Agenda item

Report of the Corporate Director for Finance and Resources

Jean Stevenson, Interim Finance Team Leader – Technical Team, presented the report on the Treasury Management Strategy 2023/24 and Capital Strategy 2023/24. The following points were highlighted:

(a)  The Treasury Management Strategy and Capital Strategy are produced annually, in line with Chartered Institute of Public Finance and Accountancy (CIPFA) codes and guidance from the Secretary of State;

(b)  the strategies have already been recommended to Full Council for approval on the 6 March 2023 for approval by the Executive, and are being presented to allow the Committee the opportunity to review the strategies prior to Full Council;

(c)  the Treasury Management Strategy 2023/24 includes the Minimum Revenue Provision Statement, the Borrowing Strategy, the Investment Strategy, the Prudential Indicators and Limits for 2023/24 to 2025/26, and the associated Treasury Management Policy Statement;

(d)  the Capital Strategy 2023/24 includes the Voluntary Debt Reduction policy, and the Flexible Use of Capital Receipt policies for 2022/23 and 2023/24;

(e)  the strategies take account of revisions to the CIPFA Treasury Management Code of Practice in December 2021. These revisions include a tightening of the regulations around commercial investments, and Local Authorities are no longer allowed to borrow to purchase investment properties primarily for yield;

(f)  the Council’s policy is that only secured and banked capital receipts will be considered in decisions to fund capital schemes, and consideration will not be given to any new capital schemes to be funded by borrowing;

(g)  also of note is the new liability benchmark in the Treasury Management Strategy. This is explained and shown graphically in the Treasury Management Strategy. This is difficult to calculate, as it requires cashflow forecasts for many years into the future, and external advisors are still working to help develop the indicator.

In the discussion which followed, and in response to questions from the Committee, the following points were made:

(h)  the new CIPFA standards are a response to investments that expose local authorities to disproportionate debt costs, who do not have the capacity to service these when risks present themselves and find they need to seek support from central government. The new regulations are intended to curtail the ability of local authorities to invest primarily for yield and return;

(i)  Members considered it important to build slippage into the models, as it can make a difference to capital flows and has implications in terms of revenue allocation. The finance team seek to monitor slippage by reprofiling and performing slippage exercises;

(j)  Members appreciated the delivery of the Liability Benchmark indicator, which visualises the profile of debt; 

(k)  the Liability Benchmark currently shows a sharp drop in Public Works Loan Board (PWLB) debt from 2028 onwards; officers clarified that the tool is still being developed and work is continuing to be completed on forecasting. Further information would be provided to councillors directly on this and on slippage. The CIPFA requirements are that the LB is estimated and measured for the forthcoming financial year and the following two financial years as a minimum;

(l)  Members welcomed the policy on the Council Subsidiary Deposit Facility, by which subsidiary companies within the group organisation may be provided with a safe haven deposit facility for surplus cash balances held by these companies. Ross Brown, Corporate Director of Finance & Resources confirmed that he would consider any such requests and update members on the outcome;

Resolved to:

1)  Note the Treasury Management Strategy for 2023/23, and in particular:

a.  the strategy in relation to debt repayment (Minimum Revenue Provision Statement) in 2023/23;

b.  the Borrowing Strategy for 2023/24;

c.  the Investment Strategy for 2023/24;

d.  the Prudential Indicators and Limits for 2023/24 to 2025/26;

e.  the current Treasury Management Policy Statement;

2)  Note the Capital Strategy 2023/24 and in particular:

a.  the Voluntary Debt Reduction policy;

b.  the Flexible Use of Capital Receipt policy 2022/23;

c.  the Flexible Use of Capital Receipt policy 2023/24.