Agenda item

The Head of Financial Management introduced the outturn report for 2021/22 and drew attention to the following:

1. The report had been drafted in line with CIPFA’s Code of Practice requirements and would also be presented to Cabinet and Council.
2. Some changes had been made to reflect the recommendations of the External Audit Value for Money report to include comparative information on investment returns and borrowing to identify trends and also include the overall score and trend information in the Risk Register extract.
3. Overall investments performance averaged 0.36% which was 0.3% above the benchmark rate.  This was mainly due to the £5m long term investment balance held in the CCLA Local Authority Property Fund, and a combined £5m invested across two long term Environmental, Social, and Governance (ESG) focused funds during 2021/22.
4. The Council’s revenue budget for interest & capital financing costs was £1.078m
   under budget in 2021/22, mainly due to the high levels of cash balances resulting in a delay in the need to borrow.
5. The external borrowing total of £219.4m was a reduction from the previous year reflecting the repayment of shorter-term loans with no replacement borrowing being taken due to the Council’s high cash balances. 
6. In relation to the Performance Against Treasury Management Indicators as set out in Appendix 1, all indicators were within approved limits.
7. The economic and market review for April to March 2022 set out in Appendix 5 identified the main issues as the continuing economic recovery following the Covid pandemic; the war in Ukraine; higher inflation and higher interest rates. The Bank of England base rate increased from 0.1% at the start of the year to 0.75% at the end of the year in response to rising inflation.

Following questions from the Committee, the Head of Financial Management responded as follows:

1. In relation to the inflationary pressures leading to higher interest rates, the impact on contracts would vary, but there would be a big impact on energy contracts which were being retendered.  There would be a big increase in the cost of the contract and the Council had created an earmark reserve to help with this pressure.  In relation to other contracts, the position would be monitored throughout the year.
2. The option to borrow at current interest rates to service capital was regularly reviewed but a balanced assessment needed to be made in terms of cash balances held and future interest rate expectations.  CIPFA offered clear advice to local authorities with a borrowing requirement not to borrow to invest primarily for yield.
3. In relation to the circa £1m underspend on capital financing, this formed part of the Council’s overall outturn underspend which was being transferred to specific earmarked reserves to cover contract risks including the energy contract price increases.
4. Arlingclose had extended the maximum investment duration limit for UK bank entities on its recommended lending list from 35 days to 100 days in September and the Council received regular updates and alerts from its treasury advisors if there was any action on a bank or a change of advice.
5. The high level of cash balances was due to a number of reasons.  The Council had received Government grant funding to pass on to businesses during the Covid pandemic along with other capital grants that were received in advance of being spent which resulted in cash balances increasing.  There were also other reasons relating to debtors/creditors.

It was agreed that future reports also include graphs with quantitative columns in addition to pie charts to help Members identify trends. 

RESOLVED that

(1)  The Treasury Management Report to 31st March 2022, prepared in accordance with the CIPFA Treasury Code of Practice, be noted.

(2)  The Treasury Management Indicators to 31st March 2022 be noted.