Agenda item

Laura Mahoney, Senior Finance Business Partner, explained that this paper is to inform the Committee of the treasury management activities undertaken in financial year 2020/21. This is a backwards looking report and confirms that the Council keeps its strategy of maintaining its’ investments to a minimum, rather than taking out additional long term borrowing.

A summary of the treasury management activities shows that total borrowing in the year 2020/21 reduced by £13.1 million to £153.2 million, and total investments increased by £12.3 million to £24.8 million. This reduced the net borrowing by £25.4 million to £128.4 million.

The main reasons for the decrease in the net borrowing at the end of 2019/20 was that the Council had undertaken some short term borrowing to support small businesses in March 2020, in response to the pandemic. Welsh Government then reimbursed this, and the borrowing was repaid in June 2020. The increase in investments is due to having higher levels of cash, due to possible unexpected pressures during the pandemic.

The overall borrowing strategy remains the same, the Council has significant long term borrowing requirements. The Council’s current strategy of funding capital expenditure utilises internal borrowing rather than undertaking new borrowing when it can. The level of internal borrowing currently stands at £107 million as of the end of 31^st March 2021. Currently only investing very short term with UK government and local government, meaning there are low interest rates, but this was felt as prudent during the pandemic. The 2020/21 treasury management strategy agreed that the Council would be undertaking longer and larger investment strategies in riskier investments, to generate income. CCLCD stopped new investments following the pandemic. Due to the market volatility at the time, it was decided that it was not prudent to begin investing in more risky instruments.

In terms of the impact of Covid-19 on cash flow, the Council has had to take no further long-term borrowing since January 2021, apart from £94,000 for Salex, for a one off energy project, and this had no interest. This was due to a significant amount of Welsh Government funding during Covid-19. It is expected that additional long term funding may be required over the course of the following year.

The PWLB have released new lending terms after last years’ consultation. Interest rates will be reduced, provided that Local Authorities submit detailed capital expenditure plans. 

Discussion included the following:

·         Members queried what the PWLB stands for

o   The Senior Finance Business Partner explained it stands for Public Works Loans Board.

·         Members queried if there is a paper on when we can expect payback from Salex, and what is this money being invested in?

o   The Senior Finance Business Partner explained that the project is for the replacement of all lighting in the velodrome so it is energy efficient. The current payback is expected in 8-10 years.

o   Members commented that 10 years is a long payback period

o   The Senior Finance Business Partner replied that the payback period is expected to be 8 years

·          The Chair asked how much the capital spend slippage is

o   The Senior Finance Business Partner answered that it is approximately £7 million

o   The Chair asked why this is slipping 25% year on year, and do the treasury take account of this in the strategy?

o   Treasury Management do take account of slippage as part of the forecast, and tend to assume 25-30% for each year. This year lots of the slippage was in relation to grants from Welsh Government, who have given an extension up until the end of April in order to spend some of the allocations. Often, by the time allocations were received, it was difficult to get plans and contractors in place. 

o   The Chair queried that, if we have a plan for capital and every year there is slippage, would this not indicate poor project management? We wouldn’t want to risk losing grants from Welsh Government if it appears we are not spending this money that we have received.

·         Members commented that shortfall in education projects was cited as the reason for slippage for year before. Has all the slippage attributable to Education projects been closed out?

o   The Senior Finance Business Partner explained that there has been some slippage in Education projects, but the main areas of slippage last year have been managed more effectively this year

·         The Chair asked that, as our borrowing is now £128 million, are we now down to relatively low levels of net debt

o   The Senior Finance Business Partner said she would need to go back and confirm that.

Action:

The Senior Finance Business Partner (Laura Mahoney) to clarify the last query regarding debt levels.

Agreed:

The paper was duly noted and approved by the Committee.