Agenda item

The Leader presented the report.  This report fulfilled the Council’s responsibility to receive and approve an annual treasury management outturn report each year. The report dealt with the outturn for 2020/21 and had already been reviewed by the Audit Committee where no comments were made and would go to Council following this Cabinet meeting.

The report presented the following information:

·          Details of capital financing, borrowing, debt rescheduling and investment transactions

·          Reports on the risk implications of treasury decisions and transactions

·          Details the outturn position on treasury management transactions in 2020/2021 which confirmed compliance with the treasury limits set by Council.

The Covid pandemic had an impact on Treasury Management during 2020/21. Since the early days of the pandemic the Council had to monitor a significant increase in cash-flow activities throughout 2020/21, coming from the making of business grants and the Business Rates Relief Scheme in particular, and also by its own increased costs and lower income level. The Welsh Government provided significant up-front cash-flow support to ensure Councils were adequately financed to administer the business rates and business grants scheme, reimbursed Councils throughout the year for their increased costs and reduced income, as well as loading its RSG grant support towards the first half of the year. Alongside the slippage in the delivery of its own capital schemes and underspending on its revenue budget, this meant cash-flow was more positive than a ‘normal year’ which gave rise to lower borrowing activity and much more short term investing activities.

This did not reduce the need to borrow commitment the Council had but did slow down the pace at which that borrowing was taken up towards that commitment level.

Notwithstanding the aforementioned, in line with the agreed Treasury Management Strategy, the Council still continued to be both a short-term investor of cash and borrower to manage day-to-day cash flows in 2020/21.

Turning to borrowing activities specifically. Whilst the Council had significant long-term borrowing requirements, the Council’s current strategy of funding capital expenditure utilises ‘internal borrowing’ rather than undertaking new borrowing where it could. It can do this because of its ‘cash-backed’ reserves and at 31 March 2021, the level of internal borrowing was about £107m which saved, at current interest rate levels, about £2.4m in interest costs annually compared to physically borrowing this level of cash. 

The financial year was relatively quiet in terms of borrowing activities, as shown in Appendix B to the report:

·        The Council repaid a short-term loan taken out in March 2020 to specifically cash-flow and facilitate early payments of business grants in April. This was reimbursed by the Welsh Government and the loan repaid, as planned in June 2020.

·        In March 2021 the Authority undertook borrowing on a short term basis in order to cover normal day to day cash flow activities.

·        Lastly, a minimal amount of new long-term borrowing was required to be taken out in the second half of the financial year totalling £94k. This borrowing was from ‘Salix’ which was interest free and was linked to a specific energy efficiency project.

Current estimates within our cash-flow indicated there was the potential that additional long-term borrowing would be required in the second half of this current financial year to fund the capital programme, and whilst slippage on that was included in the cash-flow forecasts, what actually happened in the year in regard to delivery of projects would influence this significantly. In particular, the major projects within the Band B Education schemes would start the period where longer term borrowing started to be taken out. 

Turning to investing activities. The Council’s strategies in this area of Treasury Management are (i) to be a short term and relatively low value investor, consistent with the pursuit of an ‘internal borrowing strategy’ and (ii) investment priorities should follow the priorities of security, liquidity and yield, in that order.

All investments were currently placed on a temporary basis and were placed in high security institutions, in line with our other strategy in this area. At the 31 March 2021 £15m was placed with various local authorities and £9.8m with banks and building societies.

Lastly, Prudential Indicators. The Authority measured and managed its exposures to treasury management risks using various indicators, which could be found in Appendix B.  This report confirmed the Council complied with the Prudential Indicators for 2020/21, as set in February 2020 as part of the Treasury Management Strategy.

Decision:

That Cabinet:

1.      Noted and provided comment on the Annual Report on Treasury Management for the Financial Year 2020/21.

2.      Noted and provided comment that 2020/21 Prudential Indicators for Treasury Management were in line with those set by Council in February 2020.