenance and highway maintenance).

Whilst there were no new schemes being included, the programme, especially in 2024/25, was still significant and contained a number of the Cabinet’s highest priority schemes such as new school projects, the Transporter Bridge project and new leisure and wellbeing provision.

Beyond the £7m new borrowing headroom recently agreed by Cabinet, there was no new borrowing headroom to be approved at this point. The programme included indicative new borrowing from 2027/28 onwards, which, if still affordable nearer the time, would be available to pursue new schemes, such as the next wave of school development projects under the Sustainable Communities for Learning Programme.

Until the point at which that new borrowing could be formally approved, it meant that capital headroom (which was used to pursue new schemes or address cost increases on existing schemes) was limited to the new borrowing headroom, those amounts already held in specific earmarked reserves and uncommitted capital receipts. As a result, careful prioritisation would be required when making new commitments from the headroom and every opportunity would need to be taken to boost it via one-off sources, to continue to respond to emerging pressures as and when they arise.

Whilst there was no new large-scale borrowing included in the next few years of the programme, previously and recently approved borrowing would be incurred over that timeframe and would increase the overall Capital Financing Requirement and the Council’s level of debt.

The borrowing limits proposed in the report took this into account and the revenue consequence of additional borrowing (e.g. interest payable on loans) is already budgeted for, following the budget investment made in 2021/22 and planned for 2024/25. The programme proposed was affordable, prudent, and sustainable, based on current information and assumptions.

In terms of Treasury Management, the report detailed the Council’s approach to borrowing and investing.

It confirmed that the Council would continue to pursue an internal borrowing strategy, by using available cash resources to defer external borrowing for as long as possible and only undertake borrowing in advance of need where there was a clear financial rationale for doing so.

It was important to highlight the large refinancing requirement the Council had during 2024/25, which saw a handful of large loans repaid and new loans taken out in their place. The strategies reflected a prudent assumption of the capital financing cost that this replacement borrowing resulted in.

For investing, the Council continued to prioritise security, liquidity, and yield, in that order and would strike an appropriate balance between risk and return.

A minimum investment balance of £10m was still required, which was currently being met via three covered bond investments and continued to be the case for the next few years.

The Head of Finance’s commentary within the covering report directly addressed the question of affordability, prudence and sustainability and confirmed that the proposed strategy and programme met all of those criteria.

Councillor Davies seconded the report.

The majority of councillors supported the report, with two abstentions.

Resolved:

That Council -

§  Approved the Capital Strategy (Appendix 2 of the report), which incorporated the approved capital programme, and the borrowing requirements/limits needed to deliver the approved programme.

§  Approved the Treasury Management Strategy and Treasury Management Indicators, the Investment Strategy, and the Minimum Revenue Provision (MRP) policy for 2024/25. (Appendix 3 of the report)

§  As part of the above:

·          Noted the increasing debt, and corresponding revenue cost of this, in delivering the rolling Capital Programme, and the implications of this over both the short and medium-long term with regard to affordability, prudence and sustainability.

·          Noted the Head of Finance comments that borrowing needs to be limited to the extent that it stabilised the Capital Financing Requirement over the long term and did not add future pressure to the Council’s Medium Term Financial Plan, and the recommended prudential indicators on borrowing limits to achieve this.

·          Noted the feedback provided by the Governance and Audit Committee on 25 January 2024 (paragraph 8).