Agenda item

Report of the Corporate Director of Finance and Resources

Glenn Hammons, Interim Finance Lead for Technical Finance, presented a report on the Council’s performance in relation to Treasury management activity and the associated monitoring and control of risk. The following points were raised:

a)  There is currently a high level of wider economic uncertainty, so interest rates have remained higher for longer periods of time. The Council has a voluntary debt reduction policy in place, reducing its external loan debt by £77 million by the end of 2023/24. The Council has been able to repay £58 million in debt early, achieving a bonus of £1.6 million that will be recognised in the Revenue Account over the next 10 years. The interest rates being charged on loans have decreased and, coupled with early loan repayments, this has resulted in a saving of £900,000 in relation to interest payments.

b)  The Council is achieving a return on its investments, all of which have been made in compliance with the Prudential Code. Coupled with the approaches taken to debt management, this has resulted in underspends in both the General Fund and the Housing Revenue Account.

The Committee raised the following points in discussion:

c)  The Committee asked what improvement work had been done recently to ensure a strong Treasury Management function. It was reported that a very proactive approach has been taken to the management of debt to seek to reduce costs as much as possible in the long-term. There has been a close focus on ensuring that the Minimum Revenue Provision set aside to repay borrowing is at an effective and prudent level, and this had been successful in delivering better value.

d)  The Committee asked how the Council ensured social value in its investments. It was explained that opportunities for investment in line with the Council’s established risk appetite are considered where appropriate, though the primary objective of effective Treasury Management is to ensure the security of the Council’s cash, which is largely achieved through the driving down the costs of borrowing and debt. Long-term investment initiatives are managed outside the general Treasury function.

e)  The Committee asked how effective risk analysis informed Treasury activity. It was set out that the Treasury Management Strategy had a very strong focus on ensuring effective risk analysis, with detailed risk management being an inherent element of all Treasury functions. A Treasury Management Board is in place to review risk on a regular basis, balancing all options for the use of surplus cash effectively while ensuring that the Council maintains appropriate liquidity. A great deal of work is undertaken to safeguard against defaulting by the Council’s debtors, as this could have a significant impact on cashflow.

f)  The Committee sought confirmation that the current Treasury Management activity is delivering the requirements of the Council’s Medium-Term Financial Plan (MTFP). It was reported that the Treasury function was delivering the Council’s current financial strategy effectively, with clear links to the requirements of the MTFP. Debt is being restructured in a proactive way, borrowing costs are being reduced and everything possible is being done to support the General Fund. Currently, the disposal of the Council’s surplus assets is being used to support capital expenditure rather than this being done through borrowing, further reducing costs.

Resolved:

1)  To take assurance that the Treasury management controls and risk management practises in place that have operated in 2023/24 are working effectively.