Agenda item

The Assistant Head of Finance presented the report to the Audit Committee and explained that the report informed the Committee of Treasury activities undertaken during the period for the first half of the year to the 30 September 2020. The report confirmed that the Council was following its strategy of maintaining investments to a minimum value rather than taking out new long-term borrowing. The Council was also minimising its cash holding as interest rates were very low during this period so investments were being kept to a minimum.

The Assistant Head of Finance requested Committee Members to view Table 2 on page 68, which contained a good summary of the borrowing and investment position of the authority. It showed that borrowing since the end of the financial year 31 March 2020 had reduced by £17.1 million and investments had increased by £15.7 million meaning that there was quite a big decrease in net borrowing from £153.8 million to £121.1 million in the first half of the year.

It was explained that at the end of the financial year there was some extra borrowing to assist with business grants going out to businesses prior to Welsh Government providing financial assistance. Welsh Government subsequently reimbursed this and the borrowing was repaid.

In terms of the investments levels increase this was due to the revenue support grant provided by Welsh Government, which was front-loaded in the first couple of months to help local authorities with their cash flow.

The main priority for investments was security so investments were on a very short term to minimise risk so the income returns were very low due to the current situation.

The Assistant Head of Finance also mentioned cash flow as Welsh Government was able to assist in the increase of costs as they assisted with hardship claims and reimbursement on any additional business grants so there was no big increase in borrowing. Welsh Government had largely supported authorities so there was no big increase in borrowing.

Cash would now decrease and investments would drop so borrowing may need to occur in line with the Treasury management strategy. 

The Chair questioned that in January 2021; would the strategy document be presented to the Audit Committee for comments and asked whether it would provide a guidance as to what the level of borrowing should be rather than what it is. This was confirmed by the Assistant Head of Finance.

The Head of Finance confirmed that this was not the first time the Committee had commented on the Councils level of borrowing which was reaching a high level and the current capital programme would increase which involved borrowing over the next 2 to 3 years. In conjunction with this, internal borrowing had reached capacity and this was not for new expenditure so there was a pressure there. In addition, it was explained that Councils funding was low and there was uncertainty over future funding as the UK was currently in a lot of debt at present.

The Head of Finance explained that they were currently engaging with senior management colleagues and the Leader of the Council by providing information on the impact of the revenue budget and the level of borrowing. It would be favourable if the situation were restricted however, colleagues wanted more flexibility. The more borrowing that occurred meant that there was also less money to spend on front line services as the budget was spent on servicing the debt so there was some difficult trade-offs in the current situation.

The Head of Finance stated that they would bring to the council a position in February 2021 that beyond this programme that ends in 2 years’ time annual new borrowing limits should be set. The borrowing capacity should drive the prioritisation of what is affordable. This could be achieved by setting out some borrowing limits to keep it updated as and when the situation progresses over the next 5 years. The new programme would not start for another 2 years.

Questions:

·       Councillor Jordan questioned the treasury management summary table on page 68 as to whether the total borrowing figure of £17.1 million and total investment of £15.7 million added together should be £32.8 million instead of £32.7 million and the balance section of £149.2 million with a minus of £28.2million should this £21.0 million.

The Assistant Head of Finance confirmed that this was correct as a rounded figure in round millions and when rounded up would be higher.

The Chair commented that, as this report was a public document it was imperative that the figures added up and could that be taken back to the finance team, which was agreed.

·       Councillor Whitcutt asked the Head of Finance about paragraph 12 on page 62 of the report in particular the sentence, “aside from the beginning of the year when the additional short-term borrowing was required, WG have mitigated the impact by reimbursing increased expenditure through the hardship fund and through loss of income claims.” It was also pointed out how cash flow was improved and Councillor Whitcutt asked how this fitted into the overall legacy that the legacy of austerity in terms of restraints on the Council was the Head of Finance satisfied that Welsh Government had covered the impact of Corona virus on the Council. 

The Head of Finance stated that the hardship fund does cover the vast majority of additional costs incurred. If councils make their own decision to make something free e.g. free parking in the city of Newport in December and January, this was a council decision, this was not reimbursable through the hardship fund. The biggest gap was council tax and there was no support for that loss of income. However, support for Homelessness etc councils in Wales have had good support from Welsh Government.

Agreed:

That the report be noted and approved by the Council’s Audit Committee.