Agenda item

1.1          In line with the agreed Treasury Management Strategy, the Council continued to be both a short-term investor of cash and borrower to manage day-to-day cash flows. Current forecasts indicated that, in the future, temporary borrowing may be required to fund normal day-to-day cash flow activities and longer-term borrowing would increase to fund commitments in the current capital programme, as well as the impact of reduced capacity for ‘internal borrowing’. In addition, the Council had a large refinancing requirement for external borrowing during 2024/25.

1.2          During the year, the Council’s total borrowing reduced from £138.6m to £137.7m and total investments reduced from £47.2m to £13.9m, as anticipated, meaning overall the Council net borrowing increased by £32.3m to £123.7m as of 31 March 2024.

1.3          The report confirmed that all prudential indicators were complied with during 2023/24.  Including historical data in the report going forward.

Comments of Committee Members:

1.4          The Chair referred to investments and net borrowing and asked if this was in relation to the capital programme.  The Senior Finance Business Partner advised that it was a mix of the continuation of the capital programme and reserves that were being decreased which reduced the internal borrowing capacity.

1.5          Dr Barry commented that it was a good report and asked what Newport City Council was doing regarding divesting assets, what was the timescale for repayment of the £10.3m loan and what risks were involved.  The Assistant Head of Finance advised that the Council had an asset programme regarding asset optimisation.  In terms of the developer loans, there were three and the two larger loans were not yet due for repayment and were linked to a practical completion date. Appropriate steps were in place to mitigate risks. For example, the two larger loans were fully funded through the Council’s Capital programme and in the event of default then there would be no capital receipt.

1.6          The Head of People, Policy and Performance added that officers working on an extensive asset rationalisation plan which did not always mean reduction but was often about repurposing.

1.7          Mr Reed asked for clarification regarding the £10m loan and whether this was already considered as written off the loan on the basis of it being covered. Mr Reed queried whether the £10m repayments would then be considered as additional income.

1.8          The Assistant Head of Finance explained that the loan was treated as expenditure and then returns are used as new capital headroom. The Head of Finance added that that Medium Revenue Position (MRP) budget had been set aside for the two loans.  This approach was also part of the recent national guidance, which meant that Newport City Council was ahead of the curve.

1.9          The Chair asked whilst Newport City Council was granting a loan to a development company, and borrowing to backfill, would the Council make a loss or did it create additional income.  The Head of Finance advised that interest was charged on the loans, but the rates were set to be on the right side of state aid and was reasonably comparable with the Council’s cost of borrowing.  The Chair suggested that this could be explored through a closed session.

Recommendation:

1.10       The Governance and Audit Committee noted the report on treasury management activities for the period 2023/24. 

1.11       No further comments were provided other than the Governance and Audit Committee considered that it was a constructive report and thanked officers for preparing.